Labor has announced it will make two key changes to Australia’s retirement savings system to ensure it is ‘fair and sustainable’ into the future.
To improve the fairness and sustainability of the existing superannuation system, Labor plans to:
- Ensure earnings of more than $75,000 during the retirement phase are taxed at a concessional rate of 15 per cent instead of being tax free; and
- Lower the threshold for the 15 per cent High Income Superannuation Charge from $300,000 to $250,000 to better align tax concessions.
Saving $14.3 billion over 10 years, Federal Labor believes that the changes are responsible and are fair.
“A fair and sustainable superannuation system will protect living standards in retirement and take pressure off the age pension”, Opposition Mr Bill Shorten claimed during the recent launch of Labor’s new policy.
Recently, the Financial System Inquiry found that 10 per cent of Australians currently receive 38 per cent of all superannuation tax concessions.
In particular, Labor is concerned that the tax-free status of all superannuation earnings, introduced by the Howard Government in 2006, disproportionately benefits high income earners and is unsustainable.
“Labor will bring fairness back into the system by ensuring earnings over $75,000 are taxed at a concessional rate of 15 per cent in the retirement phase, instead of being tax free”, Mr Shorten said.
“This measure will affect approximately 60,000 account holders with superannuation balances in excess of $1.5 million and save around $9.2 billion over 10 years”.
Importantly, Labor has stated that their plan will not impact pensioners or part pensioners.
Labor also plans to remove the 10 per cent tax offset for defined benefit income above $75,000, estimated to effect approximately 9,500 account holders.
“In addition, Labor will lower the threshold on the High Income Superannuation Charge from $300,000 to $250,000 a year”.
“This measure will better align tax concessions received by those on very high incomes with those on average incomes and will save an estimated $5.1 billion over 10 years”, Mr Shorten said.
Instead of a 30 per cent tax concession, under Labor’s plan, those earning more than $250,000 a year will receive a 15 per cent tax concession on contributions.
“We believe these changes are all that are needed to ensure sustainability at the very top end of our superannuation system”, Mr Shorten said.
“If we are elected these are the final and the only changes Labor will make to the tax treatment of superannuation”.
“Obviously we want to see what more we can do to close the gender gap in retirement savings”.
Labor believed that with their planned crackdown on multinational tax minimisation, the changes will return more than $20 billion to the Budget over the decade.
“This demonstrates how Labor will responsibly manage the Budget and the economy without stifling economic growth or cutting billions of dollars from pensions, health and education like the Liberals want to do”, Mr Shorten claimed.
Labor has stated that its plan has been fully costed by the independent Parliamentary Budget Office.
For more information, visit http://www.alp.org.au/fairer_super_plan