The Labor party has announced that it will oppose several of the superannuation spending commitments from the 2016 Budget and wants the Div 293 threshold lowered to pay for a prospective lifetime non-concessional contributions cap.
Labor has said it will support the Low Income Superannuation Taxation Offset (which replaces the LISC) while opposing broadening access to tax deductions for personal super contributions through repealing the ‘10% rule’, removing the ‘work test’ and allowing ‘catch-up’ concessional contributions.
“These three measures will cost the budget $1.5 billion over the forward estimates and $14.7 billion over the decade. This is not affordable in the current climate,” says the Labor policy statement.
“Each of these measures is more likely to be taken up by those on higher incomes who can afford to make additional superannuation contributions. Meanwhile, the number of middle and low income earners who have the financial capacity to take advantage of these changes is likely to be limited.”
Labor also proposes that the $500,000 lifetime non-concessional contribution cap only apply prospectively from Budget night 2016. The cap, as included in the Budget papers, would count contributions from 1 July 2007 and could apply penalties or require contributions to be withdrawn for excess contributions made after the date and time of the Budget.
“We have consistently flagged concern that the Turnbull Government’s decision to impose a $500,000 lifetime cap on non-concessional contributions and back-date this to 2007 represents a retrospective change to the superannuation rules,” said Labor.
“This change would not only affect those Australians who breach the cap, confidence in the entire savings system would be undermined if it went ahead.”
“That is why Labor proposes a $500,000 lifetime cap on non-concessional contributions, to apply prospectively from Budget Night 2016.”
“This achieves the objective of tightening super tax concessions, while ensuring all Australians can continue to have confidence in the integrity of our retirement incomes system.”
Labor says this change will save $50 million over the forward estimates, according to the Parliamentary Budget Office (PBO), “compared with $550 million for the Government’s retrospective change”.
Labor plans to more than offset this by lowering the Division 293 threshold – which sets the level at which concessional contributions are taxed at 30% instead of 15% – at $200,000. The threshold is currently set at $300,000 and both the Coalition and Labor took a policy of lowering it to $250,000 to the election.
Labor estimates lowering the Div 293 threshold will affect approximately 100,000 more people, and the PBO estimates it will result in $738 million in additional revenue over the forward estimates.
“Together, Labor’s amendments will deliver a net improvement of $238 million to the budget bottom line over the forward estimates and $4.4 billion over the decade,” says Labor.
“Our package is fair, affordable and can be delivered in the Parliament – Malcolm Turnbull simply cannot say the same about his own superannuation package.”
“It is now up to the Government to adopt these fair and sensible changes to their rushed reform package. They will have Labor’s support to pass them.”
Government unlikely to support “retrograde” Labor superannuation proposals
It appears unlikely that the Government will support Labor’s proposed changes to the superannuation policies from the 2016 Budget.
“Bill Shorten today announced a very retrograde superannuation package,” said Kelly O’Dwyer, Minister for Revenue and Financial Services.
“Bill Shorten today said he was going to attack women, carers, small business people, those people with interrupted work patterns. He wasn’t going to allow them to get ahead, to save for their retirement, to have a strong retirement future.”
“His scrapping of the changes for catch-up contributions will affect hundreds of thousands of Australians, those people who might have taken time out of the work force to have a child, who might be caring for an elderly parent, who might simply have needed some time out of the workforce to start up a business and therefore is not drawing any income.”
“He has also announced today that he is going to scrap the changes that will allow for everyone to be able to make contributions concessionally on a level playing field,” said Minister O’Dwyer, referring to removing the ‘10% rule’.
“This costs about $1 billion to allow everybody to be able to get their contributions in concessionally no matter who they work for, who employs them or how they earn their money. This is important because it’s fair. It’s fair to allow everybody to be able to take advantage of their full concessional cap.”
“Someone for instance who might be working for a small business who doesn’t have the advantage of being able to salary sacrifice their concessional contributions will not be able to do that under Labor’s policy because what will happen there is that they won’t be able to make a personal deduction to take advantage of their concessional contribution. We’re allowing them to do that. That is fair and that is right.”
The 2016 Budget also included removing the ‘work test’ – which restricts some older people from contributing to super.
“We also think it’s terrible that he’s attacking older Australians. We want people to be able to contribute over a longer period of time, not simply once they hit 65. They should be able to contribute, if they want to, right up to the age of 75. Under our changes, they can do that. Under Bill Shorten they will be stopped.”
Minister O’Dwyer was asked on Sky News if the Government would consider reducing the Division 293 threshold to $200,000, answering: “Well no because what Labor is doing is they simply want to tax people more. They want to tax people more and the very fact that they are wanting to tax people more and not even deliver the flexibility measures means that this is something that they see simply as a revenue grab.”
It is Government policy, included in the 2016 Budget, to reduce the Division 293 threshold from $300,000 to $250,000 from 1 July 2017.
“Let’s take one day at a time, we will be consulting with both Labor and the Greens and the crossbench. We will consult with them around the superannuation package when the legislation is being brought forward. We want them to think of Australians and their retirement future and how we can make it more flexible but also a sustainable system that works for them,” Minister O’Dwyer said.
Update: The PM has said the Government intends to leave superannuation alone after passing the changes already announced.
“I can say to you that after this, we’ve gone through this period – it is important that superannuation is, it obviously will always be reviewed but it is important that once the changes are made and they’re settled and we obviously have to get them through the Senate and we have to deal with all the other parties and the Parliament but we would then be leaving it alone and that would set the new ground rules,” PM Malcolm Turnbull told Alan Jones on 2GB.