Labor is committed to ensuring the sustainability of the retirement income system in a way that delivers fairness and enables Australians to maintain a comfortable standard of living in retirement.
Tax concessions are an important part of the superannuation system, as they encourage people to contribute funding and preserve these savings until their own retirement.
But these tax concessions benefit high income earners more than other Australians and over time will place an increasing burden on the Budget. This is unsustainable and unfair.
The Government’s own Financial System Inquiry found that 10 per cent of Australians receive 38 per cent of Australia’s super tax concessions, more than the combined benefit of the bottom 70 per cent of Australians.
Labor’s plan is to put the retirement income system on a sustainable footing by targeting superannuation tax concessions to those that need them the most.
1. Reform the tax exemption for earnings on superannuation balances that exceed $1.5 million
The tax-free status of all superannuation earnings is disproportionally beneficial to high income earners and is unsustainable.
Labor will better target the tax concession for earnings on superannuation assets supporting retirement income streams. This measure will only apply to those in retirement.
The proposed measure would reduce the tax-free concession available to people with annual superannuation incomes from earnings of more than $75,000. From 1 July 2017, future earnings on assets supporting income streams will be taxfree up to $75,000 a year for each individual. Earnings above the $75,000 threshold will attract the same concessional rate of 15 per cent that applies to earnings in the accumulation phase.
This measure will affect approximately 60,000 superannuation account holders with superannuation balances in excess of $1.5 million.
2. Reduce the Higher Income Superannuation Charge (HISC) threshold from $300,000 to $250,000
Current superannuation tax concessions provide greater benefit to people on high-incomes than people on average incomes.
For instance, someone on $250,000 currently receives a concession of 30 per cent from their top marginal tax rate on superannuation contributions, while someone on $35,000 currently receives a concession of only 4 per cent from their top marginal tax rate.
We will improve this measure by lowering the HISC threshold to $250,000. Around 110,000 people will be affected by the new arrangements.
This would more closely align the concessions receive by those on middle incomes with those on very high incomes, so that tax relief for superannuation contributions are distributed more fairly and sustainably.
Together, these measures will save $14.3 billion over the decade, allowing Labor to invest in other important areas like schools, hospitals and keeping the pension strong.
More information about Labor’s positive plan is available here.