12 March 2003

Government Sticks to Election Promises

The Government will not be altering the superannuation co-contribution for low income earners and the superannuation surcharge reduction measure currently in the Senate.

The Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, said the initiatives were designed as a balanced set of measures that were fully costed and taken to the last federal election.

"The passage of one of these Bills without the other, or major variations to the underlying policy, is not acceptable to the Government," Senator Coonan said.

"These measures will provide incentives for people, both higher and lower income earners, to make greater personal contributions into superannuation and achieve greater self-reliance in retirement.

"Labor and the Democrats have opposed the Bill in its current form and we will not bring it back into the Senate for further consideration until we can ensure passage of both measures."

The co-contribution is designed to match personal superannuation contributions made by eligible low income earners with incomes of less than $32,500 with the maximum co-contribution of $1,000 payable to people on incomes of $20,000 or less.

"The Government's superannuation co-contribution measure is designed for lower income earners and will replace the less generous existing maximum $100 tax rebate for personal super contributions."

Senator Coonan said that despite calls yesterday by ASFA, the industry body, the Government is not attracted to proposals to extend the co-contribution to persons earning $60,000.

"I don't think that $60,000 is a low income in anybody's book and the extension would be a massive shift from the original policy intent to help those on low incomes to make some contribution for their retirement."

The co-contribution is expected to cost $95 million in its first year of operation compared to the current cost of the rebate of $10 million a year. On ASFA's own calculations, an extended co-contribution regime would impose an additional cost of at least $240 million per year.

The second part of the Bill, the superannuation surcharge reduction measure, has also been fully costed and supported at the last federal election. It will reduce the superannuation surcharge rates by one tenth over three income years. This would result in the maximum surcharge rate being reduced from 15 per cent to 13½ per cent in 2002-03, 12 per cent in 2003-04 and 10½ per cent in 2004-05 and succeeding years.

"The Government is committed to encouraging people with the ability to fund their own retirement to do so and the surcharge rate reduction would have gone some way toward achieving this.

"To amend this measure as the Democrats have proposed would continue to penalise higher income earners by keeping the maximum surcharge rates at a higher level than proposed by the Government.

"This is a balanced package, these are costed and budgeted measures and it's about time Labor and the Democrats allowed the Government to implement their election promises."