Sally Sara:
Joining me now is Jim Chalmers, the federal Treasurer. Treasurer, welcome back to Breakfast.
Jim Chalmers:
Thanks very much, Sally.
Sara:
You took the original superannuation tax reforms to the last election, why change it now?
Chalmers:
We found another way to deliver on the same objectives. In fact, what we announced yesterday means a better deal for low income earners and also better targeted superannuation tax concessions for people with millions of dollars in super. And in the otherwise comprehensive summary of the changes that you just ran through, Sally, you missed out a really important one which is we are increasing the low income super tax offset. And the combination of changes that we announced yesterday as a consequence will mean a fairer superannuation system from top to bottom, and more superannuation for people on the lowest incomes.
Sara:
So, was this latest change, was it announced because of pushback from certain groups and individuals, or was it because you somehow found a better way?
Chalmers:
We found another way to satisfy those same objectives. The objective here is a superannuation system which is stronger and fairer and more sustainable. And which delivers a better outcome for those low income workers, partly paid for by better targeting those superannuation tax concessions. And so, we found another way.
We do, as a government, work through issues in a considered and methodical way. We do take feedback seriously. And because of the work that we’ve been able to do, we’ve been able to come up with another way to satisfy those objectives. The package, as I said, it does change some of those key elements of the policy we announced a couple of years ago. But it also adds that really important change, which is by increasing the LISTO for low income earners it means that people on low incomes will retire with more. And that’s a very important change as well.
Sara:
If you’re backing down on a reform policy that was affecting so few people, why should people be confident that the government can deliver on significant tax reform that will impact far more Australians?
Chalmers:
This is a very significant tax reform. It’s a very meaningful change. And meaningful change doesn’t come easy, as we’ve seen, not just in this area but in recent decades as well. And so I wouldn’t accept the characterisation that this is anything other than substantial or anything other than meaningful. What we’re talking about here are substantial changes to the tax system as it relates to superannuation tax concessions. We have found another way to deliver those objectives. We have listened. We have worked through the issues over a period of time in our usual considered and methodical way, and you saw the outcome of that yesterday.
Sara:
Superannuation is worth trillions of dollars. We’re talking in the near term of a $4 billion black hole. Is this really significant superannuation reform?
Chalmers:
Of course it is. We’re talking here about making concessional tax treatment in super still concessional, but much better targeted. Two new thresholds – $3 million and $10 million – so that we can make that part of the superannuation system more sustainable. Our superannuation system’s the envy of the world, but it’s got its imperfections. The sustainability of tax concessions is one of them, and we’re addressing that. Another one is adequacy for people on low incomes, and especially adequacy for women, and we’re addressing that as well with the changes to the low income super tax offset.
And it goes hand in hand with what we’re doing to get the super guarantee to 12 per cent, to get payday super bedded down, to legislate the objective, to pay the super guarantee on paid parental leave. For 3 years now, we’ve been working to make the superannuation system stronger and fairer and more sustainable. And these are very meaningful and substantial changes which will help us satisfy those key objectives.
Sara:
What’s the policy purpose of still maintaining some tax breaks for wealthy older Australians?
Chalmers:
There are good reasons to encourage people to put money into super, but those concessions have to be sustainable, they have to be affordable. And if you think about some of these very big balances, I think it would be hard to sustain an objective argument that says that we couldn’t better target those superannuation tax concessions, partly to strengthen the budget, but also to fund these very important changes for people on low incomes so that they can retire with more money –
Sara:
– but even under these latest changes, people with balances from $3 million to $10 million, that will still be 30 per cent tax on those. That’s still a concession, isn’t it? What’s the policy purpose of that?
Chalmers:
Well, it’s less concessional as a consequence of the changes that we’re making –
Sara:
– but still concessional –
Chalmers:
Yes, and we’ve made that clear throughout. And that’s deliberate. It’s deliberate that they’re is concessional tax treatment in the superannuation system. But because of the changes that we’re announcing it will be less concessional, and for people with balances over $10 million much less concessional. Because we take our responsibilities to the budget and to the superannuation system very seriously. We have to fund our other priorities, whether it’s for low income earners in super or more broadly in areas like strengthening Medicare. And the changes that we announced yesterday will raise billions of dollars to contribute to that effort.
Sara:
How are you now going to fill this $4 billion black hole?
Chalmers:
You’ve got to look right across the budget. We’ve already found $100 billion in savings. We’ve delivered 2 surpluses. We’ve got the deficit in the most recent year a fraction of what we inherited from the Liberals. And so, we have been improving the budget over time across the board by managing the budget and the economy in the most responsible way that we can. And this is part of that effort. People want to pretend that because of the changes yesterday that we’re not raising a significant amount of money to make the system fairer and to make the budget more sustainable. We are doing that –
Sara:
– to bring you back to the question, there is a $4 billion black hole with these announcements. Again, the question is how are you going to fill that?
Chalmers:
Well I answered your question, Sally, by pointing out that this is not the only action that we’re taking in the budget. Even in the most recent financial year, $14.5 billion worth of savings. The budget is in much better nick than what we inherited because of the effort that we’ve put into it. That effort is ongoing, and better targeted superannuation tax concessions are part of that effort.
Sara:
With the kind of political capital that Labor received with the last election result, why is the government not being more ambitious on reforms, particularly with tax?
Chalmers:
Well, a couple of things about that. First of all, I’m not focused on the political commentary. I’m focused on the outcome. And the outcome is a fairer super system from top to bottom –
Sara:
– but that gives you an ability, surely that gives you more political capital to spend if you’re a reformist Treasurer?
Chalmers:
Again, I’ll leave the political analysis and the political commentary to others. I’m focused on outcomes. As a Labor Treasurer, I take my responsibilities as custodian of the superannuation system that Labor created, I take those responsibilities seriously. There’s a whole bunch of political commentary about that, which is not my focus. My focus is on the outcome; a fairer super system from top to bottom.
More broadly, you asked about the government’s level of ambition. This is a government which has a heap of policy reform ambition. You look at what we’re doing here in super and tax. You look at what we’re doing when it comes to cleaner and cheaper energy. Look at what we’re doing when it comes to competition policy and dynamism. Look at our productivity agenda, this is a government which is plenty ambitious.
Sara:
– but this was the only tax reform you took to the election –
Chalmers:
The changes that we announced yesterday are in that light.
Sara:
But this is the only tax reform that Labor took to the election?
Chalmers:
But it’s not the only tax reform that we’ve done. We’ve reformed taxation when it comes to multinationals. We’ve reformed the PRRT. I’m delivering 3 rounds of income tax cuts that our opponents opposed at the last election and said that they would unwind –
Sara:
– but in terms of reforming the system, this was the only tax reform that was taken to the election?
Chalmers:
No, we took to the election 2 more rounds of income tax cuts, because that’s an important reform which boosts participation and helps people with the cost of living. I think we have to be careful, Sally, with this political shorthand that says that there’s not a lot of action in the policy reform front, including when it comes to tax. Multinationals, PRRT, production tax credits in industries which will help us build a future made in Australia, there’s a lot of tax reform going on. And there is tax reform going on as a consequence of the announcement that we made yesterday. Again, it will make the system fairer from top to bottom. That’s a good outcome and it’s a substantial and meaningful reform.
Sara:
How much longer will younger Australians need to wait until there’s significant reform to address the generational gap in wealth in Australia?
Chalmers:
The changes that we announced yesterday are exactly about that. And it’s an unusual time to ask a question about intergenerational equity. What we did yesterday was we wound back some of the generosity of the tax concessions for the biggest balances at the same time as we increase the low income super tax offset so that young people on low incomes can retire with more money. And this is precisely what we’re talking about when we’re talking about intergenerational equity. I think people know that that’s a big priority for me, and that’s what these changes are exactly all about.
Sara:
Jim Chalmers, thank you so much for joining me this morning.
Chalmers:
Appreciate it, Sally. All the best.