Labor’s plan to phase out the contributions tax for people earning $40,000 - $100,000 a year will introduce massive complexity and extra costs for the superannuation industry, Assistant Treasurer Mal Brough said today.
A fund would have to seek the income details of every member to determine their tax rate. This would be a huge administrative burden on funds and the ATO.
“It will be extraordinarily complex and costly for funds to operate in Labor’s super system and those costs would be paid for by members,” Mr Brough said.
Once again, there is nothing in Labor’s plan for low income workers. For example, someone who earns $100,000 a year and contributed $50,000 into their superannuation would get a $7500 tax break under Labor’s plan. But an employee on $35,000 would pay $472.50 tax on their superannuation guarantee contribution.
“Given that Labor went to the last election with a policy to reintroduce the superannuation surcharge and to abolish the superannuation co-contribution for low income earners, people are entitled to assume that is how they will fund this latest policy,” Mr Brough said.
Low income workers, who can be up to $1,500 better off per year under the superannuation co-contribution would not only lose that incentive, they would also be subsidising tax breaks for higher income earners.
The Howard Government expects to provide concessions to superannuation of $15.9 billion in 2005-06. This makes superannuation the largest Government tax expenditure. This figure does not include about $1 billion in Government co-contributions which will also be paid in 2005-06. The Howard Government has made significant improvements to the superannuation system, including:
- Introducing the co-contribution scheme and enhancing it to boost the retirement savings of low-income Australians.
- Abolishing the superannuation surcharge and allowing Australians aged under 65 to contribute to superannuation.
- Allowing older workers to access their superannuation as a way to transition to retirement.
- Allowing spouses to split their superannuation contributions.