Reform will impose additional 15% tax on super balances over $3 million

ABC NEWS (Australia)

The plan to double the levy from 15 to 30 percent would affect only about 80-thousand Australians.  But there's been a lot of speculation on the future impact of the tax change particularly on younger Aussies.

Transcript

00:00There is no better place in the world to park your money than in the Australian superannuation

00:07system because we are so generous to very wealthy Australians with the tax breaks we're

00:13talking about. So what we've seen in recent years is people who own farms, people who

00:21own businesses, people who own anything they can, trying to get their millions and millions

00:26of dollars into their so-called self-managed super fund because effectively once they can

00:31get it into there, they pay little or no tax. So to be clear, the changes the government's

00:38proposing only affect people with more than $3 million in super. And just so that people

00:45understand the vast majority of Australians have got less than $200,000 worth of super.

00:54And indeed, women have got a lot less than men. So most people out there watching today

00:59will have less than $200,000 in super, but we're having this entire kind of media obsession

01:05about a small increase in the amount of tax that will be paid by people with more than

01:1015 times that amount, people with $3 million in super.

01:14Yeah, I think there's a few Australians who kind of feel, well, I don't really feel sorry

01:18for the wealthy if they have to pay 30% tax on their super. But there are some concerns

01:25though, particularly for younger or future generations and younger Australians, because

01:32this tax or this proposal is not indexed, which means that it won't be adjusted for inflation.

01:40Now, I read this morning on the AFR reporting that this could actually affect more than 500,000

01:46members of the current workforce. And this is almost half of them are under the age of

01:5030 at the moment. So what are your concerns about the fact that it's not indexed?

01:56I have no concerns at all. I mean, if someone left school at 18 and started work on the average

02:05income, the average full-time income from 18 and worked full-time until they were 65, they

02:12still wouldn't get to $3 million in super. So talk about a storm in a teacup. On the one

02:20hand, most Australians will still never get, even someone leaving school today is not going

02:26to get anywhere near $3 million in super. But also this fear campaign is based on the idea

02:32that no government ever in the next 20 years will ever come and look at some of these thresholds.

02:39So there's lots of thresholds in our tax system that aren't indexed. And every now and then,

02:44governments come along and change them as the needs demand, as the circumstances allow.

02:51So this is just trying to make young people who can't afford a house feel sorry for old

02:57people with $3 million in super.

03:00But what about the fact that the Greens are now pushing for this threshold to be reduced

03:06from $3 million to $2 million? Wouldn't that affect more people? And again, if it's not

03:12indexed, future generations will be affected as well.

03:16Well, look, again, remember, I said the vast majority of Australians have got less than $200,000

03:23in super. Yeah, 200,000. So even if the threshold was changed from $3 million to $2 million,

03:29we'd still be talking about an amount that's 10 times more than half the people watching today have

03:36got. Now, whether the government goes for the $2 million option or the $3 million option, well,

03:41the Senate will sort that out. But again, let's be clear, we're talking about figures that are 10

03:47times what most Australians have got. And the idea that we need to protect people with $2 or $3

03:53million to help young people and future generations. Well, if we want to help young people and future

03:59generations, I'd suggest worrying about climate change or worrying about housing would be a much

04:05better way to help young people than tax cuts or tax breaks for people with $3 or $2 million.

04:11All right. There are other criticisms over this proposal as well in relation to taxing unrealised

04:21gains. But, you know, I was reading about this and I thought, well, we already have this sort of a tax

04:26in place anyway. If we talk about, you know, land tax, we talk about council rates as well.

04:32That's right. This panic, oh, we can't tax unrealised gains. That is assets that are going up in value

04:39that haven't been sold yet. Again, there's this hysteria saying we can't start this precedent.

04:46Well, anyone that pays council rates, when the price of your land goes up, your rates go up.

04:53This is not a new phenomena. But also anyone that's on the age pension, let's think about low income

04:59earners for once. There's a whole bunch of low income earners out there, people with much smaller

05:05super balances than we're talking about. Your eligibility for the age pension, the amount of

05:12age pension you get is affected if your shares go up in value. So we already have a system with land

05:20tax, with rates and the age pension, where if the value of an asset goes up, you either get less

05:26income or pay a bit more tax. This is not unprecedented. What's unprecedented is very high income earners

05:33making this amount of noise to protect a tax break.

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