The less well off left behind
Staff reporter |
11 November 2013
The Abbott government's attitude towards superannuation is relatively clear in the decision to remove the tax on incomes above $100,000 and the removal of advantages for lower income workers. There is no interest here in social equity, as the AFR makes clear. It describes the decision to dump the rebate for low-income earners as "inexcusable":
"Sure, the low-income rebate was tied to the mining tax, which is also on the government’s chopping board. But the Coalition conveniently unbundled the super guarantee from the very same mining tax, presumably because there were votes on doing so."
The AFR points out that Tony Abbott has promised to retain the rise in the super guarantee to 12 per cent from 9 per cent. He is "insisting that his promise is still good", even though the rise will be delayed by two years.
"Scrapping the low-income rebate, which is worth up to $500 a year, will mean that the lowest paid 3.6 million (mostly female) workers will not receive the full benefit of the 15 per cent concessional tax rate on super contributions. At the other end of the scale, individuals earning more than $180,000 receive a huge benefit.
"Their super contributions, which would otherwise be taxed at 45 per cent, are levied at 15 per cent. Finding a way of reinstating the rebate, known in the industry as low- income super contribution (LISC), is imperative. Last week industry super funds suggested areas where money could be found to pay for the rebate, such as watering down the proposed paid parental leave scheme or axing the co-contribution super scheme.
"Arguably, doing either of these would also hit women adversely. The government could and should look much further than these measures.
"Generous schemes such as transition to retirement pensions could be revisited, as could the age at which individuals can start drawing down super, or the amount of pension assets that are tax-free. Unfortunately the wealth industry probably shouldn’t hold its collective breath for a U-turn any time soon. Even if Assistant Treasurer Arthur Sinodinos understands the argument (and by all accounts he does), the government is hamstrung by its promise not to make any adverse changes to super in its first term."
What is clear is that the Aboott government is going to leave super as intact as it can. It is unlikely there will be any attempts to tap into the pot of money, at least for the next three years. The political cost would be too great, although for lower income workers the risk is apparently worth taking.