Treasurer Wayne Swan and Minister for Financial Services and Superannuation Bill Shorten address the media on April 5. Photo: Alex Ellinghausen
Canberra will be hit harder by Labor's superannuation changes than anywhere else in the country because of its high number of wealthy public service retirees.
While Treasury estimates the changes will affect about 16,000 people in 2014-15, equating to about 0.4 per cent of that year's retirees, the ACT's share will be proportionately high.
Under proposed changes announced on Friday by Treasurer Wayne Swan, people with more than $2 million in superannuation will lose some tax concessions. Earnings of more than $100,000 a year on superannuation pensions and annuities would be taxed at 15 per cent.
The Australia Institute executive director Richard Denniss said the government had missed an opportunity to fix the system and had instead failed to cut the cost of tax concessions on superannuation by 1 per cent. But he added that while more top-end concessions should have been targeted, the changes could amount to a new impost on some public servants and the areas they retire to.
"The government's move today was to increase tax payments on superannuation from defined benefits, which are most common among public servants," he said. "If implemented, it will be senior public servants, diplomats and politicians that will be caught by these changes and in time Canberra and the south coast of NSW will likely shoulder a disproportionately large share of those affected.
"The changes affecting retired public servants will obviously be significant for the small number of people affected. But given the potential to reform the superannuation system, the tiny amount saved would suggest the government was more interested in politics than policy."
According to the 2011 census, public sector employees total 43.3 per cent of the workforce in the ACT, compared with 15.1 per cent for the rest of Australia.
Only the higher executives of the public service would be affected and then only those who had made significant long-term contributions to their super. But that could amount to the low thousands in the ACT.
Mr Swan said the superannuation changes might not be legislated before Parliament rises in August and the country goes to the polls in September.
"We'll do what we can with these proposals but they'll be going to the election," the Treasurer said. "There is something wrong in the system where working Australians on average wages are providing excessive support to people with millions in their superannuation account.
''Why should someone who has millions of dollars in a superannuation account pay no tax on their earnings while someone on $80,000 a year pays a marginal tax rate of 37¢ in the dollar on every additional dollar they earn?"
Superannuation Minister Bill Shorten pointed out that the changes would affect federal politicians' super schemes.
But Opposition Leader Tony Abbott likened the changes to the recent move by the government of Cyprus to tax people's bank savings. Mr Abbott said the Coalition would do all it could to block the changes.
"It is a raid on people," he said. "Every time a government raids people's funds, there are shades of Cyprus about it."
In other changes, the government abandoned a plan to increase the cap on concessional superannuation contributions to $50,000 for people aged 50 or older with total super balances below $500,000. Instead of increasing it to $50,000 for some people, the government will now lift the cap to $35,000 across the board.
Greens leader Christine Milne said the government had retreated from substantial superannuation reform and should widen the mining tax to help boost revenue.
"The government has disconcerted the whole country with their on and off again super reforms and now they are still failing to say how Australia's revenue hole will be fixed," Senator Milne said.
"The government should focus on those who can afford to pay - the wealthy mining companies who have short-changed Australia of up to $100 billion in revenue."