Super slug for high earners to save budget $1b
"It is clear that a small number of people on high incomes are getting a better deal out of super than millions of Australians on average incomes" ... Minister for Superannuation, Bill Shorten. Photo: Penny Bradfield
PEOPLE who earn very high incomes will pay 30 per cent tax on concessional superannuation contributions in a move that will be sold on the basis of ''fairness'' but also reaps $1 billion in savings to help the government return the budget to surplus.
The new tax rate - to be formally unveiled in the budget on May 8 - will apply to people with a taxable income of more than $300,000, about 1.2 per cent of workers who contribute to super - or about 128,000 people.
The current uniform 15 per cent tax on superannuation contributions is designed to encourage people to save for retirement, but because it applies across all income groups it delivers an effective 30 per cent tax concession to those on the top 45 per cent income tax rate and only a 17.5 per cent concession to middle-income earners on the 32.5 per cent tax rate.
After the new tax rate for very-high income earners kicks in, their effective tax concession will be 15 per cent, slightly lower than the concession most other superannuation contributors get.
''It is clear that a small number of people on high incomes are getting a better deal out of super than millions of Australians on average incomes,'' the Minister for Superannuation, Bill Shorten, said yesterday.
''That's why we are making the system fairer, by ensuring that the tax incentives for super are more in line across income ranges … however despite these changes, there will still be a tax incentive for these high-income earners,'' he said.
The superannuation industry has complained that it is often treated like a ''honeypot'' that governments dip into when they are short of money, but the government is confident this savings measure - unlike many of the other cuts it has had to make to reach the promised budget surplus - will be well received by most voters.
Its release ahead of the budget comes as the government is battling to return public attention to the budget process rather than the parliamentary uncertainty created by the allegations against the Speaker, Peter Slipper.
The Opposition Leader, Tony Abbott, initially criticised a measure in last year's budget to freeze the upper threshold for eligibility for some family benefits as ''class warfare''.
Mr Shorten said if Mr Abbott ''went into bat for the top 1 per cent of income earners'' it would be ''the final proof' he's betrayed the ordinary working families of Australia.''
The new system still delivers the higher 30 per cent tax concession to people earning more than $180,000 (where the top 45 per cent tax rate cuts in) but under the $300,000 threshold.
If a taxpayer only exceeds the $300,000 threshold because they are making concessional superannuation contributions, the new tax rate will only apply to the portion of their contributions over $300,000.
The government has also unveiled a plan to force super funds to reveal the pay of their top executives and publish more detailed information about how members' retirement savings are invested.
with Clancy Yeates