Key independent ACT senator David Pocock has called for the federal government to consider lowering the 15 per cent tax concession threshold on superannuation earnings to $2 million in a move that could double the savings generated by the reform.
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As the political battle lines over the super tax change harden, Senator Pocock has suggested the government reduce its proposed $3 million threshold by $1 million and make it subject to indexation.
"The question is, do you set it at $3 million and not index it or do you set it at $2 million and index it, because the indexation will make a big difference over time," the senator said.
"I think indexation is something we should look at."
But Treasurer Jim Chalmers said that the $3 million threshold was "an important design feature" of the government's tax change and ruled out indexing it.
"One of the reasons why I think it is important that the threshold is at $3 million, is because we want to make superannuation more sustainable over time," Dr Chalmers said.
"If some future government decides that they want to lift that, then they can pay for that. But that's not our intention."
Senator Pocock's support for the super tax reform could be crucial after the opposition vowed to vote against the measure, accusing the government of breaking an election promise by proposing the change.
Shadow treasurer Angus Taylor condemned the tax change, which the government said will not be implemented until mid-2025, as "a supersized broken promise".
"We're going to oppose it in this term of Parliament, because they're putting it through in this term of Parliament," Mr Taylor said.
"This whole idea that this is for the next term of Parliament is absolute rot. They're proposing to legislate ... this change in this term of Parliament."
Senator Pocock said he was "very supportive of having a cap that I think is very fair".
"The feedback I've been getting from Canberrans is very supportive, including one person who has more than $3 million of super," he said.
Australia Institute senior economist Matt Grudnoff said if the 15 per cent tax concession threshold on super earnings was lowered to $1.9 million if would affect around 150,000 people and save about $4 billion a year when fully implemented.
The government's proposed $3 million cap would affect 79,300 people and would generate around $2 billion in annual savings when fully implemented.
Mr Grudnoff backed the idea of reducing the threshold to $2 million and indexing it because of the extra savings it would generate.
The economist said the government should also be looking at other expensive tax concessions including negative gearing and the capital gain tax discount.
While admitting that tinkering with these tax arrangements would be very difficult in the current political environment, he warned that as more young people currently priced out of the property market came of voting age, the politics surrounding these issues would shift.
Earlier, Dr Chalmers was forced to clarify that the capital gains tax exemption for the family home would not change after failing to definitively rule it out in an interview on Sunrise.
Later in the day, the treasurer told reporters that he was "very prepared" to rule out any move on the tax exemption of the family home.
"We have no intention of going after capital gains tax on the family home," he said, and added that he wanted the country to focus on "the choice to make superannuation more affordable by making the tax concessions in super more sustainable".
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- Wherever the threshold for the super tax concession was set, Senator Pocock urged the government to direct savings to relieving the financial pressure on households.
"Budget repair is important but so is investing in the critical services our communities need," the senator said.
The senator suggested the savings could be used to forgive all remaining state and territory historic housing debts, increasing investment in mental health support or paying super on Commonwealth paid parental leave.
"A relatively modest investment in that now would deliver a huge dividend in future in terms of taking pressure off the aged pension and giving people - and women in particular - a better retirement," he said.
Dr Chalmers flagged the government would hold consultations about how to apply the super tax concession changes to people in defined benefit arrangements.
Mr Grudnoff said this was a complex area because it was not as straightforward as imposing a tax on a defined asset.
He said the vast majority of those with defined benefits were in the public sector, including public servants, judges and politicians, and received a set amount regardless of fluctuations in the value of any underlying asset. "It's not unsolvable, but it's a tricky thing to work through," he said.
Dr Chalmers said having the policy announced so long before the budget was "quite useful" because it would allow for genuine consultation on the issue.
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