Labor have been forced into a humiliating backdown over its plans to tax unrealised capital gains on superannuation accounts. In echoes of the bruising Labor in the 2010s took over the Rudd-Gillard mining super tax (MRRT), it appears that Treasurer Jim Chalmers has been rolled by Prime Minister Anthony Albanese. Perhaps the PM nervously recalled that the fight over the MRRT loomed large in the once-hugely popular Kevin Rudd’s precipitous downfall.
Jim Chalmers has unveiled a dramatic backdown on superannuation tax reform in a move that puts further pressure on Labor to reduce spending, dropping the widely panned unrealised capital gains tax, adding indexation and revealing a new hit for superannuants with balances $10m and above […]
The overhaul includes higher superannuation tax breaks for an extra 1.3 million Australians who have balances below $45,000, increasing the tax rate from 15 per cent to 30 per cent for balances above $3m, and setting a new 40 per cent rate for 8000 people with balances above $10m.
The new brackets will be indexed and apply to realised capital gains, with the revamp lauded by business leaders, unions and Labor luminaries Paul Keating and Bill Kelty.
But in dropping one political hot potato, Chalmers finds himself juggling another: how, then, will he pay for Labor’s spiralling spending?
AMP chief economist Shane Oliver said the revamp would “expose a hole” in the budget, and force the government to find other revenue-raising alternatives. “This decision, while the right one, does put pressure on the budget,” Dr Oliver said.
“The right thing to do would be to rein in spending growth, but I suspect it will just put additional pressure on government to find revenue from somewhere else.”
Dr Oliver said Treasury’s forecast that the budget would return to balance in 2035 had now been “called into question”.
Indeed, even the government admits that we’re in for at least a decade of deficits. The backdown on superannuation blows an even bigger hole in Chalmers’ budget. Not that he’s about to admit just how big a hole.
With the budget on track for a decade of deficits due to a taxation base that is out of kilter with spending growth, Dr Chalmers said the new package would raise $2bn over the next four years compared with $6.2bn under the previous design.
While he attributed part of this to a delay in the implementation of a new design, Dr Chalmers would not release the revenue estimates over a decade, making it unclear how it would impact the budget over the long term.
Everyone, business leaders, investors, economists, even former Treasury secretaries – except for the government – knew the tax grab was a dog of a policy, “with major negative consequences for all Australians” (Geoff Wilson, Wilson Asset Management chair). The backdown is also exposing cracks in the government leadership team.
The prime minister in June left the door open to changing the design of the super proposal to win support of the coalition, but this was shut down the following day by Dr Chalmers.
Senior Labor sources told the Australian throughout June and July that Mr Albanese was open to redesigning the under-siege package – the same period that Dr Chalmers continued to rule out changes.
While Dr Chalmers is denying he was forced into the backdown by Mr Albanese, one Labor MP said it would be “salt in the wound” for their relationship.
The opposition, unsurprisingly, are gleefully hammering the government over the humiliating policy backflip.
“This is a humiliating moment for the Treasurer who spent two years defending the indefensible – a policy so unfair it united people from all walks of life,” [Opposition Treasury spokesman Ted O’Brien] said. “Jim Chalmers has spent years assuring us there was simply no other way than to tax unrealised gains without indexation but today he was finally forced to admit that he was wrong.”
The opposition are also pointing out that the bunfight over superannuation is far from finished.
Opposition industrial relations spokesman Tim Wilson says despite the changes, Jim Chalmers’ new superannuation tax proposal shows Labor is “persisting with their war on self-managed superannuation funds”.
Mr Wilson said it was part of a bigger push to “force people” into superannuation funds that Labor “control(s)”.
The great injustice of the superannuation system as it stands is how it benefits union-run superannuation funds, which politically benefits Labor.
“Labor is the party of industry super funds and mobilised capital, and they’re still going after Australian’s retirement savings,” Mr Wilson told Sky News […]
“This is ultimately part of a longer-term plan to hit SMSFs to try and force people into the funds that they control and to be able to mobilise and control the retirement savings of Australians under the Labor Party.”
Industry super funds are essentially a trillion-dollar kitty for the left, using working peoples’ own money to leverage policies, especially on ‘climate change’, which ultimately belt working people in the hip pocket. No wonder Keating and Kelty love it so much.
