Political back-and-forth over the future of superannuation has muddied the waters around a key election issue, so The New Daily has decided to cut through the confusion.
Labor leader Bill Shorten was last week forced to clarify Labor’s tax plans after he claimed his party had “no plans” to increase taxes on superannuation.
Mr Shorten later conceded he had “misunderstood” the question and was referring to Labor’s pledge not to increase superannuation taxes beyond those previously announced, which include lowering the threshold for high-income super contributions from $250,000 to $200,000.
With superannuation comprising almost $3 trillion in Australian’s hard- earned retirement savings, any changes to this sector can have a profound impact on the livelihoods of voters.
With the Coalition confirming its stance on super in the 2019 federal budget on April 2, The New Daily decided to detail the Labor Party’s proposals for super after a week of mixed messages.
Labor plans to pare back the amount of non-concessional contributions super fund members can make in any one year from the current $100,000 to $75,000.
The move would restrict the amount that people with excess cash to invest could place in their super fund (which comes with a lower tax rate).
High-income earners’ tax
Currently anyone earning $250,000 or more is hit with a tax surcharge, meaning they pay 30 per cent tax on their super contributions instead of 15 per cent.
Labor wants to reduce the threshold to $200,000. As this chart shows, the proposed tax would significantly cut superannuation concessions to high-income earners while not affecting the retirements of others.
The government recently introduced the right to make concessional contributions to super for all, meaning anyone with the cash would be able to contribute an amount up to the difference between the 9.5 per cent super guarantee payment their employer makes and the $25,000 concessional contribution cap limit.
Labor is unhappy with that measure and pledged to scrap it as it is predicted to cost the budget $750 million a year.
Labor would also scrap a government measure that allows up to five years’ unused concessional cap to be contributed once in a working life when funds are available. The ALP move would bar those who could afford it from making up to $125,000 in concessional catch-up contributions.
Labor’s policies aim to make super less of a tax strategy for those who can already afford a comfortable retirement and cut the taxation benefits for the top 20 per cent of income earners who currently earn about 55 per cent of total super tax concessions.
For the punters
Currently the government plans to increase the super guarantee employers must pay workers from the current 9.5 per cent of salary to 12 per cent by 2025. Labor has committed to raise the rate “as soon as practicable”.
Currently, when people take parental leave, they don’t receive super contributions while they are off work. Because women take the lion’s share of parental leave, their super balances are hit. Labor plans to extend super contributions to parental-leave payments.
For low-income earners
Low-income earners have been hamstrung in their ability to build a super balance by an old law that says the super guarantee must only be paid to those earning $450 or more a month. If Labor is elected, it will phase out this threshold over five years, cutting it by $100 per year to bring more low-income, part-time workers into the super system.
The New Daily is owned by Industry Super Holdings