One of the policies the Turnbull government took to the 2016 federal election was proposed changes to Australia’s superannuation system. The changes targeted the super accounts of the top income earners and those who plan to make large after-tax contributions.
According to the Household, Income and Labour Dynamics in Australia (HILDA) survey released last week, superannuation will soon overtake the family home as the major asset owned by Australians.
Dr Helen Hodgson, associate professor at Curtin Law School and a former member of the UnitingJustice Reference Committee, said the survey highlights changes to Australia’s superannuation system are long overdue.
“The current superannuation system allows high income and high wealth individuals to over-accumulate in tax preferred superannuation, which increases wealth inequality as well as intergenerational inequality,” Ms Hodgson wrote in an opinion piece in The Conversation.
“The government proposals to restrict the level of contributions and to reduce the amount that can be retained in a tax free environment are important tools to address increasing levels of wealth inequality in our community.”
While superannuation was originally designed as a way to provide income in retirement, it has increasingly been used by some wealthy elites as a means to pay less tax. Because superannuation is taxed at a lower rate than income or other investments, some people make large voluntary contributions to their super accounts as a way to minimise tax.
In the 2016/17 budget, the federal government announced it will introduce a cap on superannuation accounts above $1.6 million. Under this new measure, any amount above the threshold will go into a separate account where profits will be taxed at 15 per cent.
Another proposal includes a $500,000 lifetime cap on after-tax superannuation contributions backdated to 2007. Currently, the cap sits at $180,000 per year or $540,000 over a three year period for those under 65.
The government believes these changes will only affect the top 4 per cent of high income earners. However, the proposed changes have been met with opposition from members of Mr Turnbull’s own backbench, with Nationals MP George Christensen describing the changes as a ‘Labor-style policy’.
The Uniting Church supports taxation reform that contributes to a more equitable and fair society. It believes taxes play an important role in funding vital services such as welfare, health, education, public transport and infrastructure.
When the 2016/17 budget was announced in May, Uniting Church President Stuart McMillan welcomed the superannuation changes for “winding back overgenerous superannuation tax concessions.”
The superannuation changes will take effect from 1 July 2017 if they pass through parliament.
Image: FreeImages.com/Julia Freeman-Woolpert