8 December 2019
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Shorten embarrassed by tampering with our super

Peter Switzer
17 April 2019

An organization that always seems to be anti-Coalition and pro-Labor has used its respected research capability to point out that Labor’s promise to pump super up to 12% would be a shocker for low income Aussies!

The Grattan Institute says bolstering the compulsory super contributions from employers from 9.5% to 12% would result in lower wages and have serious negative implications on Labor’s constituency i.e. low- incomers.

“If employers are required to put extra money into super, then by definition they will put less money into wages,” Mr Daley told the AFR’s John Kehoe. And this revelation comes as the Melbourne-based  think-tank puts out its Commonwealth Orange Book 2019, which looks at the policy implications of a future Labor or Coalition Government.

Some of the recommendations out of the Book are:

• Improving the tax treatment of second-income earners, which clearly is a pro-women idea and is smart economics.

• It supports the reduction of the capital gain tax discount, which many economists would agree with but I’d say Labor has to be careful with its timing on this, along with its negative gearing changes with the housing sector in dive mode. (You don’t have to be an economist to agree with that!)

• Showing it’s an objective economics outfit, it calls for a higher GST.

• It also want super tax concessions to be made tougher!

• And wait for it, they support an easier pension asset test, provided there could be some recognition of the value of a pensioner’s home! (That would never fly, unless you want to take on the country’s army of pensioners who own their own home.)

What the current crop of politicians doesn’t seem good at is telling voters that there’s a time and a place for bold reforms. And I know for superannuation to deliver a comfortable retirement you actually need 15% in super for 40 years but with wage rise ridiculously slow, you can’t bump up super now.

Also the economy has slipped back from 3% plus growth to 2.3%. And while economists expect a bounceback in the second half of 2019, if we load employers up with higher super payments and divert potential wage rises into super, this money will be taken away from retail consumption and house buying, which are important for job creation.

When I was young I thought governments had a huge role in directly helping low income Aussies. And while I like the idea of targeting tax relief to second income earners, I know the best thing Canberra can do is to make it easy for employers to have profitable businesses.

Only this week, one of my business partners said at a meeting and I quote: “If we are going to grow this business, we need people.”

Healthy, profitable businesses need employees and a life with a job is miles better than one on welfare. Anyone who thinks the opposite should not be leading this country at any level of government. Every decision made by politicians should come with the related question: “What will this do to jobs?”

On super, Bill Shorten has a looming super problem. He told the press that there’d be no new taxes on super or any increases to super taxes. However, after the questioning he clarified it by saying that he meant to say “no new or higher taxes” than those already announced!

Promised super changes include:

• Killing the catch-up for concessional contributions, where those with balances less than $500,000 can make up for the five years when there were no contributions e.g. women who take time off work to raise children.

Labor wants to remove the tax deductibility for personal contributions under the $25,000 cap for self-employed workers, such as tradesmen and women.

• Also, the non-concessional cap could be cut from $100,000 to $75,000.

• And now if you earn $250,000, you have a 30% tax on super contributions but Labor wants to take this down to $200,000.

Bill’s superannuation media stumble came after he had trouble answering questions on the impact of Labor’s carbon emissions policy on the economy. The AFR says “Mr Shorten's difficulties were compounded by an awkward press conference where he repeatedly refused to answer questions about the subject”.

Superannuation could become a huge issue in this election campaign. Bill’s exposure on excessive tampering with our super could become like the “Tampa affair” in John Howard’s 2001 election that he was expected to lose.

Independent calculators say Labor has $34 billion of new taxes on super in the promise pipeline and while a lot of them are focused on those on higher incomes, a lot of low income Aussies sell their homes on retirement to bump up their super. If the non-concessional cap is cut from $100,000 to $75,000, it will be harder for people to get money into super on retirement. And money outside of super will earn less income and be taxed more, which sounds unfair on retirees.

If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.

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