Treasurer Jim Chalmers has signalled the government could cap superannuation balances as part of efforts to rein in generous tax concessions that benefit Australia’s wealthiest retirees.
After starting the conversation on the “sustainability” of the super tax concessions on Monday, the debate has narrowed on the small percentage of superannuants with more than $3m in their retirement accounts.
That is not far off from what the superannuation peak body, ASFA, suggested in a pre-budget submission to the government, when it recommended tax concessions be reserved for those with less than $5m in their accounts.
While insisting the government has made no decisions, Chalmers has pushed the conversation in the direction of caps for people with large superannuation balances, noting that the average Australian had about $150,000 in their account.
“Less than 1% of people have got more than $3m in their super, the average amount that people have when they’ve got more than $3m is $5.8m,” Chalmers told Sydney radio 2GB.
“And so I think, well, we should be up for a conversation about whether paying a lot of taxpayer money in concessions for that group is the best use of that money.”
Anthony Albanese on Wednesday backed in the treasurer, saying there were no “big changes” planned and that the government would wait to receive the review into the system before making any decisions.
But Albanese said now was the “right time to look at sustainability of progress”.
“We said we would not have any major changes in superannuation and that is certainly our intention. But we’ll receive the report into superannuation, we think that it is important that this continue and that we do have a debate about the purposes of superannuation, of reinforcing what it is there for.”
Chalmers has opened the debate over the sustainability of superannuation tax concessions ahead of the release of a new tax expenditure statement in coming days that will quantify the value of a range of concessions, from franking credits to capital gains.
The government is also putting together the May budget, and will have to find billions for new submarines, a pay rise in the aged care sector, a strengthening of the Medicare system, and rebates to lower power bills. The significant call on expenditure means the government has to investigate options on the tax side of the budget.
While any move to wind back the generosity of tax concessions will spark a backlash from people intent on using superannuation as a wealth generation vehicle, Chalmers’ position has won support from members of his back bench.
Moreton MP, Graham Perrett, said that superannuation was designed to “give everyday Australians a dignified retirement rather than be a loophole for privileged people to exploit the tax system”.
“Anything that addresses that I’m supportive of,” he told Guardian Australia.
Asked about capping balances, Perrett said the government should be prepared to look at “any sensible proposal”. He noted this would impact “a small group of people who are taking advantage” of the system, not 99% of Australians with normal balances.
Perrett said that early withdrawals should be “the exception rather than the rule” although as a union organiser he had helped some workers in “extenuating circumstances” access super early.
“I’m concerned that during the pandemic the Morrison government facilitated private capital being used to stimulate an economy under stress. Anecdotally, early withdrawals were spent on everything from boob jobs to four-wheel drive accessories, and while they might seem important at the time, those people will now miss out on the benefit of compound savings.”
Macnamara MP, Josh Burns, said the “treasurer is right to point out the structural mess the previous government left us”.
“He’s right to discuss options for how we fix the budget and also how we make it work for Australians feeling cost of living pressures – this requires honest conversations about where we are, not just hitting people over the head with a political mallet,” he said.
Andrew Charlton, the member for Parramatta, said the proposed objective was designed to “safeguard the future” by preventing super being directed to other purposes, such as education or housing.
Mike Freelander, the member for Macarthur, said it was the government’s responsibility to look at the whole tax system, given the burdens on the budget.
“We should be having a look at the broader tax system – how can we make our revenue match our expectations for things like quality aged care and health care. It is reasonable to look at a whole range of concessions – not just super, housing for example – to see where money is being spent or forgone in the budget and how better it could be applied,” he said.
Liberal deputy leader, Sussan Ley, continued to push the line the government was “coming after your money”.
“We in the Coalition know that superannuation is your retirement savings,” she said. “It’s what you have worked your whole life and for the government to try… and change your returns on your own superannuation is completely a broken promise and it’s another example of this prime minister and this government leaving Australians behind.”
Chalmers said it was not about “taking shots at anybody with lots of money” but the sustainability of the concession system.
“The question really, for us is, you know, can we can we continue to pay big tax concessions, when you weigh that up against some of the other things that I want to fund in the budget,” he said.
“I want to make Medicare better… I want to strengthen aged care, I want to pay decent wages for people who work in aged care, all these sorts of things.”
