Prime Minister Julia Gillard says Labor will make “tough, necessary decisions” on super rules to protect its medium-term revenue.
The surprise announcement of the federal election date was accompanied by a commitment to superannuation and tax reform and “substantial structural savings” to deal with declining revenue.
Prime Minister Julia Gillard flagged cuts to superannuation tax concessions for higher-income earners.
Gillard said superannuation returns were only just beginning to recover from the hit delivered by the global financial crisis but she indicated that the government would nevertheless push ahead with reform to reclaim revenue otherwise lost to superannuation concessions.
“The dependent spouse tax offset, the tax breaks for golden handshakes, tax concessions on super for high-income earners, the millionaires’ dental scheme and fringe benefits loopholes for executives living away from home ... all gone,” Gillard said.
“This year we will make the tough, necessary decisions to ensure our medium-term fiscal strategy is delivered and our centrepiece plans for Australian children and Australians with disability are funded in this new low-revenue environment.”
Cuts to wasteful programs would also continue, with the government announcing measures in the lead-up to and in the May budget.
In response to Opposition Leader Tony Abbott’s promise at the weekend that, if elected, there would no “negative unexpected changes” to superannuation policy, Gillard said there was a “difference between policy and platitude” and she would not be “holding her breath” for the Opposition to produce a fully detailed and costed plan.
If you’re going to look at structural staving particularly targeting the wealthy you can’t just look at superannuation, that’s too easy.
Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos said the superannuation system was not only smart policy but renowned in the world as a driver of the economy, providing retirees a modest, comfortable income.
The key to smart policy was confidence, Vamos said, and this meant the core of the superannuation system should not be changed.
She said the low-income rebate should be maintained and superannuation contributions should be increased from 9 to 12 per cent.
“If you’re going to look at structural staving particularly targeting the wealthy you can’t just look at superannuation, that’s too easy. Look at other tax savings such as negative gearing, because you don’t want distortion of economic activity by shifting investments from a diversified superannuation portfolio,” Vamos said.
Superannuation industry groups, though, have criticised the planned changes.
Financial Services Council chief executive officer John Brogden said the government must commit to no further policy or adverse tax changes to superannuation to instil “created certainty for consumers”.
Brogden said making changes and using superannuation as a honey pot to fund government initiatives undermined the purpose of superannuation.
“Targeting superannuation tax concessions impacts everyone’s confidence in the system,” he said.
“It undermines their trust because it demonstrates that the government can adversely affect superannuation savings whenever a budget is on the horizon.“