Treasurer Jim Chalmers’ plan to overhaul the $53 billion a year in tax concessions on superannuation accounts faces early opposition from the Coalition amid claims Australians are tapping their retirement nest eggs for cosmetic procedures.
Opposition Leader Peter Dutton denounced the treasurer’s proposals to introduce new laws about what superannuation could be used for as “all code for more tax”, while defending the Coalition policy of allowing withdrawals for illness or house deposits.
Peter Dutton has denounced Treasurer Jim Chalmers proposed reforms to superannuation.Credit:Alex Ellinghausen
But Assistant Treasurer Stephen Jones will use a speech on Tuesday to argue the government needs to change the laws around superannuation to safeguard against its misuse.
In a speech to the Sydney Institute, he will attack the Coalition’s pandemic policy which led to more than three million people withdrawing about $38 billion from their accounts.
“It became the cash cow for bad ideas and the last hope for problems that government was afraid to tackle,” he said.
People can apply for an early release of superannuation under compassionate grounds, according to the Australian Tax Office, including for palliative care or medically necessary treatment.
Assistant Treasurer Stephen Jones said super became a “cash cow for bad ideas” under the previous government.Credit:Steven Siewert
Jones claimed there were doctors who were gaming the system and “encouraging, and even pressuring, patients to tap into their super for what might be termed life-enhancing procedures like cosmetic surgery”.
“It is greedy. It does not pass the pub test. It is wrong. This is the practical impact of a policy space that lacks an objective,” he said.
On Monday, Treasurer Jim Chalmers said while the government’s immediate focus was on enshrining a definition for superannuation, he flagged that the government wanted to crack down on superannuation tax concessions.
“Right now, we’re on track to spend more on super tax concessions than the age pension by around 2050. I’m not convinced that’s a sustainable way to get to our destination,” he said in a speech in Sydney on Monday.
Tax concessions on super are forecast to cost the budget $52.6 billion in 2022-23, just under the total cost of the age pension at $55.3 billion, according to an analysis of the October budget by the Australia Institute.
There are an estimated 11,000 super accounts with at least $5 million, and the Australian Financial Review reported last year there are 32 self-managed super accounts with $100 million or more. All superannuation accounts enjoy a concessional tax rate of 15 per cent.
The Coalition is already signalling that the government could start taxing multimillion-dollar deposits at a higher rate while constricting withdrawals.
“In the May budget, I suspect we’ll see more and more taxes at a time when Australians can afford it less and less,” Dutton said on Monday afternoon.
Speaking in WA on Monday, Prime Minister Anthony Albanese was critical of the Morrison government’s early pandemic policy that allowed Australians suffering financial hardship to withdraw up to $20,000 from their super, as well as a Coalition policy that would give first-home buyers access to up to $50,000 of their super to help them purchase a property.
“We know that every chance they have to undermine superannuation, the Coalition do so,” he said.
“We know that their one big announcement at the last minute … was again something that would have undermined people’s superannuation balances, and that was rejected at the election.”
Real Estate Institute of Australia president Hayden Groves said the Coalition’s super for housing scheme was a sensible way to help people buy their first home.
“The government’s review of superannuation should focus on the objectives of successful retirement as Australia’s population ages, not simply look to protect the interest of superannuation funds,” he said.
Consultation on a definition for superannuation that would be enshrined in law began on Monday, following a Labor election promise to do so. The government’s suggestion would preserve super savings for retirement.
The superannuation industry has been broadly supportive of the move to legislate a definition that restricts the use of superannuation to the provision of retirement income.
Aware Super chief executive Deanne Stewart said the government’s proposed definition of super was a good starting point because superannuation was ultimately for retirement savings, and should not be a tool for wealth preservation or estate planning.
Industry Super Australia chief executive Bernie Dean agreed.
“It should help avoid another disaster of allowing people to tap into super early for any reason, which hurts everyone,” he said.
With John Collett
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