With the coming election forcing Malcolm Turnbull and the Liberal Coalition to declare some policies at last, it looks like superannuation is in the firing line. With Prime Minister Turnbull turning away from the potentially divisive GST increase, that revenue source must be replaced with another, and generous superannuation concessions look likely to be trimmed. How will Malcolm Turnbull affect superannuation?
The current fifteen percent tax rate on contributions, which has substantially favoured the wealthy over the poor, may be axed and replaced with a larger marginal taxation rate. In addition, super fund earnings, which presently are taxed at fifteen percent but are completely tax free for most retirees, and who pay no tax on payouts, may be extended to all earnings in superannuation accounts. Malcolm Turnbull also has the cap on non-concessional super contributions in his sights; it is likely these contributions into self managed super funds will be reduced further to prevent income being parked in these low tax structures.
Superannuation in Australia has long been skewered to favour the wealthy over the poorer members of our community. It has acted as a tax shelter for the rich and seriously reduced the government’s ability to raise much needed tax revenue. Despite PM Turnbull and his Liberal-National coalition party traditionally representing the wealthier constituents of our nation, the governments need for extra revenue is acute. The proposed increased fifteen percent GST has become politically unpalatable due to the Labor opposition’s decision to base its entire election strategy around defeating it, and the government, if it runs with it. Australia has history with anti-GST election winning strategies, as witnessed by the demise of John Hewson back in the 1990s; and the infamous birthday cake example in an interview with Mike Willesee in 1993. PM Turnbull needs extra revenue in the budget to be able to provide election winning tax breaks; and must see more value in hurting retirees, and the very wealthy, and in winning over working Australians with income tax cuts.
How will Malcolm Turnbull affect superannuation? It will no longer be that tax free, and minimally taxed, shelter for seriously well off Australians. Superannuation funds have become so big; they are like the elephants in the room, and can no longer be ignored by a government in desperate need of revenue via taxation. Industry super funds, SMSFs and all those trillions of dollars are in the Turnbull government’s firing line, at last.