Note: This article relates to the ALP’s superannuation policies for the 2013 Federal Election, and is no longer current. For the ALP’s latest super policies, see SuperGuide article 2016 Federal Election update: What superannuation and retirement policies can you expect?
After a frenzied few years of super fiddling by the ALP federal government (and the previous Liberal government), our political leaders have taken a breath and exclaimed ‘that’s enough!’, at least for the next 5 years. The freeze on changes to super taxes commences immediately, that is, from 31 July 2013, and will continue for the next 5 years (but only if ALP is re-elected). The change of heart by the ALP goes even further than no tax changes to super: any changes to super will only be made to the super system every 5 years.
According to the media release issued by federal treasurer, Chris Bowen, “The Rudd Labor Government will make no major changes to superannuation tax policy for five-year periods… This will be enshrined in legislation by a re-elected Rudd Labor Government… The five-year freeze, which commences immediately, means Australians can feel confident that under a Labor Government, the rise to 12 per cent super, increased concessional caps and the tax cut for workers earning up to $37,000 will not be ripped away.
Pardon me if I am incredulous about this 31 July 2013 announcement. Are they promising not to touch indexation on contributions caps, change co-contribution thresholds, or remove tax-free status of super benefits for over-60s? Are they promising that anything not yet legislated (but previously announced), such as 15% tax on super pension earnings above $100,000, and the change to the deeming rules for super pensions for Age Pension eligibility will also not proceed?
Well, not exactly… The proposed 15% tax on super pension earnings above $100,000 from 1 July 2014 will still go ahead if the ALP is elected, and presumedly this new tax is supported by the Liberal Party because they have been silent on this issue. The reason this proposed tax change to super is not considered a super change for the purposes of the 5-year freeze is because it was announced before the super freeze started (for background on the proposed pension earnings tax see SuperGuide article New tax on pension earnings over $100,000).
In addition, the proposed extension to the deeming rules to include superannuation pensions when income testing for Age Pension eligibility will also proceed from 1 January 2015, because it was announced before the freeze on super changes. Okay, the big ‘but’ is that the extension to the deeming rules will proceed if the ALP wins the election, although presumably if the Liberals win the election they will also introduce this measure because they have been silent on the merits or otherwise of the policy (for background on the extension of the deeming rules to include superannuation pensions see SuperGuide article Income test changes (January 2015) mean less Age Pension forever) .
I am still grappling with the full impact of this announcement. Are they promising that if the state of the federal finances deteriorates further that the federal government is not going to take a swipe at our super accounts? For example, in a related measure, the federal government has announced that it intends to bring forward legislation to establish the Super Council (for background see SuperGuide article Super Charter and Council of Custodians: Have your say by 21 June 2013) to ensure any future changes to superannuation are consistent with an agreed Charter of Superannuation Adequacy and Sustainability. The report by the Charter Group on the Charter and Council recommends that the Council is funded by a levy on APRA-regulated funds (larger super funds) and by increasing the ATO supervisory levy imposed on SMSFs.
Is this not a tax change that is going to occur in the next 5 years? Or is a ‘levy’ not really a ‘tax’, and the government is going to increase the super levy to pay for the new council? What happened to the super freeze?
SuperGuide will report further on this 5-year freeze on super changes when the government releases more information.