Speaker 1: From Schwartz Media. I'm Ruby Jones. This is seven am.
Speaker 2: Labor is poised to move forward with its plan to
Speaker 2: increase the tax on superannuation balances over three million dollars.
Speaker 2: Critics say it's unfair and question why Labour's super tax
Speaker 2: will apply to unrealized gains rather than just money made.
Speaker 2: But with Labour's majority in Parliament and support from the
Speaker 2: Greens in the Senate, their opponents can't do much but complain.
Speaker 2: Today National correspondent for the Saturday Paper Mike Secam on
Speaker 2: Labour's superannuation plan and what it tells us about the
Speaker 2: government's economic priorities in its second term. It's Wednesday, June fourth,
Speaker 2: So Mike, Labor wants to overhaul superannuation. But to begin with,
Speaker 2: can we talk about how what we have at the moment,
Speaker 2: it's the current super how it was created in the
Speaker 2: first place? Because this goes back to Keating, doesn't it
Speaker 2: in the nineties, So what was the purpose of superannuation?
Speaker 3: Yeah, you're right, universal super goes back to Keating A
Speaker 3: fortunate minority if people had it before then, of course,
Speaker 3: but Keating's plan was that everyone should have it.
Speaker 4: Anounable of prime ministers to speak of. This House last
Speaker 4: night passed the Superannuation Guarantee levy, and doing so it
Speaker 4: has entrenched in legislation a great reform which will be
Speaker 4: of great benefit of coming generations of Australia. Let's speak,
Speaker 4: for the first time in our history, well in advance
Speaker 4: of reform in other advanced industrial countries. Ordinary Australians will
Speaker 4: be able to build a decent nest egg for their retirement.
Speaker 3: The idea was that it would provide people with a
Speaker 3: comfortable retirement, but along the way it would also reduce
Speaker 3: pressure on the pension which would be a good thing
Speaker 3: for future taxpayers. And of course you know it gave
Speaker 3: Australia this sort of huge fund of wealth sitting there
Speaker 3: earning income on behalf of it citizenry.
Speaker 5: This is a long term project because workers in their
Speaker 5: fifties and even in their forties on modest salaries simply
Speaker 5: cannot set aside enough of current income to achieve financial
Speaker 5: independence in their old age. To achieve this, these workers
Speaker 5: would have to start contributing as a substantial percentage of
Speaker 5: their income to super in their twenties. Is this likely
Speaker 5: without compulsion?
Speaker 3: The answer is no. To encourage people into this form
Speaker 3: of saving, which is what it is. The government not
Speaker 3: only required that a portion of your pay goes into SUPER,
Speaker 3: so your employer puts it in, but you know you
Speaker 3: can top that up, and a concessional tax rate was applied,
Speaker 3: so fifteen percent was the tax on contributions and earnings.
Speaker 3: So you know, that was well below the marginal rates
Speaker 3: of what most people would otherwise pay. So you know,
Speaker 3: it was a very attractive place to park your money.
Speaker 3: And over the years the superpool has grown enormously. It's
Speaker 3: now I think almost four trillion dollars or something like
Speaker 3: that as of this moment. The Association of super Nuation
Speaker 3: Funds in Australia reckons that for a comfortable retirement you
Speaker 3: need six hundred and ninety thousand dollars for couples five
Speaker 3: hundred and ninety five thousand dollars for singles. But over
Speaker 3: time though super has drifted well past that purpose. You know,
Speaker 3: a growing number of people have way more than they
Speaker 3: need for a comfortable retirement. I mean, there are people
Speaker 3: with tens of millions of dolls, even hundreds of millions
Speaker 3: of dollars stashed away in their super and so there's
Speaker 3: been a lot of complained about this. I spoke to
Speaker 3: Brendan Coates, who's the director of the Housing and Economic
Speaker 3: Security Program at the Graton Institute, and he told me
Speaker 3: the thing was turning into a, as he called it,
Speaker 3: tax subsidized inheritance scheme. Those big balances they often sit
Speaker 3: inside self managed funds. They're stuffed with property or family businesses,
Speaker 3: or real estate investments or even artworks. Then they're never
Speaker 3: selling those assets, they're never paying tax on it, and
Speaker 3: then when they die, they pass it on to their
Speaker 3: children tax free. So it's a very good way of
Speaker 3: minimizing tax in this life and maintaining family wealth in afterlife,
Speaker 3: as it were.
Speaker 2: Right, Okay, so this is what Labor has identified then
Speaker 2: as the problem that it wants to solve. So tell
Speaker 2: me what exactly it's proposing.
Speaker 3: Well, it's pretty straightforward, actually, you know how I said,
Speaker 3: there was a fifteen percent tax on superannuation for people
Speaker 3: with more than three million dollars in their accounts, that
Speaker 3: would effectively double, so it would become thirty percent. So
Speaker 3: you know, if you've got more than three million dollars
Speaker 3: in your super on the amount over the three million,
Speaker 3: so not all of it, only the extra you pay
Speaker 3: a high rate of tax. And the estimate out of
Speaker 3: Treasury when they ran the numbers on this was that
Speaker 3: it would raise two point three billion dollars for government
Speaker 3: revenue in the first year and that would create to
Speaker 3: forty billion dollars over a decade. So you know, it's
Speaker 3: not to be sneezed at, and actually not many people
Speaker 3: would be caught by this, roughly eighty thousand, which is
Speaker 3: about zero point five percent of people with superannuation funds.
Speaker 3: Almost all of them, would you know, have much more
Speaker 3: than three million dollars on average, in on their funds,
Speaker 3: Like I said, some accounts have more than one hundred
Speaker 3: million dollars. Where Labor's proposal is novel, however, is that
Speaker 3: it would tax unrealized gains. So say you own, you know,
Speaker 3: a super account with three million dollars in it at
Speaker 3: the start of the year, and at the end of
Speaker 3: the year that's worth on paper, worth four million dollars.
Speaker 3: While you pay tax on that paper gain, whether or
Speaker 3: not you know you've actually sold anything and put any
Speaker 3: money in your own pocket, you still pay on the
Speaker 3: notional gain. And this is something that is contentious, okay.
Speaker 2: So it's this idea of taxing unrealized gains that opponents
Speaker 2: are particularly Again, so tell me more about their argument
Speaker 2: as to why that is unfair on principle.
Speaker 3: Really, they say that this is not done very often
Speaker 3: in the tax fhere. In fact, some complain about the
Speaker 3: very idea of the wealthy paying more tax. I mean,
Speaker 3: there are some practical issues that have been raised. You know,
Speaker 3: some critics say, well, some people might not actually have
Speaker 3: the readies to pay the tax when it comes to
Speaker 3: you. You know that they've got all these assets sitting there
Speaker 3: in their account, but they mightn't have the money to
Speaker 3: pay the tax on the notional gain, and so they
Speaker 3: might be forced to sell up. You know, we've had
Speaker 3: the specter raised of you know, farmers having to sell
Speaker 3: their farms. You know, small business people having to sell
Speaker 3: their business and so on. They complain that, you know,
Speaker 3: for volatile investments like for example, startups, that it will
Speaker 3: discourage investment in those Why.
Speaker 6: Did the government choose not to allow people who can
Speaker 6: calculate their actual earnings and they're realized versus unrealized gains.
Speaker 6: Why did you choose to tax everybody on unrealized gains?
Speaker 3: People like a Legraspender, the tear independent MP for Wentworth
Speaker 3: who opposes this measure. She argues that it will capture
Speaker 3: gains essentially that may never be realized. Others would say
Speaker 3: that's in fact the entire point of the exercise.
Speaker 6: This legislation is suggesting is going to tax unrealized gains
Speaker 6: in super which I think is bad policy. And both
Speaker 6: have bad tax policy, but particularly bad for and particularly
Speaker 6: damaging I am concerned to see potentially for the venture
Speaker 6: and the startup and scale up sector.
Speaker 3: A second concern for a Legra Spender, and also I
Speaker 3: might say the Greens, is that the three million dollar
Speaker 3: figure will not be indexed, so as inflation rises. At
Speaker 3: this stage, there's no prospect that the threshold for paying
Speaker 3: the extra tax for rise, which means that over time
Speaker 3: more and more people will wind up paying it.
Speaker 2: So basically, Mike critics say that this breaks with established
Speaker 2: principles and unfairly penalizes a small group of people who,
Speaker 2: at least in their view, have I guess, played by
Speaker 2: the existing rules of superannuation.
Speaker 1: What do you make of those arguments?
Speaker 3: The point I would make is that a lot of
Speaker 3: people came out in opposition to this more recently, quite
Speaker 3: a number of experts have come out and said, hang on,
Speaker 3: these are you know, kind of weak arguments. So one
Speaker 3: of the experts I spoke to, for example, was Professor
Speaker 3: Miranda Stuart, who is a tax specialist at the University
Speaker 3: of Melbourne Law School, and she says, this idea of
Speaker 3: you know that it's a real novel idea to tax
Speaker 3: unrealized gains is not really true. We tax unrealized gains
Speaker 3: in land tax, We tax unrealized gains in council rates.
Speaker 3: So you know, even if it's a bit novel in
Speaker 3: the context of superannuation earnings, that doesn't necessarily make it
Speaker 3: a bad way to go about reining in what have
Speaker 3: become pretty gross inequalities in the current system. As for
Speaker 3: the so called hit to innovation, Brendan Coates from the
Speaker 3: Granton Institute, you know, he says, when it comes to
Speaker 3: providing venture capital for startup companies, only five percent roughly
Speaker 3: of that venture capital money comes from self managed super funds.
Speaker 3: In fact, is all the tax experts that I spoke
Speaker 3: to say, really, you shouldn't be running businesses or property
Speaker 3: portfolios inside your super That's not what it's there for.
Speaker 3: They say, it's purely and simply a tax dodge, and
Speaker 3: that this new tax goes quite some way to fixing
Speaker 3: that problem.
Speaker 1: Coming up after the break, what does labours move on? Super?
Speaker 1: Tell us about their bigger economic plans.
Speaker 2: Mike, these changes to superannuation, they were actually introduced in
Speaker 2: the last parliament, but the bill didn't pass, it was
Speaker 2: killed off and he mentioned Alec Respender earlier as she
Speaker 2: was opposed to these reforms.
Speaker 1: Who else voted against it?
Speaker 3: Well, this is kind of interesting because in the House
Speaker 3: of Representatives, every Teal member voted against the government and
Speaker 3: with the Dutton opposition. So that's Allegra Spender, Kate Cheney,
Speaker 3: Zoe Daniel Manik, Ryan, Sophie Scomp's, Kylie Tink, Zarie Steggel.
Speaker 3: But in the end it was blocked in the Senate
Speaker 3: where David Pocock, who's sort of a Teal and Jackie
Speaker 3: Lamby who's definitely not a Teal but is another independent
Speaker 3: they opposed it, and Allegra Spender claims credit for persuading
Speaker 3: them to vote against it. In a way that makes sense,
Speaker 3: you know, as the political scientists will point out to you,
Speaker 3: Allegra Spender's electorate went worth is the richest in the nation,
Speaker 3: you know, point pipe of all clues those kind of suburbs,
Speaker 3: you can bet there will be a lot of people
Speaker 3: with three million dollar plus balances in their superannuation. So
Speaker 3: you know, you might argue that the Teals, all of
Speaker 3: whom are quite affluent seats. So you know, when Labor
Speaker 3: targets a concession, even though it's enjoyed by only zero
Speaker 3: point five percent of all Australian it affects many more
Speaker 3: people in the Teal seats. And we see kind of
Speaker 3: a clash I guess between the teals progressive branding and
Speaker 3: the financial interests of their constituents. And you know, I
Speaker 3: think that it might come as a bit of a
Speaker 3: surprise to progressive voters, you know, who have tactically switched
Speaker 3: their votes from Labor to the Greens and voted for
Speaker 3: a Teal candidate with the intention of keeping out a liberal,
Speaker 3: because you know, when it comes to this, effectively, the
Speaker 3: Teals are liberals. And yet during this election campaign, even
Speaker 3: during the previous one, we had Conservatives, we had Peter Dutton,
Speaker 3: we had Advanced we had other members of the coalition
Speaker 3: out there saying or the Teals are just Greens in disguise,
Speaker 3: but when you look at how they vote on economic issues,
Speaker 3: they're not. They align very frequently with the Conservative side
Speaker 3: of parliament. They're smaller liberals.
Speaker 2: So that was the last parliament, Mike, But this time around,
Speaker 2: the Tills and the Coalition are essentially powerless. Labor can
Speaker 2: just rely on the Greens in the Senate. So given
Speaker 2: that this legislation it's likely to pass, isn't it.
Speaker 3: Well, yes, so you know the Coalition is up in arms,
Speaker 3: you know, saying that they will fight these reforms. Tim Wilson,
Speaker 3: the newly elected Liberal member for Goldstein, said that it
Speaker 3: would be his first priority in Parliament was to actually
Speaker 3: do something about this.
Speaker 1: But what can he actually do.
Speaker 3: He can complain in the hope of stirring enough popular
Speaker 3: opposition to convince the government to back off. Really, that's
Speaker 3: all that's happening, and I think the chances of that
Speaker 3: happening are just about zero frankly. But you know that
Speaker 3: has not deterred these wealthy superannums and their supporters in
Speaker 3: politics and in the conservative of financial media.
Speaker 7: Now we've been speaking a lot about farmers and other
Speaker 7: Australians may have to sell property or assets to pay
Speaker 7: their tax bill as a result of Labour's new supertax.
Speaker 3: I mean, the Australian and the finn Review have just
Speaker 3: been full of stories about what a terrible thing this is, as.
Speaker 7: If life wasn't hard enough already for our farmers with
Speaker 7: this cost of living crisis, with weather fluctuations, and now
Speaker 7: they're worried about having to sell up to meet a
Speaker 7: tax liability on increased land valuations. I mean, it's insane
Speaker 7: and quite frankly unethical.
Speaker 3: So there's been an almighty campaign run against the reforms,
Speaker 3: but you know Labour went to an election on it,
Speaker 3: so it can claim a mandate. The Greens certainly support
Speaker 3: raising the tax on high balanced super accounts. In fact,
Speaker 3: they would say that the threshold should be two million,
Speaker 3: not three million. So a lot of complaining from the sidelines,
Speaker 3: but there's really nothing that the Coalition and the Tals
Speaker 3: can do about it.
Speaker 2: And are we likely to see this play out for
Speaker 2: the next three years, Mike, You know, given the Labor
Speaker 2: government's mandate, is this what opposition to any policy will
Speaker 2: look back in the future.
Speaker 3: Well, not always. I mean there are many issues where
Speaker 3: Labor is closer to the Libs and the Gnats than
Speaker 3: it is to the Greens. You know, if development of
Speaker 3: fossil fuel projects, for example, you know, the Greens say
Speaker 3: there should be no more. Labor is every bit as
Speaker 3: keen on opening up new gas developments and coal mines
Speaker 3: as the coalition ever was. But when it comes to
Speaker 3: tax and to economic policy, the government can probably do
Speaker 3: most of what it was and the Greens will back it.
Speaker 3: The question here is how much does the government actually
Speaker 3: want to change. You know, two elections ago they went
Speaker 3: with the plan of winding back capital gains and negative
Speaker 3: gearing and they lost the election and since then that's
Speaker 3: been put in the two hard basket. Well, a lot
Speaker 3: of people would say, now that you've got all this
Speaker 3: political capital, why not pull those things back out and
Speaker 3: propose them again, you know, even if you propose them
Speaker 3: as something to be done past the next election, so
Speaker 3: that you know, you can claim amandate, you can claim
Speaker 3: to have gone to an election with it, like John
Speaker 3: how did with the GST. So you know, it depends really,
Speaker 3: I think ultimately on how brave labor is when it
Speaker 3: comes to reform. And you know, I would just make
Speaker 3: the observation here that political capital is not like the
Speaker 3: capital and you're a super account. You know, it doesn't
Speaker 3: earn interest if you don't do something with it. You know,
Speaker 3: if you've got political capital, spend it.
Speaker 1: Mike, thank you so much for your time.
Speaker 3: Nowheres Thanks Rum.
Speaker 2: Also in the news today, the national minimum wage will
Speaker 2: be raised to twenty four dollars and ninety five cents
Speaker 2: an hour, or nine hundred and forty eight dollars per week,
Speaker 2: based on a full time, thirty eight hour work week.
Speaker 2: The decision by the Fair Work Commission will translate to
Speaker 2: a three point five percent pay increase from July one
Speaker 2: for millions of Australian workers. The raise is above the
Speaker 2: rate of inflation, which is currently at two point four percent.
Speaker 2: And the last seat in doubt after the May three
Speaker 2: federal election is likely to be called today. The Australian
Speaker 2: Electoral Commission says it expects to finalize the count and
Speaker 2: the seat of Bradfield by this afternoon. After a type contest,
Speaker 2: Independent candidate Nicole Buller was leading Liberal candidate Giselle Capterian
Speaker 2: by just thirty votes yesterday afternoon.
Speaker 1: I'm Ruby Jones. This is seven am. See you tomorrow.