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Speaker 1: Welcome to the Fearing Greed Business Interview. I'm sure, almam.

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Speaker 1: Major changes to superannuation are on the way, with legislation

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Speaker 1: before Parliament aiming to reduce certain tax concessions on super

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Speaker 1: The Division two nine six legislation would reduce tax concessions

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Speaker 1: for individuals with a superannuation balance exceeding three million dollars.

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Speaker 1: If it passes, the legislation would take effect from one

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Speaker 1: July next year. The superindustry was consulted on the changes

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Speaker 1: and while these particular adjustments are targeting those with substantial

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Speaker 1: superannuation savings, there's an opportunity here to improve equity across

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Speaker 1: the whole supersystem. Mary Della Hunty is the CEO of

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Speaker 1: the Association of Superannuation Funds of Australia ASFA, which is

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Speaker 1: a great supporter of this podcast. Mary, welcome to Fear

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Speaker 1: and Greed.

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Speaker 2: Thanks for having me. It's pleasure to be here.

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Speaker 1: So tap me through the Division two nine six legislation.

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Speaker 1: We've heard lots about it in recent weeks because they're

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Speaker 1: struggling to get it through parliament. Government is but just

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Speaker 1: explain what it is.

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Speaker 2: It's firstly a great example of how we talk about

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Speaker 2: things in either acronyms or numbers and probably shouldn't so

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Speaker 2: give two ninety six. I don't know what I would

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Speaker 2: call it this, but here it is. It's a measure

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Speaker 2: of equity. So if I go back really so on

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Speaker 2: to sort of principles, as as the voice of super

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Speaker 2: been operating since nineteen sixty two to really progress a

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Speaker 2: few key components of the system of the supersystem. And

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Speaker 2: we think about Australia's system, it's you know, it's well renowned,

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Speaker 2: isn't it. So we look at things that have made

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Speaker 2: it such like equity, so making sure that there's sort

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Speaker 2: of equal distribution of what you were calling those tax

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Speaker 2: concessions and equal distribution and then of outcomes. We also

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Speaker 2: safeguard preservation, making sure that the money stays in there

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Speaker 2: for the purpose of retirement. And we also look to

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Speaker 2: safeguard other elements of the superannuation system that has made

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Speaker 2: it strong, like universality so it covers all workers. This

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Speaker 2: one goes to that element of equity. So what Div.

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Speaker 2: Two nine six ams to do is put an additional

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Speaker 2: tax on earnings over three million dollars and what asph

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Speaker 2: things should happen if we are to do that is

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Speaker 2: to make sure that that's returned in the system and

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Speaker 2: lifts the lower end of super up.

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Speaker 1: Okay, so just go further. Especially said three million earnings,

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Speaker 1: it's actually three million savings? Is it other earnings? Or

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Speaker 1: am I getting that wrong?

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Speaker 2: Earnings?

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Speaker 1: So people who have three million dollars in there in

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Speaker 1: the account that they've earned and put it into their

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Speaker 1: super account, I came.

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Speaker 2: And the tax is the tax is on the earnings

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Speaker 2: over that.

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Speaker 1: I see what sorry, I see what you're saying.

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Speaker 2: Yeah, yeah, yeah, yeah, yeah, But this is a good

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Speaker 2: this is a good point to clear up because it

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Speaker 2: is it is sort of a confusing point, and we've

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Speaker 2: been having a lot of these conversations with the decision

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Speaker 2: makers across div two nine six. Actually, the more I'm

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Speaker 2: saying that, the more. Kind of a catchy title anyway,

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Speaker 2: So that's pretty good, Yeah, that we've been having these

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Speaker 2: conversations to explain. Yes, firstly, you need to have over

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Speaker 2: three million dollars in your total superannuation balance to you

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Speaker 2: maybe've got two accounts still something like that, So firstly yes,

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Speaker 2: and then secondly, it's the earnings over that three million

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Speaker 2: dollars that will face the additional tax. So that's one

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Speaker 2: component of it. That's the top end of SUPER. This

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Speaker 2: effects about eighty thousand individuals in Australia at the last count.

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Speaker 2: The other element of equity though, which is really important

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Speaker 2: if you think about Super, it is a tax construct,

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Speaker 2: isn't it. The bargain of it, like the sort of

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Speaker 2: contract between every working Australian and every Australian is that

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Speaker 2: working Australians will set money aside for the purposes only

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Speaker 2: of their retirement income. And because of that, like if

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Speaker 2: they do that, then they will receive tax concessions for

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Speaker 2: having done so.

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Speaker 1: Yep.

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Speaker 2: That pretty much means that you should be paying less

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Speaker 2: tax for the money you've set aside than the money

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Speaker 2: you've got outside of SUPER. So that's the bargain. Yep,

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Speaker 2: that is struck fair. If you think about those people

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Speaker 2: earning under the lowest marginal tax rate there, actually there's

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Speaker 2: a few of them, way more than the eighty thousands

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Speaker 2: that are affected at the top end, that are going

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Speaker 2: to be paying more tax in SUPER than outside of SUPER.

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Speaker 2: So do you see that for them the bargain doesn't work.

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Speaker 1: Yeah, yeah, yeah, yeah. Now there is the government I'm

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Speaker 1: going to get it wrong. It's list Is that the

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Speaker 1: right term? The offset?

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Speaker 2: It's called LISTO. Maybe we will do another episode on

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Speaker 2: acronyms and how you use it. LISTO is a low

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Speaker 2: income superannuation tax offset. What that does is that that

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Speaker 2: aims to correct that bargain, but it hasn't kept up

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Speaker 2: with taxation rate changes and it doesn't correct it to

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Speaker 2: the point where people are actually better off. So we

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Speaker 2: need some changes to LISTO. Those changes would be affordable

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Speaker 2: if we ring fenced the top end. You know, this

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Speaker 2: tax that's been put on people with over three million

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Speaker 2: dollars and we popped it into the bottom end.

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Speaker 1: Yeah, And so what you're saying, so you're not against

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Speaker 1: the top end extra tax as such. You just think

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Speaker 1: the money should be used in a better way. I

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Speaker 1: Rather than going into general revenue, it should actually go

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Speaker 1: to help those who aren't winning this part of the bargain.

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Speaker 2: That would be a real measure of equity, wouldn't it.

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Speaker 2: So if one of the key components of our system

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Speaker 2: is to make sure that it's equitable and that we're

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Speaker 2: distributing those tax concessions, because even though they're not they

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Speaker 2: feel like they're not real, they're very real aren't they.

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Speaker 2: If you're giving away time, then you're missing out on

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Speaker 2: public spending. So we need to make sure that they're

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Speaker 2: equitably distributed, and a way of doing that is to

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Speaker 2: think when you take from the top end that you

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Speaker 2: give to the bottom.

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Speaker 1: Stay with me, Mary, we'll be back in a minute.

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Speaker 1: My guest today is Mary Della Hunty, chief executive Officer

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Speaker 1: of the Association of Superannuation Funds of Australia. Okay, so

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Speaker 1: it's kind of a redistribution measure as well as a

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Speaker 1: tax concession. It hasn't made it through the House of

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Speaker 1: Reps yet though, and it let alone the Senate. Is

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Speaker 1: that that's where the legislation's up to.

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Speaker 2: It's been hotly debated and there's a lot of discussion

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Speaker 2: and it's confusing, and so it's helpful to have, you know,

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Speaker 2: the conversations with you and your listeners about what it

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Speaker 2: actually means and how it actually works, because that helps

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Speaker 2: policymakers understand this as well. A few of the components

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Speaker 2: of it are a little bit unusual, but you know

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Speaker 2: that's proper, isn't it when you kind of when you're

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Speaker 2: looking at trying to do something that isn't a complex

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Speaker 2: tax environment. It's got to look a bit messy until

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Speaker 2: it's not. So we kind of we welcome those discussions,

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Speaker 2: but we would like to see the passage of it

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Speaker 2: through the House because it's me for people.

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Speaker 1: What about the unrealized I mean it seems to where

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Speaker 1: it's being held up, it seems to be the unrealized gain,

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Speaker 1: So I actually having to pay tax on unrealized gains.

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Speaker 1: Now an individual, they do have to put their hand

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Speaker 1: in their pocket in as much as it's probably presumably

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Speaker 1: any of those taxes is coming out of the super

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Speaker 1: which they own, though it's probably not help hurting their

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Speaker 1: cash flow pre sixty five. Is that fair the unrealized

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Speaker 1: taxing the unrealized gains or not.

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Speaker 2: There's been a bit of chatter about this unrealized capital gains,

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Speaker 2: and it's I guess it's fair. It's definitely fair to

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Speaker 2: analyze it. It's a little bit I think disingenuous to

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Speaker 2: suggest that this is wildly inappropriate. When you look at

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Speaker 2: the principle of taxing unrealized capital gains and you sort

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Speaker 2: of think, well, where else is this done? You can

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Speaker 2: pretty well draw a straight line between that principle and

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Speaker 2: land tax. Well, you know, it's the same sort of thing,

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Speaker 2: isn't it. I'm paying land tax on a property that

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Speaker 2: I haven't sold for a capital appreciation for hopefully appreciate

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Speaker 2: that I haven't realized. That is, in effect an unrealized

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Speaker 2: capital gains a calculation. The other place that this has

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Speaker 2: used is in Centilink. And isn't it interesting that in

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Speaker 2: the public debate about these unrealized capital gains we are

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Speaker 2: hearing a lot of noise from people who are who

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Speaker 2: are asset holders, who believe this to be pretty unusual,

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Speaker 2: But we don't hear the sort of the voiceless in

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Speaker 2: this are the people who have had to do this

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Speaker 2: year after year in order to have their Sentilink benefits assist.

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Speaker 2: So this is not an unusual construct in the Australian system,

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Speaker 2: but it's never been applied in this sense. So there

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Speaker 2: have been floated other ways of perhaps doing that. One

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Speaker 2: of those ways might be so you use the same principle,

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Speaker 2: but you're allowed to run a debt with the ATO.

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Speaker 2: That's possibly something that could be explored. But these can

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Speaker 2: be explored in a form of regulation afterwards. But let's

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Speaker 2: get the principle done that we believe this is probably

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Speaker 2: it's not an unusual way. It's a little unorthodox in

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Speaker 2: this setting, but a lot of Australians are living under

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Speaker 2: this already. And move forward from.

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Speaker 1: That point broadly, Mary, how important is it to get

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Speaker 1: the principles right up front, given the size of the

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Speaker 1: superannuation pool in Australia sort of heading towards four trillion dollars,

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Speaker 1: the fact that governments of all persuasions are gain to

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Speaker 1: be looking at that and changing the rules in the future.

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Speaker 1: We hope that doesn't happen in a sense, we need

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Speaker 1: it to be an integrity to be there. But kind

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Speaker 1: of what you're arguing here the equity argument in terms

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Speaker 1: of ak the over three million taxing on the earnings,

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Speaker 1: but actually let's use that money for people who need it.

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Speaker 1: How important is it to get those principles right now,

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Speaker 1: because presumably they become precedent setting for what happens in

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Speaker 1: the future.

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Speaker 2: Yeah, it's always important to get the principles of a

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Speaker 2: piece of legisci And right, there's another there's something else

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Speaker 2: that's being considered in this term of Parliament as well,

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Speaker 2: which would like to see go through, which is the

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Speaker 2: objective of superannuation legislation too. The objective of superannuation sets

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Speaker 2: that has like an anchor point for any decision of

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Speaker 2: Parliament that that touches the super system to have to

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Speaker 2: have a statement of compatibility against that objective. That's probably

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Speaker 2: you can see how those sort of things work hand

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Speaker 2: in hand. Where without that, as you rightly point out,

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Speaker 2: you're sort of wondering, is it formal function all the

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Speaker 2: time in this legislation, And that would be really helpful too.

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Speaker 2: We think that's a really crucial piece of legislation. And

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Speaker 2: then it's the legislation, but then it's the action that

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Speaker 2: it sets up, which is that so now I must

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Speaker 2: have a statement of compatibility, which is you know, would

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Speaker 2: go to ease some of these debates.

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Speaker 1: I think, yeah, Mary plenty to chew on. Thank you

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Speaker 1: very much for talking to Fear and thanks that was

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Speaker 1: Mary Della Hunty, CEO of the Association of Superannuation Funds

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Speaker 1: of Australia, which is a great supporter of this podcast.

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Speaker 1: This is the Fear and Greed Business Interview. Join us

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Speaker 1: every morning for the full episode of Fear and Greed.

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Speaker 1: Daily business news for people who make their own decisions.

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Speaker 1: I'm Sean Elmer, enjoy your day,