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Wednesday, 31 August 2016
Page: 225


Senator LEYONHJELM (New South Wales) (14:36): My question is to Senator Cormann as the Minister representing the Minister for Revenue and Financial Services. Given expected investment returns, your policy to increase tax on Australians with super balances over $1.6 million is more punitive than Labor's policy to increase tax on earnings over $75,000. Is the government seeking to outdo Labor at taking other people's money? Do you agree that fewer people will ever reach a super balance of $1.6 million because of your policy to impose marginal tax rates on post-tax contributions over $500,000 since 2007 and to increase tax on annual contributions over $25,000? Do you accept that your attack on the hard work, thrift and caution of Australians who save to avoid reliance on the pension represents class warfare and a betrayal of Liberal values?

Senator CORMANN (Western AustraliaMinister for Finance and Deputy Leader of the Government in the Senate) (14:37): In relation to those latter questions, no, I do not accept that. And I also do not accept that the policy the government has put forward in the budget to make tax concessions for superannuation fairer, more sustainable and more fit for purpose is more stringent than Labor's when it comes to the $1.6 million cap. What I would do in the first instance is refer the honourable senator to Labor's own policy document released in, I think, April 2015, where their case study actually pointed to the fact that the $75,000 earnings cap that you refer to actually would apply, by their modelling, to balances of $1.5 million or more.

There are a range of other features that make our approach better. Firstly, earnings in savings of up to $1.6 million would continue to be completely tax free. In relation to earnings from savings above $1.6 million, there would be a concessional tax of 15 per cent applied. That $1.6 million threshold is indexed; the $75,000 is not. You are able, under our policy, to actually retain your earnings and save in your income-tax-free account—under Labor you are not—which means that you are actually able to grow that pie.

Furthermore, under Labor's approach, the unindexed $75,000 earnings amount would attract a 15 per cent tax. In years where you have a 10 per cent return, which actually has happened in years gone by, balances of $750,000 and above would actually be captured by that, whereas under our policy it is absolutely impossible for that to happen. We provide much more certainty to people.

On a more general point, the structural challenge we have is that a growing proportion of income generated in Australia is completely income tax free. That is not sustainable. It means that other Australians have to pay more tax in order to pay for the services provided by government. (Time expired)

The PRESIDENT: Senator Leyonhjelm, a supplementary question.

Senator LEYONHJELM (New South Wales) (14:39): Your tax take is 22 per cent of GDP and rising. How can your reaction to this be an increase in the taxation of retirement savings? Australia's trillion-dollar superannuation pool is a national treasure that is financing Australian business and infrastructure. Why are you attacking high super balances rather than cheering them on?

Senator CORMANN (Western AustraliaMinister for Finance and Deputy Leader of the Government in the Senate) (14:39): As I have indicated, the government's reforms are designed to ensure that tax concessions made available in the context of superannuation are fair, sustainable and fit for purpose. The purpose of superannuation tax concessions producing a lower tax rate or no tax rate—under certain circumstances—is to encourage people to save, to generate an income in retirement that replaces or supplements the age pension. It was never meant to be a tax effective wealth accumulation or estate-planning vehicle. What we are doing is making sure that, at the higher wealth and higher income end, people pay a more appropriate share of tax. If you have a situation where a growing amount of income generated in Australia, in particular at the higher wealth and higher income end, is generated completely tax free, it means that every other family has to pay more tax to pay for the goods and services provided by government— (Time expired)

The PRESIDENT: Senator Leyonhjelm, a final supplementary question.

Senator LEYONHJELM (New South Wales) (14:40): No other country in the world imposes high marginal tax rates on retirement savings accounts because, if they did, no-one would save in those accounts. Why then do you persist in calling Australia's taxation of superannuation 'concessional'? Should not personal tax rates of 37 per cent and 45 per cent be seen as a national disgrace rather than as a benchmark for all taxation?

Senator CORMANN (Western AustraliaMinister for Finance and Deputy Leader of the Government in the Senate) (14:41): I do not know how to describe a zero per cent tax rate as anything other than highly concessional. Obviously if you generate income and you pay zero per cent tax, that is the ultimate concession. When you have got a growing proportion of Australians at the higher wealth and higher income end that pay absolutely no tax on the income they generate then that means that every other Australian working for a living and saving and investing pays more tax than they might otherwise have to in order to cover the same level of expenditure. What we are seeking to do—and it is not just taxes at the higher end—is reform the superannuation tax arrangements as a whole, including providing better flexibility for low- and middle-income earners, and provide better flexibility, for example, for women, who might have disrupted work patterns, to enable them to come play catch-up when it comes to saving for their retirement using previously underutilised or unutilised concessional contribution caps and the like, providing something— (Time expired)