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Australia Institute defends Div 296 as Coalition calls it a 'terrible idea'
While the controversial measures have received little support in the Senate, the think tank has argued Division 296 would “make the nation’s super system fairer”.
When the $3 million super tax legislation was shelved in December, the SMSF sector, in particular, greeted the news with cautious optimism, however, the measures have refused to stay buried, and there is little indication that the Labor government plans to scrap the changes altogether.
Adding fuel to the fire this week is public policy think tank the Australia Institute, which said the stalled changes “would make the nation’s super system fairer, at a time when so many Australians are doing it tough”.
“The vast majority of Australians can only dream of retiring with a super balance of $3 million. Most people end their working lives with just a fraction of that,” it said.
“While the superannuation system has enabled the likes of farmers and small business owners to place assets such as farms and properties into their super, the number of those who do that is small and most – if not all – do so as a way of reducing the amount of tax they pay.
“This is not what the superannuation system was designed to do.”
Pointing to Treasury estimates that show concessions on superannuation earnings and contributions hit $51.7 billion, the Australia Institute said that if the government was able to secure crossbench support on the measures, “all Australians would be better off”.
“The government’s proposal to reduce the taxation concession on balances over $3m is a much-needed reform to Australia’s superannuation system,” said Greg Jericho, chief economist at the Australia Institute.
“The proposed changes would affect only 80,000 of the around 17 million people with a super account.
“This financial year the richest 10 per cent will receive just over $20 billion in superannuation taxation concessions. This is at a time when around 23 per cent of Australian retirees end their working lives in poverty, compared to 11.1 per cent in Sweden and 3.8 per cent in Norway.
“Superannuation tax concessions are designed to encourage people to save and reduce dependency on the age pension, they are not designed to be used by the very wealthiest in society to avoid paying tax.”
The Coalition has, however, confirmed that if the tax were to pass ahead of the election, it would repeal it.
Shadow finance minister Jane Hume told Sky News on Monday Division 296 “should have been doomed from the start”.
“It's a brand new kind of tax, one we haven't seen in Australia before. One that hasn't worked in any other jurisdiction… This was a terrible idea from go to woe.
“The Coalition has said not only would we vote against it, but should it pass and we get into government, then we will repeal this terrible Labor tax.”
Tax dependent on election
Speaking on the SMSF Adviser Show, a podcast run by InvestorDaily's sister brand SMSF Adviser, Smarter SMSF chief executive Aaron Dunn said the survival of the Division 296 changes is heavily dependent on whether or not the government calls an election before the federal budget that is slated for March.
“First, quite clearly, we've seen both sides of Parliament move into election mode. That’s one thing, and we've seen announcements already start to occur,” Dunn said.
“What we have heard Labor discuss is they remain committed to introducing an additional level of tax, as we know it Division 296 tax, which in its current form, under the current government, it seems like it has been defeated.
“Yes, there are some further sitting days, but unless they can get three crossbench senators, which at this stage appeared unlikely, it feels like it's dead and buried.”
However, he said this will only continue to be the case until the upcoming federal election has been decided and a government has formed.
“If it’s the Labor Party, they remain resolute to look to introduce such a measure. Now, that will then depend upon it being reintroduced and then whether there is a minority government in the House or majority, and therefore who controls the Senate as well.
“So, there's a lot of balls in the air when it comes to this particular measure. The likelihood is our 1 July 2025 start date is dead and buried. It seems unrealistic but it doesn't mean that this legislation is dead and buried because it will be dependent upon who takes government and in what shape they take government.”
AUTHOR
Keith Ford
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