Chalmers eyes high super balances for tax increase amid revenue slump
Jim Chalmers is eyeing changes to concessions on high-value superannuation accounts, after it was revealed the tax break will cost the government $55bn this year.


News.com.au
December 18, 2024

Jim Chalmers is eyeing a crack down on super concessions after revealing they were tipped to cost Commonwealth coffers $55bn this financial year.

The federal Treasurer on Tuesday released the Tax Expenditures and Insights State­ment detailing 48 tax concessions it was reviewing.

Concessions on super was top of the pack.

Amid higher public spending, driven partly by increased demand for public services, and a revenue slump on the back of plummeting mineral earnings, the government has been scrambling to find ways to plug fiscal holes.

Speaking to press in Canberra after the statement was released, Mr Chalmers acknowledged growing demand for government services was weighing on federal budgets, but said Australians “are right to expect a decent level of services”.   

Aussies with high value superannuation accounts could be taxed more.
“Whether it’s aged care, Medicare, early childhood education, the care economy more broadly, this is going to become an increasingly important part of our economy as our population ages in particular,” he told reporters.

“We’ve tried to make room for that, tried to make sure we can pay people in these important parts of our economy appropriately so that we can recruit people into these areas.”

He said the Albanese government was pursuing a “combination of spending restraint elsewhere, finding all of those savings, some modest but meaningful tax reform means that we can pay for these priorities”.

“The focus for us is we have some unfinished business when it comes to some of the tax measures that we’ve already announced, multinationals, super tax concessions and the like and that’s our focus rather than new elements of an agenda on that front,” he said.

Speaking to press in Canberra after the statement was released, Mr Chalmers acknowledged growing demand for government services was weighing on federal budgets, but said Australians “are right to expect a decent level of services”.      

https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxe...




Most basic foods, some education courses and some medical, health and care products and services are GST-free, often referred to as exempt from GST.

Things that are GST-free include:

most basic food
some education courses, course materials and related excursions or field trips
some medical, health and care services
some menstrual products
some medical aids and appliances
some medicines
some childcare services
some religious services and charitable activities
supplies of accommodation and meals to residents of retirement villages by certain operators
cars for disabled people to use, when certain requirements are met
water, sewerage and drainage
international transport and related matters
precious metals
sales through duty-free shops
grants of land by government
farmland
international mail
exports
sales of businesses as going concerns
some telecommunications supplies
eligible emissions units.

Do Australia's super tax concessions take from the poor and give to the rich?


Sun 22 Dec 2024
ABC News

In Australia's superannuation system, over two-thirds of the tax breaks flow to the top 20 per cent of income earners. 


Last week, the Albanese government's budget update had some surprises in it.

One of the biggest involved big upward revisions to the size of Australia's superannuation tax concessions.   

Let's take a look at them.

Earlier this year, the economist Chris Richardson said our super system was already acting like "a reverse Robin Hood" because it was taking money from poorer Australians and giving it to the rich.   

Will higher tax concessions make that problem worse?

How much do they cost?
You can find Treasury's latest estimates of Australia's super tax concessions here: 2024-25 Tax Expenditures and Insights Statement.

In the document, Treasury officials explain what's happening.

The Albanese government has handed down its mid-year budget update.

At the beginning of this year (January), Treasury officials were forecasting that Australia's super tax concessions were going to cost the government $50.1 billion in forgone revenue in 2025-26.

But in their new estimates, published last week, they say those super tax concessions will now cost the government $59.5 billion in 2025-26, which is $9.4 billion more than they were forecasting in January.

And in 2026-27, they say Australia's super tax concessions will now cost the government $62.8 billion, which is $9.5 billion more than they were forecasting.   




Treasury officials say the upward revisions to the size of the government's super tax concessions are being driven by a few things.

They're forecasting higher-than-expected employee earnings over the next four years, which will flow into higher superannuation contributions, and they're forecasting a stronger capital gains outlook, which will support higher earnings within superannuation balances.

Since super contributions and earnings are both taxed at a concessional rate (15 per cent), that means the "cost" to the government from its super tax concessions (via forgone revenue) will be $18 billion more than expected over the next two years.

Who will benefit most?
It's worth thinking about who will benefit from those tax concessions.

In 2023, the Parliamentary Budget Office (PBO) published a great explainer: How is super taxed?

If you're after an introduction to how our super system works, and how it's taxed, it's a great place to start.

As it shows, super systems can be taxed at three points:

When contributions are made
When super assets earn investment returns (earnings)
When withdrawals are made
Australia's super system is taxed concessionally, which means it is generally taxed at a lower rate than other forms of taxable income (e.g. it's taxed at a lower rate than an individual's marginal tax rate).


Should super tax concessions be wound back?

Australia's government taxes most super contributions and earnings at a flat rate of 15 per cent, and it generally doesn't tax withdrawals from super in retirement.

If those three taxing points are denoted as either T for taxed or E for exempt, Australia is said to have a "TTE" super tax model.

That's because we tax contributions, we tax earnings, but withdrawals are mostly exempt from taxes.

Australia is unusual in this regard.

The most common retirement scheme for OECD countries is the EET taxing model, which means their contributions and earnings are exempt from taxes, but their withdrawals are taxed.



Super systems in the OECD
Australia's 'TTE' tax model for its super system is uncommon among OECD countries. (Source: Parliamentary Budget Office budget explainer, 27 April 2023, "How is super taxed?" page 18.)

Why does Australia have a TTE model?

As the PBO explains, when Australia's compulsory super guarantee was introduced in 1992, the decision to tax contributions and earnings meant revenue would be raised sooner from the system.

Under an EET model, the government wouldn't have raised any revenue from young individuals entering the workforce until they retired, potentially decades later.

But under a model that taxed contributions and earnings, even with relatively low tax rates, Australia's government would collect revenue from an individual's super income throughout their entire working life.

When Paul Keating brought in compulsory super it changed everything.

Many people started to invest in their future by paying extra super to boost their savings for retirement. Some people bought fishing boats, sportscars, holidays and high spending habits while some saved and were a bit more frugal. Now they want to tax the ones that did save their money. When are we ever going to learn. If you punish commonsense and promote poor discipline life won't get better.

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Keating! KEATING!!!

Under the proposal, the earnings on super balances of more than $3 million will be taxed at 30 per cent, rather than 15.   

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Of course they will.

The Govt shouldn't even know how much super each person has -
it's none of their business.