The federal government has continued to remain quiet on how it intends to tax the super system, with Superannuation Minister Bill Shorten refusing to confirm any new details last night.
Although Prime Minister Julia Gillard confirmed this week the government would not tax withdrawals for super fund members aged over 60, continued reports indicate the federal budget will contain a new tax on super.
Bill Shorten said yesterday at a press conference, “I can’t rule things in or out”.
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“What I can do is ensure that there’s no false scare campaigns running around,” he said. “The PM made it clear we will keep to the policies we stated in terms of the withdrawal tax.”
“The next issue in superannuation to be resolved is to get the opposition to back down on the billion dollar tax cut to 3.6 million battlers.”
Tax experts have already expressed their frustration over the lack of clarity around possible changes to the super system, saying the government shouldn’t delve into super – the savings won’t be sustainable in the long term, they argue.
But Terry Hayes, senior tax writer at Thomson Reuters, says “the sky’s the limit” when it comes to what the government could tax in terms of super.
“It’s a government looking for revenue, so they could, in theory, tax anything.”
With so much confusion occurring at the moment regarding what the government will or won’t tax, SmartCompany has put together a few examples. Here are four different superannuation targets the government could attack in the May budget.
Currently the superannuation guarantee mandates employers pay an additional 9% of a worker’s salary into a super account, (although that figure is soon to rise). Hayes suggests the 15% tax rate charged on these contributions could increase.
“That’s a radical change, and it would be controversial to say the least, so they could certainly do that.”
Transition to retirement pensions
Currently workers who start drawing on their super accounts can still do so while collecting a pension – and the earnings on that pension are tax free. “They could look at tweaking that,” says Hayes.
“Again, that’s dramatic, and lot of people would jump up and down about it.”
Contribution tax for the wealthy
Hayes says the contribution tax for wealthy super members could be a target. Anyone earning over $300,000 a year has their contributions taxed at 30%. Hayes suggests one possible taxation area could include lowering that threshold.
While Julia Gillard has already ruled out taxing withdrawals for super members aged over 60, Hayes says there’s nothing to stop the government from increasing that age to 61 or 62. After all, the government has already said it will increase the retirement age over the next decade to 67.
“It still keeps the withdrawals tax free, so it’s something the government could possibly do.”