Government Should Control Spending, Not Dip Into Our Retirement Nest Eggs

Australian Treasurer Jim Chalmers (L) speaks to the media during a press conference as Prime Minister Anthony Albanese looks on at Parliament House in Canberra, Australia, on Feb. 28, 2023. AAP Image/Lukas Coch

Commentary

The announcement by the federal government that it intends to change the tax structure on superannuation (pension funds) should be of concern to all Australians. Indeed, it should be concerning to all Australians as it is arguably retrospective.

We are once again seeing a federal treasurer targeting a soft target (superannuation) in an attempt to address current budget problems.

History shows that governments of all persuasions have trouble keeping their hands off the retirement nest eggs of Australians.

In summary, the announced changes are as follows:

• If you have a superannuation fund balance of more than $3 million (US$2 million), then any earnings on your superannuation balance above this amount will be taxed at the new rate of 30 percent, rather than the current rate of 15 percent; and
• This change will be effective from July 1, 2025, subject to the required legislation passing the federal parliament.

The Labor estimates this will affect about 80,000 Australians. However, this number will inevitably increase as existing funds grow and contributions are made.

However, with the average Australian’s superannuation fund balance being around $150,000 (US$100,000), most people—at least in the short term—will not be affected.

Pedestrians move past a billboard along George Street in Sydney, Australia on Oct. 18, 2022. Lisa Maree Williams/Getty Images

Consequently, many people will see this and say, “So what?” as their superannuation balance is not and never will be $3 million.

Yet this arguably is a short-sighted view as the real issue is that some Australians will be financially punished despite the fact that they complied with the taxation requirements of the time and acted in good faith to accumulate their savings.

They will be victims of what is effectively a retrospective tax change, and the move will adversely impact the confidence and ability of Australians to plan for their future.

Broken Promises

In the lead up to last year’s May federal election, on March 27, 2022, the now treasurer, Jim Chalmers, stated that if elected: “We’ve said about superannuation that we would maintain the system. Australians shouldn’t expect major changes.”

On May 2, 2022, then opposition leader Anthony Albanese stated, “We have no intention of making any super changes. One of the things we are doing in this campaign is we are making all of our policies clear.”

However, on Feb. 28, 2023, Albanese stated in relation to his announced superannuation taxation changes, “This is an important reform ... I think this is the right thing to do.”

If the prime minister is really serious about this reform, the question he must be asked is: “Will the ‘defined benefit payments’ for politicians elected before 2004 and eligible for a pension, be adjusted so the concessional tax treatment on their annual pension payment is also taxed?”

I expect the likely answer will be no, but even if it is not, it will probably mean that the defined benefit superannuation fund will absorb any additional tax obligations, although this is still unclear.

Of even greater concern for all Australians should be the federal government’s short-lived dalliance with removing the current capital gains tax exemption on the family home (forcing families to pay a tax if they sell their home). This should send shivers down the spine of every current and aspiring homeowner.

A general view of homes in the suburb of Balmain is seen in Sydney, Australia, on Sept. 7, 2022. Lisa Maree Williams/Getty Images

Should this exemption be removed, it would have a devastating effect on the future financial security of countless Australians.

Thankfully, at the behest of the prime minister, the treasurer quickly backtracked on this politically suicidal and socially repugnant idea.

Looking for the Easy Way Out

What we have seen is that when faced with a diabolical budget position, the federal government is looking at new ways to raise revenue.

Arguably, they are looking at the budget problem from the wrong direction—rather than looking at how to increase taxes, they should be looking at expenditure.

Many Australians can readily identify examples of excess or irresponsible federal government expenditure. For example, the regular cost blowouts on major infrastructure projects.

The key issue to consider in this debate is the principle involved—retrospective tax changes create great uncertainty, are inherently unfair, and should be avoided.

Any changes to the taxation arrangements of superannuation should be prospective, thus allowing Australians to make informed decisions regarding their investment options, including superannuation.

With increasing pressures on the budget, the federal government should also be welcoming, and encouraging as many Australians as possible to provide for their own retirement via superannuation, rather than being reliant on the government funded aged pension.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.