Leading fund manager Geoff Wilson urges Labor to consider Greens' super tax proposal, calls for indexing above inflation
A leading fund manager has urged Labor to consider the Greens' call to index tax on super accounts, but stressed this must match investment growth to ensure young Australians are not disadvantaged by retirement time.
Labor's plan to double the tax rate on funds in super accounts above $3m without indexations over time, alongside taxing unrealised capital gains, is back on the cards, as a new Senate make-up will likely allow Labor to guarantee legislation passes with only the Greens' support.
The Greens want Labor to lower this threshold to $2m, but support indexing it over time to match the rate of inflation.
Leading fund manager and Wilson Asset Management founder Geoff Wilson supports the Greens' call, but wants the threshold indexed well above the rate of inflation.
'With the Greens indexing it to the CPI (consumer price index), the risk there is young people are going to be significantly disadvantaged again because superannuation (is something) you effectively invest in assets,' Mr Wilson told SkyNews.com.au.
'What it would make sense for them to be looking at is growth in asset prices, which runs at probably double, if not more, than the CPI growth.
'If you want young people not to be disadvantaged, that's what you need to do.'
He noted the growth in house prices and equities is about 8-10 per cent per annum, while inflation grows at about 2-3 per cent, and said the threshold was less important than how it was indexed.
'In terms of the quantum, whether it's $2m, $3m or $4m, that's not the biggest thing,' Mr Wilson said.
'I don't think anyone's concerned about paying a higher tax rate as long as it's fair and the problem with this legislation is it's unfair because it's not indexed and it's not indexed to the right measure.'
Mr Wilson's call comes as new analysis of Labor's plan showed a 22-year-old earning average income their whole life would breach the $3m cap before retirement.
Treasurer Jim Chalmers' had claimed the change would only impact 0.5 per cent of Aussies, or 80,000 households, when revealing the policy in 2023.
AMP's deputy chief economist Diana Mousina took to LinkedIn with a diagram showing how an Aussie on the average full-time wage, with three per cent annual wages growth and the 12 per cent super guarantee, would breach the threshold by age 62.
She also told Sky News her diagram may have even underestimated how quickly the 22-year-old's super account would hit $3m.
'What people are forgetting is that average super returns have been about nine per cent in Australia in the last 30 to 40 years and I'm using assumptions closer to six per cent,' Ms Mousina told AM Agenda.
She also echoed Mr Wilson's point, arguing the Greens' plan to index taxation was better for younger Australians than Labor's proposal at a higher threshold.
'For someone who has a super balance right now of $2m, it's not a great policy for them because they have to pay a higher rate of tax,' Ms Mousina said.
'It depends what age you are and how much you've got in your super at this current point in time and then into the future.
'But it's just worthwhile to do the numbers yourself and think about how much actually are you going to have in your super.'
Labor has attempted to get the super tax legislation through the Senate multiple times, at one point trying to link it with a bill which would have scrapped debit card surcharges and reduce surcharges on credit cards.
However, it was still opposed by Senators David Pocock and Jacqui Lambie, who joined forces with the Coalition to defeat the proposals.
Prime Minister Anthony Albanese, before Labor's sweeping victory over the weekend, ruled out doing a deal with the Greens to lower the threshold.
Labor's super tax plan also drew intense backlash as it would mandate Australians pay taxes for gains on assets - such as farms and properties – above a $3m threshold in their super funds, even if they had not realised the return from those assets.
Mr Wilson said this would impact the 'lifeblood of Australia' as people would restructure their investments away from risk.
He also warned it could 'destroy innovation' and entrepreneurialism as a large amount of investment into technology start-ups comes from self-managed super funds.
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