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ABC News
28-05-2025
- Business
- ABC News
Tax expert warns if Labor's super tax changes fail to get up, chance for broader reform will be quashed
A leading tax expert has warned that if the federal government can't get its proposed changes to tax on superannuation accounts with balances over $3 million into law, it will destroy any chances of bigger tax reform. "If Labor falters in getting this proposal through, then we have no chance for future further tax reform," Robert Breunig, professor at Australian National University, told The Business. While the vocal outrage over the changes is now reaching a peak, with daily coverage in some publications, the bill was first introduced to parliament in late 2023. It would impose an additional tax rate of 15 per cent on superannuation earnings from the portion of an individual's account balance over $3 million at the end of a financial year. That's in addition to the current 15 per cent tax on concessional super contributions. It has been proposed to come into effect from July 1 but is yet to pass into law. Professor Breunig, the director of the Tax and Transfer Policy Institute at ANU's Crawford School of Public Policy, said the current superannuation tax breaks are "too generous", largely at the top end of the scale. "Super is taxed about right for the average person, but it's under-taxed for people with very large balances," he said. "Superannuation was designed for providing a retirement income for people so that people could have a comfortable retirement," Professor Breunig said, noting that the level of income will look different for different people, but could be in the realm of $100,000 or $200,000, or around 80 per cent of what someone was earning while they were working. "We've got people amassing now tens of millions of dollars in superannuation, which will generate millions of dollars of annual income for them. "That's well beyond what we think is reasonably required for retirement." While the criticism of Labor's policy has been loud in recent weeks, Treasury has said it will only initially affect less than 0.5 per cent of Australians with a super account, or about 80,000 individuals. "Whenever you do tax reform, you create winners and losers. "Even if the winners are a large group of people and the losers are a small group of people, the loser's often very squeaky," Professor Breunig told The Business, describing the debate around the super reform as "very vociferous". One of the arguments raised by opponents of the super tax changes has been the lack of indexation, meaning it will capture a increasing portion of the population as super balances climb with inflation over time. However, the Grattan Institute's program director of housing and economic security, Brendan Coates, has described the idea it will disproportionately affect younger generations as "simply nonsense". "Rather than being the biggest losers from the lack of indexation, younger Australians are the biggest beneficiaries," Dr Coates wrote in The Conversation. "It means more older, wealthier Australians will shoulder some of the burden of budget repair and an ageing population. Otherwise, younger generations would bear this burden alone … Professor Breunig argued much more significant tax reform is needed to address intergenerational inequality in Australia. For example, a switch from stamp duty charged on transfers of homes to a land tax, which would tax the growth in the value of property without discouraging the buying and selling of homes. "I think the other thing we really need to look at is that our system treats very wealthy older individuals as if they are very poor. "We give the age pension to people who have millions of dollars of assets. We treat them as if have no income. We provide age care to people without asking them to contribute to it. "I do think we need to look at putting all of people's assets, including the family home, into the age pension means test and into the means test for age care," Professor Breunig said. "Now, those will not be very popular policies, but they are really the policies that we need to address intergenerational inequity." He described the super changes as a "really important first step" to opening the door to broader reform. One of the other aspects of the policy seized upon by its critics is the fact that it will tax unrealised capital gains — that is, it will levy an annual tax of the increased paper value of an asset — for example, property held in a self-managed super fund that is yet to be sold, so the increase in value is yet to be "realised". On the failed campaign trail, ousted opposition leader Peter Dutton described the move as a "quasi-inheritance tax", while farming groups have said it could create cashflow issues for farmers holding properties in their super funds. Professor Breunig said people were currently putting assets like farms and properties into super funds as a tax shelter. "[Superannuation] wasn't set up to be a business vehicle where you have multiple property holdings or farms, or even actual businesses run through them, and the only reason people are doing that is to avoid tax." He said only taxing actual gains has encouraged people to hold onto assets, giving the example of someone holding multiple properties in an SMSF. He argued a fair approach would be to allow people to opt in to either paying the tax on unrealised gains annually, or accumulate the tax bill until the assets are sold. "That's very much what we do with council rates. If you're a pensioner, you don't have a lot of liquid assets and you get your rates bill, you call the council and you say, 'look, I don't have any money to pay this,' [and] they say, 'that's fine, we'll just keep track of what you owe us, we'll index it by inflation and when your house is transferred or sold, we'll then take the tax liability that you owe.' "So, we could give that to everybody in the system — we could say, 'we're going to tax the unrealised gains, you can pay it now, or we'll keep track of it, and we'll charge you when the property is either transferred or sold.'" The Grattan Institute's Dr Coates noted that one-fifth of all withdrawals from super are currently via bequests and Treasury expects that to grow to one-third of all withdrawals by 2060. "Superannuation in Australia was intended to help fund retirements. Instead, it has become a taxpayer-subsidised inheritance scheme," he wrote. A report from the think tank, released in January, found many retirees are net savers, with their super balances growing for decades after they retire, for fear of outliving their savings. Grattan's modelling showed that Australians who draw down their super at the minimum rate when they retire will leave the equivalent of 65 per cent of their original super balance unspent by the age of 92.
Yahoo
15-04-2025
- Business
- Yahoo
Where does New Hampshire get all of its not-so-great ideas?
"With Republicans firmly established as the MAGA Party, I wonder where the highest marginal tax rate was set when that crowd last considered America to be 'Great.'' (Photo) As Gov. Kelly Ayotte, President Donald Trump, and legislative and congressional Republicans continue to shape their marketing campaign for selling reductions in critical public services and programs as 'reasonable adjustments' to spending, it's important to keep up with your reading. If you're a fan of dark comedy, you should check out an April 14 New York Times dispatch headlined 'Republicans Ponder the Unthinkable: Taxing the Rich.' The premise of the necessarily short piece is that congressional Republicans are so shocked by the degree to which they've bamboozled the working class that they're 'quietly' — and antithetically — considering doing them a solid by increasing the tax rate on top individual earners (those above $609,351). 'For Republicans struggling with the roughly $4 trillion cost of continuing the 2017 cuts,' tax policy reporter Andrew Duehren writes, 'letting the top rate snap back to 39.6% (where it stood before Trump cut it to 37% during his first term) would be an easy way to reduce the cost of the bill.' Rather quickly, the story crumbles under the weight of its unlikelihood, placing it in the same news category as one headlined, 'Powerball ticket buyer dreamily considers benefits of taking lump sum over annuity.' The lottery ticket won't hit and the GOP won't tax the wealthy, and so the pros-and-cons exercise is meaningless. It shouldn't be meaningless, mind you, but it is. Even though the Tax Policy Institute calculates the return to 39.6% would save about $366 billion, the Times story notes, 'some Republicans quickly promised to try and kill any tax increases, and leadership was circumspect.' With Republicans firmly established as the MAGA Party, I wonder where the highest marginal tax rate was set when that crowd last considered America to be 'Great.' Was it the 88% of the Greatest Generation years of 1942 and 1943, or the 94% of 1944 and 1945? Probably not. Could it be that when they say 'Great Again' they're actually referring to the years just before and during the Great Depression, when the rate was 25% (and a low of 24% in 1929, the year that brought us Black Thursday)? While I'm sure they love that rate, it's tough to put a positive spin on an era of global economic collapse, so no. But it's also clear as day they don't mean the mythologized golden years of 1951 to 1963, when the rate was steadily 91% (except for the two years, 1952 and 1953, when it was 92%). 'Great Again' has to refer to Trump's beloved 1980s — the Gordon Gekko 'Greed is Good' era. When Ronald Reagan was elected president in 1980, the top rate was 70%, but by the time he left office after two terms, it was 28%. How great has Reaganomics worked out for the American working class, you ask? Here's what a first-ripple 1992 study from the Center on Budget and Policy Priorities found, as reported by the Los Angeles Times on Aug. 28 of that year: ''In the vast majority of states, economic growth during the 1980s was not shared evenly among the rich, the poor, and the middle class,' the study concluded. 'Instead, the wealthy fared substantially better than other income groups.'' Nearly three decades after that study, a 2020 Pew Research Center report offered a longer view of the kind of economic growth that is 'not shared evenly among the rich, the poor, and the middle class': Since 1980, Pew researchers said, there has been an 'uninterrupted increase in inequality' in America. And, this past October, the Congressional Budget Office reported that as of 2022, 'families in the top 10% of the distribution held 60% of all wealth, up from 56% in 1989.' Meanwhile, for the rest of the top half, that percentage fell from 37% to 34%, and the bottom 50% remained steady from 1989 to 2022 — at a shame-of-the-nation 6% (which, without factoring in future Social Security benefits, is actually 3%). That's a lot of numbers, so here's the flashcard: The top 10% in America holds about two-thirds of all wealth and the bottom 50% holds just (and optimistically) one-twentieth. And, since the beginning of the GOP's beloved (and still unfolding) Reagan Revolution, the middle class share has been heading in the wrong direction. If you listen to the Republican Party now — from Ayotte to Trump to legislative and congressional leaders — you won't hear about this nation's obscene acceleration of economic inequality since 1980. What you will hear, however, is an abundance of blame placed on those with the least — the undeserving Medicaid and SNAP recipients, the invading migrants, all of the people living with disabilities, various 'welfare' fraudsters — for allegedly hollowing out the middle class. That sure sounds like an unbelievable amount of macroeconomic influence for people holding 3 to 6% of national wealth, doesn't it? Truly, statistically, commonsensically unbelievable. Still, Republicans say they're slashing budgets not to punish the less fortunate, which is inarguably what they are doing in practice, but to eliminate 'waste, fraud, and abuse.' And they always say it in that singsongy order ('waste, fraud, and abuse') because it's meant to be an earworm marketing jingle rather than factual. You will also hear, from Ayotte, Trump, and Republican leadership, that any proposed Medicaid cuts will not affect 'vulnerable' people — and they always use the word 'vulnerable.' Why? Because since the November electoral victories they've been rewriting, all on their own, the definition of who is considered 'vulnerable' so they can more easily sell the punitive as a 'reasonable adjustment.' I wonder: How many more decades of data do we need in order to see who has benefited — and who has not — from the Reagan-era policies exalted and expanded by the modern American right? And, when will it become clear to Granite State voters that New Hampshire Republicans are following — to the letter — a playbook that has resulted in historic levels of economic inequality and all its targeted suffering? What I'm asking is, what will it take for the 90% who populate 'Other America' to realize they're getting played by the party of the 10%?
