Labor’s $14bn tax grab will have major repercussions for wealthy Australians
Written by Carl Turner on May 04, 2015.
The date of the next Australian federal election has not yet been set but Australian politicians are already gearing up for the fight in advance of polling, which will take place between August 2016 and January 2017. The Labor Opposition have already announced a series of fiscal policies which could have major repercussions for wealthy Australians.
Last week Bill Shorten, the Opposition Leader revealed plans to raise more than $14bn over the course of a decade by targeting superannuation schemes of the wealthy. He argued that the current superannuation system effectively provides a tax haven for the wealthy and that the system is unsustainable.
In a two-fold attack his proposals will affect those earning more than $75,000 from their super as well as cutting the threshold for concessions on pension contributions from $300,000 to $250,000.
Under current regulations, anyone over the age of 60 benefits from tax-free superannuation income but under Labor’s proposed new legislation any income in excess of $75,000 will be taxable at 15%. It is estimated that approximately 60,000 retirees with a super account balance over $1.5m will be affected by the changes which would net $1.9bn over four years and more than $14bn over the course of a decade. This threshold is lower than the $100,000 proposed in the 2013 Labour budget which was rejected by Parliament.
The Opposition’s second proposed policy will hit an estimated 110,000 Australians earning between $250,000 and $300,000. They will be affected by a reduction in the threshold for the higher rate contributions on superannuation. Under existing rules contributions are taxed at 30% for anyone earning over $300,000 and 15% for anyone else. The new proposal will drag an estimated 110,000 earners into the higher bracket, which according to Labor would raise $5.1bn over a decade.
While the Labor opposition are intent on hitting high earners and wealthy retirees, Prime Minister, Tony Abbott pledged to keep taxation on supers at current levels. Those likely to be affected by the changes will no doubt be keeping a close eye on the fortunes of the two major parties over the next 18 months and may wish to make changes to their financial plans to mitigate the consequences of Labor’s proposed policies if they look like winning the next federal election.
Disclaimer: Infinity is not licensed or qualified to give tax advice.
This article is intended for information only and does not constitute tax advice. If you are in any doubt about your tax status please contact a qualified professional.