Labor’s new hit on super defies logic

Federal Labor has plans to make it even harder to save for retirement

By Noel Whittaker   Sunday Times  29 April 2018

One would think a major goal of all political parties would be to minimise changes to superannuation.

That would hopefully restore trust in the system, and encourage people to use superannuation for its original purpose – funding their retirement so as not to be a burden on the welfare system.

But it looks like the politicians can’t keep their hands off it.

I was dismayed to hear that during a recent speech to the Financial Services Council, Senator Kristina Keneally made the following comments on behalf of Shadow Treasurer Chris Bowen.

“We oppose the Government’s measures to allow catch-up concessional contributions and tax deductibility on personal superannuation contributions cap to $75,000 and further lower the high-income super contribution threshold to $200,000. We believe in increasing the superannuation guarantee to 12 percent when fiscal circumstances allow, which will greatly assist in maximising people’s retirement incomes in the future.”

I will discuss these issues in future columns, but today I will focus on the proposal to remove tax deductibility for personal concessional super contributions.

For many years superannuation regulations have prevented a person claiming a tax deduction for additional personal concessional contributions if an employer was contributing.

There was no logic to it, and nobody has been able to tell me the reasoning behind it.

This rule created two classes of employees.

A sole trader could make additional contributions and claim a tax deduction, but a company employee could not.

Well, they could if their employer allows the employee to contribute part of their gross pay as an additional contribution.

Some unscrupulous employers treated the extra salary sacrifice contributions as part of their 9.5 percent compulsory super obligation, conning their employees by reducing their compulsory contribution.

But generally, employees of companies that offered salary sacrifice were better off.

In the latest raft of changes by the Turnbull Government, all taxpayers were given equality.

This is the kind of change that super needs – small improvements to the system.

Everybody can make additional contributions (up to the concessional limit of $25,000 a year including employer contributions) and claim a tax deduction.

Now Labor is threatening to reverse this long overdue change in the rules.

Where is the logic in that?

Many employees cannot afford additional contributions, even if the employer offers salary sacrifice.

But they may well be able to save a bit and make an extra contribution at the end of the financial year.

One major benefit of doing so would be to get a tax refund, which could be used as a contribution to superannuation in the following year.

The more politicians tinker with it, the less attractive it becomes to lock money away in super.


Oppose changes to tax deductibility for personal superannuation contributions – Read the recently released ALP Policy on Super here

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