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representatives vote 2024-10-09#1
Edited by
mackay staff
on
2024-11-02 16:11:51
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Title
Bills — Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023; Consideration in Detail- Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 - Consideration in Detail - Indexation
Description
<p class="speaker">Kylea Tink</p><p>by leave—I move amendments (1) to (3) as circulated in my name together:</p>-
- The majority voted against [amendments](https://www.openaustralia.org.au/debates/?id=2024-10-09.114.1) introduced by North Sydney MP [Kylea Tink](https://theyvoteforyou.org.au/people/representatives/north_sydney/kylea_tink) (Independent), which means they failed.
- ### What do the amendments do?
- Ms Tink [explained that](https://www.openaustralia.org.au/debates/?id=2024-10-09.114.1):
- > *The amendments I'm moving today would ensure that the large superannuation balance threshold is indexed annually, in line with the consumer price index. As it stands, the $3 million large superannuation balance threshold, established in the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill of 2023, is not indexed, leaving the decision of when and if to lift the threshold to a future government at some unknown time. This is simply not consistent with sound long-term superannuation taxation policy. It does not provide sufficient certainty to those with money in super or the super industry, and, if left unaddressed, it will create intergenerational inequities.*
- ### Amendment text
- > *(1) Schedule 1, item 15, page 10 (after line 17), after section 296-40, insert:*
- >
- >> *296-42 Large superannuation balance threshold*
- >>
- >> *The large superannuation balance threshold is:*
- >>
- >>> *(a) for the 2025-26 financial year—$3 million; or*
- >>>
- >>> *(b) for a later financial year—the amount worked out by indexing annually the amount mentioned in paragraph (a).*
- >>>
- >>> *Note 1: Subdivision 960-M shows how to index amounts. However, annual indexation does not necessarily increase the amount of the cap (see section 960-285).*
- >>>
- >>> *Note 2: The rounding amount for indexation is $100,000 (see subsection 960-285(7)).*
- >
- > *(2) Schedule 1, page 28 (after line 10), after item 17, insert:*
- >
- >> *17A Section 960-265 (after table item 10A)*
- >>
- >>> *Insert:*
- >>
- >> *17B Paragraph 960-285(3)(a)*
- >>
- >>> *After "paragraph (b)", insert "or (c)".*
- >>
- >> *17C At the end of subsection 960-285(3)*
- >>
- >>> *Add:*
- >>>
- >>> *; or (c) if the amount is mentioned in item 10B in section 960-265—the amount for the 2025-2026 financial year.*
- >>
- >> *17D Subsection 960-285(5) (paragraph (a) of the definition of base quarter )*
- >>
- >>> *After "paragraph (b)", insert "or (c)".*
- >>
- >> *17E Subsection 960-285(5) (at the end of the definition of base quarter )*
- >>
- >>> *Add:*
- >>>
- >>> *; or (c) if the amount is mentioned in item 10B in section 960-265—the quarter ending on 31 December 2024.*
- >>
- >> *17F Subsection 960-285(7) (cell at table item 3, column 1)*
- >>
- >>> *Repeal the cell, substitute:*
- >>>
- >>> *(3) Schedule 1, item 18, page 29 (line 27), omit "means $3 million", substitute "has the meaning given by section 296-42".*
<p class="italic">(1) Schedule 1, item 15, page 10 (after line 17), after section 296-40, insert:</p><p class="italic">296-42 Large superannuation balance threshold</p><p class="italic">The <i>large superannuation balance threshold</i> is:</p><p class="italic">(a) for the 2025-26 financial year—$3 million; or</p><p class="italic">(b) for a later financial year—the amount worked out by indexing annually the amount mentioned in paragraph (a).</p><p class="italic">Note 1: Subdivision 960-M shows how to index amounts. However, annual indexation does not necessarily increase the amount of the cap (see section 960-285).</p><p class="italic">Note 2: The rounding amount for indexation is $100,000 (see subsection 960-285(7)).</p><p class="italic">(2) Schedule 1, page 28 (after line 10), after item 17, insert:</p><p class="italic">17A Section 960-265 (after table item 10A)</p><p class="italic">Insert:</p><p class="italic">17B Paragraph 960-285(3)(a)</p><p class="italic">After "paragraph (b)", insert "or (c)".</p><p class="italic">17C At the end of subsection 960-285(3)</p><p class="italic">Add:</p><p class="italic">; or (c) if the amount is mentioned in item 10B in section 960-265—the amount for the 2025-2026 financial year.</p><p class="italic">17D Subsection 960-285(5) (paragraph (a) of the definition of <i>base quarter</i> )</p><p class="italic">After "paragraph (b)", insert "or (c)".</p><p class="italic">17E Subsection 960-285(5) (at the end of the definition of <i>base quarter</i> )</p><p class="italic">Add:</p><p class="italic">; or (c) if the amount is mentioned in item 10B in section 960-265—the quarter ending on 31 December 2024.</p><p class="italic">17F Subsection 960-285(7) (cell at table item 3, column 1)</p><p class="italic">Repeal the cell, substitute:</p><p class="italic">(3) Schedule 1, item 18, page 29 (line 27), omit "means $3 million", substitute "has the meaning given by section 296-42".</p><p>The amendments I'm moving today would ensure that the large superannuation balance threshold is indexed annually, in line with the consumer price index. As it stands, the $3 million large superannuation balance threshold, established in the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill of 2023, is not indexed, leaving the decision of when and if to lift the threshold to a future government at some unknown time. This is simply not consistent with sound long-term superannuation taxation policy. It does not provide sufficient certainty to those with money in super or the super industry, and, if left unaddressed, it will create intergenerational inequities.</p><p>From the outset, experts and commentators have been almost universally critical of this lack of indexation. Indeed, during the consultation process on this legislation, AustralianSuper wrote:</p><p class="italic">Indexation of the threshold at which the measure applies would lead to greater certainty and promote stability and confidence in the system.</p><p>The National Farmers Federation said:</p><p class="italic">Given the long-term nature of superannuation and rising inflation, the $3 million value will increasingly capture a greater share of Australian farming assets. As such, the NFF recommends indexing the cap to inflation or the Consumer Price Index.</p><p>The Tax Institute, the Business Council of Australia and the Institute of Financial Professionals Australia, just to name a few, also all recommended that the proposed $3 million threshold be indexed.</p><p>Closer to home, when I talk to people in my community about this bill, even those who wholeheartedly support the intent of it, they see the lack of indexation on large super balances as absurd. Without indexation, the threshold does not currently account for inflation, and, therefore, reform most certainly will impact more and more ordinary Australians over time.</p><p>The Treasurer has said that from 2025, the concessional tax rate applied to future earnings for balances above $3 million is expected to apply to around 80,000 people. However, alternate modelling by the Financial Services Council puts that figure closer to half a million Australians if the cap remains unindexed. The number of people impacted in their lifetime would include more than 200,000 Australians under the age of 30.</p><p>The lack of indexation is out of step with current accepted tax principles, with most other elements of our super system being indexed, from contribution limits to the transfer balance cap and lump-sum benefits. Leaving the cap at $3 million without indexing it will mean people in my generation will have an entirely different and relatively higher threshold to that of my children, with the real value of the threshold likely falling to $2 million, due to inflation, by around 2040. Take the example of a current 30-year-old. By the time they retire at the age of 65, the real value of the cap will have fallen to $1.3 million, assuming inflation of just 2½ per cent. If inflation is higher, say four per cent, the real value would actually be $760,000—quite the departure from a $3 million cap.</p><p>Ultimately, my electorate of North Sydney and many individuals and stakeholders across this country broadly support the intent and principle of this bill—that is, to rein back generous tax breaks for super balances that are beyond what is currently deemed necessary to fund a comfortable retirement. However, in its current form, and without indexation, this legislation leaves many deeply concerned. The large superannuation balance threshold should be indexed to keep pace with inflation, to avoid bracket creep and to ensure greater intergenerational fairness. This amendment does just that. It is sensible, it is simple, it is practical and it is in line with current taxation law. I commend the amendment to the government.</p> <p class="speaker">Stephen Jones</p><p>I thank the member for North Sydney for her ongoing and good-faith engagement on this issue and on a range of other issues around the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023. I know that she's bringing the propositions that she's bringing in good faith and that they reflect representations that have been made to her by members of her community. We won't be supporting the amendments, and I'd just like to point out, in very brief terms, why.</p><p>Firstly, a matter of context: the average balance on retirement today is somewhere between $150,000 and $200,000. That's a long way south of the $3 million threshold that has been set in the bill before the House. It's for that reason that we're confident that less than 0.5 per cent of all fund members will be caught by the new provision—about 80,000 people, on introduction—and we don't see any significant shift in that in the near term.</p><p>It is of course the norm within the taxation system that we do not index tax thresholds. For example, we don't index personal income tax thresholds. Indeed, the previous government didn't index the division 293 tax threshold when it introduced those changes about a decade ago. It is of course open to a future government to decide to lift the threshold, and a future government would make that decision in the context of all the other fiscal pressures that are bearing upon a government at that point in time.</p><p>It's a modest change. It's a change that won't impact more than 99.5 per cent of all taxpayers. And let us not forget the objective of this. It's about ensuring that the taxation arrangements in relation to superannuation—which are generous—are sustainable over time. Even at the higher threshold of 30 per cent, for that portion of a fund over $3 million, that is still an incredibly concessional rate of taxation. So, we think the bill strikes the right balance in ensuring that people are encouraged to save for their retirement. It puts no cap on the amount of money people can have within their superannuation account. If they want to have more than $3 million in their superannuation they can do so, but there will be a higher rate of taxation on that part of the balance over $3 million—still a very generous tax concession for that portion of the fund balance over $3 million. I fully expect that the very small number of Australians who are caught by this will continue to decide to invest their money through the superannuation system because of those generous taxation concessions.</p><p>For these reasons, while I accept that the arguments are put in good faith by the member for North Sydney, the government won't be accepting the amendments.</p> <p class="speaker">Kylea Tink</p><p>Thank you for your commentary, Minister. I would like to put to you that this has broadly been advocated for across a number of organisations. I take what you're saying—that it's not standard practice for taxation brackets to be indexed—but it is certainly true that in most other elements of the super law they are indexed, whether it's what you can take out or what you can put in.</p><p>I think the thing that is very concerning to many people is that the potential impact here is for those who have self-managed super funds, particularly farmers and small-business owners who may have assets other than cash in their self-managed super fund. What assurances can you give to people who have taken the initiative and set up a self-managed super fund that this reform is not directly targeted at them, trying to force them back into commercial superannuation systems?</p> <p class="speaker">Stephen Jones</p><p>I thank the member for her question and I stand by the comments I've made in relation to the norms within the taxation system at large. The rules are sector neutral. They give no preference to whether a fund is a regulated superannuation entity or is regulated by the tax office, being a self-managed superannuation fund. I fully expect that following the passage of these laws people will make decisions on whether they control their own superannuation investments through a self-managed superannuation fund or they go through a regulated superannuation entity based on their own time, need, expertise and personal circumstances. From the government's point of view, this is sector neutral and it is absolutely driven by ensuring that we have a sustainable set of taxation concession arrangements in the superannuation systems. And I repeat: even if somebody has more than $3 million within their superannuation fund, the high rate of taxation on that proportion of their superannuation savings over $3 million will still be incredibly concessionally taxed.</p> <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>-
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