Zoe Daniel (Goldstein, Independent) Share this | Hansard source

Superannuation is designed to allow workers to save enough through their working lives to enjoy a dignified retirement. It's also designed to ease pressure on budget funding for the age pension. It is not, as I said in my earlier speech on the Superannuation (Objective) Bill, a bandaid that tries to patch up the structural housing policy failure of successive state and federal governments by encouraging people to deplete their retirement savings. That policy was the brainchild of my predecessor in Goldstein. I opposed it before the 2022 election, and I continue to oppose it wholeheartedly now.

ANU researchers found that, because of the authorisation of the early release of super during the COVID-19 pandemic, an Australian who withdrew $10,000, the maximum permitted, may well have lost $120,000 by the time they reach retirement. As a result, more women, because they have smaller super balances than men and a more interrupted career path, will retire with less security, less independence and a less certain future. Whatever else it is, early withdrawal of super is not a housing policy.

Superannuation is also not designed to encourage tax minimisation or outsized wealth creation. I support the principle behind these bills, but there are some details I oppose, and I will support the amendments being proposed by the member for North Sydney to address them. The most recent data from the tax office shows that, in 2020-21, 28 people had superannuation balances of more than $100 million and 107 had balances of more than $50 million. That's not saving for a dignified retirement; it's using the beneficial taxation arrangements for superannuation for wealth creation, or, as the Grattan Institute would put it, a taxpayer-funded inheritance scheme. It's simply not in line with the intentions of the superannuation system.

Grattan estimates that the super tax breaks cost $45 billion a year—two per cent of GDP—and will soon exceed the cost of the age pension. Grattan adds that two-thirds of the value of super tax breaks benefit the top 20 per cent of income earners, who are already saving up for retirement and whose savings choices aren't much affected by tax rates. Much of the boost to super balances from tax breaks is never spent, says Grattan. By 2060, one-third of all withdrawals from super will be via bequests, up from one-fifth today. Some argue that tax breaks on super ease spending on the age pension. Not so, according to Grattan, which says that the cost of super tax breaks far outweighs the age pension savings that they produce, with the bulk of benefits going to higher income earners who would never receive the age pension.

So I do support the principle of increasing to 30 per cent the concessional rate of taxation applied to future earnings of super accounts with balances above $3 million. I note that the existing concessional rate of 15 per cent will remain for balances below the $3 million cap. That is as it should be. A balance of $3 million ought to be sufficient right now to provide for a dignified, self-funded retirement. I've spoken to members of my community about this—Goldstein is arguably one of the communities where some constituents will have very high balances—and those I've discussed this with have said that this change is tolerable. However, there are two major qualifiers. One is the government's refusal to entertain indexing the cap. Not to do so is the superannuation equivalent of bracket creep. As time goes on, inflation is bound to reduce the real value of superannuation balances of $3 million. In turn, that will reduce the quality of life for those retirees who have legitimately planned for a dignified retirement without depending on taxpayer support.

AustralianSuper, the country's largest superannuation fund, argues that indexation of the threshold would lead to greater certainty and promote stability and confidence in the system. Indexation is accepted as principle for several government payments. I've advocated for tax indexation, for example, to depoliticise bracket creep and increase certainty for taxpayers in regard to income tax. For consistency, much as these are very high superannuation balances, the government ought to agree to indexation of this measure. Therefore, I will support the amendment proposed by the member for North Sydney for the cap to be indexed.

There's one other major problem with the legislation that's been raised with me by representatives of holders of self-managed superannuation funds and Goldstein constituents, and that goes to the treatment of unrealised gains. What the government is proposing is out of line with their treatment in other areas of tax policy, where capital gains are normally taxed on realisation, not accrual. The Grattan Institute, which others have outlined, doesn't think the legislation goes far enough and points out that taxing unrealised gains could create tax flow problems for some self-managed super fund members who hold illiquid assets such as property and who will be required to pay tax before realising those gains.

The Australia Institute also notes that problems with accrual taxation include the fact that taxpayers may not have liquid resources to pay the tax. The SMSF Association commissioned research from the International Centre for Financial Services at the University of Adelaide. Their analysis was based on data from more than 700,000 self-managed super fund members from 2020-21 and 2021-22. The research found that the legislation could have a negative impact on up to 50,000 self-managed super fund members, who would suffer a mean additional tax liability of more than $80,000. This is a particular problem for people who are asset rich and cash poor. For instance, farmers who have placed their properties into their superannuation funds under existing law may now lack sufficient funds to pay the tax.

The National Farmers Federation noted in its submission to Treasury on this legislation that, unlike salaried employees, farmers do not make regular superannuation contributions throughout their working lives; instead, their land asset is effectively their superannuation. The NFF estimates that as many as 30 per cent or more of farm businesses may have their land in self-managed super funds, pointing out that, as part of the successions planning process, land assets are commonly transferred into a self-managed super fund. The next generation then takes on the running of the business and makes a lease payment to the retiring farmer. This lease payment becomes their retirement income. The problem, according to the NFF, is that, while the value of agricultural land can fluctuate by as much as 20 to 30 per cent in one year, the lease value does not change at the same rate. In short, in a year where agricultural land values rise significantly so will the tax liability for the people affected, even though their modest income from the lease has not risen to match. That could leave farmers in such a predicament that they have no alternative but to sell the farm.

Some small businesses could well be similarly affected if the premises are owned by a self-managed super fund because the owner acted in line with the existing tax treatment of superannuation accounts. The authors of the Adelaide University study also argue that maintaining existing tax settings for superannuation could yield more tax revenue for the government over the medium to long-term. The authors state that that is because this new tax will still be levied on capital gains but only when the underlying assets are eventually sold. Under normal asset price appreciation over time, the overall tax base will be greater.

I support the second reading amendment proposed by the member for North Sydney on indexation, as well as her amendment on unrealised gains. I'm concerned that the government has not listened to consultation on these matters, appearing to have made rigid decisions about this legislation, even before consulting. So, on balance, while I do support the core principle of the bill, I am sufficiently concerned about these outstanding issues, particularly the precedent set by taxing unrealised gains, that I will not support it.

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