Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin, also representing the Treasurer. Minister, from 1 July, payouts from a superannuation fund will be tax free for those aged 60 and over. Has the minister noted that the three main criticisms being aired in the media are that this policy dangerously narrows the income tax base, disproportionately advantages high-income earners and still allows high-income earners to claim further tax rebates? What is the government’s response to those criticisms? Dealing with the last of those three criticisms, which concerns double-dipping, wouldn’t that problem be solved by simply requiring tax-free super income to be declared on annual tax returns? Minister, will well-off retirees earning $100,000 or $200,000 be able to qualify for the low-income tax offset and, if they will, why should they be able to?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

The government’s reforms to superannuation taxation are, I think, properly considered by all as the most significant reforms to the taxation of superannuation in this country. There has long been the quite proper criticism of the way in which superannuation taxation has developed in this country that it is taxed on three occasions: when it goes in, while it is there and when it comes out. All parties have struggled with that difficulty. Overall superannuation has been taxed concessionally—and we acknowledge the role that the former Labor government played in that, and it has been a bipartisan view that superannuation, because it represents retirement incomes, should be taxed concessionally—nevertheless, the fact that it has been taxed at three points in the chain has been a major source of complaint right across the community and one that both major parties have struggled to come to terms with.

Given the strength of the economy, the strength of the federal government’s budget and the strength of federal government finances, we are now in a position where it is possible for us to deal with that problem. If you wished to eliminate one of the points of taxation, you could pick any one of the three, I guess. It is true, as Senator Murray would know, that at one stage I floated the possibility that you might focus on the contributions tax as a tax to be eliminated.

But the government has been very alive to this problem. After due consideration, it decided in last year’s budget that it would eliminate the tax on end benefit. That was warmly and widely received and, I think, supported by all parties. There is no fundamental institutional opposition to the proposition that retired Australians, once they have access to their superannuation pensions, should be able to receive them tax free, given that tax has been paid on those superannuation benefits at the contributions point and in the earning. So there is tax paid on the way through.

It is our assessment that ensuring that we maximise the private provision of retirement incomes is very important and that continuing to maximise the attraction of Australians investing in superannuation is also very important to lessening the burden that will be placed on future generations of taxpayers—again I point to the gallery—in relation to the ageing of the population and the burden that future taxpayers will bear with the change in the demographic order. But that only increases the importance of ensuring that Australians can provide for their own incomes in retirement and not rely solely on the age pension, which will be paid for by then current taxpayers.

While you could superficially argue that we should not do this because of the income tax base, you have to look at the whole box and dice. It is important to look at it on the basis of the issue of demographic change and the need to ensure that we keep to a minimum the burden on the budget from the age pension and we maximise the attraction of retirement incomes. Lessening the tax burden on superannuation, by definition, must increase the attraction of people investing in super.

We do quite properly think this is a responsible and sensible way to go. Inevitably, when you remove or reduce taxation, with those on higher incomes of course paying much higher rates of tax—and, as you know, most of the taxation in this country is paid for by higher income earners—there will be, on the face of it, a disproportionate advantage. They are still paying a lot of tax. If you put a lot of money into super, you will still pay a lot of tax on the way through and in terms of the earnings that that will pay. Senator Murray may have a supplementary.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. I thank the minister for his answer, but I would ask him if he would not mind coming back to the Senate in due course—perhaps today—with the answers to the questions as to whether tax-free super income should be declared on annual tax returns and whether wealthier retirees will be able to qualify for the low-income tax offset.

I ask as my supplementary question: can the minister confirm that the Medicare levy is not defined as income tax and therefore should not be included in tax-free super? Can the minister confirm that all retirees over 65, well-off or not, will qualify for the concessional Commonwealth seniors health card? If that concession is available to all, does the government think that better-off retirees should pay the Medicare levy on their income?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

They are technical questions. I accept them and you are right to ask them. I will endeavour to get a specific answer to each of them by three o’clock, Senator Murray.