Joe Ludwig (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise this evening during the adjournment debate in the Senate to raise a matter that many Queensland constituents have raised with me over the last few weeks. The removal of the low income super contribution is an unfair burden on low-income earners today and a tax on our grandchildren.

The Henry tax review said as much:

The tax advantages provided for superannuation serves … the purpose of providing incentives for contributions …

The changes the government proposes would be a return to the old system, which Henry said does 'not provide fair or adequate incentives to all'. The review said:

Superannuation should continue to receive tax assistance, but there is a case for distributing assistance more equitably between high and low income individuals, including by limiting generous salary-sacrifice concessions. Similarly, everyone should have equitable access to the assistance.

Labor took this advice seriously and implemented the low income super contribution.

I have yet to find a person of any political persuasion who is willing to defend the removal of the low income super contribution. The tax breaks for superannuation offered to those on high incomes are substantial. Income put into super attracts a 15 per cent tax as opposed to the higher rate of tax of 45 per cent. That is a 30 per cent tax break—a large incentive to defer today's consumption and save for your retirement.

But what of the person on $37,000? They pay about 9.7 per cent tax on their income but their super is taxed at the same 15 per cent as the high-income earner. They are actually made five per cent worse off by their super contributions. It certainly does not seem equitable that the well-off get a 30 per cent tax break but those on low incomes get punished. You can argue at the margins but I do not think anyone could disagree with Ken Henry's view that there is a need for more equality between the incentives provided for high- and low-income individuals.

This is not an academic issue. This attack on superannuation will hurt working Australians, and many constituents have written to me about this. I have been contacted by many people telling me how unfair they see the removal of the low income super contribution. We know that 3.6 million low-paid workers will lose a yearly tax refund of up to $500—a tax refund dedicated to saving for retirement.

Many of the people who have contacted me are women. They point out in letters and emails to me that they will be particularly disadvantaged by the removal of the low income super contribution. And 2.1 million women will be affected. A significant percentage of these are mothers working part time while looking after young children. This is exactly the time in a woman's career when an additional $500 a year going into superannuation will be of benefit for building retirement savings

This is an unfair tax on workers that will hit every town in every state in every part of our economy, and Labor will oppose it every step of the way. The 3.6 million people who want to control their own retirement destiny deserve support to be able to achieve just that.

I do not see the logic, through the storm of rhetoric, of those opposite. One of the glib lines is that there is intergenerational inequity if the government ever borrows money. It really is a facile argument that ignores the importance of economic growth, infrastructure, health and education in ensuring our children's prosperity into the future. Let's not even touch on the gross hypocrisy of a coalition government dedicated to doing nothing on climate change lecturing us on intergenerational equity.

If we needed another example that these are crocodile tears from members opposite, the removal of the low income super contribution provides a clear one. The removal will reduce superannuation savings for those on low incomes. This will lead to lower savings as these people reach retirement age and more people dependent on the pension, denying them the options that a decent superannuation pool offers them. It is the taxpayers of tomorrow who will pay these pensions. Make no mistake, this is a tax grab today which punishes the taxpayer of tomorrow.

It seems we have successfully wedged the coalition government by appealing to logic. The coalition, so comfortable with opposition, has taken the trappings of opposition into government. If Labor appeals to logic, truth, fairness or economic analysis in its arguments, the coalition refuse to debate on these grounds. It has vacated the field—gone completely—and all that remains is its three-word slogans and its broken promises. The logic of opposition permeates its thinking. It has a fundamentalist approach to policy. One of the great myths perpetrated by this government is the belief that some measures are inextricably linked. The Greens have been sold a pup. Money is money. Revenue is revenue. Revenue is fungible and flows into consolidated revenue. To accept otherwise is feeble-minded and unconstitutional.

We cannot accept that the fate of a tax on the rents derived by majority foreign owned mining companies from the resources all Australian's share the ownership of is linked to a law enabling people on low income to save for their retirement. What is the link between giving $3 billion to big business and removing the retirement savings of low-income earners? The link is that these nonsensical policies hurt ordinary Australians. That is something I see the coalition seem to embrace. When you have shot yourself in the foot, though, you do not then shoot yourself in the head just because they are connected. Labor does not concoct arbitrary links between policies; Labor links policies with the people it affects. We opposed the petrol levy because it took money from those who can least afford it. A fig leaf of a temporary tax on high-income earners does not balance a permanent increase in low-income earners' cost of living. Just as much, the removal of the low income super contribution hurts those least able to afford it and those least able to contribute.

Look at the coalition promises they have broken time and time again after only a short period—less than 12 months—in government. This is a bad government. It continues to favour foreign owned mining companies but it does not favour helping low-income super contributors. These promises to big multinational companies are a sacred cow to those opposite, but the promise to ordinary Australians can be broken: cuts to education, cuts to pensions and tax increases due to the removal of the low income super contribution. Be in no doubt that this is a broken promise, this is a new tax. The effect of the low income super contribution is to remove the tax on superannuation employer contributions paid by those on low incomes. Its removal is a new tax for those on low incomes. People on incomes lower than $37,000 are effectively punished for saving for their retirement.

It seems an anathema to me that a coalition government who would want people to save, who would want people to contribute effectively to the economy and to their own retirement, would punish low-income earners like this. Another useful economic concept the government could take note of is that people respond to incentives. Again, you would have thought it would be a coalition that would embrace the concept of incentives. But not this coalition government. If you actually increase your tax, if you choose to save for your retirement, you will save less. That is the message that they are giving to low-income earners: do not save, do not contribute to your future, because this government does not care two hoots about you.