The government must act on reining in the cost of superannuation tax concessions, which are projected to overtake the cost of the age pension in just four years’ time, Labor says.
Budget figures show that the accumulated cost of concession for superannuation earnings and contributions will top $50.6bn by 2018-19. By contrast, the age pension will cost taxpayers $50.4bn.
The shadow treasurer, Chris Bowen, was due to address the National Press Club on Wednesday, where he planned to call on the government to make changes to tax concessions to help the budget bottom line.
“The earnings concession on superannuation is the fastest growing tax concession in the federal budget,” he planned to tell his audience. “The rate of growth dwarfs the increase in the scale of age pension costs. Joe Hockey’s own budget papers show the cost of the concession doubling over just the next four years to more than $30bn.
“This a challenge for budget sustainability that must be met right now. The taxation concession on superannuation earnings in retirement is unsustainable. We can’t afford it as a nation.”
Last month, Labor unveiled two measures aimed at cracking down on super concessions for wealthy Australians.
The first measure would involve the threshold for the 30% tax on super contributions being lowered from $300,000 to $250,000.
The second measure would apply to retirees who earn an investment income of more than $75,000 off their super. Labor wants the tax-free threshold to be lowered to $75,000. Anyone earning more than the threshold will be taxed at 15%.
The treasurer, Joe Hockey, said earlier this month that record low interest rates meant retirees were earning less from their super, and that cutting concessions would make their lives harder.
“It’s going to be very hard for people who retire and rely on their savings being in the bank. That’s one of the reasons why the government has decided that it is unacceptable to have any increases in taxation on superannuation in the upcoming budget,” Hockey said, when the interest rate fell 25 basis points to 2%.
“Now is not the time to hit superannuants who are facing potentially many years of lower returns on their savings in bank accounts.”
Prime minister Tony Abbott said opposition leader Bill Shorten wanted to raid Australians’ savings accounts.
“There is a world of difference between tax funded benefits and people’s own savings. Yes, superannuation is tax-advantaged. Still, you’ve got to make the money and put it aside in your super account, so it’s your money. It’s never government money,” Abbott told reporters in Brisbane on Wednesday. “He regards our super as his piggy bank to break open when he needs money. I just think that’s dead wrong.”
Labor estimates that the winding back of the concessions would be worth $14bn over 10 years.
“Someone has to show the courage to say it and to deal with it and Labor has decided not only to do that, but to do it before an election and seek a mandate to deal with it,” Bowen planned to say.
Labor was due to warn the Coalition that it is prepared to fight an early election on superannuation, saying: “bring it on”.
