The Treasury secretary, John Fraser, has repeated his view that the federal government should examine the growing cost of superannuation tax concessions, but argued it was “a long-term discussion that really should be thought of in terms of decades”.
Fraser faced questions at Senate estimates committee hearing in Canberra on Monday in light of Tony Abbott’s blanket declaration that the government had “no plans whatsoever … to smash people’s superannuation”.
The prime minister has framed superannuation policy as a clear point of difference between the Coalition and Labor in the lead-up to the next election, with the opposition proposing to scale back generous tax concessions for high income earners.
The treasurer, Joe Hockey, said in his budget speech last month that “there will be no new taxes on superannuation under this government”, but he subsequently told the ABC’s Q&A program that he did not subscribe to “never ever” statements in politics.
Calls for action grew after the Financial System Inquiry, headed by former Commonwealth Bank chief David Murray, found the majority of superannuation tax concessions accrued to the top 20% of income earners.
Fraser, the most senior official within Treasury, said in February that fairness was an important criterion for a well-functioning tax system.
“For example, substantial tax assistance is provided to superannuation savings,” Fraser told the Committee for Economic Development of Australia at the time. “We need to consider whether the level and distribution of these concessions remains appropriate.”
During an appearance before the Senate’s economic legislation committee on Monday, Fraser was given several opportunities to back away from those comments.
Fraser noted that the growing cost of super concessions had “been pointed to in a number of publications” and the issue should be considered “in the longer term”.
“I have said in the longer term, and I don’t resile [from the view], that like many many other programs governments will have to address, and societies will have to address, the cost of programs,” he said.
“In the longer term, over the period to 2055, absolutely.”
Labor’s Senate leader, Penny Wong, asked Fraser whether the long-term fiscal position of the commonwealth would require examination of the growing costs of super tax concessions.
The Treasury chief replied: “Well any government that doesn’t have a process of review of their longer term commitments, I think, is letting the community down.”
When asked whether Hockey or the government took advice prior to ruling out super changes, Fraser said he had always said it was a longer term issue.
“There is an issue in the medium term about people who have saved under the aegis of certain rules. There is the social compact which I think needs to be respected. You cannot change the systems for people who have saved for 10, 20 years under a set of particular circumstances,” Fraser said.
The finance minister, Mathias Cormann, who was sitting next to Fraser during the hearing, associated himself with the comments.
“That is the position of the government,” Cormann said.
“We understand that people saving for their retirement need certainty and stability in policy settings in particular when it comes to tax policy settings. That is a considered decision that we’ve made … [whereas] Labor’s instinct is always if in doubt let’s whack on another tax in particular on people saving for their retirement.”
Fraser said the advice he provided to government “was totally consistent with my previous answer”.
“My advice has been totally consistent,” he said.
“You cannot make lightly changes with the parameters that govern people’s savings behaviour for their retirement over many many years. There is a social compact I believe between the government and those people which you mustn’t play with. It’s something that really should be thought of in terms of decades.”
Labor seized on Fraser’s comments about the need to review super tax concessions as “an embarrassing revelation for the Abbott government”.
But the shadow treasurer, Chris Bowen, said he believed the concessions required “immediate attention”.
“The Abbott government refusal to address a high-growth tax concession that largely benefits high income earners is nothing more than a continuation of its unfair budget strategy to target low- and middle-income Australians,” Bowen said.
“The Treasury secretary’s comments follow findings of key government reviews, including the Commission of Audit, Financial Systems Review, and Tax White Paper discussion paper, that show these tax concessions flow to high income earners and will shortly outstrip the cost of the age pension to the budget.”
Labor has proposed two main changes to superannuation tax concessions to raise $14.3bn for the federal budget over 10 years.
People currently enjoy tax-free earnings from super accounts in the retirement phase. Labor’s plan would tax annual earnings above a $75,000 threshold at 15%.
The second proposed change affects the High Income Superannuation Contribution, which ensures people on high incomes pay 30% tax on their contributions. The income threshold for this tax treatment would be lowered from $300,000 to $250,000.
Labor has argued its changes strike the right balance and they would still maintain concessional treatment of superannuation.
But Abbott said Labor saw superannuation as a “piggy bank” to be raided.
The prime minister told parliament on Monday the government had no plans to increase superannuation taxes in the years ahead “but members opposite think that your superannuation is their money when they need it”.
“I say to the superannuants and the retirees of Australia, you cannot trust your money with the Labor party. If they see it there and if they have got a problem, they will take it and that is what will never happen under this government,” he said.
