Wayne Swan takes aim at high income earners through super tax reform

Higher income earners could once again be delivered a blow by the Federal Government, with treasurer Wayne Sawn flagging changes to superannuation policy as part of tax reforms following the Ken Henry review.

In a speech delivered yesterday, Swan noted a number of tax reforms that could take place as a result of the review, including a number of “unpopular choices” regarding super tax breaks for high-income earners.

Swan said Australians must look to their sense of fairness when it comes to superannuation tax reform, citing disproportionate gains to higher-incomes.

”It’s important that we maintain incentives for Australians to save for their retirement through super,” he said. ”But I know that some have asked the [Henry] review whether aspects of the current taxation of superannuation contributions work against our progressive personal tax scale.”

”Because superannuation contributions are taxed at a flat rate of 15%, the value of concessions on contributions increases as a person earns more income”, Swan said, noting that less than 2% of taxpayers earn over $180,000, but receive a concession worth 31.5%.

On the contrary, Swan said an individual earning $35,000 per year would only receive a benefit of 1.5%, which he believes is working against the philosophy of a progressing personal income tax scale. He also said Australians must look beyond their own interests when considering tax reform.

“Overall fairness, however, requires us to think about a wide-range of retirement-related policies. And I look forward to the review panel’s recommendations on a whole array of complex matters related to fairness over a person’s lifetime, and to the adequacy and sustainability of the retirement system.”

“Tax itself is the price that we pay for a decent society. And altering the way we tax people and companies provides one of the most effective means we have of achieving the community’s wider social and economic objectives.”

The speech comes after the Government halved the amount taxpayers could place into their own superannuation accounts without incurring penalties in the May budget, along with a number of reforms targeting high income earners.

But Swan said the reforms wouldn’t play a part in the Government’s election strategy next year, with the comprehensive changes expected to take up to a decade to complete.

“I expect the report will provide a 10-year plan for reform, with recommendations that are evidence-based, and built on sound, best-practice tax policy,” Swan said, but admitted there could be ”some things that we can do immediately”.

“We’ll foster this debate over the coming years. But we won’t be pursuing these reforms until the community is ready.”

Swan also attacked the complexity of the current tax structure, saying he would be “especially attentive” to changes that would see a simplification of the tax process. He mentioned it was “astounding” that 70% of taxpayers use an accountant for their returns.

Swan also mentioned reforms to business tax, saying the Government’s aim is to “minimise disincentives to invest in Australia, but only where this will benefit us. Taxing returns from investments has a place in any sensible mix of taxes, and we need to make an informed and balanced judgment as to how we do it, including the level of company tax”.

Treasury secretary Ken Henry is expected to hand in his panel’s review of the tax system on Christmas Eve, with the Government to release the report early next year before the federal election.