Always back self-interest
High fliers get huge tax break
- ANDREW CARSWELL
- The Daily Telegraph
- February 12, 2013 9:07AM
The loophole has allowed Prime Minister Julia Gillard to avoid paying $151,000 in annual tax on her generous post-career pension, while also gifting Treasurer Wayne Swan and Opposition Leader Tony Abbott $80,000 and $70,000 respectively.
In its budget last year the government announced it would double the amount of tax on superannuation contributions from Australians who earn more than $300,000, taking the tax from 15 per cent to 30 per cent.
But amid claims of double standards, federal politicians who were voted in before changes to the pension scheme were enacted in 2004 are not required to pay the tax on their defined benefit scheme - their for-life pensions - because they weren't deemed to be contributions.
It is a similar case for judges and key bureaucrats, including the Reserve Bank governor Glenn Stevens who, according to Rice Warner, one of the nation's key actuary and superannuation consultants, would have paid at least $53,000 if the tax increase for all workers earning more than $300,000 was applied.
Despite repeated claims by the government that it was looking at the issue, no draft legislation has been forthcoming, gifting 128,000 high-earners a year off from paying the increase, and allowing those on defined benefit schemes to pay little or no tax at all on their superannuation payments.
Superannuation experts believe both Treasury and the Australian Tax Office are struggling to include senior politicians and judges in their mooted super legislation and are yet to find an equitable solution. They are scrambling to have legislation introduced by June 30, legislation that Superannuation Minister Bill Shorten's office claims will include politicians and judges.
"The measure will apply to federal politicians earning over $300,000, including those in defined benefit schemes," a spokesman for Mr Shorten said.
Australian Super Funds Association boss Pauline Vamos said the government had its work cut out applying the tax to all high-income earners.
"The ability to apply the tax is quite hard because of the way defined benefit funds work, because you don't actually pay contributions. What Treasury is still trying to do is figure out how they can apply the legislation to catch all high-income taxpayers," Ms Vamos said
Michael Rice, of Rice Warner, said a gross imbalance remained that had to be rectified. But he doubted the government would be able to put the tax on all high-income earners who use a defined benefit scheme.
"It is phenomenally generous compared to what the rest of the nation gets," Mr Rice said.
s"There is no particular reason why judges are being treated differently. It is hard to think that they are underpaid. Those funds should be closed for good, at least for newcomers.
"But politicians and judges will argue that it is retrospective to change people's employment conditions."