Superannuation was not set up for cosmetic surgery, says finance minister Stephen Jones.
In a period of intense debate about the purpose of super and super tax concessions, the government is being slammed by the Opposition for attacking ‘middle Australia’.
While the government has now acted on super tax concession, with Treasurer Jim Chalmers announcing yesterday that tax rates paid by Australians with superannuation account balances worth more than $3 million will double – from 15 per cent to 30 per cent –the ‘purpose’ of super is still to be formalised.
Mr Jones says some Australians are “gaming the system” to fund activities such as cosmetic surgery.
“Superannuation was not set up for cosmetic surgery,” he said. However, his wrath is not directed at the patients who have made use of the loophole, but those who are actively encouraging its use.
“People who are trying to abuse the system, and this is not directed at the patients here, it’s directed at the surgeons … and schemes promoting it, they run the risk of ruining it for everyone else who is doing the right thing.”
According to Australia Tax Office (ATO) figures, funds released early from superannuation totalled $573 million in the 2021-22 financial year. Of that, around $545 million was spent on medical treatment, which included $234 million on weight loss, $171 million on dental treatment and $45 million on IVF.
The Albanese government wants the purpose of super to be enshrined in proposed new legislation.
Outlining that proposal, Dr Chalmers said: “The objective of super is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
Part of Labor’s proposed strategy included a cap on super balances of $3 million and that is set to take effect from 2025-26 and apply to about 80,000 people.
Former Liberal PM John Howard calls the reforms “an attack on middle Australia driven by an ideological belief people’s retirement savings are a political ‘honey pot’ for Labor and unions”.
But the government points out that only 1 per cent of Australians have a super balance over the $3 million mark. In addition, the legislation does not prevent Australians from having more than $3 million in super.
The Opposition is also concerned that the reforms will prevent Australians from accessing their superannuation to buy a first home. The Liberals took that policy to the last election.
Opposition Leader Peter Dutton says that any future government led by him would reverse any legislation that would prevent such access.
“One of our first acts in government will be to overturn the legislation, which has been driven by ideology and not by super fund members’ best interests,” Mr Dutton said.
Mr Jones said that the government’s changes will not only ensure superannuation is used for its intended purpose of funding retirement, it will also help balance the books. He said the current structure was “not sustainable on current budget settings and we’re having to grapple with that”.
“We have inherited budget problems, we’ve got a structural deficit and we have to deal with all of it,” he said.
What do you think of the changes? Has the government got it right or is this, as Mr Howard claims, are they an attack on middle Australia? Why not share your thoughts in the comments section below?
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So what do people want, an unlimited tax reduced bucket of cash which they can pay in to reduce their tax and then draw out for any reason or any purpose without limits? That hardly sounds like a retirement superannuation scheme.
$3 million at a draw down average of 5% annually provides $150,000 tax free annually. If you need more and have more to invest you can still do it but at the tax rate of 30% which should still be a concession for most people who can save that much.
No multi-millionaire need retire in poverty on that!
For a person at retirement who owns their own house and with reasonable cash reserves a tax free income income of $150,000 provides a very comfortable lifestyle. This includes regular long haul business class international travel and the ability to maintain house and car appropriately.
This is beyond the dreams of the average retiree who might make one or two trips in their retirement.
There is no reason why the government should continue to give generous concessions to the super wealthy one percent of the Australian population who do not need financial support.
I have been retired for almost 20 years and have my own house and have a SMSF. I am below the $3 million threshold and as things stand my children will inherit a highly significant amount of money. I travel and do the things that I want and money is not a problem.
Those who cry poor because they only have $3 million plus in their SMSF are greedy in expecting that others will subsidise their lifestyle.
Comments by Cosmo and Alan are spot on. John Howard is responsible for creating this mess by allowing those at the top end of income to build even more wealth through Howard and Peacocks policies.
Nobody needs $3 million for a comfortable retirement let alone the $400 million of one individual.
Australia needs a return to equality which Howard and Peacock destroyed and Dutton et al wish to retain.
“it will also help balance the books. He said the current structure was “not sustainable on current budget settings and we’re having to grapple with that”.
Super is not meant to balance the governments books either!! This lot couldn’t organise a chook raffle! I hope the affected all retire, grab their money before the 30% cuts in and invest it elsewhere. No I’m not affected, senior on a pension! but It is not fair to change the rules.
The reality is that many of the supposed 80,000 people who may be affected by this cash grab by Mr Chalmers and Mr Albanese, are more than likely to be small business owners who worked long and hard to build up their businesses and employ others. Having sold their businesses and put the money into super for retirement, they are now going to be penalised for doing so. THAT is what is unfair. And whether you agree with the basic principle of a cap on super or not, it is a clear broken promise that was obviously premeditated and is undoubtedly only the first salvo in their redistribution of wealth to support their social agenda.