The unhinged criticismsto changes in superannuationmake more sense when you realise that Australia’s entire tax debate is geared to ensure rich, wealthy people and companies get richer and wealthier.
The government’s proposal to reduce the tax concessions on earnings on super balances above $3m has been the ultimate case in point.
It will affect only 0.5% of people with super and would take many decades of governments not increasing the threshold to affect anything close to even 10% of people, and yet you would think the government is about to seize the means of production.
So divorced from reality is some of the commentary that the Australian Financial Review thoughtpresentinga scenario where someone’s super grew $1.18m in one year to $3.18m was a winning argument against the tax because that person would be required to pay (gasp!) $1,528 in tax.
The new argument is that the tax is bad because people willjust find other tax rorts to make use of. (Great, let’s go after those as well!)
Because avoiding paying tax is pretty much the point of the system for wealthy individuals and large companies.
For example, right now, numerous commentators who are against the changes to super are also saying we needto cut company taxto ensure competitiveness. Less mention is made that many large companies pay little or no tax, including in some of the most profitable sectors in Australia.
My colleagues at the Australia Institute found that from 2014-15 to 2022-23 Queensland LNG projects delivered $310.1bn total income for gas companies but they paid just $966m in company tax – or just 0.3% of total income (and all of that was paid by just one company).
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When huge multinational companies are able to earn such huge incomes but pay bugger all tax, the problem that needs to be addressed is not that our 30% company tax rate is rendering Australia “uncompetitive”.
Yes, we need to reform our tax system. But suggest gas companies should pay more tax and the chin-scratchers will say “hmmm not like that, something, something Hawke, Keating … bipartisanship!
That’s because most commentary about our economy values profits as sacrosanct and more important than wages:
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The same applies to individuals – wealthy ones matter more, especially when it comes to superannuation.
We’re told the real evil is taxing “unrealised capital gains”. These are the increases in the value of the assets held in your super that you have yet to sell (or “realise”).
And look, I can understand how bad it would be.
Imagine if, for example, Centrelink had a record of every share you owned and every six months calculated their value, or if you had to let Centerlink know if the value of your non-financial assets went up by more than $1,000.
Outrageous! Unprecedented! Communism!
Oh wait, sorry, actually that’s whatpeople on the age pension already have to do.
We have a system where it is considered right thatthe poorest people in Australia are penalised if their assetsgo above $314,000 but where parts of the media come out against a proposal that if someone’s super goes up $314,000 in a year from $3m they should pay $4,462 (1.4%) in tax.
Please. The only reason there is so much outrage over this is if the rich and vested interested are annoyed people might realise just how big of a rort they have going.
Currently these massive unrealised capital gains in super can keep going up and people pay no tax on them (unrealised, you see!) and then when they are retired they can sell them (ie realise them), and then pay … errr zero tax.
Under these changes they would have to pay 15% on the share of earnings above $3m.
Yeah, end of times.
Heck even normal capital gains outside of super gets a great deal. If you have held an asset for over a year you will get a 50% tax discount on the profit.
Earn $250,000 in capital gains, you get $125,000 tax free.
Earn $250,000 in income, you get $18,200 tax free.
Little wonder the rich love capital gains. The 0.2% of taxpayers who make $1m each year account for 41% of all capital gains:
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The average salary of people with an income of $1m or more is around 16 times the average of people earning less than $100,000; the average capital gains is 234 times larger:
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The very rich, their media supporters and financial advisers are worried we might start wondering how much revenue is being lost each year from giving them these tax breaks.
Well, we know the answer – in 2025-26 around $33bn in tax breaks for capital gains tax and superannuation go to the richest 10% – or around two-and-a-half times what it would cost to funddental in Medicare:
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So here we are – tax reforms meaning companies that pay bugger all tax demanding cuts in the company tax rates, and the richest 0.5% demanding they not get a slightly lower tax break on the super earnings.
Don’t be fooled into thinking they are caring about you. Instead think of what could be done if Australia’s tax system was better designed – better schools, better hospitals, better infrastructure.
Right now, Australia’s tax system works to give the wealthiest in society the smoothest of rides. These super changes will force them to go over a very small speed bump.
They should be supported and they also should be just the start.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work