Liberal frontbencher Tim Wilson has accused Treasurer Jim Chalmers of trying to turn “parents against grandparents” amid speculation about a new raid on wealthy baby boomers’ superannuation and family trusts.
While the Treasurer has declined to provide specifics, he has pledged to tackle “intergenerational inequality,” which is being interpreted as a crackdown on retirement savings for millionaires.
“Labor’s using generational language to wedge the debate to turn younger Australians against their parents and grandparents, but their real objective is to come after family savings,’’ Wilson told news.com.au.
“It’s like their family savings tax on unrealised capital gains, it starts hitting grandparents, but it then hits parents and then their grandchildren, it’s clever, it’s sneaky, you have to give them points for being so rat cunning.”
“Starting tax brawls inside families is really low politics, but that’s where this government has got to because they didn’t achieve anything from their three day tax hike talkfest.”
Liberal finance spokesman James Patterson also criticised the Treasurer, saying he was “preparing the ground to break an election commitment, to raise taxes.”
“If he proceeds with it, it’ll be one of the biggest breaches of faith in modern Australian history,’’ Senator Patterson explained.
“The way they’re talking, it looks like they’re going to do it during the term, and they might try and use the same trick they did on unrealised capital gains, which is, they’ll say legislated in this term, but it will only take effect after the next election.
“Therefore, it’s not a breach of faith. But of course, that is a breach of faith because they explicitly ruled out tax increases repeatedly during the campaign.
“I think family trusts is almost certainly the first thing that they’ll do. They may think that that’s an unsympathetic group in the community to go after, but these things always have unintended consequences.
“A lot of small businesses, a lot of farms are in family trusts. It could really hurt some people who are not wealthy, and I think they’re going to do more on superannuation.
“And the question is, do they package it up as part of their unrealised capital gains reforms?”
Chalmers has pledged to tackle “intergenerational equity” in the tax system, which could open the door to new taxes on superannuation for wealthy retirees, family trusts, and capital gains tax exemptions.
While the Treasurer wrapped up his three-day economic roundtable without revealing specifics about making the tax system fairer for younger Australians, giving some clues about potential reforms.
One option under consideration is cutting income taxes for workers while funding it through a crackdown on super tax breaks for rich retirees.
The government has already proposed doubling the 15 per cent super tax rate for balances over $3 million and has left open the possibility of adopting a Productivity Commission recommendation to introduce a 20 per cent company tax rate for businesses with turnovers under $1 billion.
Speaking on the ABC’s 7.30, host Sarah Ferguson asked, “You’ve acknowledged the tax system is fundamentally unfair to younger workers compared to older Australians. How do you plan now to fix it?”
“Well, I think one of the clear areas of consensus out of the Economic Reform Roundtable is that when we look to reform the tax system, one of the most important objectives is to make it fairer in intergenerational terms,’’ Chalmers responded.
“There’s a number of ways that we are looking to improve the tax system, cut taxes for working people, work on the multinational tax agenda, and road user charging.
There’s an agenda there. But one of the most important areas where there was common ground was that when we reform the tax system, we have to make it fairer to the generations that follow us.”
Ferguson then asked if the government was targeting baby boomers.
“Let me put this simply, have you fired a shot now across the boughs of wealthy, retired baby boomers living off investment and the generous tax treatment that they enjoy. Are you telling them that this is now coming to an end?’’ she asked.
“I wouldn’t put it like that,’’ Chalmers said.
“If you look at the tax changes I’ve made already as Treasurer, that the prime minister’s government has made, they’ve been all about making sure that when it comes to income tax cuts, for example, that those income tax cuts are made available to younger workers and women, people right up and down the income scale.
“Not just people who are already doing very well. So there’s an intergenerational lens already being applied to those tax changes that we have made,” he continued.
“One of the areas where the common ground was most obvious was, if and when we consider next steps in tax reform, we have to care about the intergenerational aspects and the feedback from the group today, from my point of view, is very welcome.”
Ferguson pressed about taxing retirees and cracking down on family trusts.
“Does this mean that you will consider asking retirees to pay tax on earnings and withdrawals to reduce the capital gains discount? she asked.
“And as the Treasury has wanted for a long time, to crack down on family trusts?” she asked.
“We haven’t taken a decision on any of those things,’’ Chalmers replied.
“We haven’t changed our policy or our position on each of the issues that you raised. You know that we’ve already got policies and legislation that’s been in the Parliament for a couple of years now.
“When it comes to making superannuation tax concessions …(we) haven’t taken any decisions to change our policies.”
Notably, the Treasurer added, “It’s a matter for Cabinet,’’ suggesting changes could be coming.
Another signal came when the government invited Grattan Institute chief Aruna Sathanapally to deliver the keynote speech opening the tax discussion.
She argued retirees should be taxed more to ease the burden on younger workers in order to combat intergenerational injustice.
“Reducing superannuation concessions so the system meets the policy objective of saving for a decent retirement, rather than being a tax shelter; introducing at least a low tax rate on earnings and withdrawals in retirement; reducing the capital gains discount; reforms to family trusts,” Sathanapally said.
After the roundtable, Chalmers told a press conference the government could pursue reforms without a formal review.
“I think our tax system is imperfect, and one of its most troubling imperfections is best seen through an intergenerational lens, which is why we take our responsibilities to the coming generations seriously,” the Treasurer said.
“A fair go for working people, including in intergenerational equity terms. A simpler, more sustainable tax system to fund the services people need.”
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