Canberra – Labor’s plan for fair, sustainable superannuation

E&OE TRANSCRIPT

PRESS CONFERENCE
CANBERRA
WEDNESDAY, 22 APRIL 2015

SUBJECT/S:  Labor’s plan for fair, sustainable superannuation; Labor’s plan to make multinationals pay their fair share; Medicare Review; Climate Change Authority Report

BILL SHORTEN, LEADER OF THE OPPOSITION: Good morning everyone. Superannuation should be designed to give hard working Australians comfort in retirement and should not be a tax haven for a very few.  Today, my colleague Shadow Treasurer Chris Bowen will outline changes which are Labor’s policies to make our pension and superannuation system sustainable in the future. It’s an open secret that the superannuation changes introduced by Peter Costello and John Howard at the time when the Federal Government revenues were rivers of gold, delivered a windfall to a very lucky few. They created a system where if you could put in millions and millions of dollars into superannuation, you just simply wouldn’t pay tax in the pension phase off the earnings of millions and millions of dollars. Now, Labor is the party who invented superannuation, we built it, our parliamentary and legislative record shows that time and time again we’ve been the champions of the great good dream of people working hard and having a comfortable retirement. But Labor does not support a system which returns tens of billions of dollars from taxpayers to support people who already have millions and millions of dollars in their superannuation, to support them to reach an even more comfortable retirement. Today, Chris Bowen will outline sensible changes which of course help the bottom line of government in terms of the very difficult issues and the headwinds that we face as a nation. But fundamentally what we are doing is we are saying that our pension system and our superannuation system needs to be made more sustainable. But what we refuse to do is slug millions of ordinary pensioners and cut their pensions when in fact we think this is the better path. I might now ask Chris Bowen to outline Labor’s fair and responsible measures to provide certainty in the superannuation system in Australia.

CHRIS BOWEN, SHADOW TREASURER: Thanks very much, Bill. What we’re announcing today exposes the Liberal lie, that to have a positive plan for the Budget, you have to embrace unfairness. The measures that we’re announcing today represent a concrete, fair and workable plan, built after months of consultation with the superannuation sector and community groups, by Bill, myself, and Bernie Ripoll, including a round table held last month with the superannuation sector by Bernie and myself. Today we’re announcing three measures.

Firstly in relation to earnings tax in the retirement phase. Peter Costello abolished the earnings tax in the retirement phase of superannuation. Now, it’s really important that this be fixed. At the moment, around 30 per cent of superannuation assets are held by people in the retirement phase. But that’s going to grow, and grow dramatically as the community ages, and it’s expected to grow to around 44 per cent over the next 30 years. So the measures we announce today make the system sustainable as well as fair. We would reinstate an earnings tax for earnings over $75,000 a year in the retirement phase. Now, it’s important to note that all earnings under $75,000 would remain tax free and that even people who pay the earnings tax would only pay it on the amount over $75,000 a year. Now, we estimate that this will affect around 60,000 people, and it will raise $8.6 billion over the next decade.

Secondly, in relation to defined benefits schemes – again, in 2006, a 10 per cent tax concession was introduced for people on defined benefits schemes. We’ll remove that tax concession for defined benefits that are over $75,000 a year. Again, even people who will pay this tax will not be subject to it for the first $75,000 a year of their defined benefits, and this will affect 9,500 people around the country and will raise $0.6 billion over the next decade.

Finally, the high-income superannuation charge. At the moment, everybody pays 15 per cent tax on contributions up to a threshold of $300,000 a year in income. Then the charge becomes 30 per cent. We believe it is better, fairer and more sustainable for that threshold to be $250,000. This will mean that people on high incomes over $250,000 will still receive a substantial tax concession compared to their marginal tax rate, but it will be a fair tax concession. It will still make perfect sense and good sense to invest in superannuation.

And that’s the case with all these measures that we’re announcing. The concessionality for superannuation remains and remains strong, and remains right throughout the system. We want to see people investing in superannuation and we think the tax system should reflect that, and should give people a break for investing in superannuation but it must be fair. Now, the total of the measures that we’re announcing today will mean for the Budget $14.3 billion over the next decade. That’s a positive return for the Budget. These measures will be a very important part of our budget and fiscal plan. Together with the measures that we announced earlier in the year on multinational tax, it means we have outlined more than $20 billion of a return to the budget bottom line over the next decade. We’ve said that not only would we participate in the national discussion that the Treasurer called for on tax, but we would lead it, and that’s exactly what we’re doing today. We’re leading the debate and the conversation about the taxation treatment of superannuation and the fairness of our tax system and sustainability of our tax system more broadly.

SHORTEN: Thanks Chris, we’re happy to take questions.

JOURNALIST: You’ve estimated about $14 billion over 10 years in revenue, in the longer term do you see that compounding in a structural sense as more people – as more people in retirement than working?

SHORTEN: I’ll answer that briefly and I might ask Chris to unpack some of the numbers in more detail, but yes we do. It would be irresponsible of any political party not to address this question of the largesse of the 47 cents concessions, the multimillionaires receive from the taxpayer. The challenge of our superannuation system is to ensure that the people who go to work every day, that the middle class of Australia, have got a comfortable retirement. Something went wrong about 2006 when Peter Costello and John Howard took off any brake when they provided practically unlimited tax concessions to people who have millions and millions of dollars. Now, there’ll still be tax concessions in the system no matter what you earn. But really, is it the function of the taxpayer of Australia to support people who already have amassed multiple millions of dollars in superannuation in the pension phase? To be fair, they’re already comfortable. What we want to do is lift everyone to a good standard. I might get Chris to unpack the rest of the numbers in your question.

BOWEN: Thanks Bill and the short answer to your question Phil is yes. This is a very important, quality structural addition to the long term budget and this underpins Labor’s fiscal approach – a credible plan for the Budget which builds over time. We’ve been saying for some time that there needs to be a credible and gradual budget plan, and this is what the Treasurer has got so hopelessly wrong. You saw the Governor of the Reserve Bank from New York just yesterday saying exactly the same thing. That we need a long-term plan. Now of course, as more and more people move into the retirement phase, which is where much of this package is focused, the importance of these changes will grow. So this is a plan for 10, 20 years. This is a long-term plan for the Budget and it’s one which is an important part of ensuring a solid path for the Budget.

JOURNALIST: Just further to that then, I assume you’re not going to index these rates? You’ve said 60,000 people will be affected by the 15 per cent tax on earnings, that presumably would grow significantly as well over the years, over the decades?

BOWEN: Well tax thresholds generally aren’t indexed. We would obviously keep it under periodic review like all governments do with all tax thresholds, but tax thresholds generally aren’t indexed.

JOURNALIST: Would the income thresholds be indexed? 75,000 and say the 250,000, would that be indexed upwards?

BOWEN: No, no both sorts of tax thresholds generally aren’t indexed.

JOURNALIST: So do you have an estimate of how many that would catch over time? I mean 60,000 people is right now, but in 10 years, how many would be paying the –

BOWEN: Oh well that would obviously depend on a whole range of variables, including the quality of the stock market and returns that people get and you will see that go up and down. We estimate that on the $75,000 earnings, for example, you would need a superannuation account of $1.5 million based on historical trends to generate that level of earnings on an annual basis.

JOURNALIST: Presume you want Tony Abbott and the Coalition to support this before the next election?

BOWEN: We do.

JOURNALIST: His promise is no unexpected adverse changes to super in this term. You’re always at him not break his promises, now you’re telling him to break his promise on this one?

SHORTEN: I think Tony Abbott’s already set the Guinness World Records of breaking promises. On this particular measure we’re offering bipartisanship. Everyone knows that you can’t sustain these mega concessions when in fact what we’ve got to do is make sure that the great bulk of Australians gets to a comfortable level of retirement, it’s just a matter of what are your priorities. We’re saying to Tony Abbott there’s a better way than cutting the pension for fixed income pension recipients. We’re saying let’s look at this very small group who receive a high degree of taxpayer-funded largesse. The 11 million people who go to work pay their taxes. There is an obligation of all political parties to ensure those taxes and indeed taxpayer concessions are allocated in the appropriate priority. There is simply no case remaining that for someone who has $5 million already, they don’t need a 45 or a 47 cents tax concession as well.

JOURNALIST: Pauline Vamos from ASFA has told me she’s concerned about women who might be earning a good salary but for a short period of their working life and therefore have poor superannuation being unfairly penalised by these sorts of arrangements. How will you get around that sort of a problem?

SHORTEN: I can reassure, Pauline Vamos, first of all she’s right to talk about the gender savings gap in this country and we’re very committed to that and we have flagged in our statement that more work needs to be done there. Women at the point of retirement have far less in their average account balances than men, and that’s for a whole lot of reasons; it’s from inequality in terms of pay, it’s through broken periods of employment service as they do the heavy lifting and raising and rearing of families. So Pauline’s right about the issue. But again when you look at who’s got what accounts and what size, I suspect that the vast bulk of people who are affected in this very small group who are affected are men.

JOURNALIST: If a woman is say earning a $300,000 salary for five years of her working life, aren’t you dissuading her from putting more money into her superannuation?

SHORTEN: I think superannuation is still a marvellous tool for retirement policy. Labor’s retaining the core principle of concessionality. If we compel people to save money, then it does need to be I think concessionally taxed, that’s the deal. If we’re asking Australians to potentially forgo consumption for 10, 20, 30, 40 years depending on their age, it should be concessionally taxed and it still is. Superannuation as a source of wealth accumulation, with our proposals, with everything we’ve done over the last 20 years is a fundamentally excellent driver of prosperity. So I don’t believe that this leads to some great flight of income. The greater problem isn’t so much some people who are doing really well for a short period of time. The greater problem is the vast bulk of people who have account balances which frankly are not going to be enough to sustain them in retirement.

JOURNALIST: On the $14 million saving over a decade, going by the tax expenditure statements, the tax concessions now on super are about $30 billion a year. So over a decade that’s $300 billion a year. You’re taking back about $14 billion. Did you think about perhaps going after a bigger saving on super tax breaks and if you did, can you talk about why you wouldn’t want to save any more than this?

SHORTEN: I’ll ask Chris to go first and I might comment at the end of his answer.

BOWEN: I was just wondering whether that’s The Australian’s editorial position, that we should’ve gone harder?

JOURNALIST: It’s got nothing to do with The Australian’s editorial position. It’s a simple question.

BOWEN: Sure, no, no. It’s a fair question David, of course we considered various options, of course we did, as you would expect us to do as a responsible opposition. We think this strikes the right balance. As Bill has said and as we have said we want to see concessionality remain in the superannuation system. We want it to be fair. So there will be some people who will say we’ve gone too far, and others will say we’ve gone not far enough, we’ve already seen some of that commentary this morning. That’s entirely expected. We think the measures we’re announcing today get the balance right, hence we’re saying today this is the sum total of the revenue raising through changing taxation of superannuation that we will take to the next election. It’s important that people have certainty and stability in the taxation of superannuation. I think people – there’s a broad and growing community understanding that this current system is simply unsustainable, and that the current system needs to be changed. But also people want stability and certainty and that’s what we’re announcing today provides. We’ll go to the next election with this policy, seek a mandate for it and seek to implement it and then have a period of stability. I think that’s a fair approach and it’s the approach that I think will get a broad acceptance in the Australian community. I’m not saying it won’t be without controversy, but we are up to being honest with the Australian people about our plans, clear and upfront with the Australian people about our plans unlike our opponents who purported one Budget plan before the last election, and implemented a completely different one after the election.

JOURNALIST: Will this apply to those who are just a year or two away from retirement and is it fair on them if they planned you know, a certain income without having to pay tax on those earnings?

BOWEN: Well presuming the Government doesn’t implement it before us and accept our offer of bipartisan support, it would come into place on 1 July 2017 after the election of our government, and that would be, give people obviously plenty of time for adjustment plans etcetera.

JOURNALIST: So no grandfathering for those close to retirement?

BOWEN: The grandfathering that would apply would be for capital gains which have already occurred before the date of implementation for the (inaudible).

JOURNALIST: But if I retire between now and then-

SHORTEN: Oh right.

JOURNALIST: and in another hypothetical I’ve got one and a half million in super, that kicks in straight away?

SHORTEN: Well it would apply from 1 July 2017. You know, let’s be straight, this doesn’t come as a complete surprise. It’s a well-known fact, I think, amongst a lot of observers of our retirement income system that the concessions are exorbitantly generous and that there’s millions of tax-payers going to work today, who are paying in their taxes to provide tax concessions to people who quite rightly, don’t need the extent of the tax concessions they’ve got. The scenario outlined about someone approaching retirement is, you look at say the returns over the last seven years, it’s been just over three per cent, someone who has $1.5 million at retirement is not going to be paying tax even on all of it, it’s only once they’ve earned over $75,000 in earnings in the pension phase, they then pay 15 per cent for that amount above that. I mean I said I’d come back to what David said a bit earlier at the end of Chris’ answer, I think what we want to do here is we want to get the balance right between, I think, putting some speed limits on the out of control concession system at the top end in the interest of fairness and sustainability, but also what we want to do is give certainty. What drives people to frustration, people perhaps for the second half of their working life in the mid 40s to the mid 60s is constant changes to tax planning. What we are making clear here, is we are adopting a very responsible and fair position. We’re also making clear here is that with Labor we’re not proposing to review the system ad infinitum like the Liberals are doing, we’re saying what you see if what you get and indeed as someone observed in the media today, all that the Government can offer on retirement income certainty, is they’re going to keep reviewing things. See you’ve got the Government acting like an opposition just saying we want to review everything and you have an opposition, to be blunt, acting like a government, offering policy certainty.

JOURNALIST: So what is your commitment? After this your promise is there’ll be no changes whatsoever to super?

SHORTEN: We say that no changes to the tax treatment of superannuation and if people want to decode what that means: if you’re are person in your 40s or 50s or 60s and you’re trying – you’re sitting down with your planner, your advisor, what does it mean for you? What we are saying is that under Labor this is the policy which we will have which we will take the election. We do flag very clearly and I might get Chris to unpack a couple of these propositions in a moment, we think the issue of the gender gap in savings is unfinished business. We’re certainly also interested in how do we take superannuation policy to the next stage, a sort of more Reserve Bank approach of superannuation guardians who can have a transparent approach on policy which is robust, but I might get Chris to talk more on this.

BOWEN: Thanks Bill, and I’ll be saying a little bit more about this at lunchtime, but this is the sum total as we said of our efforts to raise revenue out of changes to taxation in superannuation and obviously superannuation is very, very important to us and Bill and I individually and our party collectively, it’s one of our greatest achievements as a party. We want to see it grow and be protected so we obviously would continue to consult about the right and proper treatment of low income earners, the terrible gender gap in retirement incomes as Bill has suggested and obviously we’ll continue to look at the rate at which we get to a 12 per cent superannuation guarantee, which the Government has breached very blatantly and on three separate occasions an election commitment and is slowing the rate till 12, so we’ll continue to consult with that and we’ll have more to say on that later.

JOURNALIST: So Mr Shorten just to be clear, does this apply to any term of government you lead or just the first term, this no other changes?

SHORTEN: I’d encourage you to come and listen to Chris at lunchtime, he’ll unpack further how we belt and brace the proposition about removing uncertainty.

JOURNALIST: Just on the gender gap, can I ask Mr Shorten, just on the gender gap, curious statement you want to address the gender gap, one option to address the gender gap on super and retirement incomes might be to restore the Low Income Super Contribution which did benefit low income women, female workers, more than others – is that an option?

SHORTEN: I might get Chris to answer that.

BOWEN: Well as I said to, and in answer to Mark’s question at the low income level and women in particular, we are continuing to consider a range of options, and there are a range of options available for governments who actually care about fixing this. And as the previous Labor Government did and as the Shorten Labor Government we will care about fixing this, and that’s what we’re flagging, that we will continue to consult and consider ways of improving the retirement incomes of women in particular because we believe in a very simple proposition: every single Australian deserves a dignified retirement, every single Australian and there’s plenty in particular, female Australians who are denied that through the superannuation system as we speak.

JOURNALIST: Mr Bowen, do you – in terms of how these things sometimes change the way people invest under these decisions, do you see it potentially resulting in a shift where some of that money goes, say into property –

BOWEN: No.

JOURNALIST: Or is the deal so good people will stay where they are?

BOWEN: No and we’ve consulted, obviously the policies we’ve announced today are being consulted by the Parliamentary – costed by the Parliamentary Budget Office independently of us and they take into account any behavioural shifts as a result of any policy changes, and they take a very rigorous approach to that, and I would say – although I don’t want to speak for them obviously – but they have looked at the fact that strong concessionality remains. That it is still a very good tax treatment for superannuation investments and the factor that in to any possible considered behavioural change, and hence they’ve provided us with these costings.

JOURNALIST: Mr Bowen just on costing, the Government was out last night challenging the assumptions behind your multinational tax policy. What are you going to do to, I guess, fire proof the policy announcements against these kinds of challenges from the Government?

BOWEN: Well, let me deal with that, I’m going to deal with – there’s two parts to that – let me deal with the specific issue of multinational tax and let me deal with the second part of your question. Multinational tax – what a pathetic excuse and alibi from a Treasurer who is just failing to act, and is flailing around looking for somebody else to blame for his failure to act. I mean he beats his chest, he talks tough about multinational tax avoidance, and he’s done absolutely nothing. Just a couple of weeks ago he was flagging a ‘Google Tax’, a diverted profits tax, we said we thought that was a bad idea, seems he now caught up with us and has realised it’s a bad idea, seems he’s dropped it.

Now his big, bold, definitive plan is to have a meeting with the United Kingdom Treasury, that’s his big, bold, definitive plan, and he writes to me and says I don’t like your plan.

I mean the Treasurer has no plan.

We have a costed, well considered, properly thought-out plan on the table, which he could adopt tomorrow, and I’ve previously said to him that the Shadow Assistant Treasurer can come down to Treasury and brief them on our proposal, in detail if he chooses to take that up. And he’s not taken that up.

Now on your second question, we of course have had every policy costed by the Parliamentary Budget Office, and will continue to do that. They are independent, professional, arm’s length of government. I’ve also announced that under a Labor Government the Parliamentary Budget Office would prepare the Intergenerational Report unlike the politicised document the Treasurer has produced, and we’ll continue to do that, and we’ll continue obviously to have the most rigorous processes and conservative assumptions underpinning that.

JOURNALIST: Just correct me if I’m wrong Mr Bowen, on your policy on multinationals, it’s about reducing the deduction you can claim by averaging their debt/equity ratio. How does that work if they’re not declaring their profit in the first place, I mean isn’t the fact that they’re (inaudible)

BOWEN: What a number of companies are doing is not declaring their profit by loading up debt in one particular jurisdiction ie. ours, and therefore bringing their declared profits down to a very small level. There are other mechanisms which some companies employ but the OECD has highlighted the problem that we are remedying through our multinational tax policy as they key to dealing with base erosion and profit shifting.

JOURNALIST: Do Apple and Google load up debt in Australia?

BOWEN: Well I mean Apple and Google have not been particularly forthcoming in the Senate Committee in terms of their tax arrangements. I’m not going to comment on any particular company and I’ve avoided doing that up until now, but what we are dealing with is a principle of what should be allowed and not allowed.

JOURNALIST:  Mr Shorten, on health, with doctors supporting the Medicare Benefits Schedule taskforce, where does Labor stand?

BOWEN: Well its good news that the Liberal Government is belatedly fumbling its way to Labor’s position.

As I said earlier, there’s a bit of role reversal here, the Government’s having reviews and we’ve got policies. We’ve got a very clear policy about not trashing Medicare, it’s the Government whose stolen 18 months of this nation’s life, but wasting the nation’s time on five different versions of a tax on sick people going to their GPs. We’ve always said that no system’s immutable and we should always been in a constant search for efficiency and improvement but what you’ve got to do is do it with clinicians, do it with the experts.

I think it’s an indictment on the Government that 18 months after getting elected, 592 days after getting elected to be specific, they finally worked out they need to talk to doctors.

JOURNALIST: Mr Bowen, on other parts of the pension system, is Labor considering any major changes to pension assets test and (inaudible)

BOWEN: No, well, look we see a daily thought bubble from Scott Morrison on this, if he has a concrete plan bring it forward. As Bill has consistently said, as Jenny Macklin has consistently said, as I’ve consistently said, instead we see daily thought bubbles, no plan from the Government. If they have a concrete plan which they care to share with us and the Australian people well that’s something we should do.

SHORTEN: Let’s be straight when we talk about the pension system, the Government has one proposal on the table, one detailed proposal, they don’t have any other proposal. No other proposal formally exists anywhere, so let’s not give them the leave pass to say that they’ve dumped what they’re doing now. They keep threatening to dump it, just do it.

The best single thing they could do in this rotten budget, is that they could just take the anxiety off the shoulders of millions of Australian pensioners.

You know, they say they want to fix the pensions stem, we don’t think it’s unsustainable. We think some of the tax concessions to some of the people who have multi-million dollars in their superannuation accounts, we think that’s unsustainable. It tells you a lot about the different values of Liberal and Labor, that we’re interested in how you make a system sustainable by looking at unfair concessions, not changing the whole system but making, just reigning in some of the largesse and excess and all that the Liberals can do, all they can say is we’ll make ever pensioner take a cut by adjusting the indexation formula that’s used to increase the pension.

JOURNALIST: On the Medicare review, is the problem that review now wont report until later in the year so it’s pushing it off beyond the budget?

SHORTEN: Spot on.

The Government’s coming up to its second Budget and they’re saying it’s going to have a review. What we have is Government who never really stopped being the opposition, what we have is a Government who’s just proposing review after review, you know, they wander around, you know, sort of constantly, with constant expressions of delight after they find out a new fact, the new fact on the medical system is we should talk to doctors and nurses and again it will be interesting to see, they’re still proceeding with their cuts to hospitals.

You know, let’s not forget the unsavoury cage fight of last week which I referred to the Premiers’ conference where there’s $55 billion plus being taken out of hospitals in the next 10 years. You can have all the reviews you like, but if you’ve got a GP tax, if you’ve got a co-payment proposition, if you’ve got massive cuts to hospitals, you know, your review, what’s that going to tell you?

JOURNALIST: Mr Shorten, on the emissions reduction target, the Climate Change Authority is recommending 30 per cent by 2025, do you think that makes sense? Would you endorse those recommendations?

SHORTEN: We’ve said certainly, I think there’s three points in that. We’ve always said we take the CCA very seriously. We will be guided by the best science but I think the reason that the CCA comments are attracting such interest today highlights that the Abbott Government is a Government of climate sceptics run for climate sceptics and their policies are clearly not going to achieve anywhere near the targets that the rest of the world are setting. I think the best short term thing the Abbott Government could do is actually rescue the Renewable Energy Target.

Again, two weeks ago Labor put forward a compromise based upon the best advice of industry, based upon the Clean Energy Council and other investors and other people in the industry and good environmental expert advice. We’ve said lets remove the uncertainly over billions of dollars of investment, lets remove the uncertainty of millions of Australians who have solar power on their households. Lets remove the uncertainty for tens of thousands of jobs. The Abbott Government can’t even pick up a deal that’s in front of their nose so no wonder the CCA sounding the alarm about what needs to be done on the future because they know under the Abbott Government we’re going backwards on climate change, not forwards. Last question thanks.

JOURNALIST: But does Labor back the 30 per cent figure?

SHORTEN: We’re working on what our target should be, we’re interested and most committed to seeing what at occurs at the Paris Conference and we are certainly in the short term, demanding the Government remove one of the big log jams to a sustainable future for Australian energy, for a sustainable future for Australian households by doing a deal on the Renewable Energy Target. The Government desperately doesn’t want to talk about renewable energy and solar power, well we’re not going to forget it. We’re going to fight for all those people who understand that Australia’s future energy mix in 2025 and 2030 deserves to have solar power and renewables part of it. Just as we’re about the future in renewable energy, we’re about the future in superannuation. Today’s proposal, to close off, simply shows that we’re about certainty, we’re about integrity in the system and we’re about fairness.

Thanks everyone.

BOWEN: Thank you.


ENDS