Treasurer Joe Hockey open to scaling back superannuation tax concessions

Federal Treasurer Joe Hockey has left open the option of scaling back superannuation concessions as part of the tax white paper process.

Speaking at the Australian Israel Chamber of Commerce lunch in Melbourne, Mr Hockey also flagged a package for small business and startups in the upcoming federal budget.

Mr Hockey spoke after Labor this week announced a plan for superannuation tax concessions for the rich to be wound back.

Opposition Leader Bill Shorten said the plan could save $14 billion over a decade.

Labor’s proposal is to limit the effective tax-free-threshold for superannuation earnings to at or below $75,000 in any one year. After that, a 15 per cent tax rate would apply on earnings that are currently tax free.

Labor also wants to reduce the high-income threshold at which contributions to a super-fund begin attracting a 30 per cent tax rate.

The threshold is currently set at $300,000 per year, but would drop to $250,000 under Labor’s plan.

Asked about Labor’s proposal to slap a 15 per cent tax on super earnings Mr Hockey said: “We will have a look at the details, but I am always sceptical about Labor coming up with new taxes.”

Mr Hockey stuck to a recent pledge, made on ABC’s Q&A program, where he said the issue of superannuation concessions would be covered in the tax white paper.

“We’ve got a proper process in place to look at taxation,” Mr Hockey said.

“Mr Shorten is making it up as he’s going along. Last time he tried this the Treasury said it was un-implementable in various ways.”

Mr Hockey said the federal government would focus on reducing spending in the upcoming budget.

“I don’t like higher taxes, I am philosophically opposed to higher taxes.

“If you increase taxes you’re just collecting someone else’s money.”

“We have a tax white paper; we have a proper process. Quite frankly we’ve said if they are integrity measures they should be looked at.”
Atlassian meeting

Mr Hockey said he had recently met the founders of one of Australia’s most successful startups, Atlassian, and discussed with them ideas about what can be done to help startups.

The current R&D tax breaks offered to business were helpful, but there was more the government wanted to do.

“From my perspective there are a number of things we can do to help startups and we will be saying more about that in the upcoming budget.”

The focus in the May budget would be growth and jobs. “Innovative small businesses would benefit in the upcoming budget’s small business and jobs package,” he said.

Mr Hockey also confirmed at the lunch that Australia was looking at updating a tax treaty with Israel.

Late last year it was revealed that Israel was one of the main nations where wealthy people had hidden income and assets under the recent ATO amnesty.

He also reiterated the importance of working with other tax jurisdictions to fight multinationals, and defended his plan to set up a working group with the UK government so that Australia could learn lessons from Britain’s new “Google tax”. He said some of the action items on the OECD’s plan to fight profit shifting, known as base erosion and profit shifting, which Mr Hockey was supportive of and had promoted at the G20, was “about setting up rules and definitions around profit shifting; they’re not a responsive action”.

That was why earlier in the week he had discussions with UK Chancellor of the Exchequer George Osborne about the diverted profits tax. “We all need to work together to understand what the impact is of that diverted profits tax, and importantly to ensure that companies who earn their profits in a country pay the appropriate tax.”

Also speaking at the event was Mark Leibler, the head of law firm Arnold Bloch Leibler. He said while the government should look at reforming Australia’s superannuation system, including superannuation concessions, any changes should only apply retrospectively.

“We must ensure the preservation of the rights and legitimate expectations of current retirees and those about to retire,” he said. ” In my view, any changes must be prospective. In general, tax changes which impact retrospectively cannot be justified.”