Key senator responds to super changes

Senate kingmaker David Pocock has called for the contentious “stage 3” tax cuts to be revisited after Labor announced it would pare back superannuation tax concessions.

The Albanese government has reignited debate over tax reform after last week revealing it planned to tax earnings above $3m in super accounts at 30 per cent rather than 15 per cent from July 1, 2025, saving an estimated $2bn a year.

Labor says the policy will make super more equitable, improve the budget bottom line and affect 0.5 per cent of the population or about 88,000 people.

The Coalition has vowed to vote against the policy, meaning Labor must win support from the Greens and at least two crossbenchers to pass its legislation through the upper house.

Senator Pocock, the ACT-based independent whose vote the government is likely to need, said on Monday he was broadly supportive of the “modest” changes.

But he said it was time for a broader conversation around welfare payments and other tax concessions.

“When you want to start actually dealing with some of the root causes of the housing crisis and look at things like capital gains discount or negative gearing … good luck – the major parties simply don’t seem to want to have a sensible debate,” he told ABC Radio.

With the government’s superannuation changes sparking speculation Labor may have other tax concessions in its sights, Senator Pocock said the stage 3 cuts “have to be revisited”.

Due to come into effect from 2024, the cuts have been the source of one of the most contentious debates around tax reform in recent years.

After the first two tranches offered targeted tax relief to low and middle income taxpayers, the third tranche of cuts legislated by the Morrison government with Labor’s support will scrap the 37 per cent marginal tax bracket and lower the 32.5 per cent marginal tax rate to 30 per cent from 2024.

It also increases the threshold for the 45 per cent marginal tax rate, so people earning between $45,000 and $200,000 will pay the same 30 per cent tax rate.

Treasury costing of the policy released late last year revealed the hit to the budget had blown out by $11bn from $243bn over a decade to $254bn.

The Labor government has so far stared down pressure to backflip on its election commitment to keep the stage 3 cuts, with critics – including some within Labor – arguing they will worsen inequity at a time when the Australian economy is struggling.

Senator Pocock suggested the money would be better spent elsewhere.

“We’re told we need to be really careful about lifting the rate of JobSeeker because that could be inflationary, yet that $250bn of tax cuts, most of that’s going to the wealthier Australians (who) are somehow exempt from being inflationary. I just don’t get it,” he said.

“You know, if we wanted to do away with bracket creep for people at the low end, there’s better ways of doing that than the stage 3 tax cuts.”