(April 5, 2013) Wealthy Australians are in for a shock today after treasurer Wayne Swan announced plans to curb tax relief for those saving for retirement, as the government continues to battle to make the A$1.5 trillion ($1.6 trillion) pension system more sustainable.
Retirees who receive earnings of more than A$100,000 ($104,180) a year from superannuation assets will now be taxed at 15%. Savings up to A$100,000 are tax free of charge.
The changes will affect 20,000 people and save about A$900 million ($937.6m) over four years, Swan said.
The move has been attacked by the Australian opposition party, with leader Tony Abbott pledging to overturn the changes if his coalition takes over from the current government at elections on September 14, according to Bloomberg.
“We don’t support this new tax on superannuation,” he said. “This is a A$1 billion ($1.04bn) hit on people’s retirement savings.”
But the measure has been supported by former Prime Minister Paul Keating who helped design the system.
Speaking to the Australian Associated Press, Keating said hitting the wealthy with superannuation changes will help pay for Australia’s retirement savings system over the long term.
“The changes seemed designed to return to the notion of reasonable benefits for superannuation without altering the tax treatment of lump sums themselves,” he said.
The ageing population is a key concern for the fourth biggest pool of funds under management globally, and the costs are starting to hurt the Treasury.
The treasurer was forced to abandon a pledge to return the national budget to surplus late last year, and several changes to “the Super” were threatened as part of a plan to get the funds back on track.
Swan also announced that from July 1, the government will allow Australians aged over 60 to contribute as much as A$35,000 ($36,500) to their pension fund each year at a reduced tax rate. This concession will extend to people aged 50 and over from July 2014.
And employers, which currently contribute 9% of workers’ salaries to superannuation funds, have been told their levy will rise gradually to 12% by 2019, beginning with an increase to 9.25% on July 1.