The Federal Opposition’s proposed tax plan has been branded short term and opportunistic, with yesterday’s announcement by Labor leader Mark Latham triggering a barrage of criticism from the financial services industry.
As the election campaign heats up, Latham announced that a Labor government would abandon superannuation co-contributions for low income earners and reinstate the surcharge for higher income earners, in order to help pay for tax cuts. Labor would also reduce the superannuation guarantee levy from 15 per cent to 13 per cent over four years.
The Investments and Financial Services Association (IFSA) described Labor’s proposals as a “a move in the wrong direction” and was highly critical of the move to dump the co-contribution scheme.
“Preliminary estimates indicate that Australians would be $2 billion further away from Labor’s own retirement income target of 65 at 65 [under these proposals],” IFSA chief executive Richard Gilbert says.
Labor’s target is for people to retire on 65 per cent of their pre-retirement income.
Gilbert’s sentiment is mirrored by his counterpart at the Association of Superannuation Funds of Australia, Philippa Smith, who says the changes to the co-contribution policy is a tragedy.
She says the policies provide no long-term incentives for individuals to save towards their retirement.
“The ALP proposal to reduce the contributions tax by 15 per cent to 13 per cent over the next four years is welcome but too little, too late and too slow if we are to help people save more for retirement and meet the ALP’s agreed target of 65 at 65,” she says.
But Smith says the government has also failed to take a leading position to improve individual incentives to save.
“The strategies outlined by both parties to date are incomplete and patchwork – both parties need to do better,” she says.
Taxpayers Australia was also highly critical of Labor’s plan.
“As a reform or a change to the tax system, I think it achieves nothing. It’s not really a policy or a structural change, it’s simply an immediate tax cut that has no real long-term ongoing benefit,” Taxpayers Australia national director Peter McDonald says.
“The elimination of the co-contribution doesn’t make sense at all, it was designed to encourage people to put money into superannuation, and was specifically targeted at low to middle income earners,” he says.
