Hopes that the superannuation contributions tax will be scrapped in the next budget have been dampened, with Federal Treasurer Peter Costello today stating a removal of the 15 per cent levy could raise interest rates and Finance Minister Nick Minchin backing down on his earlier calls for the tax’s death.
“If we put pressure on inflation, if interest rates go up as a consequence, it’ll be no consolation to anybody that they’ve had a tax cut here or an increased spending there,” Costello told ABC Radio this morning.
Senator Minchin, meanwhile, has watered down comments he made earlier in the week at a Young Liberal conference and to a major national newspaper calling for a scrapping of the tax “whether in this budget or in the future”.
“In my speech to the Young Liberal Movement yesterday, I made the point that the current Budget surplus is not so large that we can afford the sort of income tax cuts some are suggesting without overheating the economy and risking higher interest rates,” he said.
Treasurer Costello’s and Senator Minchin’s latest comments will disappoint industry groups, which have announced their support for Minchin’s initial calls to scrap the tax.
“Senator Minchin’s comments advocating the removal of the Superannuation Contributions Tax at the 2006 Young Liberal Convention are both welcome and highly symbolic. By 2030, Australia will have some 22 per cent of the population or 5.5 million people over the age of 65 compared to 12 per cent of the population in 2002,” Investment and Financial Services Association chief executive Richard Gilbert said.
Association of Super Funds of Australia (ASFA) chief executive Philippa Smith said: “If the Government removed the 15 per cent super contributions tax in the next Budget, given the additional net contributions and compound interest, the average wage earner would benefit by around $30 per week in retirement.”
“The Government’s good fiscal management puts it in an ideal position to now abolish or greatly reduce the superannuation contributions tax. Improving retirement savings makes sense from an individual and broader economic perspective.”
