AUSTRALIA - Any move by the government to reduce or abolish the 15% tax on superannuation contributions will not form part of the 2006/07 budget, Nick Minchin minister for finance and administration, said today.
Minchin moved to clarify that his comments regarding the abolition of the tax, made in a speech to the Young Liberal Movement Federal Convention at the weekend, were part of a “longer term debate”.
Minchin asserted there was a strong case for abolishing the 15% tax on superannuation contributions, which raises approximately A$3.3bn of budget revenue and was introduced in 1988 by Labor’s then-Prime Minister Paul Keating.
At the convention Minchin said: “If there is a capacity to reduce government revenue in this year’s budget within the context of good economic management, I think we should look first at the possible removal of Paul Keating’s tax on savings before we consider further changes to income tax arrangements.”
However he has since added: “I see this as part of a longer term debate over national savings - not (as has been suggested by recent media reports) to flag an immediate intention by the government to reduce or abolish tax in the 2006-07 budget.”
“I suggested that in the longer term we should consider how we tax superannuation savings, noting that any tax relief in this area would not overheat the economy. I believe there is a strong case for maintaining a surplus of around 1% of GDP. That provides limited scope to loosen fiscal policy in the 2006-07 budget.”
The Association of Superannuation Funds of Australia (ASFA) had welcomed the original remarks and claimed the removal of the tax “would not only enhance the retirement savings of millions of Australian, but also be a sound economic move.”
“If the government removed the 15% 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,” ASFA said.
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