Minchin Argues For Elimination Of Australia's Superannuation Tax

by Mary Swire, Tax-News.com, Hong Kong

25 January 2006

Australian Finance Minister Nick Minchin has proposed that the government should abolish the superannuation tax in the next budget rather than cutting income taxes which, he argues, could help overheat the economy by boosting consumer spending and increasing inflation.

In a speech to the Young Liberal Movement Federal Convention in Sydney, Senator Minchin said there was a strong case for abolishing the current 15% tax on superannuation contributions, which raises around A$3.3 billion in Budget revenue.

"This is a Labor Tax, brought in by Paul Keating in 1988 in a typically desperate bid to raise revenue, which made Australia one of the very few countries that taxes peoples’ contributions to their superannuation," Senator Minchin remarked.

"The super industry estimates that the abolition of this very odd tax could mean the average worker would be up to A$30 a week better off in retirement," he added.

Senator Minchin cautioned that further income tax cuts which boosted consumer spending might force the Reserve Bank to raise interest rates to keep inflation in check.

"There is however a very obvious way to reduce taxation without unduly stimulating the economy and putting upward pressure on interest rates, and that is to look at how we tax savings as opposed to spending or income," Senator Minchin argued.

"Abolishing Labor’s tax on super contributions would deliver a very real benefit to Australian workers without overheating the economy," he concluded.

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