PMO interest in $3m super – Just coincidence?

ANALYSIS

Treasury officials last week told Senate Estimates that the Prime Minister’s Office (PMO) had taken an interest in feedback around the Government’s $3 million superannuation tax cap and taxation of unrealised capital gains.

Yesterday, the Treasurer, Jim Chalmers, announced what amounted to significant concessions on a policy which he previously suggested had been on the books for some time and was not up for change.

The net result is that, as had always been suggested as a better option, the Government will now deliver indexing around high balance tax caps of $3 million and $10 million and there is now no prospect of the taxation of unrealised capital gains.

This represents a major win for the industry and lobby groups which had worked actively behind the scenes to have the Government change its policy approach. It also reflects the reality that the Government needs the support of the Australian Greens in the Senate and that party has always insisted on indexation.

The Treasury officials appearing before Senate Estimates were last week circumspect about what had passed between Treasury and the PMO, but it was evident that the disquiet felt by Labor parliamentarians about taxing unrealised capital gains had filtered upwards.

As well, notwithstanding the Labor Party’s handsome majority in the House of Representatives and the continuing disarray in the Coalition, political strategists know that taxing unrealised capital gains was likely to be a political albatross around the neck of a party which often struggles in the regions.

It says a lot about Chalmers’ announcement yesterday that the Treasurer decided to headline it with the Government “boosting the low-income superannuation tax offset (LISTO) – something which had been on the wish-list of its industry superannuation fund constituency for years.

The LISTO change is important, but it is the type of announcement that would usually have be timed around the budget in May, next year.

The LISTO change, though welcomed by all the major superannuation players, failed to distract from the bigger story around the changes to the $3 million superannuation tax cap policy.

The economics of not indexing the tax cap and of taxing unrealised capital gains never fully added up. However, the long-term political consequences were always obvious.