ANTHONY ALBANESE, PRIME MINISTER: This time last year, our nation was in the midst of a major flood disaster. It caused the loss of life, widespread destruction through large areas of Southern Queensland and the Northern Rivers of New South Wales. One year on, our thoughts are with the loved ones who lost their lives during and as a result of these floods, as well as the thousands of people who were dislocated from their homes and from their businesses. Communities like Lismore were doing it really, really tough and continue to do so. Our thoughts are also with the volunteers, the Australian Defence Force personnel, all those who have come in and provided support and assistance on the ground, that I have witnessed firsthand, in Northern New South Wales and in Queensland. Since then, tragically, of course, we have also seen major flooding in Southern and Western New South Wales, in Victoria, in Tasmania, in the Riverland in South Australia, and of course around Fitzroy Crossing and the North-West of Western Australia. This is a difficult country, but at the worst of times we see the best of the Australian character. And over the last year we have seen that. So my thoughts are with those who today it will be a very difficult day. We'll continue to provide support to state governments, to local government, to individuals, over $3 billion has been committed to recovery from the February last year New South Wales floods, from the state and the Federal Government. We'll continue to roll out resilience and betterment projects as well in disaster-prone regions, including to our new Disaster Ready Fund. We need to make sure we don't just try and build back to what was there, but build back better, so that communities are greater protected. And I thank all those today for whom it will be a tough day.
The Cabinet has met this morning and had a discussion about superannuation. You might have noticed it's been occurring over recent times. This Government inherited a trillion dollars of debt with very little to show for it. And today I'm announcing that the earnings on super balances above $3 million will have a concessional rate of 30 per cent rather than 15 per cent. This proposal does not change the fundamentals of our superannuation system. 99.5 per cent of people with superannuation are unaffected by this reform. Under 80,000 people will be impacted by this. Importantly, this change will not occur until 1 July 2025. You will have noticed that's beyond this term. It's after the next election. It's also not retrospective. It applies to future earnings. Labor built the superannuation system and we have fought to keep it strong. But Australians who are having to make tough decisions around the kitchen table expect their government to be prepared to make tough decisions around the Cabinet table. And with 17 people having over $100 million in their superannuation accounts, the individual who has over $400 million in his or her account, most Australians would agree that that’s not what superannuation was for. It's for people's retirement incomes. Confronted with this information, it will be irresponsible to not take any action whatsoever. And that's why we've made this decision today.
This reform will strengthen the system by making it more sustainable. The savings that are made from the reduction in these tax breaks will contribute $900 million to the bottom line over the forward estimates, and some $2 billion when it is operating on a full-year period. This is an important reform. We have worked closely with Treasury in particular, but others as well. Obviously, this will be a part of our Budget in May, and then the legislation will follow after that. But as I said, it will come in from 1 July 2025. That makes it very clear that if Mr Dutton chooses to stand up for the individual with over $400 million in their account, and the 17 people who have over $100 million, well, that's a matter for him, and he can make those decisions and people can look at the fiscal implications of that after the next election when we get to it. But I think this is the right thing to do. It's the responsible thing to do. And that is why we've come to this decision today. I will ask Jim to make some comments and to comment as well on the Tax Expenditure Statement that has been put out by the Treasury as well today.
JIM CHALMERS, TREASURER: Thanks very much, Prime Minister. And as the PM has said, today, as you know, we have released the Tax Expenditure and Insights Statement, and it details the concessions, exemptions, deductions and other features of Australia's tax system. This statement is released every year by governments of both political persuasions, in order to comply with the Charter of Budget Honesty. We said from our opposition days that we would make it more comprehensive and more accessible and more meaningful so that people can get a better understanding of the different parts of our tax system and that's what the Treasury has done in this document. It's important to understand what the Tax Expenditure Statement is not. It’s not a statement of government policy or even policy intent, it shouldn't be read that way. It's an honest reporting of the facts, what the various concessions are, who benefits from them, and how much they cost the Budget. We’ve tried to be up-front in our time in office about the challenges in our economy and in our Budget as well, and I think people are pretty familiar with them by now. We inherited $1 trillion of debt which is getting more and more expensive to service as interest rates go up. We’ve got persistent and growing spending pressures in health, the NDIS, aged care and of course defence as well. Now in the near-term in the Budget we're doing pretty well, from a combination of higher commodity prices, low unemployment, and the beginnings of stronger wages growth. But beyond the next couple of years, the budget pressures are intensifying rather than easing. This is the mess that we were left and this is the mess we're trying to clean up. And the announcement that the Prime Minister has just made is part of that effort.
Now in the past week or so, there's been a welcome debate about the sustainability of some of the more generous tax concessions in our superannuation system. And what the Tax Expenditure Statement shows is that the cost in revenue foregone from super tax breaks is about $50 billion a year. And that will surpass the cost of the aged pension, as I said before, by around 2050. Now this debate or this part of the debate began when we released the proposed objective of superannuation, which is about making sure its purpose is to deliver a dignified retirement for working people. That's what super is for. And when that objective can be satisfied while also making our economy stronger, and our society stronger, then even better. But to achieve its true purpose, and to live up to its full potential, we need to make sure that our superannuation system is equitable and that it's sustainable. And we care deeply about the future of the superannuation system. You know, this is a proud creation of the Australian Labor movement. We have always tried to protect it when the Liberals have tried to wreck it, or hack away at it. And we have a duty and we take this duty very seriously, to make sure that superannuation is affordable and sustainable into the future. We have a great superannuation system. It is absolutely world class. But it's not perfect, and one of the imperfections is the ongoing and growing cost of some of these tax breaks. Now the tax breaks for contributions to super and earnings from super are generous, and they should be, because they help people save more money for their retirement, which is what superannuation is for. But the cost of these tax breaks is overwhelmingly skewed towards a small number of people with high balances, with balances well beyond what’s required for a comfortable and a dignified retirement.
Now, we don't begrudge anyone who has made a lot of money, or saved a lot of money, or takes advantage of the tax breaks that are legitimately available to them. We want to make that clear. If you’ve done well in super, that's a good thing. We're not going out of our way to begrudge people who’ve done well for themselves. I think that’s an important thing to note. And we're not coming after, we're not trying to diminish anyone's superannuation balance. As the Prime Minister said, this is a prospective change that comes in in a couple of years' time, and it's about future earnings over a certain balance that people have. And we think, at a really crucial time for our Budget, we need to make a serious assessment of what is affordable and what is not affordable. And we want to make sure that whatever we provide in the tax system is fair. And I think it's for any objective observer, the idea that ordinary working people subsidise incredibly generous tax breaks for people with millions and millions of dollars in superannuation doesn't stack up.
The average superannuation balance is about $150,000. And the few people with balances above $3 million hold an average of almost $6 million in their accounts. As the Prime Minister said, 17 people have got more than $100 million, one person has got more than $400 million. And think about this example, a $100 million fund earning a five per cent return receives a tax break upwards of $1.5 million a year, compared to a return outside of super it was taxed at the marginal rate. So it takes 100 average wage earners paying the average amount of tax to pay the tax break for that single super account every year. 100 ordinary people to fund, with their taxes, the tax break on someone with $100 million in super. And every dollar that’s spent on a tax break for people with tens of millions of dollars in super is a borrowed dollar that makes the deficit bigger. If you’ve got millions in super, that’s impressive, obviously there will still be tax concessions for you, they just won't be quite as generous as they were before. Our current system provides tax breaks for contributions and earnings in accumulation, and for withdrawals and earnings in the pension phase, all four parts of the current system will stay in place. As the Prime Minister said, after Cabinet met today and the Expenditure Review Committee last night, we do intend to make this one modest adjustment, to tax concessions on earnings for super balances above $3 million, which is just one half of one per cent of Australians with superannuation accounts. Earnings on balances above this amount will attract a concessional headline tax rate of 30 per cent, instead of 15 per cent. Earnings corresponding to funds under $3 million will continue to be taxed at the same headline amount of 15 per cent. Now what this means is 100 per cent of Australians with super will continue to receive generous tax breaks. 99.5 per cent of Australians will be completely unaffected by the changes that we are announcing today. If you are part of the one half of one per cent with more than $3 million, you will still get tax concessions, they will just be a little bit less generous. This isn’t about limiting the amount of super you can accumulate, it's just about how generous the tax concessions are on it. It will apply to the 25-26 income year, so that's after the election. This policy will go to the people, and the Prime Minister and I think that is very important. It will improve the Budget position by $900 million over the forwards, $2 billion in its first full year and $3.2 billion over five years. And I’ve given you that five-year number because I wanted you to include one of the full years in it, so $3.2 billion over five years. It's prospective on future earnings, not retrospective, and it doesn’t come in for more than two years.
Now the Government will undertake some targeted consultation on the implementation of this measure between now and the Budget as well. There is a lot of complexity in the system. For example, it's our intention to include defined benefit schemes, this will require some consultation to make sure that we get that detail right. If we can include defined benefit schemes in what we're proposing today, we would like to. But we want to speak to the sector about that, there is some complexity there as well. No superannuation tax change proposed by the Government will take effect this term of the Parliament. And if this is about one thing, it's about responsible economic management. I'm confident that Australians will see this change as modest and reasonable and fair, but one which makes a difference to the sustainability and affordability of the superannuation system that we cherish. I think it's good that more people have become aware over the course of the last week or so, about some of the features of the tax concessions in superannuation, I know this is and can be a contentious area. But equally, we take our responsibility to manage the Budget in a common sense way very, very seriously. We are interested in the right path here, and not just the path of least resistance.
Now, one final thing about our opponents. These are the same people who gave us a trillion dollars in debt and deficits as far as the eye can see, they now want to borrow even more and have even bigger deficits in order to give the most generous tax breaks to people with tens of millions of dollars in super. In 2016, they jacked up taxes on superannuation to the tune of $5 billion. And at the time, Angus Taylor said, “it's totally inappropriate that someone who has contributed millions and millions of dollars continues to get those 15 per cent concessions.” That's what Angus Taylor said in 2016 when they increased taxes on super. If they want to vote against this change, and try and prevent this change, then they can explain to people why they're not prepared to back energy bill relief for pensioners, they're not prepared to back people fleeing domestic violence with more affordable homes, they’re not prepared to back manufacturing jobs and a broader, deeper industrial base in this country, but they are prepared to go to war for the one half of one per cent of people with more than $3 million of superannuation in their accounts. They can explain that to the Australian people. We take our responsibilities seriously. This is about responsible economic management. We think we have struck the right balance here and we're confident that we have.
JOURNALIST: There’s one change announced today, but of course the Treasurer has just outlined major challenges with the sustainability and the fairness of the superannuation tax concessions. So do you want a larger debate about further changes that might be on the agenda in the future? Would you consider taking any other changes to the next election?
PRIME MINISTER: We're putting forward this proposal today as something that we will legislate for, this term, but something that won't kick in until after the next election. There's a very conscious decision, so that it's very clear that everyone can see what we're doing here, which is about consistent with the commitments that we've made. But it's also the case that when you inherit $1 trillion of debt, which we have, then one of the reasons why this is important, and in terms of its timing as well, is the structural deficit which is there in the Budget. It's something that we're very conscious of.
JOURNALIST: Prime Minister, taking into consideration this doesn't come into effect until after the next election, you have pointed out, and the Treasurer has pointed out in recent days, the equivocation in your promise on super, that you had no intention of changing it, that you had no intention of major changes. What absolute commitment can you give to the 99.5 per cent of Australians who won't be affected by this change, that you won't be messing with their super?
PRIME MINISTER: Well people can see what we're doing here. Which is we're proposing a change that will have the impact on half a per cent of the population. And Mark, if you knew there was someone out there who had $400 million in their superannuation account, I didn't, if you knew there were 17 people who had $100 million in their account, I didn't, and it's hard to argue that those levels is about actual retirement incomes, which is what superannuation is for.
JOURNALIST: Joe Hockey, your predecessor, in 2016 used his valedictory speech to commend a pairing back of superannuation concessions. You've done that. But he also commended restricting negative gearing towards new housing. Now, in your statement today, the expenditure statement, you say it's not a statement of intent, but it's clearly very expensive in the order of $20-21 billion. Can you tell us here and now whether you plan to look at negative gearing?
TREASURER: Our focus is superannuation. There's almost, or there’s around $50 billion a year that goes to superannuation tax concessions in the system. The top ten tax breaks in the system add up to about $150 billion. So about a third of it is superannuation tax concessions. And so we think that is the best place to direct our efforts. You're right to identify in your question that the Tax Expenditure Statement is not a policy statement, it's not a statement of intent. We've made clear what our priority is here when it comes to tax breaks, and that's the superannuation tax concessions for people with balances over $3 million, still concessional, but slightly less so.
JOURNALIST: Prime Minister, both of you have said today this is about making the super system more sustainable. But in its first year, it only claws back $2 billion in a $50 billion a year tax concessions in super. How does this really touch the sides?
PRIME MINISTER: This is about long-term sustainability, and it's about the structural problems that are there. One of the one of the things that I often get in media conferences, is why do politicians always just focus on the short-term? Where's the long term thinking? My Government is focused on short-term issues, we're focused on dealing with the floods, all of that, but we're very much focused as well on the long-term challenges that Australia faces. That's why we're making this decision.
JOURNALIST: Back to Andrew's question, Treasurer, you have put rental reductions in this statement for the first time. And the biggest concession is CGT on the family home. Is what people are going to read into that, that the insertion of rental deductions, that negative gearing remains unfinished business for Labor? Can you categorically rule it out? Or is it just not your intention at this time?
TREASURER: We don't see it that way. We don't see it as unfinished business. I committed in opposition some time ago to make the Tax Expenditure Statement more meaningful. I said that while we're trying to get the Treasury to put as much information they could in there, about the revenue foregone for some measures, the distributional impact, the sense of expected growth, and all those sort of pieces of information, but it’s again the same answer to Andrew's question. It’s genuinely not a policy statement or a statement of intent. I’ve asked the Treasury to provide you and through you the Australian people the most information that they can about the various concessions in the Budget. Now superannuation is a big part of it. $50 billion or thereabouts in superannuation tax concessions is a big expense to the Budget. And as the Prime Minister rightly pointed out in the response to Trudy's question, this is a meaningful change, a structural change to the Budget over time. But it recognises we want it to come in after the election so that we can take it to the people, and it's a relatively modest change and it’s deliberately so.
JOURNALIST: On the Australian Professor Bryce Barker, he has recently returned from Papua New Guinea. We all undoubtedly welcome his return. Are you concerned there's now heightened risk for Australians in PNG, given a ransom was paid and is this something that the Australian Defence Force or AFP are going to work with PNG authorities on, as we develop this security defence partnership?
PRIME MINISTER: Look, we will continue to work very closely with our PNG counterparts and friends. Can I say this to Prime Minister Marape, thank you, to not just you personally for the role you played, but to your personnel who played a very positive role. We welcome the release of all those who had been taken hostage. Of course, it wasn't just the Australian Professor Barker, but there were others as well. PNG, we encourage people as well to follow travel advisories. And some of those advisories, of course, will indicate differentiated risk depending upon where people are. And we'll continue to work with the Department of Foreign Affairs and Trade. But I'm very pleased with the relationship with PNG. We had their ministers here for a ministerial council meeting and I look forward to progress on the security agreement and I thank Prime Minister Marape again for the honour of being the first non-PNG citizen to address the PNG Parliament in Port Moresby. That was a great honour.
JOURNALIST: You and the Treasurer both said that the point of having this start in 2025 is that you want to take it to the people, but you want to legislate now. Isn't that a backwards way of seeking a mandate?
PRIME MINISTER: No.
JOURNALIST: Prime Minister, on the defined benefits scheme, is this a message to – I mean obviously your opponents are going to talk about the very generous defined benefit scheme that the older politicians, no offence, but, those that had been here for a while…
PRIME MINISTER: None taken, Kieran. Next question, over here.
JOURNALIST: Is this a message to them to say you're looking at your own generous super scheme on the same playing field as others?
PRIME MINISTER: It will be. There's nothing subtle about it. It's not about me or any individual and I think that it’s, you know, about the system and we'll look at that. We’ve asked Treasury to look at that.
JOURNALIST: Just on the $2 billion generated, could this revenue be reinvested in the super system to support women and low-income Australians as Greg Combet has suggested?
TREASURER: Look, the purpose of raising this money from superannuation tax concessions is to improve the structural position of the Budget. You know, we see this as an important investment in responsible economic management. This is a common sense change that will improve the Budget over time. Now, separately, we have said for some time since before the election, after the election, I said it last Monday in a speech to the superannuation sector, now when we can afford it, we would like to pay superannuation guarantee on paid parental leave. That's been our position and we mean it. But this change that we're proposing today is not about redirecting it to another purpose. It's about improving the structural position of the Budget, a Budget that we inherited with a trillion dollars of debt, and deficits as far as the eye can see.
JOURNALIST: Treasurer, you have given two years notice, that people who have the $100 million do know their way around the tax superannuation system. Are you concerned there may be behavioural change by these people ahead of this to avoid a higher tax rate? And are you going to index the $3 million?
TREASURER: Two great questions. So on the first one, we do expect that people will respond to this announcement that we have made today, but you need to remember that concessions in the tax system will still be there for people with large balances, but they will be slightly less concessional. So when people go through their own arrangements, some people might take their money out of super, but more likely, people compare the 30 per cent headline rate with their marginal tax rate, and decide to leave it where it is. People will make their own decisions, and that's fine. That's a good thing. Part of our costing is based on some people getting out, but more likely, people will receive a tax concession, but slightly less so. On the indexation of the $3 million, I don't intend to index the $3 million threshold. Obviously part of the consultation that Treasury engages between now and the Budget, people will raise issues including perhaps that one, but my starting point, my intention, is not to index it because we need to make superannuation more sustainable over time. As you understand, Shane, and many of you understand here, when we get these little upward revisions to revenue in the near-term, it can distract us from the massive structural deficit, the structural challenges, in the Budget more broadly and so our job, my job, and Katy’s job in particular, but the Prime Minister and the Cabinet, is to try to put the Budget on more sustainable footing and non-indexing the threshold is part of that effort.
JOURNALIST: Just picking up on the structural deficit point that the Treasurer has raised, forgive me I'm just a bit confused as to where the boundaries of action are. You have released a document today that basically categorises a bunch of tax concessions that are unaffordable across the board that punch an enormous hole in the Budget, and you’ve basically worked out a situation where you’ve identified one reform that you want to make that you will put to the people before it takes effect. So are you seriously saying, that's it, you're not going to do anymore on any other concession that has been identified in the document today between now and the election?
PRIME MINISTER: Well, the Tax Expenditure Statement isn't a policy document. It's an action of transparency. It's important that people be able to see exactly what the system is, where the ins are, where the outs are, revenues, expenditures, and it's about transparency. That's why it's been done today so that people can see that.
JOURNALIST: You said the 99.5 per cent can see what you're doing today, but I don't think they heard you categorically say that you're not going to do other changes to superannuation. Do you want to take an opportunity to do that and say that that's no part of your plan, you're not going to do that even on the other side of the next election?
PRIME MINISTER: There will be no changes, no changes, this term. Even this change, what we are doing is pointing towards 2025. Now, we can't be clearer, not just in our words, but in our actions. That's what counts. We're being very clear here by our actions, what we intend to do.
JOURNALIST: You’ll soon meet with your Indian counterpart, Narendra Modi, in a week or so. A recently-revealed report by the UK Government found that he was directly responsible for a climate of impunity during the Gujarat riots which killed more than 800 people. Human Rights Watch is warning of a rise of mob violence in India. Can you guarantee Australians, particularly the Muslim diaspora here, that this is something you'll raise with him when you meet with him?
PRIME MINISTER: Look, I'll travel to India in, I’m trying to think, in a week's time and I look forward to the visit. I'm going at the invitation of Prime Minister Modi. I'll be taking some of you along, I think, although Kieran just got put with the luggage. And we will there, I think I'll be taking as well the CEOs of some major Australian companies. Can I say this about the relationship with India, the Varghese Report is, I think, one of the best documents about Australia's relationship with a rising power that has ever been written. And it's a pity that a whole lot of it has just stayed on the shelf. What I'm determined to do is to build a better relationship between Australia and India. I see it as a relationship of opportunity. I look forward to having positive discussions with the Prime Minister. One of the things that my government has done also is to return to acting like a diplomatic government should. We'll continue to act in that vain to develop positive relationships. We always stand up for our values, and I'm very much looking forward to the visit to India along with the CEOs of major Australian corporations. This is a very significant visit, and later on in, possibly in the first half of this year as well, I'll welcome Prime Minister Modi, Prime Minister Kishida, and President Biden to Australia for the Quad Leaders’ meeting. That will be a very significant event to be held here in Australia as well. Australia's back around the international table, engaging with our neighbours, pursuing our interests, but also pursuing our values. That's a positive thing.
JOURNALIST: To the Treasurer, just putting aside capital gains, putting aside negative gearing, if you impose this, if you put a higher tax on higher contributions to super, there's a decent chance people will take the money and put it into housing, helping to overheat the housing market. Is that something you’ve considered? And what action might you take to avoid that?
TREASURER: Well, first of all, we want to see more investment in housing. We need more houses built in this country, one of the reasons as you and I have talked about before, we’ve got low vacancy rates and high rental rates and we’ve got a whole raft of policies that Julie Collins is doing an amazing job implementing around housing supply. People will make their own decisions in their superannuation, as they have been and as they will continue to do. But one of the things that they will factor in, and one of the things that we're trying to emphasise today, is that even if you have a large balance, you'll still be able to access concessional tax treatment on your superannuation, it’ll just be a little less concessional than it was before. I think that's a change that strike’s the right balance. I'm confident that we can explain to the Australian people that 99.5 per cent of people are completely unaffected, people with more than $3 million will get a concessional rate, but slightly less concessional. If the Opposition has a different view about that, they can make that argument.