CANBERRA, ACT, Oct. 13 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: Better Targeted Superannuation, BHP iron ore shipments, Queensland energy policy
Jim Chalmers:
This morning on my recommendation the Cabinet agreed practical changes to make the superannuation system stronger, fairer and more sustainable. There are 6 main changes to the proposal that we put forward a couple of years ago, including one entirely new element, which is an increase to the Low Income Superannuation Tax Offset. These are sensible changes which take more than 2years of feedback into account.
We have worked through the issues and we found another way to deliver on the same objectives. This means a better deal for low‑income workers and also better targeted concessions for the biggest balances. This will make the superannuation system fairer from top to bottom.
So let me run through the main changes. The first one is to increase the Low Income Superannuation Tax Offset - the LISTO - to increase it from $500 to $810, and also to raise the eligibility from 37,000 cut off to 45,000 in 2027 to coincide with the government's third tax cuts. This will mean more superannuation for 1.3million Australians of whom 60percent are women. It means the total number of eligible Australians for the LISTO will become 3.1million, and by one realistic calculation it means about an extra $15,000 at retirement. That's the first change.
The second change is to introduce 2 thresholds for the Better Targeted Superannuation tax concessions. The first threshold is $3million, the second threshold is $10million. For earnings on super balances between $3million and $10million the rate remains 30percent. The rate for over $10million becomes 40percent. So this is still a concessional tax arrangement, but it's better targeted. It will still only impact less than half apercent of Australians with the updated years and taking into consideration earnings this means about 90,000 Australians next year will have more than $3million in their super, and about 8,000 will have more than $10million. And you'd be aware in recent weeks and months that people have been recommending a cap to us for super, this second threshold at $10million is really instead of going down that path. That's the second change.
The third change is to index both of these thresholds to maintain relativity with the transfer balance cap which was introduced by the Coalition. The transfer balance cap is indexed at CPI. These thresholds will be indexed to the transfer balance cap to maintain an appropriate relativity between the 2 sets of thresholds. We have always had in our back pocket this indexation or an indexation like this in order to get it through the parliament. We have also always said to you publicly and privately that we expect future governments would have lifted the old threshold. Here we are indexing that to make that clear. Indexing both thresholds, that's the third set of changes.
The fourth set of changes is to apply these new tax arrangements to realised gains. And I'll come back in a moment to the future work, the extra work, that we will do in consultation with the sector to implement that change. That's the fourth change.
The fifth change is made necessary by those other changes, which is a one‑year delay to consult and bed down the changes and then ideally legislate them as soon as we can in 2026. So pushing the start date from the middle of this year to the middle of next year in order to do a bit more consultation, to bed down the changes and to legislate the changes. For all of these changes we're announcing today the new start date becomes 1July 2026 except for the LISTO change, which is timed in 2027 to coincide with the government's third tax cuts. So that's the fifth change, the one‑year delay.
The sixth one is to better align the treatment of federal judges' defined benefits interests with the existing constitutional exemptions for state judges. Judges might have a bunch of different accounts. This is really about the judges' pension scheme to make sure there is better aligned treatment of federal and state judges when it comes to their defined benefit interests.
Now, as I flagged a moment ago, I think there are 3 main areas where we will do a bit more consultation and a bit more work. The first one is to make sure that we have commensurate treatment of defined benefit in these arrangements we're announcing today, as we had in the original proposal. For example, we want to make sure that federal politicians are in when it comes to these changes but, more broadly, we want to make sure that defined benefit schemes are appropriately calculated and included in these changes in a way that they were in the original proposal.
Secondly, there is more work to do on the calculation and attribution of the realised gains part of what we are proposing here. We are anticipating that it will be calculated at the fund level and then attributed to members with balances above 3 and $10million, but we want to be upfront with you and say that we will do a little bit more work on that. We've done some work behind the scenes in the lead‑up to this announcement, but there is a bit more work to do.
And then the third area is to find the best way to adjust the treatment of capital gains accrued prior to the start of these new arrangements to make sure that we've got the base appropriately captured when it comes to the new calculations.
So this is a government which takes feedback seriously, which works through issues and advice in a methodical and a considered way and you're seeing the fruits of that today. Our superannuation system is the envy of the world. It is our proud Labor creation, but it has its imperfections and today with these announcements we are addressing at least 2 of them - the sustainability of concessions in the highest balances and also adequacy for women and low income earners. And in doing that we are reinforcing the objective of super as a vehicle for decent retirement savings.
This goes hand in hand with our other reforms. We've actually done a lot to strengthen super, to make it fairer and more sustainable - we've legislated the objective, we got super to 12percent, we're making the changes so that we have payday super, we're paying the superannuation guarantee on paid parental leave, and we'll also make sure that the performance test is doing its job as well.
I wanted to leave you with this comparison: 14 times more people will benefit from the low income super changes than will be impacted by the better targeted tax concessions. This is a fairer superannuation system from top to bottom, and it's another part of us ensuring as a Labor government that more Australians are earning more, keeping more of what they earn and also retiring with more.
I'm going to go Phil, Katina, Mark, Andrew.
Journalist:
Treasurer, 2 questions - one, what are the new revenue projections with all these changes? And given you were prepared to legislate this last year but you couldn't get it through, what does it say about your level of preparedness given you still haven't worked out how defined benefits work and the other things you're sort of looking at? Would it have been reckless to go ahead and legislate this when you still had none of those things determined?
Chalmers:
Well, I think what today makes clear is we're prepared to work through these issues in a considered and a methodical way. We have done some work in recent weeks with the sector and with others to try and find another way through, and we've announced that today after it's been through the Expenditure Review Committee and the Cabinet this morning.
Now, when it comes to the revenue impacts, there's a couple of different ways to see that. The original proposal would have raised $6.2billion over the forward estimates. This new package will raise $2billion over the forward estimates, but a very big chunk of that is actually the one‑year delay. And so a more effective way to make the comparison is that the original proposal would have raised in '28-29 a bit over $2 and a half billion. This will raise a bit over $2billion. And then you take the $435million for the low‑income super tax offset from that as well.
And so it will raise a bit less than the original proposal, but it will still make the superannuation system fairer and stronger and more sustainable and that's our objective. We've found another way to deliver on our objectives by working through the issues in our usual considered and methodical way, and that's what we're announcing today.
Katina, Andrew, Mark. I might have got that a different way around. You'll be okay. Katina.
Journalist:
Just further on these changes, you've said for months now that it wasn't technically possible or it was too complicated to calculate this on anything other than unrealised capital gains. What has changed now that suddenly it is possible?
And if I can, have you had any updates from BHP around the iron ore shipments? You spoke with Mike Henry last week, I think.
Chalmers:
Thank you. Well, in reverse order, I did have a good discussion with Mike Henry from BHP about developments with that Chinese customer. I won't obviously go into the detail of that. We're staying across it. Obviously BHP is staying across it, but I don't have any more updates for you since then.
Now, when it comes to the way of calculating the gains, it was the advice that we were acting on that that was the best way to go about it at the time. We asked for the best, most workable alternative to that, and that's what we're announcing today. And we do that because we know when we've got some objectives to satisfy here - making the tax concessions still concessional but fairer, more targeted, and a better income for low‑income Australians - we've tried to work through the issues, we've tried to take feedback seriously and take that feedback on board and that's how we've arrived at the half a dozen or so changes that we're announcing today.
Andrew then Mark.
Journalist:
Treasurer, this is quite the retreat. Do you concede you got it wrong? Furthermore, amid the cacophony of criticism of your policy, what was the most persuasive that you had, indeed, got it wrong?
Chalmers:
Well, first of all, when it comes to the feedback that we've had for more than 2years now, the objective there has been to separate the genuine feedback from the usual kind of predictable, partisan feedback that you get from time to time. As Treasurer and as a government we always try and take feedback seriously. We always try and find the best way through. We always try and work through issues in a considered and a methodical way and that's what's happened here. We've found another way to satisfy the same objectives. It means a fairer superannuation system from top to bottom. It means a better outcome for people on the lowest incomes and better targeted concessions for people with the biggest balances and that's a good outcome from our point of view.
Mark.
Journalist:
Treasurer, could you just give us an idea about the real impact of the Low Income Super Tax Offset? What will that mean to low income people in retirement?
Chalmers:
By making the superannuation system fairer for people on low incomes it will mean thousands more in their super balance when they retire. And the Low Income Super Tax Offset - the LISTO - has always been about topping up super for people on low incomes recognising that they're paying tax in the fund and sometimes that's more than what they are paying outside the fund because they are on relatively low incomes.
So we are big believers in the LISTO and we've been working for some time to make sure that we can use the LISTO in a responsible way to make sure we get a better outcome for people on low incomes. And so for people earning up to $45,000 a year, more people will be eligible, more people will get a bigger top‑up, and that means more super at retirement. And again, it's of a piece of almost everything that this government does - earning more, keeping more of what you earn, retiring with more as well with an emphasis on people who need the most help in super, and that's what this is all about.
We're going to go Mel, Pat, Tom and then we'll go over that side.
Journalist:
Treasurer, do you have a guarantee from the Greens that they will support this alternative plan through the Senate?
Chalmers:
I've had an initial conversation with Larissa Waters this morning after the Cabinet agreed to my recommendations. I don't want to put words in Larissa's mouth. She will confer with her colleagues, as is appropriate, and make their position known in due course. I have appreciated throughout, and I appreciate today the opportunity to engage constructively with the Greens in the Senate.
Journalist:
Are you optimistic? Are you confident? How would you characterise your expectations of its passage?
Chalmers:
It was a constructive conversation, but I don't want to pre‑empt the Greens Party room. They will consider this, these changes in the usual way and they'll make their views known in the usual way as well.
I think I said we'd go to Pat and then Tom.
Journalist:
Treasurer, could I just clarify, sorry, just on Mark's question about the LISTO, is it the case that you've had to top it up because your top‑up tax cuts mean those people between 37 and 45 are probably paying higher income tax than they would - sorry, higher concessional tax than income tax? That's just the breakdown, is it?
Chalmers:
That's part of the motivation, but it's not the whole motivation. You know, one of the reasons why it's aligned with our third set of tax cuts is that reason. But even absent that, you know, we're always looking for ways to get a better outcome for people on low incomes in superannuation. You know, if you think about our superannuation system, you know, it is genuinely the envy of the world, but there's an adequacy issue for people on low incomes. There's an adequacy issue particularly for women, and here I shout out the Minister for Women Katy Gallagher for the role that she's played in finalising our approach to the LISTO. And so, we would want to do this regardless, but the income tax cuts, the third income tax cuts from this government, is part of our motivation.
Pat and then Tom and then yourself and then we'll go over there.
Journalist:
Just to follow up on Katina's question, have you spoken to the big super funds about, you know, whether they're willing and able to make these changes, because I think the regulatory impact statement did talk about it would be quite different and expensive for funds to be doing this.
Chalmers:
We have had some conversations with a small number of funds and with peak organisations. There is more work to do on that front, but we have been exploring changes of this nature. The advice initially has been that this new type of calculation would be difficult. We're actually confident that we've found a way through here to make these calculations in the most appropriate way, recognising the compliance costs on the funds themselves. We'll do a little bit more consultation with them, but I'm very grateful for the way that the sector has engaged constructively with us to here.
Journalist:
So, you're not seeing a fight [indistinct]?
Chalmers:
I'm not anticipating that, no.
Tom.
Journalist:
Treasurer, at the Press Club earlier this year you said you wanted to grasp the nettle on difficult tax reform and take on the fight. So in this case you've really shifted on pretty much every criticism, even minor ones, that were made of this tax policy, and the role of the Prime Minister and the Prime Minister's Office got some discussions at estimates last week. There will be some who say a more cautious Prime Minister is not as willing as you to grasp the nettle. Do you accept that characterisation of this, and what does this say about broader tax reform prospects?
Chalmers:
A couple of things about that. I mean, first of all, this is difficult tax reform. This is about making the superannuation tax concessions more sustainable, and that's never easy. So I don't accept the characterisation that any of this is simple or easy or uncontested, it always is. Now, the difference between a Labor treasurer and a Coalition treasurer is we take our responsibilities to superannuation seriously, and that means making the necessary changes, and some of them are hard. And this one has been difficult. It's been contentious, as you all know. And so this is a difficult change which means we will raise billions of dollars partly to fund a better outcome for people on the lowest incomes but also to make the system more sustainable overall.
I think as I said last week when I was asked about the meetings with the Prime Minister's Office, it's not unusual at all for us to facilitate briefings with other offices. Our office was in attendance, I think as some of you reported last week, in those discussions. And when it comes to tax reform more broadly, I think, you know more than 2years of feedback here shows how difficult tax reform is. But this is a difficult tax reform. It's a really important one, and I'd like to see it pass the Senate.
Journalist:
Treasurer, just a question on another matter, if I can just quickly: if the Queensland Government is going to extend the life of coal‑fired power stations until the 2040s, is that going to undermine or stymie the private investment your government needs in renewables to get to its 2035 and net zero targets? And if gas‑fired power generation is going to be doubled by 2035, should that new supply be subject to an east coast gas reservation?
Chalmers:
Ultimately this is a question for the operators of the coal‑fired power stations. You know, how long they keep their ageing coal‑fired power stations open will be a commercial decision at the end of the day. But as we've seen across the country, investment in cleaner and cheaper energy is increasing rapidly, and I expect that trend to continue around the country and around Queensland.
We'll go James then Greg then yourself.
Journalist:
Treasurer, I could clarify, for 2years you've told us that these proposed super changes won't be changed, 'This is what we're doing.' Now today you've basically retreated on every single point. I mean, why the sudden change after 2years? And, secondly, did you make the final call on this change, these changes, or did the Prime Minister?
Chalmers:
The Prime Minister and I agreed these changes and I recommended them to the Expenditure Review Committee of Cabinet on Friday afternoon and to the Cabinet this morning and they were agreed. I don't -
Journalist:
How do you explain the retreat on every single point?
Chalmers:
I don't accept that, because what we're talking about here is a tax reform in super which makes the system more sustainable. And we found another way to do that. The Prime Minister and I have had discussions over recent months about finding another way to satisfy the same objectives, and that's what's happened here. And so there are swathes of your question that I wouldn't agree with.
I do accept that this is a change to the proposal that we made more than 2years ago. And I think what it demonstrates about me as Treasurer but also, more importantly, about the government as a whole is that we work through these issues in a considered and methodical way. We're always looking for the best way forward, and I'm confident this is it.
Greg.
Journalist:
Shortly after the election Anthony Albanese in his language left the door open to changes to this package to gain broader support. The next day you shut that door, you said that people opposed to the unrealised capital gains component weren't actually worried about the model. They just didn't want a fairer superannuation system. So how can this be interpreted in think other way that you've been rolled by the Prime Minister?
Chalmers:
I mean, first of all, we changed our policy today when the Cabinet agreed it. We didn't change our policy back then. And my comments reflected that. Secondly, I think there are 2 types of critics of this policy. There are those who genuinely said that the unrealised gains element of it or the indexation element of it absent -
Journalist:
But you said that -
Chalmers:
If you can let me finish my answer, please, Greg. There were people who said that that was a genuine sticking point for them. Now that that sticking point is no longer there they have no excuses but to support it. Then there's another group of people who I was referring to I think in the answer that you are citing, Greg, who would never support any change to tax concessions in super. And I think there's 2 different groups of people.
Now, when it comes to the government, the Prime Minister and I agreed these changes. I recommended it to the colleagues. I've announced it within a couple of hours of Cabinet agreeing it because we've found another way to satisfy the same objectives. And our objective, which will be satisfied by these changes, is a fairer tax system from top to bottom.
Journalist:
Just to clarify, none of these changes and criticisms around the original policy are particularly new. These are all things we've known about for some time. So to follow up on James' question, why now? Why are these changes being announced now when we've known about these criticisms for quite a while. And just secondly, if I can, the government's response to what we're seeing out of the Middle East at the moment. It looks like hostages are going to be released in the next couple of hours out of Gaza.
Chalmers:
It's a very welcome development to see hostages released. You know, the highest priority is to see these people returned to safety. And if and when that happens that will be a very good thing. I can only imagine the extraordinary relief that a number of families will feel when their loved ones are returned to them. We've seen some very welcome developments in recent days in the Middle East. We've expressed our support for those developments. And it's a very good thing to see hostages released.
Now, in terms of the timing, I think as I've indicated a number of different ways this morning, we've taken our time to work through the issues. We didn't react quickly to every editorial or every criticism from every quarter. We've taken the time to work through the issues. I personally have been working on this for a little while now, but the policy only changed a couple of hours ago when the Cabinet changed it, and I've announced it as soon as I can after that.
Journalist:
Can you give an indication of how long you've been working on this for?
Chalmers:
Some time.
Journalist:
Could I just ask on another -
Chalmers:
We'll go to Ron after you and then the front, Mike.
Journalist:
Today we've gotten statistics on the current poverty rates in Australia, or at least for 2023. That one in 7 are at risk of being under the poverty line, one in 6 kids. ACOSS have welcomed the movements to increase payments over the last few years but are saying that it's still unacceptable that JobSeeker is at 42percent of the minimum wage. How do you justify that?
Chalmers:
First of all, I think as I always say and I always mean when I'm asked about the ACOSS point of view, I respect the important contribution that ACOSS makes to the public policy debate. This government has increased the base rate of JobSeeker in a permanent and ongoing way in addition to the indexation, which means that JobSeeker is, you know, more than $100 more than when we came to office. But I do recognise that there is a constituency of people that I respect who would like us to do more.
We're a Labor government and from Budget to Budget we do what we can to help people on low and fixed incomes. We're doing it today with the changes to low‑income super tax offset. We've done it with a permanent and ongoing increase to JobSeeker. We've done it with rent assistance. We've done it with energy bill relief. There are a whole of bunch of ways, social housing. There are a whole bunch of ways that we're helping people on low and fixed incomes, and I respect people and value people who say that we should do more and to do things faster. We do things as much as we responsibly can from Budget to Budget.
Ron.
Journalist:
Thanks, Treasurer. You mentioned the 40percent rate for $10million and you said that was in place of putting in a cap. Can you just expand on that decision? Did you actually consider putting a cap in there? You know, why did you go with the 40percent? And can you just give us some figures around what it actually means? Like, how much do you - are you going to raise extra from that particular 8,000‑person cohort?
Chalmers:
Thanks, Ron. So a couple of elements to that. A number of people recommended to us, including at the Economic Reform Roundtable, or around it, that we implement a cap on super so that people couldn't have more than 3 or 5 or 8 or $10million in super at all. And I think the reason they did that is because one of the big consequential change that was made in this regard was just before the 2007 election.
And what Howard and Costello did was they abolished the reasonable benefit limit. And what that did was it helped change superannuation from a vehicle primarily about retirement to a vehicle more primarily about investment. They abolished the reasonable benefit limits and it meant that, you know, in legitimate ways people built up these huge balances. And some people, including people that I have a lot of time for, said that we should implement a cap and make people withdraw over a certain amount - 5 or 8 or 10 or whatever it might be. We looked at that, like we looked at all of the feedback, and we think the more appropriate way is to maintain a sense of concessionality for the tax treatment of everyone in superannuation.
But for people with really big balances, more than $10million - to make sure that those tax concessions are better targeted. And to give you a bit of a sense of that, Ron, you know, the average balance for someone who's got more than $10million is $19million balance. They will still get a tax concession, I think of $97,900, but they were getting a tax concession of $266,000. That's just one example. There's a heap of examples we'll provide to you. But really what I'm saying there is there is no good reason for people with hundreds of millions of dollars in super to get the same kind of tax concessions as people with smaller balances, and that's what this change reflects.
And then Jack. And then we'll probably finish on yourself.
Journalist:
Treasurer, you've spoken about your motivation to reform superannuation taxation given its, you know, the convergence now that we're seeing from the initial policy aims as a retirement fund. I mean, my question is this it for the Albanese government's ambition on reform? What would your advice to the superannuation sector be? Is there potential for more reforms down the track or is this it?
Chalmers:
Look, we're not contemplating any, you know, future changes in this area. We've done a lot of work to get to this point. This has been a kind of central feature of the public debate about the Budget and the economy and super for more than 2years now. We've done our best to find the best way forward, and I'm confident that this is it. More broadly, I think as I flagged with you after the roundtable and in other ways, any other tax reform in any other areas will be a matter for the Cabinet, as is appropriate.
Jack and then up the back.
Journalist:
Treasurer, do you have any revenue projections for how much it will raise over a decade rather than the forward estimates?
Chalmers:
We don't usually release the decade numbers, but it will raise a substantial amount of money over the course of the next decade. The changes that we're proposing today will still raise a substantial amount even as we make these tweaks, and that will help make the superannuation system more sustainable.
Journalist:
Less than the previous proposal, though?
Chalmers:
I've made that clear already.
Journalist:
Treasurer, just on the poverty report, so nearly 4million Australians are living below the poverty line. At the same time we've seen support for One Nation double to 14percent, particularly in outer suburbs where people are bearing the brunt of the cost of living. How concerned are you as Treasurer and a potential future leader of this country that unless the government arrests the rise in inequality, we will see trends towards popularism. We're seeing Nigel Farage in the UK, Donald Trump in the US. How likely is that splintering in Australia unless we get on top of rising inequality?
Chalmers:
I've always thought that there's a link between disadvantage and disengagement. But I'm primarily concerned every day with people on low and fixed incomes for economic reasons. You know, I come from a community with its share of economic challenges, and whether it's this change to the low‑income super tax offset or the other changes I mentioned in response to your colleague over here, we take our responsibilities to people who are doing it tough very seriously. You know, that's what motivates so much of what we do. To make sure that people are earning more and keeping more and retiring with more with a particular emphasis on people with low incomes.
You know, for a lot of us this is why we are here. And sometimes that requires us to make difficult decisions elsewhere in the Budget. And you're all aware and you've all sort of in your questions have kind of come at this in one way or another. This has been a contentious policy, and that's because we are making a difficult change to the tax system. And we don't expect unanimous support when that happens. We're talking about making tax concessions fairer and we're talking about boosting superannuation for low‑income earners and especially for women.
These are the right objectives, and from time to time when you take feedback into consideration you can find another way to satisfy those objectives. The objectives haven't changed. The policy has been changed today in ways that follow a whole heap of work. And when we do this work, for me as Treasurer and for the government more broadly, for the Prime Minister and others, people on low incomes are always front of mind. Thanks very much.
Journalist:
You've spoken to the Greens. Have you spoken to the Coalition, Treasurer?
Chalmers:
I haven't.
Disclaimer: Curated by HT Syndication.
