Julian Leeser (Berowra, Liberal Party, Shadow Attorney-General) Share this | Hansard source

The Treasury Laws Amendment (Building a Stronger and Fairer Super System) is a bill that deals with the trickiest tax that Labor have ever sought to bring into this place since Federation, and we as the coalition are deeply opposed to what they've been trying to do.

This bill is also evidence of a policy backtrack. Coalition and community pressure forced Labor to abandon the taxation of unrealised capital gains and indexation freeze. This would have done untold damage. The government has been found out and has retreated under pressure. That's what we're seeing in what they've done with this bill. Thanks to sustained scrutiny from the coalition—scrutiny that has been applied by many of my colleagues over many days in many different fora—from the superannuation sector, who have expressed deep concern about the government's proposals, from small businesses, whose retirement is very important and whose savings are often tied up in their businesses, and from everyday Australians, who saw the injustice of the proposal, Labor was forced to step back from the most outrageous elements of the proposal—that is, the taxation of unrealised capital gains. This was not a proposal that was just aimed at hurting retirees; this actually was aimed at hurting future generations, stealing the future of younger Australians away from them without their knowledge or their understanding.

We exposed a clear breakdown in the relationship between the Prime Minister and the Treasurer, the principal designer of this deeply flawed policy proposal. The original design to tax unrealised capital gains represented a fundamental break from longstanding principles of the Australian tax system. It demonstrated, in my view, that this government fundamentally doesn't understand the way people make decisions and the way in which investment is conducted in this country.

Australians have always understood that tax is paid when income is realised, when a gain is crystallised and when cash is actually in their hand. What the government was doing here was effectively just proposing to tax paper gains, particularly in volatile asset classes. This wasn't a minor tweak. Imagine, for instance, if you had purchased Atlassian shares, which went up massively; you would have been taxed on the unrealised gain of those shares. But, when those shares fell, you weren't able to write that off. This was a structural shift that would have set a dangerous precedent across the entire tax base, because asset classes go up and asset classes go down, and if you're holding an asset class that's not crystallised—where you don't have cash in hand—you have to sell the asset class or you have to find money elsewhere in order to pay the tax.

Equally concerning was the government's refusal to index the $3 million threshold. In an inflationary environment—and we know that, under this government, inflation has got out of control and has been made worse by the Treasurer and his willingness to pour debt petrol on the inflation fire—failing to index thresholds is indeed a silent tax hike. More and more Australians would have been captured, not because they were wealthier in real terms but because inflation would have eroded the value of the threshold. That's actually bracket creep by design, and it underscored the flawed nature of this policy. If it wasn't a flawed policy, it was certainly a sneaky trick to take away more of people's hard-earned savings.

We, as Liberals, believe very firmly that people should be able to plan for their retirement, that they should be able to put away their savings and that they should be able to invest with confidence and certainty. The government's backdown demonstrates one thing clearly: this actually was never a settled policy that was grounded in principle. Instead, it was a blatant revenue grab that was exposed and that collapsed under scrutiny. But Labor was being sneaky. At the last election, they didn't present Australians with a policy to tax unrealised gains in superannuation. Australians were not told that longstanding superannuation settings would be fundamentally altered. Australians were not warned that indexation would be stripped away. Promises matter in a country like Australia, where people go to the ballot box to choose their government and try to make a decision based on the available information.

Major structural tax changes should be put clearly. They should be put transparently to the Australian people. Instead, this proposal seemed to appear out of nowhere, with limited consultation and a rushed legislative timetable. That's why this debate has resonated so very strongly with Australians, who instinctively understand that, when something's been slipped in under the cover of darkness without their consent, it's a very bad idea. We're talking about retirement savings. We're talking about things that Australians are trying to use as they plan for the future—the nest egg that they've built over decades of hard work and self-sacrifice. If we're going to muck around with Australians' nest eggs, the bar must be set much higher.

We've got a government here that's demonstrated that it can't be trusted. We were promised by the Labor Party, by Treasurer Chalmers, that they'd beaten inflation and high interest rates. Well, people paying higher mortgages as a result of the latest interest rate rise will see that they haven't beaten inflation and they certainly haven't beaten interest rates. We were told by this government that it was going to make life so much easier for families, yet families have less flexibility and less choice. Life is just that much harder for hardworking Australians when they're paying their mortgages, when they're paying their bills, when they're paying their energy bills and when they're having to make ends meet. I think about the families in my own electorate, families that are having to make harder and harder choices each year. Do they put food on the table, or do they pay their power bills? Can they afford to put their kids in weekend sport, or do they buy a new pair of shoes? Can they pay their insurance? All of these issues are issues that confront ordinary families in Berowra because of Labor's failure to get the cost of living under control.

The fact of the matter is that inflation and high interest rates have beaten the Treasurer and they've beaten the government. You know this proposal is bad when three absolute Labor luminaries come out and attack the proposal. It's rare that you hear people on this side of the House quote from Labor luminaries, but when Labor luminaries are making good points it's worthwhile noting some of the important things that they say. One of those Labor luminaries, of course, is Sally McManus, the head of the Australian Council of Trade Unions. She warned, on Labor's proposal to have the $3 million limit without indexation:

I do think it's got to be indexed because you've got to make sure eventually people don't end up there.

That was one of the real worries about Labor's original proposal.

The former ACTU secretary Bill Kelty said:

I think taxing unrealised capital gains is bad policy. It distorts the effective tax. Changes your income flows, and if it was on superannuation generally, there would be a revolution about it. It would destroy super.

This is from one of the architects of the super system, who was saying that what was happening under Labor's policy would actually have destroyed the system he sought to create. The father of the superannuation system, Paul Keating, has similarly said that workers would be caught up, and industry analysis has found that claims by the government that it would only hit a small number of Australians were furphies and that it was going to hit 1.8 million Australians. They're looking at small businesses particularly closely because so many Australians who own small businesses hold their assets in super. That's how they put aside money for their retirement.

The problem confronting our country is structural spending growth that is outpacing sustainable economic growth. That is the major problem that is driving prices in this country today. When governments spend beyond their means, they inevitably reach for new taxes to fill the gap, to fill the hole. That's precisely what we're witnessing here. Rather than confronting waste, rather than prioritising programs and rather than restoring fiscal discipline, Labor has chosen to look for new pools of capital to tax. That's what this taxation regime is all about.

Trust is fundamental in tax reform. Australians are happy to have tax reform when it's principled, when it's predictable and when it's based on broad consultation. What they don't really like is retrospective tinkering. They don't like ad hoc changes. They don't like when ideological experiments are dressed up as so-called modest adjustments. The proposal in these bills reinforces a broader pattern. First, the government engages in higher spending, then they have to find new taxes to pay for that spending. It's not reform; it's just straight-out fiscal mismanagement.

There are new risks: the removal of the death tax exemption, impacts on surviving spouses and impacts on TPD recipients. Beyond the headline rate and the threshold changes, this legislation introduces serious structural risks into our economy. The removal of the effective death tax exemption creates uncertainty for families at precisely the moment that they are most vulnerable. Surviving spouses who rely on superannuation balances to maintain stability after the tragic loss of a partner could face additional tax complexity and reduced security. We want to support widows in our country, but this creates increased uncertainty.

Total and permanent disability benefit recipients are another cohort that must be considered carefully. My grandfather, a war veteran who fought in the Second World War, was a prisoner of war in Changi and served on the Burma Railway, was a TPD benefit recipient. This cohort must be considered very carefully. These are Australians who, through no fault of their own, are no longer able to work. Their superannuation is not an abstract investment vehicle; it's their lifeline. Any changes that increase volatility and reduce predictability or complicate access to those funds carry real human consequences for some of our most vulnerable Australians. Tax policy can't be designed in isolation from lived reality. When retirement income settings are destabilised, confidence in the entire system is eroded.

I want to talk a little bit about the low-income superannuation tax offset, or the LISTO. The increases in the LISTO are actually welcome, but they're modest, and, unfortunately, because of Labor's reckless spending, they don't address the cost-of-living pressures that Australians are facing today. The government has pointed to increases in the low-income superannuation tax offset as evidence of balance. Any measure that supports low-income earners building retirement savings is always welcome, but we must be honest about the scale and the timing. The low-income superannuation tax offset adjustment, while positive at the margins, does not put money back into household budgets today. It does not lower grocery bills. It does not ease mortgage repayments. It does not reduce electricity costs. It does not reduce insurance costs. It does not reduce all the other expenses that households face. Australians are facing immediate cost-of-living pressures. A future offset adjustment in superannuation does little to relieve those stresses now.

If the Albanese government is serious about helping households, it must tackle inflation at its source. It must tackle its excessive spending and its weak growth, rather than reshuffling offsets within the retirement income system. Orthodox economic policy in a time of rising prices is to reduce government spending and to make a more productive economy by reducing regulation. This government, unfortunately, is doing the opposite.

This proposal shouldn't be viewed in isolation. It's about Labor being able to spend more and pour more fuel on the inflation fire. When spending accelerates without corresponding structural reform, governments eventually reach the limits of conventional revenue sources. They've got to test the new boundaries. Thresholds are left unindexed. There are new bases for taxation and new interpretations of income. This is a government that is scrambling to find more revenue. Today, it's superannuation balances above $3 million. Tomorrow, it might be another threshold, another definition or another set of asset classes.

Once the principle of taxing unrealised gains is entertained, it does not remain neatly contained. That's why, earlier this year, we asked questions in the House about whether they propose to tax unrealised gains on the family home. If this is a good idea in superannuation, as Labor has been prosecuting, why not on other asset classes as well? We know it's a bad idea. That's why we oppose it. Australians deserve clarity about the direction of travel. Is this just an isolated adjustment, or is it the opening chapter in a dark age of high-tax, high-spending approaches to governing? Is it a time where people who have made provision for their assets will not be able to have certainty around their assets? This is sadly what life has become like under a Labor government that has spending out of control and is now coming up with new, alternative ways to find extra revenue.

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