Simon Kennedy (Cook, Liberal Party) Share this | Hansard source

Let's be clear on what this debate on the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026 and the Superannuation (Building a Stronger and Fairer Super System) Imposition Bill 2026 is really about. This isn't a narrow, technical adjustment to superannuation settings. This is not a small tweak of superannuation. This is a question of trust with the Australian people. It's a test of principle. It's a test of whether this government really believes retirement savings belong to Australians, everyday Australians, or whether it believes they're simply another revenue source to be mined and to be taxed.

Over recent months, Australians have watched this piece of legislation and this proposal unravel. What began as a somewhat bold attempt to fundamentally rewrite longstanding tax principles has been scaled back and has collapsed under pressure—pressure from the coalition, pressure from the superannuation sector, pressure from small-business owners and pressure from everyday Australians, who instinctively understood that something stunk about this proposal.

The government has retreated, and this retreat tells its own story. The original design of this proposal was anything but modest. It was not incremental. It represented a fundamental break with how Australia has approached taxation over the last 100 years. For 100 years or more, Australians understood a simple principle: you pay tax when you recognise income. When a gain is crystallised, when you actually have that cash in your hand, you pay tax on it. Treasurer Chalmers wanted to upend this principle and our entire taxation system.

The government's initial plan was to tax unrealised gains—paper increases in asset values. This would have torn at the very foundation of our taxation system, particularly in very volatile asset classes such as venture capital, farms or, in the right environment, even housing. Taxing paper gains is a complete structural shift. It creates liquidity pressures where people have to keep a certain amount of the fund in cash and it introduces artificial volatility. Once that precedent is set in one part of the system, there's a danger and a risk that every Australian should be alive to: what unrealised gain are they going to come after next? It's a very dangerous path. I don't know of another Western nation that does it. There may be some, but I've looked high and far and I can't find one.

More concerning than that was the refusal to index the $3 million limit. Inflation has been above the band for this government's entire time in office. The Reserve Bank is forecasting it to be above the band for this entire term, which will make it six years above the inflationary band. In an inflationary environment, failing to index thresholds is not neutral; it's a silent tax increase every single year. That's what they were doing. They were baking in an annual tax increase that was a little bit sneaky. Over time, more and more Australians would have been captured, not because they were wealthier but because inflation devalued that threshold. This is bracket creep by design. That's another thing we have with this Treasurer and this government. It's a government addicted to bracket creep. We had it in superannuation and we have it in income tax.

That is the reason 42 per cent of Australia's taxation revenue comes from income tax. The OECD average is just 23 per cent. We have a tax on Australian aspiration. When Australians work more, this government taxes more. On this side of the House, when Australians work more, we want them to get more. You should be rewarded. The more effort you put in, the more you take out. This wasn't accidental. This flawed policy design was a deliberate attempt to expand the tax base over time. But this government's backdown demonstrates something important. This wasn't settled policy grounded in principle or grounded in the Henry tax review. This didn't even mention the Henry tax review. The Henry tax review has a lot of fantastic ideas that have never been implemented. This government reached into its bag of tricks and pulled this out because what this really is is a revenue measure—how do we get more money?—and it collapsed under scrutiny.

At the last election, Australians were not told that our longstanding superannuation tax settings would be fundamentally redesigned and disrupted. They were not told unrealised gains could be brought into the taxation system. They were not told indexation would be stripped away from superannuation balances. Major structural taxation changes such as this should be transparently taken to the Australian people so they can make informed decisions. They should be debated openly, and they should be consulted on thoroughly. My worry is that this is pattern behaviour. We've got a government addicted to spending and, like all addicts, they keep this poor pattern behaviour going. What is next? Is it CGT discounts that aren't being taken to the Australian people and are being snuck in? Is it carbon taxes? Is it cash flow taxes? What is coming next?

Every Australian should worry, because we're going through a cost-of-living crisis where disposable income is getting stripped away. The average family is paying $21,000 more on a mortgage since Labor came to office. On top of that, the money you have left over—that increasingly small bundle of money you have left over that's being eroded away by inflation—is the target of further taxes. Australians are, rightly, protective of their retirement savings. These are nest eggs built over decades, through overtime shifts, small-business people taking risks, delayed holidays and disciplined saving. The bar for legitimacy in retirement income policy must be higher.

Prominent Labor figures criticised this proposal. Paul Keating—Labor royalty—was critical of this. Graham Richardson was critical of this. And it was not just him. Ken Henry was critical of this. Ken Henry has done thorough work on taxation. It sits on the shelf, gathering dust—actual, real taxation reform that could make this economy more competitive and that could see the speed limit lifted on this economy. Right now, this economy is unable to grow any faster than two per cent per annum, and, when it does, you get poorer through inflation because we don't have that structural reform. Instead of attacking Ken Henry's reforms—of which there are many—we've got this cash grab.

This isn't a fringe concern. Industry analysis suggested the impact could expand well beyond the narrow cohort initially described. People were projecting that, in 30 years, up to 50 per cent of the population could be captured by it. We know many small-business owners legitimately hold assets within superannuation structures. For them, it wasn't theoretical. This was about real questions. It was about valuation, volatility, liquidity and compliance risk.

Beyond the design flaws, there is a deeper flaw at play. Australia doesn't have a revenue crisis that we need to fix with more taxation; it has a spending discipline crisis. Right now spending as a percentage of GDP is 26.9 per cent. What does this abstract figure mean? This abstract figure is the highest percentage of federal government spending in 40 years outside of the pandemic. In 40 years, outside of the pandemic, spending has never been higher than today. The only day at risk of being higher than today is tomorrow, because it is not forecast to come down. This structural spending growth is running far ahead of our sustainable economic growth. When governments expand their spending commitments without corresponding reform, we get inflation—persistent inflation. When we get inflation, we get higher interest rates. When we get higher interest rates, Australians get poorer. That is the cycle we are living through right now—increased government spending, increased inflation, increased interest rates, Australians getting poorer—and we are rinsing and repeating that cycle.

Rather than restoring fiscal discipline, rather than making tough choices on prioritising programs, attacking rorting or waste in the NDIS or attacking large grant programs, like the HAFF program—the housing fund building 900 houses with $11 billion—rather than actually going after these big buckets of money, we are instead attacking Australians' retirement savings income. Spend first, tax later. This is pattern behaviour, not reform.

Taxation trust is central. You have Australians, you have businesses and you have international investors making decisions based on trust. When they are allocating capital to superannuation, which is often over many decades, they are doing this believing that it will not be taxed differently retrospectively. This initial piece of legislation was violating that trust. Australians will accept change. They accepted the GST when we took it to an election. We debated it out in the open. We had the to-and-fro. It's been a very big success when it's principled, predictable and properly consulted on, but what Australians won't accept is retrospective tinkering, ad hoc structural shifts and ideological experimentation dressed up as some modest adjustment.

These bills raise additional structural concerns that deserve further scrutiny. The removal of the longstanding protections around the death benefit taxation introduces new uncertainty for families at precisely the moment they are at the most vulnerable, when they lose a loved one. When a mourning spouse is adjusting to loss, the last thing they need to confront is added tax complexity or instability on their retirement income base. Similarly, Australians receiving total and permanent disability benefits rely on superannuation not as an abstract investment vehicle but as a lifeline. Changes that increase volatility or reduce the predictability carry human consequences. These are disabled Australians and mourning spouses who are struggling to continue on with their lives.

The government points to adjustments to the low-income superannuation tax offset as evidence of balance, and we welcome that. Any measure that supports low-income Australians building retirement savings is welcome, particularly in this cost-of-living crisis, but these adjustments do not fix the cost-of-living crisis. They don't lower mortgage repayments. They don't ease electricity prices. In this cost-of-living crunch, a future superannuation tax offset does not relieve everyday Australians struggling to make ends meet, struggling to pay school fees and struggling to pay electricity bills. Renters don't benefit from the home battery program or this long-term superannuation tax offset. They need relief here and now. If the government is serious about households, it must tackle inflation at its source—tackle excessive government spending that's increasing demand, increasing inflation, increasing interest rates and crushing Australians.

The experience Australians have had over recent years has been sobering. We were told inflation was under control. It wasn't. We were told relief was around the corner. It wasn't. We were told life would be easier. For families and many families in my electorate, it's become so much harder—harder to service a mortgage, harder to pay your energy bills, harder to buy a house, harder to find a rental, harder to pay your school fees and harder to get ahead. In that environment, confidence in the retirement system matters more than ever. Superannuation is built on long-term trust—trust the rules won't shift unpredictably, trust that thresholds will not be quietly eroded with inflation and trust that core principles of our taxation system will be adhered to. Undermining that trust carries long-term costs. You lose the trust of the Australian people. You lose the trust of outside investors who want to invest in Australia, invest in our energy grid, invest in our manufacturing companies, invest in our cities and our data centres, and invest in AI.

The coalition believes in a superannuation system that's stable, predictable and principled so that Australians can make long-term investment decisions and that international investors can make those long-term investment decisions. We believe in a stronger Australia for each of those people, not a weaker Australia that's marred by increased spending, a higher cost of living and opportunistic tax grabs. I would ask this government to rein in government spending and address the problem at its source rather than steal from hardworking Australians and their retirement incomes.

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