Home Australia The big bank reveals how the super rich are keen to cut their tax bill and why Anthony Albanese is to blame

The big bank reveals how the super rich are keen to cut their tax bill and why Anthony Albanese is to blame

by Elijah
0 comment
Anthony Albanese's changes to stage three tax cuts will encourage the richest people to put their money into superannuation to minimize their tax burden, says Westpac bank (Prime Minister pictured with fiancée Jodie Haydon)

Anthony Albanese’s changes to stage three tax cuts will encourage the richest people to put their money towards retirement to minimize their tax burden, analysts at Westpac bank predict.

Labor changed the previous coalition government’s stage three tax cut plan to maintain, rather than eliminate, the 37 per cent marginal tax bracket for those earning between $135,000 and $190,000.

The Prime Minister’s changes will also see the top 45 per cent tax bracket set at $190,000 instead of $200,000, and February’s changes will go through Parliament with opposition support.

That means the top three per cent of people with incomes of $200,000 or more will see their tax bill reduced by $4,529 from July 1, 2024, instead of $9,075 under the previous coalition government’s plan.

The changes were designed to give more relief to low- and middle-income people.

But the stage three tax changes could also end up causing more tax concessions of other kinds to flow to the wealthy.

Anthony Albanese's changes to stage three tax cuts will encourage the richest people to put their money into superannuation to minimize their tax burden, says Westpac bank (Prime Minister pictured with fiancée Jodie Haydon)

Anthony Albanese’s changes to stage three tax cuts will encourage the richest people to put their money into superannuation to minimize their tax burden, says Westpac bank (Prime Minister pictured with fiancée Jodie Haydon)

Westpac senior economist Jarek Kowcza said high earners will instead put more of their salary into superannuation, which would only be taxed at 15 per cent rather than 45 per cent.

“One area that has received less attention is the interaction between changes in tax schedules and the retirement system,” he said.

‘These changes may cause some behavioral effects.

“People with higher incomes will be more incentivized to contribute to superannuation to reduce their tax bill than under the previous package.”

Kowcza said stage three of Labour’s tax cut changes would likely deliver more tax concessions for those on higher incomes, even if it meant they had to wait until they turned 60 to access their retirement savings.

“They may lead to the benefits of retirement tax concessions becoming even more skewed towards higher earners than is currently or would have been the case under the previously legislated package,” he said.

A Westpac analysis of tax office data for 2020-21, the most recent available, showed those earning more than $128,100 received 40 per cent concessional tax breaks for super contributions.

The changes were designed to provide more relief to people with lower and average incomes, but the stage three tax changes could end up seeing more tax concessions of other types flowing to the wealthy (file image shown in photo) .

The changes were designed to provide more relief to people with lower and average incomes, but the stage three tax changes could end up seeing more tax concessions of other types flowing to the wealthy (file image shown in photo) .

The changes were designed to provide more relief to people with lower and average incomes, but the stage three tax changes could end up seeing more tax concessions of other types flowing to the wealthy (file image shown in photo) .

1712803125 111 The big bank reveals how the super rich are keen

1712803125 111 The big bank reveals how the super rich are keen

More than half, or 55 per cent, who benefited from super-friendly tax rates earned more than $95,000, which was then slightly above the average full-time salary.

The Treasury’s Fiscal Outlook and Expenditure Statement for 2023-24 predicted that superannuation tax concessions would cost the Budget $50 billion in 2024-25.

From 1 July 2025, the concessional tax rate for super contributions will double to 30 per cent for the 80,000 people with a balance of more than $3 million, or 0.5 per cent of the population.

This measure is designed to save $2 billion a year, but Kowcza said the stage three tax cut changes could cause more people to question the wisdom of retirement tax concessions that favor the wealthy.

Labor changed the previous coalition government's stage three tax cut plan to maintain, rather than eliminate, the 37 per cent marginal tax bracket for those earning between $135,000 and $190,000.

Labor changed the previous coalition government's stage three tax cut plan to maintain, rather than eliminate, the 37 per cent marginal tax bracket for those earning between $135,000 and $190,000.

Labor changed the previous coalition government’s stage three tax cut plan to maintain, rather than eliminate, the 37 per cent marginal tax bracket for those earning between $135,000 and $190,000.

“One thing these changes can do is contribute to the growing debate in the community about the sustainability of Australia’s tax and transfer system, including the setting of the superannuation tax,” Mr Kowcza said.

At the lower end of the scale, 4,385,353 people or 29 percent of taxpayers earning between $18,200 and $45,000 benefit from their marginal tax bracket falling to 16 percent, down from 19 percent as part of the stage three tax reduction changes.

Someone on $45,000, now less than the full-time minimum wage, would receive $805 instead of nothing.

A below-median earner with $80,000 would receive $1,679 instead of $875.

You may also like