I'm Ruby Jones and you're listening to seven AM. This week, the federal government dramatically rewrote.
Its signature tax policy.
The changes mean that a small section of people with very high superbalances will.
Pay less tax.
That backflip has big consequences for the government's budget and for its commitment to addressing wealth inequality This Country Today Press Gallery journalist Paul Bonjorno on why the government cave to pressure from outside and within its own ranks.
It's Saturday, October eighteen, so Paul.
The Treasurer Jim Chalmers had an awkward start to the week this week when he announced that he has reworked his superannuation reform to make it less ambitious.
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 two of them.
Tell me about the announcement. What did he say?
Well, first of all, we have to note that it really took everybody by surprise. Why it was a surprise, as Albaneze actually left the country on the weekend on Sunday for a bit of a holiday on a tiny Micronesian island with his fiance. No one begrudges him that, but it did look that he was leaving the Treasurer
to carry the can on his own. One Cabinet minister thinks that it looked like and felt like a bit of a snub because on Monday morning a notice went out to the press gallery that the treasure would be holding a mid morning news conference. People were scratching their heads about what it would be, and of course what it was was the bombshell announcement that six significant changes to the way he was going to deal with the taxing super for the wealthiest Australians, the wealthiest savers.
For super earnings on superbalances between three and ten million dollars, the rate remains thirty percent. The rate for over ten million dollars becomes forty percent.
But their unrealized capital gains, that is investments they have that are growing in value but they haven't yet sold well, they will no longer be taxed. This was a big sticking point.
This is a fair 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 and Paul.
When I watched Jim Chalmers speak, my first question, which I think was similar to a lot of people's, was why is he doing this? Because, as you say, the government won the last election with this overwhelming majority. They took this policy to the election. It seems like it was settled, So why walk it back now?
Yes, Well, that's the big question, and the simple answer is that Anthony Albanzi judged that he would have to spend a lot of political capital defending the original proposal, especially the non indexation, the sort of blowback that he was getting not only from the top end of town but also from a former Prime Minister and Treasurer Paul Keating.
He thought it was badly designed policy and opened up labor for the sort of scare campaign that the finance writers, particularly in the Australian and the Financial Review, were running. One Treasury official told me that some of the scenarios painted, particularly in the Australian, talking about we're back to the
absolutism of Henry the Eighth was just rubbish. But Albanezy judged that this sort of scare had merit and then there were also some in the Labor government themselves, some in the ministry and the backbench who weren't all that happy, although no one really was creating a fuss. For one reason is the Liberals didn't make anything much of it. I mean, it wasn't brought up by the Liberals at
the election at all. And as we saw, Albanezi emerged the other side of the election with a landslide, a ninety four seat majority, which has people scratching their heads and certainly made the Treasurer swallow hard when he had been defending these changes and he had to backtrack so quickly on them.
So Anthony Abernezi has intervened here and made Jim Chalmers change what was a signature policy of his. So take me back to when Chalmers first proposed these changes to superbalances over three million. What was his case for it.
The case for it is that Treasury is worried that the budget relies over heavily on taxing income.
For any objective of observer. The idea that ordinary working people subsidize incredibly generous tax breaks for people with millions and millions of dollars in superannuation doesn't stack up, and.
Treasury is also worried that over the years there's been an accumulation of tax concessions that are getting out of hand, not only in super but on property, that is assets. We're talking about capital gains tax discounts here, we're talking about negative gearing these concessions. And a good example in the area of superannuation is the tax concessions that is, taxing savings and then earnings at a much lower rate is costing fifty five billion dollars a year.
Every dollar that's spent on a tax break for people with tens of millions of dollars in super is a borrow dollar. That makes the deficit bigger. If you've got millions in super, that's impressive.
Obviously there'll still.
Be tax concessions for you, they just won't be quite as generous as they were before.
What we've got and this is what the Treasurer wanted to address, and Treasury says as urgent is a burgeoning wealth inequality, and not surprisingly, most of that wealth is tied up in superannuation and housing.
And at the.
Time when Chalmers did first announce this policy, he said that he wouldn't be changing any of his policies, but obviously things have changed, the government has backtracked. You said that this really doesn't seem to have much to do with pressure from the opposition, And you mentioned Paul Keating, the former Labor Prime minister. So just how influential do you think he has been here?
Two points to make here. Very influential, given who he is and given the fact that he's like a dog with a bone, and he was quietly and behind the scenes, you know, making it known, particularly to Albanizi, but not only Alberanzi, Charmers himself that he thought that it was bad design and it needed to be rethought and it made the government vulnerable to scare campaigns that, in Keating's view, had had a basis in reality, as all good scare
campaigns need to have. What we have to see is strange parallels between this fight and what happened when we saw the Rudd Gillard government try to tax miners' super profits. You might remember Gina Reinhardt, the richest person in Australia. She even got on the back of a truck in Perth to scream herself literally hoarse, against having to pay any more tax, any more royalties on mining that had made her this billionaire. And the people who were screaming
loudest here are the richest in the country. They can afford the best accountants in the country. In fact, one said to me, the accountants can afford better than some of the ones that Treasury have got, and they can afford to run campaigns. So all of that plays into the whole argument, will we ever get tax reform that tries to get the wealthier Australians to bear more of the bird.
Coming up? The changes for low income earners Paul?
The government still has to get this through the Senate. So how have the other part is reacted to the change?
Well, the Liberals welcome the change. In fact, to the Shadow Treasurer Ted O'Brien, if you like, was dancing on Jim Charmers's grave.
We now see a terrible tax that was going to hurt hard working, forgotten Australians all across the country dumped the government. The Treasurer has been chewed up and his tax plan has now been chucked out.
And he said a coalition of common sense has had a big victory today.
Again is a victory for the Coalition of common sense.
The Greens, however, who will be absolutely needed in the Senate. Sarah Hanson Young, who's the tactician in the Senate for the Greens. She says that this is labor caving in to the wealthy.
It does look as though the government has gone week on taxing the wealthy, and she.
Said that they'll be looking very carefully at the legislation that the Treasurer does put before the Senate, and they will be hoping that the Greens will come to wave through the substantial part of these reforms.
Sure, but if they do, they're likely to want something in return for their supports. So what do you think that's likely to be.
Well, that's a very good question. One of the things they did want for the threshold to be dropped from three million down to two million. They had no problem with taxing unrealized capital gains, and in fact, one of the Greens pointed out to me. They asked me a question, do you pay council rates? And I said, well, do you realize that they go up every year on unrealized capital gain? On the worth of your property. You haven't sold it, but you've been asked to pay more rates
or tax on it. It's not a foreign concept. And if you're a multi millionaire, well you can afford to pay a bit more based on the fact that your wealth has increased. In fact, you can go out and borrow more money on that accrued wealth even though you
haven't sold the house. These are the sorts of arguments the Greens will be putting and it'll be interesting to see how far the government will go to meet them and what the Greens do come up with, because the Greens will realize that if they reject this completely, then the status quo remains.
Paul.
Ultimately, where do you think this leaves lower income earners well?
As the Treasurer said he was looking after the bottom end as well, so he also announced the tax off set for low income earners. It's called LISTO Low Income Superannuation Tax off Set.
This will mean more superannuation for one point three million Australians, of whom sixty percent are women. It means a total number of eligible Australians for the LISTO will become three point one million, and by one realistic calculation, it means about an extra fifteen thousand dollars at retirement.
So given the circumstances of all of this poll a government with a huge mandate, a policy that has already been taken to an election and ultimately only affects a very small group of wealthy Australians. What does all of that tell you about how much political appetite there is to make the kind of economic changes that are needed to deal with both the structural problems in the budget and also just the fact of rising inequality.
What it tells me is that unless we can get a political leader prepared to be bolder than the Prime Minister is, then we're not going to get this sort of tax reforms that are needed. If you've got a ninety four seat majority, you have political capital to spend in the national interest. It should be remembered that when John Howard went to an election with the Goods and
Services Tax, he too had an enormous majority. As a result of that election, he lost nineteen seats but still managed to bring in the reform that is the Goods and Services Tax. No one's talking about wealth inequality, not income inequality, but wealth and how has this enormous wealth been created on the backs of taxpayers. It's sort of almost a vicious So it would seem that the only safe tax reform is the tax reform that hits the poor.
You know, the sort of thinking that gave us Robodebt that talks about doll bludgers, and one of Australia's most prominent economist, Chris Richardson, he's despairing. He says, look, if you get this much of a blow up over a tax reform that is hitting such a tiny cohort of taxpayers,
what hope have we got? As Chris Richardson says, the way we're doing tax and spending at the moment is stupid quote unquote, So we need people to be less stupid and braver, and I wonder if we should hold our breaths on any of that.
Well, it was great quote unquote, No, it was excellent talking to you.
Thank you so much for Thank you Ruby Bay.
Before we go, I wanted to let you know that this week Treaty legislation was introduced into the Victorian Parliament. It was a significant moment and my colleague Daniel James has written about what it means in today's edition of the seven Am Newsletter, which you can subscribe to on our website seven am podcast dot com dot au slash subscribe. As Daniel writes, it's about changing how the Victorian government works with First peoples, making sure that decisions are guided
by lived experience rather than political convenience. Meanwhile, what's happening in the Northern Territory couldn't be more different. The return of heavy handed policies, tie the police powers, alcohol restrictions, and top down controls over aboriginal communities echoes the two thousand and seven intervention. Last year we made a three part series about this called This Is Alice Springs. Sadly, it's just as relevant now as it was then, so
we're republishing it tomorrow. You'll see it in your feed. Seven Am is a daily show from Solstice Media. It's made by Atticus Basto, Chris en Gate, Daniel James, Sarah mcvee, Travis Evans, Sultan Petcho and me Ruby Jones. Our theme music is by Ned Beckley and Josh Hogan, Boon Void Bordeo.
See you next week.