RN Drive with Patricia Karvelas

E&OE TRANSCRIPT RADIO INTERVIEW RN DRIVE THURSDAY, 2 JUNE 2016

SUBJECT/S: Government’s Superannuation Mess; Deficit Levy and Budget Repair

PATRICIA KARVELAS: It's six past six and the Turnbull Government continues to draw fire over its superannuation plans. Labor might be sitting back and enjoying the moment, but then again, they have plenty of questions of their own to answer. Jim Chalmers is the Shadow Minister for Financial Services and Superannuation. Welcome back to RN Drive.

JIM CHALMERS, SHADOW MINISTER FOR FINANCIAL SERVICES AND SUPERANNUATION: Thanks Patricia.

KARVELAS: There's clearly some pressure on the Prime Minister over his super reforms. Here's his response today.

TURNBULL: It is true that some people, around four per cent on high incomes and with high superannuation balances will have to pay some more tax on their superannuation account. Fifteen per cent remains a very concessional tax rate. That is less tax than a kid pays on his marginal income stacking shelves at Woollies. Let's get real about this. Super has been an extremely generous system. It remains a very generous tax advantage system.

KARVELAS: What part of it do you dispute? Do you say the changes affect more than the top four per cent? Are you standing up for the four per cent?

CHALMERS: Well a couple of things about that, Patricia. We've been saying for more than a year now that the tax concessions in superannuation are poorly-targeted, particularly at the top end. And that's why we've put that policy out more than a year ago of ours, because we do think that some action needs to be taken. The problem that the Prime Minister has got is this is another example of his party leading him rather than him leading his party. That's why we've got this desperate language today because he's got significant sections of his own backbench who have said, remarkably, 'if you elect us, we will fight to change our own policy'.

KARVELAS: You're saying the party is leading him. We just played that grab, it's quite the opposite. If you're saying that there's some backbench dissent on this, that's the Prime Minister putting his foot down and saying 'we think that the super system is unfair, we need to change it'. It seems that he is leading and he isn't being led by his party. Listen to what he just said.

CHALMERS: Well the backbench is telling any journalist who will listen that they intend to roll the Prime Minister on the superannuation measures in the Budget. That's a pretty extraordinary thing. It's a new low in a Government that's taken disunity and dysfunction on economic policy; a dangerous new low for them.

KARVELAS: Okay, so let's compare your super plans with the Governments and if you can just give me the briefest answer to clear some of this up. The Coalition is upping the tax on contributions to thirty per cent for those earning above $250,000. Are you not proposing the same thing?

CHALMERS: There are two measures, Patricia, where the Government in the Budget announced that they would copy our policy. That's one of them. The other thing is to restore Low Income Super Contributions. They changed the name but it's effectively the same policy. So we've said since Budget night there are two measures that we support because they are our policy and we've said on the rest of them, there's about ten measures in the Budget to do with superannuation, we've said on the rest of them that we won't make the same mistakes the Government has made and we will carefully consider and consult on those.

KARVELAS: The Coalition is proposing a $500,000 lifetime cap on after-tax contributions, so any of your pay packet that you decide to put into your super. They say it's so unfair that this is turning into tax minimisation or estate planning. What's Labor's proposal?

CHALMERS: Our issue with that one, Patricia, is that it's back-dated to 2007. And the Government has argued somehow that's not retrospective. It's pretty hard to argue that something like that is not retrospective when it's back-dated nine years ago. So that's our concern with that one. But like I just said, there are a whole range of measures there that we are taking the time to speak with people about. We're not going to rush to judgement on them. And people will know when they get to the election where we stand on superannuation.

KARVELAS: The first votes are going to be cast in pre-polling in less than two weeks. Are you going to give a firm answer on particularly this very contentious proposal, this $500,000 lifetime cap, what you would do on this one?

CHALMERS: Well people know where we're coming from already on super. As I said, we've put our policy on the table. But they will have a firm idea of what Labor's view is on the Budget measures and on superannuation generally when they vote.

KARVELAS: Dr Jim Chalmers is the Shadow Minister for Financial Services and Superannuation. 0418 226 576 is our number if you want to text us. Well what do you think of super? Everyone has got a view on super at the moment. It's all about super. The Coalition also wants an annual cap on pre-tax contributions that can be put into super of $25,000. It's currently 30 or 35,000 depending on your age, I reckon.

CHALMERS: Correct.

KARVELAS: What's Labor's position?

CHALMERS: Well that falls into the category I was describing to you before, Patricia, those eight or so measures that we're--

KARVELAS: The 'we haven't decided yet'.

CHALMERS: Well, we're consulting on those as well.

KARVELAS: Why do people need then, to put more than $25,000 of pre-tax dollars into their super each year?

CHALMERS: Well the argument that people make is that some people with broken work patterns want to catch up and so they want to contribute other sums. We have said before that we're open to hearing the arguments about that $25,000 measure. That's not one of the ones that have attracted much of the controversy like some of those that you've mentioned have and like the transition-to-retirement one has.

KARVELAS: So you're likely to support that one or announce your own version of it?

CHALMERS: Well, we're considering each of the measures, Patricia, as I keep saying. And--

KARVELAS: But you're saying it hasn't attracted as much controversy. I'm assuming that means you think it's, you know, more acceptable.

CHALMERS: It's dangerous to make an assumption, Patricia.

KARVELAS: I'm trying.

CHALMERS: I'm just making the observation so that I don't give you the same answer over and over again that there's some that have attracted a lot of attention, transition-to-retirement, the $500,000 cap, the $1.6 million transfer cap, whereas the one you've just raised has not been discussed that widely in the media so far.

KARVELAS: The Coalition, you just mentioned, at this fifteen per cent on the transition-to-retirement schemes, the one that Julie Bishop struggled to explain this week, what do you make of that policy? You say it's controversial, but really? You heard the Prime Minister make his argument, going from zero to fifteen per cent, is that really such a big deal?

CHALMERS: Well I think the main thing that made that a controversial measure, Patricia, was that the Government spent some weeks pretending that their superannuation package only impacted on the very highest income earners. And what has come out since then, and even Kelly O'Dwyer was forced to concede yesterday on another program, that it's one of the measures that impacts people right up and down the income scale. So what has attracted people's attention there, including our own, is that it's not just a measure that impacts on the wealthiest people in the community. There are people on middle incomes who are accessing that.

KARVELAS: So could you introduce something similar, a fifteen per cent tax on that, but perhaps create, put into it, means-testing so that people at $60,000 don't have to pay the fifteen per cent, but at a higher bracket do. Is that something that's under consideration?

CHALMERS: There are all kind of alternatives being pitched up to us at the moment. We're in a program of very heavy consultation including I'm off to one of those consultations tonight with some members of the community in Melbourne. That's some of the ideas that have been put to us. We haven't resolved a view on it yet--

KARVELAS: Okay, but do you think that one's reasonable? Because it sounds like it would address what you were saying which is that lower income people, or people at $60,000 a year do have to now pay the fifteen per cent. Is that one way it could address your concerns?

CHALMERS: Well we're listening to all those kinds of proposals.

KARVELAS: On company tax cuts, Labor says the Government would be helping the big banks but as Mr Turnbull points out, big business won't get any relief for eight years, which is I think about three elections away. If you win any of them can you reverse the cuts?

CHALMERS: Reverse the tax cuts?

KARVELAS: Yeah.

CHALMERS: Well we don't support the tax cuts in the first place. It's an assumption that they will get through somehow. You're assuming that the Government wins the election and then they get through the Senate. We've said this is the key issue in the election campaign because when you've got a tight Budget as we do, when you've got a Government that has tripled the deficit in two years, then you've got to think about what the top priorities are. And we say that the nation's top priority is not a $50 billion tax cut for multinational corporations, whenever that comes in. And we think that this election is really about a Government that wants to take billions of dollars out of schools and hospitals and give it to big business. That's really one of the key issues in that campaign and I think that we're going to win that argument.

KARVELAS: There was some confusion yesterday about whether Labor was extending the deficit levy permanently or just for ten years. Can you confirm is it just for ten years?

CHALMERS: Well we budget for ten years so we have said that in our ten year costings that the deficit levy will remain, partly because as I just said before, the deficit has blown out under the current Government, but also--

KARVELAS: But you're not paying down the deficit with it, are you? You're actually putting it towards new spending.

CHALMERS: Well as long as there is a deficit, there will be a need for that deficit levy. The main point that we're making is that with the Budget as it is and all of the other priorities including saving Medicare and all of these other things, we don't think that someone on a million dollars a year should get a seventeen thousand dollar tax cut, which is what they stand to get from Malcolm Turnbull and the Liberals. So we don't think that's a good idea.

KARVELAS: Doesn't it make sense though, if you're going to keep a deficit levy, doesn't it make sense that you use it to pay down the deficit?

CHALMERS: Well you should use it to contribute to the bottom line. There are priorities that the country has got, things like making sure that Medicare is adequate, things like making sure that our hospitals and schools are adequate, there are --

KARVELAS: So would you maybe rename it? Maybe to Medicare and education spending? Because it's not a deficit levy then, it's not actually paying down the deficit.

CHALMERS: Well we've got a very substantial program of Budget repair and this is part of it. We've made room for big investments that we want to make in schools and hospitals and also said that we want to repair the Budget in a way that is fair and that's part of, the deficit levy, is part of that effort.

KARVELAS: Alright, before I let you go, this is going to be my new question to people because of the eight week campaign. You're the first cab off the rank.

CHALMERS: Great...

KARVELAS: How are you getting through the election? Have you got a regime, a thing that you're doing to kind of keep healthy or keep yourself interested?

CHALMERS: Yeah, a very early morning run and no beers.

KARVELAS: No beers?

CHALMERS: No. Ten weeks I'm going.

KARVELAS: You're not going to have a beer in ten weeks?

CHALMERS: That's right.

KARVELAS: No alcohol or is it just beer?

CHALMERS: No alcohol.

KARVELAS: Jim Chalmers, very impressive. Thanks for joining me.

CHALMERS: Okay, see you Patricia.

KARVELAS: That's the Shadow Minister for Financial Services and Superannuation, Jim Chalmers. No beer for him. And we made several requests for a Coalition representative to come on the show and talk to us about these and many other issues but they've declined our invitations.

ENDS