Voters in a quandary over parties' super policies

WITH election day just three weeks away, Australians have a difficult choice if superannuation is important to them. For the first time in living memory, Labor has more generous superannuation policies than the Coalition.

Labor is committed to subsidising tax paid on super contributions for low-paid workers and continuing with two maximum deductible super contribution thresholds. Currently, they are $25,000 for everyone under 50 and $50,000 for those 50 and over. The Coalition, however, has a one size fits all contribution limit of $25,000 for all ages that will apply from July 1, 2012, if it wins the election.

This differing approach to super is all the more remarkable when you look back at the past 27 years of superannuation history. Over that time, the Labor Party has had the reputation for increasing taxes and reducing benefits while the Liberals, except for a brief period, implemented policies to make superannuation more attractive.

The overhaul of Australia's superannuation system started in May 1983, when Paul Keating changed the tax treatment of superannuation payments. From the overly generous and lopsided preference for lump sum payments, where only 5 per cent of a super lump sum was taxed, lump sums under $50,000 had a tax imposed of 15 per cent, with the excess taxed at 30 per cent. After this first foray into increasing taxes, Labor introduced further adverse changes to the treatment of superannuation. In 1988, a 15 per cent tax on deductible super contributions and income earned by superannuation funds was imposed. In addition, a tax was introduced on superannuation benefits that exceeded reasonable benefit limits.

The Liberals under John Howard initially continued the tradition commenced by Labor of increasing taxes on super. In 1996, Peter Costello introduced a super surcharge tax on the contributions of people with taxable income above a certain limit.

After this rocky start the trend of making superannuation less attractive was reversed. It started with the gradual removal of the surcharge tax, the introduction of the Commonwealth co-contribution, and culminated in the introduction of a simpler super system on July 1, 2007.

It did not take the Rudd government long to continue the tradition of Labor governments reducing superannuation benefits. After only 18 months in office, the co-contribution for low-income earners was cut temporarily from a maximum of $1500 to $1000, and the maximum concessional contribution limits were halved.

Within 12 months Labor's attitude has changed, but not completely. This year's budget had bad news when the reduction in the maximum co-contribution was made permanent, but there was good news with the $50,000 concessional limit for people 50 and over being made permanent rather than ceasing in 2012, which is the Liberal's policy.

As previously stated, this is where Labor has taken over the mantle of being more pro super than the Liberals. This dramatic change can more than likely be attributed to the current Liberal leader.

In his book Battlelines, Tony Abbott puts forward a case for removing all tax concessions associated with superannuation. He states in his book, "it could be simpler and fairer for the revenue forgone in superannuation concessions to be provided as a pension instead".