What are Treasury hiding?
It’s bad enough that Superannuation funds are buying our Infrastructure and Public assets like titles offices.
They are also owning a larger share of listed companies.
When Costello started refunding franking credits in 2000, there was less than $500 billion in Superannuation. Today there is more than $4 trillion in superannuation. It is expected there will be almost $10 trillion by 2050.
This is eroding the overall company tax base as company tax is refunded to superannuation funds via franking credits because retirees pay no tax on their superannuation income in retirement.
The Treasury are claiming they don’t think this is impacting the net company tax rate. I.e. Company tax less franking credits but it is. I’ve read that the net company tax rate is now as low as 13 cents in the dollar and is forecast to fall below 10 cents as Superannuation gets bigger and more people retire.
As the net company tax rate gets lower, the tax burden is being picked up by wage earners through bracket creep who have less take home pay. This is also impacting productivity as companies offshore their Labor increase of paying higher Labor taxes.
Serious questions need to be asked why Treasury doesn’t know this number as it is impacts budget settings and what they are going to do about. It’s not good enough to claim they don’t know what the answer is.
Economics Legislation Committee
26/02/2025
Estimates
TREASURY PORTFOLIO
Department of the Treasury
Senator RENNICK: I also asked what the net company tax rate was. My concern was that, when Peter Costello started refunding franking credits in 2000, we had $500 billion in super and now it’s $4 trillion. As you well know, companies pay 30c in the dollar to Canberra and then at least half of it comes back to super funds during the accumulation stage and in retirement all of it goes back. I’m not sure if it was Treasury or the ATO that replied that they didn’t think there was a decrease in the company tax rate as a result of that. I tend to dispute that. If there’s $4 trillion—and I know it’s not all invested in the ASX, but a certain percentage of it is—and if we’re increasing the amount of money invested in the ASX that’s held by super funds, we’re really just washing money through the system. I would have thought from a policy setting point of view you’d need to look at the net company tax rate to see what impact superannuation is having on our overall tax receipts. Of course, the people who pick up the slack here are the income earners through bracket creep. Could you address the fact that you don’t think it’s an issue, because I think it is?
Dr Kennedy: I’m sorry to pass this, but I am going to ask a colleague in Revenue Group to look at it. I wasn’t aware of a significant change, to be honest. We do talk about the interaction of the super system and company tax. However, in front of me, I’m not across the detail you’ve raised, but my colleagues don’t appear until 5 pm this afternoon. They can be well placed to go to that.
