SYDNEY, Nov 8 (Reuters) – Australia’s centre-left government said on Tuesday it planned to cut tax breaks for super-rich pension funds as it sought to close a budget shortfall and ease its growing debt.
Prime Minister Anthony Albanese’s Labor government, which came to power in May, aims to debate cutting tax benefits once it legislates the future of pension funds.
Reducing tax breaks for people with multimillion-dollar retirement accounts would raise much-needed billions of dollars each year for the government.
“We have 32 self-managed super funds with over $100 million in assets – the largest self-managed super fund has over $400 million in assets,” Deputy Treasurer and Minister of Financial Services Stephen Jones said during the meeting. AFR Super & Wealth summit in Sydney.
“The government is celebrating success, but the concessional imposition of funds like these has a real cost to the budget,” he said.
The government said in its federal budget announcement last month that it saw its annual deficit widen to around 50 billion Australian dollars ($32 billion) by the financial year 2025/26, as the prices of raw materials decline and spending pressures increase.
Debt is expected to reach A$1.16 trillion that year, or 43% of gross domestic product, due to the financial impact of the pandemic over the past two years.
Pension fund managers benefited from a mandatory employer contribution system introduced in the early 1990s. This left funds full of money to invest, but with limited domestic assets in which to invest.
Jones said providing a clear purpose for super funds will allow the industry to identify opportunities where the national interest and member interests align.
Last month the government said it had been in talks with super funds to consider investing in affordable housing projects, to help solve a housing crisis.
“The pension funds have approved our housing agreement and will work with us to mobilize more investments that serve the interests of their investors and members, as well as the national interest,” Jones said.
($1 = 1.5449 Australian dollars)
Reporting by Praveen Menon; Editing by Christopher Cushing
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