Hockey sets out to tax super savings

Artificially "converting" labour income into income from savings is a social problem, and one that may lead to tax policy reform, if Joe Hockey and the Abbott government share this thinking.

"Individuals with higher incomes tend to have higher levels of income from savings," Treasury observes in a discussion paper on tax policy reform released yesterday.

"Income from savings contributes to a person's ability to pay tax," the paper notes.

Some form of reform of taxes on savings is in prospect, although the paper makes no actual proposals.

Taxation on domestic savings is "'a small but important revenue base for the Commonwealth," the Treasury paper says.

In 2013/14, receipts from superannuation alone raised A$6.1 billion and
made up 1.8 per cent of Commonwealth receipts. Capital gains tax raised $3 billion. Taxes paid on interest and dividends for individuals yielded around $7 billion.

"Empirical evidence suggests the behavioural response to taxing savings is uncertain and may not be significant," Treasury says.
    
The economic cost of taxing income from savings is not large. So tax income from savings, and set out to improve tax efficiency, Treasury suggests.

"Exempting or providing concessional taxation treatment of income from savings creates incentives to minimise tax," the paper says. This stance informs the next comment, which gripes at artificially 'converting' labour income into income from savings.