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Super Surcharge Ends

On Wednesday 10th August the Senate passed the Bill to abolish the superannuation surcharge with retrospective effect from 1 July 2005. This will result in about half a million people on higher incomes having $650 million more invested in super funds in 2005/06. The surcharge was a poor piece of tax policy. It was costly to administer, discouraged underfunded baby boomers from voluntarily topping up super and caught unawares some lower-income recipients of retrenchment payments at times in life when they needed every penny. The surcharge came into effect on 20 August 1996 as a 15% non-rebateable tax on employer paid or tax-deducted super contributions for people with the gross income plus employer contirbutions in excess of $75,000pa.

The history of the surcharge is an interesting political tale. When the coalition parties entered the 1996 federal election campaign, their policy on superannuation was that they would make no changes to taxation of super in their first term, if elected. This had voter appeal due to a period of frequent changes to tax on super by the Hawke and Keating governments since 1983. The coalition won the election in March 1996. When putting their first budget together in August 1996, the surcharge was decided in a last-minute fix to mend a hole in the budget surplus. This was apparently decided without the relevant public servants being consulted for advice on implementation. It was called a ‘surcharge’ rather than a tax, presumably to deflect attention from the pre-election promise.

Posted Saturday, 13 August 2005


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