Country Report Australia October 1996 Main report

Economic policy: Superannuation surcharge may be unworkable--

The proposal for a superannuation surcharge has proved the most controversial. The Association of Superannuation Funds is lobbying the federal government to amend its scheme, on the grounds that the administrative difficulties posed by it are substantial. In order to levy the surcharge on 355,000 people (the government's estimate of the number affected), details relating to around 16 million individual superannuation accounts will have to be reported to the Australian Taxation Office (ATO), which must then inform the super- annuation funds which accounts will attract the surcharge. In providing this information, the ATO will almost certainly be breaching existing privacy laws relating to income and taxation.

The Society of Certified Practising Accountants estimates that the administrative cost of the proposed superannuation tax surcharge could come to as much as the government revenue raised (around A$500m per year). This cost would be spread across all fund members. The superannuation funds would prefer to see the surcharge deducted by employers and included with routine tax instalment payments. This would remove the administrative burden for funds (although it would marginally increase it for employers) and would side-step privacy issues. But the government is not keen on this approach, as it would make the surcharge seem too much like a promise- breaking tax rise.

--and higher private health insurance charges cause embarrassment

As noted above, a central feature of the budget was the tax rebate offered to individuals and families with private health insurance. However, within days of the budget's presentation, a number of private health funds said that they would increase insurance premiums by an amount almost equal to the rebate. Although the premium rises had been planned for some time, the news was met with a public outcry and the prime minister intervened by revoking the Department of Health's authority to approve future increases. Approval will now be required from the minister for health, Michael Wooldridge, in conjunction with Mr Howard and the treasurer, Peter Costello.

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