VACC supports calls by a senior Federal Government minister to abolish the current 15 per cent levy on superannuation contributions.

Finance Minister, Nick Minchin, believes a portion of the forecast $11.5 billion surplus in this year's May budget should be used to cut the superannuation tax.

Senator Minchin said the abolition of the levy - which would cost the Government an estimated $3.3 billion - is the perfect way to distribute some of the surplus to the working population of Australia, without overstimulating the economy.

"VACC definitely supports the notion that a fair share of the nation's surplus should go back to the man in the street, but not at the high price of pushing interest rates through the roof, or risking a dangerous inflation hike," VACC Executive Director, David Purchase, said.

"Many of our members are running small businesses in the highly competitive automotive industry, and they are doing it tough. The last thing they need is for tax relief to trigger a rise in interest rates.

"The Federal Government should embrace a strategy which enables it to give something back to the workforce of Australia without overstimulating the economy; Senator Minchin's plan appears to be the perfect option," Mr Purchase continued.

"This is a 'win-win' opportunity for the Government. If $3.3 billion was spent on income tax relief it would give tax payers an average of $6 per week in his pocket, but by abolishing the superannuation levy, the average Australian worker will be more than $20 per week better off in retirement."

Background

• Senator Michin has made the call to dump the current 15 per cent superannuation levy in the lead-up to the May Federal Budget, in which an $11.5 billion surplus is expected to be announced.
• Senator Michin made a similar call this time last year to abolish the 'high-earners' superannuation surcharge. It was abolished in the 2005 Budget.
• Superannuation contributions are currently triple-taxed - on contributions, on the earnings those contributions return, and on final payout benefits.
• Superannuation tax on contributions and earnings currently raise over $5 billion per annum for the Federal Government (source: www.budget.gov.au).
• The abolition of the superannuation levy has also been supported by the Association of Superannuation Funds of Australia (ASFA) and respected economist, Chris Richardson, of Access Economics.