The Australian Treasury is short of cash and looking for some more income. There is a fairly large amount of money is superannuation savings accounts, and contributions mean it keeps growing, so it was inevitable that this pot would eventually come to their attention.
This is basically a wedge issue. Swan said in the presser on Friday that the legislation would probably not be passed before the election (after subtracting estimates, the Senate has only ~10 sitting days left before the election, and the House ~17 days).
So why do it? So they can spend the money. There are other savings measures from MYEFO that have not been passed and are unlikely to be (but they have spent the money), so this is not new. The ‘saving’, will, however, be included in the Pre-Election Fiscal Outlook (the PEFO), and you can bet that the ALP will spend the money.
The idea is to give the Conservatives less money to spend (if they object to the bills) or to make them sign up to something that is anathema to their base.
Anyhow, so is this a good idea? Probably not. Apart from that fact that the tax is basically retrospective (taxing contributions, as the conservatives previously did to raise cash does not alter the retirement plans of the invested — taxing earnings does), it is also bad economics.
Most economists agree that taxing capital is not just bad policy, but also impossible.
There is a great summary blog post on this topic here. The bottom line is at the top:
The standard “classic” result in this field is, in fact, that an optimal system would have no taxation of investment income.
So what’s the beef?
Under standard, pretty flexible assumptions, it’s impossible to tax capitalists, give the money to workers, and raise the total long-run income of workers.
So who ultimately pays the tax? Workers do via lower real wages.
If you tax capital income and hand all of the tax revenue to workers, then in the long run (or the “steady state”) you’ll wind up with a smaller capital stock. And since workers use the capital stock to earn their wages, the capital tax pushes down their wages
[There is an excel sheet on the blog you might play with]