The Government’s rhetoric may suggest its Budget super problems can be solved with a few technical amendments. In reality, fundamental concessions are required.
The Federal Treasurer, Scott Morrison has signalled that the only changes likely to be made to the Government’s Budget superannuation policy will be entirely technical and that will be capable of being contained in the exposure draft legislation which will be tabled during the first few weeks of the new Parliament.
Pragmatically, Morrison must know that it will take a good deal more than technical amendments to ensure the passage of the bulk of the superannuation changes through both houses of the Parliament and that, at the very least, every hint of retrospectivity will need to have been removed.
Thus, comments he made in early August talking about technical implementation issues and the creation of more flexibility with respect to “major life events” may reflect the direction in which the Government would like the debate to head but it does not reflect the political reality.
The bottom line for Morrison and the Prime Minister, Malcolm Turnbull is that the changes to superannuation announced in the Federal Budget are regarded by some within their own party as having cost the Coalition votes in crucial seats and as something which therefore cannot be allowed to stand.
Therefore, while the Treasurer has undoubtedly already started a dialogue with members of the Senate cross-bench seeking to determine what might be possible, he should also be talking to the key superannuation lobby groups to determine what is technically sensible.
What is clear from the reaction to the Government’s Budget superannuation policy announcements is that while the Treasurer may have canvassed the opinions of the industry, he ultimately placed far greater weight on the opinions of his advisers in the Federal Treasury.
Thus, the positive elements contained in the Federal Budget such as the virtual retention of the Low Income Superannuation Contribution and the winding back of tax concessions to upper income earners were offset by the perception of a Government prepared to tax superannuation retrospectively.
Morrison is right when he suggests the underlying policy intent of the Budget superannuation changes is sound and when he discusses the non-concessional cap, suggesting those who have made contributions over their lifetime of $500,000 have an average balance of $2 million in their super.
The Treasurer is also right when he suggests “that the vast majority of Australians don’t get anywhere near this – in the top income decile”.
He is also right to suggest that the only big winners from changing the measure would be people who already have $2 million in their account, have already put an average of $700,000 in, but this overlooks the issue of retrospectivity and the fact that people have been acted consistent with the rules as they currently it exist.
The irony for Morrison and Turnbull is that the changes they are seeking to make are in large measure seeking to wind-back the overly generous policy decisions of the former Howard Coalition Government.
Both the Government and the Federal Opposition have acknowledged that the existing tax settings around superannuation have given rise to intergenerational inequity and that change is necessary. On that basis, both parties are headed in the same direction but via different routes.
For Morrison to navigate the bulk of his superannuation policy through the Parliament will require that he move a long way further than a few technical amendments to the exposure draft. It will require that jettisons those elements deemed to be retrospective.
$50,000 rent a year for a “decent” house to live in sounds a lot, Bob. Maybe far too much. This inflation of figures is generally a problem. You have rightly pointed out, Mike, that Mr Morrison has said $1.6 m in super is a figure that the vast majority of Australians don’t get anywhere near. Mr Morrison has been light on presenting the facts of the extreme differences between these “few” and the rest of us members of the proletariat. The comparisons issuing from government cite “the average” in super of certain age groups, including groups nearing retirement, say an average of $250,000 for those nearly 60. More realistic is the “median” in super, which is considerably less, but a more accurate figure, since the higher average is skewed by the super balances of high worth individuals, overwhelming male. We’re looking at a ratio of 1,600,000:76,000[approximately], that is, incomes of the high wealth cohort to the plebs of 21 to 1. It does not seem that Mr Morrison is really talking to the Australian people at all, but to some rump of privilege when he talks of removing certain concessions, and probably out of some sense of restoring some small justice There are some ‘experts’ out there who don’t help to make clear what Mr Morrison initial intentions were in the proposed changes. For example, I have seen two investment advisers in separate publishing outlets say that small business owners and salaried workers will be able to claim non-concessional (personal) contributions post age75 (Morningstar) and another (Herald Sun) that earnings in Transition-to-Retirement Pensions will not be taxed. Both wrong: under current legislation one cannot contribute personally to super over the age of 75, and Mr Morrison wants to INTRODUCE tax on earnings in a transition account. If the experts can’t get it right, who can? And as for Mr Morrison, maybe it would be a good idea for him to let those of us who want to work on into old age contribute personally (up to some cap) and allow some tax deductibility for doing so – an idea which Mr Shorten has recently opposed, even though up till now business owners have been allowed to claim tax deductibility for personal contributions!
Appropriate comment that the Govt needs to compromise Mike. Now I know all the Political Party’s and probably all the independents currently in Parliament support the $1.6m limit on Super, but I’ve been trying to make the point for some time now, that $1.6m is appropriate for people who own a house (or 10)! But some of us don’t own a house and choose to pay rent of maybe $50k a year for a decent house in which to live personally. So our earnings on $1.6m, in some years, and last year is a reasonable example, cover our rent and bare living costs. Now I know I could spend my Super assets and buy a house and then claim a Govt pension, but surely wouldn’t the Govt be better off encouraging me to not claim a Govt pension and instead allow non home owners a reasonable amount extra, say 400-500k in addition to the $1.6m limit?