Category: Features

ALP’s franking credits policy targets shareholders with low taxable incomes

15 October 2018

Jim Bonham

“Having a non-means tested government payment solely on the criteria that you own shares and giving people a refund when you haven’t actually paid income tax for the year that the refund covers, what’s the economic theory behind that?” asked Opposition Leader Bill Shorten recently, and reported by Phillip Coorey in the Australian Financial Review on 12 October 2018.

Mr Shorten is  talking about refundable franking credits, but actually franking credits are means tested (because they’re taxable income and our progressive tax scales are a form of means testing), and you have paid income tax (because franking credits are also pre-paid tax) and, finally, there is an economic theory (to ensure gross dividends are taxed as ordinary income).

Unfortunately, that’s not the way the ALP sees it.

Shadow Treasurer Chris Bowen, said refundable franking credits are “a concession”, “unfair revenue leakage” and “a generous tax loophole” when describing the ALP’s plan to stop the refunding of unused franking credits  (see SuperGuide article  and and the ALP’s policy document, )

Those comments are not right either.  Refundable franking credits are part of an unfortunately convoluted and widely misunderstood process, but their function is straightforward: to ensure that Australian company profits distributed to Australian shareholders are taxed in the hands of the owners (shareholders) rather than the company, in exactly the same way as income from any other source.  The company is only taxed on that part of its profit which is kept in the company for internal use, and not distributed.

In our present system of refundable franking credits therefore, there is no concession, no leakage and no loophole.

In the discussion referenced above, the Shadow Treasurer also said “While those people [with low taxable incomes] will no longer receive a tax refund, they will not be paying additional tax” which is a prime piece of Orwellian double-speak.  It’s not correct, and shareholders on sufficiently low incomes will find that their franking credits are simply confiscated as tax – money they get now will no longer be received and they will have less to live on.

Australians on low incomes will lose franking credits, unless they receive a part or full Age Pension. After strong protests that convinced the ALP that its policy would actually harm those on low incomes, they announced the “Pensioner Guarantee” – an exemption from the policy for Age Pensioners who hold shares directly, and for SMSFs where at least one member received the Age Pension or a government allowance before 28 March 2018 – but that still doesn’t help non-pensioner shareholders with low incomes.

In this article, I dig into this subject in more detail, particularly for those who hold their shares directly in their own names, to show what the ALP proposal really means and how it would operate.

I’ll show that the policy can cause very substantial loss of income for direct shareholders, especially those on low or middle incomes.  Retirees will simply not be able to suck up the sort of losses involved and we can expect some creative asset reduction to get under the Age Pension asset test threshold, or a major restructure of the investment portfolio to avoid franked dividends.

Dividend imputation, and how franking credits work

In the bad old days when dividends paid from company profits (taxable in Australia) were double-taxed, it worked like this:  the company paid tax at the corporate rate (currently 30%) on the relevant profit; the remainder (70% at current rates) was sent as a dividend to the shareholders, who then paid further tax on it as part of their ordinary income.

In 1987, the Hawke-Keating government decided to remove this double taxation of dividends, introducing a dividend imputation system similar to what we have today, except that franking credits were non-refundable.

Although the company still paid tax at the corporate rate (currently 30%), any of that tax which was associated with profits paid out as a dividend was reclassified as a “franking credit” and held by the ATO as a pre-payment of tax on behalf of the taxpayer – very similar to the PAYE system

The franking credit was also treated as part of the shareholder’s taxable income.  In other words, the gross dividend, which is the franking credit plus the dividend, was added to any other taxable income when calculating the shareholder’s income tax.  The franking credits, being pre-paid tax, were then subtracted from the calculated tax owing, so that in the end the gross dividend was taxed just like any other income.

For high-income shareholders, whose tax liability exceeded the value of the franking credits, this system had the effect of transferring the liability for tax on company profits from the company to the shareholder.

However, for low-income shareholders the situation was different.  If there were franking credits left over after paying the tax, the ATO simply kept the excess.  (This outcome is what is meant by “non-refundable”). Taxpayers who would have paid no tax at all if the same amount had been earned from employment, actually paid the corporate tax rate on their dividends.  Their dividend income was “taxed in their own hands”, but not taxed like other income.

In 2000, the Howard-Costello government made unused franking credits refundable to the taxpayer, creating the current system in which gross dividends are always taxed as shareholder’s income, regardless of the shareholder’s tax rate.

Here’s a simple example to show how the three systems treat low and high income taxpayers.  For this example, “low income” means too low to pay tax in our current system and “high income” means over $180,000 so the marginal tax rate is 47% (including the Medicare levy).  It’s also assumed that the gross dividend is not large enough to alter the taxpayer’s marginal tax rate, and today’s tax rates are used.

The table shows how much money, after tax, ends up in the shareholder’s pocket as a result of $100 profit earned by the company and distributed as a dividend. Clearly, low-income recipients of franked dividends will be the hardest hit if the ALP re-introduces non-refundable franking credits.

System After tax income from $100 profit
  Low income High income
Double taxation (prior to 1987) $70 $37
Non-refundable franking credits (Hawke-Keating) $70 $53
Refundable franking credits (Howard-Costello) $100 $53

Dividend imputation with non-refundable franking credits  was a have-your-cake-and-eat-it-too system for the government, where that part of a company’s profits distributed as dividends was taxed at either the corporate or the personal tax rate, whichever gave the higher result.  This is the system the ALP wants us to return to – Age Pensioners (mostly) excepted.

So who is most affected by the proposed policy? What is their income? How much income will they lose?  How effective is the Pensioner Guarantee? Let’s look at these questions in some detail.

Significant loss of income under ALP proposal for direct shareholders

People who hold shares directly, outside of superannuation, may be rich or struggling; they may be retired or in their youth; they may rely on dividends from shares for all of their income, or just a part of it; they may have other taxable income from dividends, rental, employment etc.  They might also receive non-taxable income from a superannuation pension, but that has to be looked at separately and does not affect what happens with their taxable income.

Whatever the circumstance, the introduction of the ALP’s policy will result in either a loss of income or, if the shareholder’s income is high enough, no change.  No one gains except the government.

If a shareholder is going to lose income under the ALP policy, the actual amount depends on total taxable income, the amount of gross dividends as a percentage of the total, and whether the taxpayer is entitled to SAPTO (and if so, whether single or a member of a couple).

Incidentally, wherever I use the phrase “entitled to SAPTO”, it is to be understood that the entitlement only applies if the income is below the appropriate threshold.  Above that, the “entitled to SAPTO” and “not entitled to SAPTO” curves in the graphs to follow are, of course, identical.

Fig 1 presents the loss of income which would result from the ALP proposal for a single senior shareholder entitled to SAPTO, where the gross dividends received constitute 25%, 50%, 75% or 100% of the shareholder’s total taxable income.

For example, if gross dividends represent 100% of a taxpayer’s income, the introduction of the ALP proposal will be most financially devastating for single senior Australians earning about $33,000 a year but will also affect those earning up to about $138,000 a year. If gross dividends represent 75% of a taxpayer’s income, the ALP proposal will most severely hurt single senior Australians earning about $33,000 a year  but will also affect those earning up to about $75,000 a year

In all scenarios, single senior Australians with low to moderate incomes will be most affected by the ALP’s proposal to ban franking credits refunds.

Figure 2 shows the same results, but for a senior taxpayer who is a member of a couple.  Note this graph is just one partner’s share of both the income and the loss.  The shapes of the curves are a bit different from those in Fig 1 because of the complicated structure of our tax scales.

Note: In particular, for a couple, if gross dividends make up 50% or less of total income, the worst loss occurs at an income (each) of about $22,000.

Finally, Fig 3 shows the same results for a younger taxpayer who is not entitled to SAPTO.

In each of these three graphs the curves are skewed towards lower incomes and the greatest amount of income loss occurs at a taxable income of between $22,000 and $33,000 depending on the individual case.  That’s hardly a huge income, yet in the worst case the ALP proposal will reduce this income by up to $10,000 per year, depending on the percentage of franked shares contributing to taxable income.  The proportional loss is savage.

For those who don’t qualify for SAPTO, the maximum loss of income occurs at lower taxable incomes and is not quite as large, but it is still very significant in relation to the level of income

This is just another slap in the face to seniors who, in recent years, have suffered the doubling of the Age Pension asset test taper rate, dramatic upheaval in the structure of superannuation in retirement and now, for share investors, the threat of losing some or all of their franking credits.

Many retirees must question why they put so much effort in their younger years into saving and learning how to invest, only to have their assets and income so badly trashed by continually changing rules.

What about the Age Pension?

When introducing this policy, the ALP claimed that it would mostly affect wealthy retirees.  A strong backlash led to the Pensioner Guarantee (exemption) and the claim that they were thus protecting those less well off.

However, that did nothing for those who fail to qualify for the Age Pension but still don’t have much income.  We need to see where in Figs 1 or 2 the Age Pension might cut out.

To keep things as simple as possible, we’ll just look at the top curves in Figs 1 and 2, which assume that gross dividends make up all the taxable income.  In both cases, the worst loss occurs for a taxable income of about $33,000, and if we assume a gross dividend yield of 6% (approximately the average for fully franked shares in the ASX 200) the value of the shares needed to generate that income is $550,000.

The upper asset test threshold for the Age Pension is different for singles and couples, and for those who own their own homes:

Asset test upper threshold
Homeowner Not homeowner
Single $564,000 $771,000
Couple (each) $424,000 $511,000


None of these figures are very far from $550,000.  What that means is that someone who just fails to qualify for the Age Pension, and so is not excluded from the ALP policy, will probably find themselves facing close to the maximum loss of income.

How will people respond?

With incomes at these levels, nobody’s going to just suck up the sort of losses involved, so expect either (a) some creative asset reduction to get under the Age Pension asset test threshold, or (b) a major restructure of the investment portfolio to avoid franked dividends.

The first alternative, that is, creative asset reduction, is likely to trap the person into permanent dependence on the Age Pension, restricting a person’s ability to improve her financial position in future or to deal with major health or care issues late in life.  The second alternative, restructuring the investment portfolio, could adversely affect the risk of the portfolio producing poor returns, leading to an inadvertent slide onto the Age Pension.

Either way the objective of the ALP proposal is thwarted, which makes it rather pointless to make people jump through these hoops, while putting more people on the Age Pension

SMSFs also hit by ALP proposal

The ALP’s proposal also applies to shares held within a self-managed super fund.

If an SMSF is in accumulation mode, then the tax rate on investment earnings and discounted capital gains is 15%. In such circumstances, if gross dividends make up more than half the total income, some of the franking credits will be lost.  I suspect most people caught in this situation will restructure their investments to bring gross dividends down below 50% of income.  Such a strategy solves the tax problem, but may adversely alter the SMSF’s risk profile.

SMSFs in pension mode are in a much more difficult situation.  They pay zero tax on fund earnings, but under the ALP proposal they would lose all of their franking credits, which could be up to 30% of their current income.  Portfolio restructure is one option to avoid this tax (although it would mean abandoning shares paying franked dividends), as is simply reducing (spending) assets so as to bring their value low enough to qualify for the Age Pension – in both cases with the possible consequences outlined earlier.

Unfortunately, reducing the value of shares held in the SMSF – as a deliberate strategy or simply to supplement income – to the point where a retiree qualifies for a part Age Pension still won’t protect the franking credits. The Pensioner Guarantee does not apply to SMSF members who qualify after 28 March 2018, so retirees in this situation will probably consider closing their SMSF and reinvesting outside super.

SMSFs in pension mode seem to be the main target of the ALP’s proposal, and the Shadow Treasurer’s statement ( ) specifically refers to the fact that some SMSFs get very large refunds of franking credits.  Well yes, some did, but that was largely eliminated by capping superannuation pension accounts at $1.6 million.  Meanwhile, lots of people have relatively small SMSF pension accounts.

If the real problem that the ALP is trying to address is the fact that SMSFs in pension mode pay no tax, then that should be addressed directly with full consideration of context including large funds as well as SMSFs.  It is a fundamental and complex issue and simply changing the way dividends are taxed is not the way to deal with it.

Destructive and unfair tax policy

Halting the refund of excess franking credits is a very destructive policy for those who hold shares directly or in an SMSF, especially in pension phase

Such a proposal puts a severe strain on retirees whose taxable income is fairly low unless they can find a way to restructure their investments or qualify for the Age Pension, but it has little or no effect on wealthier people – unless their investment is through an SMSF in pension mode.

Likely responses to the policy would see some people driven to the Age Pension, at long-term cost to themselves and the government.  Others will close their SMSF purely to get under the umbrella of the Pensioner Guarantee.  Some may decide to remove all Australian shares paying franked dividends from their portfolios – how is this good for themselves or the country?

Income tax is often arbitrary and complex, but the basic principle of dividend imputation with refundable franking credits is simple and sound:  to ensure profits distributed as dividends are taxed as normal income in the hands of shareholders.  Why mess that up?

The ALP policy is the antithesis of a well-designed tax policy, a direct slap in the face to the notion of a progressive tax system, and an extraordinary proposition to have come from the ALP.

Exempting Age Pensioners who hold shares directly from this policy was painted as supporting those on low incomes, but really it was just a way of papering over part of a problem and hoping no-one would notice the rest.

Technical note: All tax calculations in this article use 2018-19 tax rates, and include LITO, LMITO, SAPTO (if relevant) and the Medicare levy.  The Age Pension asset test thresholds are applicable from September 2018. For more information on income tax rates see SuperGuide article For more information on Age Pension assets test, see SuperGuide article .

About the author: Jim Bonham

Dr Jim Bonham is a retired scientist and R&D manager, who is deeply concerned about the appalling instability of the regulatory environment around superannuation, retirement funding and investment generally. If the ALP policy is implemented, he will be affected by the loss of franking credits in relation to shares held directly, and within an SMSF. 

Copyright: Jim Bonham owns the copyright to this article. Copyright © Jim Bonham 2018

First published on 15 October 2018 on SuperGuide:

On 16 October 2018 Jim Bonham sent the following email to Bill Shorten and Chris Bowen:

From: Jim Bonham []
Sent: Tuesday, 16 October 2018 9:19 AM‘ <>‘ <>
Subject: Franking credits

Dear Mr Shorten,

I was dismayed to read the following quote, attributed to you, regarding refundable franking credits:

“Having a non-means tested government payment solely on the criteria that you own shares and giving people a refund when you haven’t actually paid income tax for the year that the refund covers, what’s the economic theory behind that?”  ( )

The facts are:

  1. Refunds of franking credits to shareholders with low taxable income are means tested, because franking credits are taxable income and the progressive nature of income tax system effectively applies a means test.
  2. You have paid income tax, because the franking credit is treated by the ATO as a pre-payment of tax.  The refund to those on low taxable incomes occurs because the pre-payment is an over-payment.
  3. There is an economic theory.  The dividend imputation process was designed to ensure that company profits distributed as dividends are taxed in the hands of the shareholder (the company is only taxed on profits retained for internal use).  Refunding franking credits in excess of the shareholder’s tax obligation is essential to ensure that the gross dividend is taxed in the same way as other income.  Failing to refund excess franking credits, as the ALP is proposing, forces those on low taxable incomes to pay a higher rate of tax on gross dividends than they would if the same income were earned in any other way.


Please abandon the policy of making franking credits non-refundable.  It hits those with low taxable incomes the hardest, and makes living in retirement on your own resources far more difficult for self-funded retirees.

Jim Bonham

How did both major parties get super so wrong?

The Australian

1 October 2018

Robert Gottliebsen – Business Columnist

Both the government and the opposition have the same problem — they both have difficulty in devising sensible superannuation and retirement policies.

And this raises the question of why can’t they get it right? Why do they make so many mistakes?

In the Weekend Australian I set out how shadow treasurer Chris Bowen simply got his franking credits policy wrong.

But go back a few years and the then treasurer Scott Morrison and his assistant Kelly O’Dwyer put forward a set of horrendous superannuation policies and even went as far as saying they were not retrospective when of course everyone knew they were.

Those bad policies almost cost the Coalition the election. They were lucky because many of their backbenchers took the trouble to talk to people and understand what was happening and forced through policy adjustments that were at least a substantial improvement on the original ideas.

And in the current ALP fiasco my understanding is that, in a similar way to the Coalition, intelligent backbenchers are talking to the voters and are starting to understand the looming disaster and are desperately looking for a way around the problem without admitting error.

Let me help them. The best way is to abandon the policy altogether, but if you need a compromise then limit the amount of cash franking credits that can be claimed to, say, about $15,000.

The cap being floated in ALP circles is $10,000 but I think that is too low. But whether it be $10,000 or $15,000, the problem is we are introducing legislation that is complex, will raise very little money and makes retirement just that much more complex.

We can fix that over time, and a $15,000 annual cap to cash franking credits will solve most of the problems among the battlers who are struggling to fund their own retirement. The problem both the Coalition and the ALP face in superannuation matters is that, in the first instance, the politicians have very generous super arrangements and don’t do their homework on the rest of the population. Even worse, in the public service the people at the top are mostly on incredibly generous benefits and are members of the so-called “$10 million club” with benefits that are way in excess of what is available to the general public.

While that has been changed for the most recent recruits, the people at the top of the public service are mostly living in a different world to the rest of the country. So when they look at super and retirement matters they simply have no idea what is taking place. My understanding is Chris Bowen, when devising his super franking credit disaster, actually went to the public service to have it evaluated and they came back with the thumbs up, which made him confident that the concept was a legitimate tax arrangement that would take money from the rich.

As we all now know, the policy is a savage blow to ordinary Australians trying to fund retirement, with about 1.4 million people in the ALP’s sights and hardly a rich person among them.

I believe we are looking at a phenomenon that cripples both parties. The first step in solving the problem is that ministers in areas like superannuation need to understand that the public service is of limited value to them.

They have to send their people out into the real world and, as the Coalition found, the best advice came from the backbenchers who usually have the time to be in touch with the electorate.

Ministers and shadow ministers in Canberra (and also in state governments) surround themselves with ministerial staff who second-guess the public service. Too often the ministerial staff are “yes” people with no depth to their knowledge outside of politics.

This situation has caused many talented people to either leave the public service or simply not join it. Once we had a proud public service that was as far as possible independent, but we are now seeing in so many areas public service advice simply doesn’t have the same standards it once did.

Nothing is going to happen in the short term, but down the track ministers are going to have to think about how they restore the quality of public service advice so that they don’t get caught in situations as we have seen in superannuation and retirement from both parties. When Australians reach their 40 and 50s they make long-term plans for their retirement in accordance with rules that exist at the time. When past governments changed rules the old rules were grandfathered so they were not retrospective.

It was the Coalition that decided there should be retrospective legislation. At least Bowen is being honest and is saying he is changing the rules retrospectively, but that doesn’t validate his policy. For what it is worth I admire the shadow treasurer for the fact that he is open about the tax measures he is planning to undertake.

Traditionally opposition treasurers keep their mouths shut and introduce the nasties once they get into office.

The 2016-2017 adverse superannuation changes; a Grattan Institute/Turnbull Government recipe for loss of trust and increased uncertainty?

Address by Jack Hammond QC, founder of Save Our Super.

Tuesday, 18 September 2018 at La Trobe University Law School, City Campus, 360 Collins Street, Melbourne, lunch-time seminar, “Australian Superannuation: Fixing the Problems”.


In 2016-17, the Turnbull Government made a number of superannuation policy and legislative changes which adversely affected many Australians. Those changes were made without appropriate ‘grandfathering’ provisions even though they amounted to ‘effective retrospectivity’ (a term coined in February 2016 by the then Treasurer, Scott Morrison). ‘Grandfathering’ provisions continue to apply an old rule to certain existing situations, while a new rule will apply to all future cases.

I am a retired barrister and am adversely affected by those 2016-17 superannuation changes. That, in turn, has led me to form the superannuation community action group, Save Our Super.

The Turnbull Government, assisted and encouraged by the Grattan Institute in Melbourne has, without notice and at a single stroke, changed the superannuation rules and the rules for making those rules. They have turned superannuation from a long-term, multi-decades, retirement income system into, at best, an annual federal budget-to-budget saving proposition. That is a contradiction in terms . It is unsustainable.

Further, it is a recipe for a loss of trust and increased uncertainty for all those already in the superannuation system and those yet to start.

Save Our Super has three proposals which we believe will redress the 2016-17 superannuation policy and legislative changes and prevent a recurrence.

But first, how did we get here and in particular, without appropriate ‘grandfathering ‘ provisions? Those type of provisions have accompanied all significant adverse superannuation changes over the past 40 years.1


29 November 2012 Lucy Turnbull appointed a director of the Grattan Institute, Melbourne.2
May to June  2015 Scott Morrison, whilst Minister for Social Services in Abbott Government, makes 12 ‘tax-free superannuation’ promises.3
2014 to 2015 Malcolm and Lucy Turnbull donate funds to Grattan Institute.4
15 September 2015 Malcolm Turnbull replaced Abbott as Prime Minister. Scott Morrison becomes Treasurer.5
24 November 2015 Grattan Institute publishes Report ”Super Tax Targeting” by Grattan Institute CEO John Daley and others. Dismisses need for ‘grandfathering’ provisions6 and observes ‘…that taxing earnings for those in the benefits stage may raise concerns about the government retrospectively changing the rules’. 7

No mention of the possible consequential of loss of trust and uncertainty that retrospective changes may bring.

Note that the Grattan Institute material shows, on its front page, an image of three of the bronze pigs on display in the Rundle Street Mall, Adelaide.8

We, and other self-funded superannuants, believe that the Grattan Institute’s prominent use of that image of those bronze pigs was not merely a juvenile attempt at humour.

It was a none-to-subtle insulting implication that Australians whom had faithfully conformed with successive governments’ superannuation rules and had substantial superannuation savings were, nonetheless, greedy pigs with their ‘snouts in the trough’.

See also 9 November 2016 entry below.

2015-2016 Malcolm and Lucy Turnbull donate further funds to Grattan Institute.9
18 February 2016 Scott Morrison, as Treasurer, gave an address to the Self Managed Superannuation Funds 2016 National Conference in Adelaide.

Draws attention to ‘effective retrospectivity’ and its ‘great risk’ in relation to super changes.

“Our opponents stated policy is to tax superannuation earnings in the retirement phase. I just want to make a reference less about our opponents on this I suppose but more to highlight the Government’s own  view, about our great sensitivity to changing arrangements in the retirement phase.

One of our key drivers when contemplating potential superannuation reforms is stability and certainty, especially in the retirement phase. That is good for people who are looking 30 years down the track and saying is superannuation a good idea for me? If they are going to change the rules at the other end when you are going to be living off it then it is understandable that they might get spooked out of that as an appropriate channel for their investment.

That is why I fear that the approach of taxing in that retirement phase penalises Australians who have put money into superannuation under the current rules – under the deal that they thought was there. It may not be technical retrospectivity but it certainly feels that way.

It is effective retrospectivity, the tax technicians and superannuation tax technicians may say differently. But when you just look at it that is the great risk.”10

3 May 2016 Scott Morrison, as Treasurer, announces in his Budget 2016-17 Speech to Parliament a number of adverse ‘changes to better target superannuation tax concessions’ .

No ‘grandfathering’ provisions announced.11

See also, Budget Measures, Budget Paper No 2, 2016-17, 3 May 2016, Part 1, Revenue Measures, pp 24-30.12

5 September 2016 John Daley, CEO Grattan Institute, said:
“Winding back superannuation tax breaks will be an acid test of our political system. If we cannot get reform in this situation, then there is little hope for either budget repair or economic reform” (AFR 5/9/16)13
9 November 2016 To give effect to the Budget 2016-17 superannuation changes, Scott Morrison presented the Turnbull Government’s package of 3 superannuation Bills to Parliament.

To publicly explain and justify those superannuation changes to Parliament, Scott Morrison and Kelly O’Dwyer circulated and relied in Parliament upon a 364 page “Explanatory Memorandum”.

The Explanatory Memorandum states on its front page “Circulated by the authority of the Treasurer, the Hon Scott Morrison MP and Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP.

In turn, the Explanatory Memorandum expressly refers to, and provides links to, the Grattan Institute’s 24 November 2015 Media Release and Report (see 24 November 2015 entry, above).

As noted above, that Grattan Institute material shows, on its cover, an image of three of the bronze pigs on display in the Rundle Street Mall, Adelaide.14

Bronze pigs in Rundle Street Mall, Adelaide 

23 November 2016 The Turnbull Government, with the support of Labor, rushed through Parliament two of its three superannuation Bills.
29 November 2016 Those two Bills were assented to on 29 November 2016 and are now law:

Superannuation ( Excess Transfer Balance Tax) Imposition Act 2016 (C’th) (No 80 of 2016);15

Treasury Laws  Amendment (Fair and Sustainable Superannuation) Act 2016 ) (C’th) (No 81 of 2016)16

The third superannuation Bill, the Superannuation (Objective) Bill, remains stalled in the Senate.17

1 December 2016 Lucy Turnbull retired as a director of the Grattan Institute.18
24  August 2018 Malcolm Turnbull resigns as Prime Minister.19
Scott Morrison becomes Prime Minister.20

Save Our Super has three proposals which we believe could redress the 2016-17 superannuation policy and legislative changes and prevent a recurrence.

First,  Scott Morrison, in his new capacity as Prime Minister, should request the Treasurer, Josh Frydenberg and/or through him, the Assistant Treasurer, Stuart Robert, to revisit the Turnbull Government’s 2016-17 superannuation changes.

A discussion paper and advice from Treasury should be requested. It should include the effect of the Turnbull Government’s 2016-17 superannuation changes on superannuation fund taxes in 2017-18 and over the forward estimates.

To restore trust and reduce uncertainty in the superannuation system, the Morrison Government should introduce into Parliament legislation which will retrospectively provide appropriate ‘grandfathering’ provisions in relation to the Turnbull Government’s 2016-17 adverse superannuation changes.

Those ‘grandfathering’ provisions to be available to those significantly adversely affected and whom wish to claim that relief. 

Secondly, Save Our Super proposes to create a Superannuation and Retirement Income  Policy Institute, independent of government , funded, at least initially, by private donations/subscriptions.

Its role will be to advocate on behalf of those millions of superannuants and retirees whose collective voice needs to be heard.

Thirdly, Save Our Super will advocate for an amendment to the Australian Constitution, to have a similar effect in relation to superannuation and other retirement income, as does section 51 (xxxi) has in relation to the compulsory acquisition of property.

That section empowers the federal Parliament to make laws with respect to the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws (emphasis added).

Thus Parliament’s power to make laws in relation to superannuation and other retirement income should not be affected. However, any significant adverse change to existing situations will need to be on just terms, for example, by providing appropriate ‘grandfathering’ provisions as part of that federal law.

1. []
2. [ (pp 2-3)]
3. []
4. [ (p 19)]
5. []
6. [ (p 7)]
7. [ (pp 68-9, para 6.5)]
8. [ (front page)]
9. [ (p 24)]
10. [Scott Morrison, Address to the SMSF 2016 National Conference, Adelaide]
11. []
12. []
13. [ (p 6)]
14. [The Explanatory Memorandum refers to the Grattan Institute’s 24 November 2015 report “Super tax targeting” by John Daley and Brendan Coates: (see page 275, paragraph 14.12, footnote 2). Click on the link on footnote 2, 2 Grattan Institute, media release, ‘For fairness and a stronger Budget, it is time to target super tax breaks’, 24 November 2015,”.
Click on the link at foot of that page Read the report“. That link will take you to the Grattan Institute report “Super tax targeting “ dated 24 November 2015 by John Daley and others. The report’s front page shows the image of those bronze pigs in the Rundle Street Mall, Adelaide. Note: The Grattan Institute’s website has been updated since the publication of that document. However, the article itself and the image of the 3 pigs remain.]

15. [Superannuation ( Excess Transfer Balance Tax) Imposition Act 2016 (C’th) (No 80 of 2016)]
16. [Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 ) (C’th) (No 81 of 2016)]
17. [Superannuation (Objective) Bill]
18. [ (p 3)]
19. []
20. []

Labor’s excess dividend imputation credits Media Release – 27 March 2018








Labor’s reforms to excess dividend imputation credits will crack down on an unsustainable tax loophole that gives tax refunds to people who don’t pay income tax, while protecting pensioners and paying for better schools and hospitals.

Today, Labor is introducing a new Pensioner Guarantee – protecting pensioners from changes to excess dividend imputation credits.

The Pensioner Guarantee will protect pensioners who may otherwise be affected by this important reform.

Labor is cracking down on this tax loophole because it will soon cost the budget $8 billion a year.

Much of this goes to high-wealth individuals, with 80 per cent of the benefit accruing to the wealthiest 20 per cent of retirees. The top one per cent of self-managed superannuation funds received an average cash refund of more than $80,000 in 2014-15.

Labor does not think it is fair to spend $8 billion a year on a tax loophole that mainly benefits millionaires who don’t pay income tax – not when school standards are falling and hospital waiting lists are growing longer.

$8 billion a year is more than we spend on public hospitals or child care. It’s three times what we spend on the Australian Federal Police.

Labor will close this tax loophole to help pay for better schools, better hospitals and tax relief for working Australians – but we’ll protect pensioners with our Pensioner Guarantee.

We believe in a fair go for pensioners. We know they are struggling with the cost of living, especially with out of control power prices and Turnbull’s cuts to Medicare.

That’s why Labor is making sure pensioners will still be able to access cash refunds from excess dividend imputation credits.

The Pensioner Guarantee means pensioners and allowance recipients will be protected from the abolition of cash refunds for excess dividend imputation credits when the policy commences in July 2019.

Self-managed superannuation funds with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes.

This means that every pensioner will still be able to benefit from cash refunds.

Labor has always protected pensioners – and we always will.

In contrast, the Liberals have cut the pension, increased the cost of living, and are trying to force Australians to work until they are 70.

Turnbull has:

  • cut the pension for 277,000 retirees;
  • kicked another 92,300 retirees off the pension altogether;
  • cut pension concessions that help pensioners with costs including rates and registration; and
  • is trying to cut the $365-a-year energy supplement for 400,000 pensioners.


Turnbull’s cuts will see more than $7 billion taken out of the pockets of Australia’s pensioners.

Turnbull has been the worst prime minister for Australia’s pensioners in living memory.

Labor’s policy is fair and responsible because it cracks down on an unaffordable tax loophole while protecting pensioners and paying for better schools and hospitals.

Mr Turnbull and his Liberals are protecting tax loopholes for millionaires, giving a $65 billion tax handout to multinationals, increases taxes for seven million working Australians, and cutting funding to local schools and hospitals. They are totally out of touch.

Labor’s policy will improve the budget position by $10.7 billion over the election forward estimates and $55.7 billion over the medium term.  This is a reduction of $700 million over the election forward estimates compared to the original announcement, and $3.3 billion over the medium term.

Part of this saving will be used to fund Labor’s Australian Investment Guarantee – delivering tax relief for businesses investing in Australia and in Australian jobs.

Labor’s policy has been fully costed by the independent Parliamentary Budget Office. The Parliamentary Budget Office’s costings are based on the current budget baseline, which includes the effect of the $1.6 million balance transfer cap.

More information on Labor’s policy can be found here.


Authorised by Noah Carroll ALP Canberra

Labor’s Pensioner Guarantee for dividend imputation credits

27 March 2018

Sourced from:
– (no longer available)

“The Uncertain Path of Superannuation Reform” by Peter Costello

SuperRatings & Lonsec
Day of Confrontation 2017
Grand Hyatt, Melbourne

12 October 2017

Award superannuation approved by the Australian Conciliation and Arbitration Commission is now 30 years old. Superannuation implemented by the Commonwealth under its tax power – the Superannuation Guarantee Charge – is now 25 years old. We have quite a deal of experience to judge how the system is performing. It is no longer in its infancy. It is maturing, if not a fully mature system.

The origin of Award superannuation was the ALP – ACTU Accord Mark II of September 1985. It was agreed there that a 3% wage rise should be paid, not to employees, but into superannuation on their behalf. The then Government also pledged that:
“before the expiration of the current parliament the Government will legislate to: – establish a national safety net superannuation scheme to which employers will be required to contribute where they have failed to provide cover for their employees under an appropriate scheme”

Taken together the proposal was:-
(a) employer/employee schemes would be certified by the Arbitration Commission where there was agreement;
(b) outside that there would be a national safety net superannuation scheme;
(c) a 3% contribution would be a safety net, not to replace the Age Pension but to supplement it.

Neither the contribution into the Fund nor the earnings of the Fund were to be taxable. That was introduced later, in 1988, when the Government needed revenue, so it decided to bring forward taxation receipts otherwise not payable until there were end benefits. With few lonely exceptions, Governments have been hiking superannuation taxes ever since.

There had been various proposals throughout the 20th Century to set up a funded retirement scheme in Australia The Chifley Government introduced the National Welfare Fund Act of 1945 to impose an additional tax levy which, along with a payroll tax paid by employers, would pay for such benefits. The money was separately accounted for but nonetheless treated the same as consolidated revenue. It was formally abolished in 1985. No individual benefits were ever paid from it. When I became Treasurer in 1996, people were still writing to me asking about their entitlements in the National Welfare Fund! There was nothing to look for.

In 1973 a National Superannuation Committee of Inquiry was established and in 1976 it reported and recommended a partially contributory, universal pension system with an earnings – related supplement. This was rejected by the then Fraser Government.

The first leg of Award superannuation, Consent Schemes were endorsed by the Arbitration Commission to come into operation where there was Employer – Union agreement from 1 July 1987.

The second part – a national safety net scheme was never followed through.

What the Government, in fact, did was to introduce the Super Guarantee System which provides that unless an employer pays a superannuation contribution into an approved Superannuation scheme it is liable to pay an equivalent or greater charge to the Tax Office. No sane employer would give money to the Tax Office when they could use it to benefit employees. As a result money was forced into the superannuation system under the Commonwealth taxation power.

When I became Treasurer (1996), the SG was 5% for small business and 6% for big business. When I left office (2007) it was 9% for both. In 2014 it went to 9.5% where it is today. It will start to increase again in 2021 as the legislated table shows:

1 Year starting on 1 July 2013 9.25
2 Year starting on 1 July 2014 9.5
3 Year starting on 1 July 2015 9.5
4 Year starting on 1 July 2016 9.5
5 Year starting on 1 July 2017 9.5
6 Year starting on 1 July 2018 9.5
7 Year starting on 1 July 2019 9.5
8 Year starting on 1 July 2020 9.5
9 Year starting on 1 July 2021 10
10 Year starting on 1 July 2022 10.5
11 Year starting on 1 July 2023 11
12 Year starting on 1 July 2024 11.5
13 Year starting on or after 1 July 2025 12

The SG  system was superimposed (no pun) on the existing landscape – Industry Funds that had been agreed on and certified by the Arbitration Commission, and private – sector company or public offer plans.

After the idea of a national safety net scheme was dropped, there was little interest in a financial structure that would maximize benefits for those compulsorily enrolled in the scheme under threat of taxation penalties. Yet since this is such a valuable stream of income, mandated by the State, there has always been a very vigorous argument between potential recipients about who should receive it.

I will come back to that in a moment.

Australia’s retirement system therefore consists of three parts:
1. The Commonwealth Age Pension currently fixed at 27.7% of Male Total Average Weekly Earnings – maximum rate of $23,254 p.a. for an individual and $35,058 p.a. for a couple . This is income tested and asset tested. It is totally unfunded. It is paid out of tax revenues received in the year it is paid or (if the Budget is in deficit) paid out of a combination of tax revenue and Government borrowings for that year.

2. The Superannuation System. This is a defined contribution scheme. It guarantees no defined benefit. It is fully funded, but subject to investment risk.

3. Income – whether by way of defined benefit or from defined contributions – over and above the SG system. Voluntary contributions are usually the subject of a tax incentive. As we know both sides of politics have recently combined to reduce the tax incentives to discourage larger amounts in private savings.

Average Retirement Benefits

According to APRA’s Annual Superannuation Bulletin, the average balance in the Age Bracket 60 to 64 (coming up to retirement) in an APRA regulated entity with more than four members as at 30 June 2016 was:
Male- $148,257
Female- $123,690

These figures would include those who have made voluntary contributions, that is, those under both the second and third stream above.

Those who have only received the SG payments (with no voluntary contributions) would have considerably less.

If you were born in 1956 you could have been in the SG system since age 30 – for 30 years. This is not a system still in infancy. We are now starting to get people who have spent nearly their whole working lives in it. On average (male and female) the balance is $137, 144.

That balance is worth less than the value of 6 years of Age Pension. Yet life expectancy for males at age 60 is 26.4 years and for females 29.1 years.

The SG system will not provide anyone with average life expectancy a retirement income for life, not at a comfortable level and not at all.

What the SG system will do, is supplement a person’s Age Pension. And it is particularly harsh in that respect.

The Age Pension is subject to income and assets test. Roughly, for each $100,000 of assets (after the first), a pensioner will lose $2,000 of pension. They will lose 50 cents in pension for each dollar of income or deemed income over the threshold. It is an extraordinary high effective marginal tax rate.

Superannuation can give a person extra up to the threshold in assets and income, but after that every dollar they get back results in 50 cents being clawed out of their pension.

The Commission of Audit, which reported in February 2014, noted that around 80% of Australians of pension age are reliant on the Age Pension. It then looked at what would happen if contributions were lifted to 12%. It found that with a 12% SG over the next 40 years, the same number – roughly 80% would be still be on the pension. The difference is that the SG would reduce many of those now on full pension to a part pension (about 20%).

The SG system does not take people off the pension. It supplements it.  And as it supplements it, it reduces their pension 50% for each dollar (above the threshold). In February, APRA reported there were total superannuation industry assets of $2.1 trillion as at 30 June 2016. “Small funds which include SMSFs, small APRA funds and single member – approved deposit funds accounted for 29.7 per cent of total assets. Retail funds held 26.0 per cent of total assets, industry funds held 22.2 per cent, public sector funds held 17.0 per cent and corporate funds held 2.6 per cent.”

Over the last 10 years the fastest growing sector of the superannuation Industry was the SMSF sector. While total superannuation industry assets increased 132% SMSF assets increased 206%. This is the truly voluntary sector of superannuation. These are the people aiming to, and the people likely to, fund a retirement that will take themselves off the Age Pension entirely and for life.

This works out to be a great saving to the taxpayer.

Of course, this is the sector the Government has targeted with new tax increases, particularly through caps on contributions.

What could be done?

Let us think of how this system of fully funded pension supplement could have been differently structured.

Canada is a country that shares many similarities with us – population 36 million with a similar level of per capita income. Like us it has a three tier retirement income system consisting of :

(a) Old Age Security Pension (lower than ours)income tested and unfunded;

(b) The Canadian Pension Plan (CPP), a defined benefit Plan with compulsory contributions, that is partially funded;

(c) Private savings.

The contributions into CPP are currently 9.9% The employer and the employee pay half (4.95%) each. It is planned to go to 11.9% soon. The CPP makes pension payments to contributors when they reach 65 equal to 25% of the earnings on which contributions were made over 40 years. At present the average is around C$7,839 and the maximum is C$13,370.

Like our SG scheme it is an occupational scheme. Unlike ours (because it is DB) it is not fully funded. In another respect the CPP is very different. It is managed and invested by a Government body, the Canadian Pension Plan Investment Board (CPPIB). CPPIB currently has C$300B in investments. It has economies of scale. It is extremely active in Australia. It would be one of the most respected investors in the world.

Let me say that I believe that, subject to safeguards, people should be able to choose who should manage their superannuation. But the reality in Australia is there is a very large cohort of people that don’t.

Their money goes into so-called “default funds” that get allocated to an Industry Fund under an Industrial Award or union agreement, or to a private sector plan by an Employer.

With default funds we are dealing with the money of people who make no active choice about where they want the their money to go or how it should be invested.

Instead of the Government arbitrating between Industry Funds and private funds, there is a fair argument that this compulsory payment should be allocated to a national safety net administrator – let us call it the Super Guarantee Agency – a not for profit agency, which could then either set up its own CPPIB – like Investment Board – the SGIA – or contract it out – the Future Fund Management Agency could do it. There would be huge economies of scale. It would end the fight between the Industry and the profit sector over who gets the benefit of the default funds. Neither sector has been able to attract the money voluntarily. It exists by reason of Government fiat. The Government has decided it should go into the Super system. It could show some interest in managing it in a cost – efficient way.

Default contributions are now spread between many Funds. They allocate them to equity products, fixed income products etc. Sometimes the different superannuation funds use the same managers each paying the fee to do so. Those fees would be reduced if the money were pooled together, if there were one default fund making larger allocations, if market power were used to reduce costs.

It is the other side of the investment equation that particularly interests me. One side is how it comes in, the other side is how it is invested out. You all know that the biggest variable in the benefit that a retiree will receive from Super is the investment return. A bigger pool with economies of scale and access to the best Managers would likely drive down costs and drive up returns. It would be in the interest of all, except of course the mangers, and those interested in using administration fees for other purposes.

CPPIB is an example of how a long term Sovereign Fund investing defined contributions can get global reach, and valuable diversification in asset class and geography.

It also adds to the National skill base that Canada has: – a Sovereign Institution of sophisticated investors operating in global markets. The feedback and expertise developed is very valuable to national decision-makers.

The Concentration in Australian Equity Markets

Now I know that Super Ratings is releasing or has just released its ratings on performance of various funds.

The year ended 30 June 2017 was a good year for superannuation returns. I congratulate those of you who have done well.

For Balanced Funds (growth assets ratio between 60% and 76%), the top quartile return was 11.15% and the bottom quartile was 8.28%. It would be wrong to conclude this means there is a 3% return for skill. Inside this category – Balanced Funds – there is a large variation for growth assets – 15%. We would expect allocation further up the risk curve to do better – and in fact that was the case.

What made returns good this last year was the bounce on global equity markets. You know and I know that the most important factor in return is the overall market movement – Beta.

And what worries me is that the Australian Market is overwhelmingly influenced by Bank Stocks. Bank Stocks make up 25% of the ASX 200. They are either the four largest companies on the Australian Stock Exchange or 4 out of the top 5 – depending on the price of BHP.

There would not be another Western Country where the Stock Exchange is so dominated by financials and in particular by the main banks – the quadropoly as I have previously described them.

We therefore have a situation where superannuation returns are unduly influenced by the returns of the big four Australian Banks. I do not think it is healthy to have retirement incomes so significantly concentrated in this way.

I have no doubt it is an enormous advantage for the Banks. It means that every Australian in a super scheme that holds growth assets (and every working Australian is in a super scheme by virtue of Government legislation, and every person short of nearing retirement will be in growth assets), is invested in Banks.

Banks never have to fear a flight of Australian investors.

By reason of their size and by reason of compulsory pool of savings, Australian superannuation funds with their compulsory rivers of gold have to hold them.

The four big banks are privileged. They are immune from takeover. They cannot merge. They have an ever ready supply of superannuation money flowing in to their stocks. You can see why an air of impregnability and complacency has seeped into the management in Australian banks. Market discipline is negligible. And the returns on equity are hardly matched anywhere else in the world.

Again judging from the experience of CPPIB, the ability to accumulate and diversify with economies of scale might be good for superannuation members and it might also be good for the banking system – not so much in price – but in introducing a little more competition and market discipline.

The big mistake in developing our pension supplement (the occupational contributory superannuation system), is that all the focus was on getting money into it, with not enough thought about the optimal way of managing it. I do not say it has caused it, but it has contributed to concentration of financials in the Australian Stock Market.

The interaction of the tax and welfare system (particularly very high withdrawal rates) means compared to reliance on the Age Pension alone, the system does not bring anything like the benefits touted. To really calculate the benefit of SG, you need to deduct foregone age pension it will trigger.

The system has created an industry. It has certainly delivered benefits for those working in it. But it does not exist for them. It exists for those who are forfeiting wages month in month out in the expectation that in 10, 20, 30 or 40 years they will get to enjoy the fruits of their labour.

Peter Costello

Former Treasurer of Australia – (1996 – 2007)

Morrison, O’Dwyer will keep messing with superannuation policy

The Australian

17 September 2016

Judith Sloan – Contributing Economics Editor, Melbourne


The biggest take-home message from this week’s superannuation changes by the government is that the Coalition can never be trusted on superannuation.cartoonbillleakflightsuperjumbo

Its leaders say one thing and do another, trying to out-Labor the ALP when it comes to imposing higher taxes on savers who are seeking to provide for their retirement.

And how should we interpret the government’s backflip on the crazy backdated lifetime post-tax super cap? During the election campaign, Malcolm Turnbull was adamant: “I’ve made it clear there will no changes to the (superannuation) policy. It’s set out in the budget and that is the government’s policy.” I guess that was then. What a complete fiasco the superannuation saga has been. Mind you, Scott Morrison and Revenue and Financial Services Minister Kelly O’Dwyer have only themselves to blame. They were hoodwinked by extraordinarily complex and misleading advice given by deeply conflicted bureaucrats. The only conclusion is that they are just not that smart.

How do I know this? Because Treasury has been trying to convince treasurers for years that these sorts of changes must be made to the tax concessions that apply to superannuation. Mind you, these concessions apply because superannuation is a long-term arrangement in which assets are locked away until preservation age is reached.

It was only when the Treasurer and O’Dwyer took on their exalted positions that Treasury was able to execute its sting. Other treasurers (even Wayne Swan) had the wit to reject Treasury’s shonky advice.

But here’s the bit of the story I particularly like: when it came to the proposal that those pampered pooches (the advising bureaucrats) should pay a small amount of extra tax on their extraordinarily generous and guaranteed defined benefit pensions (the 10 percentage point tax rebate will cut out at retirement incomes above $100,000 a year), they baulked at the idea. This is notwithstanding the fact they have been members of funds that have paid no taxes during their careers and they will have also built up substantial accumulation balances on extremely concessional terms. Clearly, no one in Treasury has heard of the rule that what’s good for the goose is good for the gander.

Let us not forget that the superannuation changes announced in the budget represent a colossal broken promise by the Coalition government not to change the taxation of superannuation, a promise reiterated on many occasions by Morrison when he became Treasurer.

While trenchantly criticising Labor’s policy to impose a 15 per cent tax on superannuation retirement earnings of more than $75,000 a year, he made this pledge: “The government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future. Unlike Labor, we are not coming after people’s superannuation.”

When you think of all the criticism Tony Abbott faced, including from the media, about his broken promises on (supposed) cuts to health, education and the ABC — actually the growth of spending in these areas was merely trimmed — it is extraordinary that there has not been the same focus on this unequivocally broken promise of the Turnbull government.

To be frank, I am not getting too excited about the government’s decision to scrap the loony idea of having a backdated post-tax lifetime contribution cap. It was never going to fly.

The fact David Whiteley, representing the union industry super funds, is endorsing the tweaked super package is surely bad news for the government. He has declared “this measure, combined with the rest of the proposed super reforms, will help rebalance unsustainable tax breaks and redirect greater support to lower-paid workers who need the most help to save for retirement”.

Actually, the government does the saving for these workers by guaranteeing them a lifetime indexed age pension. It is the middle (and above) paid workers who need the most help to save for retirement.

It will also be interesting to see Whiteley’s stance when O’Dwyer seeks to push through changes to the governance of industry super funds and default funds. Here’s a tip, Kelly: he won’t be your friend then. My bet is that O’Dwyer will lose again on this front.

In terms of the replacement of the lifetime non-concessional cap, the government’s alternative is extremely complex and potentially as restrictive. Post-tax contributions will be limited to $100,000 a year (they can be averaged across three years), but only for those with superannuation balances under $1.6 million.

The fact the market value of these balances fluctuates on a daily basis makes this policy difficult to enforce. Is the relevant valuation when the contribution is made or at the end of the financial year?

And what about the person who is nearly 65 and is barred from making any further contribution, but the market drops significantly after their birthday? O’Dwyer’s response no doubt would be: stiff cheddar, egged on by her protected mates in Treasury who bear no market risk at all when they retire.

What the government is clearly hoping to achieve is that, in the future, no one will be able to accumulate more than $1.6m as a final superannuation balance. At the going rate of return that retired members can earn on their bal­ances without taking on excess risk, the certain outcome is that there will be more people dependent on the Age Pension in the future. But Morrison and O’Dwyer will be long gone by then.

There is also a deep paternalism underpinning this policy. An income slightly north of the Age Pension is sufficient for old people, according to Morrison and O’Dwyer. After all, Morrison had no trouble describing people with large superannuation balances as “high income tax minimisers”.

We obviously should have been more alert to the possibility of the Turnbull government breaking its solemn promise not to change the taxation of superannuation.

Last year, O’Dwyer described superannuation tax concessions as a “gift” given by the government. I thought at first she must have been joking. But, sadly, her view of the world is that everything belongs to the government and anything that individuals are allowed to keep should be regarded as a gift — the standard Treasury line these days.

The final outcome will be a policy dog’s breakfast that carries extremely high transaction costs and delivers little additional revenue for the government. Superannuation tax revenue has disappointed on the downside for years and there is no reason to expect this to change.

But by dropping just one ill-judged part of the policy, the government thinks it can get away with pushing through the rest of it. The dopey backbenchers clearly have been duped into accepting it, even those new members who maintained a commitment to lower taxation and small government before they were elected.

It’s a bit like a real estate agent who shows you four atrocious houses. The fifth house is slightly better and you take it. The reality is that the fifth house is also dreadful but you have been tricked into accepting it on the basis of the contrived comparison.

There are still major flaws in the government’s policy. If there is an overall tax-free super cap, why have any limits on post-tax contributions at all? The figure of $1.6m is too low. And the indexation of this cap should be based on wages, not the consumer price index. The changes to transition-to-retirement should be dropped and the concessional contributions cap raised to $30,000 a year, at least, for those aged 50 and older.

But I’m not holding my breath. When Morrison said the government had “no interest in increasing taxes on superannuation either now or in the future”, he told an untruth. Just watch out for more revenue grabs in the future.

Treasurer Scott Morrison’s taxing our nerves with his super fibs

The Australian

27 August 2016

Grace Collier Columnist Melbourne @MsGraceCollier

According to a Coalition insider, years ago our federal treasurer at the time, Peter Costello, completely “stuffed up” our superannuation system. Until recently, this theory was completely unknown to me, and probably is news to you, too. You may have thought, as I did, that Costello was the last competent treasurer this nation had.

In any case, we were all wrong; apparently Costello was an irresponsible galoot. And unless our stuffed superannuation system is fixed, Scott Morrison said on radio this week, he will find it pretty hard to look his “kids in the eye and tell them they’ve got to saddle a higher debt because someone who had a very big income wanted to pay less tax”.

This “someone” with a “very big income” who wants to “pay less tax” is how the Treasurer refers nowadays to self-funded retirees. Earlier this month, he told listeners of radio station 5AA there were 6000 of them with superannuation balances of more than $5 million. One might expect a Liberal politician to praise these people, hold them up as role models and publicly thank them for staying off the public purse. After all, they have done exactly what various governments through many years have wanted them to do, and none of us will have to lift a finger to support them.

But no, Morrison — who often sounds more like a socialist than those on the left of the Labor Party — spoke about these people as though they were selfish tax dodgers. If one picks up Morrison’s vibe, the existence of these 6000 people is evidence the superannuation system is stuffed and the reason we are in debt and on the cusp of losing our triple-A credit rating.

The nation’s debt is of no concern to many Australian adults. Would Morrison’s children really lie awake at night worrying about it? And is the amount of money Morrison is planning to collect from his superannuation “reforms” going to help much? After all, the net savings are a mere 0.16 per cent of total government receipts across the forward estimates.

Regardless, the Treasurer needn’t worry about what to say to the children. He can just do to them what he does to us: say any old thing, no matter how obviously untrue, over and over, like a commission-only sales rep. Come to think of it, Morrison could just tell his kids there is no public debt at all.

Thanks to the website, we can see what the Treasurer said just last year about how the government would never, ever do what he said Labor would do, which is exactly what the government is going to do now: tax the income from people’s superannuation savings accounts.

Radio 3AW, June 19 last year: “Well, we do want to encourage everyone … to be saving for their retirement and … we don’t want to tax you, like (Labor’s treasury spokesman) Chris Bowen does.”

Radio 2GB, May 25 last year: “My own view is … I don’t want to tax people more when they’re basically investing for their own future … That’s why I think Chris Bowen’s idea … of … taxing superannuation incomes is a bad idea. I don’t support it.”

Question time, May 25 last year: “And when they get into their retirement, we are going to make sure that their hard-earned savings in their superannuation will not be the subject of the tax slug that those opposite want to impose, those opposite see it as a tax nest — a tax nest for those to plunder. What we will do for them is: we will not tax them.”

3AW, May 18, last year: “It’s the Labor Party who wants to tax superannuation, not the Liberal Party, particularly the incomes of superannuants …”

Doorstop, May 8 last year: “The government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future … unlike Labor, we are not coming after people’s superannuation.”

Press conference, May 7 last year: “What we are not going to do is we are not going to tax those savings like Bill Shorten wants to do. That is the difference, we will not tax your super, Bill Shorten will … we are not going to increase those taxes … nothing we have done with the Greens has in any way changed the government’s position on not taxing your super. We will not tax your super.”

ABC’s AM, May 5 last year: “What is not fair is if you save for your retirement and you create yourself a superannuation nest egg and the government then comes along and taxes that income, which is what Labor are proposing to do.”

3AW, May 1 last year: “The government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement.”

For those on the other side of this debate and supportive of the government’s changes, remember this: people who aim to fund their own retirements are not angry about having to pay more tax. These people are well accustomed to paying for everyone else; they have done it all their lives. They are angry because they have been lied to by Morrison, and when he isn’t boasting about how he has caused the value of Australia’s largest pastoral company to plummet, he runs around the place insulting and degrading successful savers, the people he should be praising.

In my opinion the man is dangerous and not fit to be Treasurer. And the next election cannot come soon enough.

Superannuation: Coalition guided by leftie Grattan Institute

20 August 2016

Grace Collier Columnist Melbourne @MsGraceCollier

Sacre bleu! In recent weeks, while defending the government’s superannuation policy in the media, Scott Morrison has morphed from a future prime minister into a dogmatic zealot.

Meanwhile in Canberra an under-the-carpet consultation process has begun. Coalition MPs are being canvassed by the party hierarchy about the superannuation “reforms” in an attempt to gauge the level of support or resistance before the changes are put to the house.

Will MPs vote for the policy or cross the floor and vote against it? The only MP who said he would cross the floor, George Christensen, has been made a whip, so does that mean he has been bought off?

And if the superannuation policy does pass the lower house, will some sage operators in the Senate threaten to block the Australian Building and Construction Commission bill and force the government to change the policy anyway, and thus make a fool of the wimps who voted for it?

These are the important questions of our time.

Typically, among Liberal MPs courage seems to be in short supply. Apart from one exception, who floored me by asking, “Why should we tax people less just because they’re old?”, every MP I spoke with thinks the policy is appalling and must be immediately sunk — by someone else.

Meanwhile, looking on is the base: the Liberal rank and file, the members, the donors and the volunteers. Here is where fury and despair remain widespread. Policymakers needn’t panic, this is not about the desire to avoid tax. Everyone knows half the households in this country are addicted to their welfare — er, “transfer payments” — and someone has to pay for that.

Out there in the real world, among half of us at least, there is acceptance we are compelled to work to fund the necessities of life, such as family tax benefits to the middle class, corporate welfare, politicians’ entitlements, education industry rorts, childcare scams and the installation of squat toilets in the Australian Taxation Offices. The only fly in the ointment is that the Coalition’s superannuation policy is terrible. Labor’s superannuation policy is better.

I am told that before the election, cabinet waved the policy through simply because nobody understood it and time constraints were pressing. Indeed, the policy is complex, contradictory and bizarre.

There is a cap of $1.6 million, yet hardly anyone is allowed to get to that cap unless they inherit wealth or something like that. Most MPs don’t understand their own policy, let alone where it came from — a publicly funded left-wing think tank, the Grattan Institute. Its report Super Tax Targeting is sexist and ageist. It urges the government to take money off “rich old men” who don’t need it and are committing “intergenerational theft” anyway via their superannuation accounts. Further, self-funded retirees should be aware the authors of the report — John Daley, Brendan Coates and Danielle Wood — regard them as greedy pigs.

Look at the report’s cover, pictured below.


Sceptics who doubt the Liberals would be so foolish as to adopt the institute’s leftist agenda should seek out the report on Google and read just the first page.

Back in June, when a public furore broke out about the policy, the institute put out a media release by Daley and Coates. It was titled “Tax-free super is intergenerational theft” and said: “A number of politicians have struggled this week to explain the Turnbull government’s proposed changes to superannuation … this complexity explains why intergenerational ‘theft’ through superannuation has continued for so long. No one has ever explained why we should have an age-based tax system … some of these voters are now objecting vociferously to losing their privileges but they were never justified in the first place.”

I sent off emails asking the Coalition powers-that-be to deny their superannuation policy was based on or informed by the report, and whether they deny meeting the authors. The Treasurer and Revenue and Financial Services Minister Kelly O’Dwyer declined to offer a denial and sent back a statement saying they talked to everyone.

Greedy pigs on the cover of the Grattan Institute report

The Grattan Institute was formed in 2008 and $30 million of taxpayer funds has been given to it.

It is housed in taxpayer-funded accommodation at the University of Melbourne and is crammed to the rafters with ex-Labor staff. All of this, in itself, is not such a bad thing. What is life without diversity? We can’t all be productive members of society. But the problem is that a body such as this shouldn’t be setting Coalition policy.

How on earth did this happen? Who knows, but the PM and his wife are listed on the “Friends of Grattan” web page as individual financial supporters. Further, Lucy Turnbull has been on the board since December 2012. So in the absence of any other rational explanation for the Liberals’ superannuation madness, there is always that.

We remind Scott Morrison of his broken “tax-free super” promises

Email dated 16 July 2016 from Save Our Super to Treasurer Scott Morrison in lead up to the Liberal Federal Parliamentary Party meeting to be held on Monday 18 July 2016:

Dear Mr Morrison,

I write to you in your capacity as the Treasurer in the second Turnbull L/NP Coalition Government.

This email relates to the superannuation issue. Therefore, if possible, would you please read it before the Liberal Federal Parliamentary Party meeting to be held in Parliament House, Canberra next Monday 18 July 2016. It may go a long way to explain the anger and dismay felt by many Liberal Party/National Party members and conservative supporters of the L/NP Coalition. I am one of many.

I am a Melbourne QC. I live in Kelly O’Dwyer’s electorate of Higgins in Victoria.

Also, I am the founder of Save Our Super; see: . A brief biography of my background can be found on that website under “Our People”.

Save Our Super is an organisation I formed as a consequence of the Government’s current superannuation policies. Those policies were announced by you on 3 May 2016, when you delivered Budget 2016 on behalf of the first Turnbull L/NP Coalition Government.

It is no understatement to say that those policies were sprung on the Australian public without notice or any real consultation. They were not “evidence-based” public policies by any reasonable use of that term.

Moreover, they were, and remain, in direct contradiction to that which you had told the Australian public on many occasions prior to you delivering Budget 2016.

You made at least 12 “tax-free superannuation” promises in May-June 2015, and in your Address on 18 February 2016 to the Self-Managed Superannuation Funds National Conference in Adelaide. You gave that Address less than three months before you delivered Budget 2016 on behalf of the L/NP Coalition Government.

We have posted them on Save Our Super’s website; (see under the tab “Scott Morrison’s tax-free super” for the source; and see under the category  “Quotes” for the full Address and source).

I have set them out below for your convenience.

You are the one most likely to be accepted by the Governor-General as the Treasurer in the second L/NP Coalition Turnbull Government in about a week’s time.

We believe you should be reminded of your broken promises, at least for the purpose of the forthcoming Liberal Federal Parliamentary Party meeting to be held in Parliament House, Canberra next Monday 18 July 2016.

Scott Morrison’s 12 tax-free superannuation promises : May to June 2015

3AW – 19 June 2015

MINISTER MORRISON: Well we do want to encourage everyone … to be saving for their retirement and particularly when you are drawing down on that when you are retired we don’t want to tax you like Chris Bowen does.

2GB – 25 May 2015

My own view is that the superannuation system, for example, meant I don’t want to tax people more when they’re basically investing for their own future… That’s why I think Chris Bowen’s idea, …of …taxing superannuation incomes, is a bad idea, I don’t support it…

Question Time – 25 May 2015

And when they get into their retirement, we are going to make sure that their hard-earned savings in their superannuation will not be the subject of the tax slug that those opposite want to impose, … Those opposite see it as a tax nest—a tax nest for those to plunder.

The shadow minister earlier referred to ‘trousering’. The ‘trouser bandit’ sits over there because he, together with the shadow Treasurer, wants to come after the hard-earned superannuation savings…

What we will do for them is: we will not tax them like the ‘trouser bandit’ opposite.

3AW – 18 May 2015

It’s the Labor Party who wants to tax superannuation, not the Liberal Party, particularly the incomes of superannuants and I think that’s a fairly stark contrast that’s emerging.

Doorstop – 8 May 2015

The Government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future.

… unlike Labor, we are not coming after people’s superannuation…

Press Conference – 7 May 2015

MINISTER MORRISON: What we are not going to do is we are not going to tax those savings, like Bill Shorten wants to do. That is the difference, we will not tax your super, Bill Shorten will.

MINISTER MORRISON: Yes, and there are other taxation arrangements that apply to superannuation already and we are not going to increase those taxes as the Labor Party does and nothing we have done with the Greens has in any way changed the Government’s position on not taxing your super. We will not tax your super.

ABC AM – 5 May 2015

…what is not fair is if you save for your retirement and you create yourself a superannuation nest egg and the Government then comes along and taxes that income; which is what Labor are proposing to do.

ABC RN – 5 May 2015

We don’t think that people who have done that should be punished with higher taxes, Bill Shorten does, and so does Chris Bowen and I think that’s a stark difference between the Government and the Opposition on these issues.

3AW – 1 May 2015

The Government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement.”

Australians “… spooked out of… their [superannuation] investment” – Scott Morrison

Treasurer Scott Morrison, 18 February 2016

“One of our key drivers when contemplating potential superannuation reforms is stability and certainty, especially in the retirement phase. That is good for people who are looking 30 years down the track and saying is superannuation a good idea for me? If they are going to change the rules at the other end when you are going to be living off it then it is understandable that they might get spooked out of that as an appropriate channel for their investment. That is why I fear that the approach of taxing in that retirement phase penalises Australians who have put money into superannuation under the current rules – under the deal that they thought was there. It may not be technical retrospectivity but it certainly feels that way. It is effective retrospectivity, the tax technicians and superannuation tax technicians may say differently.”

In light of the above, how can the public trust anything you say in future, let alone superannuants and those who advise others regarding superannuation?

As to the latter, see Jim Brownlee’s letter set out below; (see under “Letters to Save Our Super”, and Save Our Super’s Disclosure).

“Government Destroys Financial Adviser’s Trust in Superannuation

26 June 2016

I have been an ASIC-registered Financial Adviser for more than three decades. Over that time, I have provided my clients with retirement-planning advice. I have promoted the Government’s (both Liberal and Labor) carrot and stick message of (1), the increased long-term vulnerability of the aged-pension and, (2), tax concessions specifically structured to encourage self-funding superannuation retirement savings.

ASIC requires me to give my clients a Statement of Advice (“SoA”). It sets out the Government’s superannuation tax incentives. Those tax incentives underpin my SoA’s recommendations. They are crucial to the client’s decision. I am invariably asked “What happens if the Government changes things?”. UntiI now, I have always answered: “In my long-term experience, Governments have always ‘grandfathered-in’ protection for existing arrangements.”  

But Treasurer Scott Morrison, in his May 2016 Budget, changed all that.

Last year, before that Budget, he said to the Australian people:

“The Government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future.

… unlike Labor, we are not coming after people’s superannuation…”

Not only did the Government not do what the Treasurer promised, they did precisely what the Treasurer promised that the Government would not do.

The Government came after people’s superannuation and announced proposed increased taxes on superannuation.

Furthermore, the Treasurer added insult to injury. He announced those increased taxes without also announcing that Australians who had acted in good faith and saved for their retirement under the then existing rules, would have their superannuation savings protected by grandfathering.

What am I supposed to tell my clients now, when they ask me, as they will, “What happens if the Government changes things?

Am I now to say, “Well, I remember the Liberal Government’s May 2016 Budget. I wouldn’t put my savings into superannuation because you can’t trust the Government not to change the rules, and not protect your savings by grandfathering the existing rules”.

Jim Brownlee

Authorised Financial Adviser Representative.

Berwick, Victoria”

Please let me know your view of the Government’s current superannuation policies and the outcome of the meeting next Monday, 18 July 2016. I intend to publish this email and any replies I receive on Save Our Super’s website.

If you wish to raise with me any aspects of the Government’s current superannuation policies, or any suggested changes to those policies, I am only too happy to discuss them with you.

Please feel free to contact me on 0400 — — or by email on


Jack Hammond QC

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