Category: Features

Kelly O’Dwyer: “…very, very disgruntled multi-millionaires…” and tax on super

ABC Radio 774: Excerpt from Raf Epstein interview with Kelly O’Dwyer

20 September 2017

Link: http://kmo.ministers.treasury.gov.au/transcript/032-2017/

This interview contains the following exchange, near the end of the interview:

KELLY O’DWYER:
I stand outside of the shopping centre for an hour in one location and an hour in another location and I just talk to people about the issues that are important to them because there are a lot of things that people are thinking about which they are not prepared to pick up the telephone and call you about or write you a letter or send you an email but they will raise it with you if they see you and I find the same thing when I’m at train stations. If fact to be honest I find it when I’m doing the shopping that people will stop you in the supermarket, but it is really important. I think Clare is right when she says it’s really important to listen to people and to listen to the issues that they’re raising with you and to take that very seriously.

RAF EPSTEIN:
Do you know what changes people’s minds? I don’t, I’m asking if you do.

KELLY O’DWYER:
Well I think if you can listen to people and address the concerns that they have raised and put an argument to them I think that can persuade people and change people’s minds.

RAF EPSTEIN:
Can it persuade disgruntled millionaires?

KELLY O’DWYER:
Look there are some people who will always have a fairly firm view on certain issues. I have got to say I think very, very disgruntled multi-millionaires who don’t like paying Singapore rates of tax on their earnings on superannuation above $1.6 million, maybe they can’t be persuaded but for all other people, which is 99 per cent of the population, I think that the answer is probably yes.”

Super reform: Kelly O’Dwyer should hang her head in shame

The Australian

9 November 2016

Judith Sloan | Contributing Economics Editor | Melbourne

The government knows its superannuation legislation is deeply flawed. Its efforts to contain the consultation process — allowing a week for parties to comment on hundreds of pages of new law — haven’t prevented those who actually understand these things to declare much of it is unworkable.

Where tax legislation language is appropriate, the new laws use inappropriate accounting concepts. The rules contain unrealistic start points and maximise the compliance costs associated with the transfer balance cap of $1.6 million.

For those with several superannuation accounts, including one providing a defined-benefit income stream, expect to be unfairly treated. By using the one multiplicand (16) of annual pension income irrespective of age to calculate the implied transfer balance amount, anyone over the age of 70 is essentially done in the eye.

But it is good for the public servants who have given the government such dodgy advice, who will retire on unimaginably generous money courtesy of a recent salary increase and the benefit from the new rule.

But here’s the thing: the government doesn’t care. In particular, the responsible minister, Kelly O’Dwyer, doesn’t care. All she wants is the legislation to be rammed through parliament and she will do almost anything to achieve this dubious objective. The fact that, in due course, there will be many more older people on the Age Pension doesn’t worry her. She will be gone by then.

The fact there will be even higher taxes imposed on superannuation in due course because the Liberals were more than happy to impose additional taxation on current and retired superannuants to the tune of $6 billion over three years won’t bother her either.

She doesn’t care about the extraordinarily high compliance costs or the fact the changes benefit the industry (read union) super funds at the expense of self-managed superannuation funds. She’s from the Graham Richardson school of politics — whatever it takes.

And then we have the Labor Party wheeling and dealing, even though the super policy it took to the election was a Harry met Sally policy: we’ll have what they are having and book the same savings.

Now it turns out that this was actually a bit of a porkie and Labor wants to impose some further changes that will raise an extra $1.4bn over the forward estimates.

Labor Treasury spokesman Chris Bowen wants the annual non-concessional contributions cap to be $75,000 rather than $100,000 and the 30 per cent contributions cap to kick in at an adjusted salary of $200,000 a year rather than $250,000.

And Kelly can say good night to her carry-forward arrangements in relation to unused concessional contributions as well as eliminating the work test for older people. These were really the only sweeteners in the Liberals’ super package announced at budget time, apart from the pointless low-income superannuation tax offset.

All the time, Liberal backbenchers stay mum, in part because most wouldn’t have a clue and in part because those who should object are more worried about their career prospects than prosecuting the case for lower taxes and small government.

The only ray of hope is that Malcolm Turnbull regards the changes demanded by Labor as a bridge too far (and Labor won’t budge) and that enough crossbenchers won’t co-operate.

Going back to the policy drawing board would be the best outcome at this stage.

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 saveoursuper.org.au, 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.

grattaninstitutereportimage

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.

It’s not intergenerational theft

https://s3.amazonaws.com/ozblogistan-blog-uploads/wp-content/uploads/sites/4/2016/08/20101745/download-13.jpg

 

 

 

Greedy pigs on the cover of the Grattan Institute report

 

Catallaxy Files – Judith Sloan

20 August, 2016

Grace Collier is completely on the money to call out the Grattan Institute for releasing tacky, biased pap and using cheap undergraduate humour to make its point.  A picture of pigs with their snouts in the trough as representing people who have worked hard and saved according to the applicable superannuation rules.

In its campaign to impose higher taxation in order to fund bigger government, the Grattan Institute has come out with some completely loony proposals ($11,000 annual concessional contributions cap –  is this a joke?) dramatically to increase taxation on superannuation, proposals which have appealed to our left-leaning government.

Read my lips: we don’t have age-based taxation.  Current income is taxed in the same way irrespective of age.  The taxation of savings is another matter and every economist (not that Daley is not an economist) knows that savings need to be taxed in a different way from current income – apart from the little twinks at Grattan.  (Wood should know better, by the way.)

(What’s that you say?  The pigs are actually the staff at the Grattan Institute who have their snouts in the trough courtesy of two Labor governments just giving away taxpayer money ($30 million) without any competition and with nary a proposal as the ends to which the monies would be put.)

Here’s the key section of Grace’s piece:

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 [above].

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.

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: http://saveoursuper.org.au . 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@saveoursuper.org.au

Regards,

Jack Hammond QC

http://saveoursuper.org.au

jack.hammond@saveoursuper.org.au

Kelly O’Dwyer: Who you stand up for on super depends on where you sit in Parliament!

(21 Mar 2013)  House of Representatives Hansard
Ms O’DWYER (Higgins) (10:40) [whilst in Opposition to the Gillard Labor Government]:

I rise today to speak on the Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013. We have heard a number of speeches in this place as to the import of this bill, but let me recount that the bill amends the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 to increase the maximum levy payable by a trustee of a self-managed superannuation fund for an income year from $191 to $259 from the 2013-14 financial year. It brings forward the liability to pay the levy during the income year instead of the current requirement to pay some months after the year ends, when the SMSF lodges its returns.

Whilst the government made the announcement in the Mid-Year Economic and Fiscal Outlook last year that it would increase the levy from around $191 to $259, the implementation and timing is such that these changes will in fact result in a total levy being paid in the 2012-13 year of $321 and a total levy in the 2014-15 year of $388. We on this side understand that levies do need to be recovered on a cost-recovery basis. We respect that attitude, we respect that that is a responsible way to manage the budget and, in that statement, we do not oppose this bill.

However, it has been clear from the evidence presented to the Parliamentary Joint Committee on Corporations and Financial Services that there is a suggestion that the amounts and levies being charged on self-managed super funds are over and above what would be considered cost recovery.

Evidence was presented to the committee by the Self-Managed Superannuation Professionals’ Association of Australia that there was no justification provided, no evidence presented, by the government that this was in fact cost recovery. They said in evidence to the Parliamentary Joint Committee on Corporations and Financial Services:

As we alluded to previously, the increased costs have been around changes from the Stronger Super package. We have seen those in the 2011-12 budget papers and again in the 2012-13 papers, but, in contrast, in the recent 2012-13 MYEFO papers, there was no justification or reasons given accompanying the increase in the levy.

This was indeed curious, and members asked questions of the ATO. They asked questions regarding the increase and the bring-forward provisions of the bill. The ATO were asked the specific question:

Who proposed this increase in the levy? Was it the tax office or the government?

The ATO’s response was:

I think it is best to take that one on notice. My recollection—but my memory sometimes fails—is that on this occasion the discussion was probably initiated by Treasury, but I may be mistaken.

We are not convinced that this cost increase was one that did not come directly from the government. In fact, the government has a very strong track record of ripping money out of the superannuation sector. Over five years it has ripped more than $8 billion out of the superannuation sector.

I wanted to talk in the time available today about the changes that the government has made to superannuation and how it is having a very direct and significant impact on those people who are doing the right thing—trying to save for their future and be self-reliant. It is critical that people have confidence in our superannuation system and, when people invest their hard earned money, they need certainty—certainty around how that money will be taxed going in and how it will be taxed coming out. They need certainty around the contributions that they can make. They need to know that there will not be continued fiddles with the superannuation system.

This government has in fact made more than 23 fiddles with the superannuation system. That is almost four changes every year, and that is the very opposite of certainty. Some of those changes include: the reduction of the rate at which the government superannuation co-contribution is paid from 1 July 2009 and 30 June 2014; a limit on concessional contributions, reduced from $50,000 per annum to $25,000 per annum; matching the rate for government superannuation co-contributions to be reduced from $1 to 50c, with the maximum benefit also to be reduced from $1,000 to $500; the maximum incomes threshold also proposed to fall from $61,920 to $46,920; and the indexation of concessional contribution caps proposed to be paused for one year in 2013-14 at $25,000 for individuals under the age of 50 and $50,000 for individuals aged 50 and over. That is not to mention, of course, the penalties that have been applied to those people who many have inadvertently breached the ever-moving caps that the government seems to change at every opportunity.

There are significant penalties that go towards ensuring that those people will not see the benefit of the hard earned money they have contributed to their superannuation savings to ensure that they can live the life that they would like to live in retirement. How does the provision to introduce another levy on self-managed super funds incentivise investment in our superannuation system? How does this provide more certainty? The answer is that it does not, and we have already heard from the Prime Minister that she intends to make yet further changes to superannuation. In her Press Club address earlier in the year she flagged that there will be more changes in the budget around the tax arrangements to do with superannuation.

I hear the very deep and real concerns from constituents, who raise this matter with me in a very heartfelt way and who are desperate to know what faces them in retirement. Let me read into Hansard the letter that I received from Glen. He says this:

I am writing—desperately—about the noise on taxation of Superannuation/ Pensions. My wife and I are just recently retired. I am 67 and have worked to the end. We had planned for retirement—foregoing much else to fund our superannuation. And we are totally self-funded. This was long term planning and was done deliberately not to be a burden on the Government and to enjoy some financial freedom. Although the amount we have accumulated in Super may look large, it is frightening to watch how long it is going to have to last while supporting our planned lifestyle. To be candid, the current ‘noise’ is terrifying us.—

And this noise is of course coming from the government.

We had planned everything a long time ago based on Peter Costello’s initiatives and have taken advantage of every new government adjustment while relying on the promises. We are asking you — maybe that should be pleading — to lend you weight to preventing changes for those of us who are now self-funded in retirement without any possibility of re-entering the workforce.

Let me read from what Angela sent me:

As I am facing retirement myself in the not too distant future I am deeply concerned about the proposal to tax the income of self-funded retirees in the name of addressing structural problems within the budget. The only structural problem that I can identify is the reckless and wasteful spending that has occurred over the last six years. Like many self-funded retirees, I have worked, saved and salary sacrificed in order to build-up enough superannuation to ensure that I could enjoy a reasonably comfortable retirement for as long as possible. With the exception of a small minority of wealthy people most self-funded retirees are not ‘wealthy’ and should not be the subject of an unfair tax impost. Apart from the activities of this government, inflation and rises in the cost of living pose the greatest threat to the financial security of self-funded retirees who are living on a fixed income. Many of them run out of money after a short period of time and qualify for a pension. For example, 10 years ago $500,000 was considered adequate for a couple to retire on. Today, financial advisers are recommending that a couple would require at least $1 million in superannuation in order to retire comfortably. It has been estimated that $1 million in superannuation will deliver an annual income of approximately $55,000-$65,000. This might seem to be a reasonable income today however in ten years time an annual income of $55,000-$65,000 may be insufficient. To give you an example, when I started working 40 years ago, I earned the grand total of $35.00 per week. Today, $35.00 might buy you a weekly zone 1 train ticket, if you are lucky.
I am concerned that self-funded retirees are viewed as a soft target by this government and their hard-earned superannuation savings are considered to be a honey-pot ripe for the picking. Any adverse changes will make superannuation an unattractive investment option for working people with the result that fewer people will be motivated to work and save towards independence in retirement. That defeats the purpose of having a superannuation scheme in the first place.

I say to Angela: I could not have put it any better myself. Finally, let me tell you what Daryl has said:

Why is it that in this country we continue to penalise hard work, sacrifice and the occasional success?
…   …   …
I am in my late 50s and therefore approaching retirement age. I have planned for my retirement, sacrificed and worked hard to save for my retirement so I will not have to rely on government handouts. I am therefore increasingly concerned that the incumbent government … continues to covet superannuation with growing evidence that superannuation and superannuation savings could be targeted as soon as the May budget. This is of immense concern for those who have planned carefully, been thrifty and worked damn hard to build a reasonable fund balance. In some respects, one must question whether it was all worth it, or whether sacrifice, responsible savings and thrift should have given way to a more extravagant lifestyle in years past.

We on this side have given an undertaking not to muck around with superannuation, as this government continues to do. We understand the importance of certainty when people are sacrificing and saving for their retirement. We understand the importance of good and responsible economic management so that the government does not have to put its hand in the pockets of the retirement savings of Australians. It is quite, quite wrong. That is why we will stand up for all Australians who want to work hard, create opportunities for their families and be rewarded for their efforts. They should not be penalised.

This government has an awful lot to learn, and, come 14 September, the voices of those people who have been penalised will be heard.

Draft super laws to be released before parliament sits

The Australian

July 22 2016

David Crowe Political Correspondent

The federal government will fast-track its $6 billion superannuation reforms by releasing draft legislation within weeks to clear the way for talks with industry and the wider community over changes that might calm the storm over the controversial tax hikes.

Malcolm Turnbull and his ministers will outline the first draft of the tax proposals well before parliament resumes on August 30 in a bid to ensure weeks of consultation on the detail of the changes before they have to run the gauntlet of the Coalition partyroom.

The draft will stick to the broad plan set out in the federal budget on May 3 but will leave time for critics of the proposals to push for changes, mapping out a strategy to negotiate amendments in the new Senate as soon as possible.

The Prime Minister is insisting on the need for the overall package while Scott Morrison has warned against sacrificing $550 million in revenue by scrapping the most contentious change, a $500,000 lifetime cap on non-concessional contributions that is meant to take effect from July 2007 and has sparked claims of “retrospective” taxation.

The Australian has learned that super industry experts, including financial planners who are at the “coalface” advising retirees, will be consulted throughout next month in order to ensure the details are canvassed before the Coalition partyroom rules on the reforms.

While there is speculation about exemptions being granted to the $500,000 lifetime cap — such as allowing people with inheritances or divorce settlements to exceed the limit — the advice from Treasury is that these would be difficult to stipulate in black-­letter law because every circumstance would be different.

One option to resolve the issue is to give the Commissioner of Taxation the discretion to let indiv­iduals exceed the cap, but this would be on a case-by-case basis and would be hard to quant­ify in terms of the tax revenue forgone.

The fast-track plan is being aided by the work done by Treas­ury during the election campaign, when the government was in caretaker mode but officials had time to draft legislation to put into effect budget measures announced before parliament was dissolved.

Coalition MPs are hoping to press for changes in the first partyroom meetings after parliament resumes, but the government is also preparing for negotiations with powerbrokers in the Senate including Derryn Hinch, Pauline Hanson and Nick Xenophon.

Mr Hinch wants Mr Turnbull to introduce the super package in the form outlined in the budget so that parliament, rather than the Coalition partyroom, could make any changes. “He can’t amend it now for his backbench and fiddle with it and say ‘That’s not what I was elected for’ — he can’t have it both ways,” he said on Tuesday.

“He’s going to lose the fight, ­especially over the $500,000. He’ll lose the fight but he has to present it as it is and I think he intends to do that.”

Ms Hanson said on Monday night that the government should “leave the superannuation alone”, in a comment that could force the Coalition into dealing with Labor and the Greens to get around the Senate crossbench.

Financial Services Minister Kelly O’Dwyer argued yesterday that some of the benefits of the changes had been overlooked during the election campaign. While the tax increases raise $6bn over four years, about half this amount is used to pay for offsets for workers on low incomes and more flexible rules for women re-entering work. Once these bene­fits are taken out, the package adds $3bn to the budget bottom line.

“We expect to begin consult­ation on exposure draft legislation shortly and, consistent with usual practice, will listen carefully to ­advice on the design of the legislation,” Ms O’Dwyer told the Fin­ancial Services Council’s annual forum in Melbourne yesterday.

The Treasurer said yesterday he expected Labor would support the reforms. “We took that policy to the election and that is the policy we continue to work through now on its implementation,” Mr Morrison said. “There is no retrospective element in our super­annuation policy, therefore I would presume that the Labor Party would wish to support it.”

He was firm that there could be no change to any budget policy that produced an increase in the deficit, with any reduction in savings needing to be offset. “There are no exceptions to those fiscal rules,” the Treasurer said.

He said Australians had put their trust in the Coalition to manage the budget. “We have an oblig­ation to the Australian people to ensure that we hold to that task, and we hold firmly to that task.”

Opposition superannuation spokesman Jim Chalmers said the government had made a mess of the reforms but it could talk to Labor about “workable and fair” changes — once a review had been done of the budget plan.

“We said during the campaign that we would support changes which are workable and fair and consider any alternative measures which yield similar savings,” Mr Chalmers told The Australian.

Greens Treasury spokesman Adam Bandt also warned that there could be no deal until Mr Turnbull and Mr Morrison resolved the divisions within the Coal­ition and calls for changes from the Institute of Public Affairs.

LNP warns Turnbull over super “madness”

The Australian

26 July 2016

Michael McKenna

Malcolm Turnbull’s superannuation changes have been branded as “madness’’ by the Liberal National Party’s small business policy committee.

In a motion to be debated at the LNP’s state convention next month, the committee said the Turnbull government had “broken faith’’ with the Australian people in the changes announced in the May budget.

Aspects of the superannuation overhaul — particularly plans to implement a $500,000 cap on non-concessional contributions back to 2007 — has caused division within the Coalition and are openly opposed by some incoming Senate crossbenchers.

While the Prime Minister has indicated the changes could be subject to “fine-tuning” , he last week insisted the $500,000 cap was “absolutely right’’ .

Mr Turnbull is expected to outline the first draft of the proposals before federal parliament resumes on August 30 — just days after the LNP state convention.

The policy committee, headed by Queensland businessman Paul Smith, has called on the government to change the cap and that any changes to the treatment of superannuation should not be retrospective.

The committee accused the government, which hopes to raise $550 million from the $500,000 cap, of breaking assurances not to target superannuation.

“On budget night 2016, the government broke faith with the Australian people and undermined their trust in the superannuation system,’’ the motion reads.

“Although there were positive changes, several measures broke repeated assurances that there would be no additional taxes on superannuation and that ‘the government is not coming after your superannuation’ .’’

The move comes just days after a push by some in the LNP to consider setting-up a separate partyroom in Canberra.

The LNP state executive narrowly defeated a motion to formally assess the proposal amid anger over the make-up of the Turnbull frontbench.

LNP president Gary Spence last night said he was unaware of the small business committee’s superannuation motion, which still has to be vetted before it is put on the agenda of the three-day state convention from August 26.

The committee was scathing of the proposed “$500,000 contribution cap’’ and the government backdating the measures to 2007.

“Australians have planned for their retirement in good faith and have foregone alternative investment or lifestyle opportunities to save enough for their retirement so they would not be a burden on the taxpayers,’’ the motion reads.

“They now find that there is no traditional ‘grandfathering’ of these changes.

“Instead they are told that they are not retrospective. Whilst this is correct in a technical sense, they are retrospective in effect and to say otherwise is perceived as arrogant and out of touch.’’

The motion calls for the government to further consult on superannuation changes, to recalculate any proposed cap and not backdate the changes.

“The total funds allowed in superannuation accounts should be capped by actuarial formula related to the value of the government benefits to be forgone,’’ the motion said.

Outspoken Queensland MP George Christensen last week warned he would cross the floor if the “bad’’ superannuation policy wasn’t changed, calling the changes “Labor-style policies’ ’ that hurt people who had worked hard all their lives.

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