Australian Financial Review
9 August 2016
Scott Morrison refuses to concede that the decision to backdate the lifetime limit on non-concessional superannuation contributions to 2007 is anathema to Liberal philosophy.
Scott Morrison doesn’t do reverse easily, if ever. The Treasurer’s approach to politics may not be the same as Paul Keating’s famous description of his own style – “downhill, one ski, no poles”. But when Morrison’s focused on his target, he doesn’t really contemplate changing course – or even creating an effective diversion.
Right now that target is achieving even the most modest claim to maintaining fiscal discipline any way he can, but most certainly including curbing superannuation tax concessions.
So despite the extreme level of agitation in his own party about his proposed superannuation changes – including rather pointed advice on super from other predecessors like Peter Costello – Morrison’s not sounding as if he has any intention of making substantive concessions to even the most passionate of criticisms.
Instead, he is holding firm to this view despite an increasingly heavy personal political cost to his own standing within the party and the very real potential that his judgment may be overturned by colleagues.
It’s true the draft legislation is now likely to grant certain exemptions from the proposed $500,000 lifetime cap on non-concessional super contributions in case of special events like compensation payouts or divorce settlements.
Concept of fairness
But Morrison is still not conceding the key and savage complaint of the party membership and many of his own colleagues, including some very senior ones.
This is that the decision to backdate the lifetime limit on non-concessional superannuation contributions to 2007 is anathema to Liberal philosophy or to any concept of fairness because it is retrospective.
Nor is he in any way inclined to lift the proposed new limit of $1.6 million as the maximum amount that can be allowed to remain in the untaxed pension phase of super. In his view, that limit doesn’t mean that people aren’t still receiving a tax benefit for savings above that amount. They are just no longer getting it tax free.
He is also convinced the budget cannot afford to alter the large announced reductions in the annual limits of super contributions taxed at a 15 per cent concessional rate.
These are now supposed to fall to a maximum of $25,000 a year from the old rates of $30,000 a year and $35,000 for those over 50.
Instead, he keeps insisting that he cannot consistently argue the need for cuts to family tax benefit supplements while simultaneously rejecting any diminution of already generous tax benefits to those who tend to be much wealthier.
He is deaf to the argument that these are the same people who will be entirely or largely self funding their own retirement rather than relying on access to the aged pension.
The Department of Treasury, which has always greatly disliked super concessions, has never accepted this argument either. That’s despite the obvious difficulties in making realistic estimates of how much such reductions in super concessions will eventually add to the taxpayer cost of funding the pension.
Now Treasury finally has a Treasurer, and a Liberal one at that, who seems to agree with this logic.
Nor does Morrison accept the position that in an era of abnormally low returns indefinitely, an amount of $1 million or even $1.6 million no longer generates much annual income from the low-risk investments favoured in retirement.
Instead, he maintains he’s telling people who earn a lot less than those able to put $500,000 after tax into super that their family tax supplement has to go in order to pay for child care changes.
“How can I look them in the eye and at the same time say ‘Oh no, I am going to protect this interest over here who are sitting on half a million bucks that they want to load in and stuff in so they can pay less tax on it,” he declared on radio this week.
That’s hardly going to win him votes among existing or aspiring self-funded retirees or the more traditional Liberal voters.
Ironically his biggest supporters of superannuation changes are more to be found within the Labor Party and the industry super funds, especially as he is using half of the supposed $6 billion in super savings over four years to bolster the super accounts of low-income earners.
His own colleagues are far less persuaded about the whole thing but they are most particularly aggrieved on the issue of retrospectivity and the 2007 start date.
Locking in benefits
They were as astounded as the industry was when Morrison unveiled his budget on May 3 and want this measure, at the very least, to only start from that date. Many of them know to their campaign fundraising cost that it harmed their ability to raise money or other support from their usually faithful “base” of strong Coalition backers.
Yet for Morrison, the typical “grandfathering” adopted to assuage those most affected only translates into locking in benefits for those who have already enjoyed advantages.
Given such a depth of feeling and the narrow margin of Coalition numbers, this strict view is going to prove another key test of Morrison’s ability to hold the line. Not to mention his own prospects in the party.
Morrison’s previous popularity with the conservative wing of the Liberals has never really recovered from his role in the demise of Tony Abbott last year. That overwhelmed his earlier hero status as the Immigration minister who finally stopped the boats as promised. As Social Services Minister, he did negotiate through the Senate some significant changes to pension eligibility without attracting much obvious public ire.
As Treasurer, he’s regarded as a big improvement on Joe Hockey. But the doubts remain and the pressure on him can only intensify in an era with no spare money and no spare numbers. Especially on super.