Category: Newspaper/Blog Articles/Hansard

SMSFs lose confidence in the share market

Australian Financial  Review

10 August 2016

Sally Patten

Sharemarket volatility has hit self-managed superannuation fund trustees’ confidence in their ability to select investments.

Self-managed super schemes anticipate they will invest less in blue chip shares and high yielding shares over the next 12 months, but expect to tip more of their savings into professionally managed funds, a survey by research company Investment Trends and fund manager Vanguard found.

The change in investment intentions is linked to self-managed fund members’ pessimistic outlook for equity returns over the next year. The study found that trustees had reduced their return expectations for the local market to 2.8 per cent in March from 6.6 per cent a year ago.

“It is becoming harder for trustees to select investments because of the volatility. They feel they can’t do it as well because of the uncertainty. They feel less confident about doing it themselves,” said Recep III Peker, head of research for wealth management at Investment Trends.

The increased self-doubt is perhaps not a surprise, given that 28 per cent of self-managed funds said that more than half of their portfolios were invested in financial shares, which have performed poorly thanks to rising capital requirements and sluggish economic growth.

In the biggest change in investment intentions since the global financial crisis, 55 per cent of do-it-yourself scheme trustees said they intended to invest in blue chips over the next 12 months, down from 65 per cent who had that intention a year ago. The proportion of fund members who expected to invest in high-yield shares and exchanged traded funds (ETFs) fell to 24 per cent and 18 per cent respectively, down from 32 per cent and 20 per cent.
More bearish

On the other hand, the proportion of funds expecting to invest more in managed funds, including those covering the domestic and offshore markets, rose to 17 per cent from about 14 per cent last time.

“Investors are a bit more bearish than they used to be but they are still thinking about the long term. They want to rely on professionals more. Anyone who gives advice to self-managed funds on the investment side has got a great opportunity right now to benefit from this market volatility,” said Mr Peker.

Mr Peker said it was the first time since 2008-09 that demand for ETFs had fallen, although he said the market remained healthy. Some 90,000 self-managed funds hold ETFs, up from 54,000 in 2014.

Investor nerves about the market were also apparent from the change in their asset allocations over the past year. The weighting of direct shares in self-managed portfolios slipped to 38 per cent in 2016, the lowest level for six years. Cash holdings sat at 25 per cent of the average portfolio, the highest level since 2013.

Self-managed fund trustees, according to the survey, were most worried about a slowdown in China and another global financial crisis. The two issues where concerns rose compared to a year ago were a China slowdown and a rise in Australian debt levels. Investment Trends and Vanguard found that the proportion of self-managed fund members who consider themselves to be ‘self directed’ fell to 42 per cent, down from 54 per cent last time. The proportion of trustees who use an adviser to validate their ideas increased to 48 per cent from 35 per cent.

Treasurer Scott Morrison signals softer superannuation stance

The Age

8  August 2016

Peter Martin

Scott Morrison’s super warning

It would cost half-a-billion dollars to abandon superannuation changes announced in the budget – and the ratings agencies are unlikely to react well, warns Scott Morrison. Courtesy ABC News 24.

“One of them, if you get a pay-out as a result of an accident or something like that, then that is exempted from the $500,000 cap,” he said. “If you have entered into a contract before budget night to settle on a property asset out of your self-managed super fund and you are using after-tax contributions to settle that contract – well, that won’t be included.”

Other measures would be in the exposure draft of the legislation that would be released shortly.
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Labor says it will oppose the $500,000 lifetime cap if it is found to be retrospective. But its superannuation spokesman, Jim Chalmers, says he will consider supporting it if an independent review finds in its favour.

Mr Morrison said he would be most unlikely to lift the $500,000 limit.

“I don’t know too many people out there who are sitting there with a bag of $500,000, which they want to put in their superannuation fund,” he said. “They are on higher incomes, have higher balances, have already benefited significantly from the generous tax contribution and other concessions, and the argument they are making is: ‘I want to put more in so I don’t have to pay as much tax as someone else is on those earnings’.

“I am saying we should be getting rid of the Family Tax Benefit supplement payments every July, and that is to people who earn a lot less than those who are able to put half a million dollars after tax. 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 is sitting on half a million bucks’.”
Treasurer Scott Morrison says he is prepared to write in exemptions in the superannuation proposals.

Mr Morrison spoke with Senate powerbroker Nick Xenophon and his team in in Adelaide last week and would be meeting with new senators Pauline Hanson and Derryn Hinch. He would impress on them that every savings measure the new Senate rejected would make it harder to retain Australia’s AAA credit rating and get the budget back in to surplus.

“The facts of the Senate are that if Labor and the Greens are blocking government legislation then it only takes the Xenophon Party or the One Nation Party to side with Labor and the Greens and it is blocked,” he said. “Senators will be in a position where they really do have a balance of power. They won’t have the option to say that this is their view and move on.”

IOOF boss Kelaher says super tinkering at an end

The Australian

10 August 2016

Michael Roddan Reporter Melbourne @michaelroddan

Chris Kelaher, managing director of financial services provider IOOF, believes there will be no further government tinkering to the $2 trillion superannuation system after the Turnbull government’s proposed reforms riled sections of the public.Shares in IOOF, which man­ages about $150 billion of client money and super funds, yesterday fell as much as 8.4 per cent in intraday trade despite the company booking a 42 per cent increase in net profit to $196.8 million for the year to the end of June. The bumper result was boosted by the $72m sale of IOOF’s Perennial business, passed off to Henderson Group last year. Stripping out one-off items, underlying profit was steady at $173.4m for the financial year, with revenue flat at $907.9m.Investors were also apparently unimpressed with a deterioration in the profit margin of the IOOF platform business, which fell three basis points to 0.2 per cent over the past six months.The group said in May it expected the gross funds margin to be “materially unchanged”.
“Decline in the platform margin will unlikely be well received, especially in the context of the earnings update in May,” said Credit Suisse analyst Andrew Adams.Despite IOOF emphasising ­future savings in financial 2018, Mr Adams said “investors may have been hoping for something ­sooner”.

While IOOF had positive funds flows of $1.8bn over the year supported by compulsory super contributions, including $1.3bn through its financial advice channels, fund flows to its platforms were somewhat hamstrung by market ructions such as Brexit and a “soggy start to the year”, Mr ­Kelaher said.

“This is a pleasing result in the face of turbulent market conditions,” he said.

Without the contribution from the $670m Shadforth acquisition, which the company bought in 2014, IOOF’s earnings per share would have been about 16 per cent lower year-on-year, according to CLSA analyst Jan van der Schalk.

The takeover delivered $25m in cost savings over the year.

Mr Kelaher said the prospect of further changes to the super system now appeared “negligible” after the government stoked outrage among some wealthy superannuants with the proposals outlined in the budget ahead of the federal election. “There’s not a lot of mileage in fiddling with superannuation,” he told The Australian. “People don’t like it being fiddled with and it tends to be retrospective, so people get agitated — even when there’s no impact on them.

“Our superannuation offering in Australia is one of the best in the world. That shouldn’t give you a natural inclination to go tinkering with the area — you want to leave it alone.”

Mr Kelaher has led IOOF through a series of takeovers including buying Bridges Financial Services, Shadforth, Lonsdale and a majority stake in Ord Minnett, and he said mergers and acquisitions were still “paramount” to the group’s growth strategy.

The group was recently outbid for the $1bn StatePlus financial planning business, but Mr Kelaher said it was regularly approached for deals. “If these opportunities come forward, we are in a position to deal with them,” he said, noting IOOF’s net debt stood at $20m after the Perennial selldown.

Consolidation and divestment of non-core businesses form a large part of the group’s strategy. During the year, IOOF merged $7.1bn of client funds and 40,000 client accounts, in one of the country’s largest platform consolidations, as part of an efficiency bid. Operating costs across the business fell 2 per cent over the year.

The low interest rate environment was also providing a tailwind for the company. “People, particularly retirees, are struggling to survive (amid low rates) so the climate for advice has never been greater, and the advice is often technical advice. It’s positive for the company,” Mr Kelaher said.

IOOF will pay a 26c final dividend, bringing the year’s total payout to 54.5c, ahead of the previous year’s 53c distribution and a company record.


Scott Morrison tells wealthy to accept superannuation changes

Treasurer Scott Morrison says ‘those sorts of concessions can no longer be afforded’.

The Australian

David Crowe Political Correspondent Canberra @CroweDM


Scott Morrison is vowing to scale back the “extremely generous” tax breaks on superannuation, telling wealthier Australians to accept the changes while other people are also dealing with cuts that are needed to balance the budget.

The Treasurer hardened his message on the need to scale back the tax concessions despite a Liberal Party backlash against the budget reforms, which raise $6 billion in tax revenue, and use half of that amount to fund benefits for workers on low incomes while the rest helps to narrow the deficit.

“The tax arrangements for superannuation have been extremely generous and they were made extremely generous at a time when there was $20bn of surplus in the budget and $40bn in the bank,” Mr Morrison said on Sydney radio 2GB yesterday.

“Now, the simple truth is going forward with the way things are globally and where the budget is at, those sorts of concessions can no longer be afforded. And if I’m going to make changes, as I have as social services minister, to pensions, if I’m going to make changes to family tax benefits, if I’m going to do those sorts of things, then frankly we need to ensure that these savings and these other revenue measures are felt evenly across the population.”

Mr Morrison persuaded parliament to accept tougher rules on the pension assets test when he was social services minister, scaling back the part-pension for thousands of older Australians in the name of budget repair.

As Treasurer he is proposing savings on super tax concessions that impact on workers or retirees who are generally wealthier than those who had to accept the pension changes.

The budget cuts to family tax benefits are intended to raise about $3bn — about the same as the super reforms — and will halt annual supplements for some families on low incomes, leading Mr Morrison to argue that he must spread the burden on high-income families as well.

Liberal MPs are preparing to dispute the need for super tax hikes when parliament resumes at the end of this month, aiming for a partyroom meeting on August 30 to press for changes that could soften the impact.

With Labor already banking the super savings in its policy costings and the Greens arguing for cuts to the concessions, the package appears highly likely to be legislated, provided it can clear the Coalition partyroom, with limited scope for crossbenchers to sway the outcome.

How the Senate can fix the superannuation mess

The government needs help on superannuation. It is now clear it rushed into badly thought out superannuation changes on advice from Treasury. (AAP Image/Mick Tsikas)

The Australian


Robert Gottliebsen Business columnist Melbourne @BGottliebsen

The government needs help on superannuation. It is now clear it rushed into badly thought out superannuation changes on advice from Treasury.

Treasury for years has deliberately issued false statements about the cost of superannuation to the Australian nation and, unfortunately, has no credibility in giving advice on this subject. (Treasury’s hoax is tormenting the super debate, March 9 2015)

A more experienced Treasurer would have known this but Scott Morrison got caught. It’s now up to the Senate to get both Morrison and the country out of the mess that has been created. At this stage, I am not going to tell the Senate what to do in detail but let’s set up a few guidelines.

  • The biggest single superannuation problem is the old public service defined benefit superannuation scheme where our real deficit is between $400 billion to $600bn and it is growing by $6bn a year.

The public service figures understate this because they use unrealistic investment projections. There is $120bn set aside in the future fund to cover this, but it’s still way too small. (The superannuation review must include the public service, November 16).

In fairness, Scott Morrison did make some proposed changes to the public service scheme and I praised him for this after the budget (The Treasurer’s welcome attack on public service pension rorts, May 17)

Whatever limits are placed on private sector superannuation should also be placed on the public service scheme following an actuarial evaluation that counts current investment returns and recently introduced rorts.

This will stop the deficit growing by $6bn a year. That’s not a bad cost saving start.

  • *Both the ALP and the Coalition are not far apart in the way funds in pension mode should be taxed. The ALP has a simple straight forward scheme whereby when income of a fund in pension mode reaches $75,000 it should be taxed at 15 per cent. The Coalition has a complex scheme whereby the first $1.6 million in the fund is set aside for tax free treatment and its performance is rated separately to the whole fund. The idea is complex and was designed to suit a few big superannuation funds with poor computer systems. We are probably stuck with the complex system but life would be so much easier if we used the ALP system. Both proposals raise about the same amount of money.
  • *The government proposal plans to introduce retrospective transition retirement cuts. They should be scrapped and the new measures should apply from budget night. Treasury over-estimated the savings in this area.
  • *The object of superannuation should be to reduce the burden on the government pension. So, let’s start with some figures from people who know what they are talking about. The Self Managed Superannuation Funds Association obtained top actuarial advice and estimate that if you are a couple aged 65 and in retirement or about to go retirement and seek a $58,922 pension per annum then you need approximately $702,000 in savings. Some 30 per cent of self-managed funds will be unable to afford that $58,922 level. Now, if a couple aspires to a $100,000 pension per annum then the amount required for a couple aged 65 is $1,886,000. Obviously there are a lot of variations but given the government has set a $1.6m tax free sum it should be possible to reach it. In simple terms, for the average middle class person reaching $1.6 million is very difficult. So, what the government is doing is forcing people to arrange their finances to maximise their pension entitlement.
  • The $500,000 maximum injection of tax paid funds is too low. If the Treasurer plans to allow people with windfall gains to put money in, then some adjustment must be made for the rest of the community. The extra cost can be covered via ending public service super rorts of the old scheme.
  • It needs to be harder to take lump sums out because the proposed system does not allow people to save a worthwhile amount and that will encourage people to take their money out of superannuation and live on the aged pension. The current proposals might save a few dollars in the next few years but will become a cost as the demand for government pension grows. We need some really good thinking and treasury is not a good place to go for guidance on this subject.

Malcolm Turnbull’s ‘wafer thin’ majority a threat to Australian economy: Peter Costello

Herald Sun

8 August 2016

Annika Smethurst – National Politics Reporter

AUSTRALIA’S triple-A credit rating will be downgraded if the Turnbull Government can’t manage its “wafer thin” majority and pass budget savings measures, former treasurer Peter Costello says.

The stern warning comes as former cabinet minister Eric Abetz hit out at Prime Minister Malcolm Turnbull over the Coalition’s superannuation policy and his failure to promote conservatives, such as former PM Tony Abbott, to the frontbench.

Mr Abbott said while he won’t return as party leader, he wants to influence the future direction of the Liberal Party over the next three years to try to “crystallise and clarify where centre-right politics in this country goes”.

Speaking to the ABC TV’s Four Corners program, Senator Abetz issued his own warning to senior Government MPs saying: “it will only take one person or two in the House of Representatives to cross the floor to defeat Government legislation.”

“If we keep going full steam ahead and pretend that nothing happened on the Second of July … we will be going to an electoral disaster in 2019.”

The conservative Senator is leading a push within the Coalition to change the Government’s superannuation policy which targets generous tax breaks.

With one member of the Coalition — conservative Queensland MP George Christensen — already threatening to cross the floor if policy isn’t changed, former treasurer Peter Costello said Mr Turnbull will be “beholden” to his backbench.

Mr Costello — who was treasurer under former prime minister John Howard — said it will be an “alluring prospect” for Coalition MPs to sit on the crossbench.

“This is the risk on any particular issue at any particular time, not that these people will cross the floor, but they’ll threaten to go independent.”

He said the Government’s one-seat majority has rattled ratings agencies who now believe the chances for budget repair have declined.

“Will we make any progress on our budget deficit? Will we be able to reduce debt? If we’re not able to do that, if the political situation stops us from doing that, that’s the time we’ll get a downgrade,” the former treasurer warned.

During the one hour program which examined the challenges facing the Coalition, former PM Tony Abbott also called for reform within the NSW Liberal Party saying lobbyists are acting as powerbrokers and creating “a potential for corruption”.

No saving grace in this super stuff-up

The Australian

9 August 2016

Judith Sloan Contributing Economics Editor


Government’s superannuation package is a mess.

The superannuation package Scott Morrison announced in this year’s budget is turning into a complete shemozzle.

The Liberal Party’s membership is in revolt — that is, among those members who haven’t already resigned.

There is a widespread sense of betrayal. There are also some specific criticisms about the package: it’s over-engineered , unworkable, unfair and the figures are wrong.

The real reason Malcolm Turnbull knocked back Kevin Rudd had nothing to do with Rudd’s poor interpersonal skills but rather Turnbull’s realisation that his party base would go into complete meltdown had he supported the former prime minister’s candidacy for the position of UN secretary-general .

Turnbull and Morrison probably now realise they have been played for mugs by the bureaucrats in Treasury and Prime Minister and Cabinet who have long held the ambition to unwind what they see as the unjustifiable superannuation tax concessions.

You have only to check out the highly erroneous but enormous values put on these concessions, as presented in the annual tax expenditure statement released by Treasury, to pick up the agenda that the activist bureaucrats have been running.

We also know that in 2014 Treasury advised Joe Hockey as treasurer to ditch the tax-free status of superannuation pension income and to impose much higher taxation on contributions using marginal tax rates minus a rebate, even though this latter piece of advice was essentially unworkable. Hockey had the sense to reject the advice.

We also should not overlook the fact, to a man and a woman, the senior officials advising the government on superannuation matters will receive unimaginably generous defined benefit superannuation payments on retirement (more than half of their final salary ) that are barely affected by the budget measures. Note the salaries of these senior public servants have been jacked up significantly in recent years and that their personal financial contributions to superannuation while working are trivial.

No need to save up, pay tax and make non-concessional contributions for this lot.

And if any of them die before their spouse or partner, then a two-thirds pension is paid to the surviving spouse or partner until that person dies.

For them, paying a few thousand dollars more tax each year on their (indexed) retirement incomes is just chicken feed compared with the impact of the superannuation measures on those who have accumulated superannuation balances in good faith under the rules that applied at the time.

That stuff about “commensurate measures” the Treasurer was going on about at budget time was just a ruse.

Here’s an idea. Why don’t these senior officials agree to forgo the benefits of the defined benefit scheme and instead be given an account of, say, $1.6 million to be used to generate a retirement pension? Any residual amount would be returned to the commonwealth when they die. After all, the Treasurer thinks the income generated from a fund of this size is perfectly adequate.

The core problem now for Turnbull and Morrison (and we can throw in Finance Minister Mathias Cormann and Revenue and Financial Services Minister Kelly O’Dwyer ) is how they can construct a more palatable superannuation package without completely undermining their own leadership.

But we shouldn’t think a nip here and tuck there will cut it. There has to be a fundamental rethinking of some of the measures, including ditching some of them altogether. The backdating of the lifetime cap on non-concessional contributions has to go, for instance .

But the real issue is this: as long as there is a cap on the final taxfree superannuation balance, there is really no need for many of the other measures. After all, people have paid the full whack of tax on non-concessional contributions , so why would we want to restrict them?

And talking of the cap, $1.6m is the wrong figure given the low rates of return retirees can expect and the longevity risk that they bear. Had the old reasonable benefit limit remained in place, it presently would be $2.5m. So this is the sort of figure the government should be considering.

But there is an even more fundamental problem with the cackhanded budget measures.

With all the restrictions in place, including the unrealistic figure of $25,000 on annual concessional contributions, most people won’t be able to get to the maximum balance that the government regards as being worthy of tax-free status.

By and large, people are able to save seriously for their retirement only when their mortgage is paid off or is relatively low and the kids are off their hands. But the government’s one-size-fits-all measures simply fail to acknowledge this lifetime pattern.

The real worry for our fiscal future — Turnbull and Morrison will be long gone — is that the combination of the restrictions being contemplated will mean that many people just give up on the dream of self-providing for their retirement and instead plan to rely on the age pension, full or part.

If there is any spare money in the meantime you may as well invest in buying a better home or upgrading your present one — Morrison doesn’t seem to object to this form of estate planning. It’s only superannuation that is an evil form of estate planning, even though non-dependent beneficiaries pay 15 per cent tax on inherited superannuation.

Another big hint for the government that it has seriously messed up is the endorsement of the measures by journalists and commentators working for leftwing media outlets, including the ABC.

Any sane Liberal treasurer would be aghast at the degree of backslapping from people who wouldn’t vote for the Coalition if their lives depended on it.

And what a bad look it would be if the Turnbull government were to rely on Labor or, worse, the Greens to secure the passage of the superannuation measures through the Senate.

The Labor parliamentary leadership group just couldn’t believe its luck when Morrison announced the superannuation measures on that fateful night in May.

Opposition Treasury spokesman Chris Bowen never thought he could go that far and get away with it, politically speaking.

Now Labor will seek to wave through most of the measures in the knowledge that it will be Turnbull and Morrison who will be politically damaged. And in the meantime the champagne corks will be popping in the boardrooms of the union-controlled industry super funds.

Does it get any better than this for Labor? Does it get any worse for the Liberal Party?

Turnbull and Morrison probably now realise they have been played for mugs.

Don’t bite the hand that feeds

The Australian

6 August 2016

Grace Collier Columnist Melbourne @MsGraceCollier


The government will pay at the next election if its treachery continues


“I fear we will get slaughtered next election,” said the text, and it was hard to disagree.


The parliamentary term is just beginning but already Bill Shorten seems to be running the country by proxy, and the Liberals seem to be running on empty.


Who knows what the Turnbull government stands for or where it is taking us? More important, how many of its traditional supporters even care? The base has been slapped in the face one too many times.


At the election last month, Liberal voters fired a warning shot by voting against the party in the upper house. Without real change, next time the lower house votes will go elsewhere too. The government appears to be adopting Labor’s agenda and making a cowardly attack on its supporters in the process.


Realistically, what are the chances of the next three years going well? As for the government’s economic mantra, the best example of jobs and growth can be seen within the expanded cabinet.


Senior Liberals concede that at the next election, they will need to pay people to hand out how to vote cards. Where will the money come from? No one knows. Once the superannuation policy was announced, donations ceased; Malcolm Turnbull had to bail out his own election campaign.


All this, and branches around the country are now in open revolt. Tony Abbott’s foolish deficit levy was an insult begrudgingly endured, but the superannuation policy is madness and many will fight it to the death.


Take the federal electorate of Higgins in Victoria. According to several sources within the electorate, donations towards the sitting member, Kelly O’Dwyer , are drying up. According to insiders, there are two plans being floated, both designed to remove O’Dwyer because of her advocacy for the policy.


One suggestion is to put up an alternative Liberal candidate to challenge at the next preselection, due in 18 months. The other suggestion is to leave O’Dwyer in place and put up an independent to cruel the party’s chances of retaining the seat.


O’Dwyer is said to be panicking, which would be understandable. This isn’t a case of a few disgruntled nuff-nuffs having a rhetorical whinge. These people are substantial, with significant resources and serious intentions. Anyone they back is going to go a long way. O’Dwyer’s career is evidence of that. In the past, some have been disappointed with the representation in Higgins, claiming it has been inadequate. Now there is fury at O’Dwyer’s meek acceptance of the policy. Supporters feel O’Dwyer is not sticking up for the people who put her into the privileged position she enjoys today.


Former Liberal benefactor John McMurrick, who has resigned from the party recently, helped O’Dwyer for years, from the time Peter Costello stood down. McMurrick says he is “devastated at the way O’Dwyer has handled this matter, considering I have given her 200 per cent support” .


Fern Blackman, who worked for O’Dwyer as a booth captain in 2013, as well as in her campaign office for three months, resigned from the party. She says, “It’s just bizarre that the only people the government are targeting are their base. They are treating their friends very shabbily.”


O’Dwyer’s office says her campaign was well resourced and she won with a two-partypreferred swing of less than 2 per cent. Sources in her corner say the complaining should be disregarded because it is merely the “cronies” of Victorian Liberal Party president Michael Kroger agitating for a candidate Kroger may prefer and Costello may not.


Those interviewed deny this. “Do you think we are so stupid that we are going to do all this because of some problem between Kroger and Costello?” said one.


A group of MPs despise Kroger and ride on the coat-tails of their association with Costello, whom they greatly admire. However, skill doesn’t transfer by osmosis; none of these operatives comes close to matching Costello’s talent or performance. Can you imagine Costello waxing lyrical about the need to lower taxes while putting them up, advocating a policy because it hurts only the wealthiest 4 per cent or taking people’s retirement savings on the grounds the government needs the money?


When people are facing a reduced standard of living in old age because a government has broken its promises and is acting unfairly and retrospectively to harm them financially, this generates extreme anger. Petty participation in a political grudge between two men is of no interest to busy people.


For example, and for the purposes of disclosure, the government’s plans will disadvantage me, so I am motivated towards criticism; I am not the least bit interested that two men with whom I am barely acquainted don’t like each other. Readers can rest assured that in the interests of pushing for policy change, both the Costello and Kroger “factions” will be lambasted equally.


At this point, the government is giving every indication the policy will not be amended substantially. Before the election, it begged people to back off their criticism with promises of change later. Now, it claims it has a mandate to proceed with the policy unaltered. Treachery of this kind will not be forgotten.

Coalition lives or dies by Morrison’s performance

The Australian

6 August 2016

Terry McCrann Business Columnist Melbourne

Scott Morrison is the last best and indeed only hope of the Turnbull government. It lives — brutally, maybe even just survives — or dies, in chaos and ignominy, on the Treasurer’s success or failure.

I do not mean or even just quixotically hope that Morrison can somehow succeed in waving some magical fiscal wand, slashing taxes and the deficit simultaneously and winning seamless Senate approvals.

Success in this contemporary economic and political context will be a far more modest affair. But any such success, limited as it might realistically be, will turn on Morrison aggressively projecting himself in this government and more specifically in this cabinet, as a 21st century version of the Paul Keating of the second half of the Hawke government in the 1980s.

Or to be more precise, as Keating subsequently projected himself and his role as being — perhaps in something of a posthoc rationalisation of his relentless stalking and ultimate toppling of someone who was easily Labor’s most successful prime minister and indeed the “bronze medal holder” in the pantheon of PMs behind the incomparable Robert Menzies and John Howard.

In essence Keating claimed that he became the PM-in-effect for the last four years of the Hawke government, providing both the policy grunt and political leadership in the PM’s “absence” . It is an interpretation that is a matter of some considerable contention.

Whatever the truth of that, Morrison has to become that Keating, of fact or fiction: because someone has to, given both the aimlessness and ineptitude of Malcolm Turnbull and the fact that there is quite simply no one else.

The PM’s party deputy, Julie Bishop? Pu-leeze . She’s too busy “projecting” herself into international forums, when she’s not attempting to do the same for a certain former PM.

It all comes down to Morrison and the absolute fulcrum is his superannuation proposals.

Now two weeks ago, I argued they had become the fundamental defining issue of his treasurership. Either he fixed the mess he unveiled on budget night or he announced his total unfitness to be treasurer.

That stands. But I would now take it to a broader and more defining level: fixing the mess — frankly, walking back from what he proposed — is the sine qua non of Morrison asserting himself into that more fundamental role of giving this government both policy cohesion and direction and political viability in the absence of the PM.

Turnbull’s , for want of a better word, performance in the 10 months leading up to the election was quite simply abysmal. As I wrote in April, he had proved himself to be a dud. In the month since the election, his performance has been depressingly worse. Not only has he “done” nothing in policy terms, not even just some articulation of where the Turnbull government would like to head; he’s given not the slightest indication that he’s spent the time working out that policy direction and a political strategy built around, but not exclusively, dealing with the Senate reality.

That in itself is just a continuation of his pre-election “approach” : as I’ve previously noted, in becoming PM, he was an example of “the dog who caught the car” — not having the faintest idea of what to do with it.

Pre-election he refused to engage in any meaningful, far less effective, way with the disparate individuals who comprised the crossbench, culminating in his “inspired” double-dissolution and Senate voting change tantrum.

Does anyone seriously believe that the “Sun King PM” of Bill Leak’s cartoons will deign to stoop to smooge with Pauline Hanson, who with her four senators is now the absolute fulcrum of getting any non-Labor /Greens legislation through the Senate?

The contemporary concern operates on two levels. The first is the drift and aimlessness; the second is not just the reality of letting the opposition fill the policy and political space left vacant, but even a willingness to do so. To let Labor and the Greens govern in effect from opposition.

In no small part this is because Turnbull finds it hard to disagree with what appeals to Labor and the Greens; further — and dangerously — he is likely to see, in various accommodations with either Labor or the Greens, the path through the crossbench complications.

This gives even greater heft to my point that the government must walk back from the worst idiocies of its super proposals; it would be all too easy to claim “success” in passing them essentially unchanged via a “Grand Coalition” with Labor.

As I argued two weeks ago, the great danger was a replay of the 2014 budget, when Labor was only too willing to pass tax increases — specifically, the high-income levy — but none or few of the spending cuts.

It’s bad enough that we are shaping up for an extended repeat. But worse, this process will start with “bad” tax increases, in the form of the super proposals.

They are mendable. Broadly, the two ceilings — the $1.6 million “retirement” pot and the $500,000 for after-tax contributions — need to be increased.

Morrison has first to accept they need major refinement. He also has to drop his hairychested silliness that any changes must be fiscally neutral. We need the “right” policy, not one that just “adds up” .

And “adds up” to absolutely no real fiscal point; for the changes will make four-fifths of very little real difference to the budget bottom line in the short term. But they would seriously damage it in the long term by encouraging even more investment in both negatively geared property and the family home, and by encouraging otherwise self-funded retirees to “retire” instead to the old-age pension.

For both the survival of the Turnbull government and for some hope of good policy that can also be politically effective, it is a case of Morrison or the bush.

He can prove he is fit to be both treasurer and PM, or we can start counting the days to Turnbull’s toppling.

Does anyone believe the PM will stoop to smooge with Pauline Hanson?

SMSF’s tax arrangements in retirement savings review

Australian Financial Review

Aug 3 2016 at 6:27 PM Updated Aug 3 2016 at 6:27 PM

by Joanna Mather

Tax arrangements for the million Australians who have self-managed superannuation funds will form part of a sweeping review of the $2 trillion retirement savings system.

In an attempt to guarantee value for money and prevent gouging, the government has asked the Productivity Commission to come up with ways to assess the efficiency and competitiveness of the super system.

In a report released this week, the commission said there was a belief in some quarters that operational efficiency of SMSFs should not form part of the exercise because they are so different to retail, industry and corporate funds.

But the commission decided SMSFs would be included wherever possible. In fact, consideration would be given to whether SMSFs face any unique barriers to accessing particular investment markets due to, for example, a lack of scale.

“Similarly, the commission will also look at how taxation is managed in SMSFs compared with institutional funds, and what implications this has for member balances,” a draft report said.

There were more than 550,000 SMSFs with about $590 billion in assets as at June 2015.

The commission noted that investment performance by SMSFs tended to be below other funds and they are also more expensive to run.

It said Australian Taxation Office figures suggested the estimated average operating expense ratio, as measured by operating expenses as a proportion of assets, for SMSFs was 1.06 per cent.

“ATO data indicate that smaller SMSFs have higher average operating expense ratios than larger ones.

“For example, over the 2010-14 period, the average operating expense ratio was in the range of four to 12 per cent for SMSFs with less than $100,000 compared with less than 1 per cent for SMSFs with over $1 million.”

Past studies have examined the impact of SMSF scale on their cost competitiveness, the commission said.

For example, a report commissioned by ASIC found that SMSFs with balances of $200,000 or more were likely to be cost competitive with APRA-regulated funds provided trustees undertook some or all of the administration themselves.

And balances over $500,000 could provide equivalent value for money on a full-service basis where administration has been outsourced.

The ASIC report also found SMSFs potentially become less cost competitive in the retirement phase, as member’s draw down on their balances.

“Participants to this study and previous inquiries, such as the Financial System Inquiry, emphasise that costs and fees are only part of the story: some people want the flexibility to pick their own investment options, some start with small funds but expect to expand them with asset transfers in the future, and some keep their costs to a minimum by doing much of the administrative work themselves,” the commission said.


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