Category: Newspaper/Blog Articles/Hansard

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.

Memo Liberals: Making enemies of friends is deeply foolish

The Australian

July 26 2016

Grace Collier Columnist @MsGraceCollier

Before the recent federal election, those campaigning against the government’s superannuation policy were begged by the party ­hierarchy to back off, to keep a lid on it all, until the election was won.

Well the election is won, the lid is off and the pot is boiling over. In Queensland, there is open revolt. The anger is palpable and Liberal National Party members are organising a campaign against the changes, beginning with a formal motion to demand their demise.

“The Labor Party wouldn’t even do this,” says my long-time friend Graham Haycroft, a party policy committee chairman in the Queensland LNP.

“With what they have done, people’s superannuation is now just like fish in the barrel; any future government can come along and shoot whatever they like. The Liberals have broken the seal; after this, it will just be open slather.”

Haycroft is not speaking as a party spokesman, merely passing on the sentiment among the 15,000 party members. “The anger is palpable” he says.

With its foolish superannuation changes, the Liberal Party is hitting the people who do everything for them; it is taking money out of the pockets of its own support base.

Small business people, the wealthy and the non-wealthy but aspirational are all going to be unfairly penalised by the nonsensical changes the Turnbull government has planned.

The government is hopelessly addicted to spending, and when a government addicted to spending can’t break its habit, it robs the piggy banks of those closest.

It abuses the rights of those within the family; it takes advantage of the close relationship, banking on the hope there will be reluctance to retaliate.

In Queensland, though, things are different. Here, the structure of conservative politics differs to all the other states. The Liberal party is the Liberal National Party, with a different constitution. This party is run from the middle, not from the top, and individual leaders do not have the power they have in the other states.

All decisions are subject to ratification by state council and at the next state council, next month, a motion is being put up to quash the superannuation policy. Party insiders expect it to pass, easily. Even if it does, and the policy is dumped, or significantly amended, the Liberals have already paid a terrible price for their folly.

“The way the decision was made leads you to think, how can you trust these people?” says Haycroft. “Even if they fix this, it will take at least a decade to get that back.”

At the weekend, various MPs and party insiders rang to chat. Many are livid at the changes. The policy is seen as an injudicious move. The view is Treasury has had the policy, in some form or other, in the bottom drawer for many years, and has just been waiting for a treasurer mug enough to swallow it.

It is not just Scott Morrison in the firing line — the guns are out for the small clique around him, too. The attitude coming from this group is that superannuation tax treatment is a form of middle-class welfare. It was put to me that it makes no sense to tax people less just because they are older.

The attitude coming from the Liberals is that retirees should be grateful the government lets them keep some of their own money, and should not begrudge the end of the government’s generosity, because after all they need the money to pay for everything else, including the incredible cost of saving Christopher Pyne’s seat.

Election 2016: Eric Abetz says result a ‘big kick up the pants’ for Coalition, says superannuation a big public concern

ABC

Conservative former minister Eric Abetz has unloaded on the way his Government’s leadership team handled the federal election campaign, saying the Liberal Party fell over the line and failed to heed community concern about superannuation policy.

“When you have had such a big kick up the pants, as we have had as the Coalition, and especially the Liberal Party element of the Coalition, then I think it is worthwhile to ask the question; ‘why did we haemorrhage so many seats? Why did we haemorrhage so many votes?’,” Senator Abetz told Radio National this morning.

The Tasmanian Senator said the election win had been the “barest of victories” and it was time the party listened to backbenchers who had been out doorknocking and hearing directly from voters.

He nominated the Coalition’s budget plan for a $500,000 lifetime cap on after tax superannuation contributions as a key area of public concern for Coalition voters.

“The superannuation measures were presented to the partyroom at the budget and then the budget was immediately announced to the people and we went off to an election, so this matter has not been properly ventilated through the partyroom,” he said.

“It’s quite clear now from leaks from within Cabinet that there were misgivings within the Cabinet and backbenchers right around the country have indicated their misgivings.”

Senator Abetz said there might be a need for “recalibration” in response to the way people voted.

Voters punished Liberals over super changes: senator

West Australian Liberal senator Chris Back told AM voters informed him they would back the Liberal Party in the Lower House but not the Senate, in the hope the Government’s superannuation changes would be blocked.

“There were certainly people who said to me we will vote Liberal in the House of Representatives but we won’t support you in the Senate,” Senator Back said.

Senator Back hopes Monday’s Coalition party room meeting will offer some hope of relief for worried retirees.

“Dyed-in-the-wool Liberal voters said to me they were very, very upset by the suggestion that something backdated to 2007 was not retrospective, they felt insulted by that comment,” Senator Back said.

“I look forward to a debate on Monday and indeed I can understand the position of the leadership team, saying we have got to make these savings, and they do.”

Yesterday the Prime Minister said the Government would deliver on all of the election promises it took to voters.

Finance Minister Mathias Cormann maintains the Government has a mandate to implement its proposed changes to superannuation tax concessions.

“We took an agenda to the election, the Australian people voted in this election about their preferred team, their preferred plan and we now have a responsibility to get on with the job of implementing the plan that we took to the election,” he said.

Malcolm Turnbull is set on making super another ETS moment for himself – John Roskam

Australian Financial Review

Home News Policy Opinion Jul 14 2016 at 3:19 PM Updated Jul 14 2016 at 5:34 PM

A quite retirement has become a turbulent political issue.
by John Roskam

In 2009 as the leader of the opposition Malcolm Turnbull supported the introduction of an emissions trading scheme. He maintained his support for an ETS in the face of overwhelming opposition from the grassroots members of his own party, and against the grave concerns of many of his parliamentary colleagues. It did not end well for Turnbull.

Seven years later, superannuation does not need to be, and should not be, another ETS-like moment for the Prime Minister. If he’s as determined as he says he is to increase taxes on superannuation and throw into disarray the retirement plans of hundreds of thousands of Australians, the least he can do is make a commitment to listen to their concerns.

The Coalition’s superannuation changes were made in the rush of a budget and an election campaign. Prior to budget night Coalition MPs, and for that matter the public, had no inkling the PM and his Treasurer were planning to break the Coalition’s 2013 election promise not to make any adverse changes to superannuation. It was a promise the Treasurer repeated almost up until the time he announced he was going to break it.

The Coalition has convinced itself superannuation played no role in the government’s near demise at the election – but three different polls and surveys say something different.

During the election campaign Turnbull was hamstrung from attacking Labor’s higher taxes on capital gains because he was proposing tax increases of his own.

There’s absolutely no reason why any final decision on the Coalition’s superannuation policies must be reached at Monday’s meeting of Coalition MPs. Given the PM has promised he won’t make any more changes to superannuation after these current changes, if the government is deciding on policy settings it hopes will last for years to come, the details of the policy should be the result of more than a five-minute discussion.

It is bizarre the Coalition is attempting to portray its imposition of higher taxes as “reform” and that a Liberal Party Prime Minister appears to want to make his desire to increase taxes a test of his authority as leader.

The government says higher taxes on superannuation are “broadly accepted by all sections of the community”. That’s debatable. In any case the policy elites of Greece, Italy and Spain all think higher taxes are a good idea too.

The government also claims its changes are necessary to repair the budget. But any administration that really wanted to achieve budget repair would focus on government spending.

Over the next four years, Commonwealth government revenue from taxes and other receipts will increase from 23.5 per cent of GDP to 25.1 per cent of GDP.

Meanwhile spending will only fall from 25.8 per cent of GDP to 25.2 per cent of GDP. No one can call that “budget repair”. And even if this small reduction in government spending is achieved, the government will still be substantially larger than it was prior to the GFC. The truth, which the government won’t admit, is that what little budget repair there is, will be accomplished by raising taxes, not cutting the size of government.

To get an indication of what real budget repair looks like we can go to the United Kingdom. In 2009 UK government spending as a share of GDP was 49.6 per cent. Last year that figure was 43.2 per cent.

Beyond the issue of superannuation, there’s a much bigger question – and it goes to trust.

When politicians break their promises they lose the trust of the public. First there was Julia Gillard’s carbon tax promise, then there was Tony Abbott’s “no cuts to education and health” promise. Now there’s superannuation.

Ian McAllister, a professor of political science at the Australian National University who operates an extensive program of surveys of voters, has argued convincingly that the electorate’s trust in politicians is collapsing. One manifestation of that collapsing trust is the growing vote for non-traditional political parties.

Labor’s claims during the election campaign about what Turnbull would do to Medicare were outrageous and wrong. But unfortunately they fell on fertile ground. The PM was asking the public to believe the Coalition’s promise on Medicare even though the Coalition had just broken its promise on superannuation.

As McAllister has said “Voters don’t forget these things. Labor’s success with the ‘Mediscare’ campaign has to be seen in context. People saw a history of broken promises.”

Broken trust risks feeding into a cynicism about the processes of democracy itself. Forty per cent of Australians think it makes no difference which party wins the federal election, and nearly half believe their vote doesn’t matter.

For reform to succeed there needs to be trust between the politicians and the people who elect them.

Reform inevitably takes the public into the unknown because reform is change. If you’re going to follow someone into the unknown you need to trust them.

If the Coalition goes ahead with its proposed tax increases on superannuation it risks destroying for a generation the opportunity for any real economic reform.

John Roskam is executive director of the Institute of Public Affairs

AFR Contributor

Concern rises over $500,000 super contribution cap

Australian Financial Review

Home Personal Finance Superannuation & SMSFs Jul 14 2016 at 6:25 PM Updated Jul 14 2016 at 6:25 PM

by Sally Patten Joanna Mather

Concern is growing in the superannuation industry that the federal government’s plan to introduce a lifetime $500,000 ceiling on after-tax super contributions may be hard to administer, adding to the pressure on the government from the revolt against the change from some backbenchers.

The Australian Institute of Superannuation Trustees said that while it supported the “intention” behind a plan to introduce the ceiling, it harboured concerns about the ability of super funds to implement the policy and the backdating of the cap to 2007.

“AIST is supportive of the intention behind the $500,000 cap but [we] do have concerns particularly around timelines and cost of implementation for funds,” a spokesperson said. The AIST said that replacing the lifetime cap with an annual $50,000 non-concessional contributions limit would be easier to administer.

“It’s easier to monitor the status of contributions made over the course of a year to a member’s fund, than over a lifetime,” the AIST spokesperson said. The lobby group representing not-for-profit schemes added that lowering the pre-tax contributions limit to $25,000, another key measure of the May budget, would hurt older savers.

The Financial Services Council, which represents bank-controlled super funds, also raised concerns over the implementation of the $500,000 lifetime cap.

“Any measure that is backdated by almost a decade will have issues with implementation and with information retrieval, especially as superannuation is currently transitioning from a paper-based system to a digital system,” FSC chief Sally Loane told The Australian Financial Review.

On Monday Ian Silk, chief executive of the $100 million AustralianSuper retirement fund, said the $500,000 cap was retrospective “to a degree” and predicted the government would come under pressure from its own backbenchers to modify the measure. Mr Silk, like many in the industry is supporting a $1.6 million on tax-free super pension transfers and the proposed tax offset for low income earners.

The Association of Superannuation Funds of Australia said it supported the $500,000 lifetime cap, adding that the start date was “a matter for the government”.

Industry Super Australia, which represents large industry super schemes, said it supported lifetime limit, as well as the start date.

“If the objective is to ensure the super settings deliver better sustainability, you do need a mechanism so that people don’t take advantage of a transition time to boost non-concessional contributions,” said ISA deputy chief executive Robbie Campo.

The government has received broad support for other proposed reforms, such as placing a ceiling on tax-free investment earnings in retirement.

But MPs claim to have received fewer donations and found it harder to find volunteers for polling booths during the election because of the proposed changes.

An MP group is set to take alternatives to a party room meeting on Monday but have been told any changes must be confined to super and garner the same level of savings.

The MPs are said to be trying to come up with other policies – and the requisite $2.5 billion in savings – so the most contentious elements of the plan can be dumped.

Former employment minister Eric Abetz and West Australian senator Chris Back publicly questioned the government’s approach in separate radio interviews on Thursday a day after Prime Minister Malcolm Turnbull reiterated his support for the budget measures..

“Dyed-in-the-wool Liberal voters said to me they were very, very upset by the suggestion that something backdated to 2007 was not retrospective. They felt insulted by that comment,” Senator Back told the ABC.

Senator Abetz, who left out of cabinet when Mr Turnbull became prime minister, said the retrospective nature of the $500,000 cap “hurt us within our base”.

The government insists the changes will only affect four per cent of superannuants.

Liberal Party members in Victoria are pushing for an extraordinary state meeting to air their grievances.

Save Our Super, established by Melbourne QC Jack Hammond, who is not a member of the Liberal Party, said the changes should at the very least be grandfathered.

Scott Morrison holds line on super ahead of draft legislation release

Australian Financial Review

26 July 2016

by Phillip Coorey

Treasurer Scott Morrison has used his second international forum in as many days to assure the financial world he was holding the line on proposed changes to superannuation for the sake of the federal budget.

A day after telling the G20 Finance Ministers meeting in China the changes were about protecting the integrity of the tax base, the Treasurer used an interview with CNBC on Monday to reassure restive credit ratings agencies that he envisaged only making minimal changes to the proposals to ensure their passage.

“There can be no doubting our commitment to the fiscal consolidation that we have embarked upon,” he said.

“There are some minor technical issues that we are still working through which are part of the normal process but they overwhelmingly enjoy support in terms of obviously our own party.

“These are reforms that are very critical to the long-term sustainability of our superannuation system. I think these reforms are somewhat overdue and they really do right what have been some very generous concessions that have sat around the system.”
Draft legislation

Early next month, the government is expected to release the draft legislation for the changes which will remove $6 billion in superannuation tax concessions, of which $3 billion will be churned back into bolstering the super savings of the low paid.

The move to place a lifetime cap of $500,000 on contributions, which would save the budget $550 million over four years, is the most contentious issue with Labor and many on the Coalition backbench saying it is retrospective because it was backdated to contributions made since July 2007.

Once the legislation is released, the government will go through what it says is a standard period of consultation with the backbench and stakeholders before putting it to the Parliament after it sits on August 30.

Last week, The Australian Financial Review revealed that in order to appease backbench anger the government was considering exemptions to the $500,000 cap for so-called life events, such as an inheritance or divorce settlement.

Financial advisers claimed such exemptions would be unworkable and even act as a perverse incentive for couples to divorce.

One senior member of the government, who backs the super changes but did not want to be identified, called such claims “bullshit”.
Cost of backdown

“If a couple does get a divorce over this, what does it say about the quality of your marriage?” he said.

The source said the government was determined to minimise the cost of any exemptions and argued much of the anger was coming from well-off people who were unprepared to do their bit to help with budget repair and would rather the burden be carried by the less well-off.

“They have got a lot of money and they can’t stuff it into their accounts, that’s their problem,” he said.

Depending on the extent of life events the government allows, estimates have put the cost of a backdown at between $300 million and $450 million. Internally, Mr Morrison, Finance Minister Mathias Cormann and Prime Minister Malcolm Turnbull are trying to hold the line.

Mr Morrison told CNBC ongoing reform was vital to growth and he was prepared to demonstrate the government could have a good working relationship with the Parliament to get its budget measures through. It also had to remain receptive to foreign investment.

“The Australian economy is now in its 25th year of consecutive economic growth, we are growing at 3.1 per cent … but to maintain that and keep it going, reform needs to continue and above all we have to ensure that private capital has a home in Australia where it can earn a decent return and you have got to have the right settings to achieve that.”

Super changes slapdash and misguided says banker Mike Smith

Australian Financial Review

Home Personal Finance Superannuation & SMSFs Jul 15 2016 at 12:15 AM Updated Jul 15 2016 at 12:15 AM

by James Frost

Former ANZ chief executive Mike Smith has rounded on the Turnbull government’s superannuation changes, describing the new measures to wind the clock back and cap contributions as slapdash and misguided.

The career banker, who was at the helm of ANZ from 2007 to 2015, is the latest in a line of financial services heavyweights to take the government to task as it stares down a restless backbench over its controversial super policy.

“I think they are a little confused frankly,” Mr Smith said. “Being retrospective on some of these things, that’s just crazy,” he said.

Mr Smith has joined the backlash from the Liberal Party’s electoral heartland and government MPs, as well as many in the wealth industry who have argued that some of the government’s proposed super changes were doomed because they were too difficult to implement.

Conservative MPs such as Tasmanian senator Eric Abetz, Kevin Andrews and WA senator Chris Back on Thursday challenged Prime Minister Malcolm Turnbull over his conduct of the election campaign and the superannuation policy.

Mr Turnbull tried to shut down opposition to the changes on Wednesday, including the most controversial measure – the $500,000 lifetime cap on super contributions backdated to 2007. He said the government would be presenting the same budget measure to Parliament that it took to the election.

Mr Smith said the decision to wind back the clock and cap non-concessional contributions from 2007 needlessly introduced an element of uncertainty into retirement planning.

“What you should say is ‘OK, well they’re grandfathered. But anything you do in future, you have to do it on this basis’. That’s how legislation should work.

“Otherwise, people just never know where they stand and that uncertainty doesn’t do anything for the underlying confidence in the economy,” he said.

Mr Smith, who steered one of Australia’s largest banks through the financial crisis, says that although the rationale for the changes is valid, the approach and execution of the changes left a lot to be desired.

“I get what they’re trying to do, they’re trying to make the system fairer, I have no problem with that but I think there are better ways of trying to do some of the stuff. I think it’s got to be much clearer.”

He echoed the sentiments of the Financial Services Inquiry chaired by former CBA boss David Murray that recommended a wholesale banning of geared property investment by super funds but the government has failed to show an interest in it.

“The question to ask is should you be allowed to leverage super funds? Frankly, that’s the question to ask. Is that an appropriate thing to do?”

“But rather than mess around with the sides, you should grab the bull by the horns and say ‘OK, this we will not allow’, say property into self-managed super funds, or leverage of any sort”.

Mr Smith, who appears inside the August edition of Smart Investor magazine in The Australian Financial Review today, has also sought to defend his legacy at the bank as the architect behind the bank’s ambitious Asian growth strategy.

“I’m very happy with what we achieved,” he said. “We were able to make significant inroads at a time when others were withdrawing”.

He also had some parting words for the analysts who regularly came into conflict with the banker over the Asian strategy on results calls.

“These analysts are interesting, I mean none of them run anything and their own organisations don’t use them for advice so you wonder why the market does.”

Federal election 2016: Super contributed to Libs’ poor result

The Australian July 9, 2016

Judith Sloan – Contributing Economics Editor Melbourne

To what extent did the superannuation changes announced in the budget contribute to the Liberal Party’s poor electoral outcome?

All week, Scott Morrison has peddled the line that superannuation was irrelevant. His argument is, in the 10 seats in which voters are most affected by the changes, the party held on. In half of the cases there was a swing to the ­Liberal Party. Let me tell you: the Treasurer’s remarks are just spin. The superannuation issue came close to ­derailing the Liberals’ campaign as floods of complaints were fielded; party resignations from longstanding members were reluctantly accepted; donations dried up; and previously willing volunteers refused to help in any way.

In NSW, there was such a shortage of volunteers there was little scope to offset the impact of unionists and GetUp! supporters brought in to urge a vote for Labor to the people waiting in line to ­record their votes.

But the impact did not end there. The raft of ill-considered and over-engineered changes that were announced out of the blue on budget night, just days before the campaign began, repre­sented a fundamental breach of trust for many Liberal Party supporters.

After all, Tony Abbott, before and after the 2013 election, had made it perfectly clear that there would be no adverse changes to the taxation of superannuation during his term of government.

This pledge was reinforced by then treasurer Joe Hockey in last year’s budget, when he declared “there will be no new taxes on superannuation”. He went on to say: “I want to reassure all Australian workers that they can have confidence in their retirement plans.”

And if that’s not bad enough, in February Morrison himself told the audience at a superannuation conference: “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.”

That statement lasted less than three months, when the taxation of superannuation suddenly was described in the budget papers as amounting to “estate planning and tax minimisation”. Numerous changes were announced to ­extract an additional $6 billion across the forward estimates from people on higher incomes and those who had entered into superannuation arrangements in good faith, including those now on transition-to-retirement plans.

To justify the breaking of a promise, Morrison emphasised how the changes would affect only 1 per cent or 4 per cent of the population — his figures moved about a lot but were always wrong. (The actual figure is close to 10 per cent; Mor­rison should never have relied on Treasury for information or ­advice.)

But what was his point? There aren’t many of you and, sure, you have played by the rules, but we are prepared to do you in the eye because it suits the present government. Let’s face it, it was Tony’s promise and Malcolm is not bound by his commitments.

And, by the way, we can recycle some of the money to give a tax break to low-income earners who are going to end up on the full age pension in any case. The ABC, Fairfax Media and left-wing think tanks even may give us a pat on the back for our audacious but reasonable changes to super­annuation, changes that go much further than Labor’s proposals.

The clear message to those ­affected by these changes, now and in the future, was that they could just suck it up. After all, ­Assistant Treasurer Kelly O’Dwyer had described superannuation tax concessions as, bizarrely, a “gift from the government”. On this logic, the gift could be taken back any time by the government — actually, by the small number of out-of-touch ministers who planned the heist.

But when did the percentage of the population that might be affected by a change ­become the driver of good policy? Would it be sensible to apply a 99 per cent marginal income tax rate to the top 1 per cent of income earners and declare it good policy because so few people are affected? When did such base utilitarianism drive Coalition policy?

The superannuation fiasco didn’t get any better during the campaign. Neither Foreign Minister Julie Bishop nor Resources Minister Josh Frydenberg could explain the changes to the transition-to-retirement provisions during a Melbourne radio program. These provisions actually affect a lot of people on modest incomes.

Bishop subsequently made the suggestion that she would explain the superannuation changes after the election. Was she kidding? Did she think this was helping?

And she was quickly pulled into line when she declared there could be some changes to avoid “unintended consequences”.

Morrison, stubborn and unyielding, wasn’t having a bar of any backing down.

Mind you, he had quickly backed down on the backpackers’ tax, another fiasco of the government’s making. And he has been forced ­to make one concession on super in relation to non-recourse loans backed by non-concessional ­contributions.

Then there was Labor’s ­response to the government’s super changes. No doubt opposition Treasury spokesman Chris Bowen was blown away by the scale and daring of the changes; it made his proposals look modest by comparison. Labor simply was proposing to impose the 30 per cent contributions tax under Division 293 on those with (adjusted) incomes of $250,000 a year or more rather than the present $300,000 a year or more and to levy a 15 per cent tax on super retirement income streams above $75,000 a year.

Had the two parties been playing bridge, the Liberal Party then effectively bid seven no-trumps. It matched the changes to Division 293; it set a maximum superannuation balance of $1.6 million from which tax-free income could be sourced, never to be topped up; it reduced the annual concessional contributions cap to $25,000 a year; it introduced a lifetime concessional contributions cap of $500,000 backdated to July 1, 2007; and it imposed a 15 per cent tax on transition-to-retirement ­income streams.

Bowen must have thought he was dreaming. He would never have dared to go this far lest he be accused of blowing up the superannuation system, particularly in terms of its role as a substitute, in part or in full, for the age pension.

But what the heck, Labor was happy to go along for the ride. And in the final week of the campaign Labor effectively declared that it would adopt the Liberals’ super­annuation policy with the one ­exception of the retrospective ­element of the non-concessional contributions cap. While details were vague, it took on board the full budget savings.

This last-minute switch of policy by Labor, which never would have occurred were it not for Morrison’s budget announcements, doubtless caused some extremely reluctant Liberal Party supporters to hold their noses and vote for Liberals in the lower house. The Senate, of course, was a different story. Labor also played dead in many of the most affected electorates — for example, Higgins, Kooyong, Goldstein, North Sydney.

Assuming that the Coalition is returned to power, there is no choice but for the government to fully reconsider the superannuation changes. The best outcome would be to ditch all of them for now and go about systemically ­assessing the much smaller number of changes that can be justified in the name of good public policy, seek a mandate from the electorate at the next election, then implement the changes. Only in this way can the Liberal Party hope to re-engage with its base.

It was never just about superannuation; it was a matter of trust.

Superannuation: Coalition’s changes undo the trust

The Australian – July 13, 2016

Glenda Korporaal – Associate Editor (Business) Sydney

Chances are the Turnbull government will get most of its May budget proposed changes to super implemented.

Its problem has never been support from the Labor Opposition, which would never have dared to propose such drastic changes to the system itself, and is more than happy to see the government continue to support its own low income super tax offset.

The real problem has always been with the Liberals’ own constituency which is the one hit hardest by the proposed changes.

It does seem that the Coalition leaders, particularly Malcolm Turnbull and Scott Morrison, will press to keep as much of the budget super package as possible — mainly from a revenue point of view.

Labor’s super spokesman Jim Chalmers, who is calling for an independent evaluation of the proposed super changes, argues there is “serious internal dissent” over the proposed changes, pointing out that “people’s retirement savings shouldn’t be messed with on a whim”.

Once the government has sorted its leadership out, the super industry is gearing up to have consultations on the proposed changes to ease back some of the most drastic changes — particularly the proposed cut in the concessional superannuation caps to $25,000 a year and the $500,000 lifetime cap on post-tax contributions backdated to July 1, 2007, which came into force on budget night.

The implementation of the package is going to have major implications for the super industry itself as it comes to terms with how to process the changes.

Confidence in the system is low, particularly among people who are or have been putting extra into super above the mandatory super guarantee requirements.

The industry and people with a sizeable interest in super have been in limbo since the May budget and can be expected to remain so until the actual legislation is passed in the Senate sometime later this year.

The big question will be how to restore long-term confidence in the system, particularly among the aspirational middle classes who have spent their working lifetime seeing super as a way to plan for a self-funded retirement with no reliance on the pension. Turnbull and Morrison have cynically hacked back on the super tax concessions to generate revenue to fund their proposed corporate tax cuts to help sell their much parroted mantra of “jobs and growth”.

The proposed changes were not the result of a detailed, thoughtful review of the super system but an overnight election eve attempt to claw back more revenue on the basis that those most affected would be rusted on conservative voters who had nowhere else to go.

They were “justified” by implying that people who were using the super system boosted by the Howard/Costello government to fund their retirement were evil rich people rorting the system when they were just following the law.

It was a bizarre political strategy, to say the least, which sought to attack those who had taken advantage of the Howard/Costello changes and made no attempt to spell out a long-term vision for super.

Few would argue that the tax concessions were very generous at the top end and arrangements like transition to retirement had evolved primarily into tax reduction exercises.

Reform of the tax concessions on super was always expected to be part of the tax white paper discussion.

The question is: what is the future of super under a Turnbull-led Liberal National government? Or does it even care? The Turnbull government must have a proper internal discussion about where it wants to go with super and whether it believes in the system at all above the basic super guarantee requirements.

Clearly the old curbs on governments going back on their election promises (in this case the promises made in the 2013 election) and not introducing retrospective policies have not worried the Turnbull/Morrison team despite the massive erosion in trust that logically follows.

That trust has now been lost, paving the way for “Mediscare” and who knows what other scare campaigns Labor and other government opponents will come up with in future.

Does the new government actually care enough about super to try to restore some confidence in the system, or will it continue to see super as a cash cow to be plundered for further budgets?

Does it care enough about super that it is up to assuring the public that there will be no changes after these changes for a guaranteed period of time? Probably not.

The next year will see a major rethink of investment strategies by the Australian aspirational middle class, which now realises that when it comes to super governments can’t be trusted over the long term. Good luck with the partyroom talks, but the horse has bolted. Trust has gone. What actually happens over the next few months — and not government spin — will be pivotal for the system’s future.

Federal election 2016: Turnbull should cop it on the chin

The Australian July 13, 2016

Judith Sloan – Contributing Economics Editor Melbourne

It’s hardly surprising that Bill Shorten has agreed to pass most of the government’s budget changes to superannuation, subject to an independent review that assesses whether some of them are retrospective.

I have sitting on my desk an opinion — well, it’s actually ­gobbledygook — of a QC commissioned by Assistant Treasurer Kelly O’Dwyer concluding that none of the changes — even the backdated lifetime cap on non-concessional contributions — is retrospective.

Pull the other one, I say. Even Scott Morrison is aware of the duck rule: looks like a duck, quacks like a duck, is a duck. Earlier this year he described Labor’s proposal to impose a 15 per cent tax on superannuation pension earnings above $75,000 a year as retrospective.

To quote the Treasurer: “Our opponents stated policy is to tax superannuation earnings in the ­retirement phase. It may not be technical retrospectivity but it ­certainly feels that way. It is effective retrospectivity, the tax technicians and superannuation tax technicians may say differently. But when you just look at it, that is the great risk.”

Of course the Opposition Leader’s current offer to pass most of the government’s super changes has the effect of making life even more difficult for the Prime Minister as he seeks to appease many of his parliamentary colleagues as well as swathes of the party’s base.

Not that Assistant Minister to the Treasurer Alex Hawke has helped the situation by claiming that “changes to high-end superannuation are broadly accepted by all sections of the community and the government was right to propose them”.

Tell that to the large numbers of the party’s previously loyal supporters. Given the flood of complaints that the party has fielded, the tsunami of resignations, the drying up of donations, the shortage of volunteers and the loss of votes (over one million, in total), Hawke’s chutzpah is quite ­astounding.

So what should Malcolm Turnbull do?

Here are the key super changes he must agree to:

  • Forget about backdating the lifetime cap to non-concessional contributions;
  • Make this cap $1 million, up from $500,000;
  • Raise the superannuation balance from which tax-free ­pensions can be drawn from $1.6m to $2.5m, the latter of which would be the figure if the old Reasonable Benefit Limit had been retained;
  • Keep the concessional contributions caps where they are;
  • Forget about increasing the tax on those on Transition to ­Retirement Income Streams. TRIS are now only useful for those on modest incomes and with the increase in the preservation age, this arrangement will become ­irrelevant over time;
  • Don’t bother with topping up the superannuation balances of those on low incomes, who will mainly end up on the full Age ­Pension. It is costly to do this. It is also fair that these people make a modest contribution to the cost of their Age Pension.
  • When the Liberal parliamentary party meets again, those members who are concerned about the government’s fundamental breach of trust on superannuation must extract these changes, at a minimum, from the small coterie of ministers who dreamt up this heist in the first place.

Turnbull may just have to suck it up, just in the same way he ­expected present and future ­superannuants to take the ­additional tax imposts on the chin.

And just in case he mentions the contribution super must make to budget repair, remind him of the billions of dollars that he committed to wasteful pork-barrelling during the election campaign. That worked well … not.

And don’t forget to mention that Treasury’s estimates of the savings/additional revenue from the super changes are laughable. An additional $6 billion over the forward estimates — tell ’im he’s dreaming.

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