Category: Newspaper/Blog Articles/Hansard

Coalition MPs should not upset the apple cart on superannuation

The Australian

July 23 2016

Judith Sloan Contributing Economics Editor Melbourne

Here’s what’s going to happen with superannuation. The narrowly re-elected Prime Minister, Malcolm Turnbull, has assured his detractors within his party that “it will get fixed”. The quid pro quo for this assurance is that the detractors will go quietly, at least for the time being.

After all, there is many a slip between the cup and the lip before the radical and hastily assembled package of superannuation changes announced in the budget is legislated.

All Coalition parliamentarians with any hope of promotion — indeed, retention of their present position — will have the good (read: self-interested) sense to stay mum at this stage, ­irrespective of their private views of the superannuation changes.

We shouldn’t expect Labor to make life easy for the government; criticisms will be raised and amendments will be required.

At the end of the day, Labor will allow the (amended) changes to pass the Senate, leaving Turnbull to deal with any residual resentment on the part of his own parliamentary colleagues and party members.

All that bluster from Turnbull during the campaign that the superannuation changes were “completely iron-clad” was basically for show.

Walking quickly away from any of the key changes at that stage would have been a clear sign of weakness and indecision.

Of course, Turnbull deliberately failed to mention the fact Scott Morrison had already been forced to back down in relation to one matter: grand­fathering the access to non-concessional contributions under the old rules to pay off non-recourse loans. So much for “completely iron-clad”.

And now there is talk of other exemptions. If uncle Bob leaves you some money, that won’t be counted in the lifetime non-concessional contributions cap. But if you save up post-tax earnings and want to make a substantial contribution to your fund, you will be limited to $500,000 backdated to July 1, 2007.

All I can say is this sort of stuff is a hard sell. And, by the way, divorce was always a major complicating factor that the budget super changes ignored.

The Prime Minister rightly says superannuation is a complex area. Indeed, it is so complex that I would be surprised if he were across the details.

But the key question is this: what did the Prime Minister and the Treasurer think they were doing?

  • It can’t really have been about budget repair; under $3 billion across four years is chicken feed.
  • It can’t have been about improving the super system in terms of encouraging more people to self-provide during their retirement. After all, the changes will make it more difficult for people to accumulate sufficient funds to make it on their own.
  • It can’t have been about making the system simpler; the complexity of the arrangements will increase by several notches and the transition costs will be vast.

The only groups that are happy are financial planners, accountants and lawyers, who will be raking it in advising their clients on the new arrangements and re­structuring their clients’ financial affairs.

And the union-controlled industry super funds are pleased at the prospect of billions of dollars, in total, of taxpayer money being added to the accounts of low-income members, to be then gobbled up in extra fees and charges.

The answer to the question about the government’s superannuation brain snap is twofold.

Turnbull and Morrison were spooked by the accusation they had achieved nothing in terms of tax reform. One moment everything was on the table; the next nothing was.

The GST option had come to nothing. Similarly, the suggestion that the states levy their own income tax had come to nothing. By introducing the raft of radical superannuation changes in the budget, these two men thought they would show their sceptical supporters, particularly in the press, that they could do reform.

Then there was the underlying misinformation in the Treasury’s estimates of the costs of the concessional taxation of superannuation, which a sensible Treasurer (with the help of his advisers) should have insisted be corrected. Only in this way could the Treasurer deny the false proposition peddled by ill-informed commentators that super tax concessions cost as much as the age pension.

In fact, the solution was relatively simple. Treasury just needed to present the cost of the superannuation tax concessions using the GST as the benchmark tax rather than income tax.

After all, superannuation is about saving and a consumption tax, such as the GST, promotes saving. It is therefore the appropriate tax benchmark. At a minimum, the figures for both benchmarks should have been presented.

This was done in the Treasury’s 2014 tax expenditure statement, although the estimates using the GST benchmark were relegated to an appendix with the adjective “experimental” added to the title.

Note that the estimated cost of the superannuation tax concessions using the GST as the benchmark was negative. But for some strange reason the practice was discontinued last year.

Morrison then missed a key opportunity to highlight the substantial downward revision in the cost of the superannuation tax concessions that was outlined in the 2015 tax expenditure statement released by Treasury.

The cumulative cost of the concessional taxation of superannuation had fallen by more than 22 per cent for the three matched years, 2015-16 to 2017-18. Indeed, for one component — the concessional taxation of superannuation entity earnings — there was a fall of $11.45bn, or 40 per cent, for one year alone, 2017-18.

These sorts of wild fluctuations really gave the game away. How could $11.45bn just go missing in one year without the validity of the entire exercise undertaken by Treasury being called into question? But the real problem was that few people — including, it would seem, the Treasurer — picked this up. The basis on which the government devised its radical superannuation changes was a fraud or the dramatic writedown in the cost of the superannuation tax concessions undercut any need for major changes.

Now this may all seem rather technical, but let us not forget the role of the backroom boffins in Treasury (and in the Department of the Prime Minister and Cabinet) helping to devise the changes to superannuation and attach mythical cost savings/additional revenue to each one of them.

Let us also not forget the warning given by Treasury itself that “the effect of superannuation is to reduce outlays on the age pension. Some commentary argues that these expenditure savings should be recognised in the estimates of superannuation tax expenditures. (But) tax expenditures are a more limited construct than a budget costing and, by their nature, do not seek to measure the full budgetary impact on related current or future government expenditure.”

This is the key: the Treasury’s extremely unreliable estimates of the cost of superannuation tax concessions are not reflective of the true cost to the budget, which must include the (cash) cost of the age pension.

Undercut the incentives for people to save via superannuation and the cost of the age pension goes up — something this government has studiously ­ignored. The second part of the answer as to why Turnbull and Morrison opted for the radical super changes is along the same lines that explain why Joe Hockey decided to impose the temporary budget repair levy in the 2014 budget.

This latter decision also has significantly annoyed the Liberal Party’s base.

Hockey (and presumably Tony Abbott) thought that this measure would convince the critics that the government cared about fairness; after all, they were prepared to increase the top marginal income tax rate by two percentage points for four years.

Of course, few opinion leaders gave the government any credit for introducing the levy on the grounds of fairness. Labor, however, was more than happy to wave it through the Senate while blocking almost every other (cost-saving) budget measure. It is now Labor policy to keep the levy as a permanent feature of the income tax scales.

Having learned nothing, the next dynamic duo, Turnbull and Morrison, thought they would have another crack at irritating the Liberal Party’s base of supporters while seeking the approval of the progressive press for the “fairness” of the superannuation changes.

After all, it is proposed that nearly $3bn of the gross increase in revenue across four years will be redirected to top-up the superannuation accounts of low-income workers, mirroring Labor’s policy.

A large proportion of these low-income workers will end up on the full age pension and adding a few hundred dollars of precious taxpayer money to their superannuation accounts is expensive and extremely bad public policy.

So what are the lessons for the government of the past nine or so months? Don’t ever put everything on the table. It is poor policy and potentially suicidal politics.

Let’s face it, tax reform was Hockey’s vanity project — all treasurers like to claim the title of reformer — but Turnbull would have been wise to drop it and make the case for much more limited change, such as reducing the rate of company tax. As it turned out, he did a lousy job at explaining even this proposal.

Also forget the call for us to feel excited. Toddlers drinking red lemonade are excited. Optimistic could work, even aspirational — but not excited.

Optimism can be tied into people being motivated to get ahead, to provide for their families and be independent of government handouts. Fairness can then be framed in this context, rather than the narrow focus of win-lose redistribution, which is the Labor way. And don’t forget to mention the lack of fairness of building up government debt to be paid for by ­future generations.

At this stage, there is no reason to believe Turnbull or Morrison have any particular skills in quality economic management. The challenge is in front of them; they have got off to a very bad start.

Superannuation changes to turn Liberals’ friends into enemies

The Australian

July 23 2016

Grace Collier Columnist Melbourne @MsGraceCollier

The times necessitate it but, still, this observation is regretfully made. The Liberal Party has a consistent and notable failing: it does not look after its friends. And because of this, it doesn’t have many. The Labor Party, though, is great at looking after its friends. This is why it has lots and lots. The link between how well you treat your friends and how many you have is obvious to all except the people who run the Liberal Party today.

They just can’t see it and, if they do, they can’t adjust their arrogant and self-destructive behaviour. The next three years are going to be hideous.

To be honest, the problem with the Liberal Party has gone beyond it not looking after its friends. At present, the party is going out of its way to harm its friends, via an illogical imposition of life-changing, financial disadvantage. Coalition politicians keep defending their superannuation policy as fair and good for women. What rubbish. With their dog of a policy, their inability to explain it and their vacuous and insulting responses, one wonders how any of these people sleep at night.

This week, I spoke with four women like me, all part of the Liberal base, all around the age of 50, who are low-income earners or have a long history of self-employment, and therefore small superannuation balances. All of us, long ago, purchased investment property and the plan was always to sell close to retirement, top up superannuation and avoid going on the old age pension.

This is a noble aim, and Australia needs more people with this aim, and you would think a Liberal government would encourage and support us, but no; just the opposite.

If the Coalition’s changes are passed, it will not be possible for any of us to put enough money into our superannuation accounts so we can have a sufficient income in retirement. We will not be allowed to put more than $500,000 of our after-tax money in and will be prevented from making more than $25,000 a year in pre-tax contributions.

Because of these limits, even if all of us start contributing right now, none of us will be able to amass more than $875,000 into superannuation before age 65. Current interest rate returns for term deposits sit on less than 3 per cent. For women such as us, a balance of $875,000 will produce a tax-exempt income of about $26,000 a year.

The government intends to tax the proceeds of superannuation funds over the amount of $1.6 million. This is a tax grab by a government too incompetent to cut obscene amounts of wasteful spending in other areas. However, putting that argument aside, if we must have a cap, then we must let people reach the cap, in whatever way they can, with money from wherever they can get, and at a time that suits them. To do otherwise is grossly unfair.

Going back to our example, if my women friends and I were allowed to put in up to $1.6m of our own money into our superannuation, we could achieve a yearly income of about $48,000.

So why does the Liberal Party want to punish women like us to the tune of $22,000 a year, and why does it want to prevent people from providing for themselves in retirement?

Nationals MP George Christensen gave us a much needed display of courage. If only we had more who would do the same. Christensen vowed to vote against the policy and spoke the truth: “These policies are Labor-style policies which hit those people who have worked hard all of their lives; those who have scrimped and saved and done the right thing. These policies penalise success. Principally, these policies hit small business owners and farmers who have retired, sold their assets and transferred their wealth into superannuation.”

Malcolm Turnbull and his team underestimate the anger out there. This superannuation issue is the last straw. The base is in despair, on the verge of abandoning the party for good. This is not a “we want Tony Abbott back” thing. This is a “sick of the poor performance — including under Abbott — of not knowing what the Liberals stand for, and tired of being slapped in the face” thing.

The base is tired of the weak leadership, lack of fiscal probity, refusal to practise small government, inability to promote the virtues of self-reliance and personal responsibility, and failure to reframe the Labor Party’s mantra of “fairness”.

The base is sick of being taken for granted, pushed around and punished by the people they vote for, give money to and volunteer their time to assist. The base does not care if the superannuation policy affects 4 per cent, 0.04 per cent or 40 per cent. The point is that the policy is disgraceful, unfair and cruel.

If something doesn’t change, come the next election the base will dig the Liberals’ grave, push them in, then dance on top with gay abandon.

This superannuation policy is a measure of how foolish the Liberal Party is now; a senseless decision, made after swallowing the Labor agenda, is turning its greatest friends and advocates into bitter enemies.

In the previous term, not long before Abbott was overthrown, I was in the office of one of his cabinet members. The man kept shaking his head and groaning, repetitively, “We are so f..ked, we are so f..ked.” At the time, despite everything, I didn’t agree.

Now I do.

More on super | Turnbull tax reform: don’t undermine the integrity of super

Catallaxy Files

Judith Sloan

Posted on July 22, 2016 by I am Spartacus

It is a few days old, but Janet Albrechtsen wrote a scathing review of the Government on its superannuation policy development process in the Australian.

Turnbull tax reform: don’t undermine the integrity of super.

She was very even handed.  She ripped into both Abbott and Turnbull.  In both cases, justifiably IMO.

I am not one who is impacted directly or am likely to be impacted by the proposed superannuation changes, but that does not mean I am not offended.  Grossly offended.  Never let it be said ….

  • First they came for the people with large super balances, and I did not speak out— Because I did not have a large super balance.
  • Then they came for the negative gearers, and I did not speak out—Because I was not a negative gearer.
  • Then they came for the ultra high earners, and I did not speak out— Because I was not an ultra high earner.
  • Then they came for me—and there was no one left to speak for me.

This policy seems a product of laziness by the ERC – looking for money, but not wanting to do the work to think about the consequences.  It smacks of Rudd-Swan mining tax from top to bottom.

  • a “bright” idea from the bowels of treasury to increase revenue.
  • a play into the inherent biases of Treasury officials – tax early, tax often, tax everything.
  • calculate the revenue on the back of a napkin and ignore behavioural effects.
  • don’t consult with anyone, because any negative feedback must come from self interest.
  • sell it to a desperate Minister desperate for money to spend on boondoggles.

A gift that keeps on giving.

This loonie policy also likely a byproduct of the disgraceful Tax Expenditures Statement produced annually by Treasury.  The basic premise of this statement is that all taxes should be at the highest rate and anything that is charged less than the maximum is a loss to the budget.  It does not adjust for behavioral impacts of higher taxes.  The entire intellectual foundation of this statement is nonsense.

But it serves a purpose.  It creates this false belief in the corners of government, bureaucracy and the intelligentsia that there is money there, ripe for the picking, available to fund any hair brain government scheme or action.

Football stadium?  Sure.  Netball courts?  Why not.  Paid parental leave?  Bring it on.  Make everyone in the LNP a member of cabinet with a department and a salary bump?  Hey – why not.

There is never a spending problem when there is a revenues solution presented in this report.  The money is clearly there.  Treasury says so.

The problem is that the money is not there.  Unless you believe that everything owned and produced in Australia belongs to the government and the it is only a matter if time before the government takes it back.  You may laugh, but there are people out there, in pubs, clubs, parties and parliaments who believe this.  They may not say the words, but the actions speak sufficiently.

The Tax Expenditure Statement for 2015 (released in Jan 2016) suggested that there is approximately $100 billion, hanging there on the money tree, waiting for the government to pick.

Interestingly, the huge benefit of RETROSPECTIVELY converting public servant and politician superannuation from defined benefit to defined contribution is not there.  I wonder why.  Would be a big benefit to the budget.

If you want a hint as to the benefit of retrospectively making this change, you may recall that the Future Fund was set up to meet the unfunded balance of these.

The balance of the Future Fund was approx $120 billion at end FY15.  And that won’t be enough.

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.

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.”

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