Category: Newspaper/Blog Articles/Hansard

The Australian

9 September 2016

Rachel Baxendale

Tony Abbott says the government needs to be “very careful about changing the rules once the game has started”, as internal consultation continues over the Coalition’s proposed changes to superannuation tax concessions.

The former prime minister’s comments came as Finance Minister Mathias Cormann declined to speculate on how long it may take to legislate the reforms, indicating the consultation process may drag on.

Speaking to 2GB’s Alan Jones, Mr Abbott reiterated his concerns about a proposal to cap non-concessional (post-tax) contributions at $500,000.

“This is one of the issues that Coalition MPs have been discussing, it’s one of the matters that the government is considering in the post-election period,” Mr Abbott said.

“My own view, as you know, is that superannuation is not the government’s money, it’s our money, it’s your money, it’s money that we’ve saved up over time.

“In many cases it’s money that we have invested, it’s not concessional money, it’s after tax money that people have put in and governments should be very careful about changing the rules once the game has started.

Mr Abbott acknowledged the difficult fiscal position the government must confront, and said it was important to ensure superannuation was a “retirement savings vehicle rather than a wealth management vehicle”.

“But still we have to be careful about the changes that we make and there are lots of members of parliament right now who are saying on behalf of their constituents, let’s think carefully about these things, particularly this issue of the $500,000 cap on non-concessional contributions,” Mr Abbott said.

Amid speculation a revised package of superannuation measures could be presented to the Coalition party room when parliament resumes next week, Senator Cormann indicated the timeline was likely to be more drawn out.

“I obviously don’t talk and discuss what is discussed in the party room, but our reform to superannuation tax concessions is a very substantial reform package, it’s designed to make the system fairer, more sustainable and fit for purpose,” he told Sky News.

“Most of these changes actually don’t come into effect until 1 July 2017, so we’ve got time to go through a proper process.

“We said before the election that there would be consultation after the election.

That consultation has been taking place, and obviously when the Treasurer and the Minister for Financial Services and Revenue is ready to take this to the next step, they will do so.

Asked whether that meant the next step could be some weeks off, Senator Cormann declined to speculate on timing.

“We’re going through a proper and orderly process and when they’re ready to press the button on the next stage, I’m sure that they will do so,” he said.

Institute of Public Affairs

Economics & Deregulation | John Roskam
Australian Financial Review 9th September, 2016

On Wednesday the Turnbull government released draft legislation to bring some of its superannuation promises into law. These changes are not the whole policy – we are told that some of the most contentious parts will be legislated in the future. But in many ways this legislation is even more significant than the policy of how superannuation should be taxed. Because for the first time the draft legislation enshrines the purpose – the principles – of our compulsory superannuation system into law.

When the government used the May budget to shred its promise not to increase taxes on superannuation, it did not consult the public on its proposal. At least they’re having a consultation this time. But the consultation will go for nine days. That’s correct. The public get nine days from when the draft legislation was unveiled (7 September) to the date consultations close (16 September) to make submissions on the future of an industry with more than $2 trillion in assets.

Meanwhile, the government estimates it will get $100 million this year from new taxes from overseas backpackers working in Australia. The consultation period was a month, and reportedly resulted in 1000 public submissions. But the consultation on the objective of superannuation goes for nine days. A sceptical observer might conclude that perhaps ministers have already made up their mind.

Over the last month the Treasurer has travelled the country assuring the public that the Coalition’s plans to retrospectively apply a $500,000 cap on post-tax contributions and limit the amount that can be held in accounts in the pension phase will only affect one per cent of superannuants. The problem with this analysis is that even if the one per cent figure is true (accurate figures for superannuation are notoriously inaccurate), the number only applies to people who are immediately affected by the change.

The figure takes no account of people potentially affected into the future. Further, the implication of the Treasurer’s claim is that if only one per cent of superannuants are affected by arbitrary and retrospective changes to superannuation, then there’s nothing to worry about. He is coming perilously close to claiming the rule of law shouldn’t apply to rich people.

‘Primary objective’

The thing that the government will spend nine days consulting the public on is the idea that the “primary objective” of superannuation should be put into law. According to the Coalition the primary objective of the superannuation system should be “to provide income in retirement to substitute or supplement the age pension.”

The problem with this as the objective of the superannuation is that it puts superannuation and the age pension the wrong way around.

The focus on any retirement income policy should be on strengthening self-funded superannuation, and the age pension should only act as add-on or top-up. The government should aim to have as few people rely on the welfare of the age pension.

Expressing the objective of superannuation in the way the government proposes is to put tax and financial consideration at the centre of superannuation policy. Instead, the starting point for any consideration of superannuation should be the inherent dignity of individuals taking personal responsibility for the care of themselves in retirement.

Saying that the main objective of superannuation is merely to save taxpayers the cost of the pension, is like saying people should be encouraged to get a job so the government doesn’t have to incur the expense of paying the Newstart Allowance. Work is important in and of itself. The self-respect of a retirement that doesn’t rely on support from someone else is no less important.

An objective for superannuation that was centred on dignity and choice in retirement could be expressed in the following way.

“The objective of the superannuation system is to ensure that as many Australians as possible take personal responsibility to save for their own retirement. The age pension provides a safety net for those who are unable to provide for themselves in retirement.”

Their policy on superannuation is not the only thing Turnbull and Morrison have got wrong.

They’re also wrong on the principles of superannuation. Getting a principle wrong is much more serious than mucking up a policy. Policies can be fixed and reversed. Principles are more difficult to correct.

In a “tetchy” private meeting with a group of Liberal and ­Nationals MPs in Parliament House on Thursday, Mr Abbott confronted Mr Morrison and Minister for Revenue Kelly O’Dwyer about their proposed $6 billion super package. He ­argued the government was wrong to offer super concessions to low-income earners.

He also argued for the government to abandon its proposed cap on post-tax contributions.

As Mr Morrison and Malcolm Turnbull seek to reach a consensus with backbench MPs on the contentious election policy, The Weekend Australian can also ­reveal that doubling the lifetime cap on non-concessional contributions to $1m would hit the budget bottom line by $750m.

MPs at the meeting said they were “aghast” that Mr Abbott had proposed hitting low-income earners — particularly working mothers — to benefit the wealthy, whom the former leader accused Mr Morrison and Ms O’Dwyer of abandoning.

“He went in there looking for a fight; he wasn’t interested in ­information, he wasn’t interested in listening to his colleagues, he wanted to have a fight,” said one MP present at the meeting.

Mr Abbott is understood to have argued that the Coalition should represent lower taxes and smaller government, prompting a retort from Mr Morrison about policies Mr Abbott had put in place while leader that had ­increased taxes. Amid a series of tense exchanges with the man he believed betrayed him in last year’s leadership spill, Mr Abbott said the super changes ­announced in Mr Morrison’s first budget in May “sent the wrong message about aspiration” and he argued that there should be no cap on after-tax contributions.

When he was prime minister, Mr Abbott ruled out changing superannuation, ­saying it was not a “piggy bank” to be raided.

The Weekend Australian ­understands Mr Morrison told Thursday’s meeting that the ­Coalition needed to focus on its key narrative — the moral ­responsibility it had for budget repair — and pointed to legislation being pursued by the government that cut taxes and spending.

“Scott was very firm, but it was clear from Tony’s demeanour that he had not got out of bed on the right side that morning,” one MP said. Another said: “Tony ­arrived to the meeting cranky, and I think people were a bit shocked that he went for Scott so obviously. It was personal.”

Increasing the lifetime cap on non-concessional contributions to $750,000 is understood to cost the budget $250m. Removing the retrospective elements but keeping the $500,000 cap would cost $540m. Raising the cap to $1m would cost $750m, but the Treasurer did not present costings for abandoning the non-concessional cap, as advocated by Mr Abbott.

Sources at the meeting say Ms O’Dwyer took aim at Mr Abbott for suggesting the Liberal Party should only look after a narrow base of wealthy constituents, suggesting he had forgotten about the “Howard battlers” and reminded him that the Liberal Party was “not just the party of the privileged”.

On the Low Income Superannuation Tax Offset, which benefits those earning less than $37,000, Mr Abbott is understood to have criticised Mr Morrison for wanting to restore the measure that he had scrapped in 2014 when the mining tax was repealed.

“Tony argued that we had suffered political pain for getting rid of it and we won’t get any credit for putting it back,” a source said.

Another said Mr Abbott “was basically arguing that the lowest paid should subsidise the wealthy”.

One female regional Liberal MP who was at the meeting of about 10 MPs, was one said to be “shocked” at his proposal to scrap the policy. Sources said she pushed back against Mr Abbott, saying the policy benefited women and part-time workers, and the government would suffer enormous political damage if it cut the $1.6bn policy to help wealthy superannuants.

It is understood Mr Morrison and Ms O’Dwyer were supported by Fisher MP Andrew Wallace and North Sydney MP Trent Zimmerman in arguing for the offset to remain in place.

The meeting also canvassed lifting the non-concessional cap to $1m. Sources at the meeting said this received a “sympathetic” hearing from Mr Morrison and Ms O’Dwyer. Mr Zimmerman, and conservative MPs George Christensen and Tony Pasin, also argued in favour of lifting the cap.

A spokesman for Mr Morrison said: “The Treasurer and Minister for Revenue and Financial Services have been consulting with colleagues on the government’s superannuation measures and welcome the continued positive discussions that have been taking place.”

Mr Abbott did not comment.

Herald Sun

31 August 2016

Terry McCrann

THE treasurer’s absolutely bull-headed refusal to reconsider his superannuation tax changes — other than in the very narrow context of a negotiating tactic with his own backbench — is a very, very, bad sign of the quality of policy more broadly we can expect from this Turnbull-Morrison government.

It should have been clear from budget night — indeed it should have been clear well before budget night, inside treasury and Scott Morrison’s office, if not his head — that the proposals added up to very bad policy and had to be changed, comprehensively and cohesively.

No, not changed because of the squeals of pain and outrage from high-income earners or those who had built up large multi-million dollar super balances, but changed for two very important functional reasons.

The first and most important was not to end up throwing the ‘baby’ out with the ‘bathwater;’ that for the sake of saving a few billion dollars upfront, you ended up compromising the entire purpose of the superannuation system and the tax concessions.

To remind the treasurer: this is, simply, to get as many people entirely or partially off the old age pension in future years, in future decades.

It would not simply be pointless but an utter disgrace, to have multi-billion dollar tax concessions each year, while also mandating the injection of over $20 billion a year into the pockets of fund managers and investment advisers, if all you ended up with was retirees being able to binge their super before spending the rest of their lives on the taxpayer pension.

The second reason why the budget proposals were bad policy is that they were proposed in a vacuum.

The government wants to put relatively low limits on how much people can put into super; while also increasing the taxation of the money that ends up in there anyway.

At the same it is leaving in place the low-tax regimes that apply to super’s two biggest competitors — negatively-geared investment, not just property but also into shares; and the capital gains tax-free family home.

As sure as night follows day, as sure as reality ultimately wins out over wished-for fantasy, people will in future double-down on negative-gearing — including inside their super funds — and also ‘invest’ more in their family home and stay in that home longer. It was almost as if Morrison brought down a budget deliberately designed to pour money into the pockets of property speculators and real estate agents — while imposing higher tax burdens and bigger budget deficits on the backs of his children and grandchildren, whose eyes he wants to be able to keep looking into.
Prime Minister Malcolm Turnbull and Treasurer Scott Morrison. Picture: AAP

As I noted on budget night — in accepting the inevitability of getting some wind-back of Peter Costello’s boomtime generosity — the government had set the two key limits too low. That was so, especially in the context of the ‘new normal’ of very low interest rates.

At a 3 per cent earning rate, the $1.6 million maximum tax-free super pension balance would generate only $48,000 a year as against between $22,700 (single) and $34,200 (couple) from the taxpayer pension.

Yes, the $1.6 million is per person, but Labor’s similar proposal would allow annual super pension income up to $75,000 to be tax-free. That’s more realistic, more reasonable.

The government should either adopt that approach or lift its tax-free ceiling to $2.5 million, which at a 3 per cent earning rate would be the equivalent.

Far more importantly, how does anyone in future even get to the $1.6 million in the context of the absolute limits to contributions that Morrison wants to impose: the $25,000 a year pre-tax ($21,250 actually into the fund) and the $500,000 lifetime maximum after-tax?

HOW can you on the one hand say that $1.6 million is an appropriate maximum sum to fund a lifetime in retirement, but accompany it with rigid contribution limits that make it impossible to actually get to that figure?

To say nothing of the good public policy objective of allowing — if not exactly encouraging — people in their early 60s to sell their family home and put, say, $1 million into super as a one-off?

It’s been nearly two months since the election. A competent treasurer, with an objective of merging good policy with effective politics, would have spent the time reworking the entirety of his super package, so that he would really have been able to confront first his backbench and then the parliament with well thought through basic good policy.

Instead Morrison has done the exact opposite: stuck his head in the sand and approached the issue as someone negotiating a deal where you want to give away as little as possible. This goes to the broader issue of leadership at the top — that of Morrison and the prime minister.

Exactly seven weeks ago, two weeks after the election, I suggested that everyone take a very deep breath and step back.

There was no need to rush to try to implement policy, whether election promise or left hanging from the budget. That in the coming weeks of the winter hiatus, this was the time for the PM to allow policy to be reconsidered, refined, and ideally made best ‘fit for purpose.’

What Morrison’s approach to the super mess demonstrates is that the first two months of the new term has been a complete waste of time.

That has been depressingly reinforced by Turnbull’s supposed 25-point action plan. Most of the proposals have more whiskers on them than a grizzly. They include such profoundly important measures as ‘registration of deaths abroad.’

We knew before the election that we had a dud — a political and policy dud — as PM. Since the election, the treasurer has made it his singular duty to convince us it’s a two-fer.

It’s going to be a very long and dispiriting three years. If we get that far.

The Australian

30 August 2016

David Crowe Political Correspondent

Liberal MPs are biding their time on their disputes with Malcolm Turnbull and Scott Morrison over free speech and superannuation tax hikes, deciding yesterday to avoid raising the divisive issues at a meeting where the economy took priority.

The government’s $6 billion increase in taxes on super went unremarked during the Coalition partyroom meeting yesterday despite fury about the changes among some of the government’s own supporters and a backbench push to soften the final reform.

The Treasurer assured MPs they would have a chance to discuss the super package before the next partyroom meeting, scheduled for September 12, but there were no deliberations yesterday in the full meeting or in earlier committee briefings.

The issue has been referred to the backbench committee on economics and finance, which is chaired by incoming NSW Nationals MP Andrew Gee with Queenslander Scott Buchholz as its secretary.

MPs are hoping to use the committee to water down a $500,000 lifetime cap on post-tax super contributions , with Liberal National Party senator Ian Macdonald warning that he had concerns over the “retrospective” measure because it would apply to savings accrued since July 2007.

LNP MP George Christensen has threatened to cross the floor if the super package is not changed while Victorian MP Jason Wood has called for the lifetime cap to be increased to $1 million.

The overall package raises taxes by $6bn and uses half of this to fund more concessions for lowpaid workers, while the remaining $3bn boosts the budget bottom line. Heavily amending the lifetime cap would sacrifice about $550m of the new revenue but MPs are trying to find an alternative saving.

While some MPs also want amendments to section 18C of the Racial Discrimination Act on the agenda, arguing the law restricts free speech by putting sanctions on remarks that offend or insult, they are also waiting for another day to air their concerns.

Liberals have called 18C a fundamental problem that offends the party’s philosophy but nobody aired any concerns about the law in the partyroom yesterday.

The government’s $6 billion increase in taxes on super went unremarked during the Coalition partyroom meeting

The Australian

27 August 2016

by Debra Cleveland

With Parliament resuming next week, the battle lines over the Turnbull government’s proposed budget changes to superannuation are drawn. An offer from the Labor party – to accept the $500,000 lifetime cap on non-concessional (after-tax) contributions in return for other compromises – has been rejected, leaving Treasurer Scott Morrison to face two other fronts.

He’s already grappling with backbenchers opposed to the $500,000 cap as they say it’s retrospective (applying from July 1, 2007). And while the Greens will support a backdated $500,000 cap, they won’t back the higher $750,000 Morrison brought to the table as a compromise this month.

At stake are $6 billion in budget savings and $3 billion in new initiatives.

Morrison said in February key drivers of potential super reforms were stability and certainty, “especially in the retirement phase”. This week he added: “I stand by everything I said for the simple reason that the retirement phase remains tax-free. The retirement phase account, which under our proposal [will have] a transfer balance cap, will mean that 99 per cent of people who have balances less than $1.6 million will remain absolutely in exactly the same situation.”

There is deep anger among many retirees and savers who feel their plans have been scuppered even though they were following the rules.

Labor said this week it would accept the $500,000 lifetime cap on condition it was prospective (applying from budget night). Its solution to lost revenue was a suggestion to increase the pool of high earners paying 30 per cent (rather than 15 per cent) super contributions tax. It proposed the higher tax kick in for those earning $200,000 a year, not $250,000. It also wanted to ditch other measures including being able to contribute to super to age 75 without the work test, tax deductions for personal contributions and catch-up concessional (pre-tax) contributions.

No matter how the super deal is sliced and diced, the bottom line is that there will be fewer tax concessions and lower limits on how much savers can contribute to super.

Advisers say Australians have become far less confident in super as a savings vehicle thanks to constant political tinkering (on both sides of Parliament). Will Hamilton, CEO of Hamilton Wealth Management, says: “It has undermined confidence in the system.” Colin Lewis, senior manager strategic advice at Perpetual Private, agrees: “Constant changes have perpetuated the uncertainty of the super system.”

Deep anger

But both say super remains the most tax-effective investment vehicle around – even after the changes.

Labor said this week it would accept the $500,000 lifetime cap on condition it was prospective (applying from budget night).

There is, however, deep anger among many retirees and savers in the middle of complex super strategies who feel their plans have been scuppered even though they were following the rules.

Retiree Paul McCarthy says: “It should be forcefully rammed home, by all concerned with fairness, good policy and good politics, that only by making the $500,000 cap prospective will everyone be treated equally. Because individual after-tax contributions to super of up to $540,000 have been permissible, and because retirees over 60 have been able to freely withdraw unlimited lump sums and then contribute again, there will be many who have exceeded either of these proposed contribution caps while nevertheless still having total current balances well below them!

“So inherent unfairness arises from the retrospective counting of past contributions and the consequent blocking of investors’ future contributions, not from the size of any cap that the government chooses.”

Fellow retiree and retired actuary Nathan Potaznik adds: “The absence of grandfathering provisions is grossly unfair. It also stands in stark contrast to when the former Parliamentary Super scheme was closed to new members in 2004, with the then existing members continuing with the same benefits. It seems that grandfathering is just fine for parliamentarians but not for ordinary citizens.”

The key message to savers is to make the most of what you can do, and start early. The proposed concessional (pre-tax) contribution cap of $25,000 a year is lower than the current $30,000 for those under 50 and $35,000 for those 50 and over. The cap is indexed to wages growth, in $5000 increments. And the plan is that if you don’t make the full $25,000 contribution each year, you can “catch up” in later years.

Remember that the $1.6 million cap on the amount in pension phase where earnings are tax-free is per person. A couple could have $3.2 million in pension phase and pay no tax on earnings.

As Hamilton says: “Everyone’s focusing on being taxed on anything above $1.6 million in pension phase. But the tax is on the earnings on the excess, not the excess itself.” So if a couple had a combined $3.3 million in pension phase, they would face tax (a maximum 15 per cent) on earnings generated by the excess $100,000. They wouldn’t actually pay tax on the $100,000 itself. Lewis points out that thanks to franking credits, earnings tax is often more like 9 per cent, not 15 per cent.

The lifetime cap (whatever the final figure is) will curtail the ability of older Australians to make big top-up contributions to super. Putting more into super later once mortgage and school fee expenses decrease has been the traditional pattern. This will have to change, advisers say.

The Australian

30 August 2016

Judith Sloan Contributing Economics Editor

There are two classes of citizens: public servants and pollies, and the rest of us.

It was always going to come out that the real rorts and costs in the superannuation system are the public sector defined benefit superannuation schemes.

Just ignore Scott Morrison’s assurances that “commensurate measures” will ensure the privileged ones on defined benefit schemes will be treated like everyone else; it’s complete twaddle and he knows it.

Or he should know it, unless he has been hoodwinked by his bureaucratic advisers who are, almost to a man and a woman, beneficiaries of these gold-plated schemes.

Let us first consider constitutionally protected employees. They include judges, tribunal members and senior state public servants. As their titles suggest, they won’t be affected at all by the changes to the taxation and regulation of superannuation announced in the budget.

When Peter Costello introduced his superannuation surcharge tax, a group of judges simply went to court — presided over by another group of judges — to ensure the tax didn’t apply to them. Surprise, surprise, they won.

So for the select group of constitutionally protected employees, life is unaffected and they can look forward to their lavish pensions in due course. No “commensurate measures” for this lot.

For others who are members of (untaxed) defined benefit schemes, at worse there may be an imposition of a few grand of extra taxes for those earning more than $100,000 a year in retirement. But this impost comes nowhere near making the treatment of these pampered pooches equivalent to people who have had to work hard and save to accumulate their superannuation balances.

There are a variety of defined benefit schemes for public sector workers. Many of them are closed but some continue to this day.

The generosity of these schemes varies. Defined benefit schemes used to operate in the private sector for high-paid executives , but they have been closed for more than 20 years. Note also that few of the private defined benefit schemes paid retirement pensions: beneficiaries were handed a multiple of their final salary and sent on their way.

Top of the pops of the public sector schemes is the old parliamentary scheme, with ex-pollies earning up to 75 per cent of their highest salary indexed by movements in parliamentary salaries. Before 2001, a 30-year-old retiring (or defeated) politician could qualify for a pension — think Natasha Stott Despoja and Bill O’Chee — defying the rule about accessing superannuation only on reaching preservation age.

The scheme was completely closed in 2004. And note that neither Malcolm Turnbull nor the Treasurer are members of this old scheme. But they do take advantage of an employer contribution of 15.4 per cent, whereas those in the private sector have to make do with 9.5 per cent. You know it makes sense.

There are also some generous parliamentary schemes at the state level. And the schemes covering judges and magistrates are to die for — although if you do die, your spouse or partner will get about two-thirds of your indexed pension for the rest of their lives.

Consider the old Commonwealth Superannuation Scheme for federal public servants that was closed in 1990. (Another defined benefit scheme was put in place, the Public Sector Superannuation Scheme, to replace the CSS. The PSS was closed only in 2005.)

Most of our fearless policy advisers will be members of the CSS. For long-serving employees, the CSS pays out over 50 per cent of final adjusted salary, indexed by the consumer price index. Under this scheme, members could make zero contribution, although contributions up to 5 per cent after tax were permitted to boost final retirement income.

The fact salaries of senior public servants have soared in recent years turns the CSS into a truly princely arrangement.

There is an additional wrinkle to the scheme that knocks it out of the ballpark.

When the system of compulsory superannuation was first introduced, members of the CSS were awarded an additional contribution of 3 per cent of salary to be deposited into an accumulation account. From that point, CSS members could salary sacrifice additional contributions to this accumulation account, free of any of the constraints that apply to workers in the private sector. (This wrinkle also applies to members of other public sector defined benefit schemes.)

What this has meant is that the entire concessional contributions cap has been available to these lucky ones because there is no estimate of the monetary value of the notional annual contribution made on their behalf.

So a current CSS member aged 58, say, can make a $35,000 pretax annual superannuation contribution , whereas an employee in the private sector must take into account the employer contribution when calculating the amount that can be salary-sacrificed as a concessional contribution .

It is a complete disgrace, but the practice has persisted for years and years — I guess because the public servants never bothered to advise the politicians to close the loophole .

But if you really want to smell the putrid stench of hypocrisy, consider the government’s decision to grandfather these schemes. When the CSS was closed to new members, all existing members were allowed to remain within the old scheme and to continue to enjoy all its benefits. Ditto the parliamentarian scheme.

It was not as if there wasn’t an alternative. CSS members could have been transferred to a less generous accumulation scheme, with only their CSS benefits to that point preserved. But the government of the day decided against this action. The same argument applied to the parliamentarian scheme.

So here’s the real rub: grandfathering is fine for public servants and parliamentarians, according to politicians. But when it comes to mere mortals seeking to save for their retirement, grandfathering is so yesterday.

Indeed, it is not just the case that grandfathering is out of fashion ; there is a need to look back into time to make sure that members of accumulation schemes have not contributed too much of their post-tax savings. Indeed, Revenue and Financial Services Minister Kelly O’Dwyer told me that she wanted to reach further back than July 1, 2007, but the integrity of the records couldn’t be assured. She was fearful there could be two classes of citizens without this retrospectivity.

Kelly, there are two classes of citizens, but it has nothing to do with backdating regulation. There are the privileged public servants and pollies and the rest of us.

And the cost of running these defined benefit schemes is soaring as interest rates fall — in much the same way that $1.6 million doesn’t generate the income it once did.

The total superannuation liability of the commonwealth (for its present and former employees) will rise by close to $19 billion across the budget forward estimates , culminating in a total figure of $195bn in 2019-20 .

Any budget savings made as a result of the government’s budget superannuation changes are completely swamped by the burgeoning liabilities associated with the defined benefit schemes.

It’s time to return to the drawing board.

To mere mortals seeking to save for their retirement, grandfathering is so yesterday.

AMP (AMP) today booked a net profit of $523 million for the six months through June, a 3 per cent increase year-on-year. The group said its underlying profit was down 10 per cent as higher claims in its wealth protection business and volatile investment conditions hampered earnings.

Revenue, however, slumped 29 per cent to $6.1 billion during the period.

AMP shares opened down 5 per cent at a five-week low of $5.50.

The slide in revenue came as cashflows into AMP’s Australian wealth management business dropped by 50 per cent to $582m, down from net cashflows of $1.15bn the same time last year. AMP said its weak retail and corporate super platform net cashflows were a product of investment market volatility and weaker investor confidence given uncertainty around proposed changes to superannuation.

“AMP Capital, AMP Bank and our New Zealand business have performed strongly, while Australian wealth management has demonstrated resilient performance in a difficult market environment,” chief executive Craig Meller said.

“While first half claims experience was poor, we continue to focus on improving the outcomes for customers and shareholders in our wealth protection business, with actions underway to improve capital efficiency and reduce volatility,” he said.

Mr Meller said AMP would be overhauling its insurance business to stem the tide of claims. The wealth protection arm booked operating earnings of $47m, down from $99m a year go.

“To address performance in the insurance business AMP is strengthening income protection assumptions, repricing, continuing the transformation of claims management and accelerating our capital management initiatives,” Mr Meller said.

AMP has over 5,400 employees and manages more than $220bn in assets and will pay a 14c interim dividend, in line with the prior year’s final dividend.

Liberals MPs told The Weekend Australian their constituents wanted greater concessions than the Treasurer’s mooted proposal to lift the $500,000 lifetime cap on post-tax super contributions to $750,000 in order to soften the impact on workers and retirees.

With more talks scheduled for the week ahead, Mr Morrison is being asked to lift the cap to $1 million in the hope of ending the ­dissent over the policy, so it can be fast-tracked through the Coalition partyroom and put into force.

Angry at the way the super tax hike has been handled since the May budget, government backbenchers said a substantial compromise would be needed to assure Liberal Party supporters that their complaints had been heard and acted upon.

The proposal to lift the cap to $750,000 was only one option in the talks with backbenchers over recent days, as Mr Morrison and Financial Services Minister Kelly O’Dwyer try to test the ground for a compromise before parliament meets on August 30.

Jason Wood, the Liberal MP who holds the marginal seat of La Trobe in Melbourne’s outer east, said a higher threshold was needed to meet demands from voters.

“I am keen to lift the $500,000 cap to $1 million, as I think this is fair,” he told The Weekend ­Australian.

“I am pushing for higher, as that is what my constituents want. There is a great deal of consult­ation and seeking feedback.”

Other MPs said the signals on the lifetime cap were being sent to test the backbench mood, but would not be enough to silence complaints when the Coalition partyroom holds a crucial meeting to approve the package.

Strong critics of the super tax increase, including former cabinet minister Eric Abetz, have kept up their warnings against the ­reforms, while industry groups are calling for more detail before ­deciding on their position.

A more significant compromise proposal is to scrap the planned start date for the lifetime cap, July 2007, to fend off accusations of “retrospective” taxation, but this would sacrifice most of the measure’s $550m in forecast tax revenue over the next four years.

Mr Morrison and Ms O’Dwyer made no comment yesterday on their consultations. The super package would raise $6bn but uses half of this to fund greater super benefits for parents returning to the workforce and workers on incomes of less than $37,000 a year, leaving $3bn to improve the budget bottom line over four years.

The government is insisting that any changes to the super tax revenue would have to be offset by savings elsewhere in the portfolio.

MPs warned against paying for the compromise on high-end super taxes by scaling back the benefits to ordinary workers from the Low Income Super Tax Offset. “You couldn’t possibly do that,” said one Liberal.

Super fund groups welcomed indications that the government may be considering changes to its budget measures but said they did not go far enough. While some groups want to increase the proposed $500,000 post-tax cap, there is widespread agreement that the more critical issue is to ­retain the current caps on concessional contributions, which are proposed to be cut from $30,000 a year, and $35,000 a year for people over 50, to $25,000 a year.

“We would welcome increased flexibility around the non-concessional lifetime cap, whether it be through an increase in the cap or by specific carve-outs,” Andrea Slattery, the chief executive of the Self Managed Super Association, said yesterday. “We would welcome a shift in start date of the measure but we understand any changes would have significant revenue impacts.”

She also warned that there would need to be an analysis of any proposed “carve-outs” for lifetime events such as divorce.

The Weekend Australian understands there will be no special treatment for funds received from inheritances. Simon Swanson, the chief executive of ASX-listed wealth management company Clearview, said an increase in the post-tax contribution cap would allow ­people who had interrupted work patterns to “catch up” in saving for their retirement.

“An increase of the contrib­ution cap to $750,000 would give those people who leave the workforce for an extended period a chance to catch up, thereby ensuring they don’t need any support from the pension,” he said.