August 20, 2016
David Crowe Political correspondent Canberra @CroweDM Glenda Korporaal Associate Editor (Business) Sydney @GlendaKorporaal
Scott Morrison has hit another barrier in his bid to legislate a $6 billion tax hike on superannuation, as Liberal MPs insist on bigger changes to the divisive budget measure before they sign off on the plan when parliament resumes within weeks.
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.