9 November 2016
Judith Sloan | Contributing Economics Editor | Melbourne
The government knows its superannuation legislation is deeply flawed. Its efforts to contain the consultation process — allowing a week for parties to comment on hundreds of pages of new law — haven’t prevented those who actually understand these things to declare much of it is unworkable.
Where tax legislation language is appropriate, the new laws use inappropriate accounting concepts. The rules contain unrealistic start points and maximise the compliance costs associated with the transfer balance cap of $1.6 million.
For those with several superannuation accounts, including one providing a defined-benefit income stream, expect to be unfairly treated. By using the one multiplicand (16) of annual pension income irrespective of age to calculate the implied transfer balance amount, anyone over the age of 70 is essentially done in the eye.
But it is good for the public servants who have given the government such dodgy advice, who will retire on unimaginably generous money courtesy of a recent salary increase and the benefit from the new rule.
But here’s the thing: the government doesn’t care. In particular, the responsible minister, Kelly O’Dwyer, doesn’t care. All she wants is the legislation to be rammed through parliament and she will do almost anything to achieve this dubious objective. The fact that, in due course, there will be many more older people on the Age Pension doesn’t worry her. She will be gone by then.
The fact there will be even higher taxes imposed on superannuation in due course because the Liberals were more than happy to impose additional taxation on current and retired superannuants to the tune of $6 billion over three years won’t bother her either.
She doesn’t care about the extraordinarily high compliance costs or the fact the changes benefit the industry (read union) super funds at the expense of self-managed superannuation funds. She’s from the Graham Richardson school of politics — whatever it takes.
And then we have the Labor Party wheeling and dealing, even though the super policy it took to the election was a Harry met Sally policy: we’ll have what they are having and book the same savings.
Now it turns out that this was actually a bit of a porkie and Labor wants to impose some further changes that will raise an extra $1.4bn over the forward estimates.
Labor Treasury spokesman Chris Bowen wants the annual non-concessional contributions cap to be $75,000 rather than $100,000 and the 30 per cent contributions cap to kick in at an adjusted salary of $200,000 a year rather than $250,000.
And Kelly can say good night to her carry-forward arrangements in relation to unused concessional contributions as well as eliminating the work test for older people. These were really the only sweeteners in the Liberals’ super package announced at budget time, apart from the pointless low-income superannuation tax offset.
All the time, Liberal backbenchers stay mum, in part because most wouldn’t have a clue and in part because those who should object are more worried about their career prospects than prosecuting the case for lower taxes and small government.
The only ray of hope is that Malcolm Turnbull regards the changes demanded by Labor as a bridge too far (and Labor won’t budge) and that enough crossbenchers won’t co-operate.
Going back to the policy drawing board would be the best outcome at this stage.