9 May 2018
After three years of hitting people saving for their retirement, last night’s budget contained some measures to make their life a bit easier. It will also pave the way for the Turnbull government to go to the next election with a clear point of difference with Labor on superannuation policy.
The government will encourage the Australian Taxation Office to find people’s lost super and send it to their active super account.
It claims the move will deliver almost $6 billion to about three million Australians in the first year it starts — from July 1, 2019.
The government will ban exit fees from superannuation accounts for people wanting to change accounts and stop super funds from forcing people under 25 from having to take out life insurance.
If they want to they can opt into life insurance, but they won’t be automatically put into life insurance policies by their super fund.
It is also capping the fees on super accounts with balances under $6000 at 3 per cent. This is estimated to save them around $570m in fees in the first year.
It is marginally improving life for retirees by giving them a one-year exemption from the work test, so that people aged between 65 and 74 can put more money into their super — provided their total super balance is below $300,000.
It is also increasing the amount age pensioners can earn without affecting their pension from $250 to $300 a fortnight.
For those who qualify, it is also expanding the pension loans scheme to people on the full pension and self-funded retirees.
It is very modest pickings, but after the big hits of the past few years when the assets tests for pensioners was made stricter and the super sector was hit with major tax changes, last night’s budget reflected the need to get the retirement saving sector back on side.
It also confirmed that the federal government planned to move the compulsory superannuation guarantee up from the current 9.5 per cent to 10 per cent in 2021-22, rising to 12 per cent by 2025.
Surprisingly, this was done with no fanfare last night, but contained in the budget papers.
While the government has worked hard to play down the impact of the big changes to super announced in the May 2016 budget which came into effect last year, the fact is that the sheer scope of the measures sent fear through the broader sector that each budget was a potential open season on people saving for their retirement.
The good news is that last night’s budget represents a cession of the rhetoric of the past few years that the super system, which had been boosted by the Howard/Costello government, was far too generous and needed to be reined in — and that people who were moving heaven and earth to put their savings into super were potentially rorting the system.
Given that the bulk of people affected by the changes were Liberal voters, who have long memories (and now short arms when it comes to donating to the party), last night’s budget was about shifting gears and painting the Liberal-National government as a friend of people saving for an independently funded retirement.
Financial Services Minister Kelly O’Dwyer is now assuring the industry that a Coalition government will go to the election promising no new taxes on superannuation.
While this sounds good, there is always the memory of 2013 when the Coalition also went to the election promising no new negative unexpected changes to superannuation without consultation — only to renege on that promise in spades.
Save Our Super founder Jack Hammond recently pointed out that there was some hypocrisy in the government painting itself as a friend of the super savers given the changes it announced.
That said, voters will have no option but to believe the Coalition on its policy on super, particularly those who may be hit by Labor’s promise to scrap tax refunds for dividend imputation — not to mention its promised removal of negative gearing on existing houses and a cut-back of capital gains tax benefits.
In his budget speech, Scott Morrison said the government would, “oppose unfair tax grabs on retirees and pensioners by enabling everyone who has invested in Australian companies that issue franked dividends to keep their tax refunds”.
Hardly a resounding election cry, but at least last night’s budget began a process of repositioning the Liberal-National government as one which is encouraging saving for retirement, which is well overdue.