26 April 2017
Glenda Korporaal – Associate Editor (Business)
The political impact of the Turnbull government’s proposed superannuation changes announced in last year’s budget is being felt.
It actually came home to roost in last year’s election with Liberal voters affected by the changes becoming disengaged and unhappy with the government, opting for minority parties in the Senate and cutting back on donations and electioneering support.
So much so that Turnbull himself had to put his hand in his pocket to help fund the campaign.
But anger at the changes among those most affected has continued to simmer and is now increasing as they work out how to rearrange their affairs — what they need to do under the old rules before June 30 and how things will change from July 1.
The issue is now erupting in the upmarket federal seat of Higgins in Victoria, held by Revenue Minister Kelly O’Dwyer, who was one of the people who spearheaded the changes as the Minister for Superannuation and Assistant Treasurer.
The issues have been simmering since the May 2016 budget and have nothing to do with the fact that she is on maternity leave.
They have to do with the fact that she — and many other Liberals — were apparently unconcerned that some people in her own electorate would be hit by the super changes.
Higgins takes in some of the country’s most affluent suburbs including Kooyong, Toorak and South Yarra.
While people can argue they are better off than many other people around the country, one would expect their local member to have some sympathy with their concerns.
While the Nationals ferociously defend the interests of their rural constituency, the Turnbull government introduced radical changes to super which hit middle and upper middle income aspirational Liberal voters, believing that those hit by the changes had nowhere else to go.
Well, they do.
As Jack Hammond QC told The Australian yesterday, he is being deluged by emails from Liberal voters who are “white hot with anger” at the changes.
He is the founder of Save our Super, which he set up after the May budget — not to stop the changes but to allow people who have arranged their affairs under the existing rules to grandfather them in some way.
The changes did not hit the seriously rich like Turnbull himself (“Mr Harbourside Mansion”), as putting a few more dollars into super is not something that worries people with his level of assets.
The main people clapping from the May announcements were the unions, industry super funds and Labor voters. The attitude from Turnbull, Treasurer Scott Morrison and O’Dwyer was that the changes didn’t affect that many people anyway.
The changes were sold with the very distinct tone that anyone who had been putting serious money into super — under the laws as laid down by a conservative government — was some sort of evil tax dodger or one of a few rich old men whose views didn’t deserve listening to.
For many who had been steadily putting extra money into super as they approached retirement, it seemed that the government was suddenly pulling the rug from under them, and snidely criticising them for planning their retirement and somehow rorting the system.
There was particular anger that the changes were retrospective.
No one is arguing that the existing generous superannuation system — particularly as it was boosted by the Howard-Costello government — did not need to be trimmed back.
But the May budget changes were far more radical than anyone expected and far more radical than anything proposed by Labor.
The system allowed people with super to pull money out tax-free (once they reached retirement). Once funds were in “retirement phase” their earnings were also tax-free.
It sounds generous, but — like a bank account — contributions to super are taxed on the way in at 15 per cent (up to a maximum of $35,000 a year) and the earnings on the account are being taxed at 15 per cent as they accumulate.
Extra contributions can be made to super but these have to be out of post-tax dollars. No one would argue that people should be taxed on the amount of money they take out of their own bank accounts, given they have paid tax on the money going into the account and on the earnings along the way.
And some tax concessions do have to be given to people in exchange for locking their money up until retirement, instead of spending it.
There was also anger about people with large superannuation balances being able to live tax-free in retirement — and this is a fair point.
But the limits on how much could be placed into super on a concessional basis have been steadily cut back from $100,000 a year to $30,000 a year for people under 50 and $35,000 a year for people over 50. And for people earning more than $300,000, super contributions were taxed at 30 per cent.
Before the budget, the Association of Super Funds of Australia had suggested at maximum of $2.5 million in tax-free super but the government went much further than expected with its $1.6m cap and a host of other changes.
The government is particularly vulnerable in Victoria, which has pockets of people with the highest average super balances.
As Hammond pointed out yesterday, purses and wallets are being shut in a way that is already affecting Liberal Party funding.
It might sound amusing, but after the Turnbull government has dumped on its own supporters in such an arrogant way it is not surprising that super is re-emerging as political tinder for tensions within an already divided party.