Turned 60 on 2 June, and entered Transition To Retirement (“TTR”) – working full-time to increase super balance. My super is “only” $500,000″ but due to two divorces, I rent. I need to try to accumulate enough to buy something to live in, or face life-time renting. I am a fit, active, 60 year old. Like my parents and my uncle and aunts, I may live until I’m 90-95 years or older. I do not want to be reliant on housing from Fed Govt and taxpayers. Taxing TTR is bad enough – virtually negating any benefit or dramatically reducing it. Furthermore, if back-dated, means that people making that decision like me – will be disadvantaged when simply complying with the legal rules. Those rules were put in place for good reason. They have already assisted many thousands of Australians to be better prepared for the road ahead without salary or wages. Well done Save Our Super. Thank you for the initiative and representation of an otherwise silent mob.
Neil Chapman
I am a Self Funded retiree and am outraged by the proposed superannuation changes. I am neither rich or poor, but have arranged my retirement finances around the rules in place. Worst of all are the lies the government told us in that there would be no change in taxation arrangements to Super. I would be happy to pay some tax in difficult times but the $1.6M cap is far too low. I believe in the interests of fairness the existing rules should be grandfathered.
James Rowe
Bowral, NSW
I am happy to participate in any productive activities which may contribute to better ongoing stability for superannuation. As brand-new retirees, my wife and I are very annoyed and feel seriously disenfranchised by the recently proposed superannuation changes. Hence I have willingly joined the “Save Our Super” efforts, including the email petition. I sincerely hope that a massive groundswell of currently angry “grey power” people, and our future generations of “grey power” people, will bring about a realisation among politicians of all persuasions that our own futures are being savagely messed-with for political expediency. It must stop!
Daryl Toepfer
Castle Hill, NSW
I’m sick of Governments changing super. We save and try to salary sacrifice. We have transitioned to retirement and now they want to tax that. If they keep making changes, people will stop trying to get ahead and go back to relying on a pension. We are not high income earners. Between us we earn under 120,000 per year – but the superannuation changes will still affect us. It’s not fair.
Christine McNab
The Australian
6 August 2016
Grace Collier Columnist Melbourne @MsGraceCollier
The government will pay at the next election if its treachery continues
“I fear we will get slaughtered next election,” said the text, and it was hard to disagree.
The parliamentary term is just beginning but already Bill Shorten seems to be running the country by proxy, and the Liberals seem to be running on empty.
Who knows what the Turnbull government stands for or where it is taking us? More important, how many of its traditional supporters even care? The base has been slapped in the face one too many times.
At the election last month, Liberal voters fired a warning shot by voting against the party in the upper house. Without real change, next time the lower house votes will go elsewhere too. The government appears to be adopting Labor’s agenda and making a cowardly attack on its supporters in the process.
Realistically, what are the chances of the next three years going well? As for the government’s economic mantra, the best example of jobs and growth can be seen within the expanded cabinet.
Senior Liberals concede that at the next election, they will need to pay people to hand out how to vote cards. Where will the money come from? No one knows. Once the superannuation policy was announced, donations ceased; Malcolm Turnbull had to bail out his own election campaign.
All this, and branches around the country are now in open revolt. Tony Abbott’s foolish deficit levy was an insult begrudgingly endured, but the superannuation policy is madness and many will fight it to the death.
Take the federal electorate of Higgins in Victoria. According to several sources within the electorate, donations towards the sitting member, Kelly O’Dwyer , are drying up. According to insiders, there are two plans being floated, both designed to remove O’Dwyer because of her advocacy for the policy.
One suggestion is to put up an alternative Liberal candidate to challenge at the next preselection, due in 18 months. The other suggestion is to leave O’Dwyer in place and put up an independent to cruel the party’s chances of retaining the seat.
O’Dwyer is said to be panicking, which would be understandable. This isn’t a case of a few disgruntled nuff-nuffs having a rhetorical whinge. These people are substantial, with significant resources and serious intentions. Anyone they back is going to go a long way. O’Dwyer’s career is evidence of that. In the past, some have been disappointed with the representation in Higgins, claiming it has been inadequate. Now there is fury at O’Dwyer’s meek acceptance of the policy. Supporters feel O’Dwyer is not sticking up for the people who put her into the privileged position she enjoys today.
Former Liberal benefactor John McMurrick, who has resigned from the party recently, helped O’Dwyer for years, from the time Peter Costello stood down. McMurrick says he is “devastated at the way O’Dwyer has handled this matter, considering I have given her 200 per cent support” .
Fern Blackman, who worked for O’Dwyer as a booth captain in 2013, as well as in her campaign office for three months, resigned from the party. She says, “It’s just bizarre that the only people the government are targeting are their base. They are treating their friends very shabbily.”
O’Dwyer’s office says her campaign was well resourced and she won with a two-partypreferred swing of less than 2 per cent. Sources in her corner say the complaining should be disregarded because it is merely the “cronies” of Victorian Liberal Party president Michael Kroger agitating for a candidate Kroger may prefer and Costello may not.
Those interviewed deny this. “Do you think we are so stupid that we are going to do all this because of some problem between Kroger and Costello?” said one.
A group of MPs despise Kroger and ride on the coat-tails of their association with Costello, whom they greatly admire. However, skill doesn’t transfer by osmosis; none of these operatives comes close to matching Costello’s talent or performance. Can you imagine Costello waxing lyrical about the need to lower taxes while putting them up, advocating a policy because it hurts only the wealthiest 4 per cent or taking people’s retirement savings on the grounds the government needs the money?
When people are facing a reduced standard of living in old age because a government has broken its promises and is acting unfairly and retrospectively to harm them financially, this generates extreme anger. Petty participation in a political grudge between two men is of no interest to busy people.
For example, and for the purposes of disclosure, the government’s plans will disadvantage me, so I am motivated towards criticism; I am not the least bit interested that two men with whom I am barely acquainted don’t like each other. Readers can rest assured that in the interests of pushing for policy change, both the Costello and Kroger “factions” will be lambasted equally.
At this point, the government is giving every indication the policy will not be amended substantially. Before the election, it begged people to back off their criticism with promises of change later. Now, it claims it has a mandate to proceed with the policy unaltered. Treachery of this kind will not be forgotten.
The Australian
6 August 2016
Terry McCrann Business Columnist Melbourne
Scott Morrison is the last best and indeed only hope of the Turnbull government. It lives — brutally, maybe even just survives — or dies, in chaos and ignominy, on the Treasurer’s success or failure.
I do not mean or even just quixotically hope that Morrison can somehow succeed in waving some magical fiscal wand, slashing taxes and the deficit simultaneously and winning seamless Senate approvals.
Success in this contemporary economic and political context will be a far more modest affair. But any such success, limited as it might realistically be, will turn on Morrison aggressively projecting himself in this government and more specifically in this cabinet, as a 21st century version of the Paul Keating of the second half of the Hawke government in the 1980s.
Or to be more precise, as Keating subsequently projected himself and his role as being — perhaps in something of a posthoc rationalisation of his relentless stalking and ultimate toppling of someone who was easily Labor’s most successful prime minister and indeed the “bronze medal holder” in the pantheon of PMs behind the incomparable Robert Menzies and John Howard.
In essence Keating claimed that he became the PM-in-effect for the last four years of the Hawke government, providing both the policy grunt and political leadership in the PM’s “absence” . It is an interpretation that is a matter of some considerable contention.
Whatever the truth of that, Morrison has to become that Keating, of fact or fiction: because someone has to, given both the aimlessness and ineptitude of Malcolm Turnbull and the fact that there is quite simply no one else.
The PM’s party deputy, Julie Bishop? Pu-leeze . She’s too busy “projecting” herself into international forums, when she’s not attempting to do the same for a certain former PM.
It all comes down to Morrison and the absolute fulcrum is his superannuation proposals.
Now two weeks ago, I argued they had become the fundamental defining issue of his treasurership. Either he fixed the mess he unveiled on budget night or he announced his total unfitness to be treasurer.
That stands. But I would now take it to a broader and more defining level: fixing the mess — frankly, walking back from what he proposed — is the sine qua non of Morrison asserting himself into that more fundamental role of giving this government both policy cohesion and direction and political viability in the absence of the PM.
Turnbull’s , for want of a better word, performance in the 10 months leading up to the election was quite simply abysmal. As I wrote in April, he had proved himself to be a dud. In the month since the election, his performance has been depressingly worse. Not only has he “done” nothing in policy terms, not even just some articulation of where the Turnbull government would like to head; he’s given not the slightest indication that he’s spent the time working out that policy direction and a political strategy built around, but not exclusively, dealing with the Senate reality.
That in itself is just a continuation of his pre-election “approach” : as I’ve previously noted, in becoming PM, he was an example of “the dog who caught the car” — not having the faintest idea of what to do with it.
Pre-election he refused to engage in any meaningful, far less effective, way with the disparate individuals who comprised the crossbench, culminating in his “inspired” double-dissolution and Senate voting change tantrum.
Does anyone seriously believe that the “Sun King PM” of Bill Leak’s cartoons will deign to stoop to smooge with Pauline Hanson, who with her four senators is now the absolute fulcrum of getting any non-Labor /Greens legislation through the Senate?
The contemporary concern operates on two levels. The first is the drift and aimlessness; the second is not just the reality of letting the opposition fill the policy and political space left vacant, but even a willingness to do so. To let Labor and the Greens govern in effect from opposition.
In no small part this is because Turnbull finds it hard to disagree with what appeals to Labor and the Greens; further — and dangerously — he is likely to see, in various accommodations with either Labor or the Greens, the path through the crossbench complications.
This gives even greater heft to my point that the government must walk back from the worst idiocies of its super proposals; it would be all too easy to claim “success” in passing them essentially unchanged via a “Grand Coalition” with Labor.
As I argued two weeks ago, the great danger was a replay of the 2014 budget, when Labor was only too willing to pass tax increases — specifically, the high-income levy — but none or few of the spending cuts.
It’s bad enough that we are shaping up for an extended repeat. But worse, this process will start with “bad” tax increases, in the form of the super proposals.
They are mendable. Broadly, the two ceilings — the $1.6 million “retirement” pot and the $500,000 for after-tax contributions — need to be increased.
Morrison has first to accept they need major refinement. He also has to drop his hairychested silliness that any changes must be fiscally neutral. We need the “right” policy, not one that just “adds up” .
And “adds up” to absolutely no real fiscal point; for the changes will make four-fifths of very little real difference to the budget bottom line in the short term. But they would seriously damage it in the long term by encouraging even more investment in both negatively geared property and the family home, and by encouraging otherwise self-funded retirees to “retire” instead to the old-age pension.
For both the survival of the Turnbull government and for some hope of good policy that can also be politically effective, it is a case of Morrison or the bush.
He can prove he is fit to be both treasurer and PM, or we can start counting the days to Turnbull’s toppling.
Does anyone believe the PM will stoop to smooge with Pauline Hanson?
Australian Financial Review
Aug 3 2016 at 6:27 PM Updated Aug 3 2016 at 6:27 PM
by Joanna Mather
Tax arrangements for the million Australians who have self-managed superannuation funds will form part of a sweeping review of the $2 trillion retirement savings system.
In an attempt to guarantee value for money and prevent gouging, the government has asked the Productivity Commission to come up with ways to assess the efficiency and competitiveness of the super system.
In a report released this week, the commission said there was a belief in some quarters that operational efficiency of SMSFs should not form part of the exercise because they are so different to retail, industry and corporate funds.
But the commission decided SMSFs would be included wherever possible. In fact, consideration would be given to whether SMSFs face any unique barriers to accessing particular investment markets due to, for example, a lack of scale.
“Similarly, the commission will also look at how taxation is managed in SMSFs compared with institutional funds, and what implications this has for member balances,” a draft report said.
There were more than 550,000 SMSFs with about $590 billion in assets as at June 2015.
The commission noted that investment performance by SMSFs tended to be below other funds and they are also more expensive to run.
It said Australian Taxation Office figures suggested the estimated average operating expense ratio, as measured by operating expenses as a proportion of assets, for SMSFs was 1.06 per cent.
“ATO data indicate that smaller SMSFs have higher average operating expense ratios than larger ones.
“For example, over the 2010-14 period, the average operating expense ratio was in the range of four to 12 per cent for SMSFs with less than $100,000 compared with less than 1 per cent for SMSFs with over $1 million.”
Past studies have examined the impact of SMSF scale on their cost competitiveness, the commission said.
For example, a report commissioned by ASIC found that SMSFs with balances of $200,000 or more were likely to be cost competitive with APRA-regulated funds provided trustees undertook some or all of the administration themselves.
And balances over $500,000 could provide equivalent value for money on a full-service basis where administration has been outsourced.
The ASIC report also found SMSFs potentially become less cost competitive in the retirement phase, as member’s draw down on their balances.
“Participants to this study and previous inquiries, such as the Financial System Inquiry, emphasise that costs and fees are only part of the story: some people want the flexibility to pick their own investment options, some start with small funds but expect to expand them with asset transfers in the future, and some keep their costs to a minimum by doing much of the administrative work themselves,” the commission said.
The Australian
30 July 2016
Grace Collier Columnist Melbourne @MsGraceCollier
In Melbourne’s Malvern Town Hall on June 20, about 250 people gathered for a Save Our Super meeting. On the stage sat three empty chairs representing Malcolm Turnbull, Bill Shorten and assistant treasurer Kelly O’Dwyer. The Prime Minister and the Opposition Leader had promptly declined the invitation to attend. O’Dwyer, the local member of parliament and the person with carriage of the superannuation issue, declined to attend at the last minute.
“Not only did she not attend, until mid-afternoon on the day of the meeting she had not even responded,” says Jack Hammond QC, founder of the community-based group Save Our Super. “Worse, the response only came after I phoned a senior member of the Liberal Party, advised that Kelly had not responded to earlier messages, and said it was a very bad look.”
O’Dwyer was contacted for comment but did not respond.
Hammond goes on to say, “In 1915, superannuation earnings were exempted from income tax, but now, for the first time since then, a government intends to tax the earnings on people’s pension savings accounts.”
In the past, O’Dwyer gave the impression she respected the savings of retirees. Consider this, in March 2013, from Hansard. It was part of a passionate speech based on letters from people who were worried that Labor might steal their super.
“We on this side have given an undertaking not to muck around with superannuation … We understand the importance of certainty when people are sacrificing and saving for their retirement. We understand the importance of good and responsible economic management so that the government does not have to put its hand in the pockets of the retirement savings of Australians. It is quite, quite wrong. That is why we will stand up for all Australians who want to work hard … and be rewarded for their efforts. They should not be penalised.”
Now, though, those on that side do intend penalising Australians who want to work hard. The Turnbull government is going to put its hands into their retirement savings. O’Dwyer no longer thinks it is “quite, quite wrong” to do so. In March this year, O’Dwyer said: “No one has a right to a super tax concession. It is a gift that the government should only provide when it makes sense.”
A gift. Letting people keep their own money is now considered a gift by a Liberal government. This government can’t manage the economy well, at least not without taking these gifts away.
This week, on Sydney radio 2GB, Scott Morrison admitted as much. “This is a package that deals with fairness, sustainability, but above all it is also contributing to getting the budget back into balance.”
Above all. So there you have it. Taking money from retirees is essential because, above all, Turnbull and his team cannot do their jobs and cut back wasteful spending.
The Save our Super website lists the Treasurer’s “12 tax-free superannuation promises”. They make for damning reading. It is hard to pick a favourite, but this one from a doorstop in May last year is as good as any: “The government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future … unlike Labor, we are not coming after people’s superannuation.”
Supporters of the changes point to people who have millions in super, and ask why their income should be tax exempt. First, these people have obtained the money lawfully; and, importantly, these people have done in good faith exactly what the government told them to do. Now they find themselves treated as tax dodgers.
Hammond says, “There are two basic principles of superannuation: trust and certainty.” He says a successful, fair superannuation system requires the government to accept these two principles. Trust in the system is destroyed when ministers make and break promises. Certainty is broken when governments change longstanding rules, then penalise people who have planned their financial lives around those rules. For this reason, when rules are changed, the existing rules must be grandfathered for those who have relied on them.
Readers who wish to fight the Turnbull government over this issue can do the following:
It defies belief that a Coalition government would act so foolishly. The question is this: exactly who came up with this stupid idea? The hunt is on, a team of insiders is collecting evidence and the answer is expected in the near future.
Australian Financial Review
July 28 2016
Sally Patten
Half of all self-managed superannuation fund trustees face a hit from the Coalition’s proposed super reforms, and the controversial plan to limit transfers to a super pension to $1.6 million will hit one in five over the age of 65.
Research by the SMSF Association and actuarial certificate provider Accurium found that 48 per cent of self-managed super fund trustees would have been affected by one or more of the super measures had they been in place in the 2015 financial year.
Since July last year, the median account balance of self-managed super funds that were at least partly in the pension phase rose 3 per cent. This suggests that the number of superannuants who stand to be hit by the reforms will be higher by July next year when they are scheduled to take effect.
Transferring super into a pension is a common strategy because earnings are tax free so long as regular withdrawals are made.
The research found that 70 per cent of self-managed scheme members who contribute more than $25,000 a year to super will not be able to take advantage of a concession offered by the government allowing savers to carry forward unused pre-tax contribution limits for up to five years.
SMSF Association chief Andrea Slattery said she was working closely with the government “behind the scenes” in an effort to try to amend some of the reforms. She conceded that Treasurer Scott Morrison was likely to proceed with the majority of the proposed changes contained in the May budget. But Ms Slattery argued that reducing non-concessional super contributions limit to $25,000 from $30,000 or $35,000, depending on the savers age, was too drastic.
“We believe there needs to be some re-thinking around the $25,000 cap,” Ms Slattery said. She also expressed concern about the complexity of administering the $1.6 million super pension transfer ceiling.
Even under the current rules, the proportion of couples in self-managed funds who have an 80 per cent chance of being able to afford a comfortable lifestyle in retirement has fallen to 70 per cent from 75 per cent a year ago, the research found. This was blamed on inflation and the dismal outlook for investment returns.
“The deterioration in the global economic outlook has, on average, led to lower investment returns. More capital is needed today with lower expected returns to support the same level of spending over retirement,” the research paper concluded.
The 4.2 per cent median return recorded by self-managed funds operated by older members in the year to June 2015 was considerably less than the 6.2 per cent average return of the previous five years.
The SMSF Association and Accurium found that if a 65-year old couple wanted to lead a comfortable retirement, which would cost $59,000 a year to fund, with a 95 per cent degree of confidence, they would need $1 million in super savings. If a couple wanted the same degree of confidence they could spend $70,000 a year in retirement, they would require $1.5 million in super savings. Self-managed fund trustees typically aimed to spend about $75,000 a year in retirement.
Grace Collier (“Super folly will cost Libs dearly”, 23/7) correctly identified some of the unfairness that the proposed caps on superannuation contributions and superannuation balances will cause for women. Similar issues will also apply to married couples where only one partner has superannuation or each has very unequal superannuation balances.
This may have arisen because only one partner worked or one had a better paying job, or because one partner made lump sum withdrawals to pay off a mortgage or to recontribute into the other partner’s fund to reduce administration fees.
Another possibility is that they have been planning for years to top up their superannuation when an investment property is sold.
There should be transitional provisions to allow couples (and others) who are seriously disadvantaged by the proposed, clearly retrospective, changes to rearrange their superannuation balances.
A more serious issue is the unworkability of the cap on tax-free balances. Not all assets in a fund earn at the same rate and some of the annual increase in a fund may be unrealised capital gain. For shares, that amount will vary daily. Who will decide which gains are taxable, especially if a person has more than one superannuation account? One thing is for sure, administration fees will rise.
A far simpler scheme would be to impose a tax on the actual earnings of the total superannuation holdings of each individual.
The relevant amounts can be easily calculated by the fund and forwarded to the contributor for inclusion in their annual income tax return if the tax-free limit is exceeded. A special concessional tax rate could be set for these excess superannuation earnings.
Surely the superannuation debate is being approached from the wrong direction.
Let people contribute as much as they want (after all, it is an investment in various activities of the country’s economy) but apply a modest tax to what is withdrawn.
At a time of good government revenues, John Howard and Peter Costello were over generous when tax was removed completely from the amount withdrawn from a fund on the basis that it had already been taxed, albeit at 15 per cent. Let’s say that the first $100,000 drawn down is tax-free, the majority would not be affected.
Then a tax of say 10 per cent could be applied to amounts between $100,001 and $300,000, and 20 per cent tax above that.
Applied to all superannuation pensions, whether from defined benefit schemes or others, this would be a much fairer process, particularly in relation to the extravagant pensions awarded to retired parliamentarians.
In your editorial (“Super solutions must be Prime Minister’s priority”, 22/7) you correctly highlight Janet Albrechtsen’s critique of the government’s failure to grandfather superannuation arrangements to budget night.
Unfortunately, a serious defect in Scott Morrison’s Treasury-concocted Robin Hood superannuation changes — taking from the wealthy to give to the poor — is that these taxed savings of the wealthy will gradually dwindle with time and their wealth will be redirected into other tax minimisation arrangements, while the cost of entitlements handed out to low-income earners will rapidly escalate, as all government entitlement programs have in the past, leading to greater budget deficits — such are the unintended consequences of little- though-out grandiose government plans seeking an appearance of fairness while attempting to raise more revenue.
Grace Collier’s elegantly written article clearly spells out how the heavy-handed nature of the Coalition’s proposed changes to superannuation will particularly deny middle aged women the ability to amass sufficient savings in superannuation to provide a reasonable retirement income.
In mathematical terms the Coalition has over-specified their model of change with too many constraints, such that few will be able to achieve the objective of a tax-free limit of $1.6 million in superannuation savings.
Grace is right; keep a tax free limit but “let people reach that cap in whatever way they can”.
Until I read Grace Collier (“Super folly will cost Libs dearly”, 23/7), I didn’t understand how bad are the Turnbull-Morrison super changes.
Come, come Grace Collier, self-reliance and personal responsibility are such old-fashioned virtues.
So, Scott Morrison is still our federal Treasurer and Mathias Cormann remains as Finance Minister. These two mugs should get together and form a Lotto syndicate, they must be the luckiest blokes in Australia.
