4 July 2016 12.00am
Treasurer Scott Morrison has been urged to stay the course on controversial changes to superannuation in the pre-election budget amid pressure from the Coalition partyroom to ditch a measure that helped fund its signature corporate tax cuts.
Peter Collins, the former NSW treasurer and opposition leader, said the Coalition had already paid the price for the proposed changes and would set back the job of budget repair by abandoning the changes after the result.
Mr Collins, who chairs the not-for-profit superannuation fund peak body Industry Super Australia, said it was unlikely the proposals to reduce concessional and non-concessional contributions caps and tax earnings on funds with more than $1.6 million of assets in the pension phase were a significant factor in the election result.
And any impact would have been countered by the Labor Party’s proposal to restrict negative gearing and capital gains tax concessions on residential property.
The government faced a storm of protest from sections of the retirement savings industry over the changes, which ended the tax-free status of super fund earnings introduced by Peter Costello in 2007.
Opponents argued the changes were retrospective because they applied a new $500,000 lifetime cap on after-tax superannuation contributions that was backdated to 2007 and reduced the tax-effectiveness of assets above $1.6m in an individual fund.
Setting those new caps was expected to hit middle-aged, middle-income earners hardest because it was typically in the last years of their working lives that people emerged from the burdens of paying the mortgage and schooling their children and could afford significant salary sacrifices and post-tax contributions to super to self-fund their retirement
The changes, estimated to generate $2.9 billion for the budget, as well a $3.9bn crackdown on corporate tax avoidance, were designed to fund a lowering of the corporate tax rate from 30 per cent to 25 per cent over the next decade.
Labor adopted the Coalition’s budget savings in the final days of the campaign and has its own proposal that allows up to $2.5m in a fund and taxes earnings above $75,000 at 15 per cent.
The changes were not strongly opposed by heavyweight bodies, including the Financial Services Council, which represents the wealth arms of the major banks as well as institutions including Perpetual, AMP and BT Investment management.
Mr Collins echoed support for the changes from superannuation bodies that had labelled the Costello-era changes as “unfair and unsustainable’’, and said Mr Morrison would make his budget repair job harder if he ditched his changes.
“For any high net worth individual the budget changes to superannuation caps would have been more than outweighed by the impact of the Labor’s negative gearing changes,’’ Mr Collins said.
“While unpalatable to the wealthy, they cancelled each other out.’’
Mr Collins, a former treasurer in Nick Greiner’s NSW government, experienced an election in 1991 that resulted in a hung parliament that eventually saw the Coalition turfed out in 1995.
He said he did not think the super proposals had a major impact on the election, saying the length of the campaign and the dramatic improvement in Opposition Leader Bill Shorten’s campaigning were bigger factors in wiping out the Coalition’s 30-seat majority from the 2013 election.
The Self Managed Super Funds Association said it was looking forward to working with the government on its budget proposals, including the new contributions caps, and highlighting the role of super in building national prosperity.
Super funds face a list of potential major changes beyond the budget proposals, with Assistant Treasurer Kelly O’Dwyer bringing forward a review of the default fund system and seeking changes to the governance of industry funds.
With backing from the FSC, Ms O’Dwyer is seeking changes that would make it easier for retail funds to attract new members by removing or diluting the role of the Fair Work Commission in deciding which funds could be included in industrial agreements.
The current two-stage process is seen as favouring industry funds because their lower fees improve returns to members — one of the key selection criteria for the funds — and because only recognised employer and employee groups can advocate for those funds before the commission.
Mr Collins said only measures that would improve the returns to members should be advanced.
Industry funds are also sitting on a review of their governance arrangements by former Reserve Bank governor Bernie Fraser that was commissioned in exchange for support of Senate crossbenchers in opposing government moves that would have required industry funds to appoint a majority of independent directors to the board. Industry funds claim equal representation is a key factor in their continued outperformance.