27 January 2020
Glenda Korporaal – Associate Editor (Business)
The Save Our Super lobby group has called on the federal government to grandfather any future negative changes to superannuation and abolish the $1.6m cap on the amount of money that can go into tax-free super retirement accounts.
In its submission to the federal government inquiry into retirement incomes, Save Our Super argues that the fall in interest rates since the 2016 budget has significantly reduced the income retirees can earn from savings since the $1.6m transfer cap was announced.
The submission argues that the cap, which was announced as part of a broad package of changes, including cuts to super contribution limits, should be either abolished or raised.
“The interest earnings from $1.6m is now almost 40 per cent lower than it was in early 2016,” the submission says.
“With the continuing drift of interest rates towards zero, whatever unexplained calculations arrived in 2016 at the $1.6m on the superannuation in retirement phase should be re-examined with a view to grandfathering the cap, raising it or abolishing it.”
Save Our Super was set up to lobby against the 2016 budget changes to super by a group including retired Melbourne QC Jack Hammond.
The organisation has consistently argued that it is a basic principle of the Australian taxation system that there should be no negative retrospective changes to tax and superannuation.
The 2106 changes were announced after the Tony Abbott-led Coalition went to the polls in the election of September 2013 promising not to make any negative changes to super during the first term of its government.
The Save Our Super submission argues any future negative changes to super must be grandfathered so that “those people who committed in good faith to lawfully build their life savings are not blindsided by policy changes with effectively retrospective effects”.
“Citizens need assuring that any future changes in policy will not have any significantly adverse effects on lawful prior savings,” it says.
Federal Treasurer Josh Frydenberg announced a review of retirement incomes policy last September.
The review is expected to report in June this year.
The SOS submission argues that the current compulsory super system should be recognised as a success in encouraging saving for retirement in Australia and reducing the number of people on the full Age Pension.
It argues that any assessment of the impact of super policies should consider the benefits of the compulsory super system and not just the narrow annual cost of super tax concessions.
“Instead of cost-benefit work, we see reporting which highlights only the estimated gross costs of retirement policy — expenditures on the aged pension plus problematic estimates of the ‘tax expenditures’ on superannuation,” it says.
“There is no measure anywhere of the fiscal and broader economic benefits in moving, over time, significant numbers of those age-eligible for the pension to a higher living standard in self-funded retirement from increased saving,” it says.
It argues that the review’s “highest priority” should be in establishing a fact base on the situation around retirement income in Australia that would include long-term economic modelling of retirement income trends and their social costs and benefits.
It argues that the current focus on the tax forgone from super tax concessions is “misleading” and “hugely overstates gross costs” and ignores other positive outcomes such as encouraging saving for retirement and reducing a potential drain on the Age Pension.
The submission also argues for a reform of the current compulsory super guarantee system.
It says the compulsory 9.5 per cent contribution to super, which is set to rise to 12 per cent, is too high for people on low incomes.
It says the current income level threshold for super contributions has been kept at the low level of $450 a month — a level set when the super guarantee system was introduced at 3 per cent in 1992.