Category: Media Releases

Superannuation changes will condemn middle class to the pension

 ipalogoMedia Release

Simon Breheny and Brett Hogan

The Turnbull Government’s proposed superannuation changes will condemn middle-income Australians to the Age Pension, according to a research paper released today by free market think tank the Institute of Public Affairs.

The paper, Strangling the Goose with the Golden Egg – Why We Need to Cut Superannuation Taxes on Middle Australia, which was written by Rebecca Weisser in collaboration with Henry Ergas, highlights how the government’s desperation for new sources of revenue to fund its spending habits is undermining the integrity of Australia’s retirement incomes system.

“Currently, middle class Australians can only expect income in retirement equal to 58% of their pre-retirement earnings, compared to nearly 90% for low income earners,” said Mr Simon Breheny, Director of Policy at the Institute of Public Affairs.

“The poor have the pension, the rich have alternative investments and the middle class will miss out again. The objective of the superannuation system should be for people to maintain their living standards in retirement, not imply that they should be grateful to be tied to the Age Pension,” Mr Breheny said.

The paper’s recommendations include moving to abolish taxes on contributions and earnings and instead taxing end-benefits in retirement at an individual’s marginal income tax rate, prioritising the reduction of fees and charges, and facilitating the purchase of private, defined benefit pensions for those who wish to purchase them.

“The compulsory superannuation guarantee will not help, given that the proportion of retirees on a full or part pension will remain at around 80 per cent over the next three decades according to the recent National Commission of Audit,” said Brett Hogan, Director of Research at the Institute of Public Affairs.

“Instead of citing ‘fairness’ to criticise people who attempt to provide for themselves, policy makers should acknowledge that private funds put aside for retirement represent deferred consumption, so flat and low superannuation taxes on contributions and earnings for everyone is actually good public policy,” Mr Hogan said.

A copy of Strangling the Goose with the Golden Egg is available here.

For media and comment: Simon Breheny, Director of Policy, Institute of Public Affairs, on 0400 967 382, or at, or Rebecca Weisser on 0438 645 562, or Henry Ergas on 0419 239 710.

For media coordination, please contact Evan Mulholland, IPA Media and Communications Manager, on 0405 140 780, or at

How to destroy superannuation – just ask Grattan

Last November 2015, the SMSF Owners’ Alliance, put out a media release regarding the Grattan Institute’s attitude to superannuation. In view of Grace Collier’s article in the Weekend Australian (20-21 August 2016, page 22) “Leftie think tank behind super grab – Why should Coalition policy be based on the Grattan Institute’s recommendations?”, Save Our Super thinks it is timely to revisit the SMSF Owners’ Alliance media release.

25 November 2015


An $11,000 cap on concessional contributions, as proposed by the Grattan lnstitute, would confine superannuation to being merely a substitute for the age pension rather than a vehicle for increasing savings for individuals and the nation.
This narrow approach defeats the purpose of superannuation. lf people can only save enough for retirement to be a bit better off than the pension then, rationally, they will spend their retirement savings as fast as they can and go on the pension. Where is the incentive to save more and be financially independent?
This is not the way to grow Australia’s retirement savings and give everyone the chance to live comfortably at a level related to their pre-retirement income, a concept known to economists as the ‘reasonable replacement rate’. This is generally accepted to be around two-thirds of pre-retirement income.

Grattan’s plan would throttle retirement savings and condemn millions of Australians to spend the last years of their lives in genteel poverty. Grattan quotes ASFA’s estimate that a retired couple need super savings of $640,000 for an “affluent lifestyle”. At a 5% return, that would give couples an income of $32,000 – hardly affluent.
It doesn’t allow for unexpected costs, such as surgery, house repairs or other necessities, that will run down fund balances. Nor does it allow for the likely high costs of care at the end of life which will have to be met by the taxpayer if people can’t afford to pay for themselves from their retirement savings.

As the Financial System Inquiry (FSl) noted, the biggest fear older people have is that their savings will not last all their lives. We suspect that Grattan really doesn’t like the idea of superannuation at all and would prefer everyone to be on the taxpayer funded age pension. Remember that when Labor announced their policy to tax super earnings above $75,000, Grattan said the limit should be $20,000 – about the same as the age pension. So in their view any income from savings above the age pension level should be taxed.

Superannuation is not a welfare system. lt is a retirement savings system that delivers important social and economic benefits to the nation. Grattan doesn’t see this distinction and seems to regard superannuation as a social engineering tool like the welfare system.
lf Grattan gets their way, Australia’s savings pool will be drained. There will be less money going into superannuation, less investment and fewer jobs – not least in the superannuation ‘industry’ itself. The corporations that back Grattan should think about this.

The Grattan Report repeats a couple of well-worn fallacies.
First, that the majority of superannuation tax concessions go to high income earners. Yes, they do, but high income earners pay proportionally more in income tax than they receive in concessions.
Grattan, and others, should acknowledge that higher income earners pay more tax. The Government’s ‘Better Tax’ website points out that the one third of taxpayers on incomes above $80,000 pay two thirds of income tax while the two thirds of taxpayers on incomes below $80,000 pay one third. ATO stats show that the top 20% of income earners pay 64% of income tax collected.

Second, Grattan comes up with a $25 billion cost to the budget of superannuation tax concessions. At least this is different to the usual $32 billion claim and moving in the right direction but it is just as flaky. As the Parliamentary Tax & Revenue Committee has been hearing, these numbers are not valid and even Treasury doesn’t stand by them.

Besides, mismanagement of the budget is not a reason to cut back on incentives for retirement savings. Governments need to get their real spending under control.

SMSF Owners believe the superannuation system is generally working well but can be improved. One way is to change the taxation of contributions. lnstead of everyone paying the same flat tax on contributions, there should be a flat (equal) tax benefit for everyone in the form of a rebate for super contributions keyed off an individual’s marginal income tax rate. This is the concept advanced in the Henry tax review five years ago, supported in principle by SMSF Owners in our Tax White Paper submissions and recently advocated by Deloitte Access Economics.

On our proposal, adjusting the front end taxation of contributions would allow the removal of taxes on fund earnings without affecting government revenue and boost tax-free retirement incomes so Australians can afford a comfortable and care free retirement. This would inspire Australians to save as much as they can, not as much as Grattan thinks they should.

lf there are to be changes made to the taxation of superannuation then they should be considered in the context of the whole tax system, including Australia’s highly progressive income tax rates. This is the outcome we are expecting from the current White Paper process which should deliver lower, simpler and fairer taxes for everyone.

Duncan Fairweather
Executive Director

SMSF Owners


IPA Media Release Logo

Institute of Public Affairs | Australia’s leading free market think tank

12 July 2016 (sic)


The Turnbull government should cut government spending or delay the introduction of its proposed company tax cuts instead of increasing taxes on superannuation says Dr Mikayla Novak, Senior Research Fellow at free market think tank the Institute of Public Affairs.
Dr Novak was responding to media reports that the Turnbull government was considering modifying its controversial superannuation tax increases.

“The superannuation tax increases are projected to raise a net total of $2.9 billion over the next four years.

There are many alternative ways of financing this amount, including:

  1. Means-testing the child-care rebate and tightening eligibility for Family Tax Benefit Part B
  2. Reducing expenditure across all government departments by one-fifth of one percent
  3. Delaying the company tax cut by 3 years and reducing corporate welfare spending”


2016-17 $m 2017-18 $m 2018-19 $m 2019-20 $m Total $m
Middle-class welfare reforms
Means-test Child Care Rebate 250 250 250 250 1,000
Tighten eligibility for FTB B 500 500 500 500 2,000
Reduce cost of government by 0.2% 723 739 776 804 3,042
Other measures
Delay company tax cut by 3 years 400 500 800 1,700
Reduce corporate welfare spending 427 317 237 208 1,189

Some of these proposals were outlined in Dr Novak’s research paper ‘Making Welfare Sustainable-Targeting welfare to those who need it most’  published in November last year.

“Company tax cuts should not be paid for by increasing taxes on retirement income.”

“The superannuation changes announced in the 2016 Budget do more to damage confidence in the
retirement income system than they are worth in dollar value.”

“The government is right to be concerned about its credit rating, but the most important step in the path to budget repair is to get control of spending, ” Dr Novak said.

For media and comment:
Mikayla Novak, Senior Research Fellow, Institute of Public Affairs, or 0448 276 376.

Hate to say it Malcolm, but we told you so

logosoa3 July 2016

The rebuke delivered by voters to the Coalition yesterday came as no surprise to one group of


Ever since the May budget introduced a new tax and retrospective limits on superannuation

savings, SMSF Owners and many thousands of individuals have been warning the Government it

is going the wrong way on superannuation.

This was expressed in our regular briefs to Coalition members before and during the campaign, in

letters from members of SMSF Owners to Coalition members, senators and candidates and in

thousands of social media comments. While the superannuation changes were not a headline

issue in most of the media during the campaign, we know that Coalition members were under a lot

of pressure in their electorates.

Many Liberal voters felt betrayed that a party supporting individual effort and self-reliance should

impose a new tax on retirement savings. This sentiment came not just from those in retirement

who would be affected directly by the tax now, but also from those in middle-age who aspire to be

financially independent in retirement.

It was extraordinary for a Coalition Government that argues for lower taxes and lower government

to introduce a brand new tax on superannuation earnings for retirees. There has never been such

a tax since superannuation was first introduced with the progressive income tax system over 100

years ago.

It was baffling that the Government attempted to argue that a new cap on contributions back-dated

by 9 years was not retrospective. It clearly was and already the Government has had to modify its

policy to take account of unintended consequences.

During the campaign and again on election night, the Prime Minister argued for stability in

government to deal with economic and political turbulence created by Brexit and other global

factors. It is no time to be fiddling with superannuation and undermining confidence in it.

On last night’s known voting figures it appears the Coalition will either just scrape back into

government on its own account or it may have to rely on independents to form a minority


Either way, one of the first things the Prime Minister should do on his likely return to office is order

a re-think on superannuation policy and engage in genuine consultation with the superannuation

sector, including SMSFs, on a better way forward.

If changes to superannuation are considered necessary they should be made in a way that does

not reduce the value of savings that were made under the rules that existed before the May budget

or reduce the opportunity for people to make non-concessional contributions.

Changes to superannuation should be prospective, not retrospective and retirement savings made

before the May budget should be grand-fathered from the budget measures. This applies, in

particular, to the lifetime cap on non-concessional contributions.

Instead of imposing a new tax and contribution limits, the Government should be expanding the

parameters of superannuation and encouraging more retirement savings so more people can be

financially independent in retirement and not have to rely on the next generation of taxpayers to

support them.


Duncan Fairweather.

Executive Director. 0412 256 200

SMSF Owners’ Alliance

Letter from Scott Morrison to SMSFOA




Parliament House Canberra ACT 2600 Australia

Telephone: 61 2 6277 7340 | Facsimile: 61 2 6273 3420

Mr Duncan Fairweather

Executive Director
SMSF Owners’ Alliance Limited

Via email:

Dear Mr Fairweather
I write to clarify the scope of the Turnbull Government’s superannuation reforms announced in the 2016-17 Budget.
As you are aware, the 2016-17 Budget announced the introduction of a lifetime non-concessional contributions cap of $500,000, applicable from 7:30pm (AEST) on 3 May 2016 (Commencement Date).

The Government has been asked to provide guidance on how this measure will apply to a very small number of individuals using sophisticated financing techniques for the purchase of assets within a self-managed superannuation fund (SMSF).

Specifically, the Government has been asked for guidance on the consequences for individuals in the following circumstances:

• The trustee of the individual’s SMSF has entered into a contract for the purchase of an asset (often using a limited recourse borrowing arrangement (LRBA)) prior to the Commencement Date (Pre-Existing Contract);

• The Pre-Existing Contract is due to be completed after the Commencement Date;

• The individual was above the lifetime non-concessional cap as of the Commencement Date or would be above the lifetime non-concessional cap as a result of further non-concessional contributions made in respect of the completion of the Pre-Existing Contract; and

• The individual had planned to complete the contract of sale by making further non-concessional contributions after the Commencement Date.

In such circumstances, transitional provisions will apply to allow further non-concessional contributions to be made only to the extent necessary to complete the Pre-Existing Contract, taking into account existing financing arrangements. The quantum of the additional contributions must also be within the constraints of the non-concessional contributions cap rules that existed immediately prior to the Commencement Date. These additional non-concessional contributions will be counted towards the lifetime non-concessional cap, but will not result in an individual being in breach of the lifetime non-concessional cap.

In addition, transitional arrangements will apply to SMSFs with existing borrowings, including LRBAs. Members of SMSFs with existing borrowings will be permitted to make further non-concessional contributions to the extent necessary to ensure the legal obligations of SMSFs that existed on or before the Commencement Date are met or to comply with the Australian Taxation Office (ATO) Practice Compliance Guideline 2016/5 (PCG 2016/5). These additional non-concessional contributions will be counted towards the lifetime non-concessional cap, but will not result in a breach of the lifetime non-concessional cap, until 31 January 2017. Once legislated, this deadline will be extended only in exceptional circumstances and at the discretion of the Commissioner of Taxation.

This transitional period allows those with no other practical option than to make further non-concessional contributions to meet legal obligations that existed at the Commencement Date or to comply with PCG 2016/5 sufficient time to rearrange their affairs such that they do not breach the cap as a result of contributions made after the Commencement Date.

The date of 31 January 2017 is consistent with the deadline set by the ATO in relation to PCG 2016/5, which provides safe harbour guidance for SMSFs who have borrowed from related parties under a LRBA.

I trust this information provides you and the very small number of individuals to whom the aforementioned proposed treatment applies the necessary certainty going forward.

Should you have any queries in relation to the contents of this letter, please do not hesitate to contact Byron Hodkinson, Senior Adviser, Office of the Treasurer on (02) 6277 7340.

Yours sincerely

The Hon Scott Morrison MP

29 June 2016

Government relents on non-concessional contributions limit for asset purchases

logosoa30 June 2016

SMSF Owners has been advised by the Treasurer that the Government will amend its policy on the back-dated $500,000 non-concessional contributions cap following concern expressed by SMSF Owners on the impact of this Budget measure on contracts that were entered into prior to the 3 May Budget.

The budget imposed a life-time $500,000 cap on non-concessional contributions from 1 July 2007.

SMSFs in the process of buying an asset, e.g. a property, and had entered a legal contract prior to the 3 May budget, expecting to use non-concessional contributions to complete the purchase, would have been caught by the new back-dated contributions cap.

The Treasurer has advised SMSF Owners that where an individual’s SMSF has entered into a contract for the purchase of an asset prior to 3 May and planned to make contributions to the SMSF to allow it to complete the purchase, this will be able to be done under transitional arrangements without breaching the $500,000 cap. However, the additional contributions must be within the $180,000 annual limit for non-concessional contributions that existed prior to the 3 May budget.

In addition, transitional arrangements will apply to SMSFs with existing borrowings to ensure legal obligations they entered into prior to 3 May can be met, but only until 31 January 2017.

The Treasurer’s letter to SMSF Owners is attached.

SMSF Owners welcomes the announcement by the Treasurer.

This decision addresses one of the concerns raised by SMSF Owners and others about the impact of the new $500,000 cap. Other concerns remain and we intend to pursue them with the Government after the election.

Duncan Fairweather
Executive Director
SMSF Owners’ Alliance
0412 256 200

Labor issues a blank tax invoice on super on eve of election

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28 June 2016

More than a year ago the Labor Party announced its policy on superannuation, flagging a new 15% tax on retirement account earnings above $75,000 to raise $1.4 billion in revenue. Labor would also raise $0.5 billion from higher income earners.
Labor said then: “If elected, these are the final and only changes Labor will make to the tax treatment of superannuation.”

Last Sunday, just six days before the election, Labor changed its tune and revealed that it will tax superannuation more heavily if it is elected on Saturday.

When releasing Labor’s budget costings for the election, the Shadow Treasurer said a Labor Government would take up all of the revenue measures on superannuation proposed by the Coalition.

He said: “We continue to have concerns about the retrospective nature of the Government’s measures, we want to raise the same money announced, but committed to raising the same amount as the Government from the superannuation changes and there are some measures, resources of government, we would then sit down with the sector and work out if there is a better way, like but the commitment is to the envelope which the Government outlined.” (our added emphasis).

The Government estimated its superannuation measures in the budget would result in a net gain to revenue of $2.9 billion.
Labor is now proposing to tax superannuation savings to the same extent but is not saying how this will be done. For now, all it is saying is that it will pocket the extra tax revenue from superannuation changes proposed by the Coalition. After the election, it will sit down with the superannuation sector.

Labor’s commitment to consultation is welcome but it’s really not good enough, on the eve of an election, to flag new taxes on retirement savings without any detail. The Coalition Government has set out in detail in the Budget how its superannuation changes will work. Labor should do the same before the election.

Otherwise, it is asking people to support extra tax on their superannuation without saying how it
will be applied and who will be affected.

The taxation of superannuation affects people in different ways according to their circumstances.
Before they go to vote on Saturday, people need to know how Labor’s superannuation policy will
impact their retirement savings.

Duncan Fairweather
Executive Director
SMSF Owners’ Alliance
0412 256 200

Save Our Super joins superannuation policy ginger group

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28 June 2016

The newly-formed lobby group Save Our Super has joined an alliance of investor and superannuation associations who are urging the Coalition Government and the Labor Opposition not to proceed with their proposed superannuation changes.

Save Our Super is led by Melbourne lawyer Jack Hammond QC who is campaigning to have superannuation savings made before the 3 May Budget ‘grandfathered’ so they do not adversely impact people who saved for their retirement under the previous rules.

Save Our Super joins the Australian Shareholders’ Association, The Australian Investors Association, the Small Independent SMSF Funds Association and the SMSF Owners’ Alliance in calling for the Government and the Opposition to review their policies if elected on Saturday.

The Budget decisions have caused dismay among many retirees and those close to retirement because they impose new limits and a new tax on earnings from superannuation accounts.

“Save Our Super adds a new voice to the chorus of concern over the policies of both major parties that will impose a new tax on superannuation earnings and restrict the opportunity for people to save enough to be financially independent in retirement,” according to Duncan Fairweather, Executive Director of the SMSF Owners’ Alliance which is co-ordinating the campaign.

More on Save Our Super can be found on their website:

Jack Hammond can be contacted at:

And on: 0400 862 865


Duncan Fairweather

Executive Director

SMSF Owners’ Alliance

0412 256 200

Brexit means the Government must pause and re-think on superannuation

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26 June 2016

The economic shock waves from Brexit mean the Government must pause and re-think its superannuation tax plans if it is elected next Saturday.

The retirement savings of Australians are now vulnerable to the buffeting they will receive as the global economy adjusts to Brexit. Superannuation fund investment strategies and expected returns on fund assets are now much more uncertain. The share market will be more volatile, interest rates may stay lower for longer and investment values will be affected by variations in exchange rates and trade flows.

In these circumstances, new taxes and new limits on superannuation savings will diminish the capacity of superannuation funds to deliver dependable and adequate returns to their members in line with their investment strategy and anticipated retirement income.

The superannuation funds to which most Australians entrust their retirement savings are not protected against economic turbulence, whether they are self-managed or run by professional fund managers. They are exposed to investment risk, including the loss of capital, and longevity risk.

In contrast, the defined benefits funds that politicians and public servants enjoy are guaranteed for life by government at the cost of taxpayers and are immune from adverse economic conditions.

In the current circumstances, it would be unfair and unwise for the Government to proceed with its superannuation tax plans. Politicians should not expose the retirement savings of others to risks they do not bear themselves. They should not be imposing new structural changes on superannuation when the investment climate is so uncertain.

If elected, the Coalition should immediately put its superannuation tax plans on hold until the consequences of Brexit become clearer. This is consistent with the Prime Minister’s message at his campaign launch today that in the wake of Brexit Australia needs stability in economic policy.

If elected, the Government should also review the unfair impact of its superannuation changes on people who have invested in superannuation under the rules and now find their retirement savings are to be taxed. The Government should ‘grandfather’ the rules that applied prior to the Budget on 3 May.

The Government should also review the numbers that underpin its policy. We have shown through analysis by Dr Ron Bewley, former Professor of Econometrics and Head of the School of Economics at the University of NSW, that the numbers on which the Government justifies its policy do not add up.

A fund of $1.6m is not enough to last all of retirement for all people – to do that it would need to be twice as large, $3.2 million. Nor will a fund of $1.6m deliver four times the age pension, nor an income equivalent to $100,000 from a defined benefit fund as the Government has claimed. Dr Bewley’s analyses can be found here –

The numbers on which the Government justifies its superannuation changes do not stack up and should be independently audited.

As well as hitting the pause button on its superannuation tax policy, the Government should engage in genuine consultation with superannuation investor groups. So far it has fallen short of proper consultation.

The Tax White Paper process was cut off at the knees even before an options paper was released; there was no consultation on the significant structural changes to superannuation in the Budget; and consultation on the objective of superannuation was merely expedient. The thoughtful submissions by many superannuation groups have not yet even been published on the Treasury website.

There has been no answer from the Government on the many basic questions being asked about how the superannuation tax changes will affect them.

There is widespread dismay among Australians who have retired, and among those approaching retirement, that the Government’s superannuation changes will disrupt their retirement plans and diminish the income they expected to rely on in retirement.

Many people have told us they will now have to defer their retirement and work longer.

Many have found that the back-dated non-concessional contributions cap, in particular, has wrecked their retirement savings plans.

Abrupt changes to superannuation break the implicit contract between government and the people: in return for requiring people to lock-up part of their income for the whole of their working lives, the government provides incentives to encourage savings and should ensure that the rules of the game are not changed midstream to adversely affect people who have made savings in good faith.

If younger people are to have confidence in superannuation, they need to be assured that the savings they make now under the current rules should still be intact in decades hence and not diminished by government policy changes in the meantime.

Changes to the superannuation rules should always be prospective with prior savings and caps ‘grandfathered’ to honour the policies under which the savings were made.

Retirement savings are such an important element in the economic and social fabric of Australia that the rules should not be changed by one political party or the other, but should only be made after thorough review, proper consultation and with bipartisan agreement.


Duncan Fairweather

Executive Director

SMSF Owners’ Alliance

0412 256 200

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