Category: Newspaper/Blog Articles/Hansard

The Australian

10 August 2016

Michael Roddan Reporter Melbourne @michaelroddan

Chris Kelaher, managing director of financial services provider IOOF, believes there will be no further government tinkering to the $2 trillion superannuation system after the Turnbull government’s proposed reforms riled sections of the public.Shares in IOOF, which man­ages about $150 billion of client money and super funds, yesterday fell as much as 8.4 per cent in intraday trade despite the company booking a 42 per cent increase in net profit to $196.8 million for the year to the end of June. The bumper result was boosted by the $72m sale of IOOF’s Perennial business, passed off to Henderson Group last year. Stripping out one-off items, underlying profit was steady at $173.4m for the financial year, with revenue flat at $907.9m.Investors were also apparently unimpressed with a deterioration in the profit margin of the IOOF platform business, which fell three basis points to 0.2 per cent over the past six months.The group said in May it expected the gross funds margin to be “materially unchanged”.
“Decline in the platform margin will unlikely be well received, especially in the context of the earnings update in May,” said Credit Suisse analyst Andrew Adams.Despite IOOF emphasising ­future savings in financial 2018, Mr Adams said “investors may have been hoping for something ­sooner”.

While IOOF had positive funds flows of $1.8bn over the year supported by compulsory super contributions, including $1.3bn through its financial advice channels, fund flows to its platforms were somewhat hamstrung by market ructions such as Brexit and a “soggy start to the year”, Mr ­Kelaher said.

“This is a pleasing result in the face of turbulent market conditions,” he said.

Without the contribution from the $670m Shadforth acquisition, which the company bought in 2014, IOOF’s earnings per share would have been about 16 per cent lower year-on-year, according to CLSA analyst Jan van der Schalk.

The takeover delivered $25m in cost savings over the year.

Mr Kelaher said the prospect of further changes to the super system now appeared “negligible” after the government stoked outrage among some wealthy superannuants with the proposals outlined in the budget ahead of the federal election. “There’s not a lot of mileage in fiddling with superannuation,” he told The Australian. “People don’t like it being fiddled with and it tends to be retrospective, so people get agitated — even when there’s no impact on them.

“Our superannuation offering in Australia is one of the best in the world. That shouldn’t give you a natural inclination to go tinkering with the area — you want to leave it alone.”

Mr Kelaher has led IOOF through a series of takeovers including buying Bridges Financial Services, Shadforth, Lonsdale and a majority stake in Ord Minnett, and he said mergers and acquisitions were still “paramount” to the group’s growth strategy.

The group was recently outbid for the $1bn StatePlus financial planning business, but Mr Kelaher said it was regularly approached for deals. “If these opportunities come forward, we are in a position to deal with them,” he said, noting IOOF’s net debt stood at $20m after the Perennial selldown.

Consolidation and divestment of non-core businesses form a large part of the group’s strategy. During the year, IOOF merged $7.1bn of client funds and 40,000 client accounts, in one of the country’s largest platform consolidations, as part of an efficiency bid. Operating costs across the business fell 2 per cent over the year.

The low interest rate environment was also providing a tailwind for the company. “People, particularly retirees, are struggling to survive (amid low rates) so the climate for advice has never been greater, and the advice is often technical advice. It’s positive for the company,” Mr Kelaher said.

IOOF will pay a 26c final dividend, bringing the year’s total payout to 54.5c, ahead of the previous year’s 53c distribution and a company record.

Herald Sun

8 August 2016

Annika Smethurst – National Politics Reporter

AUSTRALIA’S triple-A credit rating will be downgraded if the Turnbull Government can’t manage its “wafer thin” majority and pass budget savings measures, former treasurer Peter Costello says.

The stern warning comes as former cabinet minister Eric Abetz hit out at Prime Minister Malcolm Turnbull over the Coalition’s superannuation policy and his failure to promote conservatives, such as former PM Tony Abbott, to the frontbench.

Mr Abbott said while he won’t return as party leader, he wants to influence the future direction of the Liberal Party over the next three years to try to “crystallise and clarify where centre-right politics in this country goes”.

Speaking to the ABC TV’s Four Corners program, Senator Abetz issued his own warning to senior Government MPs saying: “it will only take one person or two in the House of Representatives to cross the floor to defeat Government legislation.”

“If we keep going full steam ahead and pretend that nothing happened on the Second of July … we will be going to an electoral disaster in 2019.”

The conservative Senator is leading a push within the Coalition to change the Government’s superannuation policy which targets generous tax breaks.

With one member of the Coalition — conservative Queensland MP George Christensen — already threatening to cross the floor if policy isn’t changed, former treasurer Peter Costello said Mr Turnbull will be “beholden” to his backbench.

Mr Costello — who was treasurer under former prime minister John Howard — said it will be an “alluring prospect” for Coalition MPs to sit on the crossbench.

“This is the risk on any particular issue at any particular time, not that these people will cross the floor, but they’ll threaten to go independent.”

He said the Government’s one-seat majority has rattled ratings agencies who now believe the chances for budget repair have declined.

“Will we make any progress on our budget deficit? Will we be able to reduce debt? If we’re not able to do that, if the political situation stops us from doing that, that’s the time we’ll get a downgrade,” the former treasurer warned.

During the one hour program which examined the challenges facing the Coalition, former PM Tony Abbott also called for reform within the NSW Liberal Party saying lobbyists are acting as powerbrokers and creating “a potential for corruption”.

The Australian

9 August 2016

Judith Sloan Contributing Economics Editor

Government’s superannuation package is a mess.

The superannuation package Scott Morrison announced in this year’s budget is turning into a complete shemozzle.

The Liberal Party’s membership is in revolt — that is, among those members who haven’t already resigned.

There is a widespread sense of betrayal. There are also some specific criticisms about the package: it’s over-engineered , unworkable, unfair and the figures are wrong.

The real reason Malcolm Turnbull knocked back Kevin Rudd had nothing to do with Rudd’s poor interpersonal skills but rather Turnbull’s realisation that his party base would go into complete meltdown had he supported the former prime minister’s candidacy for the position of UN secretary-general .

Turnbull and Morrison probably now realise they have been played for mugs by the bureaucrats in Treasury and Prime Minister and Cabinet who have long held the ambition to unwind what they see as the unjustifiable superannuation tax concessions.

You have only to check out the highly erroneous but enormous values put on these concessions, as presented in the annual tax expenditure statement released by Treasury, to pick up the agenda that the activist bureaucrats have been running.

We also know that in 2014 Treasury advised Joe Hockey as treasurer to ditch the tax-free status of superannuation pension income and to impose much higher taxation on contributions using marginal tax rates minus a rebate, even though this latter piece of advice was essentially unworkable. Hockey had the sense to reject the advice.

We also should not overlook the fact, to a man and a woman, the senior officials advising the government on superannuation matters will receive unimaginably generous defined benefit superannuation payments on retirement (more than half of their final salary ) that are barely affected by the budget measures. Note the salaries of these senior public servants have been jacked up significantly in recent years and that their personal financial contributions to superannuation while working are trivial.

No need to save up, pay tax and make non-concessional contributions for this lot.

And if any of them die before their spouse or partner, then a two-thirds pension is paid to the surviving spouse or partner until that person dies.

For them, paying a few thousand dollars more tax each year on their (indexed) retirement incomes is just chicken feed compared with the impact of the superannuation measures on those who have accumulated superannuation balances in good faith under the rules that applied at the time.

That stuff about “commensurate measures” the Treasurer was going on about at budget time was just a ruse.

Here’s an idea. Why don’t these senior officials agree to forgo the benefits of the defined benefit scheme and instead be given an account of, say, $1.6 million to be used to generate a retirement pension? Any residual amount would be returned to the commonwealth when they die. After all, the Treasurer thinks the income generated from a fund of this size is perfectly adequate.

The core problem now for Turnbull and Morrison (and we can throw in Finance Minister Mathias Cormann and Revenue and Financial Services Minister Kelly O’Dwyer ) is how they can construct a more palatable superannuation package without completely undermining their own leadership.

But we shouldn’t think a nip here and tuck there will cut it. There has to be a fundamental rethinking of some of the measures, including ditching some of them altogether. The backdating of the lifetime cap on non-concessional contributions has to go, for instance .

But the real issue is this: as long as there is a cap on the final taxfree superannuation balance, there is really no need for many of the other measures. After all, people have paid the full whack of tax on non-concessional contributions , so why would we want to restrict them?

And talking of the cap, $1.6m is the wrong figure given the low rates of return retirees can expect and the longevity risk that they bear. Had the old reasonable benefit limit remained in place, it presently would be $2.5m. So this is the sort of figure the government should be considering.

But there is an even more fundamental problem with the cackhanded budget measures.

With all the restrictions in place, including the unrealistic figure of $25,000 on annual concessional contributions, most people won’t be able to get to the maximum balance that the government regards as being worthy of tax-free status.

By and large, people are able to save seriously for their retirement only when their mortgage is paid off or is relatively low and the kids are off their hands. But the government’s one-size-fits-all measures simply fail to acknowledge this lifetime pattern.

The real worry for our fiscal future — Turnbull and Morrison will be long gone — is that the combination of the restrictions being contemplated will mean that many people just give up on the dream of self-providing for their retirement and instead plan to rely on the age pension, full or part.

If there is any spare money in the meantime you may as well invest in buying a better home or upgrading your present one — Morrison doesn’t seem to object to this form of estate planning. It’s only superannuation that is an evil form of estate planning, even though non-dependent beneficiaries pay 15 per cent tax on inherited superannuation.

Another big hint for the government that it has seriously messed up is the endorsement of the measures by journalists and commentators working for leftwing media outlets, including the ABC.

Any sane Liberal treasurer would be aghast at the degree of backslapping from people who wouldn’t vote for the Coalition if their lives depended on it.

And what a bad look it would be if the Turnbull government were to rely on Labor or, worse, the Greens to secure the passage of the superannuation measures through the Senate.

The Labor parliamentary leadership group just couldn’t believe its luck when Morrison announced the superannuation measures on that fateful night in May.

Opposition Treasury spokesman Chris Bowen never thought he could go that far and get away with it, politically speaking.

Now Labor will seek to wave through most of the measures in the knowledge that it will be Turnbull and Morrison who will be politically damaged. And in the meantime the champagne corks will be popping in the boardrooms of the union-controlled industry super funds.

Does it get any better than this for Labor? Does it get any worse for the Liberal Party?

Turnbull and Morrison probably now realise they have been played for mugs.

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:

• Contact your local member and complain. Give them a good telling off. It may not change anything but it may make you feel a bit better.
• Liberal Party members can resign, signal their intention to resign, refuse to donate and volunteer.
• Liberal Party and Nationals branches can contact the PM’s office and request a copy of the draft superannuation bill. They then can call meetings to discuss the draft bill and write to the PM with changes before parliament resumes on August 30.
• Go to the Save Our Super website, register your support and attend future meetings.

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.

Concessions unuseable

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.