Category: Newspaper/Blog Articles/Hansard

The Australian – Letters to the Editor – 25 July 2016

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.

Ian Wilson, Chapel Hill, Qld

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want (after all, it is an investment in various activities of the country’s economy) but apply a modest tax to what is withdrawn.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government revenues, John Howard and Peter Costello were over generous when tax was removed completely from the amount withdrawn from a fund on the basis that it had already been taxed, albeit at 15 per cent.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.

Douglas Moore, Moonbah, NSW


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.

Mort Schwartzbord, Caulfield, Vic


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”.

Thomas Hogg, East Melbourne, Vic


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.

Christopher Game, Alphington, Vic


Come, come Grace Collier, self-reliance and personal responsibility are such old-fashioned virtues.

E. J. Ash, Boreen Point, Qld


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.

Brian Pymont, Frenchs Forest, NSW

Turnbull tax reform: don’t undermine the integrity of super

The Australian

July 20 2016

Columnist Sydney @jkalbrechtsen

f77def5408a3655f79085fe41049424eThe story of how the Turnbull government stitched up the poorest policy by a Liberal government in decades is told in one short letter to The Australian from a former Treasury official and an explosive email sent to the Liberal Party campaign director by a party donor.

In a letter sent to this newspaper a week after the May 3 budget, Terence O’Brien wrote: “Assistant Treasurer Kelly O’Dwyer doesn’t seem to understand why the increased tax on superannuation will destroy trust in saving to fund one’s retirement.” He explained that past increases in superannuation taxation had been grandfathered, so that those who saved based on previous legislative incentives were not disadvantaged. O’Brien wrote that the May budget changes meant that someone putting money into super “can never again trust a government not to change the rules”.

O’Brien’s 40-year career has been spent working in federal Treasury, the Office of National Assessments, the Productivity Commission, the OECD and the World Bank. He is not a Liberal Party member. His letter formed the basis of a longer, even more compelling critique of the government’s superannuation changes. It will be published in the Centre for Independent Studies’ September issue of Policy magazine and O’Brien sent a truncated version via email to Scott Morrison on Sunday afternoon, ahead of Monday’s Liberal partyroom meeting.

O’Brien’s analysis is devastating. In it, he details where the Turnbull government went wrong with super, which is “the most enduring and inflexible commitment of savers’ lives”.

It is a 40-plus year commitment, writes O’Brien. “A 60-year-old can today expect to live past 90, so superannuation needs to finance a further 30 years of sustained retirement living standards, ideally in a predictable taxation environment. There might be 20 to 25 governments over that 70 years of a typical worker’s saving and retirement, so it is important that there be some sense of fundamental ‘rules of the game’ governing superannuation rule-making and taxation — a ‘superannuation charter’, if you will.”

O’Brien sets out how the 1975 Asprey taxation review set down principles to guide the “long-term (superannuation) commitments entered into by taxpayers on the basis of the existing taxation structure”. “It would be unfair to such persons if a significantly different taxation structure were to be introduced without adequate and reasonable transitional arrangements,” concluded the report.

Paul Keating’s changes to super laws in 1983 and 1988 were carefully grandfathered to maintain the integrity and trust involved in the long-term commitment by taxpayers to their superannuation. Protecting the integrity of super explains why the 1997-98 budget changes, raising the preservation age from 55 to 60 by 2025, were grandfathered. The same integrity principle meant super changes in 2009 to lower the limit on concessional contributions were grandfathered. It was the same reason changes in 2004 by the Howard government to the super scheme for members of parliament were carefully grandfathered, so as not to disadvantage those MPs who started saving via superannuation rules then applicable when they entered parliament before 2004.

Protecting the trust element of a working life commitment to savings via super explains why a Productivity Commission study last year found that “people significantly affected by major (superannuation) rule changes have generally been afforded grandfathering provisions that maintain their previous entitlements”.

Maintaining the sustainability and reliability of superannuation explains the meticulous policy process behind Peter Costello’s 2006-07 simplified super reforms. As O’Brien outlines, the process was well-researched and extensively detailed in an 80-page paper that attracted 1500 submissions over four months of consultation before the Howard government settled on the new super laws. The changes, which came into effect on July 1, 2007, were a model of carefully considered changes to laws that governed the retirement earnings and living standards of taxpayers who had saved for decades. By backdating its own super changes on budget night this year to that high watermark of careful policymaking on July 1, 2007, someone in the Turnbull government has a sick sense of humour.

More important, on May 3, the Prime Minister and Treasurer blew up the nation’s superannuation piggy bank, which for decades has been carefully con­structed on the basis of savers trusting the integrity of the system. The high price of the government’s breach of trust in rushing ahead with ill-conceived, dishonest and rushed superannuation changes is laid bare in a private email sent by Melbourne businessman John McMurrick to the Liberal Party campaign director Tony Nutt on May 16.

McMurrick is a long-time Liberal Party member. For 15 years he has donated to the party and raised funds through the Higgins 200 Club, a group responsible for funding the campaign efforts for the blue-ribbon seat of Higgins. McMurrick has helped raise millions of dollars, first for Costello, then for O’Dwyer.

In his email to Nutt, McMurrick details how his frustration and disappointment with the Liberal Party didn’t happen overnight. “Some years ago we arranged a fundraising dinner … in Toorak,” McMurrick wrote. “Tony Abbott was then the opposition leader and he was the guest of honour. I think that there were 10 guests at something like $10,000 per head. Tony spoke very well and when question time came he answered a couple of questions and then when the next question came Peta Credlin stood up and said, ‘I’ll take that question Tony.’

“The guests looked at each other in amazement. A few questions later and the same happened again. After the dinner had finished two of the guests approached me and said, ‘I have no intention of paying $10,000 to listen to Tony’s chief of staff answer questions. We paid to hear Tony.’

“I knew that we had a problem.”

McMurrick’s email details later episodes where party members were left speechless at the behaviour of Abbott and his chief of staff when McMurrick and the Higgins 200 Club tried to raise money for the party. When he tried to arrange for donors to meet Abbott in Canberra or Sydney, Abbott himself agreed, yet there was no reply from Abbott’s office. “We were blocked,” McMurrick told The Australian on Monday.

When Turnbull became Prime Minister, McMurrick continued his fundraising efforts and set in motion plans for a dinner that would raise $200,000 to $300,000. McMurrick never heard back from Turnbull’s office. A few days after the budget, McMurrick received one of the usual emails from Nutt asking for donations. The Turnbull government’s super changes were the last straw for this stalwart Liberal member, donor and fundraiser.

McMurrick reminded Nutt the Turnbull government had said they “were not going to touch superannuation”. Including this from Morrison on May 25 last year: “Taxing superannuation is a bad idea, I don’t support it.” And this from the Treasurer on February 18: “I fear that the approach of taxing in that retirement phase penalises Australians who have put money into superannuation under the current rules — under the deal that they thought was there. It may not be technical retrospectivity but it certainly feels that way. It is effective retrospectivity, the tax technicians and superannuation tax technicians may say differently.”

Indeed, Morrison, the Treasurer who said “we will not tax your super”, received a three-page email last Saturday from Melbourne QC and founder of the Save Our Super group Jack Hammond. “You made at least 12 ‘tax-free superannuation’ promises in May-June 2015 … We believe you should be reminded of your broken promises,” wrote Hammond.

The breach of trust also explains why McMurrick’s email to Nutt ends with his resignation from the Liberal Party. “Tony, because of the above I cannot continue to work and to raise funds for the Liberal Party. I have been a fierce supporter for some 40 years and a very active fundraiser for many years. Consequently, I have written to the Higgins 200 Club and resigned as a committee member and as a normal member, effective immediately, and I have also written to the Liberal Party, Victorian division and resigned as a member effective immediately … I cannot support a party that acts in, what I consider to be, such a dishonest manner.”

McMurrick isn’t the only party member to down tools over the government’s super fiasco, which is why Turnbull had to tip his own money into the campaign.

And before the Labor Party starts crowing about its credentials on maintaining the integrity of the super system, remember Chris Bowen supported the findings of the 2013 Cooper report that called for principles of certainty, the ability of people to plan for their retirement. Except that Labor decided on uncertain policy: pocketing the Coalition’s super savings without telling voters exactly what their policy was.

The question is not whether governments can change super laws. Neither is this a case of the rich calling for an end to the age of entitlement — except for them. During the past few decades, both Labor and Liberal governments have altered super rules carefully with the aim of maintaining the integrity of the system and the trust at the heart of lifetime savings commitments by taxpayers.

While McMurrick awaits a response from Nutt, the question is how the government responds to this episode, which marks the nadir of bad policy as a quick revenue grab. Tinkering won’t heal the wounds or return reliability to the super system.

Super solution must be Prime Minister’s priority

The Australian

July 22 2016


When parliament resumes on August 30, the Turnbull government will need a policy and a political solution to resolve the controversial superannuation changes it announced in the budget on May 3. It is planning to release draft legislation within weeks, before consultations with the superannuation industry and consumers. After doing relatively little since the election, Malcolm Turnbull needs to settle the superannuation issue as soon as possible by placating anger in Coalition ranks and negotiating with the opposition — or with minor parties in the Senate — to secure support for reform. Only then, more than four months after the budget, will the government be able to move on from an issue causing anger and confusion.

Coalition MP George Christensen has threatened to cross the floor over the proposed $500,000 cap over non-concessional contributions and changes to the $1.6 million pension fund transfer cap. In a tight parliament, the Prime Minister would face a humiliating defeat if he failed to secure opposition support for his proposals and other Coalition MPs joined Mr Christensen in crossing the floor in the House of Representatives.

Scott Morrison and Revenue and Financial Services Minister Kelly O’Dwyer are digging in against the revolt, insisting the government’s election policy is essential for ­budget repair. The problems of the proposals were summed up on these pages yesterday by Janet Albrechtsen, who cited the objections raised by former Treasury official Terence O’Brien in a letter to The Australian after the budget. Mr O’Brien detailed how the changes would reverse four decades of certainty for investors. Under the Hawke and Howard governments, taxpayers who had invested in superannuation on the basis of existing tax structures were “grandfathered” from subsequent changes. The Turnbull government’s proposals, in contrast, have breached trust in the integrity of the system.

This should be Mr Turnbull’s starting point in leading the debate, which he must do. Bill Shorten, who promised to play a constructive role in the new parliament, probably would relish the opportunity to negotiate with the government to shape the final reforms, which would allow him to claim some of the credit.

Opposition Treasury spokesman Chris Bowen told the Financial Services Summit as much yesterday, flagging Labor’s broad support for the reforms, apart from the “retrospective nature” of some changes. Labor also showed it supported the changes during the election campaign when it factored $3 billion in savings from them into its own costings while promising to “revisit” the proposals.

Government ministers argue that the point of super is building retirement income, not minimising tax. Fair enough. But in struggling to save for retirement — when a $1m super balance reportedly provides the same lifestyle as the aged pension — certainty and tax incentives to save are vital. Taxpayers, if not politicians, know that cutting concessional contributions will reduce the incentive to put away extra savings, ultimately increasing our ageing population’s reliance on welfare.

Scott Morrison needs to fix his superannuation mess or go

The Australian

July 23 2016

Terry McCrann Business Columnist Melbourne

Superannuation is now the fundamental defining issue of Scott Morrison’s treasurership. Either he fixes the mess he unveiled on budget night or he announces his total unfitness to be treasurer.

Indeed, his failure to demonstrate even the slightest understanding of how and why he got it wrong — far less, any comprehension of the more substantive and more complex policy issues involved — suggests an incapacity to do the job.

Very simply but very significantly, what is proposed is just very bad policy. It was always going to be the outcome of a process corrupted from gestation, as it aimed solely at generating revenue and devil take any consideration of good policy.

There is not the slightest indication of any substantive analysis of the impact of the proposed changes on the superannuation system in the long term; far less its integration with the old age pension and retirement incomes and social welfare costs overall.

That’s one side of the failure; that it could prove one the great fiscal “own goals” of recent memory, if it ends up encouraging — or more simply, just forcing — more people to move out of self-funded retirement on to a full or part pension, plus all the other taxpayer-funded benefits that would then accrue.

The entire, the only purpose of the superannuation tax concessions is to encourage people to preferably fully but at least partially self-fund their retirement.

It is “penny wise and, very, pound-foolish”, if you initiate price signals that persuade people to take the, even reduced, concessions upfront and then end up still on the taxpayer teat in their, truly and most likely long-extended, “golden years”.

Even if that’s not bad enough — the utter failure to integrate the super changes intelligently with overall retirement incomes reform — what made it worse, was the incomprehension of the negative intersection with other investment dynamics.

Again, quite simply, you cannot go down this single-issue path, which Morrison has blundered on to, without at least considering the consequential impacts with negative gearing, capital gains tax and both the tax and social welfare exemptions of the family home.

To put it in simple terms which the Treasurer could hopefully understand: if you make superannuation less attractive as an investment, savings will move from it to other still tax-advantaged alternatives like investment and owner-occupied properties.

Further, at the risk of this getting a little too complicated for the Treasurer (and, it seems, Treasury) to understand, you will even encourage funds inside super to move in that (and other) directions to minimise the payment of the extra super tax you expected to reap.

To take the most obvious example: someone in retirement with a super balance of more than the proposed $1.6 million tax-free cap would split their assets, so that all the taxable-income-generating assets were in the $1.6m pot and all those generating no taxable income or indeed tax credits would be in the taxable pot.

This is what happens when you have one focus: raise revenue — an objective demonstrated most graphically by how exactly we ended up with the three major changes.

I am informed that initially only the two caps were proposed — the $1.6m tax-free retirement pot and the $500,000 for lifetime after-tax contributions.

But that just wasn’t going to raise enough revenue. Indeed, it would have been almost revenue neutral when you accounted the offsetting cost of the new concessions.

So Treasury was sent back to the drawing board to come up with a big hit that would give the package at least the appearance of contributing to so-called “budget repair”.

It came back with the reduction in the cap for concessional contributions to $25,000 and reducing the income point to $250,000 at which the contributions tax goes up from 15 per cent to 30 per cent. These will raise $2.45 billion over three years and so, hey presto, the whole package became revenue positive.

But talk about selling a cohesive retirement incomes policy for a mess of fiscal potage. Add up all the measures and they are projected to raise the grand total of $3.4bn net over the four years. As a consequence the four-year aggregated budget deficit will be $84bn instead of $87.5bn. We’ve been saved from fiscal Armageddon.

In fact, the real deficit as opposed to the Treasury and Treasurer projected deficit over the four years will be at least $120bn and the real net tax outcome of the changes will almost certainly be less than projected as investor behaviour changes and tax savings are targeted inside and outside super elsewhere.

In sum, these changes will really contribute four-fifths of five-eighths of very little to “budget repair”. A treasurer who cannot understand these simple realities should not be sitting in that office. That’s before even getting to the, ahem, more “challenging” issues.

Start with the need to model lifetime employment patterns — on a realistic 21st century basis when people are supposedly going to have eight to 10 jobs in very different industries and probably in very different geographic locations. Then factor in likely investment returns and increasingly complex risks. What are thus the likely retirement super balances?

Arguably, it will be impossible to build sufficient balances from concessional contributions, especially when Canberra takes 15 per cent going in; unless you specifically allow much greater contributions when people are in their 50s and (hopefully) finally earning serious money.

Arguably you should have a much higher ceiling on the after-tax contributions because in the world of tomorrow there will be far fewer people earning salaries and certainly not regularly for lifetimes. Or, more sensibly, have only one combined ceiling for all contributions — say, for purposes of illustration, $3m. You can get there either pre-tax or after-tax — your choice, or what’s available for or you.

In short, start from the position of what we want super to achieve, and then ground the tax concessions in the real world of both future employment and investment returns.

Coalition MPs should not upset the apple cart on superannuation

The Australian

July 23 2016

Judith Sloan Contributing Economics Editor Melbourne

Here’s what’s going to happen with superannuation. The narrowly re-elected Prime Minister, Malcolm Turnbull, has assured his detractors within his party that “it will get fixed”. The quid pro quo for this assurance is that the detractors will go quietly, at least for the time being.

After all, there is many a slip between the cup and the lip before the radical and hastily assembled package of superannuation changes announced in the budget is legislated.

All Coalition parliamentarians with any hope of promotion — indeed, retention of their present position — will have the good (read: self-interested) sense to stay mum at this stage, ­irrespective of their private views of the superannuation changes.

We shouldn’t expect Labor to make life easy for the government; criticisms will be raised and amendments will be required.

At the end of the day, Labor will allow the (amended) changes to pass the Senate, leaving Turnbull to deal with any residual resentment on the part of his own parliamentary colleagues and party members.

All that bluster from Turnbull during the campaign that the superannuation changes were “completely iron-clad” was basically for show.

Walking quickly away from any of the key changes at that stage would have been a clear sign of weakness and indecision.

Of course, Turnbull deliberately failed to mention the fact Scott Morrison had already been forced to back down in relation to one matter: grand­fathering the access to non-concessional contributions under the old rules to pay off non-recourse loans. So much for “completely iron-clad”.

And now there is talk of other exemptions. If uncle Bob leaves you some money, that won’t be counted in the lifetime non-concessional contributions cap. But if you save up post-tax earnings and want to make a substantial contribution to your fund, you will be limited to $500,000 backdated to July 1, 2007.

All I can say is this sort of stuff is a hard sell. And, by the way, divorce was always a major complicating factor that the budget super changes ignored.

The Prime Minister rightly says superannuation is a complex area. Indeed, it is so complex that I would be surprised if he were across the details.

But the key question is this: what did the Prime Minister and the Treasurer think they were doing?

  • It can’t really have been about budget repair; under $3 billion across four years is chicken feed.
  • It can’t have been about improving the super system in terms of encouraging more people to self-provide during their retirement. After all, the changes will make it more difficult for people to accumulate sufficient funds to make it on their own.
  • It can’t have been about making the system simpler; the complexity of the arrangements will increase by several notches and the transition costs will be vast.

The only groups that are happy are financial planners, accountants and lawyers, who will be raking it in advising their clients on the new arrangements and re­structuring their clients’ financial affairs.

And the union-controlled industry super funds are pleased at the prospect of billions of dollars, in total, of taxpayer money being added to the accounts of low-income members, to be then gobbled up in extra fees and charges.

The answer to the question about the government’s superannuation brain snap is twofold.

Turnbull and Morrison were spooked by the accusation they had achieved nothing in terms of tax reform. One moment everything was on the table; the next nothing was.

The GST option had come to nothing. Similarly, the suggestion that the states levy their own income tax had come to nothing. By introducing the raft of radical superannuation changes in the budget, these two men thought they would show their sceptical supporters, particularly in the press, that they could do reform.

Then there was the underlying misinformation in the Treasury’s estimates of the costs of the concessional taxation of superannuation, which a sensible Treasurer (with the help of his advisers) should have insisted be corrected. Only in this way could the Treasurer deny the false proposition peddled by ill-informed commentators that super tax concessions cost as much as the age pension.

In fact, the solution was relatively simple. Treasury just needed to present the cost of the superannuation tax concessions using the GST as the benchmark tax rather than income tax.

After all, superannuation is about saving and a consumption tax, such as the GST, promotes saving. It is therefore the appropriate tax benchmark. At a minimum, the figures for both benchmarks should have been presented.

This was done in the Treasury’s 2014 tax expenditure statement, although the estimates using the GST benchmark were relegated to an appendix with the adjective “experimental” added to the title.

Note that the estimated cost of the superannuation tax concessions using the GST as the benchmark was negative. But for some strange reason the practice was discontinued last year.

Morrison then missed a key opportunity to highlight the substantial downward revision in the cost of the superannuation tax concessions that was outlined in the 2015 tax expenditure statement released by Treasury.

The cumulative cost of the concessional taxation of superannuation had fallen by more than 22 per cent for the three matched years, 2015-16 to 2017-18. Indeed, for one component — the concessional taxation of superannuation entity earnings — there was a fall of $11.45bn, or 40 per cent, for one year alone, 2017-18.

These sorts of wild fluctuations really gave the game away. How could $11.45bn just go missing in one year without the validity of the entire exercise undertaken by Treasury being called into question? But the real problem was that few people — including, it would seem, the Treasurer — picked this up. The basis on which the government devised its radical superannuation changes was a fraud or the dramatic writedown in the cost of the superannuation tax concessions undercut any need for major changes.

Now this may all seem rather technical, but let us not forget the role of the backroom boffins in Treasury (and in the Department of the Prime Minister and Cabinet) helping to devise the changes to superannuation and attach mythical cost savings/additional revenue to each one of them.

Let us also not forget the warning given by Treasury itself that “the effect of superannuation is to reduce outlays on the age pension. Some commentary argues that these expenditure savings should be recognised in the estimates of superannuation tax expenditures. (But) tax expenditures are a more limited construct than a budget costing and, by their nature, do not seek to measure the full budgetary impact on related current or future government expenditure.”

This is the key: the Treasury’s extremely unreliable estimates of the cost of superannuation tax concessions are not reflective of the true cost to the budget, which must include the (cash) cost of the age pension.

Undercut the incentives for people to save via superannuation and the cost of the age pension goes up — something this government has studiously ­ignored. The second part of the answer as to why Turnbull and Morrison opted for the radical super changes is along the same lines that explain why Joe Hockey decided to impose the temporary budget repair levy in the 2014 budget.

This latter decision also has significantly annoyed the Liberal Party’s base.

Hockey (and presumably Tony Abbott) thought that this measure would convince the critics that the government cared about fairness; after all, they were prepared to increase the top marginal income tax rate by two percentage points for four years.

Of course, few opinion leaders gave the government any credit for introducing the levy on the grounds of fairness. Labor, however, was more than happy to wave it through the Senate while blocking almost every other (cost-saving) budget measure. It is now Labor policy to keep the levy as a permanent feature of the income tax scales.

Having learned nothing, the next dynamic duo, Turnbull and Morrison, thought they would have another crack at irritating the Liberal Party’s base of supporters while seeking the approval of the progressive press for the “fairness” of the superannuation changes.

After all, it is proposed that nearly $3bn of the gross increase in revenue across four years will be redirected to top-up the superannuation accounts of low-income workers, mirroring Labor’s policy.

A large proportion of these low-income workers will end up on the full age pension and adding a few hundred dollars of precious taxpayer money to their superannuation accounts is expensive and extremely bad public policy.

So what are the lessons for the government of the past nine or so months? Don’t ever put everything on the table. It is poor policy and potentially suicidal politics.

Let’s face it, tax reform was Hockey’s vanity project — all treasurers like to claim the title of reformer — but Turnbull would have been wise to drop it and make the case for much more limited change, such as reducing the rate of company tax. As it turned out, he did a lousy job at explaining even this proposal.

Also forget the call for us to feel excited. Toddlers drinking red lemonade are excited. Optimistic could work, even aspirational — but not excited.

Optimism can be tied into people being motivated to get ahead, to provide for their families and be independent of government handouts. Fairness can then be framed in this context, rather than the narrow focus of win-lose redistribution, which is the Labor way. And don’t forget to mention the lack of fairness of building up government debt to be paid for by ­future generations.

At this stage, there is no reason to believe Turnbull or Morrison have any particular skills in quality economic management. The challenge is in front of them; they have got off to a very bad start.

Superannuation changes to turn Liberals’ friends into enemies

The Australian

July 23 2016

Grace Collier Columnist Melbourne @MsGraceCollier

The times necessitate it but, still, this observation is regretfully made. The Liberal Party has a consistent and notable failing: it does not look after its friends. And because of this, it doesn’t have many. The Labor Party, though, is great at looking after its friends. This is why it has lots and lots. The link between how well you treat your friends and how many you have is obvious to all except the people who run the Liberal Party today.

They just can’t see it and, if they do, they can’t adjust their arrogant and self-destructive behaviour. The next three years are going to be hideous.

To be honest, the problem with the Liberal Party has gone beyond it not looking after its friends. At present, the party is going out of its way to harm its friends, via an illogical imposition of life-changing, financial disadvantage. Coalition politicians keep defending their superannuation policy as fair and good for women. What rubbish. With their dog of a policy, their inability to explain it and their vacuous and insulting responses, one wonders how any of these people sleep at night.

This week, I spoke with four women like me, all part of the Liberal base, all around the age of 50, who are low-income earners or have a long history of self-employment, and therefore small superannuation balances. All of us, long ago, purchased investment property and the plan was always to sell close to retirement, top up superannuation and avoid going on the old age pension.

This is a noble aim, and Australia needs more people with this aim, and you would think a Liberal government would encourage and support us, but no; just the opposite.

If the Coalition’s changes are passed, it will not be possible for any of us to put enough money into our superannuation accounts so we can have a sufficient income in retirement. We will not be allowed to put more than $500,000 of our after-tax money in and will be prevented from making more than $25,000 a year in pre-tax contributions.

Because of these limits, even if all of us start contributing right now, none of us will be able to amass more than $875,000 into superannuation before age 65. Current interest rate returns for term deposits sit on less than 3 per cent. For women such as us, a balance of $875,000 will produce a tax-exempt income of about $26,000 a year.

The government intends to tax the proceeds of superannuation funds over the amount of $1.6 million. This is a tax grab by a government too incompetent to cut obscene amounts of wasteful spending in other areas. However, putting that argument aside, if we must have a cap, then we must let people reach the cap, in whatever way they can, with money from wherever they can get, and at a time that suits them. To do otherwise is grossly unfair.

Going back to our example, if my women friends and I were allowed to put in up to $1.6m of our own money into our superannuation, we could achieve a yearly income of about $48,000.

So why does the Liberal Party want to punish women like us to the tune of $22,000 a year, and why does it want to prevent people from providing for themselves in retirement?

Nationals MP George Christensen gave us a much needed display of courage. If only we had more who would do the same. Christensen vowed to vote against the policy and spoke the truth: “These policies are Labor-style policies which hit those people who have worked hard all of their lives; those who have scrimped and saved and done the right thing. These policies penalise success. Principally, these policies hit small business owners and farmers who have retired, sold their assets and transferred their wealth into superannuation.”

Malcolm Turnbull and his team underestimate the anger out there. This superannuation issue is the last straw. The base is in despair, on the verge of abandoning the party for good. This is not a “we want Tony Abbott back” thing. This is a “sick of the poor performance — including under Abbott — of not knowing what the Liberals stand for, and tired of being slapped in the face” thing.

The base is tired of the weak leadership, lack of fiscal probity, refusal to practise small government, inability to promote the virtues of self-reliance and personal responsibility, and failure to reframe the Labor Party’s mantra of “fairness”.

The base is sick of being taken for granted, pushed around and punished by the people they vote for, give money to and volunteer their time to assist. The base does not care if the superannuation policy affects 4 per cent, 0.04 per cent or 40 per cent. The point is that the policy is disgraceful, unfair and cruel.

If something doesn’t change, come the next election the base will dig the Liberals’ grave, push them in, then dance on top with gay abandon.

This superannuation policy is a measure of how foolish the Liberal Party is now; a senseless decision, made after swallowing the Labor agenda, is turning its greatest friends and advocates into bitter enemies.

In the previous term, not long before Abbott was overthrown, I was in the office of one of his cabinet members. The man kept shaking his head and groaning, repetitively, “We are so f..ked, we are so f..ked.” At the time, despite everything, I didn’t agree.

Now I do.

More on super | Turnbull tax reform: don’t undermine the integrity of super

Catallaxy Files

Judith Sloan

Posted on July 22, 2016 by I am Spartacus

It is a few days old, but Janet Albrechtsen wrote a scathing review of the Government on its superannuation policy development process in the Australian.

Turnbull tax reform: don’t undermine the integrity of super.

She was very even handed.  She ripped into both Abbott and Turnbull.  In both cases, justifiably IMO.

I am not one who is impacted directly or am likely to be impacted by the proposed superannuation changes, but that does not mean I am not offended.  Grossly offended.  Never let it be said ….

  • First they came for the people with large super balances, and I did not speak out— Because I did not have a large super balance.
  • Then they came for the negative gearers, and I did not speak out—Because I was not a negative gearer.
  • Then they came for the ultra high earners, and I did not speak out— Because I was not an ultra high earner.
  • Then they came for me—and there was no one left to speak for me.

This policy seems a product of laziness by the ERC – looking for money, but not wanting to do the work to think about the consequences.  It smacks of Rudd-Swan mining tax from top to bottom.

  • a “bright” idea from the bowels of treasury to increase revenue.
  • a play into the inherent biases of Treasury officials – tax early, tax often, tax everything.
  • calculate the revenue on the back of a napkin and ignore behavioural effects.
  • don’t consult with anyone, because any negative feedback must come from self interest.
  • sell it to a desperate Minister desperate for money to spend on boondoggles.

A gift that keeps on giving.

This loonie policy also likely a byproduct of the disgraceful Tax Expenditures Statement produced annually by Treasury.  The basic premise of this statement is that all taxes should be at the highest rate and anything that is charged less than the maximum is a loss to the budget.  It does not adjust for behavioral impacts of higher taxes.  The entire intellectual foundation of this statement is nonsense.

But it serves a purpose.  It creates this false belief in the corners of government, bureaucracy and the intelligentsia that there is money there, ripe for the picking, available to fund any hair brain government scheme or action.

Football stadium?  Sure.  Netball courts?  Why not.  Paid parental leave?  Bring it on.  Make everyone in the LNP a member of cabinet with a department and a salary bump?  Hey – why not.

There is never a spending problem when there is a revenues solution presented in this report.  The money is clearly there.  Treasury says so.

The problem is that the money is not there.  Unless you believe that everything owned and produced in Australia belongs to the government and the it is only a matter if time before the government takes it back.  You may laugh, but there are people out there, in pubs, clubs, parties and parliaments who believe this.  They may not say the words, but the actions speak sufficiently.

The Tax Expenditure Statement for 2015 (released in Jan 2016) suggested that there is approximately $100 billion, hanging there on the money tree, waiting for the government to pick.

Interestingly, the huge benefit of RETROSPECTIVELY converting public servant and politician superannuation from defined benefit to defined contribution is not there.  I wonder why.  Would be a big benefit to the budget.

If you want a hint as to the benefit of retrospectively making this change, you may recall that the Future Fund was set up to meet the unfunded balance of these.

The balance of the Future Fund was approx $120 billion at end FY15.  And that won’t be enough.

Draft super laws to be released before parliament sits

The Australian

July 22 2016

David Crowe Political Correspondent

The federal government will fast-track its $6 billion superannuation reforms by releasing draft legislation within weeks to clear the way for talks with industry and the wider community over changes that might calm the storm over the controversial tax hikes.

Malcolm Turnbull and his ministers will outline the first draft of the tax proposals well before parliament resumes on August 30 in a bid to ensure weeks of consultation on the detail of the changes before they have to run the gauntlet of the Coalition partyroom.

The draft will stick to the broad plan set out in the federal budget on May 3 but will leave time for critics of the proposals to push for changes, mapping out a strategy to negotiate amendments in the new Senate as soon as possible.

The Prime Minister is insisting on the need for the overall package while Scott Morrison has warned against sacrificing $550 million in revenue by scrapping the most contentious change, a $500,000 lifetime cap on non-concessional contributions that is meant to take effect from July 2007 and has sparked claims of “retrospective” taxation.

The Australian has learned that super industry experts, including financial planners who are at the “coalface” advising retirees, will be consulted throughout next month in order to ensure the details are canvassed before the Coalition partyroom rules on the reforms.

While there is speculation about exemptions being granted to the $500,000 lifetime cap — such as allowing people with inheritances or divorce settlements to exceed the limit — the advice from Treasury is that these would be difficult to stipulate in black-­letter law because every circumstance would be different.

One option to resolve the issue is to give the Commissioner of Taxation the discretion to let indiv­iduals exceed the cap, but this would be on a case-by-case basis and would be hard to quant­ify in terms of the tax revenue forgone.

The fast-track plan is being aided by the work done by Treas­ury during the election campaign, when the government was in caretaker mode but officials had time to draft legislation to put into effect budget measures announced before parliament was dissolved.

Coalition MPs are hoping to press for changes in the first partyroom meetings after parliament resumes, but the government is also preparing for negotiations with powerbrokers in the Senate including Derryn Hinch, Pauline Hanson and Nick Xenophon.

Mr Hinch wants Mr Turnbull to introduce the super package in the form outlined in the budget so that parliament, rather than the Coalition partyroom, could make any changes. “He can’t amend it now for his backbench and fiddle with it and say ‘That’s not what I was elected for’ — he can’t have it both ways,” he said on Tuesday.

“He’s going to lose the fight, ­especially over the $500,000. He’ll lose the fight but he has to present it as it is and I think he intends to do that.”

Ms Hanson said on Monday night that the government should “leave the superannuation alone”, in a comment that could force the Coalition into dealing with Labor and the Greens to get around the Senate crossbench.

Financial Services Minister Kelly O’Dwyer argued yesterday that some of the benefits of the changes had been overlooked during the election campaign. While the tax increases raise $6bn over four years, about half this amount is used to pay for offsets for workers on low incomes and more flexible rules for women re-entering work. Once these bene­fits are taken out, the package adds $3bn to the budget bottom line.

“We expect to begin consult­ation on exposure draft legislation shortly and, consistent with usual practice, will listen carefully to ­advice on the design of the legislation,” Ms O’Dwyer told the Fin­ancial Services Council’s annual forum in Melbourne yesterday.

The Treasurer said yesterday he expected Labor would support the reforms. “We took that policy to the election and that is the policy we continue to work through now on its implementation,” Mr Morrison said. “There is no retrospective element in our super­annuation policy, therefore I would presume that the Labor Party would wish to support it.”

He was firm that there could be no change to any budget policy that produced an increase in the deficit, with any reduction in savings needing to be offset. “There are no exceptions to those fiscal rules,” the Treasurer said.

He said Australians had put their trust in the Coalition to manage the budget. “We have an oblig­ation to the Australian people to ensure that we hold to that task, and we hold firmly to that task.”

Opposition superannuation spokesman Jim Chalmers said the government had made a mess of the reforms but it could talk to Labor about “workable and fair” changes — once a review had been done of the budget plan.

“We said during the campaign that we would support changes which are workable and fair and consider any alternative measures which yield similar savings,” Mr Chalmers told The Australian.

Greens Treasury spokesman Adam Bandt also warned that there could be no deal until Mr Turnbull and Mr Morrison resolved the divisions within the Coal­ition and calls for changes from the Institute of Public Affairs.

LNP warns Turnbull over super “madness”

The Australian

26 July 2016

Michael McKenna

Malcolm Turnbull’s superannuation changes have been branded as “madness’’ by the Liberal National Party’s small business policy committee.

In a motion to be debated at the LNP’s state convention next month, the committee said the Turnbull government had “broken faith’’ with the Australian people in the changes announced in the May budget.

Aspects of the superannuation overhaul — particularly plans to implement a $500,000 cap on non-concessional contributions back to 2007 — has caused division within the Coalition and are openly opposed by some incoming Senate crossbenchers.

While the Prime Minister has indicated the changes could be subject to “fine-tuning” , he last week insisted the $500,000 cap was “absolutely right’’ .

Mr Turnbull is expected to outline the first draft of the proposals before federal parliament resumes on August 30 — just days after the LNP state convention.

The policy committee, headed by Queensland businessman Paul Smith, has called on the government to change the cap and that any changes to the treatment of superannuation should not be retrospective.

The committee accused the government, which hopes to raise $550 million from the $500,000 cap, of breaking assurances not to target superannuation.

“On budget night 2016, the government broke faith with the Australian people and undermined their trust in the superannuation system,’’ the motion reads.

“Although there were positive changes, several measures broke repeated assurances that there would be no additional taxes on superannuation and that ‘the government is not coming after your superannuation’ .’’

The move comes just days after a push by some in the LNP to consider setting-up a separate partyroom in Canberra.

The LNP state executive narrowly defeated a motion to formally assess the proposal amid anger over the make-up of the Turnbull frontbench.

LNP president Gary Spence last night said he was unaware of the small business committee’s superannuation motion, which still has to be vetted before it is put on the agenda of the three-day state convention from August 26.

The committee was scathing of the proposed “$500,000 contribution cap’’ and the government backdating the measures to 2007.

“Australians have planned for their retirement in good faith and have foregone alternative investment or lifestyle opportunities to save enough for their retirement so they would not be a burden on the taxpayers,’’ the motion reads.

“They now find that there is no traditional ‘grandfathering’ of these changes.

“Instead they are told that they are not retrospective. Whilst this is correct in a technical sense, they are retrospective in effect and to say otherwise is perceived as arrogant and out of touch.’’

The motion calls for the government to further consult on superannuation changes, to recalculate any proposed cap and not backdate the changes.

“The total funds allowed in superannuation accounts should be capped by actuarial formula related to the value of the government benefits to be forgone,’’ the motion said.

Outspoken Queensland MP George Christensen last week warned he would cross the floor if the “bad’’ superannuation policy wasn’t changed, calling the changes “Labor-style policies’ ’ that hurt people who had worked hard all their lives.

Memo Liberals: Making enemies of friends is deeply foolish

The Australian

July 26 2016

Grace Collier Columnist @MsGraceCollier

Before the recent federal election, those campaigning against the government’s superannuation policy were begged by the party ­hierarchy to back off, to keep a lid on it all, until the election was won.

Well the election is won, the lid is off and the pot is boiling over. In Queensland, there is open revolt. The anger is palpable and Liberal National Party members are organising a campaign against the changes, beginning with a formal motion to demand their demise.

“The Labor Party wouldn’t even do this,” says my long-time friend Graham Haycroft, a party policy committee chairman in the Queensland LNP.

“With what they have done, people’s superannuation is now just like fish in the barrel; any future government can come along and shoot whatever they like. The Liberals have broken the seal; after this, it will just be open slather.”

Haycroft is not speaking as a party spokesman, merely passing on the sentiment among the 15,000 party members. “The anger is palpable” he says.

With its foolish superannuation changes, the Liberal Party is hitting the people who do everything for them; it is taking money out of the pockets of its own support base.

Small business people, the wealthy and the non-wealthy but aspirational are all going to be unfairly penalised by the nonsensical changes the Turnbull government has planned.

The government is hopelessly addicted to spending, and when a government addicted to spending can’t break its habit, it robs the piggy banks of those closest.

It abuses the rights of those within the family; it takes advantage of the close relationship, banking on the hope there will be reluctance to retaliate.

In Queensland, though, things are different. Here, the structure of conservative politics differs to all the other states. The Liberal party is the Liberal National Party, with a different constitution. This party is run from the middle, not from the top, and individual leaders do not have the power they have in the other states.

All decisions are subject to ratification by state council and at the next state council, next month, a motion is being put up to quash the superannuation policy. Party insiders expect it to pass, easily. Even if it does, and the policy is dumped, or significantly amended, the Liberals have already paid a terrible price for their folly.

“The way the decision was made leads you to think, how can you trust these people?” says Haycroft. “Even if they fix this, it will take at least a decade to get that back.”

At the weekend, various MPs and party insiders rang to chat. Many are livid at the changes. The policy is seen as an injudicious move. The view is Treasury has had the policy, in some form or other, in the bottom drawer for many years, and has just been waiting for a treasurer mug enough to swallow it.

It is not just Scott Morrison in the firing line — the guns are out for the small clique around him, too. The attitude coming from this group is that superannuation tax treatment is a form of middle-class welfare. It was put to me that it makes no sense to tax people less just because they are older.

The attitude coming from the Liberals is that retirees should be grateful the government lets them keep some of their own money, and should not begrudge the end of the government’s generosity, because after all they need the money to pay for everything else, including the incredible cost of saving Christopher Pyne’s seat.

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