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.