Australian Financial Review
26 July 2016
by Phillip Coorey
Treasurer Scott Morrison has used his second international forum in as many days to assure the financial world he was holding the line on proposed changes to superannuation for the sake of the federal budget.
A day after telling the G20 Finance Ministers meeting in China the changes were about protecting the integrity of the tax base, the Treasurer used an interview with CNBC on Monday to reassure restive credit ratings agencies that he envisaged only making minimal changes to the proposals to ensure their passage.
“There can be no doubting our commitment to the fiscal consolidation that we have embarked upon,” he said.
“There are some minor technical issues that we are still working through which are part of the normal process but they overwhelmingly enjoy support in terms of obviously our own party.
“These are reforms that are very critical to the long-term sustainability of our superannuation system. I think these reforms are somewhat overdue and they really do right what have been some very generous concessions that have sat around the system.”
Early next month, the government is expected to release the draft legislation for the changes which will remove $6 billion in superannuation tax concessions, of which $3 billion will be churned back into bolstering the super savings of the low paid.
The move to place a lifetime cap of $500,000 on contributions, which would save the budget $550 million over four years, is the most contentious issue with Labor and many on the Coalition backbench saying it is retrospective because it was backdated to contributions made since July 2007.
Once the legislation is released, the government will go through what it says is a standard period of consultation with the backbench and stakeholders before putting it to the Parliament after it sits on August 30.
Last week, The Australian Financial Review revealed that in order to appease backbench anger the government was considering exemptions to the $500,000 cap for so-called life events, such as an inheritance or divorce settlement.
Financial advisers claimed such exemptions would be unworkable and even act as a perverse incentive for couples to divorce.
One senior member of the government, who backs the super changes but did not want to be identified, called such claims “bullshit”.
Cost of backdown
“If a couple does get a divorce over this, what does it say about the quality of your marriage?” he said.
The source said the government was determined to minimise the cost of any exemptions and argued much of the anger was coming from well-off people who were unprepared to do their bit to help with budget repair and would rather the burden be carried by the less well-off.
“They have got a lot of money and they can’t stuff it into their accounts, that’s their problem,” he said.
Depending on the extent of life events the government allows, estimates have put the cost of a backdown at between $300 million and $450 million. Internally, Mr Morrison, Finance Minister Mathias Cormann and Prime Minister Malcolm Turnbull are trying to hold the line.
Mr Morrison told CNBC ongoing reform was vital to growth and he was prepared to demonstrate the government could have a good working relationship with the Parliament to get its budget measures through. It also had to remain receptive to foreign investment.
“The Australian economy is now in its 25th year of consecutive economic growth, we are growing at 3.1 per cent … but to maintain that and keep it going, reform needs to continue and above all we have to ensure that private capital has a home in Australia where it can earn a decent return and you have got to have the right settings to achieve that.”