Tag: save our super

It’s not intergenerational theft

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Greedy pigs on the cover of the Grattan Institute report

 

Catallaxy Files – Judith Sloan

20 August, 2016

Grace Collier is completely on the money to call out the Grattan Institute for releasing tacky, biased pap and using cheap undergraduate humour to make its point.  A picture of pigs with their snouts in the trough as representing people who have worked hard and saved according to the applicable superannuation rules.

In its campaign to impose higher taxation in order to fund bigger government, the Grattan Institute has come out with some completely loony proposals ($11,000 annual concessional contributions cap –  is this a joke?) dramatically to increase taxation on superannuation, proposals which have appealed to our left-leaning government.

Read my lips: we don’t have age-based taxation.  Current income is taxed in the same way irrespective of age.  The taxation of savings is another matter and every economist (not that Daley is not an economist) knows that savings need to be taxed in a different way from current income – apart from the little twinks at Grattan.  (Wood should know better, by the way.)

(What’s that you say?  The pigs are actually the staff at the Grattan Institute who have their snouts in the trough courtesy of two Labor governments just giving away taxpayer money ($30 million) without any competition and with nary a proposal as the ends to which the monies would be put.)

Here’s the key section of Grace’s piece:

Most MPs don’t understand their own policy, let alone where it came from — a publicly funded left-wing think tank, the Grattan Institute.

Its report Super Tax Targeting is sexist and ageist. It urges the government to take money off “rich old men” who don’t need it and are committing “intergenerational theft” anyway via their superannuation accounts.

Further, self-funded retirees should be aware the authors of the report — John Daley, Brendan Coates and Danielle Wood — regard them as greedy pigs. Look at the report’s cover, pictured [above].

Sceptics who doubt the Liberals would be so foolish as to adopt the institute’s leftist agenda should seek out the report on Google and read just the first page.

Back in June, when a public furore broke out about the policy, the institute put out a media release by Daley and Coates. It was titled “Tax-free super is intergenerational theft” and said: “A number of politicians have struggled this week to explain the Turnbull government’s proposed changes to superannuation … this complexity explains why intergenerational ‘theft’ through superannuation has continued for so long. No one has ever explained why we should have an age-based tax system … some of these voters are now objecting vociferously to losing their privileges but they were never justified in the first place.”

I sent off emails asking the Coalition powers-that-be to deny their superannuation policy was based on or informed by the report, and whether they deny meeting the authors. The Treasurer and Revenue and Financial Services Minister Kelly O’Dwyer declined to offer a denial and sent back a statement saying they talked to everyone.

The Grattan Institute was formed in 2008 and $30 million of taxpayer funds has been given to it.

It is housed in taxpayer-funded accommodation at the University of Melbourne and is crammed to the rafters with ex-Labor staff. All of this, in itself, is not such a bad thing. What is life without diversity? We can’t all be productive members of society. But the problem is that a body such as this shouldn’t be setting Coalition policy.

How on earth did this happen? Who knows, but the PM and his wife are listed on the “Friends of Grattan” web page as individual financial supporters. Further, Lucy Turnbull has been on the board since December 2012. So in the absence of any other rational explanation for the Liberals’ superannuation madness, there is always that.

Friday, January 4, 2019

Morrison’s super backdown does not go far enough

Australian Financial Review

19 August 2016

Sally Patten

Superannuation funds, including self-managed super funds and their advisers, welcomed Treasurer Scott Morrison’s proposed backdown on one of the most controversial super measures contained in the May budget, but say they don’t go far enough.

The SMSF Association said it would welcome either raising the planned lifetime ceiling on after-tax super contributions to $750,000 from $500,000, or bringing forward the start date until budget night.

“We would like to see an increase in flexibility around the non-concessional caps, whether it be raising the cap, introducing carve-outs or bringing forward the start date,” said SMSF Association chief Andrea Slattery.

In May Mr Morrison said the after-tax contributions ceiling would be backdated until 2007.

In addition to raising the after-tax contribution limit or moving the start date, the Turnbull government has said it will allow savers to exceed the ceiling for certain “life events”, such as divorce settlements.

Ms Slattery said that the super package would need to be looked at in its entirety, adding that she had concerns over the granting of carve-outs for certain windfall payments on the grounds that they could make the super system more complex to administer. Ms Slattery suggested that raising the proposed annual $25,000 before-tax contribution limit, particularly for savers over the age of 50, was a more important issue.

However shadow treasurer Chris Bowen said the super backdown was an example of government dysfunction along with the “rolling fiasco” of the census, and the fighting retreat over banks.

“Malcolm Turnbull and Scott Morrison told us before the election they would stand by every word of the superannuation policy,” he said. “Today we see leaks out of the government on the front page of the Financial Review that the government is preparing to walk away from its $500,000 dollar cap on superannuation.”

Labor said it was disingenuous for the government to spend this week demanding the Opposition honour the spending cuts it pledged to back during the election campaign when the government was diluting its own savings proposals on super.

“(Mr Morrison) should be on the front foot and tell people, the superannuants of Australia, those who have invested in good faith under existing rules just what his policy is,” he said.

“We were told just a few weeks ago that the government would be ready and on the front foot before Parliament. Well, Parliament meets the week after next, and now we read, no, the legislation won’t be ready for some time.”

Welcoming the Coalition’s “consultative approach”, the Association of Superannuation Funds of Australia said the government’s proposed $25,000 annual non-concessional limit needed re-thinking. The new limit is considerably lower than the current annual contributions limits of either $30,000 or $35,000 depending on a member’s age.

“ASFA has consistently supported the broad thrust of the budget changes as we believe they make the system more equitable and sustainable, but has indicated that further consideration and analysis needs to be applied, particularly to the proposed reduction in annual concessional caps,” an ASFA spokesperson said.

“The concessional caps affect all Australians and affect their ability to achieve adequacy and that’s why it is important,” Ms Slattery said.

The SMSF Owners’ Alliance welcomed a move to raise the lifetime ceiling from $500,000, but argued that Australians should be allowed to contribute to their super accounts until they hit the proposed $1.6 million super pension transfer limit, another contentious measure unveiled in the May budget.

SMSF Owners’ Alliance chairman Bruce Foy said it was critical that retirees already drawing a private pension be allowed to retain all their savings in a tax-free pension and not have to move amounts above $1.6 million back into a so-called accumulation fund which attracts a 15 per cent earnings tax.

Mr Morrison has made it clear that he will stand by the policy of allowing retirees to transfer a maximum of $1.6 million into a tax-free private pension.

“The $1.6 million cap is a retrospective measure for people who have set assets aside. At the very least the $1.6 million cap should be raised. It should be grandfathered for people in the pension phase,” Mr Foy said.

The Financial Services Council said it welcomed the sign that the government was considering moving the start date for the introduction of the $500,000 lifetime contributions ceiling.

“Any measure that is backdated by almost a decade will have issues with implementation and with information retrieval, especially as superannuation is currently transitioning from a paper-based system to a digital system,” said Sally Loane, chief executive of the FSC.

The Association of Superannuation Fund Trustees said the proposed $500,000 cap was an important equity measure.

“Treasury has importantly confirmed that the 2007 start date relates to calculations around individual cap limits going forward. It does not mean that anyone who may have already put in more than $500,000 in non-concessional contributions will have to withdraw amounts above the cap,” said David Haynes, AIST executive manager of policy.

Saturday, September 3, 2016

Older super savers ‘thrown to the wolves’

Australian Financial Review

17 August 2016

by Sam Henderson

Many believe a $25,000 pre-tax contribution cap is too restrictive and does not adequately encourage Australians to save more in retirement

A reader in his 50s with $700,000 in super has a good chance of hitting $1.6 billion by retirement age, writes Sam Henderson who answers your questions on super.

Q: I am in my mid-fifties with a super balance of $700,000, largely achieved by making use of the pre-budget annual non-concessional cap over the last few years since the mortgage and private school fees have finally been put behind us. I had a perfectly sound plan in place to achieve a healthy super balance in line with Rice Warner’s lucky 40-year-olds over the next 10 years, using a combination of concessional and non-concessional contributions. But with the new flat $25,000 annual cap on concessional contributions, and having already used up the proposed retrospective $500,000 non-concessional cap, how can I possibly now achieve my pre-budget plan or even anything close to it? Some 40-year-olds may indeed be crying wolf, but I feel that we 50-somethings are being thrown to them! David

A: David, you are correct but only assuming you receive no return on your money, which is unlikely. I thought I’d run a quick rudimentary spreadsheet on the numbers and you would need to attain a return of 6.5 per cent compounded per annum to attain a little over $1.6 million in 10 years. According to SuperRatings, the average return over the past five years has been around 5.5 per cent for a super fund so assuming you received this return, it may be estimated that you could end of achieving a retirement lump sum of a little south of $1.5 million. Depending on your risk profile, experience, knowledge and preparedness to borrow money, gearing might magnify the returns (and potentially losses) to attain a figure well in excess of $1.6 million.

Incidentally, despite requiring a little faith in the future and an assumption that no further detrimental changes to super will affect you (lets hope not!), I don’t think you will be too far from the mark.

For the record, I do agree with you that the $25,000 is too restrictive and does not adequately encourage Australians to save more in retirement. It is proposed that superannuants will be able to use non-utilised years of the $25,000 (essentially saving it up and making a lump sum of up to $125,000 and still be able to claim a tax deduction). It’s further proposed that they will be able to contribute to super over the age of 65 without having to meet the work test until 75. This will help those people needing to pump up their super using lump sum contributions from the sale of assets or an inheritance.

All of this is increasingly important in a lower interest rate environment when $1.6 million may not create the income stream it did when interest rates were at 7 per cent. I should also note how highly problematic it is attempting to navigate the advice process in this environment after the government has made such impactful announcements without any of them having seen the light of parliament yet.

Q: I am another who will be caught out by the proposed changes to the transition to retirement pension rules. I do not classify myself as wealthy and I did not use the pensions to avoid tax. I believe that I have used them as intended and am now almost completely retired. I would like the option of doing interesting work if it came my way but it looks like that will be denied. I am also annoyed that the government has misrepresented the Productivity Commission which actually suggested that more information is needed to see who used TTR pensions and for what purpose before changes were made. The government is applying collective punishment to all who used the TTR pensions. I am now 68 and hence am well above my preservation age. I have a term allocated pension and an allocated pension in a self-managed super fund. Is it true that if I fully retire before the end of this financial year, the earnings for these pensions will continue to be tax-free? If so, I feel that it is ironic that the government will force a highly educated and experienced person (Ph.D.) from the work force but will draw no additional tax revenue. Michael

A: Thanks for your question, Michael. Your answer is far simpler than you may imagine. Attaining age 65 (three years ago) is a full condition of release so you should be receiving a full account-based pension not a transition to retirement (TTR) pension. TTRs are only for people from preservation age (age 56 at the moment) to age 64. This should have been changed by your administrator or accountant when you turned 65. You really have very little to worry about given the changes.

Essentially, you may continue to work or you may retire but either way, your pension will remain tax-free and you may also retain an accumulation account for as long as you like although it may be prudent to have as much as possible in a pension phase.

The only caveat is if you have greater than $1.6 million in your individual account, although I doubt you’d have a TAP if you are in this situation and the proposals are yet to pass parliament.

These questions are answered without the full financial and lifestyle details of readers and must therefore be taken as general advice. We recommend you speak to a qualified financial adviser for complete and comprehensive advice.

Financial planner Sam Henderson is CEO of accounting, advice and funds management firm Henderson Maxwell (www.hendersonmaxwell.com.au). To submit a question, please email: superquestions@fairfaxmedia.com.au. Published questions will win a free copy of Sam’s book The One Page Financial Plan (Wrightbooks, RRP $29.95) – remember to include your mailing address in your email.
AFR Magazine

AFR Contributor

Sunday, August 28, 2016

Doubling super cap to $1million would ‘satisfy’ restive Coalition backbencher

Australian Financial Review

21 August 2016

Jacob Greber

Liberal National MP George Christensen, who has threatened to cross the floor against Treasurer Scott Morrison’s $6 billion crackdown on high-end superannuation concessions, has signalled that doubling the $500,000 lifetime cap would bring him back within the fold.

In a sign of how far restive backbenchers are demanding Mr Morrison go in winding back the Coalition’s super plan, Mr Christensen said that lifting the cap to $1 million “would satisfy most concerns” over the government’s policy.

Raising the lifetime non-concessional contributions cap would almost certainly wipe out most of the budget benefit from the $550 million measure and leave the Coalition wide open to opposition attacks that the government is demanding curbs to middle-class welfare while failing to share the pain on its wealthy political base.

Labor is expected to ramp up this issue in coming days.

Mr Christensen’s intervention follows revelations in The Australian Financial Review last week that Mr Morrison is considering either lifting the cap to $750,000 or making it prospective.

Government ministers maintained their stance over the weekend that they were consulting the industry and party colleagues, with Mr Morrison spending much of last week travelling around the country canvassing alternatives.

Financial Services Minister Kelly O’Dwyer was tight-lipped about the cap on the ABC’s Insiders on Sunday, but declined opportunities to deny the cap is now under review.

“We’re doing what we always do when it comes to legislation, we are consulting very broadly,” Ms O’Dwyer said. “We’re making sure that there are no unintended consequences. We’re making sure that we get it right.”

She emphasised that the Coalition’s super policy was about ensuring more flexibility for savers and allowing lower-income earners to increase their concessional contributions caps, with a rolling $125,000 allowance over a decade.

She said that would add up to $250,000 that could be put into super.

“We’re going to be legislating an objective for superannuation that says that it is for the retirement incomes of Australians that will either supplement or substitute for the aged pension,” she said.

“Now that is where our package has been tied together through this particular objective. The non-concessional contributions is one aspect that people have highlighted.”

There is growing anger within Labor that the Coalition is watering down its proposed curbs to high-end superannuation at a time when the opposition is being encouraged to support the government is cutting welfare supplements to low and middle-income families.

Both sides of politics denied on Sunday that they had reached a deal to halve a $700 payment, with both saying they haven’t been approached by either side.

Opposition frontbencher Brendan O’Connor said Labor will keep its election commitments but had to scrutinise a proposed omnibus bill with a bundle of measures to ensure the government was keeping its promises.

He added that if the government was going to put such a premium on keeping promises it should go ahead with its cuts to the super concessions as laid out in the May budget.

Monday, September 12, 2016

We remind Scott Morrison of his broken “tax-free super” promises

4 May 2019 – Due to an inadvertent transposition, the quotes in this document do not match the proper source. We have corrected the document. The update can be found here:

We remind Scott Morrison of his broken “tax-free super” promises – Updated 4 May 2019

Email dated 16 July 2016 from Save Our Super to Treasurer Scott Morrison in lead up to the Liberal Federal Parliamentary Party meeting to be held on Monday 18 July 2016:

Dear Mr Morrison,

I write to you in your capacity as the Treasurer in the second Turnbull L/NP Coalition Government.

This email relates to the superannuation issue. Therefore, if possible, would you please read it before the Liberal Federal Parliamentary Party meeting to be held in Parliament House, Canberra next Monday 18 July 2016. It may go a long way to explain the anger and dismay felt by many Liberal Party/National Party members and conservative supporters of the L/NP Coalition. I am one of many.

I am a Melbourne QC. I live in Kelly O’Dwyer’s electorate of Higgins in Victoria.

Also, I am the founder of Save Our Super; see: https://saveoursuper.org.au . A brief biography of my background can be found on that website under “Our People”.

Save Our Super is an organisation I formed as a consequence of the Government’s current superannuation policies. Those policies were announced by you on 3 May 2016, when you delivered Budget 2016 on behalf of the first Turnbull L/NP Coalition Government.

It is no understatement to say that those policies were sprung on the Australian public without notice or any real consultation. They were not “evidence-based” public policies by any reasonable use of that term.

Moreover, they were, and remain, in direct contradiction to that which you had told the Australian public on many occasions prior to you delivering Budget 2016.

You made at least 12 “tax-free superannuation” promises in May-June 2015, and in your Address on 18 February 2016 to the Self-Managed Superannuation Funds National Conference in Adelaide. You gave that Address less than three months before you delivered Budget 2016 on behalf of the L/NP Coalition Government.

We have posted them on Save Our Super’s website; (see under the tab “Scott Morrison’s tax-free super” for the source; and see under the category  “Quotes” for the full Address and source).

I have set them out below for your convenience.

You are the one most likely to be accepted by the Governor-General as the Treasurer in the second L/NP Coalition Turnbull Government in about a week’s time.

We believe you should be reminded of your broken promises, at least for the purpose of the forthcoming Liberal Federal Parliamentary Party meeting to be held in Parliament House, Canberra next Monday 18 July 2016.

“Scott Morrison’s 12 tax-free superannuation promises : May to June 2015

3AW – 19 June 2015

MINISTER MORRISON: Well we do want to encourage everyone … to be saving for their retirement and particularly when you are drawing down on that when you are retired we don’t want to tax you like Chris Bowen does.

2GB – 25 May 2015

My own view is that the superannuation system, for example, meant I don’t want to tax people more when they’re basically investing for their own future… That’s why I think Chris Bowen’s idea, …of …taxing superannuation incomes, is a bad idea, I don’t support it…

Question Time – 25 May 2015

And when they get into their retirement, we are going to make sure that their hard-earned savings in their superannuation will not be the subject of the tax slug that those opposite want to impose, … Those opposite see it as a tax nest—a tax nest for those to plunder.

The shadow minister earlier referred to ‘trousering’. The ‘trouser bandit’ sits over there because he, together with the shadow Treasurer, wants to come after the hard-earned superannuation savings…

What we will do for them is: we will not tax them like the ‘trouser bandit’ opposite.

3AW – 18 May 2015

It’s the Labor Party who wants to tax superannuation, not the Liberal Party, particularly the incomes of superannuants and I think that’s a fairly stark contrast that’s emerging.

Doorstop – 8 May 2015

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…

Press Conference – 7 May 2015

MINISTER MORRISON: What we are not going to do is we are not going to tax those savings, like Bill Shorten wants to do. That is the difference, we will not tax your super, Bill Shorten will.

MINISTER MORRISON: Yes, and there are other taxation arrangements that apply to superannuation already and we are not going to increase those taxes as the Labor Party does and nothing we have done with the Greens has in any way changed the Government’s position on not taxing your super. We will not tax your super.

ABC AM – 5 May 2015

…what is not fair is if you save for your retirement and you create yourself a superannuation nest egg and the Government then comes along and taxes that income; which is what Labor are proposing to do.

ABC RN – 5 May 2015

We don’t think that people who have done that should be punished with higher taxes, Bill Shorten does, and so does Chris Bowen and I think that’s a stark difference between the Government and the Opposition on these issues.

3AW – 1 May 2015

The Government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement.”

“Australians “… spooked out of… their [superannuation] investment” – Scott Morrison

Treasurer Scott Morrison, 18 February 2016

“One of our key drivers when contemplating potential superannuation reforms is stability and certainty, especially in the retirement phase. That is good for people who are looking 30 years down the track and saying is superannuation a good idea for me? If they are going to change the rules at the other end when you are going to be living off it then it is understandable that they might get spooked out of that as an appropriate channel for their investment. That is why 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.”

In light of the above, how can the public trust anything you say in future, let alone superannuants and those who advise others regarding superannuation?

As to the latter, see Jim Brownlee’s letter set out below; (see under “Letters to Save Our Super”, and Save Our Super’s Disclosure).

“Government Destroys Financial Adviser’s Trust in Superannuation

26 June 2016

I have been an ASIC-registered Financial Adviser for more than three decades. Over that time, I have provided my clients with retirement-planning advice. I have promoted the Government’s (both Liberal and Labor) carrot and stick message of (1), the increased long-term vulnerability of the aged-pension and, (2), tax concessions specifically structured to encourage self-funding superannuation retirement savings.

ASIC requires me to give my clients a Statement of Advice (“SoA”). It sets out the Government’s superannuation tax incentives. Those tax incentives underpin my SoA’s recommendations. They are crucial to the client’s decision. I am invariably asked “What happens if the Government changes things?”. UntiI now, I have always answered: “In my long-term experience, Governments have always ‘grandfathered-in’ protection for existing arrangements.”  

But Treasurer Scott Morrison, in his May 2016 Budget, changed all that.

Last year, before that Budget, he said to the Australian people:

“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…”

Not only did the Government not do what the Treasurer promised, they did precisely what the Treasurer promised that the Government would not do.

The Government came after people’s superannuation and announced proposed increased taxes on superannuation.

Furthermore, the Treasurer added insult to injury. He announced those increased taxes without also announcing that Australians who had acted in good faith and saved for their retirement under the then existing rules, would have their superannuation savings protected by grandfathering.

What am I supposed to tell my clients now, when they ask me, as they will, “What happens if the Government changes things?”

Am I now to say, “Well, I remember the Liberal Government’s May 2016 Budget. I wouldn’t put my savings into superannuation because you can’t trust the Government not to change the rules, and not protect your savings by grandfathering the existing rules”.

Jim Brownlee

Authorised Financial Adviser Representative.

Berwick, Victoria”

Please let me know your view of the Government’s current superannuation policies and the outcome of the meeting next Monday, 18 July 2016. I intend to publish this email and any replies I receive on Save Our Super’s website.

If you wish to raise with me any aspects of the Government’s current superannuation policies, or any suggested changes to those policies, I am only too happy to discuss them with you.

Please feel free to contact me on 0400 — — or by email on jack.hammond@saveoursuper.org.au

Regards,

Jack Hammond QC

https://saveoursuper.org.au

jack.hammond@saveoursuper.org.au

Sunday, May 5, 2019

Kelly O’Dwyer: Who you stand up for on super depends on where you sit in Parliament!

(21 Mar 2013)  House of Representatives Hansard
Ms O’DWYER (Higgins) (10:40) [whilst in Opposition to the Gillard Labor Government]:

I rise today to speak on the Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013. We have heard a number of speeches in this place as to the import of this bill, but let me recount that the bill amends the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 to increase the maximum levy payable by a trustee of a self-managed superannuation fund for an income year from $191 to $259 from the 2013-14 financial year. It brings forward the liability to pay the levy during the income year instead of the current requirement to pay some months after the year ends, when the SMSF lodges its returns.

Whilst the government made the announcement in the Mid-Year Economic and Fiscal Outlook last year that it would increase the levy from around $191 to $259, the implementation and timing is such that these changes will in fact result in a total levy being paid in the 2012-13 year of $321 and a total levy in the 2014-15 year of $388. We on this side understand that levies do need to be recovered on a cost-recovery basis. We respect that attitude, we respect that that is a responsible way to manage the budget and, in that statement, we do not oppose this bill.

However, it has been clear from the evidence presented to the Parliamentary Joint Committee on Corporations and Financial Services that there is a suggestion that the amounts and levies being charged on self-managed super funds are over and above what would be considered cost recovery.

Evidence was presented to the committee by the Self-Managed Superannuation Professionals’ Association of Australia that there was no justification provided, no evidence presented, by the government that this was in fact cost recovery. They said in evidence to the Parliamentary Joint Committee on Corporations and Financial Services:

As we alluded to previously, the increased costs have been around changes from the Stronger Super package. We have seen those in the 2011-12 budget papers and again in the 2012-13 papers, but, in contrast, in the recent 2012-13 MYEFO papers, there was no justification or reasons given accompanying the increase in the levy.

This was indeed curious, and members asked questions of the ATO. They asked questions regarding the increase and the bring-forward provisions of the bill. The ATO were asked the specific question:

Who proposed this increase in the levy? Was it the tax office or the government?

The ATO’s response was:

I think it is best to take that one on notice. My recollection—but my memory sometimes fails—is that on this occasion the discussion was probably initiated by Treasury, but I may be mistaken.

We are not convinced that this cost increase was one that did not come directly from the government. In fact, the government has a very strong track record of ripping money out of the superannuation sector. Over five years it has ripped more than $8 billion out of the superannuation sector.

I wanted to talk in the time available today about the changes that the government has made to superannuation and how it is having a very direct and significant impact on those people who are doing the right thing—trying to save for their future and be self-reliant. It is critical that people have confidence in our superannuation system and, when people invest their hard earned money, they need certainty—certainty around how that money will be taxed going in and how it will be taxed coming out. They need certainty around the contributions that they can make. They need to know that there will not be continued fiddles with the superannuation system.

This government has in fact made more than 23 fiddles with the superannuation system. That is almost four changes every year, and that is the very opposite of certainty. Some of those changes include: the reduction of the rate at which the government superannuation co-contribution is paid from 1 July 2009 and 30 June 2014; a limit on concessional contributions, reduced from $50,000 per annum to $25,000 per annum; matching the rate for government superannuation co-contributions to be reduced from $1 to 50c, with the maximum benefit also to be reduced from $1,000 to $500; the maximum incomes threshold also proposed to fall from $61,920 to $46,920; and the indexation of concessional contribution caps proposed to be paused for one year in 2013-14 at $25,000 for individuals under the age of 50 and $50,000 for individuals aged 50 and over. That is not to mention, of course, the penalties that have been applied to those people who many have inadvertently breached the ever-moving caps that the government seems to change at every opportunity.

There are significant penalties that go towards ensuring that those people will not see the benefit of the hard earned money they have contributed to their superannuation savings to ensure that they can live the life that they would like to live in retirement. How does the provision to introduce another levy on self-managed super funds incentivise investment in our superannuation system? How does this provide more certainty? The answer is that it does not, and we have already heard from the Prime Minister that she intends to make yet further changes to superannuation. In her Press Club address earlier in the year she flagged that there will be more changes in the budget around the tax arrangements to do with superannuation.

I hear the very deep and real concerns from constituents, who raise this matter with me in a very heartfelt way and who are desperate to know what faces them in retirement. Let me read into Hansard the letter that I received from Glen. He says this:

I am writing—desperately—about the noise on taxation of Superannuation/ Pensions. My wife and I are just recently retired. I am 67 and have worked to the end. We had planned for retirement—foregoing much else to fund our superannuation. And we are totally self-funded. This was long term planning and was done deliberately not to be a burden on the Government and to enjoy some financial freedom. Although the amount we have accumulated in Super may look large, it is frightening to watch how long it is going to have to last while supporting our planned lifestyle. To be candid, the current ‘noise’ is terrifying us.—

And this noise is of course coming from the government.

We had planned everything a long time ago based on Peter Costello’s initiatives and have taken advantage of every new government adjustment while relying on the promises. We are asking you — maybe that should be pleading — to lend you weight to preventing changes for those of us who are now self-funded in retirement without any possibility of re-entering the workforce.

Let me read from what Angela sent me:

As I am facing retirement myself in the not too distant future I am deeply concerned about the proposal to tax the income of self-funded retirees in the name of addressing structural problems within the budget. The only structural problem that I can identify is the reckless and wasteful spending that has occurred over the last six years. Like many self-funded retirees, I have worked, saved and salary sacrificed in order to build-up enough superannuation to ensure that I could enjoy a reasonably comfortable retirement for as long as possible. With the exception of a small minority of wealthy people most self-funded retirees are not ‘wealthy’ and should not be the subject of an unfair tax impost. Apart from the activities of this government, inflation and rises in the cost of living pose the greatest threat to the financial security of self-funded retirees who are living on a fixed income. Many of them run out of money after a short period of time and qualify for a pension. For example, 10 years ago $500,000 was considered adequate for a couple to retire on. Today, financial advisers are recommending that a couple would require at least $1 million in superannuation in order to retire comfortably. It has been estimated that $1 million in superannuation will deliver an annual income of approximately $55,000-$65,000. This might seem to be a reasonable income today however in ten years time an annual income of $55,000-$65,000 may be insufficient. To give you an example, when I started working 40 years ago, I earned the grand total of $35.00 per week. Today, $35.00 might buy you a weekly zone 1 train ticket, if you are lucky.
I am concerned that self-funded retirees are viewed as a soft target by this government and their hard-earned superannuation savings are considered to be a honey-pot ripe for the picking. Any adverse changes will make superannuation an unattractive investment option for working people with the result that fewer people will be motivated to work and save towards independence in retirement. That defeats the purpose of having a superannuation scheme in the first place.

I say to Angela: I could not have put it any better myself. Finally, let me tell you what Daryl has said:

Why is it that in this country we continue to penalise hard work, sacrifice and the occasional success?
…   …   …
I am in my late 50s and therefore approaching retirement age. I have planned for my retirement, sacrificed and worked hard to save for my retirement so I will not have to rely on government handouts. I am therefore increasingly concerned that the incumbent government … continues to covet superannuation with growing evidence that superannuation and superannuation savings could be targeted as soon as the May budget. This is of immense concern for those who have planned carefully, been thrifty and worked damn hard to build a reasonable fund balance. In some respects, one must question whether it was all worth it, or whether sacrifice, responsible savings and thrift should have given way to a more extravagant lifestyle in years past.

We on this side have given an undertaking not to muck around with superannuation, as this government continues to do. 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, create opportunities for their families and be rewarded for their efforts. They should not be penalised.

This government has an awful lot to learn, and, come 14 September, the voices of those people who have been penalised will be heard.

Sunday, May 5, 2019

Super change a case of intergenerational equity: Morrison

The Australian
8 August, 2016
David Crowe Political correspondent Canberra @CroweDM

Scott Morrison has countered the idea of giving wealthier Australians any relief from a new $500,000 cap on some of their superannuation, saying the change should go ahead to ensure “intergenerational equity” for younger workers.

The Treasurer conceded the case for “technical” changes to the budget package but held out against calls to change the start date for the $500,000 cap on after-tax contributions, a measure that has ignited warnings about retrospective taxation because the threshold will apply from July 2007.

Mr Morrison said the policy was “sound” and Australians who had already benefited from tax breaks on super would have to accept tighter rules, along with younger workers who will never benefit from the previous more generous concessions.

“So I think there is a real intergenerational equity here and those who stand most to benefit from those changes have the biggest balances, the biggest incomes and have made the biggest tax-free contributions,” he told the Australian Agenda program on Sky News yesterday.

A backlash against the super tax increases caused turmoil within Liberal ranks during the election campaign, as members withdrew support at polling booths and some quit the party.

Malcolm Turnbull and his ministers are holding to the $6 billion tax increase, which adds $3bn to the budget bottom line after helping fund a rise in super for millions of workers on salaries of less than $37,000 a year through a super tax offset.

Labor has embraced the $3bn saving and the Greens back the reform to super tax concessions, suggesting Mr Turnbull and Mr Morrison will have the numbers to legislate the changes if they can address complaints in the Coalition partyroom.

The $500,000 cap raises $550 million over four years but would raise very little if the start date were shifted to this year.

Draft legislation is expected from Financial Services Minister Kelly O’Dwyer in weeks but the date is not expected to change.

Mr Morrison said those who had already made non-concessional contributions of $500,000 should accept the new cap. “They have an average balance of $2m in their super — $2m. And they have actually on average contributed $700,000,” he said.

Tuesday, April 11, 2017

IPA: SUPERANNUATION TAX HIKES SHOULD BE REPLACED BY SPENDING CUTS

IPA Media Release Logo

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

12 July 2016 (sic)

IPA: SUPERANNUATION TAX HIKES SHOULD BE REPLACED BY SPENDING CUTS

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

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

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

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

 

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

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

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

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

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

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

Sunday, August 21, 2016

Derryn Hinch wary on super, seeks ABCC compromise, live export ban

Australian Financial Review

12 August 2016

Ben Potter

Derryn Hinch, the celebrity journalist turned senator-elect, says he has problems with the Turnbull government’s plan to wind back superannuation tax breaks for the rich.

Mr Hinch, who had a liver transplant five years ago, also said he wanted a compromise on the government’s construction industry watchdog, a ban on livestock exports and a million more organ donors.

Mr Hinch won a Victorian Senate seat in last month’s federal election, making him one of 12 crossbench senators the Turnbull government will have to court to pass bills spurned by Labor and the Greens.

He told AFR Weekend he got a lot of feedback on the super changes during the campaign “and if they say it didn’t affect their vote they are dreaming”.

The government wants to cap the super nest egg on which earnings for over 60s are tax free at $1.6 million, limit non-concessional contributions to $500,000 and cut the cap on annual concessional contributions for over 50s to $25,000 from $35,000.

The measures are aimed at reining in the budget deficit and defusing criticisms the super concessions favour the rich. But they were criticised for breaching a convention against retrospective legislation, and triggered a backlash among coalition supporters.
Fear of retrospectivity

“The thing that hurt them most was the fear of retrospectivity. I think that – rightly or wrongly – is what they fear the most,” Mr Hinch said. He said voters who did something five years ago in order to fund their retirement in 2025 didn’t like being told they had done the wrong thing.

Treasurer Scott Morrison this week offered exemptions for “life events” such inheritance and divorce payouts.

Katy Gallagher, shadow financial services minister, said Labor wanted to wind back costly super tax breaks for the rich and would work “constructively” with the government, but didn’t have any details.

On the Australian Building and Construction Commission, Mr Hinch said he didn’t want to “risk anything that will hurt workers but I also loathe corruption, so somewhere between those two we’ll work out where to go”.

The government wants to reinstate the ABCC to combat systemic corruption and illegal activity by construction unions and some employers uncovered by the trades union royal commission.

Mr Hinch wants to get a million more organ donors by changing the rules so that grieving family members can’t overrule a donor’s election. He said he expected live animal exports to be “the biggest battle” of the coming parliamentary term.

The livestock industry and nationals leader Barnaby Joyce – a staunch supporter of live exports – says monitoring of offshore slaughter has improved since the former Labor government slapped a shortlived ban on the trade in 2012. But Mr Hinch said “if you don’t know the Vietnamese are beating the shit out of cattle with a sledgehammer you can’t police it”.

Sunday, August 28, 2016

Correcting Morrison’s senseless superannuation strategy

The Centre For Independent Studies

Robert Carling – Spectator Flat White

Scott Morrison is reportedly open to the idea of exemptions to his proposed $500,000 lifetime cap on after-tax superannuation contributions for defined ‘lifetime events’ such as inheritance, divorce or even a lottery win.

Though the details are yet to be unveiled, the broad contours are sufficient to place this notion squarely in the category of regulatory abominations. As I reached for one word to capture what is wrong with the policy, ‘capricious’ sprang to mind, and my dictionary definition (‘inconsistent; guided by whim’) confirmed its fitness for purpose.

The $500,000 limit is bad policy, but granting exemptions for ‘lifetime events’ is a very bad way to fix it. When governments look around for narrowly defined groups to receive special dispensations from a general rule, we can be sure the principle of equality before the law has gone out the window. Why is an individual who has inherited or won a large sum more deserving than one who has simply accumulated it through saving and investing?

At a more practical level, any attempt to draw legislative boundaries around selected ‘lifetime events’ is bound to leave cracks to be exploited by those not intended to benefit, and will invite claimants who see their particular circumstances as being worthy of new exemptions.

If the $500,000 limit stands, it should apply to everyone, without exception. But better still rethink it to address legitimate concerns that have been raised. For a start, the amount is too low. It is a draconian reduction from the current limit of $540,000 over three years to $500,000 over a lifetime. The current limit may be too generous, but the proposed limit is too low to give people the opportunity to accumulate a balance that will give them a good retirement income — particularly those who for one reason or another do not have the opportunity to maximise pre-tax contributions throughout their lifetime.

It is not as if the government would be blowing up its budget by allowing a more generous after-tax contributions limit. The only concession is that the income from the contributions is taxed at ‘only’ 15%. Big deal! All household saving would ideally receive such treatment in recognition of the severe anti-saving distortion imposed by taxation at full marginal rates.

Then there is the alleged ‘retrospective’ dimension. Counting after-tax contributions back to 1 July 2007 against the new cap is not retrospective taxation. Nobody will pay more tax now on contributions made in the past. And the government is not requiring anyone who exceeded the new cap up to May 2 2016 (budget night) to remove the excess from his or her super funds.

But the new cap is retrospective in the sense that people were managing their affairs in the years from 1 July 2007 to 2 May 2016 according to regulations they had every reason to believe applied to them, but which are now to be retrospectively re-written. Had they known from 1 July 2007 that a lifetime cap of $500,000 applied, they may have organised their finances differently.

The obvious remedy is to apply any new limit prospectively from the date of announcement, and if that allows someone who already has a lot in super to put in another $500,000 or whatever the new after-tax limit might be, then so be it. Get over it, Scott. And spare us the appeals to fiscal rectitude. The budget deficit is not an excuse for poor policy. In any case, a new and retrospectively applied cap on after-tax contributions does two-fifths of very little to rectify it.

Robert Carling is a Senior Fellow at the Centre for Independent Studies

Friday, September 2, 2016

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