Update: 22 February 2017

Superannuation Betrayal Day

We, and many other Australians, should not forget 23 November 2016. We have named that day “Superannuation Betrayal Day”. On that day, the Coalition Government with the support of Labor, rushed two of its three superannuation Bills through Parliament.

Remember, remember, the 23rd of November:

Super, Betrayal and Plot;

There’s no reason why

The Coalition’s Super lie,

Will ever be forgot!

(With apologies to Guy Fawkes)

Those Bills were assented to on 29 November 2016 and are now law: click Superannuation ( Excess Transfer Balance Tax) Imposition Act 2016 (C’th) (No 80 of 2016) and Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 ) (C’th) (No 81 of 2016).

Third Superannuation Bill

The third superannuation Bill, the Superannuation (Objective) Bill 2016 (“Objective Bill”), was referred to the Senate Economics Legislation Committee. On 30 December 2016 Save Our Super lodged a joint submission with that Committee. Click here to see the submission.

Amongst other things, Save Our Super submitted (at pages 4-6 inclusive):

Treasurer Scott Morrison and the Minister for Revenue and Financial Services, Kelly O’Dwyer, have said the Superannuation (Objective) Bill 2016 (hereafter, the Objective Bill) anchored the formation of the 2016 Budget’s superannuation measures. 3 Those Budget measures, slightly modified, were passed by Parliament on 23 November 2016, assented to on 29 November 2016 and are now law:

the Superannuation ( Excess Transfer Balance Tax) Imposition Act 2016 (C’th) (No 80 of 2016) and the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 ) (C’th) (No 81 of 2016). These two Acts are subsequently referred to as the 2016 Acts.

The Objective Bill, has been referred to the Senate Economics Legislation Committee to report to the Senate by 14 February 2017.

It is perverse for the Senate Committee on Economics Legislation and Parliament to be considering the Objective Bill a few months after the hurried passage of the 2016 Acts, which were allegedly shaped by it. The 2016 Acts implement the largest super changes in a decade.

The changes reverse strategic direction from the 2006-07 simplification exercise, massively re-complicate the superannuation framework, penalize high superannuation balances and hinder accumulating large savings in superannuation. They also create new, costly super incentives of debatable worth.

The Objective Bill is only partly a backward-looking rationalisation of the 2016 Acts. It is also intended to provide a stable, confidence-building, legislatively-secure framework to reassure savers about how future superannuation policy changes will be formulated.

The Objective Bill’s stated primary objective, “to provide income in retirement to substitute or supplement the Age Pension”, is fatally flawed, and incapable of helping discriminate between good and bad policies. Our submission of 17 November 2016 4 to this Committee’s earlier Inquiry into what are now the 2016 Acts, explained why the super changes were bad policy.

The five subordinate super objectives (created by regulation under the Objective Bill) make matters worse, as the six objectives taken together will often be in conflict among themselves.

The Objective Bill offers no guide on how to resolve conflicts or trade-offs between objectives.

For example, the 2016 Acts hugely re-complicate super taxation (in contradiction of subordinate objective (5) that favours simplicity, efficiency and safeguards for savers). It takes Treasurer Morrison and Minister O’Dwyer about 90% more verbiage to explain the re-complication of the taxation of retirement income than it took Treasurer Costello to explain simplification of the status quo ante, and the 2016 Acts require consequential change in at least 16 other Acts. 5 But that complexity is apparently outweighed by allegedly alleviating fiscal pressures on Government (subordinate objective (4)).

The 2016 Acts are ‘effectively retrospective’ in Treasurer Morrison’s useful terminology 6 , and damage trust and certainty in superannuation, which apparently contradicts the primary objective and subordinate objectives (1) and (2) – facilitating consumption smoothing over the course of an individual’s life, and managing risks in retirement – but that is apparently again outweighed by allegedly alleviating fiscal pressures on Government (subordinate objective (4)). We do not take up here the Objective Bill’s structural problems, noted by the Law Council of Australia, in which the subsidiary objectives and the primary objective seem to be caught in an illogical, self-referential loop of ‘statements of compatibility’ of one with the others. 7

So it seems for the Government, more revenue from super within the forward estimates period trumps all other considerations, whatever the longer-term damage to the retirement income framework or the budget implications beyond the forward estimates.

The primary objective lacks a clear recognition of the moral and economic imperatives for more Australians to enjoy higher, self-supported retirement living standards, and for fewer to be dependent on Australia’s biggest ‘unfunded defined benefit scheme’, the age pension.

As other submissions to this Inquiry show, the primary objective is widely opposed by many thoughtful and professionally well-informed critics, but the Government has ignored their criticisms. It has used the old bureaucratic ploy of claiming there was no spontaneous consensus for any one alternative to its own approach, so the Government will plough ahead with its own original preference. But a fatally flawed and heavily contested objective cannot be an anchor for good policy. As the Tax Institute has noted in its submission to this Inquiry, legislating a bad objective is more likely to further reduce trust in the future of superannuation than increase it.

It is ever-clearer why the Government has proceeded with this Objective Bill and the 2016 Acts that it claims the objectives rationalise: its erroneous belief that more revenue can be extracted from super savers within the forward estimates period, without adverse consequences showing up within that period for trust and certainty in super, for retirement living standards, and for public expenditure on the age pension. They are all problems kicked down the road for another government.

But it is not too late to draw back and think again. On the hurried consultation with Treasury on the second tranche release of exposure drafts, industry groups and professionals such as the Australian Institute of Superannuation Trustees, the Tax Institute and the Association of Superannuation Funds of Australia have submitted that it will be very costly and difficult, if not impossible, for the complex new measures to be implemented by the start-up date of 1 July 2017. The Government has been formally advised that some key back office developments in super funds and the ATO necessary for implementing the complex new concepts and rules of the Government measures are more likely to take 2 years to implement than the available 6 months. 8 Equally, it will probably not be feasible for super savers to obtain the necessary specialist advice in time to modify their own arrangements.

The Government should make a virtue out of the inevitable delay, and properly re-consider the many submissions critical of the measures it received during its rushed consultations.

It is not too late to include appropriate grandfathering provisions in the 2016 super measures, to minimize damage to trust and certainty in super. The Government should maintain the sound grandfathering policy practice of at least the last forty years 9 : policy changes adverse to super saving should only be applied prospectively in accord with the Asprey principles (summarised again at Box 2 on page 18).

Finally, it is not too late to adopt a useful and sensible objective for superannuation, to reduce the risk of further damage to superannuation by future bad policy. Save Our Super supports the objective proposed by the Institute for Public Affairs:

The objective of the superannuation system is to ensure that as many Australians as possible take personal responsibility to save for their own retirement. The age pension provides a safety net for those who are unable to provide for themselves in retirement”. 10

Click here to see the full submission.
Senate Economics Legislation Committee Report dated 14 February 2017
On 14 February 2017 the Senate Economics Legislation Committee reported to the Senate on the Objective Bill. The Committee recommended as follows:
Recommendation 1
2.66 The committee recommends that the compliance of future superannuation reforms with the legislated objective be periodically assessed and report on as part of the Intergenerational Report
Recommendation 2
2.67 The committee recommends that the Senate should pass the bill.
Click here to see the full Senate Committee Report.

Save Our Super’s future plans

The enactment of the current legislation is not the end of the story. There are a lot of angry and dismayed Australians who continue to feel betrayed by the Coalition and Labor. They are very unhappy with the super changes and are not remaining silent. A number have already contacted us to voice their disgust with the Government’s conduct.

Save Our Super has commenced planning for its continuing campaign. Save Our Super is not going into retirement!

Senate Economics Legislation Committee’s Report

On 17 November 2016 Save Our Super lodged its joint submission with the Senate Committee, as did a number of our supporters. You can find Save Our Super’s joint submission here.

On 22 November 2016 both Bills passed the House of Representatives, unamended.

At 9.31am on 23 November 2016 the Senate Committee’s Report into those Bills was tabled in the Senate chamber. For the Senate Committee Report, click here

On the same day, 23 November 2016,  The Australian published the Australian Prudential Regulation Authority’s (“APRA”) super data for the September quarter 2016, which APRA had released the previous day (on Tuesday  22 November 2016); Michael Roddan’s article, “Super doubts drain $1.5bn out of system”, The Australian, Wednesday, 23 November 2016, page 19 can be found here.

Interestingly, on the very day APRA released its September data, (Tuesday 22 November 2016) Kelly O’Dwyer told the Industry Super Australia Conference:

Thank you, everyone, for that warm welcome — it’s wonderful to be with you for the Superannuation Opportunity Forum. Today is an opportunity for reflection. Superannuation, as most of you know, is a two-trillion dollar — and growing — industry.” The speech can be found here.

In fact, as the APRA data suggests, it is not growing; it is a shrinking industry. The only thing that is now likely to grow are the number of superannuation financial advisers and their fees!

On 23 November 2016 Save Our Super sent a copy of the joint submission to Andrew Gee MP and Scott Bucholz MP, the Chairman and Secretary respectively of the Coalition Backbench Committee on Economics and Finance and CC:d it to all Coalition Senators and all Coalition Members of the House of Representatives. In that email, amongst other things, we drew their attention to the APRA data.  The email stated:

Dear Sirs

We write to you again in your capacities as leaders of the Coalition Backbench Committee on Economics and Finance. Please find attached a copy of a joint submission on the Government’s superannuation measures lodged on 17 November 2016 with the Senate Economics Legislation Committee. The submission was made by us on our own behalf, and on behalf of Save Our Super. (https://saveoursuper.org.au)

Save Our Super has argued that it is necessary to grandfather the measures in the Budget that reduce the living standards of those already retired and restrict the savings efforts of those too close to retirement to change their life saving plans.  Grandfathering is necessary to preserve trust in super and in government rule-making approaches to super saving. A destruction of trust in super would damage the budget rather than improve it, because it would reduce net super saving and increase reliance over time on the aged pension.   Before the Government had drafted its legislation, we presented those arguments in more general terms to you and Coalition MPs in Terrence O’Brien’s e-mails of 8 and 19 September 2016 and our joint e-mails of 18 and 24 October 2016 .   

After the introduction by Treasurer Morrison on 9 November 2016 of the Bills and an Explanatory Memorandum for the super measures, the public has been given just four working days to make submissions on the Bills to the Senate Economics Legislation Committee. The Committee in turn has been given four working days to report on the measures. It is already apparent from 125 public submissions to Treasury on three earlier tranches of exposure drafts that there are serious conceptual and practical problems with the approach in the Bills that add to our concerns about the destruction of trust in super and super rule-making.

Terence O’Brien’s letter to you of 8 September 2016 noted that the Australian Prudential Regulation Authority’s quarterly superannuation performance statistics for the June quarter 2016 were showing marked declines in personal contributions to super of over 10% (year to end-June 2016 over year to end-June 2015) following three years of double digit growth. (Personal contributions are mainly the concessional and non-concessional contributions to be further restricted under the Budget measures. Since personal contributions are by far the largest source of overall member contributions, the latter also declined by about the same percentage.)

Such a decline was easily understood: the Greens and Labor had been promising significantly to increase tax on super since March and April 2015, respectively.   The Coalition proposed in effect tripling the Labor tax increases in the 3 May 2016 Budget, providing cover for Labor then to triple its original tax grab.  So super savers and self-funded retirees knew by May that their retirement living standards from super savings were sure to decline whatever the election result in early July, and through chaotic policy processes likely to lead to further tax raids in future.  So they commenced rebalancing their lifetime saving plans away from super in the June quarter 2016. We predicted that when the September quarter’s data become available in November, capturing a full three months of savers’ reaction to the new super landscape and the election outcome, they would confirm and extend the contraction apparent in the June quarter.

With yesterday’s release of APRA data to end September 2016, the decline in personal contributions has accelerated as we predicted to almost 30%, September quarter 2016 on previous September quarter (or 17% year to September 2016 over previous year to September).  As we argue at pages 14-15 of the attached submission, these accelerating declines in personal contributions suggest the net effect of the Government proposals will be to reduce savings in super over time, and increase retirees’ reliance on a blend of lower super balances and a part age pension.  Savers’ confidence in super is being destroyed, and the net adverse impact of retirement income policy on the budget will gradually worsen.

This has the makings of a slow-motion retirement income policy catastrophe, about which the Government has been abundantly forewarned.

Our attached submission argues that the Senate Committee should take more time through public hearings to examine the implementation of the budget proposals, which are radical reversals of super tax strategy that damage savers’ confidence that their life savings will be governed by predictable, intelligible rules.

We are copying this correspondence and its attachments to other Coalition Senators and MHRs.

To date, Save Our Super has not received any response to that email.


The Federal Coalition Government has made a number of changes to its Budget 2016 superannuation proposals. Consequently, Save Our Super has updated its earlier email petition/s to take into account those changes.

Thank you if you signed the earlier petition/s. Please support, or continue to support, Save Our Super by completing our updated petition here.