Australia’s superannuation piggy bank may prove too tempting for Labor
Bill Shorten is driving Labor towards a $34 billion heist on retirement incomes after performing a U-turn on what he said, and did, as superannuation minister in the Gillard government.
Bill Shorten is driving Labor towards a $34 billion raid on retirement incomes after performing a U-turn on what he said, and did, as superannuation minister in the Gillard government.
In 2012, Mr Shorten argued against a key policy change Labor now intends to make to super if it wins the election.
He has also revived his 2013 idea for all changes to super be tested by independent experts first — except for Labor’s, which he has ruled off limits.
Mr Shorten was Minister for Financial Services and Superannuation for nearly three years from September 2010.
Shortly after he started in the portfolio, he declared his term would be “the time when all the tax upheavals were taken out” of super.
This was because, he said, to fund members’ “concern about the constant changes in tax treatment”.
But now, with locksmiths preparing to cut him new keys to The Lodge, Mr Shorten is preparing to usher in multiple changes.
On top of abolishing franking credit cash refunds — estimated to cost self-managed super fund members and others $56 billion over 10 years — Labor has flagged four other super changes.
According to Treasury modelling prepared for the Government, this will boost the Budget by a further $34 billion through to 2029-30.
One of these four changes — which will reap at least $7 billion — is to reduce the starting point for 30 per cent tax on super contributions from $250,000 of annual income to $200,000.
Figures show that will cost at least 180,000 Australians a minimum $2500 every year.
Labor introduced the 30 per cent tax on higher income earners’ contributions in 2012, setting the threshold at $300,000.
Wayne Swan and Penny Wong, then Treasurer and Finance Minister, wanted a $200,000 starting point. It was Mr Shorten who successfully argued against that — a claim the ALP did not deny yesterday.
The threshold was lowered to $250,000 when Scott Morrison was Treasurer, meaning Labor’s push to drop it to $200,000 is a change on a change to a change.
Labor has also revived Mr Shorten’s 2013 idea for a Council of Custodians to assess “any future changes” to super.
At that time, he commissioned a report into how to establish the council, which found “regular changes to important rules relating to taxation treatment and what members are entitled to contribute concessionally (does) affect confidence in the superannuation system”.
All of Labor’s currently proposed changes affect concessional contributions.
Yet in bringing back the Custodians concept, Mr Shorten has allowed his party to escape scrutiny, saying the independent checking process will start “after Labor enacts its already announced changes”.
One of the Custodians report’s authors, former MLC chief Steve Tucker, told News Corp Australia that “every time super is tinkered with it does undermine confidence in the system itself”.
Even changes only affecting higher income earners have an impact, said Mr Tucker, who is now chairman of Koda Captial.
“The stability of the system entirely is fundamental to people having confidence in superannuation,” he said.
Financial Services Council policy director Allan Hansell said all proposed changes should be investigated by the Custodians, if it comes to be.
Mr Hansell added: “Constant tinkering with superannuation policy settings has eroded confidence in the system.”
Association of Superannuation Funds of Australia CEO Martin Fahy said “constant change to the system” was “leading people to disengage”. That “detrimentally impacts retirement savings”, Dr Fahy said.
A Labor spokesman said it was doing “exactly what Bill spoke about” in 2010.
“We are delivering certainty so people can plan for the future,” he said.
PROMISES, PROMISES
Two political parties are promising to increase the pension by $150 a fortnight despite neither of them being able to form government.
While Pauline Hanson’s One Nation and Clive Palmer’s United Australia Party have vowed to lift the pension, the best offer from a major party is Bill Shorten’s pledge of $1000 worth of free dental treatment every two years.
News Corp Australia revealed how the UAP policy would blow a $1 trillion hole in the federal budget in a decade.
More oral care assistance has been a key demand from groups representing older Australians.
“There’s nothing for pensioners apart from the extra money on dental,” said Combined Pensioners and Superannuants Association policy manager Paul Versteege.
The biggest recent commitment from the Government came in April’s Budget — up to $125 to help with energy bills.
Council on the Ageing CEO Ian Yates said promises to increase the pension by $150 weren’t realistic.
While the pension could be boosted by $30 for singles and $50 for couples, beyond that it was better to help renting pensioners.
Mr Yates has been pushing for a 30 per cent increase in rental assistance. The Grattan Institute recently called for a 40 per cent bump.
“We see no movement from either side,” he said.
SUPERANNUATION PROPOSALS
Coalition
— Allow those aged 65 and 66 to be able to contribute to super without having to pass the work test.
Labor
— Cut non-concessional cap to $75,000 from $100,000.
— Lower the 30 per cent contributions tax threshold to $200,000 from $250,000.
— Axe catch up concessional contributions.
— Remove the deductibility of personal contributions for employees.
— Prevent borrowing by self-managed super funds (SMSFs).
— Expand super guarantee to include parental leave and wages less than $450 per month.
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