A fix for the Coalition’s super mess

Treasurer Scott Morrison needs to be big enough to make the changes to superannuation because it is the right thing to do. (AAP Image/Lukas Coch)

From what I am hearing, the protests from Coalition members over changes to superannuation are far more vicious and widespread than what is being described in the media.

And so they should be.

The Coalition is still telling half-truths and untruths about some of the changes it proposes to make to super.

Indeed, almost every time a minister speaks on the subject the government digs a deeper superannuation hole.

And yet, as I described yesterday (Super stoush could cost Coalition the election, June 1), the basic thrust of the Coalition proposal is actually more generous than the ALP. There is no need to change it.

Arthur Sinodinos has one of the most attuned political noses in the country and he senses trouble. His solution is consulting after the election and making changes then. In my view you are wrong Arthur.

Because the changes required will not greatly affect the revenue being raised its better to make them now.

And so “after community consultation,” this is what the Coalition should do:

•Admit the truth. At least one of the proposed changes — back dating to 2007 — represented retrospective legislation. Accordingly, people should be able to make $500,000 in non-concessional contributions to superannuation (money put into superannuation where there is no tax deduction) from budget night. No back dating back to 2007 which was clearly retrospective legislation and every time a government minister says it was not retrospective they appear untrustworthy.

•Where a fund has legally bought property before budget night that requires non-concessional contributions to pay for it then the additional amount of non-concessional contributions to pay for the purchase should be allowed into the fund. This will not cost a lot of money.

•The government’s superannuation proposal is more complex to administer for self-managed funds than the ALP’s but it is more generous. Funds should be given a once off option of using the ALP taxing system — i.e. a non-indexed $75,000 amount of income in a superannuation fund is tax-free and the rest is taxed at 15 per cent. Only a fool would take up such an offer because the Coalition’s plan is much more generous and the $1.6 million tax-free assets cap is indexed. The big APRA regulated funds hate the ALP scheme and would charge heavily for administration, as they will do if the ALP scheme is introduced. Offering the ALP scheme as an option is simply to highlight the difference.

•The Coalition want superannuation savers to put $1.6m into a fund to finance the tax-free pension mode income. In my view, if the assets set aside fall in value by more than 25 per cent they should be able be topped up to $1.6m. This is a once off opportunity and would have a time limit — say three years. I repeat you can only do it once.

•Minister after minister have problems with transitional retirement. I don’t have the knowledge of how to simplify the government’s plan. The government needs outside help because the community and the talkback broadcasters have picked up that this affects a vast number of people who are feeling very bruised. In my view, again, confine the changes to people actually in the transition so that there is no retrospectivity and long-term revenue is not affected.

I don’t think any of these changes are expensive and none affect long-term revenue. Indeed, giving people the option of taking up the ALP plan would raise money if anyone was silly enough to do it.

The truth is that the Treasurer listened too closely to Treasury and it doesn’t adhere to the community view on retrospectivity.

This is a vital issue, which is now completely undermining the government campaign. With another five weeks to go, the idea that the government can’t be trusted might cause Coalition voters to shift and spread to swinging voters.

You have to be pretty silly to have a base superannuation platform (the $1.6m tax-free asset cap) that is more generous than your opponent yet by making retrospective changes in other areas end up being the “superannuation destroyer”.

It’s not fair but politics is often unfair.

Scott Morrison needs to be big enough to make the changes because it is the right thing to do.