Federal election 2016: Bishop ‘gotcha’ moment puts Coalition on defensive

Julie Bishop’s floundering in an interview on superannuation reforms triggered Labor taunts of ‘chaos and confusion’.

Julie Bishop was left stumped by a question on superannuation reform from Neil Mitchell.

The Coalition has come under ­renewed fire over its tax hikes on retirement savings after Julie ­Bishop floundered in an interview on controversial reforms, triggering Labor taunts over “chaos and confusion” in government policy.

The Foreign Minister complained about a “gotcha moment” on radio yesterday when challenged to explain the changes to rules that allow people to take money out of super accounts while still at work and contributing to their funds at the same time.

Yet the scale of the problem is fiercely disputed. Scott Morrison’s office produced data late yesterday showing that only 115,000 people would be affected by the changes to the “transition to ­retirement” rules.

Actuarial firm Rice Warner suggested the impact could be greater, however, by estimating there were 580,000 accounts using the rules, a rough indication of the scale of the practice given Australians with super have an ­average of two accounts each.

Melbourne radio host Neil Mitchell asked Ms Bishop to “be honest with people” about the impact of changes that went beyond the top 4 per cent of super account holders.

“Are you aware of the tran­sition to retirement scheme?” Mitchell asked.

“Well, I’m certainly aware that we have one, yes,” Ms Bishop ­answered, but she then struggled when asked how it worked.

“Well, Neil, this is obviously a gotcha moment,” she said.

A Transition to Retirement ­Income Stream (or TRIS) pension allows someone aged between 56 and 64 to take regular amounts out of his or her super while in the last decade of work before retiring.

Some older Australians have used the rules to put much of their salary into super (at a concessional rate of just 15 per cent on contributions) and then live on the pension from the TRIS account (which is paid free of tax). This can cut tax payments on income dramatically.

The budget changes on May 3 included a decision to apply a 15 per cent earnings tax on the amounts in the TRIS accounts, curbing the benefits but still leaving the concessional tax rates on the contributions and the tax-free sums taken out to live on.

Rice Warner consultant Nathan Bonarius said the changes were “most likely” to affect more than 100,000 people but said it was hard to be sure because he did not have the data on how many individuals held the 580,000 accounts estimated to use the TRIS rules.

“It will probably affect more people than it was initially ­expected to,” Mr Bonarius said.

The government held to its claim that its super changes leave 96 per cent of ­account holders ­unaffected. The Treasurer’s office said the amended rules still offered tax concessions to the 115,000 ­people affected.

Mitchell told the Foreign Minister there was a “hole in your whole logic” because the changes affected average Australians ­rather than the “fat cats” claimed.

“I don’t accept that. I’m told that 96 per cent of people are ­either better off or are not affected by it,” Ms Bishop said.

The government’s figures suggest Ms Bishop was correct, but as Rice Warner’s figures suggest a bigger impact the government ­remains on the defensive.