Federal election 2016: Libs face revolt over super tax reform

A backlash against a superannuation tax hike has thrown the federal government into confusion.

The Coalition faces a backlash against changes to superannuation in the 2016 budget.

A backlash against a super­annuation tax hike has thrown the federal government into confusion as Malcolm Turnbull and his ministers send conflicting signals over the $6 billion budget hit while trying to stare down calls for urgent changes.

As Liberal Party supporters threaten to quit over the changes, the government is scrambling to head off the political threat with the help of independent experts who dismiss claims the new rules are retrospective.

The government struggled under the attack yesterday, with critics pointing to a specific measure that imposes a lifetime cap of $500,000 on contributions to super funds from post-tax income or savings — and back-dates the cap to take effect from July 2007.

Another contentious change puts a new $1.6 million cap on funds so wealthier workers or retirees would pay 15 per cent tax on the annual earnings on amounts over that threshold. Foreign Minister Julie Bishop raised hopes for amendments to the tax measures by talking of using feedback from the community to avoid any “unintended consequences” when the reforms were legislated after the election.

But Mr Turnbull shot down those hopes yesterday by declaring there would be no changes to the plan.

“The super changes are set out in the budget. What Julie was referring to was the process of consultation that always goes on with changes like this about the technicalities of the drafting,” Mr Turnbull said. “Can I just say these changes are not retrospective. Very, very clear — it is not retrospective at all.”

Liberal Party members told The Australian yesterday that branch members were furious over the sudden changes to super tax rules and had spoken of quitting the party or withdrawing support during the election campaign.

With Liberal MPs relying heavily on local members to hand out flyers and help on voting day, the anger over the super tax reforms has the potential to undermine the Coalition campaign. Institute of Public Affairs chief John Roskam said the new rules were clearly retrospective and a “huge” problem for the Coalition, with party members angry about the sudden changes.

The group representing self-managed super funds, the SMSF Owners’ Alliance, has branded the changes retrospective and so has the Australian Council of Public Sector Retiree Organisations.

The head of Dixon Advisory, Daryl Dixon, has rejected that claim while the head of the Grattan Institute, John Daley, insists the changes are not retrospective and in fact worthwhile.

Former corporate regulator and a key adviser to government on super policy, Jeremy Cooper, backed Mr Daley’s view as the “correct analysis” of the changes.

“Sounds retro, but only operates prospectively,” he tweeted.

Labor Treasury spokesman Chris Bowen said the budget measures were “falling apart” and the government should admit they were retrospective.

“Now let’s be very clear here, most of the people who will pay this retrospective tax are probably Liberal Party voters, but that’s not the point,” he said. “When you make retrospective changes to the tax law, not only do you hurt people unfairly, but you undermine confidence in superannuation.”

Scott Morrison reminded voters that the 96 per cent of superannuants were unaffected by the changes.

“Yes, they do target the most wealthy Australians,” he said. “We raised the money from those most wealthy Australians through scaling back and not providing generous tax concessions which have been there for some time.”