Morrison, O’Dwyer wise to compromise on superannuation

Scott Morrison and Kelly O’Dwyer have made two very smart changes to their superannuation reforms

Scott Morrison and Kelly O’Dwyer have made two very smart changes to their superannuation reforms.

They have not only gained support from Coalition MPs but have ensured enough support in the Senate to get their plan legislated -- with no sacrifice to their overall $3 billion budget saving.

First, they have dumped the $500,000 lifetime cap on after-tax contributions entirely. This was the most divisive measure in the entire package and the focal point for dissent over a “retrospective” rule because the cap applied from July 2007. Rather than tweak the cap by increasing it to $750,000, an idea floated in the media a few weeks ago, they have bitten the bullet and removed it entirely. It is replaced by an annual $100,000 cap -- a prospective change.

Secondly, they have made more savings by postponing or shelving some of the benefits they included in the original package. Originally, workers aged from 65 to 74 were going to get more room to make contributions to super -- a nice idea but one that was only of practical use to a small group of people. This has been shelved. As well, there is a delay to the “carry forward” idea of allowing people who return to the workforce to contribute more. Again, this was a “good to have” idea but was not essential. It will still happen, but later than first promised.

This is a revised plan that all sides should be able to live with. Labor may criticise the government’s long and painful handling of the super reforms but the truth is that the Coalition has had the fortitude to prosecute a very difficult budget reform. In an age of $37bn annual deficits, changes to super tax breaks had to happen. Bill Shorten could have done this when he was financial services minister in 2012 and these sorts of reforms were on the agenda. He has no grounds for complaint now.