Mike Taylor writes that with the Government again having signalled the likelihood of change to Australia’s superannuation regime, its persistent fiddling continues to undermine confidence.
If the Australian Labor Party were to lose office at the forthcoming Federal Election then it will likely hold a unique record – the only party to have altered the superannuation settings in every Budget since it gained office in 2007.
Little wonder, then, that a constant refrain within the superannuation industry has been policy certainty and an end to Government “tinkering” with the settings that impact the ability of ordinary Australians to plan for a secure and comfortable retirement.
When the Prime Minister, Julia Gillard, used her first significant policy speech of the 2013 election year to discuss her Government dealing with “tax concessions on super for high income earners” in the context of reducing the expected May Budget deficit, it sent a very clear message to the financial services industry: an eighth consecutive change impacting super.
Ironically, the sort of change being flagged by Gillard for the 2013 Budget – singling out high income earners – was actually being canvassed as a likely part of the 2012 Budget, and there were sighs of relief all round when it did not occur.
However, during much of April 2012 groups such as the Association of Superannuation Funds of Australia and the Financial Services Council railed against suggestions that the Government’s expenditure review committee had virtually committed to tax changes that targeted upper income earners.
It seems their concerns were justified and that the Government had simply pushed back implementation of the need to an election year when it could push through the change as a “Robin Hood” exercise – “taking from the rich to give to the poor”.
Much will depend on the manner in which the Government approaches the removal or reduction of super tax concessions to high income earners, but whatever route it chooses to take it will likely open itself to criticism that it is guilty of implementing something tantamount to the Howard Government’s highly unpopular super contributions surcharge.
It is also worth remembering the manner in which the Howard Government’s surcharge actually operated: those earning more than $85,000 paid a surcharge on super contributions in former Treasurer Peter Costello’s first budget in August 1996 – a measure which raised about $500 million a year.
When the Howard Government began the process of winding back the surcharge, it coincided with initiatives designed to encourage superannuation contributions over and above the superannuation guarantee – such as the co-contributions regime and higher concessional contributions caps.
While it might be argued that some of what the Howard Government delivered in terms of concessions towards superannuation unduly favoured upper income earners, it can equally be argued that the Treasurer, Wayne Swan, has been equally assiduous in eroding those initiatives under the Prime Ministerships of both Kevin Rudd and Julia Gillard.
While Swan and Gillard may point to the delivery of improved superannuation access and benefits to lower income earners and a lifting of the superannuation guarantee, the Government’s critics can equally point to a succession of Budgets which have seen the erosion of the co-contributions regime, severe reductions in concessional contribution caps, a failure to fix the patent inequity of excess contributions penalties, and the imposition of higher regulatory burdens which have added to member expense ratios.
All of this gives some resonance to the undertaking delivered by the Federal Opposition leader, Tony Abbott, that a Coalition Government would seek to deliver on policy certainty on superannuation by ensuring “no negative unexpected changes”.
This, of course, does not preclude change to the superannuation policy settings under a Coalition Government; it simply suggests that whatever an Abbott Government delivers, it will argue that it will generate a “positive” rather than “negative” outcome.
In the end, the Gillard Government will probably not lose too many more votes if it moves to remove or reduce the superannuation tax concessions enjoyed by Australia’s high income earners.
However, it will have succeeded in further undermining the ALP’s claim to being far-sighted on superannuation policy.
Superannuation is supposed to be Australia’s primary vehicle for ensuring retirement incomes adequacy. The succession of changes which have occurred under two terms of the ALP have given Australians precious little reason to believe they can ultimately trust the system to look after their best interests.