Morrison signals direction of super tax changes

The Federal Treasurer, Scott Morrison has sent his clearest signal yet that the Government is intent on altering the tax structures around superannuation to eliminate their use as "tax free inheritance pools".

At the same time as confirming his view the purpose of superannuation has to be ensuring people become less reliant on the age pension, the Treasurer said he was particularly concerned to look after the needs of low and middle income earners.

Speaking during a national television interview, Morrison said the Government believed that the purpose of superannuation, by definition the purpose of any tax incentives supporting superannuation was to "ensure that people would be less reliant, or not reliant at all, on a welfare payment, i.e. the pension, in their retirement".

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"Now, there are a whole range of people for whom the landing on the pension is not a reality for them. But they're particularly low and middle income-earners, and in particular those most at risk, if they're not building up their superannuation over time - they're the ones who are most likely to be drawing down heavily on a welfare payment in the pension in the future," the Treasurer said.

"So our argument on super is we've got to ensure the incentives are targeted to address the purpose and are not there as the form of building inheritance pools or tax free inheritance pools to pass on," he said. "That's not what super's about."

However he rules out suggestions of retrospectively legislating to impact those already in the retirement phase.

"On the retirement phase, though, I think we always have to be very careful on the retirement phase because people are in it," Morrison said. "They set up their arrangements before going into it and whether it's technical retrospectivity or not, you are effectively applying a retrospectivity when you're looking at the retirement phase."



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Grandfathering produces patently unfair results. If the Government's position on tax reform includes tax fairness and simplicity, abolish the grandfathering we see coming in just about everywhere in the retirement income and benefits space.

Unfair to those who have spent time and money planning for their retirement only to see a rule change at the last minute that penalizes them severely. Generally retrospectivity in law is very unusual. Hence the use of grandfathering to remove the unfairness. An example is the increase in preservation ages from 55 up to 60, and increased age pension qualification age from age 65 up to age 67.

Mr Morrison is politically myopic when it comes to matters of demographics. Those superannuants in the current regime that might well pass assets to their next generation are ensuring these recipients will fail entitlement to benefits because of their asset position in the future. All calculations show the social security impost is bearable at the moment, however it will become a problem 20 to 50 years in the future with less workers and more retirees then. So forcing today's superannuants to draw more of their capital now at the expense of future beneficiaries will only reinforce and exacerbate the problem at the worst possible time. Could someone please send Mr Morrison to Specsavers please!

They have already effected many pensioners retrospectively when they reduce and tinker with asset and income test caps. Also are they factoring 2.5% cash/td rates for pensioners here?

Many of us had planned their retirement with the original Government Superannuation structure with no further opportunity to build upon their future plans with security for their family.
Consideration should be given to those who retired much earlier like grandfathering their present structure and make changes for the future when people can plan. It will allow them to save their self-respect, fulfil their plans and avoiding having to go on the full pension.
With experts and Government planning for the present generation to live an additional 15-20 years makes a mockery of their proposed cutting of part pensioners who will end up on the Full Pension sooner rather than later.
It is a disappointment and leaves these folk disgusted, disappointed by being let down and looking towards future changes in Government. Almost for all their lives voting for the coalition.

L:ets just be very straight here....grandfathering is designed to be definition.

Morrison has it wrong if he is looking at taxation measures to demolish tax haven inheritance pools. Those of us working in the retiree sector of financial services often find people who have assiduously saved into their super over their working lives and accumulated healthy balances so as not to have to rely on Centrelink payments. These people have paid their taxes, including income or contributions tax on the accumulation phase of their working lives in the expectation that they will enjoy a quality lifestyle in retirement and their family will benefit from any residual when they die. Synonymous with this objective is the knowledge that if they are forced to take up residency in an aged care facility by later life ill-health, they will have the resources to pay the required deposit and daily care costs. To tax such people through legislative changes now is a betrayal of trust and will further undermine confidence in the superannuation system.
Like Morrison, I am uncomfortable with the inheritance tax haven scenario for large superannuation balances but I would be quite happy to see inherited superannuation staying within the system. For example, if an adult (non dependant) child inherits part of a residual superannuation benefit they are given the choice of paying a taxation percentage - perhaps at their marginal tax rate - if taken in cash or receive it tax free as a preserved amount into a complying superannuation fund of their own.
This approach may also provide the opportunity to undertake some reform by removing some of the more toxic and costly inequities in the superannuation system.

But superannuation passed to a spouse or dependant children is free-of-tax (as it should be), and superannuation directed to non-tax-dependants is taxed already. So the Government is actually getting a second dip at that capital. And they want more?

This is nothing but a blatant grab to try to balance the books short term. It would be far better to diminish (without grandfathering) politicians outrageously generous benefits to balance the ledger.

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