Mike Taylor writes that the major parties need to understand that notwithstanding the delicate make-up of the Senate, it is time to end the uncertainty around superannuation.’
It may have been only at the margin, but three months after tabling the Federal Budget in the Parliament, and a few days after confirmation of the make-up of the Senate, the Treasurer, Scott Morrison, began signalling the Government’s preparedness to concede changes to its Budget super settings.
Speaking on commercial radio early last week, Morrison said while the proposed $500,000 lifetime cap on top-up contributions out of post-tax income would remain, he was prepared to write in exemptions for people experiencing “major life events”.
In doing so, he cited pay-out as a result of an accident or similar as monies which would be exempted from the $500,000 cap.
“If you have entered into a contract before Budget night to settle on a property asset out of your self-managed super fund and you are using after-tax contributions to settle that contract — well, that won’t be included,” he said
It represented a start in what Morrison and the Prime Minister, Malcolm Turnbull, know will be a protracted period of horse-trading to ensure passage of the Budget measures through both the House of Representatives and the Senate.
And while the Treasurer may not entirely appreciate the fact, on the available evidence, the Federal Opposition Labor Party may prove to be a greater ally in ensuring the passage of the core of the superannuation changes than many of those sitting on the Senate cross-bench.
This is because, whereas there are significant elements of the right wing of the Coalition which resent the changes impacting upper income earners, the Australian Labor Party, backed by the industry funds movement, have backed the targeting of upper income, high account balance holders on equity grounds.
Addressing a superannuation conference conducted by Money Management’s sister publication, Super Review, during the Federal Election campaign, Labor’s now shadow Finance Minister, Dr Jim Chalmers, claimed that “on Budget night a conservative Government acknowledged that the regressive tax settings were both unfair and unsustainable”.
Then, as now, the Opposition’s major concern about the Budget changes was the perceived retrospectivity entailed in the operation of the $1.6 million cap, something which many Liberal parliamentarians reported to be a deep negative in the minds of their constituents.
Thus, while it is all very well for Morrison to provide some wriggle room around the $500,000 cap, his political priority should really be to remove the perception of retrospectivity around the $1.6 million cap — something which the Government seriously failed to do during the prolonged election campaign.
And while the Treasurer has vociferously argued that those arguing for changes to the $1.6 million cap should nominate from where the Government should then derive the necessary Budget revenue, he has thus far failed to provide a break-down of the impact on the Budget forecasts of removing the perceived retrospectivity. Until Morrison does so, his arguments will fail to gain real traction.
Given the closeness of the final election outcome, the Federal Opposition will no doubt be seeking to impose maximum political discomfort on both Turnbull and Morrison, but steadier heads within the ALP will know that it is ill-advised to allow superannuation to become too much of a party-political football.
No one should lose sight of the status of superannuation as the second largest source of wealth behind the family home or of the lofty words spoken by both sides of politics about the need to establish a “purpose” for superannuation and to remove policy uncertainty.
Elements of the Government’s Budget changes to superannuation may have been problematic, but the question which needs to be asked by the mainstream parties is whether they can risk throwing the baby out with the bathwater.
