The future of super again in doubt due to close Election 2016 result
All the pre-election debate on superannuation reform may be for nought and the close Election 2016 result could be indicative of voter dismay at the major parties’ super proposals.
The Coalition’s changes to super could be in doubt even if it were to return to government, with many of its right-wing members now challenging the party to rethink its reforms.
Tasmanian Liberal Senator Eric Abetz believes that the Coalition’s super policy may have discouraged its core voter base and, consequently, cost it votes. On election night, the Senator told the media that he would now advocate for the party to reconsider aspects of the plan.
"The issue of superannuation is very dear to the core base of the Liberal Party," Senator Abetz said.
Mr Turnbull’s own party is putting pressure on him to rethink the Coalition’s super policy. However, industry super spokespeople believe the proposed cuts to super concessions are too important for the country’s bottom line to be abandoned.
"One of the certainties is we need to get on with budget repair and this is part of it," said Industry Super Australia Chairman Peter Collins. "For those that would seek to wind back the decisions that Treasurer Scott Morrison made, there is a very clear warning: that you can't defer every aspect of budget repair, you can't please every single minor grievance out there in the electorate."
The Coalition’s plan for super is based around limiting tax-free super on balances up to $1.6 million. As of 1 July 2017, any money over that amount would need to be put into an accumulation account where earnings would be taxed at 15 per cent.
Under Labor, the annual earnings from super above $75,000 would be taxed at 15 per cent.
In a rare show of bipartisanship, both sides have agreed to reduce the annual income threshold from $300,000 to $250,000. Any contributions made over this amount would be taxed at 30 per cent instead of the 15 per cent currently paid.
Perhaps the most controversial measure that dissuaded voters is the Coalition’s plan for a lifetime cap of $500,000 on non-concessional super contributions. These are contributions that have already had tax paid on them. Should the Coalition return to government, the caps would be effective from 3 May and anyone who had made contributions totalling $500,000 between 1 July 2007 would be deemed to have used up their cap.
The lifetime cap has disrupted the future savings plans for those heading towards retirement.
The Coalition was also planning to limit the annual caps on concessional contributions to $25,000, instead of $30,000 for those under 50 and $35,000 for those aged 50 and over. Labor plans to leave the caps as they are.
Should The Greens play kingmaker, it may come with a stipulation that the government’s super policy does not adversely affect low- to middle-income earners.
Regardless of who comes into government, and even though the Coalition’s super proposals are part of Budget 2016/17, a lot would need to happen for super changes to take place on 1 July 2017. Legislation would need to be drafted, bills would then need to be introduced and then comes the arduous task of getting the changes through the House of Representatives and the Senate.
Although there is a strong sign of bipartisan support for top-end cuts, a minority government would make any further changes to super less likely.
One thing that’s clear in this situation is that there is a lot of talk about super but very little action.
Many older Australians confused and dissuaded by the uncertain future of super took to the polls with their response to the two major parties’ seeming lack of care for issues that affect retirees. That response? A vote for independents and minor parties.
There was a lot of talk about super prior to and immediately after Budget 2016/17. But when the major parties realised it was an unpopular topic of conversation – coupled with the resulting confusion about the proposed policies – the super discussion seemed to be left by the wayside during the election campaign.
The Liberal party may have lost some votes over its unpopular super plans, but so too did Labor. According to an Australian Financial Review reader survey, many superannuants chose to vote independent because they felt there was no alternative.
Our current superannuation saga makes one point clear: don’t plan your future around supposition and hypothetical changes. And that lesson becomes even more pertinent with the prospect of a minority government.
The Coalition feels it can still run the country with a minority government, only it will do so attempting to pass one policy at a time. The Election 2016 result, which means more independent and minor party input in the Senate, may be a blessing in disguise, as the interests of the individual may come more into play than the interests of the top end and unions. There is a faint hope that all the big boys and girls in Parliament could play nice and come up with proposals and plans that genuinely reflect the needs of the people. Although, based on history, that may be a pie in the sky notion.
Either way, it’s clear that super needs a rethink. Maybe the Coalition can again take a cue from Labor and take a cautious approach to accepting and reviewing superannuation changes, and actually consult super industry specialists for advice on how best to manage the future of super.
First things first, if the Coalition wants to unify all parties – should it return to government – it needs to focus on dealing with itself. A party that cannot govern itself cannot be expected to govern the country.
Did the major parties’ super policies influence your vote? Do you worry about the future of super? Do you think there’s a possibility of a cooperative approach to super, or any other policy for that matter?
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