(Pictured: Peter Costello)
by Penny Pryor
As a shaky bipartisanship on some kind of reform to superannuation concessions takes place in Canberra, the measure that many believe has the highest chance of getting up, are the changes to the taper rate at which retired Australians can get access to some form of the part-pension.
Minister for Social Services, Scott Morrison, has said that he would be willing to consider the Australian Council of Social Service’s (ACOSS) proposal to reduce the initial amount for the asset test for the pension.
Their proposal was to reduce the assets test free area for homeowners to $100,000 from $202,000 for singles and to $150,000 from $286,000 for couples. But it’s the second part of the proposal – to increase the taper rate for both homeowners and non-home owners – that is drawing the most attention.
ACOSS has recommended that taper rate be increased from the current $1.50 per $1,000 of additional assets to $2 per additional $1,000 of assets which would mean the point at which a retiree becomes ineligible for a part pension is $794,250 (in addition to the family home) from the current $1.1 million.
ACOSS estimates this could save the budget $1.45 billion 2016-17.
It was the Howard Government that initially reduced the taper rate form $3 per $1,000 of additional assets to $1.50 and it is the restoration of this higher rate which is understand to be on the cards, but without the initial reduction to the assets test free area.
Although the Budget might seem the most relevant time to announce any cutbacks – and indeed the Government seems to be doing some groundwork for the necessity of change to support an aging population with an ad campaign headed up by ‘Doctor Karl’ around the intergenerational report and “The Challenge of Change” – it won’t do much for an unpopular Abbott Government.
These changes are incredibly unpopular with voters. This issue gets more reader comments at www.switzerdaily.com.au than almost any other topic we write on. And most of them start with “I’ve worked hard all my life…”
SMSF trustees have been particularly in the spotlight, with an Association of Superannuation Fund of Australia (ASFA) review, reporting there were 76,000 Australians in SMSFs who combined receive $10 billion in tax concessions.
Of that number 24,000 have super balances over $2 million, they said, and 52,000 have balances between $1 million and $2 million. Many in the SMSF industry have considered this an indirect attack on SMSFs, which aren’t represented by ASFA.
The reality is that under current maximum contribution limits – $30,000 for concessional contributions and $180,000 for non-concessional contributions – it is very difficult to amass millions of dollars in your SMSF overnight.
Again, it was under the Howard Government that the one-off post-tax million-dollar contribution limit was announced by then Treasurer Peter Costello, which would have contributed to the million dollar balances that are now in the system.
For whatever reason, superannuation tax concessions have become a hot button issue, but while headlines like “$10 billion in super tax concessions for the rich” make the majority call for change, just try taking away their individual benefits and see what happens. I do not envy a Government that attempts that.
Penny Pryor is editorial director for the Switzer Super Report and Switzer Daily.