The Australian Government’s superannuation changes announced on Friday ended rampant speculation and were arguably brought forward to stop accusations of class warfare against the wealthy who felt they were being unfairly targeted.
While there was some removal of tax concessions on superannuation income, the introduction of the Council of Custodians of Superannuation, which will be charged with the Charter of Superannuation Adequacy and Sustainability, should also provide some security for the superannuation system in the years ahead.
The Custodians of Superannuation will include senior representatives from industry and also the regulators.
But membership is yet to be finalised and at least one major representative body was not aware of the intention to establish the council.
When announcing the changes, Minister for Superannuation, Bill Shorten, said: “The charter will enshrine and make clear the core values and principles and the commitments that Australians expect from governments of all political stripes when implementing superannuation policy.”
“The council will be charged with assessing all future policy against the charter and providing a report to Parliament – a report to be tabled in Parliament when changes are under debate. The council will also provide at least an annual report on the superannuation system against the charter which will also be tabled in the Parliament.”
AIST chief executive Tom Garcia welcomed the changes and the introduction of the council but hasn’t yet been asked to be on it.
“I wasn’t aware of the creation of this council and we haven’t been approached as yet.”
Garcia also urged the council to take an evidence-based approach.
“It needs to be able to have the ability to request data from treasury, ATO and different other regulators, to then be able to make evidenced-based factorial decisions.”
“We need to be able to model changes to the super system going forward and therefore have a much more fact-based policy.”
Garcia said the current super roundtable, which has 18 representatives of industry including Shorten, but no regulator representatives, would be a good place to start to draw people for the Council.
“The Super roundtable I would suggest has got all elements in it and that would be a natural starting point.”
As commentators pointed out following the announcement, the Government is unlikely to press the proposal towards legislation prior to the election in September, at which the Government is expected to be voted out, because it is unsure of its support.
If it is a guide to a future change, under a different Government, the removal of the tax concessions on superannuation income above $100,000 for funds in pension phase, was a lot softer that expected, although some questioned the government’s estimation that it would only effect people with superannuation balances of $2 million or more.
That assumes earnings of just 5 per cent, which sounds fairly conservative. Earnings of 6 per cent would hit superannuants with balances of $1.67 million and returns of 7 per cent would mean those with balances of less than $1.5 million, or $1.43 million, would have their earnings taxed at 15 per cent rather than the current zero percent.
Other changes announced on Friday that Labor plans to take to the election, include the increase in the concessional contributions cap to $35,000 for people over 60. Individuals who mistakenly make excess contributions above the concessional limits will also now be able to withdraw those amounts and contributions made above the concessional limits will be taxed at an individual’s marginal rate (plus a small interest charge) not the highest marginal rate.
The normal deeming rules will be extended to superannuation account-based income streams and concessional tax treatment will be extended to deferred lifetime annuities.
The arrangements for lost superannuation will also be changed to increase the amounts in accounts that will be consolidated with the ATO.
“There has been no significant structural change which is what we were really worrying about,” Garcia said.
– Penny Pryor