Radio shock jocks rally against super changes

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By Leith van Onselen

Talkback radio shock jocks, and one-eyed Coalition supporters, Ray Hadley and Alan Jones, have lobbied the Turnbull Government to back-track on its so-called “retrospective” changes to superannuation, which would see a $1.6 million cap placed on the amount that a retiree can transfer into a tax-free pension, along with the $500,000 lifetime cap on voluntary super contributions.

Here’s Ray Hadley warning Scott Morrison yesterday that the Coalition could “perish” at the polls if it did not lift the caps. From The Guardian:

“All I’m saying to you at your own peril as a government unless you do something between now and July 2 on [this cap] … this could be the rock on which you perish,” [Hadley] said.

“If you moved the $500,000 to a million, you’d probably sway the hearts and minds of people who want to see you returned to power. They don’t want to deal with Bill Shorten, Chris Bowen or Tanya Plibersek but you’re almost forcing their hand.”

Morrison defended the cap by saying it only applied to 42,000 people out of a total of 16m with superannuation and the $500,000 limit was indexed to average wage rises. He said the median after-tax contribution over the past seven years was just $41,000.

“We are talking about a very small group of people, in a position to put in hundreds of thousands of dollars of after-tax contributions,” he said…

“This is about making sure our superannuation contributions are fair,” he said.

And here’s Alan Jones’ interview with Malcolm Turnbull this morning, via The AFR:

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Mr Jones has asked Mr Turnbull if he would ‘listen to the electorate’ and raise the $1.6 million cap. Mr Turnbull stood by the government’s changes.

“15 per cent…is still a very low tax rate I mean that’s lower than the lowest rate of personal income tax, so supernnuation remains a very good deal,” he said.

May I remind readers that the Coalition’s superannuation reforms are projected to save the Budget some $2.9 billion over four years, in addition to funding the low income superannuation tax offset, which means those earning less than $37,000 would not have to pay more tax on their super than they do on their income.

Thus, the Coalition’s policy is not only a sound policy from a public finances perspective, but is also equitable as it would help those people most at risk of becoming dependent on the Aged Pension in their retirement.

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That wealthy Coalition supporters can decry the reforms because it would make them a little ‘less rich’ beggars belief. To them, ending the age of entitlement seems only to matter when it applies to somebody else – most notably the poor and younger generations. As soon as they are asked to share the Budget burden, and unwind what is clearly a rort, they squeal like stiffed pigs.

Besides, most wealthy superannuation balances would still remain tax-free under the Coalitions reforms, thanks to the wonders of Australia’s dividend imputation system, as explained by accountant Jonathan Philpot last week:

…given Australia’s dividend imputation system that gives shareholders franking credits for tax that companies have paid, Mr Philpot said the majority of super accounts still will not be paying any tax.

“I’d be surprised if all of a sudden now people’s superannuation accounts actually had to start paying annual tax sums back to the Tax Office,” he said.

“I think it will be just more the case of the refund that was usually received by superannuation accounts with the excess franking credits will just be reduced going forward”…

“Superannuation will no longer be as advantageous as what it was before these changes were announced, but I’m very strong on saying superannuation still remains the best structure for holding people’s retirement wealth,” he concluded.

“It’s still going to be the lowest tax structure.”

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Moreover, it’s not like those few people affected would be required to pay much extra tax anyway – just a few thousand dollars on more than $100,000 of income – which compares very favourably to those of us required to actually work for a living.

In other words, stop your complaining and start contributing to Australia’s Budget repair.

[email protected]

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.