First Nick Xenophon wanted to allow first home buyers to access their superannuation savings to pay a house deposit – a move that would have further inflated house values whilst placing retirement savings at risk.
Now Xenophon has flagged that his party might oppose the Coalition’s sensible reforms to superannuation in the Senate. From The AFR:
Senator Xenophon said the government “obviously needs to rethink” the new $500,000 lifetime cap on non-concessional super contributions and the lowering of the annual concessional contributions cap to $25,000.
“As they stand, these changes are unlikely to get through their own ranks let alone the Senate,” he said. “There is clearly scope for some reform in the super sector but I think the government will have to go away and consult more before coming back with a modified package.”
Let me re-iterate that the Coalition’s superannuation package is 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.
It is also entirely consistent with Xenophon’s own policy on superannuation, which argued that “Tax-breaks for superannuation must be re-calibrated so the greatest benefit is directed to those with the least savings, and a reduced benefit is enjoyed by those with very high superannuation savings”.
As noted by the Grattan Institute, watering down the $500,000 lifetime cap as well as the annual concessional limit on contributions would significantly reduce the Budget savings from super reform, while overwhelmingly benefiting the wealthiest Australians:
The proposed $25,000 cap on pre-tax super contributions will have most effect on older men with higher incomes. Nearly four in five of those making pre-tax contributions of more than $25,000 a year are aged 50 or over. Of these, more than half have already accumulated super balances of more than $500,000. Few of these people will ever qualify for an age pension…
Instead, high annual caps mainly create tax-planning opportunities for people who already have enough resources to fund their own retirement…
A $500,000 lifetime cap on post-tax contributions would also help to align super tax breaks with the Government’s stated objective for superannuation: to supplement or substitute for the age pension. In reality, after-tax contributions do little to increase retirement savings. Instead, most people who make them already have large balances and typically contribute from existing pools of savings in order to minimise their tax…
Critics who say the $500,000 lifetime cap is too low usually neglect to mention that someone who has already made post-tax contributions of more than $500,000, are so well off they are very unlikely to qualify for an age pension. $500,000 is more than 95 per cent of taxpayers have in super right now. Even in a mature super system, where workers contribute at least 9 per cent for their working lives, most people will retire with less than $500,000 in super.
Accounting for post-tax contributions made in the past – in this case since 2007 when reliable records are available – helps to target the reforms.
For these reasons, the Australian Council of Social Services, actuaries, and the Councils of the Ageing all agree that the Coalition’s super reform package must proceed undiluted.
So get out of the way of sensible reform, Nick.
