The Coalition in-fighting over its superannuation package continues to gather strength, with a group of back benchers now demanding that the proposed superannuation cap be doubled to $1 million. From The Australian:
Liberals MPs told The Weekend Australian their constituents wanted greater concessions than the Treasurer’s mooted proposal to lift the $500,000 lifetime cap on post-tax super contributions to $750,000 in order to soften the impact on workers and retirees.
With more talks scheduled for the week ahead, Mr Morrison is being asked to lift the cap to $1 million in the hope of ending the dissent over the policy, so it can be fast-tracked through the Coalition partyroom and put into force…
Jason Wood, the Liberal MP who holds the marginal seat of La Trobe in Melbourne’s outer east, said a higher threshold was needed to meet demands from voters…
“I am keen to lift the $500,000 cap to $1 million, as I think this is fair,” he told The Weekend Australian.
“I am pushing for higher, as that is what my constituents want. There is a great deal of consultation and seeking feedback”…
A more significant compromise proposal is to scrap the planned start date for the lifetime cap, July 2007, to fend off accusations of “retrospective” taxation, but this would sacrifice most of the measure’s $550m in forecast tax revenue over the next four years.
You would be hard pressed to find a bigger policy balls-up than superannuation. Both Labor and the Greens have stated that they would back the Coalition’s superannuation package, making passage through the Senate easy. And yet it is the loony conservatives within the Coalition itself that are most likely to scuttle reform.
Worse, their objections are based on the special pleadings from a handful of vocal wealthy constituents that want to maintain their privileged position of paying minimal tax while the rest of us bear the burden of restoring the Budget back to health.
Not once have these backbench dissenters actually addressed the merits of the current superannuation settings and the Coalition’s reform package.
Where is the admission from them that the existing superannuation system is busted, with the lion’s share of benefits flowing to the top 10% of income earners, who are perversely receiving more generous taxpayer assistance than the other 90% of income earners (see below AIST and Mercer chart).
How is this optimal from either a Budget sustainability or an equity perspective?
The simple truth of the matter is that the wealthiest segments of the population, who also derive the biggest benefits from superannuation concessions, cannot be quarantined from bearing any pain. Like the rest of us, they too must play a role in Budget repair.
Treasurer Scott Morrison understands this, which is why he said the following earlier in the month on 2GB Radio:
“The only people that would benefit [from abandoning super reform] are people who would already on average have $2 million in their superannuation scheme, have already put $700,000 in after-tax contributions… There about 42,000 of them in the country and that is less than 1% of the superannuants in this country. Now they are on higher incomes and have higher balances and have already benefited significantly from the generous tax contribution and other concessions that exist for superannuation. And the argument they are making is ‘I want more’. I want to put more in so that I don’t have to pay as much tax as somebody else on those earnings”…
“I’m saying that we should be getting rid of the Family Tax Benefit supplement payments … for people who earn a lot less than people who are able to put $500,000 after tax, after all their other superannuation contributions into their super account”…
“How can I look them in the eye and at the same time say: oh no, I’m going to protect this interest over here who’s sitting on half-a-million-bucks that they want load in and stuff more in and pay less tax on it?”…
“The tax arrangements for superannuation are extremely generous.. Now the simple truth is that those sorts of concessions can no longer be afforded… And if I am going to make changes… to pensions, to family tax benefits, then frankly we need to ensure that these savings and these revenue measures are felt evenly across the population”.
The Turnbull Government must ignore the special pleadings from its loony conservatives and continue to focus on developing good policy in the national interest – reforms that blend Budget restraint with fairness, as well as combine efficiency with equity.
The Coalition’s best hopes of holding on to government rest with it capturing the ‘middle ground’, not lurching to the right and governing in the interests of the wealthy elite.
Australia needs more policy along the lines of the superannuation reform package, not less.
