The Turnbull Government’s package of tax changes to limit concessions for wealthy savers has cleared parliament.
On Wednesday federal parliament voted to accept the package of super tax changes, a slightly watered down version of the proposed changes announced in the May budget.
Treasurer Scott Morrison told media the passing of the updated legislation represented “considerable progress” in the government’s drive to push through its budget program.
Under the new rules the annual cap on concessional contributions to super will be dropped to $25,000 from July 1, 2017.
The annual cap on non-concessional contributions will fall to $100,000, until savers hit a lifetime balance cap of $1.6 million.
An allowance that enables savers to carry forward three years worth of non-concessional contributions means those who can afford to do so still have a chance to pile an extra $540,000 into super before the July 1, 2017 deadline.
However the Opposition has flagged it is likely to oppose a related bill to write the purpose of super into law, a move that was recommended by the 2014 Financial System Inquiry to guide future policy changes.
Fight still looms on defining objective
Shadow Treasurer Chris Bowen this week curried favour with superannuation industry lobbyists by hinting Labor will force the Turnbull Government to re-word its proposed legislation defining the purpose of the nation’s compulsory retirement savings system.
Earlier this year, government pledged to introduce legislation enshrining the purpose of superannuation as being “to provide income in retirement that substitutes or supplements the age pension”.
The Opposition wants a definition that makes reference to a standard of living better than that afforded by the age pension.
At an Industry Super Australia conference in Canberra on Tuesday Bowen said Labor was calling on the government “to reengage” on the definition of superannuation.
“The current proposed definition is not an agreed bipartisan draft objective,” Bowen said.
“Let me remind the government the Murray review recommended the objective be based on ‘broad political agreement’. Anything but a bipartisan approach here will undermine certainty.”
Prior to the election in July, the opposition and government were in discussions to agree upon an objective. Bowen accused the government of brushing aside this process in a rush to put out its pre-election budget.
More than words
The Shadow Treasurer had suggested that a good starting point for a definition would be ‘a superannuation system should ensure that as many Australians as possible have access to the resources for a dignified retirement without recourse to the full age pension’.
“I wasn’t tied to these exact words as the Treasurer knows full well. I gave strong assurances to the government that if they engaged us in good faith, we would achieve a bipartisan objective.”
The inclusion, or not, of descriptors like “adequate” or “dignified” in relation to the retirement standards the super system should be designed to support is important because of its potential to guide the direction of future policies – such as tax concessions.
Labor’s promise to fight the government to amend the proposed legislative definition of super follows intense lobbying by both the retail and not-for-profit factions of the industry.
In a rare case of alignment, the superannuation sectors representative bodies including Industry Super Australia, the Australian Institute of Superannuation Trustees, the Association of Superannuation Funds of Australia and the Financial Services Council, all believe that ‘dignity’ or a similar concept should be include in the definition.
David Murray, from whose review into financial services the Government took its definition, has previously argued that the definition should not include such concepts, as it would allow more politics to enter the system. Specifically, he warned against the dangers of the defined benefit systems that had over promised and under delivered.
Committee for Sustainable Retirement Incomes chief executive Patricia Pascuzzo also thinks the superannuation industry’s insistence that such concepts should be included in the definition was putting the establishment of a clear goal at risk.
The Minister for Revenue and Financial Services Kelly O’Dwyer in her speech at the conference said that the inclusion of concepts like ‘adequacy’ or ‘comfort’ in retirement were very subjective.
As such, the government had ultimately decided that a “simple, unambiguous objective, without subjective concepts,” was the best path forward.
“However, we have made note of the importance of the other concepts in the bill’s explanatory memorandum,” O’Dwyer said.