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Treasurer says he will not revisit super changes

At the Bloomberg Address today (25 August 2016), Treasurer Scott Morrison outlined his plan for 'jobs and growth' in the Australian economy. He called the speech, 'Staying the course – strengthening our resilience in uncertain economic times'.

At the conclusion of the talk, I asked him about the statement he made in February 2016 at the SMSF Association National Conference in Adelaide. His exact words from that Conference are here, and I quoted the following extract directly to him to begin my question:

“One of our key drivers when contemplating potential superannuation reforms is stability and certainty, especially in the retirement phase. That is good for people who are looking 30 years down the track and saying is superannuation a good idea for me? If they are going to change the rules at the other end when you are going to be living off it then it is understandable that they might get spooked out of that as an appropriate channel for their investment. That is why I fear that the approach of taxing in that retirement phase penalises Australians who have put money into superannuation under the current rules – under the deal that they thought was there. It may not be technical retrospectivity but it certainly feels that way. It is effective retrospectivity, the tax technicians and superannuation tax technicians may say differently.” 

I then said that a few months later, he had changed the superannuation rules in the 2016 Budget. So what happened to his thinking in March and April to lead to a change in his previously espoused principle?

Here is his reply (the Q&A session is not on his website):

"I stand by everything I said in that statement for the simple reason that the retirement phase remains tax-free. You know that. The retirement phase account, which under our proposal with a transfer balance cap, will mean that 99% of people who have balances less than $1.6 million will remain absolutely in exactly the same situation that I referred to.

The changes that we put forward, which I hope at least from my point of view as Treasurer I never have to revisit, and I certainly have no intention of revisiting them, will ensure that those rules are now set for the future.  

Why did we have to change the superannuation system? Because we have an aging population and we have system that is frankly overly generous for large balances, and the cost of having those large balances and the tax concessions ... which have only been there since 2007, by the way, they weren’t introduced by Henry Parkes or anyone else like that [Editor’s note: Parkes served five terms as Premier of New South Wales between 1872 and 1891]. Those arrangements were brought in when the Budget had a $20 billion surplus and $40 billion in cash.

What we have chosen to do is make the superannuation system more sustainable in future. We have targeted a higher rate of tax, true, at the whopping rate of 15% for earnings on balances above $1.6 million. That enables us to preserve the exact situation that I was speaking in favour of at the SMSF Conference. We allow 99% of people who have saved for their retirement to have the deal that I said they should have, that is, paying no tax on what they have contributed to superannuation over their lifetime.

I know there are those with balances more than $1.6 million who are unhappy about that. I know there are less than 100,000 people in the country who have already put more than $500,000 into super after their pre-tax contributions [Editor’s note: he probably means in after-tax contributions]. I know there are those on very high incomes who will be paying more on their contributions going into superannuation now than before.

The alternative to that is for me to tell my kids, 'You’re going to have to pay higher taxes to support those concessions.' I don’t think that’s fair and I’m not going to do it.”     

Let's put aside the inconsistency of saying "the retirement phase remains tax-free" and then saying "we have targeted a higher tax rate, true ...".

My point is not about the merits of the new policy proposals per se, but the inconsistency with the earlier admission that changing the rules " ... penalises Australians ... who have put money into superannuation under the current rules – under the deal that they thought was there."

The other major point is this: he says he never intends to revisit the changes put forward in the 2016 Budget. There is widespread expectation, not only hope, that a number of significant changes will be made, such as not backdating the $500,000 non-concessional cap calculation to 2007, or increasing it to $750,000.

To quote Margaret Thatcher, British Prime Minister, in 1980:

"To those waiting with bated breath for that favourite media catchphrase, the 'U-turn', I have only one thing to say: 'You turn if you want to. The lady's not for turning.'"

Sounds like the Treasurer's not for turning either.

Graham Hand is Editor of Cuffelinks and attended the Address as a guest of Bloomberg.


April 25, 2019

It is very interesting reading these comments written in August 2016 and directed at the Lib's changes to super Move forward to April 2019, and we see the very same comments being levelled at Labor who plan to end refundable franking credits cash refunds, wind back Negative gearing and further reduce super contributions caps. Those who foresaw future governments further raiding super were absolutely correct. Seems both major parties are determined to reduce the value of saving for one's retirement. This being so, we should expect to see more people wanting a government pension. And, that will be unsustainable in years to come.

George Danby
September 05, 2016

One of the great fears everyone with super should have is this. If our country keeps going down this path of endless budget deficits and balooning national debt, this is what I can see happening. When you retire, the government of the day could. Stop you taking a lump sum and force you to put the lot into some form of allocated pension, because unless things change, there simply isn't going to be any money to pay pensions. Unlike years ago, we now see millions of people getting some form of welfare from virtually the cradle to the grave. We have couples with children earning over $100,000 p a getting welfare. We simply cannot sustain this into the future, what do others think?

Robert Ball
September 05, 2016

Don't forget what the average working man and woman has saved in superannuation. It is a pittance and will force millions to have to rely on pensions well into the foreseeable future. The allocated pension scenario is what both sides in politics want, but most workers do not, and will not have enough funds. Our attitude to super savings should've changed decades ago.

Chris Craggs
August 31, 2016

If you all are so upset about super, then don't place your investments into the super environment. Don't have to worry about contributions caps, or that nasty 15% tax if your balance is over $1.6 million. No estate taxes to pay. A pack of whiners I say. An unsustainable system has been amended to make it more sustainable. It still remains the most tax effective structure, even after breaching the new caps and people are still upset. Know wonder politicians lie to us; when they tell us the truth and put forward positive policy to make Australia fairer and sustainable we scream and shout and abuse them. The proposed policies bring the rules of super closer to the original intention of the super system. If the proposed rules were in, and they wanted to change them to what is now the current rules, we would say they were crazy and the policies are not sustainable.

Paul Skully
August 30, 2016

The counting of past contributions clearly makes it retrospective, since past contributions potentially stop future contributions. By any reasonable definition, a measure that has a start date in the past, e.g. 2007, is retrospective. Dressing it up by not making withdrawals a requirement does not change the basic facts - counting past contributions is retrospective.

August 30, 2016

Until the treasurer, and the government, come to the realisation that we have a revenue problem as well as a spending problem, and start taxing the super-rich and large corporations properly, we have a problem.

Liberal Senator Ian MacDonald let it slip the reason the hard-right was mobilising against super – because many of those affected were "our very good donors". The far-right faction of the Coalition have now admitted that wealthy donors are dictating their policy position. If this is not corruption, legal though it may be, what is??

Malcolm Turnbull himself has moderate positions on a number of issues, but has sold out to the far-right of his party for the thirty pieces of silver of his prime ministership. He can still force their hand - if he threatened to resign and/or call an election now, the LNP would lose, so he can implement proper policies and dare the far right to interfere and lose an election.

But he won't, Liberals are too arrogant to do anything for the country, they only do things for themselves and their business buddies. We certainly have got the government we deserve....

Luke Hooper
August 29, 2016

I can't see how the $500,000 NCC is retrospective. The full Budget Papers (Paper2, page 27) and the ATO (recently) state that anyone who would be considered to have exceeded the new lifetime cap over the period 1July 2007 to Budget night (roughly $1.4 million, if you're lucky) could keep those amounts in Super, free of penalty.

August 29, 2016

Just as super has now become all-partisan (despite past ideological objections, because it has strengthened our retirement system, however inadequately), the unsustainability of tax concessions, unbounded contributions and limitless balances has been starkly brought to the fore by the budget, ageing and unfunded age pensions.
In navigating this mess (really a patchwork quilt woven by treasurers beset by deficits, the allure of taxing the captive savers bound by preservation and subject to triennial electoral fisticuffs), we - the super lobby with all our nuanced and overt distinctions - should dismiss the compromises en route as a necessary evil, and encourage a solution. Quibbling about retrospectivity, some other sector's favoured treatment or personal gripes should give way to moving ahead. Rather like the struggling passengers on the Titanic powdering their ill-fated noses, now is not the time for cosmetics.

Alfred Ellis
August 29, 2016

The Industry and retail super funds have agitated consistently against SMSFs for self interest reasons. Combining with the "left wing" Grattan Institute, Labor, Greens and the leftist journalists, a majority of Australian interests, the campaign to 'clip the wings' of the competitive SMSF, who have thrown down the gauntlet to the costly Industry and Retail funds, and those displaying "envy & me too" politics. These same people have ensured the Regulator has made provisions to treat super as a financial product & cut-out accountants, who have done a super job of assisting people run their own funds and done much to bring down the cost of managed funds. Who runs Australia - guess who - The LEFT with their own ABC. Sad state of affairs.

SMSF Trustee
August 29, 2016

"The Industry and retail super funds have agitated consistently against SMSFs ....." Have they? They've agitated a lot against each other, but I'm not aware of them opposing SMSF's, except to the extent that they have quite legitimately marketed their own businesses. Nothing wrong with that.
And at least one of the large retail super fund providers, AMP, has set up a very good SMSF administration service and provides an excellent investment platform (North). I use these for my SMSF, which allows me to invest in direct shares and managed funds so I can get what I want.
So I'm not sure what your little rant is about Alfred?

Alfred Ellis
August 28, 2016

Bob Wildy,

I identify with your comments entirely. I come from a poor family and my father was known as union Jack and hence "early days" I vote "old Labor". I woke up and after working hours, went back to, night school, then university by distant learning, leading to what Joe Hocky said "get a higher paying job" with the result that my wife (a stay at home mum) & I started our SMSF, because the fees were killing our managed fund returns, my stock picking was good and the market was good and we achieved well in excess of combined $3.2m. But we have uneven account balances (does not matter till 1/7/2017). "Retrospective I say" & now taxed to contribute to WASTEFULL GOVERNMENT excesses!! As mad as hell!

Bob Wildy
August 28, 2016

The alternative to that is for me to tell my kids, ‘You’re going to have to pay higher taxes to support those concessions.’ I don’t think that’s fair and I’m not going to do it.”

What is he going to say when his children ask him "and what did you do to contribute dad". Perhaps Morrison should start by reducing ALL politicians Super payouts (including all those that are currently on Super benefits) and by back dating all payments by min 10 years, and all future payouts to start from when the politician turns 65 like the rest of us. To achieve the payments they are receiving we would need a Super balance of $5 - $6M. Surely this is not being retrospective!

Politicians must lead by example and then we might follow.

Yes I am in that upper level where I have in excess of the $1.6M and the $500K cap but it was built up over many many years through sacrifice, hardwork and all within the rules of the day.

I met with my local Member (a senior Liberal front bencher) during the course of the election and put to him a number of questions about how the system will work. Not surprisingly he did not know but took the questions and promised to get back to me after he had met with Morrison and prior to the election date. I'm still waiting. He did however know that his pension would not be changing.

Morrison if you believe what you are doing is good for the country then stand up and contribute like the rest of us.

John Neuling
August 26, 2016

Morrison claims that these concessions were introduced in 2007. Some of them were, but earnings in the pension phase have always been tax free to the fund, no matter how large the balance.

Michael Lorimer
August 26, 2016

Totally agree John Neuling. Howard and Costello were not the authors of tax-free earnings on pension assets. Similarly, they did not introduce the $1 million non-concessional/undeducted contribution opportunity - this was in fact a limit, replacing the previous ability to make unlimited undeducted contributions.
Context is everything.

August 26, 2016

Eliza, true plus any 46 yo would surely be ensuring his/her partner was trying to achieve $1.6m as well.

As others have noted in 2007 Costello introduced tax free pensions, plus we still have imputation credits up to $18,200 per person means life is not too bad ... surely !!

Kohler was right ... about estate planning ..... I was one of those who made sure the bring forward rule of $540k via a recontribution strategy was implemented ever 3 years to help wash away or dilute the taxable element thus that when I and the bride go to live in the mud hut, our kids will get a virtually tax free amount from our Will.

If the anti detriement strategy does become law, then if you havent implemented a recon strategy you should before it gets changed / lowered again some time in the future.

From memory it was a young lawyer called Malcolm Turnball advising Kerry Packer during the Costigan (painters/dockers) enquiry ( younger readers might have to Google Gonna).

Kerry fronted a senate enquiry who, when asked about his tax payments replied " .. not a penny more ..".

By me following Packer's mantra, and presumably thousands of others, Treasury/ATO could see the tax payments eroding at an alarming rate and it is no surprise to me that a cap ($500k) was introduced and effective date of 2007 is not lost on me too !!

David Roberts
August 26, 2016

the whole problem with super is the original definition of the pension as NANE income (non assessable non exempt) which means it is not declarable to the tax office, irrespective of the amount. Being NANE means no tax, no Medicare paid (2% based on taxable income), prior to Hockey's budget automatic access to Senior's Health card irrespective of the $50,000 limit for other seniors. In addition the tax free threshhold is not used up at all by the pension income. All of this is totally unfair on all other tax payers. Then there is the issue of borrowing by the SMSF which allows multimillionaires to dump millions into Super and avoid the the contributions limits. SImpla answer is to scrap NANE pension income and declare the pension from the fund to the ATO, give a tax rebate for the amount of income that would pay 30% and then tax the rest at normal tax rates. Medicare would be paid on the pension amount, access to the Senior's Health card would be wiped out if pension > $50,000, $18,200 tax free threshhold would be wiped out. Close the borrowing loophole that was opened by the ATO. Alan Kohler said in 2012 that the current Superannuation system is nothing more than an Estate planning tool for the very wealthy - hence the screams from the Lip back bench.

August 26, 2016

Both parties want to impose a tax on lump sum super funds (in the retirement phase) either on earnings on balances above a certain limit (coalition) OR on earnings above a certain limit (opposition). I have not heard of any plans to tax large defined benefit pensions (above a certain limit) enjoyed by politicians and senior executives and public servants. A pension of $50,000 pa indexed, risk free and payable for life would need to be backed by well over $1M and as such in the interest of fairness anything above that figure should also attract some tax on the same basis as the lump sum superannuant. Would love to see some comment from the Treasurer and shadow Treasurer.

August 26, 2016

When the superannuation reforms were introduced in 2007 my colleagues and I rejoiced because our retirement savings regime had been liberated from a regime which imposed tax not once, not twice, not three times, but four times ( contribution tax, contribution tax - high income earners, earnings tax whilst in the super fund, tax on retirement stream payments). The new regime only taxed our retirement savings twice - a significant improvement!
I recall that there was a question of trust raised by my colleagues - was this a ploy by politicians to lure people into a superannuation regime and at some later time treat the pot of retirement savings as a tax cow - there was a question of trust. Ultimately we resolved that no politician would be so stupid or unprincipled as to sell the dummy and then deliver the coward punch so we steadfastly saved over the ensuing 9 years, relying on good law.

.......then along came Malcolm and Scott. Why do we now sense an act of shameful betrayal?

Mr Morrison doubtless considers that 99% ( retirement balances $1.6 million which are already in retirement phase, unprincipled and quite stupid.

Last year marked the 800th anniversary of the signing of the Magna Carta - the product of a revolt against excessive and unjust taxation. It is to be hoped that the back bench revolt can achieve a similar outcome with King Malcolm.

If the proposed reforms are enacted our retirement savings will be taxed twice and one half times - for now.........

With this level of screwing around with reforms, Scott may find it instructive to study the fiscal reform agenda of King Louis XVI of France.

August 25, 2016

We were in our Advisor's office the afternoon Costello announced the tax free pension deal. Great excitement, people running around the office telling others the annoucement - celebrations all round. We sat shocked and said "that can't be right, it cannot be sustainable". The Advisor said "probably not, but make the most of it while you can. Hay while the sun shines". So Penions were started that week and we made hay while the sun shone (and Howard/Costello spent like drunks), and no complaints from all and sundry.
The same happened when Costello announced the one off $1million tax free contribution window. More scrambling and celebrations. Now, the sun has gone, harvest completed and reality of winter has set in and those who had the best of the harvest are complaining the loudest. Get real! Superannuation was never intended as a tax avoidance proposition.
Certainly the new contribution limits need to be addressed for those like Graham's 46 year old person to be able to set up an independent retirement. But anyone with any brains will not use Superannuation as their only investment vehicle simply because it will ALWAYS be subject to the whims of politicians who don't have to retire on their own savings. Why would you put all your eggs in a basket over which you don't have control? It makes no sense.

Greg Einfeld
August 25, 2016

If you read the mainstream press, the treasurer will consider a u turn, as long as the foregone revenue can be replaced (although when Labor offered an alternative, being a reduction from $250K to $200 in the maximum income before contributions tax increases to 30%, this was rejected.

As it turns out, treasury has significantly under-estimated additional revenue from removing the tax exemption on TRIS pensions. This is where the extra revenue should come from, to fund an increase from $500K to 750K, and starting from 2016 rather than 2007.

August 25, 2016

Firstly, anyone who ever believes anything a politician says is naive and foolish. They lie consistently and unashamedly - indeed it is their core skill.
Secondly, there is no doubt the super rules will continue to be a fertile source for future Government fundraising. They have massive and growing deficits and zero spending discipline or political courage to take tough but necessary decisions. I agree with Andrew Ramsay that super will retain some level of tax advantage, but I equally expect Government to continue to seek to minimise that advantage which a hostile Treasury regards as a budget cost.
This will be the fourth time in the past 25 years that I have had to make major changes to my super contribution, benefit structure, investment and pension strategy due to fundamental changes in the rules. I am no longer young enough to recover from this latest hit so my strategy going forward is to minimise super and maximise my age pension entitlement when I reach pension age in five years' time. Buy a bigger house, gifts to adult kids to help them enter the unattainable (for their generation) housing market, negative gearing and any other legal strategy I can find to achieve this end will be used. And since my previous intent has always been to accumulate enough retirement savings to ensure I never qualified for or needed the age pension, Morrison can take the credit for me adding to the future burden on Government finances purely out of total frustration at the constant political tinkering and mind-numbingly unnecessary complexity of superannuation. It's every man for himself now, as the good ship Australia founders on the shoals of political mismanagement.

John Bowen
August 25, 2016

Well said, Morrison said before the budget that any changes to super would affect everybody, public service and politicians alike, I didn't see a cap being put on there payouts or contibutions.

Richard Baldwin
August 25, 2016

What I want to know is there a level playing field with regards to us (general public) and politicians superannuation schemes? If not then more has to be made of the fact that they (the politicians) wil not be affected.

Liam Shorte
August 26, 2016

The 2004 Federal Accumulation Parliamentary Scheme allows politicians to salary sacrifice 50% of their salary. We could only wish for a level playing field so that the same conditions applying to everyone else should apply to that scheme?

Here is link to that scheme: …

The 50% salary sacrifice aspect is under SALARY SACRIFICE.

Scott Morrison entered parliament in 2007 and hence is covered by this scheme I presume.

Susan Long
August 28, 2016

We never heard anything about politicians' pension scheme benefits and contribution rules apart from a brief statement that those on high salaries will have to pay a larger tax bill on their contributions than before so that they are being affected by the changes as well as the general public. But we are not reminded about the fact that they can access their pensions after they leave parliament even if they commence other employment whereas the general public cannot until they reach pension age if they change jobs. Are these pensions taxed as income?

August 25, 2016

"You have to regularly give us a set amount of money that we will store for you so we don't have to pay for your costs later on. It's for your future and a good life lesson"

"Why don't you save some extra because it's going to better for you?"

"Actually we are going to take use of your savings because we need them"

- Parenting 101

August 29, 2016

Hi I am convinced that there should be no limit placed on the non concessional cap, as the lifetime cap of 1.6m is not sustainable. The investment measure by which sets the 1.6 is set 1st July each year, not adjusted to next year. Govt interference to all Australian listed investments can instantly trash the value overnight whilst prohibiting further super contributions into the fund as one has hit his lifetime limit. I cite BHP, Woodside, particularly CEO Peter Coleman WPL this morning in page 10 AFR saying long term investments need time, and certainty, no government interference, no tax changes, else no investment! Couldn't agree more! That sums it up as a super long term investor who has seen his resource stocks, and MMS shares trashed due to govt interference in tax policy. So how can I manage my long term super if I am prohibited from investing in topups unlike the government 50/50 contribution schemes? Answer I can't, and condemned to fail. SCOMO assumptions are static and do not reflect the real market conditions, because he relies on debt, tax and borrowing which I cannot do in my fund to manage my retirement

August 25, 2016

The Treasurer conveniently overlooks the fact that by far the biggest change was to lower the concessional contribution cap to $25,000 for everyone, including people over the age of 50. This change affects everyone - not just people with high super balances - but everyone of working age whose dreams and incentives for saving for a comfortable retirement through superannuation have now been dashed.

In fact, it has probably made the new transfer cap of $1.6million unattainable because it assumes that people can contribute $25,000 per year when they also have responsibilities for mortgages and school fees and they are then denied the opportunity to “catch-up” when those responsibilities are reduced. It is no coincidence that this change in the concessional contributions also produces the largest increase in government revenue.

Graham Hand
August 25, 2016

Hi Jack, Agree. At the Address, someone told me he was 46 years old, had finished paying off most of his mortgage and school fees would soon drop away, and he was previously planning to greatly boost his super. He now doubts he will reach $1.6 million despite being a high income earner.

Ric Bartlett
August 25, 2016

....but wait there is going to be more.....super balances will be certainly be lower in the future, and the pension benefits will also be reduced as a big spending governments (of both ilks) spend our (and our kids) futures away!

John Bowen
August 25, 2016

I agree, unless I misunderstood Labor's policy (must admit that I didn't read to carefully) the $1.6M deal seems better than paying tax on any income above $70,000. If the days of being able to get 10% return ever return then if you have a $1M fund, you'd be paying 15% tax on the $30,000 income above $70,000 threshold.

Susan Long
August 28, 2016

I think the question of superannuation should be dealt within as a bipartisan issue.
If the aim is to have as many people as possible able to live in retirement on their own savings then a policy needs to be in place to allow them to save for this. At different times in their lives people can save more than others - once mortgages are paid off, etc. and it is likely that many cannot put much aside until the later years of working. Why cannot a top limit for tax concession contributions over a lifetime be put into place so people can utilise those years? What is the point in making it very difficult for people to save a reasonable limit? I totally agree that there should be a reasonable limit to how much people should be able to accumulate in the tax free environment, but many people do not understand how much investment is needed to pay the age pension and those on the age pension do not have to worry about falls in the stock exchange or any other investment problems. People on private pensions do. So I am not sure that the $1.6 m limit is a little under what it should be, particularly in times of very low interest rates. The idea that people with this amount of saving are very rich is misleading - many have gone without in order to save. I also think that more encouragement should be given to the notion of being self sufficient in retirement - as it stands there seems to be a lot of encouragement to organise savings in a way which will maximise the chances of gaining some benefits from the state system. At the moment many people seem to feel they are entitled to the state pension because they have worked and paid taxes, and they would rather spend than save for retirement and not get benefits like lower medicines. It is so disappointing that our politicians seem incapable of coming up with a fair system which will also help reduce the tax burden for our children as more and more people become 'aged pensioners'.

Graham Hand
August 25, 2016

Thanks, Mark. Take your point but I was careful to make the heading 'Treasurer says ...' rather than 'Super rules will not change', plus at the end I say 'Treasurer's not for turning', which is correct - he says he has "certainly have no intention of revisiting them". I report on his intention.

Mark selikowitz
August 25, 2016

In the first part of your article you argue that Morrison has not been consistent in the past (about not changing the Super rules), so why at the end of your article are you so confident that he will be consistent in the future (about not re-visiting the changes put forward in the 2016 Budget)? You seem to be inconsistent! My advice with regard to politicians is not to believe what they say, just wait to see what they do.

Andrew Ramsay
August 25, 2016

It's not for ScoMo to decide whether the rules will be changed, the Cabinet and potentially the LNP party room will do that as they have with the decision to hold a plebiscite on gay marriage. Unfortunately you can't seriously believe that super rules won't be changed again in the future; any such commitments are as good as worthless. However, I still believe that Super will retain some tax advantages to encourage people to save some of their own money for increasingly lengthy retirements.


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