Scott Morrison pledges no change on superannuation

The Treasurer Scott Morrison has told the financial world the government will press ahead with budget repair and will not be backing down on its contentious changes to superannuation.

A day after addressing G20 finance ministers in China, Mr Morrison told CNBC that there would be minimal changes to the superannuation package.

“There can be no doubting our commitment to the fiscal consolidation that we have embarked upon,” Mr Morrison said.

“There are some minor technical issues that we are still working through which are part of the normal process but they overwhelmingly enjoy support in terms of obviously our own party.

“These are reforms that are very critical to the long-term sustainability of our superannuation system. I think these reforms are somewhat overdue and they really do right what have been some very generous concessions that have sat around the system.”

Mr Morrison’s strategy to talk to one of the world’s leading news networks is important because it sends a message to credit rating agencies that the government is intent on winding back the deficit and debts and putting the budget back in surplus. The agencies have threatened to cut Australia’s triple A credit rating if that doesn’t happen.

In August, the government is set to release the draft legislation for the superannuation changes removing the $6 billion in superannuation tax concessions for high income earners.

The most controversial change, which has drawn fire from Liberal backbenchers and from within the Liberal Party, has been the proposal to place a lifetime cap of $500,000 on contributions, which would save the budget $550 million over four years.

This is backdated to contributions made since July 2001 and has come under attack from the Coalition backbench and Liberal Party donors because it is retrospective.

Last week, it was reported that the Government is looking to placate backbench anger by inserting exemptions to the $500,000 lifetime cap on non-concessional contributions. These exemptions would be “life events”, classified as one-off windfalls. They would include an inheritance, a divorce settlement, or eligibility for a trust payment.

The “life events” change has come under fire from financial advisers and government MPs who claim it is unworkable and might even create some sort of incentive for couples to divorce.

“If a couple does get a divorce over this, what does it say about the quality of your marriage?” one Government MP who did not want to be identified told the Australian Financial Review.

Also last week, Nationals MP George Christensen threatened to cross the floor and vote against the Coalition’s superannuation policy if it isn’t changed.

Significantly, Mr Christensen said nothing about superannuation during the election campaign and has only just spoken up now.

Still, his crossing the floor would have limited impact because Labor is expected to vote for most if not all the changes.

Labor however is not prepared to support the retrospective part of the legislation.

It is not clear at this stage whether the “life events” clause will placate Labor or Mr Christensen.

by Leon Gettler, July 26^th 2016