Abbott says super change a “breach of faith”
TONY Abbott says the Federal Government's proposed changes to superannuation represent another broken promise.
Treasurer Wayne Swan ended a week of damaging speculation about possible changes to superannuation in the May budget by announcing a raft of reforms in Canberra this morning.
Mr Swan said the reforms, which were not as severe as many had predicted, would result in a $900 million improvement to the budget bottom line over the next four years.
The main change will affect only the most wealthy, with a 15% tax to be applied to super earnings over $100,000. These earnings are currently tax-free.
Government figures suggest just 16,000 Australians - or 0.4% of retirees - will be affected by the changes in 2014-15.
This measure would achieve a saving of $350 million over the next four years, Mr Swan said.
Speaking to reporters in Melbourne Mr Abbott could not say how the proposed changes were unfair.
But he claimed the announcement represented a "breach of faith", adding the Coalition would not support the changes.
"(It is) Yet another hit on the Australian people because what the Prime Minister said in the Parliament earlier this year is that the government would never, ever tax the superannuation payments of the over 60s," Mr Abbott said.
"These changes do in fact tax the superannuation payments of the over-60s. People will get less in their pockets because of these changes."
With just 19 sitting days remaining before the election in September Mr Swan said it was unlikely there would be sufficient time for the reforms, which were given the green light by Cabinet on Thursday night, to pass the Parliament.
The proposed reforms drew praise from industry groups.
The Association of Superannuation Funds of Australia CEO Pauline Vamos said the announcement would help stop the panic in the community and allow people to better plan for their retirement.
"We have been calling on the government to put a stop to the hysteria and consider policies which take a long-term approach to the future sustainability of Australia's superannuation system," Ms Vamos said.
"We have consistently said that with an aging population, there need to be adjustments made to ensure we meet the demands this will place on government budgets in the future. It's important that governments take action to help people boost their own retirement savings to take pressure off the age pension in the future and help retirees pay for other age-related expenses that would otherwise require further government support."
Financial Services Council CEO John Brogden, who had threatened to launch an advertising campaign against any retrospective changes or substantial tax increases, described the reforms as "favourable".
Mr Brogden said the ad blitz, which would have been similar to the resource industry's anti-mining tax campaign, had been shelved.
But he warned the FSC would wage war on any future government that created uncertainty around superannuation.
Government to tax the super rich on superannuation
THE Federal Government will tax superannuation accounts earning more than $100,000 a year from mid-2014, a situation confined to those with a super balance of at least $2.million.
Any earnings under that $100,000 will remain exempt from the 15% tax.
The changes would not be retrospective.
It was just one in a range of reforms to superannuation which were to be kept quiet until the budget, but were brought forward as concerns mounted over what changes could mean for retirement funds.
In a press conference held by Treasurer Wayne Swan and Financial Services minister Bill Shorten, they announced the government would create a Council of Superannuation Custodians to assess Federal financial policy against a charter to ensure retirement funds are not put at risk.
Each year, these custodians will release a report into how the government of the day's policies perform against these criteria.
Mr Swan said these changes were designed to ensure the strength of the superannuation schemes for coming decades.
"They reduce support for less than 20,000 of Australia's richest Australians," Mr Swan said.
"It's not a package about today or next year, it's a package about the next decade and beyond."
Grandfather arrangements spanning a decade would also be installed, so these changes would not apply to long-standing superannuation assets until July 2024.
The tax concession for $100,000 in super earnings amounts to $26,447 a year, more than $5000 above the minimum paid to age pensioners.
The $100,000 threshold will be indexed to the Consumer Price Index and will increase in $10,000 increments.
Mr Shorten said most Australians "could only dream" of earning $100,000 a year from their superannuation accounts.
"To keep the system sustainable, we all know that you can't have concessions being open ended," he said.
"Once you have achieved a comfortable level of account in retirement, you probably don't need as much taxpayer support as those who have not yet got to that."