Over the weekend I was contacted by a medium-sized business operator who is worried. He voted for Labor because of the excitement Kevin Rudd delivered at the time and because of the divisions at the top of the Liberal Party.
Like everyone else he has been hit by the global financial crisis and the value of his business has been slashed. However, he still enjoys a good salary and has been saving via superannuation. What’s now really concerning him is the subtle attack, currently gaining momentum in Canberra, on entrepreneurship and those who have really worked to put money away for retirement.
Many of the attacks are being justified as an ‘end of middle-class welfare’ but to the man I spoke with they are a concerted attack on the backbone of our community – entrepreneurs and those that have worked very hard. Some of the measures come from the Ken Henry tax review, but they all attack the same group of people. Here is this particular businessman’s list of concerns:
– The first concern he mentions is a surprise – the increase in the pension age. It’s not that he plans to go onto the pension, but that move is signalling to him that he will need to keep older workers on longer. Longer serving workers can be very expensive given their long service leave and other accrued benefits. Even more significantly, it will trigger a volley of nasties for the self-funded retirees. He has been saving vigorously to be self-funded.
– The first spin-off is the Henry recommendation to lift the super vesting age from 60 to 67 in line with pension age. A great many people have poured money into superannuation on the basis of the Costello rules. A savage rise in the vesting age would be an enormous attack on the baby boomers.
– Then there’s the Henry recommendation to tax super earnings for those who have taken a transition to the pension (ie, over 55) . Again it’s those who have saved for their retirement on one set of rules only to find them changed – and those who are still saving will be further in the gun.
– There’s also the possible changes to dividend imputation. It’s not likely to happen, but it’s on the list. That would savage the stock market.
– The new tax on employee share schemes is really bad for SMEs. It may be amended, but the fact that it was tried showed that there is no sympathy or understanding in Canberra for the small enterprise movement.
– The next complaint concerns the new Gillard IR laws on small business led by the so-called ‘award modernisation’. That’s a total nightmare. Much shift work, which is so important to productivity, will be the subject of high penalty rates.
– Next is the tax office crack-down on trusts. Trusts are a widely used structures for smaller and medium businesses.
These concerns, then, make up the core of my businessman’s list of worries, but there are also a few more obtuse items which are concerning him.
– Uncertainty over the government battle with Telstra (most DIY super funds hold Telstra stock).
– Big pressure on the RBA to further cut rates (thereby reducing DIY superannuation interest income) to try and deliver Swan’s high economic growth forecasts. In theory this would help his business, but rate reductions are rarely passed on to business. All the government pressure is on mortgage rates, not business lending rates.
If the government actually follows through and implements all those recommendations, and Malcolm Turnbull is good enough, then the list has the potential to put Turnbull in office.
It would certainly put Peter Costello in office.
This article first appeared on Business Spectator.