Two of the changes outlined in treasurer Scott Morrison’s first tranche of superannuation reform policies are aimed at assisting self-employed and low income earners, but the bigger chunks of budget savings that would be realised by introducing caps on contributions are not present in the first draft bill.
The draft Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill includes the government’s policy to relax limitations on super contributions for self-employed Australians and enshrines the Low Income Super Tax Offset for Australians earning less than $37,000 a year.
Both measures have been received positively by the community, despite the broader policy suite garnering criticism from the electorate and causing problems in the Cabinet room.
Savings from the Coalition’s super reform package rely on the introduction of a $500,000 lifetime cap on non-concessional super contributions, and a $1.6 million limit on pension phase accounts. However, these two changes are not included in the first of three bills on superannuation to be introduced by Treasurer Scott Morrison. On Monday think tank The Grattan Institute said superannuation policy reform was an “acid test” for Australia’s Parliament and that the outlook for broader economic reform would be dire if the Coalition failed to pass the full set of changes.
But the Labor party has stated this week that it opposes the change to self-employed super contributions, telling Fairfax the $8.7 billion price tag on the policy over 10 years was “unsustainably generous”. This change would see 800,000 Australians who gain most of their employment through contract work or as sole traders be able to make tax-deductible tax concessions to eligible super funds.
The Low Income Superannuation Tax Offset has been supported by a number of pay equality groups for extending super concessions to Australians earning less than $37,000 per year – supporting women who have returned to the workforce, or are starting their own businesses, by providing a rebate of up to $500 to address tax paid on their concessional contributions.
In a statement on the release of the bill Treasurer Scott Morrison said that 96% of Australians would be “unaffected” by the Coalition’s super changes, while a quarter will benefit.
However, experts continue to call for certainty in the landscape as prolonged policy discussion has an impact on employers, employees and the budget bottom line. In August an MLC report revealed two thirds of Australians have little confidence in their retirement savings, while experts have highlighted that without the major cost savings from the caps of pension accounts, the government will have to look elsewhere to make deep cuts in the name of budget repair.
The first draft bill looks to “enshrine the objective of superannuation” as a means to provide income in retirement. The rest of the package will be introduced in later bills.
Council of Small Business Australia chief executive Peter Strong says rolling the legislation out over a number of bills could actually be a good thing, as it may help to educate Australians about the super landscape.
“Superannuation is complicated and if you go too fast, too quick, cynical people take advantage of the changes,” he told SmartCompany.
“There has been big policy that’s been done well over the years – take for example the GST. There was lots of consultation, lots of information sessions [about business’s responsibility], and less fear.”