The Coalition needs to get its suite of superannuation changes through the parliament or the future of Australia’s budget and economic reform prospects are dire, according to experts.
The Grattan Institute has called super policy reform an “acid test” of Australia’s political system, one that must be resolved in order for the country to move forward on repairing the surplus and stabilising the economy.
In its report ‘A better super system: assessing the 2016 tax reforms’, the Institute reiterates the argument that the Coalition’s superannuation policy, which looks to cap the amount of non-concessional super contributions across an individual’s lifetime at $500,000 and tax super pension balances of over $1.6 million, would create a fairer super system.
But the reality of the policy debate is a different story, with the federal cabinet still fighting it out over possible exceptions to the cap limits. Meanwhile, experts say that both sides of parliament are battling the forces of expenditure and revenue in their quest to improve the budget bottom line – and that no matter the outcome on super, someone will have to hurt.
“There will have to be cost cutting [to repair the budget] and you have to remember it’s very difficult to cut costs at this high scale – lots of $100 million or $300 million,” senior lecturer in business and law at Deakin University, Adrian Raftery, told SmartCompany.
“This super legislation could be a signal to government that it will be very hard. If they don’t go with super, they’ll still have to increase revenue, and someone’s going to feel the pain somewhere,” he says, citing taxation at the “top end of town” as the other option on the table for revenue growth.
Changes to superannuation marked a controversial part of the 2016 election campaign, but the likes of The Grattan Institute have always insisted the reforms are a fair and necessary part of budget repair. Writing in The Conversation this morning, chief executive John Daley said that while both the Coalition and Labor agree on the principles, the specifics are getting in the way.
“While they agree on all but the details, they are yet to strike a deal,” he wrote.
Raftery says confidence in Australia’s super industry has been a product of stability and a lack of changing policies between its introduction in 1992 and Peter Costello’s 2006 budget – and the changing tides of policy could change the way Australians think about retirement.
“There will be a shift in thinking where people will say ‘We just don’t know what the government is going to change now,’ making individuals more reluctant to put money into super, he says.
While both Labor and the Coalition have expressed a desire to reign in tax concessions in the super system, the issue continues to cause conflict within the Coalition and there has been discussion around a number of changes to caps, such as exemptions for “life events” when contributing money to super.
The need for bipartisanship will become more important once the bills enter parliament, says Raftery.
“They’ll have to come up with a few different scenarios and work with the opposition. We’ll have to come to a resolution,” he says.