Barking up the wrong superannuation policy tree

It’s a symptom of the poverty of our politics that the rear guard action to defend the government’s proposed superannuation changes seems based primarily on the cost rather than the probity.

From various reports about the Liberal Party infighting over super, it looks like Scott Morrison’s main line of defence is that watering down the changes would leave one of those oft-mentioned budget black holes.

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That’s mainly about the part of the policy that has riled parts of the Liberal heartland most – the $500,000 limit on non-concessionary super contributions since 2007, grandfathered to allow those already over that limit on budget night to remain blessed by the tax system.

Morrison has warned that changing the non-concessionary limit would cost the budget half a billion dollars. (There’s a suspiciously neat correlation there – the $500,000 limit equates to a $500 million budget saving.)

He’s reportedly told rebellious backbenchers that they’d have to come up with matching savings from somewhere else if they want to ditch the saving on super.

In fairness, Morrison has also mentioned the policy side as well as the fiscal.

"It's important to understand that the changes we put forward in the budget are an essential part of doing two things - making superannuation more sustainable and fairer into the future and let's not forget that many of the changes we made to superannuation were to ensure those on low incomes are able to make contributions to their superannuation," he said.

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"The other issue that it addresses clearly is the one of fiscal sustainability. Now the ratings agencies have made this very clear.”

It’s the second point that seems to matter most in what passes for the debate. It’s the first point that should be paramount – but it’s the one that leaves the relatively privileged without a leg to stand on.

The reality is that the present superannuation system is ridiculously, outrageously generous for the well-off. As a former tax partner told me once, it’s the best tax haven on earth.

What Morrison is now proposing on the non-concessionary side is that those with half a million to hand can park it in an extremely tax-effective investment vehicle.

People with more than half a million spare should be quite capable of investing it elsewhere without requiring a tax break incentive.

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Part of the problem Morrison faces is that he has not adequately dealt with the purpose of superannuation.

If he had implemented recommendation number 9 of the Murray financial system inquiry, he would have reached a bi-partisan agreement on the principles of our very expensive superannuation system, legislated it and then been able to work out policy from there.

Instead, there’s an inconclusive generality about super being nice for people in retirement. It’s not a strong base from which to debate.

The government shouldn’t be handing out tax breaks to make life more comfortable for those capable of making life comfortable for themselves.

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The irony, as someone Tweeted, is that the stereotypical Liberal complaining about this tightening of tax expenditure is also likely to claim we spend too much helping poor people.

Labor, too, needs to put politics aside on superannuation. During the election campaign and since, the Opposition has been happy to play up the division within the coalition on the issue instead of agreeing on the best outcome.

But that, sadly, is politics.

 

Michael Pascoe is one of Australia's most respected finance and economics commentators with over four decades in newspaper, radio, television and online journalism. He regularly appears on Channel 7's Sunrise and news programs and is a regular conference speaker, MC and facilitator.