The fraught political battle over superannuation

Defining superannuation’s ‘goal’ ought to depart room for debate about its use for housing, writes political columnist MICHELLE GRATTAN. 

THE Albanese authorities is prodding the superannuation bear, which is usually a harmful beast when stirred.

It’s throwing out a number of questions. What ought to we enable tremendous for use for? Ought to the extremely beneficiant tax breaks for superannuation be curbed? How can extra of the large $3.3 trillion tremendous pool be channelled into areas of nationwide precedence?

In coverage phrases, these are vital debates. Politically, although, something to do with superannuation is fraught, particularly for a authorities already grappling with troublesome financial points.

And when there’s a by-election looming. The very fact Labor is blissful to have this aired earlier than the April 1 vote in Aston suggests it anticipates the seat will keep Liberal and isn’t too anxious about it. Actually the opposition is grabbing the chance provided to boost acquainted scares.

The federal government’s plan to legislate subsequent yr the “goal” of superannuation has implications for the Coalition.

On the finish of the final Labor authorities, there was discuss of attempting to “Abbott-proof” coverage. Defining superannuation’s goal may very well be seen as an try and “Dutton-proof” the system.

Within the 2022 election, Scott Morrison promised to permit first-home patrons to entry a big slice of their superannuation for a deposit. Dutton has recommitted the Coalition to the coverage.

The dialogue paper Treasurer Jim Chalmers launched this week proposes a definition that claims: “The target of superannuation is to protect financial savings to ship earnings for a dignified retirement, alongside authorities assist, in an equitable and sustainable means.”

Explaining the varied phrases within the goal, the paper notes that to “protect financial savings restricts entry to superannuation financial savings for an individual’s retirement solely”.

The paper seeks suggestions on the wording, and the federal government will make its determination. However, on the face of it, if this wording had been legislated, a future Coalition authorities that wished tremendous for use for housing must alter the definition.

When Anthony Albanese was requested on Wednesday whether or not a definition of superannuation’s goal would rule out the coverage the Liberals had provided, he declined to pre-empt the method.

Throughout the pandemic, the Morrison authorities allowed individuals to entry $20,000 of their superannuation. This was a nasty judgement. A large $36 billion was taken out. Many, particularly youthful individuals, have been left worse off for the longer term because of this.

As a basic precept, tremendous ought to be preserved for retirement (aside from the restricted hardship provisions now obtainable). However the case of housing is debatable.

Residence possession may be seen, as a lot as tremendous, as a pillar for a “dignified retirement”. Older individuals with their very own properties are higher positioned than others. Many older girls, particularly, with smaller nest eggs and paying hire, more and more discover themselves in dire straits.

So there’s a case for the proposed goal to be versatile sufficient to embody a coverage permitting a restricted dip into tremendous for a primary residence. This may be in step with Labor saying that, for its half, it doesn’t imagine tremendous ought to be used for this goal.

In the meantime, the federal government is inspecting the tax breaks obtainable for superannuation.

It’s constrained by what was mentioned earlier than the election. “Australians shouldn’t anticipate main modifications to superannuation,” Chalmers declared. That not less than left some room to manoeuvre (whereas opening an argument about what’s “main”). Albanese was much less nuanced, insisting Labor had “no intention of creating any tremendous modifications”.

Whereas the federal government says no choices have been made, it signifies “tweaks” are in prospect, aimed toward these with massive balances.

Chalmers informed Melbourne radio: “The typical is 150 grand in tremendous. Lower than one per cent of individuals have gotten greater than three million bucks. The typical for them is about 5.8 million bucks.

“I believe the nation ought to have a dialog about whether or not concessional tax therapy on balances that massive is the very best use of the taxpayer cash.”

The Retirement Revenue Overview, reporting in 2020, famous that whereas tax concessions got to assist financial savings for retirement, “most retirees depart the majority of the wealth that they had at retirement as a bequest”.

‘A taxpayer-funded inheritance scheme’

The Grattan Institute’s superannuation skilled, Brendan Coates, places it bluntly: “Superannuation has grow to be a taxpayer-funded inheritance scheme”. By 2060, Treasury estimates one-third of all withdrawals from superannuation can be paid out as bequests.

The concessions, with their ballooning price to income, clearly ought to be trimmed, on the grounds of funds price and fairness.

Think about this. The Minister for the Nationwide Incapacity Insurance coverage Scheme, Invoice Shorten, is at current searching for to search out financial savings within the NDIS to make it extra sustainable in the long run. If that’s cheap for the NDIS, it’s greater than cheap for tremendous tax breaks.

The opposite space Chalmers desires to pursue is having the federal government collaborate with tremendous funds to facilitate funding in precedence areas resembling inexpensive housing.

This raises knotty points, together with the crucial that tremendous fund members’ cash ought to be invested of their greatest pursuits. The most effective investments for his or her monetary pursuits and the very best investments for the nationwide curiosity might not align.

The desirability and viability of such collaboration – Chalmers emphasises participation can be solely as much as funds – would rely upon explicit circumstances. The initiative would require most warning by funds and authorities. The dangers are apparent.

The renewed debate round superannuation is manna for the opposition. For his half, Chalmers is pissed off observers are overlooking the Turnbull authorities’s modifications to tremendous concessions. Condemning opposition “hypocritical hyperventilating”, he mentioned on Thursday, “I name on them to elucidate the distinction between what they did in workplace and what they’re railing towards now”.

Honest level. However there’s one other level, too. The Liberals would bear in mind the massive electoral blowback they bumped into with their superannuation modifications.

One distinction between then and now, nonetheless, is that the Turnbull authorities’s modifications hit the Liberals’ personal assist base.

Labor reform directed at curbing tax breaks wouldn’t goal its personal base. Coates says the federal government would “lose some political paint” in going after concessions, however lower than can be misplaced by different measures to repair the funds.

Just like the local weather wars and the tradition wars, the “tremendous wars” appear a type of certainties of federal politics.

Michelle Grattan, Professorial Fellow, College of Canberra.This text is republished from The Dialog.