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The Superannuation saga

Joe Hockey (Image by brunchnews.com)

Joe Hockey (Image by brunchnews.com)

While a pained Joe Hockey tells us his “truth” about the mess Labor has supposedly left, and that the old age pension is no longer affordable so we must work till we drop, it is worth remembering the Coalition’s history on superannuation. Had they listened to Whitlam, had Keating won, had Howard kept his election promise, had Abbott and Hockey stuck to their word, the future may not look so bleak for those who have worked for a lifetime yet still face a retirement dependent on the pittance the government chooses to give them.

1972

Compulsory national superannuation was initially proposed as part of the 1972 Whitlam initiatives but up until the 1980s superannuation was solely the privilege of predominantly male professions, clustered in the public sector or available after a long qualifying period in the private sector.

1985

In 1985 then Leader of the Opposition, John Howard, said this:

“That superannuation deal, which represents all that is rotten with industrial relations in Australia, shows the government and the trade union movement in Australia not only playing the employers of Australia for mugs but it is also playing the Arbitration Commission for mugs”.

Howard was commenting on the deal between the government and the ACTU which saw the trade union movement forfeit a claim to 3% productivity improvement as wages to instead be paid in compulsory superannuation – endorsed by the Arbitration Commission and managed by superannuation funds with equal representation of the unions in the industry and the employers.

The Coalition has steadfastly opposed every increase in compulsory superannuation since that time, whether it be from 3% to 6%, or the 6% to the current 9.25%.

1995

In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.

1996

In its superannuation policy for the 1996 election, Super for all, the Coalition, which had hitherto been implacably opposed to Labor’s policies, promised it:

•Will provide in full the funds earmarked in the 1995 — 96 Budget to match compulsory employee contributions according to the proposed schedule;

•Will deliver this government contribution into superannuation or like savings;

•Reserves the right to vary the mechanism for delivering this contribution so as to provide the most effective and equitable delivery of the funds.

1997

So why don’t we have 15% superannuation now? Because John Howard and Peter Costello nixed it in the 1996 budget barely six months after it released its policy, insisting it was too expensive. They didn’t “vary the mechanism” so much as halted it.

2007

Significant changes were also made to superannuation policy in 2007. The majority of workers could now withdraw their superannuation tax-free upon reaching the age of 60. Most self-employed can claim their superannuation contributions as a tax deduction. In addition, semi-retired people can continue to work part-time, and use part of their tax-free superannuation to top up their pay.

Despite the relatively generous tax treatment of capital gains, the new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.

People were allowed to transfer up to A$1 million into their superannuation accounts before the June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous. In the June quarter of 2007, A$22.4 billion was transferred to superannuation accounts by individuals. This compares with A$7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.

2010

The Coalition’s superannuation policy  has drawn mixed reviews, with several major industry bodies expressing disappointment at the policy for being unsubstantial.

The Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) said in a joint statement that a failure to increase the superannuation guarantee (SG) to 12 percent, the failure to raise the concessional caps for individuals over 50 and the failure to provide a super tax contribution rebate for low-income earners would adversely impact Australian workers.

ASFA chief executive Pauline Vamos said that the majority of Australian voters would be disappointed that the Coalition’s only plan for superannuation was the promise of more reviews and delays.

AIST chief executive Fiona Reynolds said: “Australian voters are entitled to expect more than a policy document that has no concrete plans or even fresh ideas on how to address retirement income adequacy and the challenge of Australia’s ageing population.”

2011

OPPOSITION leader Tony Abbott has pointedly put down Victorian Liberal MP Kelly O’Dwyer after she questioned his controversial decision to keep Labor’s higher superannuation guarantee if a Coalition government inherits it.

Ms O’Dwyer asked at yesterday’s party room meeting about the process by which the Coalition’s previous position was reversed – saying it was her understanding such issues should go to the party room.

Mr Abbott said the party room had the right to change policy at any time. But there was no rule – and there should be no expectation – that every policy decision be brought to the party room.

“Mr Abbott, who several times made it clear he did not want to talk about the backflip, said the Coalition would have more to say on superannuation later, but repeated that it would not rescind the higher guarantee.”

Feb 2013

JOURNALIST:

So you would cut all those initiatives?

JOE HOCKEY:

Absolutely, you can’t afford them.

So there it was in black and white – the Coalition was cutting the increase in the super guarantee.

Except, apparently not so: a couple of hours later, Hockey was complaining on Twitter about being misrepresented. “What an MRRT debacle… Despite Govt’s failures we remain committed to not rescinding the increase in compulsory superannuation from 9-12%.” Hockey tweeted. After the Nine Network had accurately reported his remarks, he followed it up with:

Would be nice if Nine News had checked the facts…Coalition remains committed to keeping increase in compulsory superannuation from 9-12%.

Crikey understands Tony Abbott’s office moved immediately after Hockey’s doorstop to indicate there was no change in the Coalition’s support for the move from 9-12%

May 2013

Tony Abbott’s plan to delay the compulsory superannuation guarantee increase for two years and do away with top-ups for low income earners sets the tone for the Coalition’s policy on retirement savings to be announced in coming months.

The Liberal Party’s superannuation policy is likely to encourage individuals to make more voluntary contributions while scaling back government-directed super contributions.

The Coalition seems to be struggling with the concept of superannuation. The Coalition has lost a lot of their super knowledge over recent years with the retirement of many senior MPs, including Peter Costello, who was the architect of the 2007 changes that brought in tax-free super for over-60s, introduced caps on non-concessional contributions, reduced the caps on concessional contributions, and removed limits on the amount of super that you could withdraw at concessional rates. They have promised not to make any unexpected negative changes to super, but hey, a few weeks after making that promise, they announced they were freezing the Superannuation Guarantee increase for 2 years.

November 2013

Labor went to the election promising a 15 per cent tax on superannuation pension earnings over $100,000.

Treasurer Joe Hockey said on Wednesday the policy was too complex and it would be scrapped.

The Treasurer has also decided to cut superannuation co-contributions for low income earners

According to the chief executive of Industry Super Australia, David Whiteley, this would result in 3.6 million Australians on low incomes being out of pocket $500 a year, while just 16,000 of the nation’s top earners will benefit from the scrapping of the 15 per cent tax.

With the rise of influence of the IPA within our current government’s policy making, this article by John Roskam from 2012 should sound warning bells to us all.

“Compulsory superannuation offends practically every principle of what should be Liberal Party philosophy. If an Abbott government does keep compulsory superannuation it must, at a minimum, make drastic changes.”

Could I suggest, Mr Hockey, that this problem is very much of your own making and your decisions to date are doing nothing to help.  Stick to your word, increase the SG, and encourage lower income earners to contribute to superannuation.  They are the ones more likely headed for the old age pension than your mates who have over $2 million tax free dollars invested with an annual retirement income of over $100,000 a year!  Your lamentations lack credibility as do your ever-changing promises and actions.

It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.

Hubert H. Humphrey

45 comments

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  1. john921fraser

    <

    @Kaye Lee

    You've nailed this one.

    Howard stopping the 3% increase in Super is really starting to hurt and good old Joe "don't know" Hockey just doesn't have the guts to acknowledge it.

    Anna Bligh is today highlighting how dudded women are in the Super stakes when it comes to retirement.

    The pain for the most vulnerable continues under the moron Abbotts guidance.

  2. rossleighbrisbane

    Yep, that’s a pretty fair summary.
    Somehow, Liberals are allowed to harp on about how Whitlam sent the country broke (he didn’t, btw, but that’s not the point), while nobody ever brings up that the highest government debt in terms of GDP was left by Howard as Treasurer.
    Similarly, the fact that Howard and Costello stopped the increase in compulsory super – which would have gone a long way towards heading of this “enormous problem” – never seems to be brought up in discussions.
    Well done!

  3. john921fraser

    <

    Here's some more food for thought.

    In some small towns in South Isle N.Z. pensioners make up the numbers in supermarkets because the youth have left the towns.

    Here in Australia the moron Abbott is talking about giving unemployed youth up to $4,500 to relocate and be in work for 2 years.

    At the mines Gina and Co, only want Fly In Fly Out (FIFO) workers.

    Please use Joe "don;t know" Hockeys "eleventynomics" to work that one out.

  4. contriteshadow

    It’s quite shocking how much this government has reneged on in such a short time. I really appreciate you taking the time to put so much into this article. But you’re experienced enough to know that sometimes those who most need to read intelligent arguments like this one simply won’t see it. So I ask you, Kaye Lee, to check out a new form of online debate and discussion, with the latest topic: https://www.whysaurus.com/point/Australia_needs_a_new_Constitution

    I’m in no way affiliated with Whysaurus; just keen to see how far we can take the discussion in a social media friendly environment.

  5. diannaart

    Excellent writing Kaye Lee.

  6. Fed up

    Keep in mind, most of the super deals done with employers, was bought about by labour sacrificing wages rises for super contributions.

    Abbott is now trying to portray that the cost of super falls on he shoulders of employers.

    Yes, and that tax reduction it said that Keating did not deliver, was replaced by three percent, I think it was, super contribution.

    Howard and co biggest problem with super was, it believe that unions would have to much connection to the money, it would raised.

    Still today, they attack unions funds, that have proved to be the most efficient and cheapest.,

  7. Stephen Tardrew

    That is a critical issue Fed up I clearly remember that wage rises were sacrificed for superannuation.

    This is just another way that the LNP is trying to rewrite history to lay the burden on ordinary people.

    Another great article Kaye.

  8. Stephen Tardrew

    John: off topic but I cannot help but answer.

    We are fools to think that we can make trade offs in a way that benefits the Australian economy when each side strives to gain a benefit. One is a fool to think that when each player goes away convinced they are winners in some real respect we must all be losers. As each agreement is a trade done in secret, and without the approval of legislators or the people, they cannot, in a democratic sense, be legal. This is undoubtedly oligarchic dictatorship. What sort of stupidity is this that we are excluded from our democratic right to critically analyze any agreements made with any other nation in the name of our country.

    Secrecy simply because public outcry shut down a previously attempted agreement. This is a damnable pox upon our democracy and our rights as human beings. These trade agreements are beyond the pale. Some people will inevitably suffer why others get unreasonable rewards. These greedy corporate bastard know no limit to their avarice.

    This article is a shocking rebuke to these trade agreements.

  9. Kaye Lee

    From that article on the TPP John

    “Elected representatives in each country, including the US, are unable to see the text, yet hundreds of US “trade advisers” from industry groups and corporations such as Walmart and Cargill have full access to the text and are kept up to date with negotiations.”

    That just shows you where the power is in this new world order

  10. john921fraser

    <

    @Kaye Lee

    Not only elected representatives but also the ones who elected them.

  11. kathysutherland2013

    This government certainly doesn’t meet Hubert Humphrey’s criteria for a moral government, but I guess it doesn’t matter, because Abbott and his cronies don’t do “moral” anyway.

  12. Don Winther

    We are the morons and they know it. What pension,superannuation and entitlement are our politicians giving themselves. Do they still collect there massive pension and supper when they leave there comfortable government jobs and fall into there high payed consulting jobs. Are they physically burnt out after working on a production line and paying tax all there working life or after building our roads and hotels, bridges and cars well not cars because Tony fixed that and the production lines. Id be ashamed to be a politician. And what about Amanda Vanstones National Liberal Party show ( bit off the track ) on our Radio National blasted to every corner of Australia and the world. She is so bias with her questioning and opinions, she cant help herself. How much pension and super is she getting as well as getting payed for her show. Where is the balance. How much is Johny Howard and his mates costing Australia? Politicians are costing this country way a fortune and the cuts should start with them. Yep we are the morons.

  13. Matt James

    But why have superannuation anyway? If everyone paid into the pension what they already do through super, whether that be employer contributed or voluntary there would be more money left over due to all the unnecessary administration and marketing, financial investment advice fees, etc. Super can’t address an aging population any better than the pension, in fact it makes it worse because it is far less efficient. Too many financial middle men effectively not doing anything, except ‘growing wealth’ in the same way Magic Money Trees do.

  14. John Kelly

    You nailed it, Kaye.

  15. lawrencewinder

    Good article… as a friend of mine commented some ten years ago after returning from living in Asia for 3 years… “We are going to be the ‘White-trash’ of Asia, except it’s going to take Oz, a lomg time to work that out!”
    Hockey & “Rabbutt-the-Hun” will get us there all the more quickly c/o the “Coots-With-Queer-Ideas-from-a-Parallel-Universe” (IPA) and their successful agenda.

  16. Ricardo29

    Kaye Lee, I don’t know how you keep coming up with these insightful and incise pieces but thank you for doing so. I put them on my facebook page urging my (few,and mostly like minded) friends to read them. I agree with contrite shadow you writing needs to get to a much wider audience, but would they read it? After all it contains big words and complicated concepts.

  17. Catherine

    Yes I don’t know where it will all end up but if the pollies go without as much as we have over the years they might see where we are coming from,We look after our finances by doing things that we know we can afford it’s a shame they don’t prioritise their finances by what is most important

  18. David Somerfield

    I have been yelling this at everyone I know from before the election, especially to people who I know or suspect voted LNP and they look at me as if I am a bloody looney….and in the next breath they complain that their super isn’t going to be enough to retire on.
    But hey, after seeing the PUP bogan that the Tasmanians elected to the senate on last nights QandA I reckon we are all in the shit trough and there is no escape. Fully explains why the Libs hate Gonski, they want the electorate to be stupid.

  19. Jon Anders

    Again. It all boils down to “Hand Outs” again. Bill Short-One said publicly when announcing the increase of the super :- We are increasing the contributions because Australians are not known for being a nation of savers”!! Pah. What a load of crap! If the boot was on the other foot and employers were to deduct the super from the wages as in every other country how would the worker feel? Increasing super on to the employer just makes the expense of the employee too much to bear.
    If the super was a complusory 20% of individual wages taken at source then the future would be bright. But we have been turned into a nation of beggars through handouts by a conning ALP govt.

  20. Kaye Lee

    What rot. We have one of the best superannuation schemes in the world. It is not a handout. It is part of doing business. Unions agreed to forego pay rises to get it. You would prefer workers to pay higher taxes?

  21. john921fraser

    <

    @"jon Anders"

    Wonderful stuff.

    Is Kevin Andrews your father or father in law ?

    Brains are compulsory in most humans …. apparently you are the exception to the rule.

    Were you standing behind the door ?

    Or were you to busy to put your "hands out".

  22. Norman from Ngunnawal country

    I read, or maybe heard, somewhere that the tax concessions for people with lots of super is quickly getting to the same level as the cost of the age pension.
    Reduce the tax concessions and — magic — there is plenty of money for the age pension.

  23. Matters Not

    john921fraser

    Great link. Demonstrates how ‘reality’ can be constructed and those who do just that. And why.

    It’s why sites such as this are important as an ‘alternative’ constructor of ‘reality’.

    As for Jon Anders, he/she has a very poor understanding of how compulsory super came about and the trade-offs involved.

    But from his/her perspective, the ‘reality’ matters not.

  24. Michael Taylor

    Norman, nice to see a fellow Ngunnawal countryman here.

    And like this one, you make sense. 🙂

  25. Fed up

    Yes Norman, once again, it is a I matter of choice. Same we have with our own personal spending.

    What did Abbott announce yesterday? From where I am sitting, a short runway with a building. No information of which way it will run.

    He wants to be seen as the cando man. All regulations will be abandoned.

    He will not enter into what is needed in this region. Urgent upgrading of public transport, regardless of whether the airport comes or not.

    I thought that the upgrading to Elizabeth Drive was already under way. What he announced, was only some road works and a airport that will be built by private enterprise. No more than that.

    Also, the present airport at Botany bay will reman the main airport.

    If we can believe Abbott, a win win for all.

    do not expect to see Abbott’s plan emerge in my life time. Maybe he has some Koreans line up, with their 457s worker to build his illusion.

    Yes, all one has to do, is remove all environmental and other regulations, and it will all come. Not too sure, I like Australia being open for plunder

  26. Fed up

    Looks like Abbott’s plans have gone astray. Barrie O’Farrell held up elsewhere. Well explaining what one did not receive that bottle of wine when the evidence says you did, does take some explaining.

    So does saying you announced an airport, when it seems all you did, was announce some roads funding.

    Money to be spent over ten years. Not much up front it seems.

    Abbott sees to be getting in early for the next state election.

    Poor Mr. Abbott, this stunt is going off the lines.

    .

  27. Fed up

    Pity Abbott foes not get onto the train to the next couple of stations towards Campbelltown. He would see the extensive work that Labor achieved when it comes to rail and transport facilities. Yes, ten up Camden Valley way, and out along Cowpastures road. Will also see much has already been done.

    O’Farrell has just admitted there is a than you note signed by him. Yes, once again a memory fail.He has just announced his resignation.

    Yes, Mr. Abbott ill soon learn his inquiries can catch more of his side, than that of the unions and Labor.

  28. Scott Phillips

    John Anders trots out the old Liberal argument that if employers weren’t hamstrung by having to pay compulsory super, it would free them up to employ more people. That argument is specious because it makes too many assumptions that are not based on evidence. It assumes businesses prefer to expand rather than pay out higher dividends to shareholders, when the latter is always their first priority (since executives’ pay is linked to market value). It assumes there are more jobs that need to be done, when this may not automatically be the case.

    In terms of the big picture, it makes the egregious error central to a Liberal government philosophy that if business is given free rein it is good for the health and wellbeing of the country. Is it? Is it good for the country for the divide between rich and poor to widen? Is it good for the country if retired people do not have enough super, so that more of them turn to the pension? Is it even feasible to raise the retirement age to 70 when so many over 50 are retrenched and find it impossible to get re-employed, and are too old to retrain? This is where the Right’s tunnel vision fails, underlined by the fact that individually they don’t mix with anybody but themselves. They don’t see real life.

  29. Fed up

    Wonder how far hind is Sinodinos.

  30. Fed up

    hind behind. Mucks up Abbott’s day.

  31. Fed up

    Most of the payments employers make on behalf of the employees super comes from the worker forgoing wage rises. It was the worker that made the sacrifices.

  32. Fed up

    Abbott’s PC should be interesting. Remember Abbott is promising little.

  33. Fed up

    Another stunt hit the ground.

  34. Fed up

    In a way, it it a shame that the premier the one that has to go.

  35. Fed up

    Maybe O’Farrell is happy to go.

  36. Fed up

    What is Abbott committing to. an airport that is to be built by the private sector. Not for badly needed public transport faculties that are badly needed. Only for some roads, that are already in the pipe line.

    A airport that might begin flights somewhere in the 2020’s. A short runway at that. One that is to take the overflow from Mascot.

    200 million I believe will be made available this year.

  37. Fed up

    The note was handwritten, and personal.

  38. Carol Taylor

    Fed up, thank you for that. Abbott will always just be about the moment and never about long term.

  39. mars08

    Sooo… I guess caring for the neediest in our society is STILL out of style…

    “…that cohort of wealthier retirees, currently enjoys a major advantage over other taxpayers because the flat 15 per cent rate on super contributions is much lower than the top marginal rate they would be liable for on all other income.

    The study, to be formally released on Tuesday, found the rate of growth of super tax concessions is greater than that of the pension despite the ageing population, meaning the cost of the tax concession will soon overtake the pension to become ”the single largest area of government expenditure,” by 2016-17.

    ”’The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14,” the study found.

    It notes that the Commonwealth bill for these concessions is projected to rise at a staggering 12 per cent annually to be $50.7 billion in 2016-17.

    ”The overwhelming majority of this assistance flows to high-income earners,” the report finds.

    ”Low-income earners receive virtually no benefit…

    Super not pensions that’s killing budget
    http://www.canberratimes.com.au/federal-politics/political-news/super-not-pensions-thats-killing-budget-20140421-zqx7p.html

  40. Kaye Lee

    I saw that mars08. The Australia Institute were commissioned by the Melbourbe Unitarian Church to do a People’s Commission of Audit that was to be released soon. I notice they are releasing the study to which you are referring today. I wonder if it is part of a more comprehensive study which they will release piece by piece just like the Coalition are. One lot are leaking the bad stuff so we can get used to it, the other lot are leaking the good stuff. Let’s make sure we follow it and spread the word.

  41. mars08

    I notice they are releasing the study to which you are referring today.

    Of course, if the govt acknowledges it at all, they will tag it as class warfare and probably try… um….. ah… try …er… ahhh… ehhh…

    Hey look everyone!!!! There’s the royal couple and baby George!!! Brynne Edelsten is snuggling up to cricket player James Pattinson!!! New series of The Voice is starting!!! That last episode of The Block was awesome!!!!

  42. mars08

    Ah sigh… just heard a bit about this on ABC radio news.

    I suppose I shouldn’t be surprised that the report started with: “…A left-leaning think-tank has said…

    These days it’s all about arsecovering at the ABC, isn’t it?

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