“One of our key drivers when contemplating potential superannuation reforms is stability and certainty, especially in the retirement phase.”
(Then) Treasurer Scott Morrison, February 2016, SMSF Association National Conference, Adelaide
“… we understand that you need stability and certainty around your regulations and the rules governing superannuation.”
(Now) Assistant Treasurer Stephen Jones, January 2022, SMSF Association National Conference, Adelaide
***
The SMSF Association rotates the city where it hosts its National Conference each year. What is it about Adelaide, six years apart, that leads a Treasurer and an Assistant Treasurer to make exactly the same promise to delegates, using the same words, only to renege on the undertaking within a year? Even more bizarrely, Treasurers Jim Chalmers and Scott Morrison defend a change to superannuation by saying it would not apply to 99% of people. Apparently, there is an accepted standard for change if only 1% of people are affected. Or did Scott Morrison leave behind a song sheet, and it landed on the desk of Stephen Jones?
While the words “stability and certainty” are disingenuous, it is also hypocritical of Opposition leaders Peter Dutton and Angus Fraser to claim the moral high ground. Labor's move and words are exactly the same as the Coalition's.
This week, the Government confirmed its plan to introduce a new tax tier at 30% for superannuation balances over $3 million. It's another step in the ongoing windback of superannuation concessions. At least Labor has deferred the introduction until after the next election, effective date 1 July 2025, to deflect claims it broke an election promise, and it forces the Coalition to campaign against the changes.
No partisan politics in these words
In the 2016 Budget, Treasurer Morrison introduced the $1.6 million Transfer Balance Cap, a few months after promising no changes to superannuation regulations. In less than a year since Labor was elected, Treasurer Jim Chalmers is moving against the pre-election undertakings on “stability and certainty”.
It is doubtful whether any other country on Planet Earth creates more political stoushes and headline-grabbing stories out of superannuation policy, but we Aussies are passionate about retirement savings and election promises. Hypocrisy reigns when the only thing that matters is winning an election. The media has trawled through videos from the 2022 election campaign and found Anthony Albanese saying in May 2022:
“We’ve said we have no intention of making any super changes. One of the things we’re doing in the election campaign is we’re making all of our policies clear.”
Dr Peter van Onselen, Professor of Politics and Public Policy at the University of Western Australia, writing in The Australian, said:
“I was told that when Albanese made that comment Chalmers visibly winced, in the full knowledge his word salad had been defined down by his boss into words Labor couldn’t obfuscate.”
Faced with a backlash when the word “any” was revealed, Anthony Albanese rushed through the tax announcement on 28 February 2023. Only a few days earlier, he had been far more equivocal, calling it a "hypothetical" change. Labor found out that words before an election matter.
Assistant Treasurer Stephen Jones gave rock-solid promises
In this short speech by Stephen Jones at the 2022 SMSF Association National Conference, pitching for a relationship with the SMSF sector in his potential role as Minister for Superannuation, there is no wriggle room as he said “stability and certainty” four times in only two-and-a-half minutes.
What is different to other 'gotcha' moments is that these undertakings were not in an unscripted doorstop interview with the media yelling questions. Slips there are more understandable. This was a prepared and well-considered speech, emphasising a particular message from the aspiring Prime Minister.
“Anthony Albanese wanted me to deliver a particular message to everyone in the sector today. And it's about stability and certainty. Anthony and in fact, the entire Labor team understand that we've been through a massive amount of change and challenge over the last three years, and that there's more to come. It's not just COVID although that turbocharged them, it's not just the Haine Royal Commission, which saw a tsunami of regulatory change, which is still only being digested by the industry. But there's a whole bunch of other things that are yet to come as well.
So the message we want to send to you is around stability and certainty in an uncertain time. The last thing that we want the SMSF sector, whether it’s advisers, whether it's accountants, or the customers that you serve, the last thing that we want you worried about is the next regulatory hit coming out of Canberra. We want you focused on delivering great outcomes for members and for retirees themselves.
We want you to have peace of mind in your retirement. We want to make the case that your nest egg, your retirement savings are always going to be safer under Labor … we understand that you need stability and certainty around regulations and the rules governing superannuation. And we want to ensure that after we've been through all the change that's been digested at the moment that advisers and retirees can understand that we're going to have certainty and stability and that is what we will be offering.” (My bolding)
As election promises go, it couldn’t be much clearer. Four times “stability and certainty” in a “particular message” to SMSFs, “peace of mind in retirement”, and retirement savings are always safer under Labor.
It is statements like these which have forced Labor to move the effective date of the new 30% tax until after the next election. Labor marketed itself as transparent with integrity, and while relatively few people have over $3 million in super, far more will wonder what is next. The battle lines are drawn for the next election. As in the franking credit debate, adult children want to protect the retirement savings of their parents and grandparents or aspire to large superannuation amounts themselves.
What exactly did Morrison say directly to me in 2016?
Then-Treasurer Scott Morrison misled me in 2016 and I advised readers there would be no changes to super in the Budget. At the conclusion of a talk at Bloomberg in August 2016, I asked Mr Morrison about the statement he made in February 2016 at the SMSF Association Conference. I quoted his previous words directly to him:
“One of our key drivers when contemplating potential superannuation reforms is stability and certainty, especially in the retirement phase. That is good for people who are looking 30 years down the track and saying is superannuation a good idea for me? If they are going to change the rules at the other end when you are going to be living off it then it is understandable that they might get spooked out of that as an appropriate channel for their investment. That is why I fear that the approach of taxing in that retirement phase penalises Australians who have put money into superannuation under the current rules – under the deal that they thought was there. It may not be technical retrospectivity but it certainly feels that way. It is effective retrospectivity, the tax technicians and superannuation tax technicians may say differently.”
I asked why he had changed his unambiguous thinking when he introduced new superannuation regulations in the Budget only two months later. He told me:
"I stand by everything I said in that statement for the simple reason that the retirement phase remains tax-free. You know that. The retirement phase account, which under our proposal with a transfer balance cap, will mean that 99% of people who have balances less than $1.6 million will remain absolutely in exactly the same situation that I referred to.
The changes that we put forward, which I hope at least from my point of view as Treasurer I never have to revisit, and I certainly have no intention of revisiting them, will ensure that those rules are now set for the future.
Why did we have to change the superannuation system? Because we have an aging population and we have system that is frankly overly generous for large balances, and the cost of having those large balances and the tax concessions ... Those arrangements were brought in when the Budget had a $20 billion surplus and $40 billion in cash.”
What we have chosen to do is make the superannuation system more sustainable in future. We have targeted a higher rate of tax, true, at the whopping rate of 15% for earnings on balances above $1.6 million. That enables us to preserve the exact situation that I was speaking in favour of at the SMSF Conference. We allow 99% of people who have saved for their retirement to have the deal that I said they should have, that is, paying no tax on what they have contributed to superannuation over their lifetime.”
It could have been written by Labor in the recent debate. It's all there.
What is next?
In 2023, Jim Chalmers is using the same arguments Scott Morrison used in 2016, and there is an important warning for the future. Morrison said:
“The changes that we put forward … I certainly have no intention of revisiting them, will ensure that those rules are now set for the future.”
That’s what Jim Chalmers is saying now about defining the objective of super, but it will set the rules for the future only until another government revisits them. The $3.3 trillion in superannuation is too tempting for Treasurers to leave alone.
Graham Hand is Editor-at-Large for Firstlinks. This article is general information.