Sky News

26 May 2016


SUBJECT/S: The Liberals’ Superannuation Mess

DAVID SPEERS: Jim Chalmers, thanks very much for joining us this afternoon. There are a number of elements to what the Government announced in the Budget on superannuation. Let's just break some of them down. I know in a speech you've given today you've raised particular concern about the $500,000 cap on non-concessional contributions, so this is what people can put in after tax out of their bank account, a lot of people do this close to retirement, pour money into retirement, pour money into their superannuation when they finally can. What are you saying about this $500,000 cap?

JIM CHALMERS, SHADOW MINISTER FOR FINANCIAL SERVICES AND SUPERANNUATION: Well look David, as you know, we've been saying for some time that the poorly-targeted nature of the tax concessions, particularly at the top end of super, do need to be dealt with. Unfortunately, the way that the Government has gone about these issues, you know, railing against any changes then dropping some big, drastic changes on the table on Budget Night within a couple of months of an election mean that it has been a shambles throughout the whole time since that announcement has been made. The Government can't adequately explain their measures. We've said since the Budget that we've got grave concerns about some of the measures. We obviously support the ones they've copied from us, but we've got grave concerns about some of the others, and one of those, as you correctly identify, is that five $500,000 limit on non-concessional contributions. And our main concern with that is that it's a retrospective change. Bill, and Chris, and others have all said since Budget Night that the things we have the biggest concerns with are the retrospective elements of some of these measures. That measure, the $500,000 limit, is backdated to 2007. That's what makes it retrospective, and that's why we're giving that one particular attention.

SPEERS: There's argument about whether it is retrospective or not. If you've already put in more than $500,000 in non-concessional contributions, you can keep that. But you haven't--

CHALMERS: I think a measure backdated though to 2007, it's pretty hard to make the case that it's a prospective measure when it's backdated to '07. We've said that we'll have a good look at it. We'll look to see if there's a prospective way to do it or a better way to do it.

SPEERS: But just on that, if you did it prospectively and say, went for the same sort of cap there, you'd essentially be saying, it would really only apply to those who, what, haven't yet entered the workforce, children?

CHALMERS: No, that's not the case. This is one of the things that we're consulting on and considering. We've had a lot of discussions with various stakeholders including as recently as today. We've just flagged this as an area of concern, an area of grave concern --

SPEERS: But do you take my point, though? Anyone who has put in a non-concessional contribution, even if they're 20-years-old, under your definition, this would be a retrospective move.

CHALMERS: Well we think it's possible to forward-date a measure like this. There's no science or art to backdating it to 2007. We've just flagged it as one of the issues that we're looking at. There are others as well. We're looking at that $1.6 million retirement transfer cap as well. There are about ten measures in the Government's package, many of them took the industry and the Australian people by surprise.

SPEERS: Yeah, let's go through a couple of others. So, reducing the concessional cap, so the amount you can put in each year pre-tax, down to $25,000, that does go further than Labor had proposed. What do you think about that move?

CHALMERS: That's another one that we're consulting on, David. You'd understand that we've only known about these measures for about three weeks now, the same as the Australian people. Ideally, they would have done what we did and announce these policies more than a year ago, like we did with our package for fairer super. So we're working through the detail of that $25,000 cap and, indeed, many of the other ten or so measures that have been put on the table by the Government. We don't think you should rush changes of this nature. You need to understand how they interact with each other, what the distributional impact will be, what the costs of different measures will be, and we'll take our time to do that, and we'll talk with people, we'll consult, and we'll consider it carefully.

SPEERS: I just want to be clearer on what Labor's position is. If you are elected, what is your position in this election campaign? Your policy is now something being consulted. Will you finalise these consultations before July 2, or will you simply say 'elect us and you'll get the policy we announced some time ago'?

CHALMERS: Well, a couple of things about that, David. The first thing is we've had a policy on the table I think for more than a year now, about fifteen months from the election date, we've had a policy around superannuation tax concessions, so --

SPEERS: So if people elect Labor is that what they'll get?

CHALMERS: People know where we're coming from. I said today in that speech that you referred to that we are evaluating that policy against the Government's alternative, and that we're talking to people about it. Your question is an understandable one. People will know by the time they go into the polling booth where we stand on superannuation. We've already given them a very good indication because we've put that policy on the table some time ago. We still think that those poorly-targeted tax concessions need to be dealt with, so people know where we stand and they will know where we stand when they go to vote.

SPEERS: The other big concern that's come through from a lot of people who are close to retirement is the transition-to-retirement changes. Now, at the moment you can draw down a certain amount, I think once you're over 55, draw that down from your super account -- that's tax-free income, essentially. What the Government has proposed is having a 15 per cent tax on that in that transition-to-retirement phase. What do you think about that particular measure?

CHALMERS: Well what it means is that people at the moment over 55 but before retirements can salary-sacrifice into their super to get the advantageous tax treatment. The Government has made the announcement that you've just described to impose the same kind of tax as you have paid at the accumulation phase to try and deal with what some have argued is a less than optimal way of doing super at that stage of your working life. Again, this is one of the ones that we're hearing a lot about from stakeholders. We want to make sure, in particular, that this doesn't hurt low income earners who have been advised to do this. So we're having a good look at that, talking with affected parties about it. But that is one of the controversial aspects of what the Government announced.

SPEERS: Can I just be clear of the overall aim here? Your changes you proposed, you say, more than a year ago, are squarely aimed at the very wealthy retirees with your plan to tax at a fifteen per cent rate any earnings off your super balance in excess of $75,000 a year. What the Government has done with its $1.6 million cap in the pension phase would seem to be a fairly similar goal, wouldn't it? To try and at least have some tax rate at fifteen per cent on balances over that.

CHALMERS: Yeah, and I said today, David, you're quite right, as I said today in my speech, that our quibble with the Government is not necessarily over the ends, but over the means. We think it's been a shambolic process with real consequences for people's confidence in the system, not just the people directly involved, but right through vast swathes of middle Australia who can't understand why this change was dropped on the table, such a drastic change at such a late point. But you're quite right to say that the Government has finally come to the party on some of those high income tax concessions which have been poorly targeted. They're a legacy of quite a bad decision taken by Peter Costello in 2006, and you're right to say that the Government has finally started to pay attention to them. That's why we say that the objective might be right, but let's make sure that the way that we go about it is also good.

SPEERS: Alright, so just finally, we'll get Labor's final position, we've got five weeks, or thereabouts left in this election campaign, we'll get that fairly soon?

CHALMERS: We've got a long way to go, as you've just said, more than five weeks. It feels like we've been going forever already, as you would understand as well as any of us. There's a long way to go and people will know where we stand when they go into the ballot box.

SPEERS: Alright, Jim Chalmers, thank you very much for joining us this afternoon.

CHALMERS: Thanks David.