The Australia superannuation movement has had the most enormous victory. Any person aged over 60 who classifies their super funds as being in “pension mode” will have no tax levied on their investment income. They will be required to pay a minimum pension that rises with age, but that pension is also tax-free.
That decision, which comes amid a wide-ranging government audit of taxation, was described by Joe Hockey as “drawing a line in the sand”.
Treasury fought hard with the previous government to change those rules. But the research material they gave the government was mathematically flawed, and of no use whatsoever. The ALP government used Business Spectator/Eureka Report material to devise a tax on income over $100,000.
It turned out to be a total administrative nightmare, because that sort of material is not readily collectible given that most people with large amounts of superannuation have multiple funds.
For industry and retail funds, you would have required completely new systems. The super changes that Peter Costello introduced have now survived their first challenge.
There will be more challenges, but as each year goes by, it will become harder and harder because the number of people is set to rise sharply with the ageing population. Accordingly, older people will have a bigger influence on who governs the country.
Meanwhile, some of Joe Hockey’s comments on the previous government’s super plans are instructive.
“The complexity and compliance costs associated with this initiative are extreme and essentially undeliverable,” he said.
“This is a demonstration of the government’s commitment to provide certainty for superannuation fund members by making no adverse unexpected changes to superannuation during our first term.
“The government acknowledges that not proceeding with these and other measures will negatively impact on the underlying cash balance by $2.4 billion over the current forward estimates period.”
These words show just how serious the Abbott government is about doing what's right by Australia's growing pool of superannuants.