|Summary: The new minister in charge of superannuation, Assistant Treasurer Arthur Sinodinos, has given an undertaking to Eureka Report that there will be no substantial changes to superannuation during the Abbott Government’s first term. The minister will be looking at the previous government’s proposed tax on those earning more than $100,000 in income in pension mode.|
|Key take-out: Sinodinos was clear that he does not want to change the current residential real estate rules for self-managed funds, but he issued a warning for SMSFs to avoid property spruikers.|
|Key beneficiaries: SMSF trustees and superannuation accountholders. Category: Superannuation.|
Arthur Sinodinos was John Howard’s Chief of Staff from 1997 to 2006 – when Howard was at his peak as Prime Minister. Sinodinos entered the Senate at the last election and was given the job of Assistant Treasurer, but more importantly the Superannuation Minister.
We were delighted that he chose Alan Kohler and myself to talk to him in detail about superannuation and other matters.
Rest assured that Eureka will be watching to make sure he honours his superannuation undertakings. Just as importantly, the resulting “Sinodinos tapes” become an important step in any road map for those who have self-managed funds. You can read the full transcript of our interview on Business Spectator by clicking here.
The first question I put to Arthur Sinodinos on the superannuation issue was whether he was going to honour Tony Abbott’s promise to make no substantial adverse changes to superannuation in this first term of government.
Sinodinos gave a long reply, but the first two sentences are the most important and I will quote them to you: “Let me give you a big secret. My job relies on me delivering on that promise.” Hallelujah, Arthur, Hallelujah. That promise becomes very important as you go through rest of the “Sinodinos tapes”
And the Sinodinos undertaking is particularly important when we move to the [Opposition Leader] Bill Shorten’s tax on funds in pension mode. (The former government proposed levying a 15% tax on any super funds in pension phase that earned in excess of $100,000 in income). You will remember that Shorten bought these taxes in at a time when Treasury wanted to take to superannuation with an axe and was using totally fictitious research material to try and convince Cabinet to do it.
It was a very dangerous time, but to their credit the ALP Cabinet woke up that Treasury was trying to hoodwink them and the Cabinet ended up using material in Eureka rather than the fictitious treasury material.
What they came up with had a degree of fairness – but not to all people – and it was extremely complex to implement. Just what the current government does with those taxes will be a very important question for Sinodinos. There is no doubt that he is at least considering abolishing the Shorten tax, but I frankly do not think that will happen.
But what Sinodinos has committed to is that he will really work on making this tax simpler and much easier to administer. Combine that with the promise of no adverse changes and it is good news. What that means is that if you are planning to adjust your fund to the Shorten tax rules, which are due to start next July (if passed by the Parliament), then delay the adjustment and wait to see how Sinodinos organises it.
Another important point which we raised with Sinodinos was that, all too often, worthwhile infrastructure securities are simply offered to the big funds rather than the main players in superannuation, the self-managed funds. We didn’t get a commitment out of Sinodinos, but he is certainly looking at that proposals that use self-managed funds and he has sympathy for the cause. At Eureka we will keep the pressure up. Sinodinos is also going to look at a proposal that will help smaller enterprises cut paperwork and pay their superannuation contributions for their employees direct with their BAS statement. That will allow their employees to nominate their own fund much more easily. Many will find self-managed funds are the way to go.
Right now, the biggest single change taking place in superannuation is the fact that self-managed funds are gearing up and buying residential houses. When I raised this with Arthur Sinodinos I expected him to say he was looking at changing the rules, but that is not what happened at all. And when you think about it, any substantial adverse change would mean that Sinodinos breaches the Abbott “no adverse change” promise. Sinodinos was clear that he doesn’t want to change the residential real estate rules, although he issued a warning for self-managed fund people to avoid spruikers and not get ripped off.
In essence, at least at this stage, he is not planning to change it. What that means is that you don’t need to rush to buy a house on the basis the rules are going to change “tomorrow”. Of course, the property market is rising and that may cause you to move, but no longer do you have to do so on the basis that the superannuation rules will change. I thought Sinodinos might also have been looking at changing the rules for art, but he hasn’t decided to do that. So that is disappointing.
Separately, if he is seeking to make reforms or savings, one of the few doors left open now for Sinodinos would have to be negative gearing.
But the overall good news for Eureka readers is that there certainly won’t be anything worse than the Shorten tax, and we are likely to get a much simpler exercise and hopefully one that will carry a lesser burden.
And we have also opened the lines of communication so that in Eureka Report, if we do see major anomalies in superannuation emerging, we will be able to raise those with him. Of course, there are no guarantees we will succeed, but it is a good position for Eureka readers be in.