Change for good or change for the sake of change?

Change for good or change for the sake of change?




With the rather significant swing against the Coalition at last weekends’ by-election in the Sydney seat of Wentworth, we turn our attention to next year’s Federal Election, expected to be held around May 2019.

If present trends are an indication of the future, we will see a change of government with the Australian Labor Party (ALP) taking the reins of power in Canberra.

So, what will a change of government mean for our super?

Like so many Australians, I am sick and tired of the constant meddling with super. Hardly a month goes by without someone proposing that we change this aspect or that. It is no wonder that the average super fund member is so disengaged with their super, it just isn’t funny.

As an aside, I noticed this week that Australia has slipped from a very enviable third place to fourth place (behind Netherlands, Denmark and Finland) in the 2018 Melbourne Mercer Global Pension Index. This index measures the adequacy, sustainability, and integrity of the pension systems of 34 countries.

Now, I am not saying we have fundamental problems with our superannuation system., However, the constant meddling has resulted in members of the public becoming disinterested, disengaged, and generally unwilling to embrace the cornerstone of their financial well-being in retirement.

Back in July 2017, we saw the most significant changes to superannuation in the previous 10 years. Some changes were good, and others not so good – depending on your perspective.

If (some say, when) there is a change of government at the next Federal Election, what can we expect to see happen to our super?

Some of the initiatives the ALP has previously expressed opposition to may provide hints to changes that might be made. These include:

  1. Reducing the annual limit (cap) for non-concessional contributions from $100,000 to $75,000 per annum.
  2. Reducing the income threshold, at which the additional 15% tax becomes payable on concessional contributions from $250,000 to $200,000. Interestingly, the ALP originally proposed reducing the threshold from $300,000 to $250,000, but when the Coalition government reduced it to $250,000, the Opposition responded by announcing a reduction to $200,000.
  3. Opposition to the ability of people, with less than $500,000, in super to carry forward the unused portion of their concessional contribution cap.
  4. The ability for people to claim a tax deduction for their personal superannuation contributions.

On the positive side, the ALP recently announced plans to give women a better chance to achieve equality in superannuation by requiring superannuation guarantee contributions (currently 9.5% of salary) to continue to be paid while on government paid maternity leave. This would also be extended to men, who take paid paternity leave following the birth of a child.

Currently, employers are not required to make superannuation guarantee contributions for employees earning less than $450 per month. However, the ALP proposes to remove the minimum income threshold before superannuation guarantee contributions become payable. Unfortunately, I feel this may lead to very small amounts being contributed to super only to be swallowed up in fees and charges by super fund and otherwise being lost to the members.

Of course, the Opposition has also made some other significant tax-related announcements, including the controversial plan to eliminate the cash refunds of excess franking credits and making changes to negative gearing for existing properties. By all accounts, negative gearing will still be available for newly-built residential properties, but not for established properties.

Without a doubt, as the next election approaches, we are going to see much posturing by political parties of all persuasions, as they jockey for control over Australia’s $2.7trillion superannuation nest-egg.

In a perfect world, we could only hope for a sustainable superannuation system that is embraced by all, for the benefit of all and is free of constant political meddling.

Perhaps, I live in a fantasy land for believing that such a world could ever exist!

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