The Australian Labor Party’s superannuation and retirement policies are reasonably well-known: the ALP have been in pre-election mode since the Government announced its response to the Henry Tax Review on 2 May 2010, and then confirmed the ALP policies in the 2010 May Federal Budget.
Some of the ALP’s policies have progressed since then including public support for a key Cooper Review recommendation (MySuper), and the rejection of the Cooper Review’s recommendation to ban SMSFs investing in artwork and other collectibles. If re-elected, the ALP have promised to provide a full response to the Cooper Review report by the end of 2010.
More super for everyone
The flagship superannuation and retirement policy promised by the ALP is without doubt the gradual increase in Superannuation Guarantee entitlements from the current 9% to 12% over a seven-year period starting from 1 July 2013 (9.25%) and reaching 12% by 1 July 2019. For more information on the SG increase see article Employer super contributions: SG rate 9.5% for 2017/2018 year.
The key kicker in the SG policy promise is that it will be funded by a resource tax on mining profits. You may recall that the mining industry behaved like spoilt brats in squealing their distaste for the original version of the tax, which then coincided with a change in Prime Ministers.
The new Prime Minister negotiated a more palatable version of the mining tax (now known as the Mineral Resource Rent Tax), with some of the major players in the mining industry. I explain the details of the MRRT in my article Mineral Resource Rent Tax: Let’s get on with it.
No more commissions on new products
Another high-profile policy announcement that has disappeared from the headlines is the ban on new adviser commissions from July 2012. If the ALO Government is re-elected, and the announcements proceed as promised, then arguably, this ban will be one of the most profound changes to the financial advising and funds management industry – ever! The purpose of the ban of course is to improve the quality of advice, remove potential conflicts when making advice and save Australians billions of dollars from previously hidden charges.
In May 2010, I wrote in response to the Government’s announcement:
Let’s look forward and congratulate the Government for having the courage to ban commissions, even though the ban doesn’t start until 2012, and only applies to new investments rather than the mega money being creamed from investment and superannuation accounts in the form of trailing commissions, and entry/contribution fees. Although some existing commission arrangements will cease if the Super System Review’s ‘MySuper’ becomes a reality, it seems that it will take decades for the ban to wash through the entire product distribution system set up by the financial services industry.
Unfortunately, the Liberal Party doesn’t support this policy: they believe commissions have a role in the provision of financial advice.
For more information on this policy see article Financial advice: Government bans new adviser commissions from 2012.
Introduction of MySuper – a low-cost default super account
The ALP have promised to introduce MySuper from 1 July 2013. The key features of a MySuper account include:
- No entry fees
- Exit fees to be limited to cost-recovery.
- Licensed by Australian Prudential Regulation Authority, but no further special licence required. APRA will publish investment returns and costs.
- A single investment option
- Plain English reporting to members
- Rules requiring value for money super accounts or risk losing APRA licence
For more information about MySuper and the Cooper Review see article Cooper Review: Top 10 recommendations from final report.
ALP’s other superannuation and retirement policies
Other ALP superannuation and retirement policies are listed below:
- Refund contributions tax of up to $500 for those earning less than $37,000 a year. For more information see article Super tax refund for lower-income earners is a winner
- Increase age limit for Superannuation Guarantee to 74 from the current 69 years. For more information see article Superannuation Guarantee now fairer to older workers
- Retain over-50s concessional contributions cap for those with less than $500,000 in super. For more information see article Over-50s contributions cap of $50,000 now permanent, for some
- Introduction of tax file numbers as the key identifier for superannuation accounts and fund members from July 2011. This measure will help fund members find lost accounts, and expedite consolidating and switching account.
- Give the ATO a discretionary power when considering excess contributions from the 2010/2011 year. For more information see article Show mercy on contributions caps, for votes’ sake
- Relax the rules for First Home Savers Account (FHSA). Where an individual buys a house before the four year timeframe is up, the money accumulating in the FHSA can be paid into the individual’s mortgage (that is, an approved mortgage) after the four years has passed, rather than redirecting the savings to the individual’s super account. For more information see article Free cash: Renovating the First Home Savers Account
- From 1 July 2011 Australians can claim a 50 per cent tax discount for the first $1,000 of interest they earn, including interest earned on deposits held in banks, building societies and credit unions, and on bonds, debentures and annuity products. For more information see article Super alternative for some: 50% tax discount on savings products
- The Australian Securities and Investments Commission (ASIC) will permit listed entities meeting specific criteria to issue bonds to retail investors using a simplified process. For more information see article SMSFs: Moves to improve corporate bond market