30 November 2015
by Sally Patten

How can Scott Morrison claim $40,000 a year is enough to retire on?

Treasurer Scott Morrison's speech at last week's Association of Superannuation Funds of Australia's annual conference was nothing short of breathtaking.

For a conservative government to suggest that 70 per cent of average earnings – or less than $40,000 a year – is a sound benchmark for "adequacy" in retirement income is remarkable because virtually all the losers would be the inhabitants of the party's traditional support base.

Notably, in re-casting some of the key parameters around super, Mr Morrison is implying that he agrees with David Murray, the chairman of the financial system inquiry, that the purpose of super is to "provide income in retirement to substitute or supplement the age pension."

There is already much angst in voter land about exactly where the Coalition might draw the line on how much workers should be able to inject into super. After all, until only a couple of months ago, under Tony Abbott's prime ministership, there were going to be no increases in super taxes – ever.

Sure Mr Morrison is not talking about increases in super taxes per se, but dramatically lowering the annual contributions limits will amount to the same thing for thousands of Australians who will be forced to save outside the highly tax-friendly super system.

Change retirement thinking
It is a huge change in the government's thinking.

Limiting the amount of money that savers can hold in super to even $600,000, which is considerably higher than Mr Morrison's "benchmark", would fundamentally change the way many Australians think about how they save for retirement.

In practice, restricting an individual's super balance to even $600,000 would mean injecting much less than that through contributions as investment gains would boost the total amount.

Assuming other wealth taxes were left untouched, there would be large inflows of money into other favourably taxed strategies such as negative gearing and family trusts.

Exactly where any line gets drawn will be vital. But assuming it does need to be drawn somewhere, this is probably our best chance to do it. It would be hard to imagine the Coalition hitting their voter base and agreeing to such drastic changes while in opposition. But if they can do it while they are in government, where else will the voters go?