ROSS GREENWOOD:
Many thanks for your time Kelly.
KELLY O’DWYER:
Great to be with you Ross.
ROSS GREENWOOD:
OK this is a win for the government, you’ve actually gone to the polls with these superannuation measures, you’ve negotiated after the election and you have now got them through with the assistance of the Labor Party, that’s a win for the Government isn’t it?
KELLY O’DWYER:
Well it’s a win for the millions of Australians who we are helping to save for their retirement. The Government has introduced a number of flexibility measures to the superannuation system to make it easier for people, particularly those on lower incomes, to save. We’ve got a measure that is in our Bill that allows people to catch up on their contributions if they’ve spent time out of the workforce, which applies from 1 July 2018. These are some of the sorts of measures that you quite rightly point out are going to be scrapped by Labor if they’re elected, just as Labor would scrap some of the other flexibility measures that will help more than 800,000 Australians to level the playing field so that no matter how you’re employed, no matter who employs you, whether you work for a small business, whether you run a small business, you can take full advantage of your concessional contribution. What Labor is proposing to do is to slug superannuants an extra $1.4 billion. That’s their figures, not our figures, they’ve said that that’s what they propose to do. They took a proposal to the last election that said they were going to do everything within the same funding envelope as the Government and they certainly didn’t tell them, the Australian people, that they were going to scrap flexibility measures that would help people to save for their retirement.
ROSS GREENWOOD:
OK one of the things it will do, for example, is the Government has basically lowered the threshold at which a person had to start paying 30 percent when they make contributions to super, that has been reduced. Now the fact of the matter is that the Labor Party want to reduce it even further again so more people who are gaining upper-middle income wages in Australia will end up paying 30 percent on their contributions on their superannuation rather than 15 percent, that’s right isn’t it?
KELLY O’DWYER:
That’s absolutely correct, they also want to make it harder for people to make after tax contributions to superannuation. We are ensuring –
ROSS GREENWOOD:
You made it harder, let’s be honest.
KELLY O’DWYER:
Well we’re saying that you can put in $100,000 every year with a three year bring-forward, so $300,000 in one hit from 1 July –
ROSS GREENWOOD:
Which at the moment is $180,000 in one year and $540,000 right, so you’ve actually limited that.
KELLY O’DWYER:
Well we have because it’s got to be properly targeted, but the Labor Party is saying it should actually be $75,000. We think it’s important for people who actually want to get up to the $1.6 million to be able to do that, and we’ve given them the mechanism to do that. Labor want to make that much more difficult.
ROSS GREENWOOD:
So your message is also to people who have actually got the cash, if they can get the $540,000 in by July, or rather June 30 next year, after tax savings, that they should go hell for leather because that’s their last chance, it’s going to be reduced to $300,000 or $100,000 a year after that.
KELLY O’DWYER:
Well certainly for people who are under the age of 65, that’s correct, you can only use the bring-forward if you’re actually under 65 as you know and thereafter you have to do it year by year. And certainly if people have got the cash, they have the capacity to put in $540,000 under the existing scheme if they haven’t used any of their after tax contributions, they have the capacity to do that before 1 July next year.
ROSS GREENWOOD:
OK. One issue that worries me about all of this is with all of the debate about superannuation, to take away, shall I say, the incentive or even the confidence in the system, I do note that according to APRA figures today, Federal contributions to the superannuation system dropped by 1.5 percent over the year to September, which is basically around $1.5 billion drop. It’s a lot of money. The truth is that if people were confident, they would be putting more money into super. They seem to be putting in less and people are taking out more if they possibly can. Do you believe that illustrates a lack of confidence in the overall system, or even a lack of confidence in Government to have steady decision making in regards to super?
KELLY O’DWYER:
Well I don’t necessarily know that that is what it indicates because there are all sorts of reasons why people put less money into superannuation from year to year. In some cases it can be that there are other expenses – people have taken on a new job, they’ve got a new child, they’re putting some –
ROSS GREENWOOD:
Well you’re talking about the big averages, oh the markets are bad and they’re uncertain about that, uncertain about their job, or they’re worried about the system and maybe they prefer to go and negative gear their properties instead.
KELLY O’DWYER:
Well most of the time when people lose confidence it’s when they’re worried about their job. That’s usually the foremost thing that people are concerned about. I think what we have done as a Government which is very different to other Governments is we have brought forward a reform package to superannuation that looks at the system holistically to make it fairer, more flexible and sustainable over the long term and we have done that as a package. We have re-invested around about $3 billion back into the superannuation system, as I said before, to level the playing field so that everyone in Australia has the same, equal opportunity to make concessional contributions to their superannuation –
ROSS GREENWOOD:
Just remind me, Kelly, as you go through that point, just remind me, what are the net savings to the Government in regarding these superannuation changes over the next four years?
KELLY O’DWYER:
So it’s about $2.9 billion –
ROSS GREENWOOD:
So therefore $2.9 billion has been taken out of the system, so while you argue it’s sustainable, the truth of the matter is you’ve actually grabbed $2.9 billion over the next four years.
KELLY O’DWYER:
We’ve always said that this measure is a budget repair measure, we have always said that. But what I’m saying is we have also, as we have put together this package, we have also made sure that we have made the system even better. So we’ve helped people to be able to save for their retirement by giving them the opportunity to do that. And just to give you an example on this levelling of the playing field, it could be that somebody who works for a small business now, doesn’t get salary sacrifice arrangements. But under our system, they will be able to do that because we will actually provide for that. It could be that somebody actually owns their own small business but they might work part-time in hospitality and because 10 percent of that income is earned as a wage, they are restricted on their concessional cap contribution, which means they can’t take full advantage of it. And we think that is unfair, we don’t think that some Australians should be advantaged against other Australians, we think everyone should be on a level playing field.
ROSS GREENWOOD:
It’s going to be interesting to watch these numbers next little while to see whether confidence does come back in and whether indeed people genuinely understand these changes and also the system at large. Kelly O’Dwyer, the minister for revenue and financial services, giving you that explanation of it. As always, Kelly we appreciate your time on the program.
KELLY O’DWYER:
Thanks Ross.