by Alan Thornhill
The Goods and Services Tax is to be broadened to include on-line overseas transactions worth less than $1,000.
The announcement was buried deep in a communiqué that Federal and State leaders issued after the first day of their retreat in Sydney.
It said:” all Leaders agreed to keep Commonwealth and State tax changes on the table including the GST and the Medicare levy.
” As a first step, there was agreement in principle by Leaders to broaden the GST to cover overseas online transactions under $1000.
“This matter will be referred to the upcoming meeting of Treasurers to progress in detail.”
The Prime Minister, State Premiers and Territory Chief Ministers who attended also agreed that changes will be needed to put the necessary reforms into effect.
That was acknowledged in the communiqué.
It said:” the key to providing the services Australians aspire to is a more productive and faster growing economy.
“Improving the way our Federation works will improve Australia’s overall fiscal position and our national productivity.
“Achieving this reform will require both the Commonwealth and the States to make policy changes that would both improve the climate for business, and ensure more efficient delivery of government services while keeping taxes as low as possible.”
The leaders will continue to talk tax as their meeting continues today.
However they will also be discussing better ways of financing Australia’s health and education services.
by Alan Thornhill
The Federal government wants to improve the way Australia’s superannuation funds are run – and it says more independent people are needed to do that.
That is the basis of reforms it is proposing, in new legislation.
The Federal Treasury is seeking public comment on the government’s draft bill by July 23.
The Assistant Treasurer, Josh Frydenberg, said that given the size of the superannuation system, and its importance in funding the retirement of Australians, good governance is absolutely critical.
However, some critics see the government’s move as an attempt to curb the financial power it sees unions accumulating in industry super funds.
Mr Frydenberg said the exposure draft legislation, released today, would require Australian Prudential Regulation Authority (APRA) regulated superannuation funds to have at least one third of their directors independent.
They would also need to have an independent director on their trustee board and an independent chair.
He said this would apply to corporate, industry, public sector, and retail funds.
But he added:”The new governance rules will not apply to self-managed superannuation funds.”
The Industry welcomed the proposed reforms.
The Association of Superannuation Funds of Australia said robust governance would be a positive for super.
by Alan Thornhill
Tests for the Age Pension will be tightened, as the result of a deal between the Federal government and the Greens.
That deal saw the new tests – which the government announced in its May budget – become law when the Senate passed the necessary legislation late last night.
This means that at least 170,000 pensioners with low and modest levels of assets will have their pension increased by around $30 a fortnight.
However the changes will also mean cuts in part pensions for another 235,000 people.
And 90,000 others – with large amounts of assets- will lose their part pensions entirely.
The changes will save the government $2.4 billion.
Labor had opposed them.
The Greens leader Richard Di Natale said that – in striking the deal with the Coalition – he had managed to convince the Government to put superannuation back on the agenda.
But the Prime Minister, Tony Abbott, told parliament – after the deal was struck – that his government is not planning any changes to superannuation.
The government described last night’s vote as a major victory.
Social Services Minister Scott Morrison said it was both a win for pension fairness and for the budget bottom line.
“This is a fairly emphatic endorsement of the Government’s policy, but also of the Government’s budget,” he said.
“The have-a-go budget is gaining real traction in the Senate.
“Some $3.5 billion worth of savings passed the Senate, not just the pension assets test change but also the seniors supplement passed.”
However, Labor’s Jenny Macklin said the Greens had been “completely dubbed” as the Government had made it clear they would not change tax concessions on superannuation.
by Alan Thornhill
There is little point in acknowledging mistakes if we don’t learn from them. (See footnote)
And as we will have to live with the consequences of last week’s budget for some time yet it is still worth looking at that document, in this way.
One small acknowledgement that the Treasurer, Joe Hockey, made just a few days ago captured very little attention, among the thousands of words written about his second budget.
This was his admission that a Liberal predecessor, Peter Costello, had made a mistake that mattered – in the time of the Howard government – that still matters today.
That was to give wealthy Australians some very expensive tax breaks on their super.
It seemed like a good idea at the time.
After all the, mining boom was then close to its peak and the money was flooding in.
And no-one was talking about – let alone considering – the spectre of troublesome budget deficits.
But they arrived, anyway, after the mining boom collapsed.
Readers, with long memories, may recall that we criticised last year’s budget, on the grounds that it was driven by ideology, not economics.
That was bad enough.
But it is even more serious now, as Mr Hockey has, sadly, done it again.
Tony Abbott and Joe Hockey have had great success, telling Australians that they were elected to clear up the debt and deficit disasters, left behind by big spending Labor governments.
As they are now more than half-way through their first term – and the economy hasn’t picked up – we should, perhaps, look again at their message, asking how it relates to the real world.
The government’s political sales pitch is still dominated by three or four word slogans, like “debt and deficit disaster.”
They are wearing thin.
This approach hasn’t been a big help in tackling Australia’s serious economic problems.
Neither Mr Abbott nor Mr Hockey has shown much sign of understanding economics.
That wouldn’t be a big problem if they listened to their professional advisers in the Treasury and Reserve Bank who do.
But there has been little – or no – sign of that, either.
Which is a pity, because the economics aren’t all that hard.
Traditional Keynsian economics can be a great help when a nation is facing serious – and concurrent issues – like the end of a huge mining boom – and the aftermath of a global economic crisis.
They can do much to put a nation like Australia onto a better path.
They propose stimulatory spending, in such times.
And Mr Hockey tried that, in last week’s budget, by offering $5.5 billion worth of tax breaks to small business.
He then urged Australia’s tradies to go out and spend on badly needed upgrades to their capital equipment, to take advantage of those breaks.
But Mr Costello’s tax breaks, for the wealthy, back in the time of the Howard government, suggest that there may well be a problem with that, when the economy finally picks up again.
The Federal government could ease its apparently intractable problems with our still ballooning deficits, by scrapping – or at least curbing – the Costello tax breaks.
But it chose not to do so.
That would have been too hard, politically.
A similar problem might well arise again, when the business cycle – once again – picks up – making last week’s tax cuts for tradies yet another unwanted headache for the nation’s revenue collectors.
Was there a better way?
Well, easing back on the Federal government’s plan to cut $80 million from State spending on hospitals and schools, might have been a better choice.
Pump priming, through direct government spending, can have its problems, too.
The Rudd government’s poorly managed home insulation scheme, which was part of an earlier stimulatory exercise, clearly showed that.
But adjustments to match public spending to changing economic circumstances are usually more manageable, politically, than tax changes with the same objective.
That’s because tax breaks have a habit of very quickly becoming inalienable rights, at least in the minds of those who benefit from them.
People, that is, who will defend those breaks to the death.
That is not a prospect any political party welcomes.
Did the glare of studio lights confuse the Treasurer?
Mr Hockey was embarrassed, on the ABC television program, The Insiders, today, when he tried to deny something he actually had said the previous week.
The Treasurer had said then that mothers who accessed a paid parental scheme proposed by the government as well as a scheme offered their employers would be double dipping and guilty of “fraud.”
But he claimed today that he hadn’t said that.
The record shows something different
It all goes back to an interview Mr Hockey had given earlier, to the Press Gallery veteran, Laurie Oakes.
In today’s interview the host, Barrie Cassidy, tried to jog Mr Hockey’s memory what he had said the previous week, when he spoke to Oakes.
“The reference to double dipping, the suggestion that people were rorting the system.
“You agreed with Laurie Oakes that it was fraudulent?” Cassidy said.
As Cassidy persisted, Mr Hockey sank further into apparent confusion.
“I said, well it is da-da-da-da-da,” he said.
“But anyway, I’m not going to get caught down that path Barrie.
“The bottom line is we want to be able to deliver mums all the support we can, particularly during their career and what we have said is we hear what people say, we wanted to go into paid parental leave,” Mr Hockey added.
The Prime Minister. Tony Abbott, has said that Mr Hockey will still be
Treasurer, at the next election.
But he has also asked the Social Services Minister, Scott Morrison, to take the lead in selling this year’s Federal budget.
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by Alan Thornhill
So Joe won’t be sacked.
The Prime Minister is adamant about that.
Tony Abbott declared, in a radio interview last week, that Joe Hockey will still be Treasurer, up to the time of the next election.
What Mr Abbott did not say, though, is that Mr Hockey will be relieved of a key duty.
The Social Services Minister, Scott Morrison, is to be top salesman, for Tuesday night’s budget.
This decision, by a Prime Minister who once, famously, declared that “no one – “however smart, however well-educated, however experienced … is the suppository of all wisdom” is a clear slap down for the Treasurer.
After all, Mr Hockey has still not convinced Australians, at large, that his first budget, last year, was what Australia needed.
So why let him loose, on the public, again?
But the show must go on.
And Mr Morrison, is to be the star.
Still, all this is very strange.
Let’s lift the curtains a little, to see what is happening.
Mr Hockey’s first budget, last year, was based on a false, but powerful analogy.
That is a comparison between family finances and the national budget.
His message was, apparently, simple.
Paraphrased, it goes something like this.
“We all know if we spend too much, we will get into trouble.
“Labor spent too much and now we have to clean up the mess.
“So we have to cut back on our spending.
“Austerity is necessary.”
Many find that message is hard to accept, from a comfortably proportioned man, who likes his cigars.
But is it well based?
If it was, Australia would certainly have lost the high international credit rating, that it won under Labor.
But it hasn’t.
In fact in a world flushed with money, that isn’t all that sure about where it should go, Australia is still has its high spot among the world’s safest places to invest.
Could Keynes have been right, after all?
John Maynard Keynes, the greatest economist of them all, declared during the Great Depression of the 1930s, that governments could – and should – spend a little more to get economies moving, when thing are slow.
As they are again now, though not as slow as they were back then.
The Reserve Bank confirmed that, last week, in its latest statement on monetary policy.
It declared then that Australia’s economic growth is not only below trend, but likely to stay that way for longer than even it had expected, as recently as February.
The bank’s recognition of this grim situation was – undoubtedly – behind its decisions to cut official interest rates, to a new low of just 2 per cent.
In making these decisions – in February and May – the bank defied the risk that its cuts might simply stoke the Sydney home price boom.
That has seen home prices in the Harbour City soar by an average 14.5 per cent over the past year and leap by as much as 42 per cent in some suburbs.
But the bank knows – as well as anyone – that rate cuts – alone – won’t restore economic growth.
With both investment – and consumer spending – still low – a little pump priming will be necessary to restore both economic growth – and government finances – to robust health.
That should start with Tuesday night’s budget.
But Joe Hockey, the man – and his austere message – are now so closely associated, that they can’t be separated in the public mind.
That’s why Scott Morrison got the role.
Our Scott is, undoubtedly, a tough man.
One who gets things done.
The man who “stopped the boats.”
But none of that will matter, if Tony doesn’t realise that his pre-budget dance is, essentially, a two-step.
If he doesn’t also ease back on the austerity – and allow a little pump priming ahead, Australians will see grim times, of low growth and rising unemployment, extending well into their futures.
That is not an ideal picture, for a government facing an election in less than 18 months.
The remedies, required now, go well beyond a switching the leading man, in its Budget sales play.
by Alan Thornhill
Labor would curb tax breaks on superannuation for wealthy Australians.
In a joint statement today, the Opposition Leader, Bill Shorten and Shadow Treasurer, Chris Bowen, said that if elected, Labor will make two changes to Australia’s retirement savings system to ensure it is fair and sustainable into the future.
• Ensure earnings of more than $75,000 during the retirement phase are taxed at a concessional rate of 15 per cent instead of being tax free; and
• Lower the threshold for the 15 per cent High Income Superannuation Charge from $300,000 to $250,000 to better align tax concessions.
In a joint statement, they said these changes would “improve the fairness and sustainability of our superannuation system.
The two leaders said that, in this way, Labor would saving $14.3 billion over 10 years.
“These changes are responsible, they are fair and they are final,” the two leaders said.
They said a fair and sustainable superannuation system would protect living standards in retirement and take pressure off the age pension.
“The recent Financial System Inquiry found that 10 per cent of Australians currently receive 38 per cent of all superannuation tax concessions,” they added.
“In particular, the tax-free status of all superannuation earnings, introduced by the Howard Government in 2006, disproportionately benefits high income earners and is unsustainable,” they added.
“Labor will bring fairness back into the system by ensuring earnings over $75,000 are taxed at a concessional rate of 15 per cent in the retirement phase, instead of being tax free,” they declared.
“This measure will affect approximately 60,000 account holders with superannuation balances in excess of $1.5 million and save around $9.2 billion over 10 years,” they said.
It would not affect pensioners or part pensioners.
“Labor will also remove the 10 per cent tax offset for defined benefit income above $75,000.”
That would affect an estimated about 9,500 account holders.
“In addition, Labor will lower the threshold on the High Income Superannuation Charge from $300,000 to $250,000 a year,” they said.
“This measure will better align tax concessions received by those on very high incomes with those on average incomes and will save an estimated $5.1 billion over 10 years,” they added.
“Instead of a 30 per cent tax concession, those earning more than $250,000 a year will receive a 15 per cent tax concession on contributions,” the two leaders said.
“We believe these changes are all that are needed to ensure sustainability at the very top end of our superannuation system,” they added.
“If we are elected these are the final and the only changes Labor will make to the tax treatment of superannuation,” they declared.
The Treasurer, Joe Hockey, was asked later for his response to Labor’s plan.
A reporter asked Mr Hockey: ” what’s your reaction to Labor’s proposed changes to superannuation and specifically, would you support a 15 per cent tax on superannuation earnings above $75,000?”
Mr Hockey replied: “Well, Labor’s default position is always to increase taxes.
“The first major policy announcement from Bill Shorten is about increasing taxes.
“We’re always sceptical of announcements from Labor.
“But I’ll have a look at the details.
” Frankly, last time they tried this they made a mess of it,” Mr Hockey said.
by Alan Thornhill
The Federal government says it is working to put the scandals that have arisen over poor performances by financial advisers firmly in the past.
In a statement today, the Assistant Treasurer, Josh Frydenberg, said the financial services sector had never been under closer scrutiny than it is now.
“We are working on raising professional standards for financial advisers in response to the bipartisan Parliamentary Joint Committee inquiry,” Mr Frydenberg said.
He said that over the last 12 months alone “we have had five inquiries into the sector.”
These had included the Financial System inquiry and the Senate inquiry into the performance of ASIC, and the Scrutiny of Financial Advice inquiry by the Senate Economic Committee.
Mr Frydenberg said ASIC has been conducting its specialist Wealth Management Project since October last year, focusing investigations on the conduct of the ‘Big 4’ banks, plus Macquarie and AMP.
The industry watchdog, the Australian Securities and Investments Commission, ASIC, has itself been criticised for not either acting soon enough, or cracking down hard enough, on abuses in this area.
Mr Frydenberg also said: “We are working on raising professional standards for financial advisers in response to the bipartisan Parliamentary Joint Committee inquiry.
“A public Register of all financial advisers was launched on 31 March.
“Substantial changes to the regulatory regime for financial advisers (known as FOFA) are due to come into full force on 1 July,” he added.
Mr Frydenberg also said: “The Coalition has always supported the core elements of FOFA.
These had included “Imposing a statutory best interests duty on financial advisers, banning conflicted remuneration, and enhancing disclosure,” he added.
Mr Frydenberg said major institutions had already announced that they are taking action to improve their adviser standards.
The Commonwealth Bank, for example, had decided that:-
* All financial planners recruited from July 2014 must hold a university degree in commerce, finance or business. and
* All existing financial planners will be required to hold either an Advanced Diploma in Financial Planning or a relevant university degree by 2017.
by Alan Thornhill
Bill Shorten has now sketched the policies he will take to the next Federal election.
Addressing Labor’s National Policy Forum in Sydney today, Mr Shorten set out several goals, saying:-
“We’ve put forward a costed and tested plan to close tax loopholes and crack down on profit-shifting to make sure that multinational companies pay their fair share.”
He said this would ensure:”…a reasonable, equitable revenue measure, raising more than $7 billion over the next decade.
“We’ve called for a national crisis summit on family violence, and promised to convene one within our first 100 days, as part of our determination to ensure every Australian woman is safe in her home, not at the mercy of a postcode lottery of uncertain support,” Mr Shorten added.
And he said:” we’ve offered a constructive proposal for building the next generation of submarines here in Australia – an investment in our national security and our high-skill manufacturing sector.”
The Labor leader said, too, that:” we’ve offered a way forward for our renewable energy sector –providing certainty for investment and jobs in an industry where we should be using our natural and competitive advantages.
“We’ve worked co-operatively on national security, striking the right balance between the liberty of the individual and the safety of our people.
“We’ve urged faster progress on Constitutional Recognition for the first Australians, including a national gathering of Indigenous leaders to build consensus for change.
“And we have committed to a new community-centred focus on reducing Aboriginal incarceration, including a new justice target in Closing the Gap.”
Mr Shorten said his party had now reached the end of the consultation phase, on its policies.
But it would be calling on its members to think deeply, in the months ahead, on the development of its policies.
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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