Another Minister has been unable to explain the Government’s policy, announced in the 2016 Budget, to change the tax on Transition to Retirement pension income.
Foreign Minister Julie Bishop was challenged on 3AW to explain the proposed changes to Transition to Retirement pensions:
Neil Mitchell: “Are you aware of the transition to retirement scheme?”
Julie Bishop: “I’m certainly aware that we have one, yes.”
Neil Mitchell: “How does it work?”
Julie Bishop: “Well, Neil, this is obviously a ‘gotcha’ moment. It’s not my portfolio.”
Neil Mitchell: “This is the point. Neither you or Josh Frydenberg understand Transition To Retirement and this is where you’re hitting average people, not the fat cats, the average people.”
Julie Bishop: “I don’t accept that’s the case.”
Ms Bishop kept referring back to the better-know changes announced in the Budget, including the $1.6 million Transfer Balance Cap and $500,000 lifetime Non-Concessional contributions cap.
Currently income in super funds relating to Transition to Retirement pensions is taxed at 0%. The 2016 Budget proposes that from 1 July 2017 this income will be taxed at 15% – the same as super fund income in accumulation phase.
The change to Transition to Retirement pensions was included in the Budget papers, but was not mentioned in the speech by Treasurer Scott Morrison.
When asked for detail on the Transfer Balance Cap policy Ms Bishop said: “I’m not going to give people financial advice.”
Josh Frydenberg, currently the Minister for Resources, Energy and Northern Australia and formerly the Assistant Treasurer, was also unable to explain the Government’s superannuation policy.
Update: At a press conference the Prime Minister was asked how he could defend the Foreign Minister after criticising Labor MP David Feeney for not knowing about the school kids bonus.
Malcolm Turnbull answered: “I just say to you the reality is about the superannuation changes that we propose is they make superannuation fairer and more flexible. They either benefit or do not affect 96% of Australians. The details of superannuation, it is very complex, it’s very complex now, but I’ll say this to you – it’s not very complex to know whether you own a $2.3 million negatively geared house.”
In the same press conference the PM said that “superannuation is notoriously an area of great complexity” before explaining the change to Transition to Retirement pensions announced in the Budget.
“It is still a very concessional rate of tax and as Julie has said, as I’ve said, as everybody knows, our changes to super mean that 96% of Australians in the super system are either better off or unaffected. So yes it does affect a small percentage and I can understand why people are disappointed by that. But the consequence is that the system is fairer and more fit for purpose,” Mr Turnbull said.
Update #2: The Assistant Treasurer Kelly O’Dwyer has been on radio today trying to clear up the issue of Transition to Retirement pension changes from yesterday. Minister O’Dwyer told RN Breakfast that around 115,000 people currently have TTR pensions, and that they are included in the 4% estimated to be worse-off under the Budget changes.
Update #3: Greens Senator Sarah Hanson-Young has also confused the Greens superannuation policy in an interview, according to the ABC. Senator Hanson-Young apparently said that income in super funds should be taxed at marginal rates, whereas the Greens policy is to apply progressive tax rates to superannuation contributions.