CHANGES to superannuation unveiled by Treasurer Wayne Swan on Friday are likely to affect fewer than 20,000 rich retirees sitting on nest eggs of more than $2 million.
Mr Swan and Superannuation Minister Bill Shorten moved to dispel fears the Federal Government was preparing a raid on Australians' superannuation savings by revealing a raft of reforms on Friday - six weeks ahead of the May budget.
The reforms, which were broadly welcomed by the superannuation industry, are forecast to save about $900 million over the next four years.
Only the most wealthy will be affected by the main proposal to place a 15% tax on superannuation pensions and annuities earning above $100,000.
These retirement phase earnings are currently tax-free.
The existing 15% tax on super during the accumulation phase would remain, Mr Swan said.
Mr Swan said using a "conservative estimate" of a 5% return, only individuals with more than $2 million in their superannuation pensions and annuities would be up to pay the tax.
This would apply to around 16,000 people in 2014-15 - or 0.4% of the 4.1 million projected retirees in that year - and would save around $350 million over the next four years, he said.
Grandfather arrangements spanning a decade would also be installed, so these changes would not apply to long-standing superannuation assets until July 2024.
The 15% tax will also apply to the super savings of politicians, often criticised for their generous super perks, earning more than $100,000.
Applying the tax to these defined benefit funds will achieve a saving of $6 million over the next four years.
Mr Swan said under the current system Australia's poorest pensioners were receiving fewer tax concessions than those sitting on multi-million-dollar nest eggs.
A tax concession for $100,000 in super earnings amounted to $26,447 a year, more than $5000 above the full age pension.
Mr Swan denied announcing the changes, which were ticked off by Cabinet during a phone hook-up on Thursday night, had been rushed to end weeks of damaging speculation.
But said the government had not been spooked by the mounting criticism, claiming he and other ministers had been consulting widely with the industry before announcing the reforms.
Up until Friday Mr Swan had repeatedly told the media he would not reveal any changes to super until budget day, May 14.
On Friday he promised there would be no additional announcements in the budget.
Much of the panic was caused by senior Labor figures Joel Fitzgibbon and Simon Crean, who had been cautioning the government against retrospectively taxing super savings.
Mr Crean welcomed the news the new tax would only be applied on future earnings.
But there is a chance the changes might never be introduced.Mr Swan said Labor planned to take the proposals to the next election, conceding there was insufficient time to get the changes through the Parliament.
Opposition Leader Tony Abbott told reporters in Melbourne the Coalition did not support the reforms and would not implement them in government.
The government also announced the creation of a Council of Superannuation Custodians to assess federal financial policy against a charter to ensure retirement funds are not put at risk.
This was being done to "de-politicise" superannuation in the future, Mr Shorten said.
WHAT THEY SAID
"I think it's pretty fair to say that the reforms we're announcing today are very much within the spirit of the Keating reforms going back about 20 years."- Treasurer Wayne Swan
"All the scare stuff you heard - it's wrong."- Superannuation Minister Bill Shorten
"It appears that what we've seen from the government today is yet another breach of faith with the Australian people, yet another hit on the Australian people because what the Prime Minister said in Parliament earlier this year is that the government would never ever tax the superannuation payments of the over-60s. These changes do, in fact, tax the superannuation payments of the over-60s."- Opposition Leader Tony Abbott
"We think the government's package on balance is a favourable package. We now have some certainty from the Government about their proposals to change superannuation." - Financial Services Council CEO John Brogden
"The move to cap the level of income that is tax free to $100,000 a year will not affect most retirees and has a measure of equity in that it means an individual's tax concessions on super will only be slightly higher than the cost to taxpayers of an age pension."- Ian Yates, chief executive of senior advocate COTA Australia
"The government has disconcerted the whole country with their on and off again super reforms. And now they are still failing to say how Australia's revenue hole will be fixed."- Greens Leader Christine Milne
"Whilst we obviously welcome these improvements, the reality is the changes announced today by the federal Government amount to a mere tinkering at the edges of a system that is grossly skewed in favour of people on the highest incomes."- Australian Council of Social Service CEO Dr Cassandra Goldie
"A reform that affects just the top 0.4% of high income earners is hardly a reform at all. In fact, today's announcement will do nothing to stop the cost of tax concessions doubling in the next five years and does not address the bizarre nature of the scheme that delivers more to the top 10 per cent than it does to the bottom 60%."- The Australia Institute executive director Dr Richard Denniss
From July 1, 2014, superannuation accounts earnings more than $100,000 will be taxed at 15%.
The $100,000 threshold will be indexed to the Consumer Price Index and will increase in $10,000 increments.
SAVING: $350 million over four-year budget cycle Introduction of a higher concessional contributions cap of $35,000 (from $25,000) for people aged over 50 from July 1, 2014.
Kicks in for people aged over 60 from July 1 this year. Instead of increasing it to $50,000 for some people, the government proposes to lift the cap to $35,000 across the board.
The general concessional cap will reach $35,000 by 2018.
SAVING: $365 million over the four-year budget cycle
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