THE close election result could spell the death knell for the Coalition's proposals to reform the superannuation system, even if it is returned to government.
The Liberal-National Coalition's proposals from the May 3 budget night were aimed at slowing the growth in superannuation tax breaks going to the better-off.
Many of the people worst hit by the proposals are voters in Liberal Party heartland and it now seems likely the reforms will be challenged by a resurgent right wing of the party.
Tasmanian Liberal senator Eric Abetz said on election night he would advocate for the Coalition to reconsider aspects of its super policies.
"The issue of superannuation is very dear to the core base of the Liberal Party," Senator Abetz said.
However, an analysis of the election results shows no evidence of a ballot-box backlash in core Liberal Party electorates.
The centrepiece Coalition superannuation policy is limiting tax-free super on balances in retirement to the first $1.6 million.
From July 1 next year, a retiree will have to put the money that is in excess of $1.6 million into an accumulation super account where earnings are taxed at 15 per cent, the same rate paid by everyone else.
Labor supports the aim of the Coalition' policy though it would take a different route.
Under Labor, the annual super earnings in retirement above $75,000 would be taxed at 15 per cent.
Assuming a long-term earnings rate of 5 per cent, Labor's effective tax-free cap on super in retirement would be $1.5 million compared with the Coalition's $1.6 million.
Going into the election, both sides agreed to lower the annual income threshold to $250,000 from the current $300,000, above which the superannuation contributions tax is 30 per cent instead of the 15 per cent that applies to everyone else.
It is the Coalition's proposal for a lifetime cap of $500,000 on non-concessional contributions to super that has generated the most criticism.
These are the contributions that are made to super on money on which taxes have already been paid.
At the moment, up to $180,000 a year of contributions can be made.
Under the Coalition's proposal the lifetime cap of $500,000 would be effective from budget night on May 3.
Anyone who had made non-concessional contributions totalling $500,000 between July 1, 2007 and budget night would be deemed to have used their lifetime cap.
If they had already made non-concessional contributions in excess of $500,000 as of budget night they would be allowed to retain it in super.
The measure unsettles the plans of those looking to take advantage of non-concessional contributions, financial planners say.
"We have already had clients impacted by that announcement," says Chris Morcom, director and private client adviser at Hewison Private Wealth.
"We have strategies in place and if the change was to go through those strategies would no longer apply."
Duncan Fairweather, the executive director of the SMSF Owners' Alliance, says the lifetime cap "disrupts and frustrates plans people have for future savings".
The government was also planning to reduce the annual caps on concessional contributions, which are before-tax contributions including the Super Guarantee paid by employers and any salary sacrifice.
The new limit was to be $25,000 for everyone from July 1, 2017. Currently it is $30,000 for under-50s and $35,000 for over-50s and Labor intends to leave the caps unchanged.
The Coalition would also introduce "catch-up" contributions; where those with super balances of under $500,000 will be able to accumulate, or rollover, the annual cap for up to five years.
The policy is meant to help those with broken work patterns, especially women returning to full-time work after raising children, to better match contributions with their cash flow.
Brendan Coates, the Australian Perspectives Fellow at the Grattan Institute, doubts the catch-up proposal would really help those with irregular work patterns.
He says it is most likely to be used by higher-income taxpayers, most of whom are men.
The Australian Greens could have a big say on super depending on the final composition of the Senate, which is not likely to be known for weeks.
"We support winding back some of the super tax breaks that benefit the very wealthy," says a spokesman for Adam Bandt, the Greens member for Melbourne whose portfolio responsibilities include superannuation.
However, the party's platform is specific only on a couple of superannuation policy matters.
It wants the current 15 per cent contributions tax that applies to all but higher-income earners replaced with one that is more closely aligned to each taxpayer's highest marginal income tax rate minus 15 per cent while retaining the current concessional caps.
The Greens want the top rate of income tax to cut in from $150,000 rather than from $180,000. If that change was made, those on incomes up to $100,000 would be no worse off.
The Greens are "ruling nothing in or out" on other super polices that come before the new parliament, the spokesman says. But the Greens would not support any changes that adversely affect low or middle-income earners, he says.
Whatever the eventual form of the super changes – whether it is the policies of the Coalition or Labor – the majority of people will not be negatively affected.
The Grattan Institute has found that it is mostly higher-income earners who go anywhere near reaching the various contribution caps on super.
Philip La Greca, an executive with DIY super fund administrator, SuperConcepts, says no one should be altering their super savings strategy based on hypothetical changes.
Most of the Coalition's super changes are due to start on July 1, 2017.
"To make July 1, 2017, deadline, a lot of things need to happen in a short period of time," La Greca says.
He says the legislation has to be drafted, the bills introduced into Parliament and, then, there is the really "hard part"; that of getting the changes through the Senate.
Sydney Morning Herald