E&OE TRANSCRIPT
Interview with Neil Mitchell, 3AW

8 April 2013

Topic: Superannuation

NEIL MITCHELL:                We've re-established contact with the Minister for Financial Service and Superannuation. There is, as I said, a campaign that we're launching in China called G'day China, which I thought was very clever.

Bill Shorten. G'day China.

BILL SHORTEN:                  Ni hao Neil. I think that means hello in China although when I say it to Chinese people they say hello back to me.

NEIL MITCHELL:                Think we got Kevin Rudd on the phone, have we?

BILL SHORTEN:                  No you haven't.

NEIL MITCHELL:                Can I ask - there's some specific questions coming from the audience on your superannuation changes.

BILL SHORTEN:                  Sure.

NEIL MITCHELL:                In the event of a negative return year for superannuation, so they go backwards, will that be deductible against the next positive year that exceeds $100,000?

BILL SHORTEN:                  No.

NEIL MITCHELL:                Why? Why not?

BILL SHORTEN:                  Well, because this is a tax. First of all, what we're doing in superannuation is we're proposing a range of benefits for all people. What interests us in superannuation is the long term, not the short term. Not the current budget but the fact that all Australians should be able to get to a comfortable level - have the opportunity of retirement.

So we've proposed specifically - and superannuation can be confusing but this is specific black and white - we're proposing that anyone over the age of 60, if they have the capacity to, will be able to put in up to an extra $10,000 per annum which will be concessionally taxed into their superannuation.

NEIL MITCHELL:                Yep.

BILL SHORTEN:                  So anyone over 60 from 1 July able to put in at an extra 10k if they have the capacity to - obviously if you don't have $10,000 it's not much good to you - but for a lot of people that's when they start thinking about trying to put a bit more away for their retirement.

We're also proposing to clean up one of the loop holes which tens of thousands of people have fallen into that if they inadvertently pay over the limit to which normally you pay at a concessional rate, they're getting sort of charged at the top rate of taxation. We're clearing that up so you don't get penalised with higher rates of taxation.

NEIL MITCHELL:                Okay.

BILL SHORTEN:  So they're two good things. The other is we're proposing to get - we want to move superannuation beyond politics so we're proposing a charter of superannuation and a group of independent people who assess - whoever the government of the day, Liberal or Labor - whenever they want to put something up on super.

The specific measure you're talking about is that if people have amassed, you know, two million dollars, say, in retirement - which is pretty comfortable - if on that two million dollars in their retirement phase the fund generates a five per cent return, it takes them over 100k in earning.

NEIL MITCHELL:                But this is part of the problem. This is the hook.

BILL SHORTEN:                  Sure.

NEIL MITCHELL:                I mean, your five per cent return on two million is 100,000, but what happens when it gets up to ten and fifteen per cent return? You're bringing in a lot of people who have get less than two million dollars in their account unless this five per cent is based on the figures since the GFC.

BILL SHORTEN:                  No Neil, it's actually based on a ten year return.

NEIL MITCHELL:                Oh, okay.

BILL SHORTEN:                  Now, I would love to hope that every year for the next ten years, superannuation's going to deliver ten per cent plus. I would love that.

NEIL MITCHELL:                Well, in the next ten years I'll guarantee it does at least one. At least a couple of times.

BILL SHORTEN:                  Yes, but I tell you what. In other years it won't deliver anywhere near that.

NEIL MITCHELL:                Yeah, but in the years that it does you're going to bring into this tax a lot of people who are not the fabulously wealthy that you keep going on about.

BILL SHORTEN:                  Well, I've never gone on about the fabulously wealthy.

NEIL MITCHELL:                No, that's true. That's true. [Indistinct]

BILL SHORTEN:                  [Talks over] But - so - okay, well let's use real case studies. If you have two million dollars - and I tell you what, there's only - there's not a lot of them.

NEIL MITCHELL:                Yep.

BILL SHORTEN:                  If you have two million dollars and you get a ten per cent return on your - within the fund, you will make 200k.

NEIL MITCHELL:                Yeah, sure.

BILL SHORTEN:                  Now that is great. Now [indistinct]...

NEIL MITCHELL:                [Interrupts] Yeah, but I'm not talking about - I'm talking about the people your catching at the other end.

BILL SHORTEN:                  No, no, no. I'm just - yeah, yeah. I'll go to one of those examples in a moment but just let's be clear. It's ten per cent return. First of all, that's excellent and you earn $200,000 in the retirement phase. So if you're not retired, this whole conversation doesn't apply to you.

NEIL MITCHELL:                Yep. Sure.

BILL SHORTEN:                  If you've got - and so then you get to 200k, you'll pay 15 per cent not on your first $100,000 of earnings, that's all tax free, but on your second $100,000.

NEIL MITCHELL:                Yep.

BILL SHORTEN:                  Or use another example. If you have one million dollars saved in retirement and, you know, we want people to go well past that, and you get a ten per cent return, you'll pay nothing. So you earn 100k. If you get a 12 per cent return - which happens not that much and if it does happen, first of all, good news you're getting a 12 per cent return - you'll pay nothing on the first 100,000. On the next $20,000...

NEIL MITCHELL:                But the - no, but the –

BILL SHORTEN:                  ... you pay a total of 3k. Let's not scare people with...

NEIL MITCHELL:                Yeah, but the point - no, no, no. But the point - no, we don't want to scare people. But the point is you're going the opposite extreme and say oh, you involve 16,000 people. Nonsense. Isn't it the reality...

BILL SHORTEN:                  No, what I...

NEIL MITCHELL:                The reality is that as the super fund earns more, the amount you got to have in it to be punished comes down. And in fact, there's some expert saying could be as low as half a million dollars in the future.

BILL SHORTEN:                  Oh, okay. Well let's deal with that half a million - some expert saying half a million dollars. Do you know in order to pay anything under our proposition, you would have to get a return of 21 per cent on your superannuation annually?

NEIL MITCHELL:                What a capital gain? Is that counted as income?

BILL SHORTEN:                  No, capital - we've grandfathered capital gains on assets until 2024.

NEIL MITCHELL:                And the be... then what happens?

BILL SHORTEN:                  In 2024, well I'm sure people will have made decisions about how they want to handle, the best for investment in the next 12 years. One thing I've been determined on is nothing should be retrospective. But let's go to the principle of why we're doing it. Mr Costello when he was Treasurer made a decision to get rid of any speed limit on the amount of tax concession you can get.

NEIL MITCHELL:                But yeah...

BILL SHORTEN:                  So people with multiple millions of dollars - have put in multiple millions - good luck to them if they've got the money. Good luck to them. But I'm not sure why my kids, your kids, should be paying tax on theirs so that someone else can get an intimate tax concession. I make a prediction, no one will pull their money, very few people - Robert Gottliebsen, he's not a left-wing chap particularly, he wrote in The Herald Sun on Saturday, said superannuation is still a great vehicle for [indistinct]...

NEIL MITCHELL:                [Interrupts] Okay, well there are others who had other views. But just another specific question, will income from super funds now be included in the income test for the aged pension?

BILL SHORTEN:                  One of the proposals which has been put forward is that for the purposes of eligibility for deeming for the age pension, that superannuation income streams are not exempted. [Indistinct]...

NEIL MITCHELL:                Okay, so that means it's going to affect pensioners.

BILL SHORTEN:                  Well, hang on a second.

NEIL MITCHELL:                Isn't it?

BILL SHORTEN:                  Well, again, let's be straight about this rather than - most pensioners have nothing. It's just not even in their realm of possibility. Okay? So it just isn't right.

NEIL MITCHELL:                Okay. Well, so...

BILL SHORTEN:                  So let's not go around...

NEIL MITCHELL:                Well, I've already had a few contact me saying they're making money.

BILL SHORTEN:                  You and I both know - you and I know there are...

NEIL MITCHELL:                Yeah, go on.

BILL SHORTEN:                  Well, you and I know there are - oh, well let me tell you some of the good news then because it's congratulated.

NEIL MITCHELL:                What?

BILL SHORTEN:                  Anyone currently receiving, the current rules will be grandfathered. So it doesn't affect them.

NEIL MITCHELL:                Okay. So - and you'd reject this argument that people as low as, say, 700 could be caught in it, seven hundred thousand in their fund?

BILL SHORTEN:                  Yeah, they - to, you know, if you've got $700,000 in retirement, you would have to get a return - a regular return of 17, 18 per cent - I don't have my calculator in front me - per annum. I tell you what, most of us in Australia, Neil, would love to have a problem whereby our superannuation fund's regularly delivering 17 or 20 per cent annually on earnings in retirement. Do you know what that is? That's a good problem to have.

NEIL MITCHELL:                And you would - just to get it clear, I note we'd better rush, but I - just to get it clear, this will not be legislated before the election, will it?

BILL SHORTEN:                  It'd be good if the Opposition agreed to common sense. The whole superannuation industry, the leadership of it who are over in China would we now say yeah, this is sensible. Everyone knows deep down you can't have an open-ended tax concession. Everyone knows what the government's doing by allowing older people to put more into their super, you'd tick that box. I think there's an opportunity here for the Opposition, rather than be negative, say okay.

NEIL MITCHELL:                So you will - Alright.

BILL SHORTEN:                  There's a lot of this stuff which we'd do.

NEIL MITCHELL:                Will it be legislated before the election?

BILL SHORTEN:                  I don't know…it'd be easier if the Opposition for once didn't say no to a good idea and said yes.

NEIL MITCHELL:                Okay.

BILL SHORTEN:                  How can you argue against depoliticising super? How do you argue against allowing people over 60, if they've got the capacity, to put more into their super? How do you argue against not penalising people caught up in the red tape of the sector?

NEIL MITCHELL:                Okay. I appreciate your time. We got to run. Thank you very much.

BILL SHORTEN:                  Cheerio. Bye, bye.

NEIL MITCHELL:                Bye, bye. Bill Shorten, Minister for Financial Services, Superannuation.