LEAKED MEMO: The Turnbull government was ready for a fight over super changes

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The federal government was bracing for a wave of complaints and concerns over its larger-than-expected cut to superannuation tax concessions in the budget, according to an internal Australian Taxation Office memo.

The leaked memo, sent in the week before the May 3 budget, tells Tax Office staff that the Treasury wants them to collate and report each day the number and nature of inquiries they receive.

“Treasury has directed the ATO to capture data and report daily on calls received regarding the various measures so they can ascertain community responses,” it says.

The memo applies to the three most contentious measures in the budget: a $1.6 million limit on super retirement funds, a $500,000 lifetime limit on non-concessional contributions and reducing from $30,000 to $25,000 the annual limit on concessional contributions to super.

Because the government is now in caretaker mode, the ATO can no longer furnish it with the data it has been collecting.

A spokesman confirmed the government knew when it put the budget together there would be a backlash over the measures, especially from its core conservative constituency.

“We knew that our base was going to jump up and down about it,” he said. “We knew and we were planning for all of that.”

It was anticipated that many people, confused or unsure about the changes, would ring the Tax Office to see if they were affected. The budget measures affect just 4% of people with superannuation and “we wanted to be able to tell them that 96% wouldn’t be affected,” the spokesman said.

Despite uproar among the conservative base, led by such groups as the economically dry think-tank the Institute of Public Affairs, which believes the $1.6 million cap and and the $500,000 lifetime limit to be retrospective, the government is holding its ground.

One senior source said despite the unhappiness, the Coalition did not anticipate losing many votes given those affected were hardly likely to vote Green or Labor.

Liberal Democrat Senator David Leyonhjelm, who is battling to hold his spot at the July 2 election under the new Senate voting rules, is wooing the disaffected conservatives.

“In a clear echo of [Julia] Gillard’s promise of ‘no carbon tax under a government I lead’, the Coalition promised no new taxes on superannuation under this government. They broke this promise in the budget and betrayed their base in the process,” he said.

On the campaign trail on Thursday, Prime Minister Malcolm Turnbull defended the cuts, which, except for the $500,000 which began on budget night, are not scheduled to begin until July 1, 2017.

Of the $6 billion saved, $3 billion will be used to bolster the super savings of those on very low incomes by rebating that tax paid on super to those earning less than $37,000. This is a version of Labor’s low income tax offset which the government had intended to abolish on July 1.

“Our changes to super do reduce somewhat, the very generous tax concessions to people on very high incomes and with very large super balances. That is true. It enables the super system to be fairer and more flexible, particularly for people on low incomes whose super tax will be covered. They won’t have to pay super tax if they’re on incomes of $37,000,” Mr Turnbull said.

“If they’ve been out of the workforce for a while – and that is mostly women with family – and come back in, they can catch up with their unused concessional contributions. If they’re over 65 and under 75 they can continue contributing in a way that they can’t at the moment. So we’re making the super system fairer and more flexible.

“Yes, people with more than $1.6 million in their super account will pay a little more tax. That is about 1 per cent of the population. But it’s still a very low tax. Super remains a very attractive investment and we make no apologies for making the super system fairer and more sustainable over the years ahead.”

Labor opposes the $1.6 billion cap and the $500,000 non-concessional cap on the basis they are retrospective. If the Coalition wins the election, legislation for the measures would pass the Senate with the support of the Greens.

* This story first appeared in The Australian Financial Review. Read it here or follow the Financial Review on Facebook.

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