Former Treasurer Joe Hockey’s frank admission that tax concessions on superannuation and negative gearing need to be reviewed should be the catalyst for an informed policy discussion on the issues, according to the former Shadow Minister for Superannuation and Financial Services, Bernie Ripoll.

In a valedictory speech to Parliament on October 21, Hockey said that “tax concessions on superannuation should be carefully pared back” and that “negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property”.

Ripoll, who has stepped down from the shadow ministry and will not contest his seat of Oxley at the next federal election, says that for the first time in 21 years in politics, Hockey “just came out and told the truth”.

“He believes we’re right: There ought to be a winding back of very generous tax concessions on superannuation,” Ripoll says.

Ripoll says it is not unusual for politicians to put political objectives ahead of their own beliefs. “Unfortunately that happens all the time in this place,” he says.

“But for him to even say it [on October21] is just such a misjudgment on his behalf, to think that no one would notice or say, wait a minute, you’ve been here for 21 years so you’ve lied to us for 21 years and now you’ve just told us the truth – including on negative gearing.

“For the first time a former Treasurer of the country, who is an influencer, who is a decision maker in these areas, says, oh, but the way, I’ve changed my mind after all these years – I do agree with Labor that we ought to do something about negative gearing.”

Let’s have a conversation

Ripoll says that now the issues have been put on the table, “let’s have a conversation about it”.

“We’re not saying we have the answers on it all, but we do believe that we need to do something in that area, because it doesn’t work,” he says.

“Anyone you talk to can tell you that. And everyone says it’s politically too difficult. That may be the case, but there are plenty of people talking about it. I’m prepared to talk about it, and others are. And I was before the last election, by the way.”

Ripoll says that making no changes to current tax arrangements on negative gearing cannot be justified by saying it is too difficult, or because too many people will be affected.

“Just submitting to the path of least resistance, that we can’t possibly touch this because too many people are in negative gearing, is just a false idol,” he says.

“The fact is you need to have the debate. You need to get some consensus around what would be a better system around negative gearing – because it involves more than just property, it’s obviously any investment – and then look at what the path might be over the next decade, for example.

“How do we deal with this in 10 years’ time, or in five years’ time? It doesn’t all have to happen overnight. It’s not as though anyone’s going to have this big shock into the system.”

Ripoll, who chaired the Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial products and services, which led to the Future of Financial Advice (FoFA) legislation, also says Labor opposes proposed measures to increase the number of independent trustees on the boards of superannuation funds.

“I think the model works well, the representative model of employees and employers; and it is a meritorious selection process, and it is covered off and checked by APRA,” Ripoll says.

“So there are rules in place and it’s not as if they are running their own show and doing whatever they like – that’s the impression some would have you believe.”

Evidence and sound policy

Ripoll says any proposed changes need to be based on evidence and sound policy, not on ideology.

“If the argument of the government is that change is needed – or it’s anyone’s argument that change is needed – in this sector because we are concerned about the outcomes for consumers, with completely neutral eyes you’d look at it and say, ‘Who are the best performing [funds] over a long period of time, and what are they doing well that we should make the others do?’. Not the the other way around, saying, ‘Who is doing the least well? And let’s take their model and apply it to those who are doing really well’.”

Ripoll says Labor concedes that governance of super funds can be improved and there are clear potential benefits for members from mergers of smaller funds.

“But what I’m concerned about is there’s still some ideology that is present in the regulatory environment in Canberra rather than just really genuinely looking at the objective and trying to get the best outcomes an a range of things,” he says.

“I don’t object to change and I don’t object to the concept of independence – it’s fine. But it’s not apples for apples in the sense that you would say the rules that apply to ASX-listed corporations, public companies, should apply to a fund. It’s nonsensical. They are not the same thing. They do different things, they have a different basis, they have different outcomes and they are different in law as to what their objectives are and what their responsibilities are.

“I find it curious that this is, again, a miscalculation from a group of people thinking this is influencing government to go down a particular path.

“We’ll see what the government wants to do, but it’s pretty clear that the government has got a particular objective around this.”

Bernie Ripoll spoke exclusively to Professional Planner. A feature article focusing on Ripoll’s role in formulating the Future of Financial Advice (FoFA) laws and shifting the culture of financial planning will appear in the December-January edition of the magazine.

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