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Budget 2016: Super changes hit the rich
There's been an 'important rebalancing' of superannuation tax breaks, concedes Finance Minister Mathias Cormann.
PT2M11S 620 349Those hikes in cigarette taxes ... they're retrospective. Really.
It's not surprising that the superannuation industry is prepared to mangle the English language in order to get special treatment.
Millions of smokers took up the habit years ago on the basis of taxes as they were. Turnbull changed the rules after they decided to play.
The Coalition outlined changes to superannuation in its pre-election budget.
That's the strength of the argument being put by Australia's wealthiest superannuants and the industry that grows rich off them. They've worked hard, saved and put massive amounts of money into superannuation on the basis of the rules as they were.
Of course the changes to the rules for superannuation (and tobacco) aren't retrospective in the ordinary use of the term. No-one's being asked to pay extra tax on previous earnings. They're prospective. They apply from July 2017.
From then, only the first $1.6 million of each retiree's accounts will escape tax. Earnings on the rest will be taxed at 15 per cent. It's a tax change, along the lines of the temporary deficit reduction levy and the budget decision about when the 37 per cent rate cuts in.
Come to think of it, the Howard government's decision to make super payouts tax-free for retirees over 60 would have been "retrospective" in the eyes of the industry. It changed the rules after the game started (in a way about which the industry didn't complain). Of course it didn't really reach back into the past, it only changed the rules from then on.
Nowhere is the prospective nature of the budget changes clearer than in the way the Institute of Public Affairs describes the new $500,000 lifetime cap for extra post-tax contributions (lifetime is defined beginning on July 1, 2007 when accurate records began).
"Before budget night a post-tax contribution made between July 1, 2007, and last Tuesday did not count towards a lifetime cap. After the budget the cap did count towards a lifetime cap. The tax treatment of the contribution has clearly been changed."
It certainly has changed, but *prospectively* from budget night. If it was retrospective, as the Institute says it was, what happened before budget night would have been treated the same as what happened after it. The budget would have reached back into the past.
It's not surprising that the superannuation industry is prepared to mangle the English language in order to get special treatment. It is surprising that Labor Party is prepared to play along. If it adopted its new definition consistently, it would deem any change to any law by any future government retrospective.
Peter Martin is economics editor of The Age.
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