Retrospective Budget 2016 super changes to be election issue

Election 2016, retrospective superannuation changes Budget 2016Arguably retrospective superannuation changes in the 2016 Budget look set to be an election issue.

Shadow Treasurer Chris Bowen told the National Press Club that some of the proposed Budget changes are “clearly retrospective”. Though this is denied by members of the Government.

“Scott Morrison denies it. He doesn’t have the courage to call a measure for what it is,” said Mr Bowen.

“But here’s the tip. When a Budget measure introduced in the 2016 Budget mentions that it applies from 2007, it’s retrospective. There’s no getting around it. And it would be better if Scott Morrison simply admitted it.”

“Now you don’t expect the Liberal Government to believe in much, but you expect them to believe in not embracing retrospectivity when it comes to tax laws.”

Mr Bowen said people invested “in good faith” under the laws at the time and retrospective changes undermine confidence in the super system and “scare people away from investing in superannuation in the future”.

He went on to say there is “white hot anger” in the superannuation sector about the lack on consultation on the changes in the 2016 Budget.

Chris Bowen also said the Government doesn’t believe in superannuation and doesn’t believe in increase the Super Guarantee rate to 12%. However he refused to set out Labor’s policy on a timeline to a 12% SG rate, saying only there would be “more to say” in the election campaign.

Meanwhile the Foreign Minister Julie Bishop has said, according to the ABC, that the superannuation changes are not retrospective, : “It is not retrospective, it is absolutely not retrospective, it’s about the tax rate on future earnings.”

However the Government is also apparently open to changes to deal with “unintended consequences”.

“We’ll have a consultation period, we’ll discuss it with the public, we’ll have draft legislation, and we’ll get feedback on any unintended consequences, as one would expect.”

Update:


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6 Replies to “Retrospective Budget 2016 super changes to be election issue”

  1. I will now vote Labour. What has happened has been a disaster for me. I sold my house, so I could put the money in super. I still have money to put in super under the 3 year rule that existed $ 540.000. Do not bother with super, it is set on thin ice. Stay with property. These retrospective changes, are bad. I am overseas, now I may have to return after 6 months to fix the mess. This change has cost me a great deal, with money and confidence in super. I look at my friends on the pension.They are doing O.K. No worries trying to manage super etc.

  2. If someone is already on a transition to retirement plan, ie they are over 55 and have transferred their super into a pension fund prior to the budget (currently receiving tax free benefits on investment returns), will that fund continue to benefit from these tax free investments OR will returns start to be taxed at 15% from July 1 2017 ?

    1. There doesn’t appear to be any grandfathering for exiting Transition to Retirement pensions.

      It seems that the policy, based on the Budget papers, is that 15% tax will apply to the income relating to Transition to Retirement pensions (that is, tax on income in the fund, not tax on the pension payments to the member) for all such pensions from 1 July 2017. This is the same tax rate as superannuation in accumulation phase, compared to the current rate for pension phase of 0%. This policy doesn’t apply to non-Transition to Retirement pensions – when a member retires their pension would, presumably, then be taxed at 0%.

      Note that this policy is proposed in the Budget but not yet legislated.

      The Budget papers say:

      The Government will improve integrity in the superannuation system by removing the tax exemption on earnings of assets supporting Transition to Retirement Income Streams from 1 July 2017 (income streams of individuals over preservation age but not retired).

      1. “There doesn’t appear to be any grandfathering for exiting Transition to Retirement pensions.”
        So that sounds retrospective to me.

        1. I think the core difference of opinion is if retrospectivity means changing the rules for prior years or applying new rules going forward to arrangements that are already in place.

          However I also think the time spent debating if the changes are retrospective or not could have been better used going into the details of the policies.

  3. I feel betrayed.

    I have already put in post tax $500,000 into Super. Don’t forget, before 65 most Super holders withdrew cash in their Super and then redeposit it back into Super … so virtually some of the withdrawn cash will be counted twice to quickly reach reach the $500,000 limit. My past actions now impact upon what I now can p, or rather, what I can’t do in Super.

    And I am told these rules are not retrospective??? I am being treated as a fool!

    Super is tax attractive but really only for those with an income where they pay the top marginal tax rate. For the rest it represents “Fools Gold”!

    Income earners with a tax rate under the top marginal tax rate can save a few pennies by contributing into Super. But employer contributions into Super, though seemingly attractive, means that you have been denied a pay rise and denied access to your cash till you retire.

    Not factored into modest Super savings is the fact that those saved pennies will later guarantee that you are not eligible to claim the Aged Pension or you will receive a reduced AP!

    Don’t believe me. Then follow the bouncing ball:

    Aged Pension for a couple plus a few benefits is $35,000. After 1/1/17 assets of $850,000 and above deny you any AP payments. You will draw down 5% of say $800,000 in Super giving you an annual income of $40,000.

    OK $40,000 from Super is more than $35,000 from the AP. But think of the life time of financial denial to be merely $5,000/yr better off.?? And the AP’er only needed to reach pensionable age and never worked his or her entire life and they get $35,000 free! But this is not about attacking AP’ers. I hope to be one one day!

    What if the SRetiree went on a wild spending spree of say $500,000? They would then have $350,000 still in Super … Which pays 5% giving an annual income of $17,5000. Assets of $375,000 allow the full AP to be paid to you giving a combined annual income of $17,500 + $35,000 = $ 52,500.

    So a poor AP’er with only $350,000 now has an annual income of $52,500 compared to the assets rich SFRetiree with $800,000 ( with another $50,000 in material Assests) has an annual income of Just $40,000.

    Consider that the AP is indexed to the CPI and that Super Funds can be wiped out like they were in the GFC.

    To make Super one needs to greatly exceed a Super balance well in excess of $800,000 …. And now they have put a cap on Super Pension Accounts!

    Be smart …. Structure to get hte AP … Which totally defeats the purpose of the Aussie Super scheme! And more on the AP means a bigger national debt?

    Super is ‘Fools Gold’ unless you are on the top marginal tax rate!

    I invite a contrary point of view …..

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