The Treasurer seems to be ignoring a 2016 Budget change to Transition to Retirement pensions and at times contradicting the policy.
One of the many changes the 2016 Budget makes to superannuation is to remove the tax concession on income in pension phase relating to Transition to Retirement pensions.
“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),” says the Budget Paper No. 2.
Currently income super funds earn relating to Transition to Retirement pensions is taxed at 0% – under the Exempt Current Pension Income (ECPI) rules. The Budget will remove this from 1 July 2017, seemingly taxing the income at 15%.
However you wouldn’t know this from listening to the Treasurer. The change didn’t rate a mention in the Budget speech, and statements since have seemingly contradicted the Budget.
Asked on Sky News why the Government has now decided to increase taxes on superannuation the Treasurer answered:
I will tell you what we didn’t do tonight. What we didn’t do is we didn’t change the tax status of retirement income accounts. So if someone has a retirement income account they pay no tax on its earnings. What we did was we said there would be a limit about how much you can put into those accounts – $1.6 million.
Asked about the retrospectivity of the changes after his National Press Club address the Treasurer said:
The simple thing is I have not changed the tax treatment of retirement accounts. Those retirement accounts, those retirement accounts in the retirement phase remain tax free. We are not taxing the earnings out of retirement phase accounts. Full stop. What we’ve done is we’ve set a limit on what can go into those retirement accounts. That’s a different position. And it’s one I’m very comfortable with. I’m not uncomfortable with the fact that we put a cap on how much can go into a tax-free earnings investment made possible by the taxpayer. But I have not changed the tax treatment and nor do I propose to change the tax treatment of retirement phase superannuation accounts.
If people using Transition to Retirement pensions are more likely to be Coalition voters, perhaps the Treasurer is not keen to talk about this policy given the imminent election?