Cabinet secretary Arthur Sinodinos appeared on ABC’s Lateline last night and did a good job defending the Coalition’s superannuation package and debunking claims that its caps are “retrospective”:
EMMA ALBERICI: Several Liberal MPs say their constituents were alarmed and upset about the measures. Presumably you heard similar things during the campaign.
ARTHUR SINODINOS: I had emails from people. Yes, people were upset and I still continue to get them. For me though, the starting point of this exercise – and I was one of the people from before I became Cabinet Secretary who was arguing that we should look at the generosity of super tax concessions. Because if we are going to argue as a government to all sections of the community that they have to do their fair share in terms of budget repair, then we can’t say to one section of the community which may have particular benefit from the generosity of superannuation tax concessions that you’re exempt, you don’t – you don’t – you should in fact be looked after and quarantined from the need for budget repair.
EMMA ALBERICI: Part me for the interruption, but I think part of the concern has been the retrospective nature of the changes you’re proposing.
ARTHUR SINODINOS: I don’t believe they are retrospective in the sense that we’re not asking people to go back and open up their tax returns from previous years and pay more tax than they were levied at the time. The taxes …
EMMA ALBERICI: You’ve put on a $500,000 lifetime cap on after-tax contributions, but it’s dated back to 2007.
ARTHUR SINODINOS: It’s back-dated to 2007 when records first became available, but if you have already exceeded that cap, you don’t have to then reduce your contributions back to $500,000, or if you’re below the cap, you can go up to the $500,000. So it’s not retrospective …
EMMA ALBERICI: You don’t get penalised back to 2007?
ARTHUR SINODINOS: So it’s not a case of something where it’s back-dated in the sense that I think you are now seeking to suggest. It’s no more retrospective than Labor saying they’ll tax earnings in the retirement phase above $75,000. These taxes are prospective, they’re not retrospective.
Sinodinos made two very pertinent points.
First, restoring the Budget back to health will required shared sacrifice. The wealthiest segments of the population, who also derive the biggest benefits from superannuation concessions, cannot be quarantined from bearing any pain. They too must play a role in Budget repair.
Second, there is no way that the Coalition’s superannuation caps could be considered “retrospective” since they only apply to future earnings. ABC Fact Check came to a similar conclusion when it conducted its investigation in May:
On a broad reading, bringing in a $1.6 million cap on money transferred into a retirement phase account does retrospectively change the status of transfers previously made by those already in retirement: they will now count towards a cap, whereas they did not do so before.
But on this reading, almost every change to taxation law could be called retrospective.
On a narrower reading, the change is only prospective, given it targets only future earnings in retirement phase accounts. Prior earnings are not taxed.
Despite Labor’s protestations, its $75,000 cap on tax free income is similar, and would also be retrospective on a broad definition.
Only on the broadest possible meaning could the lifetime cap on non-concessional contributions be described as retrospective.
Those who have already exceeded the cap will not have to transfer any money out: they are, in fact, advantaged over those who have not yet reached the cap.
Ultimately, using the “retrospective” label is a convenient way for those affected to criticise the changes when the underlying objection is based on the increased tax they will have to pay…
It is the case that the lifetime cap is calculated from July 1, 2007. But those who have already exceeded it through past contributions will not suffer any direct adverse consequences, irrespective of the size of the excess.
They simply will not be able to make any additional contributions in the future.
In fact, these people are in a better position than those who have not yet exceeded the $500,000 cap or do not yet have a super account. The latter group will never be able to exceed the cap.
This measure could only be retrospective if the chosen definition is so broad that it encompasses every policy change that applies to existing superannuation accounts.
Potentially, some super account holders who assumed the law would never change may have their arrangements disrupted. But this alone does not make a change retrospective.
Other senior Coalition members could learn from Sinodinos, who has done a good job explaining the superannuation package and debunking the myths surrounding it.
