Former Howard Government deputy Prime Minister, Mark Vaile, has gone on a senseless rant against the Turnbull Government’s superannuation reforms, decrying their so-called “retrospectivity”. From The AFR:
Anger among the Coalition’s support base over proposed retrospective changes to superannuation is boiling over with senior businessman Malcolm Broomhead and former deputy prime minister Mark Vaile adding their criticism to measures…
Mr Vaile, a former Nationals leader and deputy prime minister to John Howard, and now chairman of Whitehaven Coal Limited and a director of the Hostplus SuperFund, said retrospectivity would never have been contemplated during his time in the Howard government.
“Philosophically, I don’t agree with retrospectivity. The years that we were in government if there was anything that had a sniff of retrospectivity about it we didn’t do it,” he said.
“The government obviously have got good reasons for doing this, it is obviously a revenue focus … but what is happening is that year in and year out there is always changes to superannuation.
First of all, the Government’s changes are not restrospective. They would apply to future earnings only, not earnings from the past.
Second, I love the way that Mr Vaile whinges about so-called “retrospectivity” now, but was happy for the Howard Government to apply generous tax breaks to superannuation balances accrued in earlier periods, which by his definition were also “retrospective”.
That’s right, during the Howard Government’s reign, it applied the following generous tax breaks to superannuation, which made the whole system inequitable and unsustainable, and is the key reason for the current reform efforts to wind back the largesse:
- in 2005 Treasurer Peter Costello eliminated the 15% contributions surcharge on high income earners, thus ensuring high income earners received an even greater share of superannuation tax concessions.
- in 2005 Costello also introduced generous ‘transition-to-retirement’ rules, which effectively allows those aged over 50 to lower their income tax – affectionately described in the industry as the super saver’s version of “having your cake and eating it”.
- in 2006, Costello reduced the tax rate on superannuation earnings for those aged over 60 from 15% to zero – a move dubbed by Saul Eslake as “one of the worst taxation policy decisions of the past 20 years”. This followed Costello’s decision in 2001 to introduce the “Senior Australians Tax Offset” (now called the “Seniors & Pensioners Tax Offset” or SAPTO), which allows a couple who has reached Aged Pension age to earn a ‘rebate income’ of up to $28,974 each ($57,948 combined) for the 2015-16 year without paying income tax.
Under the above reforms, those already with accumulated superannuation balances were allowed to enjoy the new (lower) tax regime. Why wasn’t Mr Vaile crying out about “retrospectivity” back then? Or is it that his “retrospective” argument only applies when tax rates are increased?
As argued by the ABC’s Michael Janda a few days back:
Prospectively bringing in a new tax, raising existing levies, or putting a cap on the amount of a tax benefit that can be claimed, is not retrospective.
If it was otherwise there’d never be any changes to tax policy – increases or cuts. After all, we’d all have based our investment, career, business and other life decisions on the previous policy.
The stone cold truth is that the Howard Government’s superannuation reforms were very expensive and likely to grow every year, representing an ever-bigger strain on the Budget. Those reforms were never sustainable and were always ‘too good to last’.
So, Mark Vaile, spare us the ‘shocked disbelief’ that the current government and opposition are seeking to claw these reforms back. It is your government that created the Budget black hole in the first place.
