Turnbull stares down own party’s super rent-seekers

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By Leith van Onselen

Finally Prime Minister Malcolm Turnbull has shown a backbone, staring down angry Coalition supporters over so-called “retrospective” changes to superannuation. From The AFR:

Prime Minister Malcolm Turnbull has pushed back at an agitated Coalition support base by declaring that proposed restrictions on superannuation that hit the rich are not retrospective and will not be changed.

Business figures, Liberal donors and the free-market think tank the Institute of Public Affairs are among those fighting the changes on the basis they breach the principle of a retrospective application of tax…

“No, the super changes are set out in the budget… And can I just say, these changes are not retrospective. Very, very clear. It is not retrospective at all.”

Good to see. But it’s a pity that Turnbull did not also display a backbone on property tax reform given that he was a supporter of change in 2005, arguing then that negative gearing and the capital gains tax discount were overly “generous”, were “tax shelters” and “tax avoidance”, and were “skewing national investment away from wealth-creating pursuits, towards housing”. But I digress.

It’s also funny how Coalition supporters frequently complain about the Budget deficit and preach fiscal rectitude, but as soon as a revenue measure is implemented that adversely affects them – even if it unwinds what is clearly a rort – they scream blue bloody murder. It seems that Budget prudence is something that only applies when it affects someone else, most notably the poor.

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The whole faux war against so-called “retrospectivity” is also highly disingenuous. There is nothing “retrospective” about the Coalition’s super reforms since the changes would apply only to future super earnings, not income earned in the past.

It’s no different to when generous changes were made to superannuation by the Howard Government, which significantly lowered taxes on superannuation earnings for retirees. Under those reforms, those already with accumulated superannuation balances were allowed to enjoy the new (lower) tax regime. And yet we heard no complaints about “retrospectivity” then.

It seems that when it comes to Coalition supporters, the “retrospective” argument only applies when tax rates are increased, not when they are decreased. Funny that.

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Not that Labor are any better. Sensing Coalition blood in the water, it has also embarked on a hypocritical campaign against restrospectivity, despite its own proposed super reforms applying a 15% tax on future earnings above $75,000, versus 0% currently. So if the Coalition’s super plan is “retrospective” then so is Labor’s.

What is most disappointing about Labor’s position is that superannuation is one area where we could have had near bipartisan agreement, thus taking the sting out of any vested interest scare campaign. But instead, Labor has taken the low road and hypocritically embraced the false “retrospective” argument, thus fueling rent-seeker opposition and strengthening the chance that the Turnbull Government will eventually water down reform should it be re-elected.

The broader Australian public deserves better than this political Punch and Judy circus.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.