Labor continues superannuation lies

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By Leith van Onselen

It is becoming increasingly evident that achieving meaningful reform to superannuation (let alone anything else) is going to be a difficult task.

On the one hand, you have the Turnbull Government locked in civil war over the superannuation changes, with a break away group of conservative Coalition members – led by former Prime Minister Tony Abbott – strongly opposing the proposed caps to post-tax contributions (among other things) because they would harm the Coalition’s wealthy constituents (and donors).

Accordingly, many important elements of the superannuation package, which were announced in the May Budget and taken to the recent federal election, have been deferred while internal negotiations and compromises take place, with the very real prospect that the reform package will be watered-down.

And then there is Labor’s opposition and outright lies over the proposed $500,000 cap on post-tax contributions, which it still wrongly maintains is retrospective. We got yet another taste of these lies yesterday:

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Shadow assistant treasurer Andrew Leigh was surprised Mr Morrison would not be including the contentious proposal to cap after-tax super contributions at $500,000, which Labor believes is retrospective.

“Today we have got the extraordinary spectacle of Scott Morrison releasing draft legislation on his retrospective superannuation reforms, without actually the retrospective bit,” Dr Leigh told reporters in Canberra.

Labor’s superannuation spokeswoman Katy Gallagher reiterated the opposition supported a $500,000 cap that was prospective not retrospective. She complained the government had failed to engage with Labor on the issue. “I would be reaching out to the other major party to seek agreement,” she told reporters in Canberra.

“Superannuation … doesn’t deserve to become a political plaything.”

Yes Labor, “Superannuation doesn’t deserve to become a political plaything”. Yet that is exactly what you have done with these lies about retrospectivity, which are indeed an “extraordinary spectacle”.

ABC Fact Check has already conducted an extensive examination of your retrospective claim and found that it was false. Why? Because the changes would apply only to future super earnings, not income earned in the past.

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The Grattan Institute’s report, released on Monday, also concluded unequivocally that the proposed superannuation caps are not retrospective:

Retrospectivity is a legal concept that applies if government changes legal liabilities for things that happened in the past. The proposed… [caps do] not change the tax treatment of past super earnings. Rather, the change will only affect the taxes paid on future super earnings…

Lots of changes affect investments made in the past, and no-one suggests they are retrospective. For instance, taxpayers purchasing shares today expect the future earnings will be subject to marginal rates of personal income tax. But if marginal rates of income tax change, they do not expect the old rates to be grandfathered to apply to all future earnings on those shares. Rather, they expect the earnings to be taxed at the prevailing marginal tax rate that applies at the time the income is earned…

Grandfathering the tax-free status of accounts for existing retirees might be politically expedient, but it is neither prudent nor fair. It would mean that the reform would contribute little to the budget for many years. It would also exacerbate the intergenerational transfers of the existing tax breaks – younger generations would continue to fund generous tax benefits for which they will not be eligible…

Too right. If the $500,000 cap on non-concessional contributions was applied to Budget night rather than 2007, as demanded by Labor, then many wealthy people already with significant superannuation savings would contribute another $500,000 and accumulate an even larger superannuation balance. This would be unfair to younger generations on the wrong side of the drawbridge who would lose out having paid higher taxes to fund concessions for older generations that they themselves won’t receive.

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So please Labor, stop lying to score some cheap political points and instead work with the Government to get its superannuation package through parliament unadulterated.

We might only get one chance to achieve meaningful superannuation reform, so don’t waste it.

[email protected]

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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.