Editorial: Look back in anger on super spin

06-Jun-2016

By Darin Tyson-Chan

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There is a lot of anger in the community regarding the changes to the superannuation rules announced in this year’s federal budget. Many people’s long-term retirement savings plans were immediately thrown into chaos on the evening of Tuesday 3 May.

Coming to grips with and navigating a path through these amendments are difficult enough, but having the government maintain the changes are not retrospective insults our intelligence and really rubs salt into a gaping wound.

The fact is, despite what the government says, the new rules are indeed retrospective in nature.

The definition of ‘retrospective’, according to oxforddictionaries.com, is “looking back on or dealing with past events”.

Let’s put this in the budget context. The government is asking superannuants to go back to 1 July 2007 to determine the level of non-concessional contributions they have made from this date to calculate if they have already exhausted the $500,000 lifetime cap.

I defy anyone to argue this exercise does not constitute “looking back on or dealing with past events”.

And if the government thinks it’s only the public at large who will complain these measures are retrospective, it should think again.

The reason why 1 July 2007 was chosen as the starting date to determine the non-concessional contributions individuals have made is because Canberra believes it is from this point the Australian Taxation Office (ATO) has accurate records quantifying these types of contribution.

The truth is, however, it no longer has this information. Anecdotally, we have been told of incidences when the ATO has been asked to provide accurate information on total non-concessional contributions an individual has made and has not been able to deliver.

It follows then that the regulator will also have to take retrospective assessments and actions to ensure proper implementation of the lifetime cap (and perhaps curse at having to do it).

But the case that this is unprecedented retrospective legislative change doesn’t end there – the $1.6 million transfer balance cap also has a retrospective element to it.

While this regulation won’t be implemented until 1 July 2017, people with a strategy in place up to that date to maximise the assets they draw a pension from will now have to revisit the plan to see if their resulting asset balance exceeds the transfer balance cap.

The bottom line is although it’s bad enough to have to put up with massive changes to super that further erode people’s confidence in the system, what’s worse is for the government to keep trotting out the line – which cannot be described as anything but ‘spin’ – that the changes are not retrospective.

My advice to our elected officials is to call it what it is and let us all get on with it. From what we can tell, this game of semantics is only fuelling the anger a lot of superannuants are feeling right now, which may easily manifest negatively at the ballot box on 2 July.

Darin Tyson-Chan is publisher of financialobserver.

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