Friday, September 16, 2016

Never retrospective, the super changes are a win for Turnbull

Limiting the amount anyone could contribute out of their own money into tax-advantaged super on top of employer contributions was never retrospective, but those who thought it was can relax.

The government is imposing a limit by another means.

The plan was to impose a lifetime limit of $500,000 - a figure so large as to be of use to less than 1 per cent of the population. How many of us know someone who can afford to pay money into super over and above their employer contribution and has half a million to spare?

It was said to be retrospective by many on the Prime Minister's own side because high earners might have planned for something else. Which makes it about as retrospective as a tax cut, or a price rise: it applies to future actions, but someone might have planned for something else.

The replacement regime will be just as (non) retrospective, but it'll be harder to paint as retrospective. Anyone who wants to put extra into super from their own funds will be able to do it up to $100,000 per year, down from $180,000 per year. Because only the size of the limit has been changed rather than its form, it'll be harder to claim that the nature of it has changed.

Of course, not many of us have a spare $100,000 to put into super over and above our employer's contribution, so for almost all of us, there will effectively be no limit.

Even if we came into a windfall and wanted to put it into super, the rules will allow us to use three years' worth of the limit at once, as they do now.

To pay for the extra generosity to Australia's richest, the government will delay for one year until 2018 a change that will allow people who have gone a year or so without making contributions to "catch up" by having their employer take out extra to compensate when they are back at work.

It will also shelve a plan that would have made it easier for Australians aged 65 to 74 to make extra contributions even though they are not working, something most wouldn't have been able to take advantage of in any event. It's hard to make extra contributions when you're not working.

Malcolm Turnbull and Scott Morrison are set to achieve what they wanted. All up, the package will save what it would have before: $6 billion over four years, with the key features still in place. There will still be a limit of $1.6 million on what you can put into super to earn income tax-free in retirement, the amount you can put in per year will fall from $30,000 ($35,000 for ages 50 and over) to $25,000, and very high earners on more than $250,000 will pay 30 per cent tax on their contributions instead of 15 per cent.

Labor supported the package apart from the question mark over retrospectivity and will feel duty-bound to support this. Turnbull and Morrison will have taken a small step towards making Australia's super system fairer, the biggest in its 25-year history.

In The Age and Sydney Morning Herald