There. I’ve said it.
There are many reasons to criticise the superannuation changes announced in the budget (more on that next time), but retrospectivity is not one of them. Why? Because they are not retrospective.
Much of the considerable amount of criticism has been around the changes being “retrospective”. However, there is confusion between “retrospectivity” and “grandfathering”.
For something to be retrospective, the Government would have to be taxing something that has happened in the past. For example, in the budget, they propose to limit lifetime non-concessional contributions to $500,000, including any non-concessional contributions made since 2007.
However, and here is the difference, if you are already over $500,000, then that will be OK. You just can’t make further non-concessional contributions without penalty. If it was retrospective, they would be taxing all those previous contributions over $500,000.
Similarly, people with over $1.6 million in pension funds, will have to reduce their balance to below $1.6 million, or face penalties. But, for it to be retrospective, penalties would have to be applied to excesses in the past.
“Grandfathering” is a different matter. Previously there has been a practice of leaving past accrued benefits to be treated under past rules, whenever changes have been brought in. These changes are a clear break with that practice, and they no doubt cause inconvenience to many people.
For those campaigning against the budget, please get your message clear, and distinguish between “grandfathering” and “retrospectivity”.
