Today in Estimates, Treasury officials have confirmed that Scott Morrison’s superannuation tax policies could include significant retrospective penalties for superannuants.
Treasury officials have left the door open to penalties “for people who transferred more than the $1.6 million or who at that point had more than $1.6 million”.
Further, the Treasury confirmed that these penalties could be like those charged for contributions in excess of the current non-concessional caps, which could be up to the highest marginal tax rate of 49 per cent.
This is a humiliating rebuke of Scott Morrison’s argument that his superannuation policies are “not retrospective”.
The Government’s policies force superannuants to divest their existing superannuation assets into other higher taxing funds or investments, and now Treasury has confirmed that in doing so they may face a significant tax penalty.
This is the very definition of a retrospective change to superannuation.
In contrast, Labor’s policy on earnings in the retirement phase would only apply to future earnings above $75,000 in their superannuation fund, and does not force anyone to move or divest any of their assets from their retirement accounts.
Scott Morrison needs to clarify what penalty the costings in his Budget is based on.
The Treasurer should admit that he lied to Neil Mitchell on 3AW in February when he said about superannuation changes,
“MITCHELL: Would you guarantee no retrospectivity?
TREASURER: Well of course”
Scott Morrison should admit that his superannuation policies will have retrospective impacts on superannuants, despite arguing against such changes for some months
FRIDAY, 6 MAY 2016
ATTACHMENT A: Extract of today’s estimates hearings on economics
SENATOR MCALLISTER: Can I ask about the practical consequences for people whose balances are over $1.6 million. The budget papers indicate that "members already in the retirement phase with balances above $1.6 million will be required to reduce those balances by 1 July 2017. A tax on amounts that are transferred in excess of the $1.6 million cap, including earnings on these excess transferred amounts, will be applied similar to the tax treatment that applies to excess non-concessional contributions." Could you just step us through how that would work? So if someone found themselves in that situation, that they had a balance of more than $1.6 million and they transferred it across, how would the tax...or what rate of tax would they be paying?
WILKINSON: So this is a new measure and the Government will be consulting on the details of this new measure. I can certainly speak to the way excess non-concessional contributions are currently taxed but I think it's worth emphasising that with a new measure like this the intent is that the policy around all of those things, including what the penalty would be for individuals who transferred more than $1.6 million into their accounts would be a matter for consultation through the legislative development process.
MCALLISTER: Sorry, so the penalty -
WILKINSON: If there was to be a penalty, as you're talking about, for people who transferred more than the $1.6 million or who at that point had more than $1.6 million, that's what we would be consulting on through the policy development process, exactly how that would work.
MCALLISTER: I'm not raising the notion of a penalty, I'm looking at what's in the Budget papers, which asserts that tax on amounts that are transferred in excess of the cap will be applied. So that's the Government's position.
WILKINSON: So the way to think about that is that's the penalty that would be applied like in the current policy if you make contributions which are in excess of the current non-concessional caps, you pay a tax. That's the penalty for making contributions above that level.
MCALLISTER: And what is the tax that would be paid on that?
WILKINSON: So the way that operates currently is that if you make non-concessional contributions in excess of the cap you have to withdraw those contributions. There's no penalty for withdrawing those excess contributions, and you have to pay - the ATO will work out what the notional earnings are on that excess contribution that you have put in as non-concessional contributions and you pay tax at your marginal tax rate on the earnings of those excess contributions.
MCALLISTER: Right, so the tax on earnings could be 49 per cent.
WILKINSON: If you take the amount that you contribute which is above the cap, the current arrangements are that you have to withdraw that amount and you have to pay tax on the earnings on that excess amount.
MCALLISTER: At your marginal rate?
WILKINSON: At your marginal tax rate, that's right.
