So much change to so many superannuation areas was contained in the federal budget it was hard to digest and keep up with on the night.
The magnitude of the new rules was reflected in my last editorial where upon first assessment of the budget I erroneously thought some non-concessional super contributions made before 3 May 2016 over and above the $500,000 lifetime cap would have to be refunded.
This of course is not the case and these amounts can be left in an SMSF, but it does illustrate a point regarding the complexity of the changes. It is evidently difficult for people who just about eat, breathe and sleep super to comprehend the new rules from the start, so how hard is it for the general public to grasp the new parameters?
And confusion as to how the $500,000 lifetime non-concessional cap will work goes right to the retrospective nature of the changes. Despite what the government says, the new rules are definitely 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’ve made from this point in time to see if they’ve 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’ll be complaining these measures are retrospective, it should think again.
The reason why 1 July 2007 was chosen as the starting date to determine the amount of non-concessional contributions individuals have made is because Canberra believes it is from this point in time the ATO has accurate records quantifying these types of contributions.
The truth is, however, it doesn’t currently have this information at hand. Anecdotally we have already been told of incidences where the ATO has been asked to accurately provide the total non-concessional contributions an individual has made and has not been able to deliver.
You don’t think the regulator will also be having to take retrospective assessments and actions to ensure proper implementation of the lifetime cap?
Further, the case arguing 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, it doesn’t change the fact people who had put a strategy in place up to this point in time to maximise the assets they will eventually draw a pension from will now be revisiting the plan to see if their resulting asset balance exceeds the transfer balance cap.
The bottom line is it’s bad enough to have to put up with massive changes to superannuation that will no doubt 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.
Just 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 that could easily manifest negatively at the ballot box later this year.