Retrospectivity – because you can’t trust the bastards

In last week’s budget the government has retrospectively changed the rules around superannuation taxation. Now there is a lot of kerfuffle relating to whether those changes are retrospective or not.

Bottom line – they are.

Our political elites are a tad confused because they do this sort of thing all the time. Anyway, I thought I’d share a discussion I had with a Labor Senator on this point (in the context of water markets).

Senator McALLISTER: You made some remarks earlier about structural problems in the water market associated with uncertainty in relation to property rights. What is the source of that uncertainty?

Prof. Davidson : Basically I would have thought that because it is a rollout plan people do not know what the rules will be going forward or if they will change unexpectedly. This is a new market, and all new markets have the disadvantages that we learn as we go, and we change the rules as we go, from our learning. People feel that they may be disadvantaged by those changes. This would lead to less liquidity in the market than might otherwise have been the case, which will lead to price fluctuations, which would lead to disruptions to supply and demand. This is what people are worried about. This is a common characteristic of almost any new market.

Senator McALLISTER: You would acknowledge that there is not uncertainty in access to the property right, though—that that has been dealt with in the legislation in establishing the arrangements under the National Water Initiative?

Prof. Davidson : To the extent that legislation is changed, yes. I would not be as confident perhaps as other people might be. The fact that it is enshrined in legislation does not mean that much, to be quite honest. Legislation can be changed.

Senator McALLISTER: You do not think that conventions and constitutional protections around property rights are adequate? I can see that there is some space for discussion around the operation of systems.

Prof. Davidson : There is a great quote by the American philosopher—comedian, perhaps, some people might say—Mencken, who said that nobody’s property is secure while Congress in in session. Maybe it is a bit harsh, but I am inclined to that view that our property is not secure while the parliament is in session. While people’s livelihoods are on the line, they are going to be cautious, and I would never say to them, ‘Don’t be cautious.’

What I found most interesting was that Senator McAllister genuinely thought that property rights are secure because of “conventions and constitutional protections”. Canberra is Lala land. Her super will, no doubt, be secure and that of her politician friends, judges, and senior public servants. The rest of us? Not so much.

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29 Responses to Retrospectivity – because you can’t trust the bastards

  1. Habib

    The biggest problem is that the bastards are secure. Secure govenment is a lazy, fat, complacent, wasteful and sometime criminal government. They should be on edge their entire tenure.

  2. Leo G

    If retropectivity in changes to superannuation is now respectable, then there’s no longer a reason to exclude retrospective changes to public service defined-value superannuation.
    The time has passed for public service lifetime indexed “unfunded” pensions.

  3. Bruce of Newcastle

    Maybe this has something to do with why Panama has been so popular lately. Just sayin’.

    Recall that the socialist government of Argentina effectively stole their entire superannuation system not very long ago. Of course the people with super balances still in theory have the number sitting in the computer. But when they actually ask for the dosh it’ll be interesting whether they’ll actually receive it.

  4. Beef

    conventions and constitutional protections

    What a classic, nothing like a good convention.

  5. Baldrick

    In last week’s budget the government has retrospectively changed the rules around superannuation taxation.

    This is something I’d expect from Labor, not the Liberal conservative party because …

    Oh, hang on …

  6. Leigh Lowe

    Whilst we’re spinning Perfesser Davidson’s greatest hits, I thought I’d play this one …

    It’s on! Turnbull for PM.

    Posted on 4:36 pm, September 14, 2015 by Sinclair Davidson

    Malcolm Turnbull has resigned from cabinet and will be challenging Tony Abbott for the top job.

    My Canberra sources tell me that Turnbull has the numbers. As such I expect a new Prime Minister tomorrow.

    Good.
    ?Turnbull did not raise taxes.
    ?Turnbull did not abandon 18c.

    http://catallaxyfiles.com/2015/09/14/its-on-turnbull-for-pm/

  7. Phil

    So can someone explain what actually happens if someone has a million in non-concessional contributions? Does it literally have to be extracted from super? Or is it just treated like concessional contributions and taxed at 15% or 30% retrospectively (i.e. up to a $150,000 tax bill which was completely unexpected- and may be impossible to pay if you are illiquid). I could be wrong but it looks like people could be bankrupted by this law?

  8. Phil

    Oh. Apparently not.
    Fact sheet states (incorrectly I’m absolutely certain) that this will raise $550m “over the forward estimates”. I.e. In a best case scenario, a close approximation to zero per year. And for this they utterly screw over their base, their workers and their donors – again. Morons.

  9. Plowboy

    Of course this isn’t the first or last time this has happened and it’s interesting you mention water Sinc.

    In 1980 I bought land with water, the water being in the form of a right to X amount, that right changed to an entitlement, and now it is merely a share, a percentage of and up to the the original X amount.

    This is how it is for all Murray and Darling Irrigators over the last 20 years.

    Irrigators still pay rates on the full amount, . At times I’ve had to buy expensive water on a short market because my share was so small. The few attempts by various groups at legal redress have been futile.

    Once there was ownership, now it’s a share

    Sounds like socialism to me.

  10. Siltstone

    In 2004 Latham forced Howard to cut back the extravagant pension arrangements for future new MHR’s and Senators (existing ones were left to bask in their ill gotten gains). It is still better than what any private sector person can get due to 50% salary sacrifice option (with no upper cap). Shorten could go a long way to winning many of the votes he needs if he “did a Latham” and said MHR’s, Senators, Judges and public servants would not get a single cent more in super than the private sector workers who actually pay for the whole lot. Plus they should face the same preservation age rules as everyone else. The Libs have thrown away any high moral ground attached to being against retrospective measures and would be unable to oppose it on that score. One would be tempted, if in a marginal electorate, to run as an indpendent on this “stop the rorts” issue alone, and watch the majors try to cosy up for preference deals.

  11. dalai lama

    Phil, theoretically you could have made $1 million non-concessional contribution as the “one-off” opportunity straight after the 2007 Costello Budget, which abolished the old Reasonable Benefit Limits and introduced the concessional & non-concessional caps.
    After that, (assuming you were under 65, or over 65 but under 75 and still working), you could have contributed up to $150,000 per year, increasing to $180,000 per year for this FY and the one before. So in total, you could have put in up to another $1,260,000 in those years.
    All of that can stay in – the new rules only mean that if you didn’t have the opportunity to do these annual contributions, and instead have planned to, say, sell a $2 million property and throw the cash in over the next 3 or so years, you’re now screwed.
    Because non-concessional contributions consist of money on which tax has already been paid, cutting off the ability to make them will not net the government any new revenue. However the whole point of this is to to stop people from building their super balances “too much”, because even though the c*ocksuckers will now charge you 15% tax if you have over $1.6 million in a pension account, it’s still a lot less than what they will charge you on the extra money that you won’t be able to contribute to your SMSF and therefore it will have to be invested in your own name & potentially taxable at 49%!
    As many here have said, here’s another long time Liberal voter who cannot wait to see these f*ckers wiped out at the election…

  12. Ez

    More examples
    Tax policy changes, mentioned April 2012:

    The Tax Institute has called on the Government to stop retrospective legislation that puts previously compliant taxpayers and business on the wrong side of the law, after the introduction of four retrospective tax rules in the last year.

    The submission flags the changes to reverse consolidation tax laws which were backdated to 2001, amendments to the Petroleum Resource Rent Tax backdated to 1990, an overhaul of transfer pricing laws with retrospective affect from 2004 and amendments to the general anti-avoidance law in Part IVA, announced to apply from the date of announcement in March 2012, despite the community not knowing the details of those changes.

    Privacy/Credit Reporting changes, 2014:

    It may be too late to start changing repayment habits.

    “The repayment history information isn’t just being collected from March 12 this year, it actually started collection in December 2012 and, as a consequence, that means that any late repayments in the last year could mean that you’ve already got a mark on your credit report for a late repayment,” Ms Lane added.

    Nothing like a kleptocrocy, frequently showing a will to retrospectively apply legislation, to dent business confidence and kill investment. #jobsandgrowth

  13. thefrollickingmole

    It doesnt have to be retrospective to be a wrecking ball.

    You buy a business in good faith and the government adds compliance and restrictions then you have done your dough as well.
    They did it to me.

    Government has the massive power to destroy wealth and no great ability to generate it.

  14. Pickles

    Remember this: They’re all fine when they’re in opposition, but as soon as they become government, they’re the enemy. Best to keep bayonets fixed.

  15. Fred Lenin

    Retrospective law. . This sets precedent ,an our laws are based on precedent are they not ? Judgements are made on precedent too. This means a future right wing government can make laws punishing former politicians fir their criminality and willfull wrecking of our country without fear of high court reversal .if its good enough for the green laboral muppets to steal super under these laws ,its good enough to punish them under similar type laws . Goose and Gander come to mind !

  16. memoryvault

    The Libs have thrown away any high moral ground attached to being against retrospective measures and would be unable to oppose it on that score.

    The Libs never had any “moral high ground” on retrospective legislation to start with. The concept was originally introduced into Australian law as part of then Treasurer Johnny Howard’s tax laws against “Bottom of the Harbour” avoidance schemes, under PM Fraser.

  17. Some History

    Canberra is Lala land.

    Now girls and boys children, the government is your best friend [hee hee]. The government is made up of selfless people that sacrifice much to serve the public [tee hee hee]. They rarely consider their own benefit often going without, always striving to improve the lot of [especially] the disadvantaged [AHH HAAA HAAAAA].

    If we trust the government, things always turn out well for everyone [AHHHHHhhhh]. Every day is like we’re skipping hand-in-hand [not at gunpoint] through daisy-covered fields beginning from those streets of harmony surrounding Parliament House [HAA HAAA HAAAAAAAAAAAAAAAAA]

    [Sorry…… I couldn’t keep a straight face]

  18. Panamas’s lovely in May, they say.

  19. tbh

    As Bruce said above, why is it that we wonder why those Panamanian companies do such a roaring trade? Tax planning has become a national obsession in this country and it’s little wonder why. Our tax system is so complicated and punitive that we do everything we can to claw that little bit back.

    I was going through how my ETP was calculated from the job I was made redundant from last year and it gave me a migraine. Not so much the payment, that’s easy, more the tax treatment. This is what we’re dealing with now and it only seems to be getting worse. It makes you want to hurl flaming bricks at every sitting member of parliament when you have to deal with it.

  20. dan

    Our tax system is so complicated and punitive that we do everything we can to claw that little bit back.

    “little bit”?
    If you run your own business and earn much more than $200k per year, and plan on selling the business..if you can base yourself in a low-tax jurisdiction the difference would be millions when you retire. The only reason all this bullshit continues is because we don’t have a land border to flee across easily.

  21. tbh

    The flip side is that lack of land border also keeps a lot people we don’t want coming here away too, both in war and peace time.

  22. dan

    The flip side is that lack of land border also keeps a lot people we don’t want coming here away too, both in war and peace time.

    Well I live in Melbourne…we invite them in.

  23. AP

    I thought Chairman Maocolm could do no wrong in your eyes Sinclair?

    Some of us saw this fraud for what he truly is a long time ago.

  24. AP

    If retropectivity in changes to superannuation is now respectable, then there’s no longer a reason to exclude retrospective changes to public service defined-value superannuation.
    The time has passed for public service lifetime indexed “unfunded” pensions.

    Hear hear. Time to just cut them alltogether and use the future fund to pay down the debt they’ve created.

  25. Crossie

    That’s why Malcolm’s money is in the Caymans. What’s his is his and what’s ours is everyone’s.

  26. Crossie

    Hear hear. Time to just cut them alltogether and use the future fund to pay down the debt they’ve created.

    What future fund? I was under the impression that Kevni gave it all away in $900 lots to save the world.

  27. Tim Neilson

    Crossie
    #2025082, posted on May 10, 2016 at 8:04 am
    My best recollection is that there was a subfund, of several billions, which Kevni used for a disappearing trick so it now consists of $0.00, but that the main fund somehow escaped his profligacy.

  28. Slayer of Memes

    For Malcontent Termite’s next trick (after not raising taxes) he will support the bill put forward by Senator’s Day and Lyjonhelm to repeal the “offend and insult” provisions of S18C….

    BWAHAHAHAHAHAHAHAHAHAHAHAHAHA!!

  29. JohnA

    frolickingmole, you said:

    “Government has the massive power to destroy wealth and no great ability whatsoever to generate it.”

    FTFY

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