Some may find this informative. A long read but the tables display revenue forgone due to various tax concessions. A screen shot of part of one table.
Superannuation, the ultimate government cash cow?
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we HAD a universal pension but the government can't live within it's means , don't be fooled by superannuation they are WORKER'S wages saved( by choice or regulation or both ) the employer just gets entangled with extra regulation and paperwork ( so it costs them as well )I wouldn't mind a dollar for the times this has been suggested in this thread. It still is a good read and makes a lot of sense.
From the article:Scrap superannuation for a universal basic pension
National Seniors Australia (NSA) has called on the federal government to implement a universal pension scheme that isn’t means tested: National Seniors Australia chief advocate Ian Henschke wants a universal pension scheme that isn’t means tested. “Review after review complains about older...www.macrobusiness.com.au
Australia’s refusal to implement such a scheme hampers retiree confidence to go out and spend, instead of hoarding cash and assets, says Mr Henschke.
“That’s the beauty of a properly designed universal pension. It takes away the year-on-year risk, but ensures it is fiscally sustainable and fair,” he said.
A universal basic income could, over time, also be good for the government’s bottom line, as it would eliminate the need for massive administration costs.
“It would get rid of the pension assets and income tests, doing away with the need for unfair taper rates, deeming rates and work restrictions, and end the need to engage with Centrelink,” Mr Henschke said in May last year.
“If everyone of pension age received a pension, retirees could just add this to their other income and pay tax. Means testing is costly to administer and leads to perverse outcomes, which are more apparent in the current crisis.
Compulsory superannuation acts like a tax and forces people to forgo current consumption, which is especially pernicious for lower-income earners.
Moreover, because superannuation balances at retirement depend on how long one works and how much they earn, the system inevitably misses lower income earners and those with broken work patterns like mothers.
Compulsory superannuation has also created a massive trough, worth some $30 billion a year, that has attracted snouts across the financial services industry like the big four banks. Australian management fees are among the highest in the world with Australian households spending twice as much each year on superannuation fees as they do on electricity.
Superannuation concessions already cost the federal budget around $43 billion a year and are very poorly targeted to high income earners, who receive the overwhelming majority of taxpayer assistance through the retirement system:
By extension, the massive costs and inefficiency surrounding compulsory superannuation means there are less funds available in the federal budget to lift the Aged Pension – Australia’s genuine retirement pillar.
Given the obscene cost, inefficiency and poor targeting of superannuation concessions, optimal public policy dictates unwinding these concessions and using the money saved to boost the Aged Pension.
Abolishing the compulsory superannuation system in favour of a universal aged pension has merit and should be given detailed consideration.
you cannot have a universal pension administered by the government they have proven they cannot resist meddling and dipping into the till ( that does not dismiss the possibility of a universal pension administered by an ACTUALLY independent body )
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sorry i don't know but MAYBE some of the Scandinavian nations might be an early place to look
I know some happy Canadians!
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We used to have the same model as the U.K, Canada and NZ, set up by John Curtin and Ben Chifley after the war , a percentage of income tax was set aside for pensions, then Menzies incorporated it into consolidated revenue. Everyone received a pension and they could have private super if they wished, which was taxed.
Then we introduced means testing and the saving helped the Government bottom line, so the rot began.
A brief summary below.
| 1923 | Bruce Government established a Royal Commission to examine the possibility of having a comprehensive national insurance scheme for retirement, sickness or disability. | Royal Commission on National Insurance (7 Sept 1923-5 Oct 1927). |
| 1928 | National Insurance Bill introduced. It lapsed in 1929 when the Government was defeated. | |
| 1938 | National Health and Pensions Bill passed, but its introduction was delayed, then abandoned because of World War 2. | |
| 1945 | Chifley Government introduced an additional levy on personal income tax which, along with a payroll tax from employers, was credited to the National Welfare Fund. There was, however, no direct link between contributions and benefits and the pension. The National Welfare Fund, whilst set up as a means of establishing a base from which a national superannuation fund could be operated, was in practice merely an accounting device until its abolition in 1985. | |
| 1961 | Superannuation funds exempt from tax if they held required amounts of Commonwealth Bonds. Commonwealth control of superannuation funds by use of taxation power firmly established. | Income Tax and Social Services Contribution Assessment Act 1961 |
| 1965 | High Court upholds Commonwealth s ability to control superannuation fund investment by use of taxation power. | Fairfax v Commissioner of Taxation 114 CLR 1 |
| By late 1960s | Means assessed on basis of income plus a proportion of countable assets except for the family home (which has always been assets-test-exempt.) About 70% of people qualifying on grounds of age received the pension. | |
| 1972 | Only 32% of workers covered by superannuation. | |
| 1973 | Whitlam Labor Government established the National Superannuation Committee of Inquiry. Chairman Keith Hancock. | |
| 1973 | Means test for pensioners 75 years of age and over abolished. | |
| 1974 | Australian Bureau of Statistics conducted the first national survey of superannuation coverage. 32% of the workforce was covered by superannuation 36% male; 15% females. 24% of people in the private sector had super cover compared with 58% in the public sector. | Year Book Australia 1974 |
| 1975 | Means test removed for persons aged 70 to 74 inclusive. | Social Services Act 1975, no. 34 |
| 1975 | Pensions linked to 25% of average weekly earnings, to be indexed annually. | Social Services Act (no 3) 1975, no. 110 |
| 1976 | Pensions became subject to automatic increases twice yearly. Age pension assets test abolished. | Social Services Amendment Act (No 3) 1976,no. 111 |
| 1976 | The Hancock Inquiry recommended a partially contributory, universal pension system with an earnings-related supplement. A minority recommendation suggested a non-contributory flat rate universal pension, a means tested supplement, and encouragement of voluntary savings through expanding occupational superannuation. | National Superannuation Committee of Inquiry. Final Report. Parts 1 (1976) and 2 (1977) |
| 20 June 1977 | Fraser government decides not to establish a contributory national superannuation scheme. | Cabinet Decision 3435 of 20 July 1977 in response to Cabinet Submission No. 1394 of 1977 |
| 1978 | Pension increases to be adjusted only once a year (in November). Future increases in the Age Pension for those aged 70 or over made subject to an income test. | Social Services Amendment Act 1978, no. 128 |
| 1979 | Fraser Government rejected the recommendations of the Hancock Inquiry. Pension increases subject to twice yearly increases, in May and November. | Social Services Amendment Act 1979, no. 121 |
| May 1983 | Base pension for those aged 70 and over subject to an incomes test. | Social Security and Repatriation Legislation Amendment Act 1983, no. 36 |
| 1983 | The Statement of Accord (Prices and Incomes Accord) between the ALP and the ACTU was endorsed in February, shortly before the federal election. Claims for wage increases were to be restricted to movements in the CPI. | |
| 1983 | Hawke Labor Government expressed support for the principles of employee superannuation. The May Economic Statement began the process of reform of the taxation of superannuation. For lump sums at age 55 or later, the first $50,000 would be taxed at 15%; the remainder at 30%. Lump sums taken below age 55 would be taxed at 30%. These thresholds indexed to AWOTE. | Economy Ministerial statement , P. Keating, 19 May 1983.. |
| 1984 | CBUSS - Superannuation for the building industry created, from an idea shared by building union leaders and ACTU officials. Regarded as a world first. (funds owned and controlled by a board comprising equal numbers of employer and employee or union representatives.) A number of other similar funds established in the following years- These funds are called Industry Funds. | ACTU website |
| 1984 | Age pension assets test reintroduced. Family home excluded. | Social Security and Repatriation (Budget Measures and Assets Test) Act 1984, no. 93 |
| 1985 | Renegotiation of the Accord identified superannuation as a key issue. | |
| 1986 | Labor joined with the ACTU in seeking a universal 3% superannuation contribution by employers to be paid into an industry fund, in lieu of a wage rise. | National Wage Case June 1986 |
| 1986 | Accord Mk II between the Government and the unions stipulated that compensation to employees should be 6% (to keep pace with inflation). This was to be 3% employer superannuation contribution, a 2% wage rise, and tax cuts. Agreement endorsed by the Conciliation and Arbitration Commission February 1986. |
| 21 December 1987 | The Government introduced the Occupational Superannuation Standards Act 1987 (OSSA). Operating standards were prescribed for the vesting of benefits from employer and employee contribution; preservation of benefits until age 55; more member involvement in the control of superannuation funds; security of members benefits.[2] | Occupational Superannuation Standards Act 1987 |
| May 1988 | Hawke Government statement Reform of the Taxation of Superannuation contained measures to bring forward payment of superannuation taxation liabilities by introducing a tax on contributions and reducing tax on benefits. Reasonable Benefits Limits introduced. |
So a tax was levied on workers to pay for pensions, that tax was absorbed into consolidated revenue and a new tax called super started to pay for pensions. Personal tax rates in the 1980's were much higher than they currently are.
Wash, rinse repeat, nothing works better than that.
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and some less than happy former company share-holders ( as Canadian Pension Funds buy up assets )
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As a bit of further info, tax rates back when super was introduced were very high, so take home money wasn't brilliant, a lot of workers spat the chewy because they needed the income, not money put away so that they could lose a pension their tax was paying for.
A lot saw it as the Government double dipping.
A lot saw it as the Government double dipping.
1985–86
Resident tax rates for 1985–86| Taxable income | Tax on this income |
|---|---|
| $0 – $4,594 | Nil |
| $4,595 – $12,499 | 25 cents for each $1 over $4,595 |
| $12,500 – $19,499 | $1,976.26 plus 30 cents for each $1 over $12,500 |
| $19,500 – $27,999 | $4,076.25 plus 46 cents for each $1 over $19,500 |
| $28,000 – $34,999 | $7,986.25 plus 48 cents for each $1 over $28,000 |
| $35,000 and over | $11,346.25 plus 60 cents for each $1 over $35,00 |
From today's AFR : Now RETAIL super fund managers have come out swinging to ban superannuation balances of more than $ 5 Million. Mercer's report further proposes the 15 % tax rate to apply on pensions ( currently tax free ) up to the TBC ( Transfer Balance Cap ) of $1.7 Million and to force retirees to draw down the excess instead of being allowed to leave it in the accumulation account.
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LOL
looks like they are desperate for 'churn fees ' ,
however i am not sure that will instill faith in the retail customers either ( but the government will LOVE the 15% extra tax idea , i bet )
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More complexity, smoke and mirrors, so no one can follow their money, magic.
So people have their money put away for them at 15% tax, its earnings pay 15% tax and when you finally get old enough to get it, if your still alive, you pay 15% on withdrawing it.
Or if the money you put in was in after tax dollars, you pay 15% tax while it is in there and you pay 15% when you withdraw it, sounds like someone has been talking to silly Billie and barmy Bowen. ?
Why would people put money in super? Oh I forgot they don't have a choice.
IMO easier just to give everyone the pension and add the super then apply normal income tax rates to it.
It would stop people putting stupid amounts in and those with big super balances from high paying jobs, pay big taxes, simple.
So contribution tax 15%, accumulation 15%, when pension starts $960/fortnight pension, for argument sake $24k/ year + say the allocated pension is $50k= $74k, first $17k tax free and so on.
As the person gets older the allocated draw down is higher, so the income is higher, therefore the tax is higher.
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From this weekend's AFR.
Here's another lot gunning for a $ 5 Million limit on super accounts.
The Association Of Superannuation Funds Of Australia ( ASFA) has found :
80,000 Aussies have more than $2 Million in their super accounts, including 370 under the age of thirty !
That's got the lefties at the Gratten Institute up on their high horse. Seems to be a bit of shrewd tax planning from the oldies at work, there.
Of the 320,000 people with over a $ Million in super, 229,000 of those had about $ 1 million, 80,000 have $ 2 million and 1,100 have over $ 5 million.
Shadow Treasurer, Jim Charmers said last week, reforming superannuation tax was not a priority for Labor . ( Well, not just yet, eh Jimbo ? )
Here's another lot gunning for a $ 5 Million limit on super accounts.
The Association Of Superannuation Funds Of Australia ( ASFA) has found :
80,000 Aussies have more than $2 Million in their super accounts, including 370 under the age of thirty !
That's got the lefties at the Gratten Institute up on their high horse. Seems to be a bit of shrewd tax planning from the oldies at work, there.
Of the 320,000 people with over a $ Million in super, 229,000 of those had about $ 1 million, 80,000 have $ 2 million and 1,100 have over $ 5 million.
Shadow Treasurer, Jim Charmers said last week, reforming superannuation tax was not a priority for Labor . ( Well, not just yet, eh Jimbo ? )
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not a priority , just a perpetual fixation it seems ( i suspect the first priority is to actually get elected )
BTW $1 million doesn't go far these days ( and is liable to be much less brag-worthy in say 5 years time )
Isn't the average house price $920k ? 1mil really doesn't go far, particularly if you intend on buying a place when you retire with your super lol.
The super giveaway that allows the wealthy to amass even more tax-free
Australian retirees die with most of the super they had when they finished work. There’s a measure in the budget that threatens to entrench that.
theconversation.com
here’s how it works: there was a 2020’s-market-crisis-erarelaxation of the rules which required retirees to withdraw from 5% to 14% from their super each year. They can put it in the bank — it’s just to make sure super isn’t used for tax-free savings (which are often inherited by the kids). But markets have recovered, and Martin suggests its extension is just another way the government quietly works to keep the wealthy, wealthy.
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The super giveaway that allows the wealthy to amass even more tax-free
Australian retirees die with most of the super they had when they finished work. There’s a measure in the budget that threatens to entrench that.
here’s how it works: there was a 2020’s-market-crisis-erarelaxation of the rules which required retirees to withdraw from 5% to 14% from their super each year. They can put it in the bank — it’s just to make sure super isn’t used for tax-free savings (which are often inherited by the kids). But markets have recovered, and Martin suggests its extension is just another way the government quietly works to keep the wealthy, wealthy.
Clickbait, in my view.
It's the less wealthy retirees who tend to be really stressed out, about being forced to take a higher withdrawal than they need to, whilst markets are down or volatile. Yes, theoretically they can just hoard the extra payment in cash, but in reality that doesn't always happen. It's psychological. That extra money is now 'gone' from their retirement savings and they'll see the balance of their super reduce accordingly.
Particularly when you consider, for the average retiree, it's within their super where they have money invested in markets. Most retirees won't have any investments outside of super, and so when they get their pension payments, they are either spending it or holding it in cash, earning bugger all.
In terms of 'the wealthy' benefitting, it's very very small numbers. Take an individual with the maximum you can hold in Account Based Pension; $1.7mill. In that scenario they would be drawing down only 2.5% compared with the standard 5% in 2022/23. That's allowing them to effectively retain an extra $42,500 in super.
What is the tax saving on the earning of $42,500? ....A few hundred dollars at most.
It also means that when drawdown rates revert to normal in the following year, they'll have to take a bigger payment due to having a higher balance.
I don't think the intention of this rule change is to benefit 'the wealthy'. Most retirees will be happy with this policy as it means their super will last a little longer.
To my mind it's a distraction @Junior. I cannot see given the current contribution limits many superannuation accounts in accumulation phase reaching the giddy heights of $5m or more. Those which are will eventually have to pay out death benefits and so, over time, they will gradually diminish. The very well off will invest elsewhere and employ advisers to make sure it is as tax-effective ("I don't want to pay tax!") as possible.
The other aspect not mentioned often is it is assumed all retirees want to splash their money around. Maybe some do or maybe they give some to their children (who are going to get it anyway usually.) Or maybe they consider they have enough cash-flow and as their needs are relatively simple have no need or wish to undertake international travel, $1,000 per night hotels, new cars or purchase white-goods and the latest and largest TV. I am in that category by the way.
I find it offensive and insulting being told what I should do with my funds. They are my assets and I'll determine how the income from those assets will be spent or not.
The other aspect not mentioned often is it is assumed all retirees want to splash their money around. Maybe some do or maybe they give some to their children (who are going to get it anyway usually.) Or maybe they consider they have enough cash-flow and as their needs are relatively simple have no need or wish to undertake international travel, $1,000 per night hotels, new cars or purchase white-goods and the latest and largest TV. I am in that category by the way.
I find it offensive and insulting being told what I should do with my funds. They are my assets and I'll determine how the income from those assets will be spent or not.
Dona Ferentes
A little bit OC⚡DC
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Death Benefits ....
Now there's an oxymoron .
The other thing about large amounts in Super, and almost universally in SMSFs because it possible/ optimal to do so, is that the large balances, the gains, have been generated inside the fund. Often by directors and management, or entrepreneurs, loading up in a company's early days when valuations are low (and risk is high) then enjoying the SP appreciation. Usually this compounding is happening in Accumulation phase, so there is a bit of tax applicable if corporate actions happen.
There's a whole industry out there advising exactly this pathway.
Now there's an oxymoron .
The other thing about large amounts in Super, and almost universally in SMSFs because it possible/ optimal to do so, is that the large balances, the gains, have been generated inside the fund. Often by directors and management, or entrepreneurs, loading up in a company's early days when valuations are low (and risk is high) then enjoying the SP appreciation. Usually this compounding is happening in Accumulation phase, so there is a bit of tax applicable if corporate actions happen.
There's a whole industry out there advising exactly this pathway.
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depending on where you buy ( naturally ) $900,00 doesn't buy you much of a house
take where i grew up in Brisbane , multiple properties have been sold in the last year ( in THAT street ) and $900,000 or less basically gets you a 'fixer-upper ' ( but more likely it will be demolished and units/townhouses replacing them )
now sure train/bus/shops are reasonably close , but if you need to DRIVE to work traffic is rather snarly ( and has been for 30 plus years )
While probably true, it isn't necessary to have the smarts (that's me) for that to occur to a some extent. Compounding and reinvestment can have an impact. In my case the balance cap is set at $1.6m yet it is now well above that and the mandated draw down of account-based pension is larger on a relative basis.
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