Superannuation, the ultimate government cash cow?

[sptrawler]

Anyone with super, in a SMSF or an Industry Fund has rocks in their head if they vote this Labor government back in.

Penny Wong has said super will be hit, and hit hard.

Any other also rans in the ALP who argue otherwise have no say.

If you haven't already I would, to those with super who can, suggest starting a pension, examine stocks held for possible capital gains realisation before the budget and sticking your head between your legs.

gg

I tend to agree with you GG, most super changes aren't retrospective.

 

[Garpal Gumnut]

I tend to agree with you GG, most super changes aren't retrospective.

I've sold many of my "winners" last week.

By the time the ole Wong gets to me there will be nothing to tax.

And she won't be able to make it retrospective.

gg

 

[drsmith]

What the government is considering, according to the SMH.

The government has been considering boosting the tax on the super-fund earnings of wealthy people from 15 to 30 per cent or increasing the earnings tax on all super accounts from 15 per cent to 20 in the May budget.

http://www.smh.com.au/opinion/politics/super-losses-likely-as-libs-reject-repeal-20130328-2gxae.html

 

[sptrawler]

Both suggested policies only affect super in the accumulation phase.
As GG says, it would be very difficult to impose extra costs to funds in the pension phase.
It would be totally counter productive, eroding pensioners balances and forcing them onto the age pension sooner.IMO

 

[drsmith]

Both suggested policies only affect super in the accumulation phase.

I can't see them increasing the fund earnings tax across the board as that would essentially be a tax increase for most income earners. The only circumstances under which this would be considered I would have thought would be if increasing the contributions tax on higher income earners wasn't going to raise sufficient revenue for their purposes.

I would have thought the simplest thing to do would be to reduce the concessional contributions caps, again.

http://www.ato.gov.au/super/content.aspx?doc=/content/60489.htm&page=3&H3

 

[sptrawler]

I can't see them increasing the fund earnings tax across the board as that would essentially be a tax increase for most income earners. The only circumstances under which this would be considered I would have thought would be if increasing the contributions tax on higher income earners wasn't going to raise sufficient revenue for their purposes.

I would have thought the simplest thing to do would be to reduce the concessional contributions caps, again.

http://www.ato.gov.au/super/content.aspx?doc=/content/60489.htm&page=3&H3

The funds earnings tax is the one that has to be lifted by the smallest margin for maximum gain.

Bashing the high income earners, when they can only get relief on $25k, is nonsense and will save nothing.

4% increase on contributions tax to bring it in line with the lowest tax rate, covers all tax earners. That's $b's

To increase the contribution tax on the top 10% of wage earners from 15% to 30% on $25k contribution is 2/5ths of 5/8ths of nothing.

It would just be another case of class bashing, that hasn't worked so far and is actually counter productive for Labor.lol

The other thing it is easy to justify, as the 15% contribution tax was the same as the lowest tax rate, now it is 19%.

 

[drsmith]

The funds earnings tax is the one that has to be lifted by the smallest margin for maximum gain.

You have a point there, in more than one sense. By hitting a broad section of the community, it would also reduce the rubble that is currently what remains the house of Labor to even smaller pieces.

Labor won't do that in my view. They'll try at least to retain some pieces of rubble big enough to shelter under and go for an option consistent with their class war rhetoric.

In the context of what Labor wants to do with the money, they're all nonsense. Super should be reformed, but in the context of broader tax reform, not spending.

 

[drsmith]

It will be interesting to see what Labor's definition of 'fabulously wealthy' is.

The government is understood to be considering lifting the 15 per cent tax rate on superannuation earnings for those with high balances, but has yet to settle on a level at which it will kick in.

http://www.theaustralian.com.au/nat...nnuation-changes/story-fn59niix-1226609774940

 

[drsmith]

Will earnings and contributions both be hit ?

Changes to the tax treatment of superannuation contributions could boost the budget bottom line by hundreds of millions of dollars.

http://www.abc.net.au/news/2013-03-31/emerson-backs-debate-on-taxing-super-of-wealthy/4602606

 

[sptrawler]

It will be interesting to see what Labor's definition of 'fabulously wealthy' is.



http://www.theaustralian.com.au/nat...nnuation-changes/story-fn59niix-1226609774940

So they are talking up the wealthy bashing, best of luck with that, it hasn't worked so far.

They are just proving how dumb they are.IMO

It is more about their jobs than sensible changes to super, that would save a lot of money.

How they can maintain 15% contribution tax with a lowest tax rate of 19% is just dumb, that gives all tax payers a 4% tax break.
Yet in the same breath they say super is unsustainable, how dumb is that, the worlds greatest loser.

 

[Sir Burr]

Will earnings and contributions both be hit ?



http://www.abc.net.au/news/2013-03-31/emerson-backs-debate-on-taxing-super-of-wealthy/4602606

How can a max. of $25K @ 15% be wealthy?
Wow

Edit: ...maybe talking about non-concessional contributions

 

[sptrawler]

How can a max. of $25K @ 15% be wealthy?
Wow

Edit: ...maybe talking about non-concessional contributions

Non concessional contributions are after tax from your pocket contributions, they tax that and the system goes down the drain.
Which believe it not may happen, what if workers in their enterprise agreements, decide to take the pay rise rather than an increase in super contributions?

Maybe they decide an extra 3% payrise towards their house payment is better value.

Actualy if they decide super is a dud and say we will forego it for a 12% payrise, well that would throw a real cat among the pigeons. LOL
It won't happen but it shows how easy it is for people to be disenchanted with something that was meant to be for their benefit.
Before this government came in workers could see putting money away for retirement was a winner.

Now in a short period of time, they have seen how a government can send you a cheque in the mail, put insulation in your roof, throw money at your school .
Now the same government is scambling round to pay for it. Absolute losers

 

[Intrinsic Value]

The govt is out of touch with reality. Their idea of the rich and the reality is two different things. They think that people earning more than 100 -150k are rich! That is bare survival money for a family with a mortgage in a capital city in Australia. What are they thinking?

It seems they don't really want people to retire and be self funded as they are doing everything in their power to dissuade people from using super as a primary vehicle to fund retirement.

What this govt should be doing is cutting costs not trying to raid our super to fund their deficit. They could start by reining in middle class welfare which according to a report this week is running at 316 billion a year and which has compliance costs equal to 50 percent of this figure. What a joke? Will the Liberals man up and reverse some of this madness? I have little confidence they will but in the mean time Labor has to go they have done their dash.

 

[Garpal Gumnut]

My contacts tell me that Gillard and Emerson may be in for more than they bargained for in raiding retiree's Superannuation.

Simon Crean and Martin Ferguson are planning to , if not cross the floor, perhaps challenge the leadership of the ALP on their Superannuation hoist.

From the Australian

SIMON Crean has deepened the rift within Labor over looming budget changes to the superannuation regime, declaring he would oppose any move by the government to tax earnings on super accounts.

Launching an attack on Labor's inability to frame serious policy debate, the senior party figure would not comment on whether he would cross the floor to vote against any changes. But he called on the government to explicitly rule out changes that retrospectively taxed earnings generated by super accounts, saying it was "tantamount to taxing people's retirement surpluses to fund our surplus".

Mr Crean delivered his ultimatum shortly after Trade Minister Craig Emerson called for a discussion on lifting taxes on the superannuation accounts of the "fabulously wealthy", highlighting the rift in Labor ranks over values and policy substance after last month's leadership crisis.

Dr Emerson also rejected claims from Mr Crean and former resources minister Martin Ferguson that the government had failed on reform and was not "governing for all Australians".

But former Reserve Bank governor Bernie Fraser yesterday backed the criticism that Labor had lost the "governing for everybody" mentality adopted during the Hawke and Keating years.

Mr Crean and Mr Ferguson, both former ACTU presidents, were high-profile casualties of the leadership row that ended with Julia Gillard's unopposed re-election as leader.

Both men have publicly lashed the party over its class-war rhetoric and handling of key policy initiatives, including the mining tax and failed media reforms.

Mr Fraser, Treasury secretary in the 1980s under the Hawke government and a former voice of the industry super movement, said yesterday the government's rhetoric on class warfare and on foreign workers was divisive and desperate but argued that a "good case" could be made for re-examining super concessions for high-income earners.

Bernie Fraser is weighing in as well.

It looks not good for Gillard and Emerson.

gg

 

[FlyingFox]

The govt is out of touch with reality. Their idea of the rich and the reality is two different things. They think that people earning more than 100 -150k are rich! That is bare survival money for a family with a mortgage in a capital city in Australia. What are they thinking?

Agreed. However the stats say otherwise. 150K puts you in the top 20% almost everywhere in Oz. The imbalance in my opinion is due to house prices going haywire in the last decade. Equate that out for people who bought prior and people on 150K are doing quite well.

It seems they don't really want people to retire and be self funded as they are doing everything in their power to dissuade people from using super as a primary vehicle to fund retirement.

What this govt should be doing is cutting costs not trying to raid our super to fund their deficit. They could start by reining in middle class welfare which according to a report this week is running at 316 billion a year and which has compliance costs equal to 50 percent of this figure. What a joke? Will the Liberals man up and reverse some of this madness? I have little confidence they will but in the mean time Labor has to go they have done their dash.

Agreed. However super concessions also costs the government a lot of money. It is not only middle but moreso upper class welfare depending on how you look at it. I think there were some numbers in a another thread by Sydboy007.

 

[So_Cynical]

The govt is out of touch with reality. Their idea of the rich and the reality is two different things. They think that people earning more than 100 -150k are rich! That is bare survival money for a family with a mortgage in a capital city in Australia. What are they thinking?

Bollocks

Survival with an Audi in a beach side suburb.

 

[Intrinsic Value]

Bollocks

Survival with an Audi in a beach side suburb.

Given the average mortgage is around 350 k you would probably need an income of at least 100k or more to qualify for a loan. Then of course you would need probably 200k saved as well just to buy an average house in the suburbs of most of Australia's capital cities.

 

[Intrinsic Value]

Agreed. However the stats say otherwise. 150K puts you in the top 20% almost everywhere in Oz. The imbalance in my opinion is due to house prices going haywire in the last decade. Equate that out for people who bought prior and people on 150K are doing quite well.



Agreed. However super concessions also costs the government a lot of money. It is not only middle but moreso upper class welfare depending on how you look at it. I think there were some numbers in a another thread by Sydboy007.

Super concessions don't cost as much money as the govt thinks. It is a bit of false economy if those people who benefit from tax breaks then go on to be self funded retirees rather than pension collectors. Remember a lot of these so called high income earners don't start making money til later in life and after paying of their mortgages and schooling their kids. They might have a 10 year window to stash it away otherwise they are going to be welfare dependent in old age and a burden on the govt so a tax incentive here is not such a bad thing.

Further If people cant use super to reduce their marginal rate they will find other ways like buy investment properties or borrow and leverage on the stock market to help reduce their taxable income so the govts savings may be more illusionary than it looks.

 

[medicowallet]

Further If people cant use super to reduce their marginal rate they will find other ways like buy investment properties or borrow and leverage on the stock market to help reduce their taxable income so the govts savings may be more illusionary than it looks.

As has been mentioned before, if they decide to negatively gear, it may cost the government more to fund the tax deductions per year of an interest only loan over say, 10 years, than to give super concessions with a rolling taxation benefit.

This would also likely contribute to a mini-housing boom (something we do not need)

Seems like the only solution if they change super is to tinker with negative gearing as well.

MW

 

[drsmith]

Having already increased the contributions tax for those on incomes above $300k, the government has already partially tapped that well. Interestingly, the same politicians making these decisions have been tardy in passing that legislation that would apply this change to their own defined benefit superannuation.

John Howard applied his superannuation surcharge to defined benefit schemes at least for the public service although I'm not sure if that went as far as politicians. It was a mess and illustrated the problems with constant change to the system.

In last year's budget, the tax on contributions was doubled from 15 per cent to 30 per cent for people earning more than $300,000; however, this has not been legislated yet.

Critics of the move said it was effectively retrospective taxation because people locked away their savings in superannuation funds on the understanding that the earnings tax rate was 15 per cent.

An alternative strategy would be to increase the tax on contributions to super by high-income earners from 15 per cent to 30 per cent. However, this would not raise as much money. One of the problems with raising the tax on earnings is applying it to defined benefit schemes, such as the generous schemes for politicians and public servants that have been closed to new entrants.

If Wayne Swan is defeated at this year's election, he is eligible for a parliamentary pension of $168,106 a year. A worker not on a defined benefit scheme would need to build up a superannuation lump sum of up to $5.6 million to secure the same amount. Ms Gillard, if defeated in September, would be eligible for a pension of $177,520 a year.

When the tax on earnings was raised for people earning more than $300,000 last year, Finance Minister Penny Wong said politicians would not be exempt. However, the legislation to implement that increase has not been before parliament yet, with industry sources saying the difficulty in managing defined benefit schemes is responsible. The Howard government faced similar difficulties when it imposed a surcharge on superannuation contributions for high-income earners as part of its deficit reduction plan in 1996.

http://www.theaustralian.com.au/nat...nal-rift-deepens/story-fn59nsif-1226610030006