Superannuation, the ultimate government cash cow?

[bigdog]

What is the impact of the new taxes on our federal pollies high pensions on retirement?

 

[sptrawler]

What is the impact of the new taxes on our federal pollies high pensions on retirement?

Sounds as though it will be minimal. Apparently some dude runs some numbers through the calculator to work out what fictitous sum the polly would have needed to support the pension payment.
Then it is divided by another number to give a number the politician is happy with. lol That's only my understanding of it.


Much simpler and fairer to just tax the pension recieved once it passes $100k. The down side is the pollies would have to pay the same tax as everyone else, we can't have that.

 

[Knobby22]

The government wimped out. Very weak attempt at fixing the problems.
They are not going to pass the legislation but instead take it to the election which means it won't happen. Hockey was non committal but Abbott couldn't help himself and opposed it. I worry what he will be like as Prime Minister.

It will now be up to the coalition to make reforms and they will have to.
I am quoting Tim Colebatch following:

"It will be Tony Abbott's problem and a big one. Treasury estimates that in 2009-2010, tax breaks on superannuation funds cost revenue (that is other taxpayers) 9.5 billion. This year it will be 11.7 billion. In three years time it will be 25.1 billion. Super tax breaks will grow from 26 billion to 47 billion in that time. You can blame the Howard government which removed the reasonable benefit limits and made payouts tax free."

And at the end of the article:

"Is it really Liberal policy to give away $47 billion a year in superannuation tax breaks , of which just 23% goes to the 60 percent of Australians in the bottom and middle incomes while 26% goes to the richest 5%?"

I am not in the richest 20% and I know I am being screwed. The Libs will have no choice except to fix this unless they raise other taxes which will be on me, I will do my best to protest if they do that. Just fix it.

 

[sptrawler]

At last the penny has dropped with the press, shonky Swann using historicaly low interest rates, to help his spin.

http://www.couriermail.com.au/money...hit-more-aussies/story-e6freqp6-1226613624250

Jeez it took the press long enough to work that one out, it stood out like dogs you know whats.
Also that is why the forecasts are saying the measure will be worth billions in 10 years, good old bracket creep.
Most workers will be paying the tax in 10 - 15 years. Lol So much for the fabulously wealthy.

 

[drsmith]

The government wimped out. Very weak attempt at fixing the problems.

That's the current government. Having completely wrecked border control, they haven't got the inclination to fix that either.

I think to a large extent it's political. There is a small sweetener or two in there which I think are designed to wedge the Libs into more commitments in the lead up to the election and defuse the discussion.

To me, the biggest worry is that whoever's in office next, we'll see harsher measures to raid super to help balance the budget. The Coalition have form here with their superannuation surcharge from the late 90's.

As for tax distribution between the wealthy and the less well off, it needs to be seen in a much broader context than just superannuation. The broader problem was well summed up in the following point yesterday,

No one's got the balls to fix the income tax system to make it truly simple and equitable and an inducement to low income earners receiving family benefits to work full time.

Debate would obviously remain about what's equitable, but that in itself isn't a bad thing.

 

[sails]

At last the penny has dropped with the press, shonky Swann using historicaly low interest rates, to help his spin.

http://www.couriermail.com.au/money...hit-more-aussies/story-e6freqp6-1226613624250

Jeez it took the press long enough to work that one out, it stood out like dogs you know whats.
Also that is why the forecasts are saying the measure will be worth billions in 10 years, good old bracket creep.
Most workers will be paying the tax in 10 - 15 years. Lol So much for the fabulously wealthy.

From that link - should be under "caption a photo"...lol. Look at Swan's despondent face and Shorten could be indicating "I give up". Interesting body language going on here:

 

[DocK]

IF the proposed changes are ever passed I can see small family-owned business being negatively affected, again. Nothing new for this segment of our economy to be completely overlooked by our present Govt.

A good number of family owned SMEs own their business premises via their SMSFs. Quite often these same people haven't been able to make extra contributions to their super and the property forms the bulk of the value of the fund - well below the 2M mark. Upon retirement and the probable sale of the premises there would hopefully be a reasonable capital gain - which would then be subject to the 15% tax on cap gain/earnings over 100K. I know the grandfathering clause exempts property already owned for up to 10 years - but this is no comfort to those family businesses who don't envisage retirement or relocation within that timeframe. I guess not only accountants and planners will benefit from yet more tinkering with super, but also real estate agents, who will benefit from the inevitable push to sell lumpy assets within the 10 years. It would certainly make sense for those whose SMSF's main asset is a factory or similar to sell and rent back for a few years.

I can see the sense in some minimisation of the current super tax breaks - but I think an across the board increase to the tax applied to earnings whilst in the accumulation phase from 15% to say 18% would raise more revenue and be fairer. Yes, it would apply to "working families" as well as the more wealthy, but super would still be taxed at such a low rate as to retain its attractiveness as an investment vehicle, and the incentives to contribute to one's own retirement rather than speculate outside of super would remain. Gen Y will complain that the baby boomers already in pension phase will receive a get out of jail free card, but I bet they'd scream blue murder if the very wealthy decide that switching to negative gearing investments in property is a better bet than risk paying tax on their super earnings down the track.

 

[Judd]

As an observation, I assume that this is an "attack" on SMSFs. I say that as I wonder how many "fabulously wealthy" individuals would use industry or retail superannuation funds?

Edit: A thought just came into my head. It would not surprise me if some trustees probably use DRPs even in the pension phase, so they could be caught with the asset purchase arrangements to apply from 5 April 2013. All very interesting.

 

[sydboy007]

What i find really annoying with this debate is the $20+ billion a year in fees the financial industry rips out of super is pretty much ignored.

Certainly a bigger grab than any Government would be proposing.

It's time all funds have to declare gross returns then deduct any expenses and high light them on the member statements.

Hopefully this will make the uninterested take a second look and start to question why they are paying so much.

I'd even go so far as to say the Govt should impose maximum fee levels, and they should also impose standard criteria to what a mixed fund means - is a fund "balanced" if it can have 50% in shares, 30% in property and just 20% in fixed interest / cash??

Then there's the issue that I'm going to save to 45+ years, but I have no idea what I will have at the end. Just changing a forecast by 1/2 a % can make huge differences in what balance I'll have at age 65.

We'd all be better off if we just focused on super to provide something a bit better than the pension, and then put the effort into growing wealth outside of super to provide for the lifestyle we'd like to have when retired. The way the debate on super goes you'd think people can't save for their retirement in any other way.

 

[drsmith]

As for tax distribution between the wealthy and the less well off, it needs to be seen in a much broader context than just superannuation. The broader problem was well summed up in the following point yesterday,

Debate would obviously remain about what's equitable, but that in itself isn't a bad thing.

Taking this point further,

SO-CALLED super tax breaks might flow overwhelmingly to higher income earners - but so does the nation's tax bill.

The latest tax office data show the top 1 per cent of income earners pay about 17 per cent of all income tax, while the top 10 per cent pay almost half of the commonwealth government's annual income tax haul.

Australia's tax system is highly progressive, with a top marginal tax rate of 45 per cent - above New Zealand's at 33 per cent and the US at 35 per cent.

http://www.theaustralian.com.au/bus...ady-pay-the-bill/story-fnc2jivw-1226612818237

The simplification that is needed is a broadening of the income tax base by removal of deductions in exchange for lower marginal rates.

 

[Judd]

...The way the debate on super goes you'd think people can't save for their retirement in any other way.

Yep, agree and it's the way my late wife and I approached the matter. That, and a few other issues, resulted in the winding up of our SMSF and I have pulled as much I can out of the superannuation arrangements.

 

[drsmith]

It looks like the Opposition will support some of the measures.

Joe Hockey,

The Coalition would support the increase in concessional contribution caps and an improvement in the tax treatment of excess contributions, he said.

This too might be interesting,

''The almost $1 billion of tax hikes are the beginning and not the end of Labor's assault on superannuation,'' Mr Hockey said. ''In his press conference Wayne Swan was asked twice to explicitly rule out further changes to superannuation in the May budget in six weeks' time. He refused.''

Wayne Swan would be politically insane if he did.

http://www.smh.com.au/opinion/polit...-consensus-greets-changes-20130405-2hcd0.html

 

[drsmith]

The AFR has a graphic the outlines the measures,

http://www.afr.com/p/national/super_hit_on_wealthy_investors_GQcUMka42N7LHKj6C6K8VO

With regard to the increase in the concessional cap (measure 2), I'm at a loss to understand how this is a saving to the budget over the 4-year estimate period.

 

[Judd]

...With regard to the increase in the concessional cap (measure 2), I'm at a loss to understand how this is a saving to the budget over the 4-year estimate period.

Probably in the same way the ATO got hold of unclaimed superannuation, ie money owed to other people, and the Government claimed it as revenue. There is accounting and there is Government accounting, which appears to be close to fiction or even the devil's work.

 

[Knobby22]

Taking this point further,



http://www.theaustralian.com.au/bus...ady-pay-the-bill/story-fnc2jivw-1226612818237

The simplification that is needed is a broadening of the income tax base by removal of deductions in exchange for lower marginal rates.

If broadening the tax base means hitting the middle class harder to appease the very wealthy then I won't be happy.

 

[DocK]

The AFR has a graphic the outlines the measures,

http://www.afr.com/p/national/super_hit_on_wealthy_investors_GQcUMka42N7LHKj6C6K8VO

With regard to the increase in the concessional cap (measure 2), I'm at a loss to understand how this is a saving to the budget over the 4-year estimate period.

Possibly because they had promised to reinstate the $50,000 cap for over 50's from July 2014, and now propose raising it to only $35,000 - unindexed.

From Superguide's website:

9. What is the concessional cap for the 2014/2015 year?

The answer to this question is somewhat speculative since it is based on Government promises, but set out below is what we have been promised:
•The concessional cap for under-50s for the 2014/2015 year (1 July 2014 to 30 June 2015) will increase to $30,000 for under 50s.
•From July 2014, those with account balances of less than $500,000 will be able to make up to $50,000 in concessional contributions each year. Although if the under-50s cap is being indexed presumably the over-50s cap will increase to $55,.000 as well. Stay tuned because we could be dealing with a different government by the time July 2014 comes around.

http://www.superguide.com.au/how-super-works/concessional-contributions-caps-10-facts-you-should-know

 

[sydboy007]

The simplification that is needed is a broadening of the income tax base by removal of deductions in exchange for lower marginal rates.

Wont happen. Seems the only reason we have politicians is so the special interest groups can trawl their ways through the corridors of power so they can get special tax breaks or other rent as applicable.

It should be relatively simple to simplify the tax system and broaden the base somewhat, but the politics are anything but simple.

Nothing of much will change in Australia until voters punish both sides of politics and force them to do things in the interests of the country, not of their butts on the treasury benches.

 

[drsmith]

Probably in the same way the ATO got hold of unclaimed superannuation, ie money owed to other people, and the Government claimed it as revenue.

That's budgeted separately as a $123m saving.

This is from the joint press release by Wayne Swan and Bill Shorten yesterday,

Simplifying the design and administration of the higher concessional contributions cap

The Government will simplify the design and administration of the proposed higher concessional contributions cap, by providing an unindexed $35,000 concessional cap to anyone who meets certain age requirements.

The Government believes that it is important to allow people who have not had the benefit of the Superannuation Guarantee for their entire working lives to have the ability to contribute more to their superannuation as their retirement age approaches.

Accordingly, the Government will bring forward the start date for the new higher cap to 1 July 2013 for people aged 60 and over. Individuals aged 50 and over will be able to access the higher cap from the current planned start date of 1 July 2014. The general concessional cap is expected to reach $35,000 from 1 July 2018.

The Government has decided not to limit the new higher cap to individuals with superannuation balances below $500,000 in light of feedback from the superannuation sector that this requirement would be difficult to administer.

This reform will save $365 million over the forward estimates period.

Perhaps it's relative to an earlier planned $500k asset capped increase in concessional cap also mentioned. The detail in that must have been too devilish even for the class warfare hawks in Labor.

If the numbers stack up, it's not bad for the Opposition. They can claim a net saving from the two measures Joe Hockey proposes to support.

 

[drsmith]

Wont happen. Seems the only reason we have politicians is so the special interest groups can trawl their ways through the corridors of power so they can get special tax breaks or other rent as applicable.

It should be relatively simple to simplify the tax system and broaden the base somewhat, but the politics are anything but simple.

Nothing of much will change in Australia until voters punish both sides of politics and force them to do things in the interests of the country, not of their butts on the treasury benches.

I tend to think more broadly there would be winners and losers across the middle class, so the time to do it was when there was excess revenue to minimise the losers. There's also the standard of general public political debate which in my view is very poor (this forum excepted of course ).

If we punish both sides of politics, what do you suggest we elect as an alternative ?

 

[Ves]

If we punish both sides of politics, what do you suggest we elect as an alternative ?

I don't think it is so much about punishing both sides and looking for an alternative, but more forcing them out of the current modus operandi of self-preservation and looking after special interest groups. Easier said than done, of course.