Superannuation, the ultimate government cash cow?

[banco]

I take all your points Julia but will still fight against an ALP Government retrospectively changing the rules on my Super.

I have had very few sick days in a work life of nearly 40 years, and when I was sick for longer than a month, had sickness insurance, which I paid for, to tide me over.

I resent an ALP Government strapped for cash taking MY MONEY, for mine it is, to get themselves out of a political hole.

Second rates like Wong, Swan and Roxon retiring on $200,000 a year from the age of 45 indexed for life is obscene, and it is not good enough to say it will be addressed. It is obscene.

And I do think it is fair for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered.

Because that is what we were promised.

gg

I'm not sure why people think aspects of the tax system are immutable. Tax rates change all the time based on Government revenues, priorities etc.

 

[sptrawler]

I'm not sure why people think aspects of the tax system are immutable. Tax rates change all the time based on Government revenues, priorities etc.

Agree completely and while you are working you can adjust to changes, someone who is 65+ can't.

They are captive and fairly well helpless to adapt.

Don't think for a moment that I think fabulously rich people need welfare.

However I do think changes should be done in a sensible transparent and logical manner, without inequity.

That's why I think, the tax should be all encompasing of everyone, at a pension amount, not on earnings.

It should also cover polliticians pensions, which would be very easy to apply if it was triggered at a certain pension amount.

 

[banco]

Agree completely and while you are working you can adjust to changes, someone who is 65+ can't.

They are captive and fairly well helpless to adapt.

.

You may have a point in theoretical point but we can't go back in time and increase taxes on super during the accumulation phase.

It also strikes me as a self-serving argument for the older generation. "Well we're over 65 now so it would be unfair to make any changes to how super is taxed in the pension phase but we recommend you tax super more heavily at the point of entry"

 

[sptrawler]

I think with all that you still managed to avoid saying whether the current policy settings are sustainable.

Sorry in a word no.

Are the new suggestions an improvement, in a word no.

Will the suggestions improve the situation,no.

Will the suggested changes reduce workers benefits,yes

Will they be thrown out in the next gfc event, yes.

Will they increase the dependence on welfare.yes

All my opinions.

 

[sptrawler]

You may have a point in theoretical point but we can't go back in time and increase taxes on super during the accumulation phase.

It also strikes me as a self-serving argument for the older generation. "Well we're over 65 now so it would be unfair to make any changes to how super is taxed in the pension phase but we recommend you tax super more heavily at the point of entry"

Now you are twisting my arguement, with spin.

I did say Obama's idea of a cap on super amounts is a good one.

My only arguement with Labors idea is the tax should be applied to the pension not the earnings.

If there was a cap on super balances, once the earnings adding to the principle reached that, they would have to be taken out of the super system.

I don't see your point, or maybe i'm on the wrong track, you sound knowledgable.

 

[FlyingFox]

Question for you sails, gg, and anyone else who is saying the recent announcement is unfair:
do you really think it's fair for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered?

I know when I first learned about that, I couldn't believe it.
Perhaps it's the 'thin edge of the wedge' in which case we have reason to be concerned, but on face value of what has been announced it seems to me to be simply addressing a tax dodge of the reasonably wealthy who would otherwise have still accumulated sufficient funds to fund their own retirement anyway.
Further, they will not be people who would have even considered voting Labor.

Personally I wouldn't mind it as much expect for the fact that we had very high concessional caps and no opportunity cost past retirement. Very little preventing you from taking out the money in lump sum and then getting a pension. Moreover the concessional caps are actually biased against the lower income earners. Many will not have enough liquid saving to actually make full use of them.

Firstly, let's not forget, the loss of tax is on savings that prior to compulsory super, wasn't there and wouldn't be there now. It is a percieved loss of tax.

No it's not a perceived loss of tax. If we did not have complusory super, we would get the extra income which would be taxed at marginal rates. It is an actual loss of tax. Compulsory super contribs is not magic money, you still earn it.

I take all your points Julia but will still fight against an ALP Government retrospectively changing the rules on my Super.

I resent an ALP Government strapped for cash taking MY MONEY, for mine it is, to get themselves out of a political hole.

They are not taking your money (well not yet anyway). They are just taxing your income above a rather high limit.

Second rates like Wong, Swan and Roxon retiring on $200,000 a year from the age of 45 indexed for life is obscene, and it is not good enough to say it will be addressed. It is obscene.

That's all the politicians mate....Start a partition.....Start your own political party.

And I do think it is fair for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered.

Because that is what we were promised.

Ahuh, now we come to the crux of the issue ... there were a lot of things promised and done for votes without foresight. However even in the face of hindsight, these "promises" are impossible to wind back due to the fact we all feel entitled to them. Even if they have very little impact on most people.

 

[FlyingFox]

Will the suggested changes reduce workers benefits,yes

Will they be thrown out in the next gfc event, yes.

Will they increase the dependence on welfare.yes

All my opinions.

How?

Read this if you think this will stop high come earners from saving and increase dependence on welfare

http://obs.rc.fas.harvard.edu/chetty/ret_savings.html

 

[sptrawler]

How?

Read this if you think this will stop high come earners from saving and increase dependence on welfare

http://obs.rc.fas.harvard.edu/chetty/ret_savings.html

So you think taxing the income and reducing compounding, is better than placing a cap and returning excess to the normal taxation system?

This IMO isn't about taxing high income earners, it's just another middle class tax.
If you think the ultra rich are going to be caught out by this crap, your dreaming.
Same as you won't catch the pollies paying it.

 

[tinhat]

Maybe Abbott wasn't so wrong after all:



Read more from SMH: Super plan contains a booby trap

Well, that's just going to push people towards fully franked dividends even more.

 

[Garpal Gumnut]

So you think taxing the income and reducing compounding, is better than placing a cap and returning excess to the normal taxation system?

This IMO isn't about taxing high income earners, it's just another middle class tax.
If you think the ultra rich are going to be caught out by this crap, your dreaming.
Same as you won't catch the pollies paying it.

Agree, mate, I thought I might have been in the 16,000, incredible to me as it may have seemed.

But on looking at it more closely I'm nearer to the 250,000th.

Many of my winners are growth not income assets, and I now plan to take the max from retirement super pension in case these silly bastards of the ALP ever get re-elected in my lifetime to implement this complete balls up of a policy, so that I end up below the 2mil.

And anyone who ends up in the 16,000 is a mug imo.

gg

 

[FlyingFox]

So you think taxing the income and reducing compounding, is better than placing a cap and returning excess to the normal taxation system?

Firstly the changes are only on the pension phase. The compounding thing does not matter much in this case. I don't mind them doing it either way. I think most will prefer the tax on income to going to the normal taxation system which will either have a much larger impact for them or have no increase in tax for the government.

This IMO isn't about taxing high income earners, it's just another middle class tax.
If you think the ultra rich are going to be caught out by this crap, your dreaming.
Same as you won't catch the pollies paying it.

Do you know many who would classify themselves as middle class that have > 2 million in super?

The rich will not be affected, hence the link. Just prevents them from exploiting a tax loophole.

 

[sptrawler]

Well, that's just going to push people towards fully franked dividends even more.

Abso bloody lutelly, you would be a goon not to.

 

[FlyingFox]

Agree, mate, I thought I might have been in the 16,000, incredible to me as it may have seemed.

But on looking at it more closely I'm nearer to the 250,000th.

Many of my winners are growth not income assets, and I now plan to take the max from retirement super pension in case these silly bastards of the ALP ever get re-elected in my lifetime to implement this complete balls up of a policy, so that I end up below the 2mil.

And anyone who ends up in the 16,000 is a mug imo.

gg

And what proportion of the population do you think are in the same boat as you and sptrawler?

What is the typical super return? I suspect it more in the vicinity of 10% than 30%.

 

[sptrawler]

And what proportion of the population do you think are in the same boat as you and sptrawler?

What is the typical super return? I suspect it more in the vicinity of 10% than 30%.

Well as the ASX has gone from 4000 to 5000 in the last 6 months, blind freddy would expect an index linked fund to do better than 10%.

 

[FlyingFox]

Well as the ASX has gone from 4000 to 5000 in the last 6 months, blind freddy would expect an index linked fund to do better than 10%.

I will avoid the cheap shot and not mention where the ASX has been prior

And that is where all your assumptions fall. The majority of people with super in the pension phase will not have a growth strategy as they are scared to loose it.

My semi-retired parents have all their savings in property and term deposits. They get ~ 6%. They couldn't care less about the market.

 

[sptrawler]

Firstly the changes are only on the pension phase. The compounding thing does not matter much in this case. I don't mind them doing it either way. I think most will prefer the tax on income to going to the normal taxation system which will either have a much larger impact for them or have no increase in tax for the government.
.

Well I thought you were knowledgeable, isn't the debate about sustainability, compounding in the pension phase is crucial.
The pension phase maybe 30 years with nothing going in, it is more important than the accumulation years where members are adding to the sum
Isn't it all about keeping the baby boomers off welfare? am I missing something, or are you?

One minute your saying it's unsustainable, next your saying, people would prefer to stay in the system.

I'm saying once the have enough in the system, any excess should be taxed normally.

Sorry can't follow your reasoning.
Just think the suggestions by Labor are crap and do nothing for sustainability

 

[Julia]

Very little preventing you from taking out the money in lump sum and then getting a pension.

This is an aspect that probably deserves more focus than the presently discussed policy. I wonder, though, how many retirees actually do this? If someone makes the effort to be self funded, it seems unlikely they'd want to spend up to $1M just to then eke out an existence on the meagre age pension.

Requiring people to take a percentage of their retirement funds in an annuity doesn't seem too unreasonable, but I suppose it would fail the "it's my money and I'll decide what I do with it" test.

So far, despite the intense interest in what is simply Labor's election policy, rather than something that will definitely happen, there has been relatively little focus on the Coalition's proposal to remove the small assistance in Super presently offered to low income earners. That seems a retrograde step to me, but I might be missing something here?

 

[sptrawler]

So far, despite the intense interest in what is simply Labor's election policy, rather than something that will definitely happen, there has been relatively little focus on the Coalition's proposal to remove the small assistance in Super presently offered to low income earners. That seems a retrograde step to me, but I might be missing something here?

+1 I too, can't follow the coalitions reasoning.

 

[sptrawler]

My semi-retired parents have all their savings in property and term deposits. They get ~ 6%. They couldn't care less about the market.

I know it is all speculation and I've probably done it to death. However if unrealised capital gains is thrown into the earnings mix, it will effect your parents.
Anyway probaly enough been said, I'll give the subject a break.

 

[craft]

So far, despite the intense interest in what is simply Labor's election policy, rather than something that will definitely happen, there has been relatively little focus on the Coalition's proposal to remove the small assistance in Super presently offered to low income earners. That seems a retrograde step to me, but I might be missing something here?

The retirement funding system should be thought about in a holistic way – Ie the cost of tax concessions + Pension payments.

The low income super rebate probably doesn’t do much to the overall funding cost of the demographic it touches – but it is a big measure in transferring the costs from the pension payment component to the tax concession component.

The tax concession cost occur earlier – removing this measure takes pressure of the budget now but pushes the cart down the road to when low wage /intermittent earners retire underfunded and will need to rely on the pension more heavily.

This really should be getting some scrutiny because introducing it was good policy – removing it is bad policy. However critiquing a Libral policy on ASF is akin to self torture – Best avoided I think.