I'm referring to the big wet kiss Howard gave the boomers in the form of a tax free superannuation pension.
Superannuation, the ultimate government cash cow?
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I'm referring to the big wet kiss Howard gave the boomers in the form of a tax free superannuation pension.
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Oh so you are talking about the ones who paid 15% contributions tax and 15% on its earnings.
Not the ones who get $30k tax free + upto $300k in the bank + perks.lol
As GG said everyone should blow their super and the younger generation shouldn't put any extra in.
We may as well all sink together.
I'm not baby boomer and I don't have an issue with it...how many times do you want to tax the guys who want to fund their own retirement? you got to give them some sort of incentive
you already get tax 15% in, 15% on earning so your out should be tax free, that is how it operate around the globe you get tax twice not three times....
or the labor way tax everyone out of their business (job creations), tax all the savers (Capital to fund business and projects) you end up....with a nation where no one want to do anything, spent every cent the got and wait for hand out...
All communist countries tried the socialist model and they all failed...spread the wealth good for everyone they said....even China now embrace the capitalist model.....
There is nothing wrong with having tax concessions on super as long as they can't be abused. The problem is that for a few years we had concessional super caps of up to $100K (still $50K) and very weak restrictions on keeping the money in super post retirement.
Not much use you saving for retirement if you then blow it or spread it via creative accounting and go on the pension. Or that you use super to do estate planning.
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I think a young person would be dumb to put extra money into super.
The government has let the 'cat out of the bag', it will be taxed, it will be seen as an assett not as savings that offset government handouts.
Don't bother with the small tax saving on extra contributions, invest tax effectively outside super.IMO
The government has let the 'cat out of the bag', it will be taxed, it will be seen as an assett not as savings that offset government handouts.
Don't bother with the small tax saving on extra contributions, invest tax effectively outside super.IMO
and you think without super they cant do it other ways
try Hybrid Discretionary Trusts
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Just to remind you that it was Labor that brought in Dividend Imputation to reduce the double taxation of this source of income.
The major issue I have with super now is:
- TRiP being abused to increase minimally taxed super payments. Surely this would be a relatively easy loop hole to shut. Estimates are for a $300M p.a saving
- People able to build up personal debt then use a lump sum from their super to pay it off then gain access to a full or partial pension.
If we have to leave the minimal taxation of super in place then people should have to use it to take a pension. Maybe some adjustment at the very low end of things so that someone getting say 5K pension would retain most of their OAP, but in general terms I don't se that super is being cost effective in minimising the OAP cost to the budget.
The dependency ratio starts to take off from around this year. Demands on the Govt are going to increase as the number of 65+ really starts to take off. Where does the revenue come from to support this? What expenditure gets cut?
I'm starting to think we should just outsource all super management to the Norwegian SWF, save around $20B in fees to the financial industry, and have the Govt come up with some simple formula to say you put this much in, you get this much pension for life. Limit the amount of pension to say $25K a person, indexed to AWE. Simple and so much cheaper to run.
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I'm beginning to think, just disband super, let people get back to spending the money they earn.
Let Australian banks go back to borrowing from overseas, why put away money you could use now. If the government can blackmail you with it later?
Much better to get extra in the pay packet and pay off the home, or invest in a negative geared property or shares.IMO
Except that the government may not be able to afford the pension in the future....
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But according to Syd and the boys, they can't afford you to save and not take a pension?
It beats the hell out of me.lol
Pizz it up to the wall and sod it, I reckon.
If you save your money your a goose, if you spend it you are the poorly hard done by.lol
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By the way SydBoy, I think old people and there super is the least of your problems.
The obesety and diabetes related health cost of your generation, is going to be far more of a cost issue.
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By the way SydBoy, I think old people and there super is the least of your problems.
The obesety and diabetes related health cost of your generation, is going to be far more of a cost issue.
That issue is across all age ranges
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I keep thinking about how to achieve the goals of super at the lowest cost.
To me the flat tax nature of the scheme is probaly why it costs so much.
I think the main issue though is that everyone has different ideas about what super is really about.
My POV is that it is mainly to minimise the impact of the OAP on the budget in 20+ years time.
Secondary issues are providing a reasonable base income for retires, and to provide support to the domestic economy by having the retired population with enough income to support the service economy.
So I suppose it all boils down to what is a reasonable base income.
A lot of people on ASF argue that $1 million in savings is the minimum required, since 5% provides $50K each year. That seems quite a high income, especially when it is tax free ie it is equivalent to $63K paying the usual tax. That is higher than AWE, so people are arguing that a comfortable retirement requires an income greater than ~60% of the population receives during their working lives. If that figure was for a couple, then I could accept that as being reasonable.
So I think it's better to first get a broad acceptance as to what is the maximum level of income that the Govt should subsidise us to achieve in retirement? I often think it would be better if people saw their marginal tax rate taken out of their super, then a Govt payment into the super as a credit less the 15% tax. This should also be done for any tax on earnings as well. It would allow people a better grasp as to what super is costing the budget. We also need to determine what is the minimum level to be achieved - most likely this will be a combination of OAP and pension funded by super.
Until we can have broad acceptance on minimum - maximum Govt supported retirement income, I don't see how super policy can really move from an argument over tax.
To me the flat tax nature of the scheme is probaly why it costs so much.
I think the main issue though is that everyone has different ideas about what super is really about.
My POV is that it is mainly to minimise the impact of the OAP on the budget in 20+ years time.
Secondary issues are providing a reasonable base income for retires, and to provide support to the domestic economy by having the retired population with enough income to support the service economy.
So I suppose it all boils down to what is a reasonable base income.
A lot of people on ASF argue that $1 million in savings is the minimum required, since 5% provides $50K each year. That seems quite a high income, especially when it is tax free ie it is equivalent to $63K paying the usual tax. That is higher than AWE, so people are arguing that a comfortable retirement requires an income greater than ~60% of the population receives during their working lives. If that figure was for a couple, then I could accept that as being reasonable.
So I think it's better to first get a broad acceptance as to what is the maximum level of income that the Govt should subsidise us to achieve in retirement? I often think it would be better if people saw their marginal tax rate taken out of their super, then a Govt payment into the super as a credit less the 15% tax. This should also be done for any tax on earnings as well. It would allow people a better grasp as to what super is costing the budget. We also need to determine what is the minimum level to be achieved - most likely this will be a combination of OAP and pension funded by super.
Until we can have broad acceptance on minimum - maximum Govt supported retirement income, I don't see how super policy can really move from an argument over tax.
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Just as a little exercise I thought I'd see what the Govt subsidy would be for 4 different people over a 40 year working life.
Starting income of 35K, 50K, 80K, 100K
Assume 3% income growth p.a
Assume tax rates stay the same
I've taken the increase in super from 9 to 12% into account.
I've not taken inflation into account - my excel skills aint that good
So after 40 years how much Govt subsidy does each person get on their contributions?
35K: 67,200
50K: 103,400
80K: 200,808
100K: 266,425
Now I do accept that it's quite unlikely for someone to start earning at 100K from the get go, but it does help to illustrate just how fast the subsidy grows with increasing income.
If I get the motivation I might try to determine how much subsidy goes into the fund earnings as well.
Starting income of 35K, 50K, 80K, 100K
Assume 3% income growth p.a
Assume tax rates stay the same
I've taken the increase in super from 9 to 12% into account.
I've not taken inflation into account - my excel skills aint that good
So after 40 years how much Govt subsidy does each person get on their contributions?
35K: 67,200
50K: 103,400
80K: 200,808
100K: 266,425
Now I do accept that it's quite unlikely for someone to start earning at 100K from the get go, but it does help to illustrate just how fast the subsidy grows with increasing income.
If I get the motivation I might try to determine how much subsidy goes into the fund earnings as well.
I don't understand one sided rationale like this. A complex tax system cannot be evaluated by individual component.
Why don't you have a look at overall tax paid?
Who is subsidizing who in the big picture?
Do you think that higher income earners with private health cover and privately educated children (who receive less of a subsidy per head than publicly educated children) cost the government more or less than the lower earners that have lower rates of both of the above?
How much extra GST revenue is generated by the higher levels of discretionary consumption that comes with having more disposable income?
Just how badly does everyone want to live in a country that provides no incentive to excel?
The rationale that they should be paying more because they can afford to is fine by me, it is a reasonable way of providing quality services for all without overly punishing those at the top end of the spectrum. What I do have a problem with is that there seems to be an ever expanding creep in how far people think it should go.
As an example, if we assessed household income (just spouses, not children) as one tax return and didn't punish families with one income earner's income being substantially greater than the other, we could do away with a lot of the rationale behind family trusts and other tax strategies that people utilise to distribute income.
There are plenty of ways you can remove the protective shell around the abusers without unnecessarily punishing the successful. Why that isn't the focus of legislators of all persuasions, sheeple around Australia and commentators on forums like this is beyond me. Success isn't a sin, maybe you all just aren't aiming high enough?
The threshold at which you are now considered worthy of being targeted to help pay for bogans to smoke bongs on couches all day is not out of reach for anyone with any interest in improving their financial position - and I don't think it's unreasonable to say that that would be every single person on this forum.
We don't need to be in a race to the bottom, our wealth relative to the rest of the world is only going to decrease in the future.
Anyone outraged at how well off other people in Australia are relative to them is a fool. Open your eyes, you're already at the top of the food chain of the 7,000,000,000 human beings on this planet.
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I suppose what I'm trying to show is the other flip side to the high income earners are being taxed like crazy, super is providing them a significant tax shelter.
I don't think people realise just how costly super is, and I'm starting to question whether it's the most economic way to provide a decent income in retirement for the majority.
I do agree with you we need a root and branch total redesign of the tax system in this country, and I also believe there is 0% chance of this happening till we are in an economic crisis and the human costs of the required change at that point are far more expensive than if we do them soon.
Too many vested interests that have seen what the mining companies and clubs have achieved by crying poor to the MSM. No Govt will have the cajones to make any changes, and the ability to have costless changes is behind us.
As for giving more breaks to families, well they already get a far bigger slice of Govt spending than single or childless couples. In general terms that's fair, but as a single tax payer seeing around $28-30K a year of tax siphoned away I am starting to feel a bit of resentment toward the whole system. It's deigned to reward speculation and punish slow and steady investments with savings rather than loading up with debt. Maybe I should play to the system, but after paying my house off I have an aversion to debt.
If anyone would like to have a play with a spreadsheet I've made up, I've added some extra capabilities to show the level of govt subsidies on
Super levy payments
Income earned within super
You can change 3 variables to see how different scenarios play out. Hopefully my math and excel skills haven't been faulty.
Great post Vix. As you have highlighted, there are more things wrong with the overall system then just super. And I agree with you that the system can be (easily?) altered to prevent abuse.
I think the some of the previous posts have been trying to highlight the cost of super concessions and are not necessarily an attack on the wealthy or wealth. However some of the allowances have been very generous and are not sustainable and will mean more tax down the road....guess who will bear the brunt of that?
In light of all the imbalances that do exist in our system and tax system, it is only prudent that we look at all of them.
As for the super case, there was a paper about a Scandinavian country where they changed or reduced subsidies a while back. Basically they found very little change in the savings habits. People who were earning more were saving outside the system and that the best way to increase super savings was to have mandated rates (like 9% here). I will try and find this on the weekend.
As to your question "Just how badly does everyone want to live in a country that provides no incentive to excel?" ? We are almost there, no?
I think the point is that if you look at the overall tax paid by that person on their income and investment income, the 'significant shelter' being provided is not such a huge injustice and slap in the face of the everyman.
In return for tax relief they are locking away money that will be used to ensure they are not a significant burden on the government in retirement via the pension system. I can tell you right now that I won't be putting a dollar more into super than I have to. I don't care if all it does is fund my insurance premiums so my family can be protected. I don't want tax incentives that come with string attached, because over a short period of time we've seen the strings pulled tighter and there is no recourse for the puppets with the locked up money.
Superannuation needs to be addressed but tax law even disregarding superannuation is disgustingly complex. The amount of legislation that affects a tiny fraction of the population is phenomenal.
The proposed example wasn't about giving families more perks, it was just an example of a whole sector (Family Trusts) that don't add value to the economy. They are just inter-generational wealth vehicles. The benefits and subsidies received by families that singles and partners don't receive is a huge difference, I agree. I used to feel like you about that, but funnily enough as I get closer to the stage of life where I want to start my own family I'm becoming a little more forgiving.
As for your aversion to debt - nothing wrong with that at all. It's a decision that you can't really fault as long as you understand that you aren't likely to save your way to greater wealth, and the fact is that it's not in the government's interest to reduce the amount of leverage going around.
Borrowed money for investment adds multiple sources of revenue to the government, and there's nothing wrong with speculating on the future success of businesses or value of land - every single business is in the game of speculation.
A $100,000 loan generates interest revenue for the lender (profits taxable).
The borrower looking to invest is presumably going to be aiming for a return greater than the price they borrowed at (capital gains and dividends/rental income taxable).
Then there are the transaction costs (brokerage revenue for the broker being taxable, stamp duty for real estate, selling commission for real estate agents - taxable, goods and materials bought to renovate - GST payable to the govt, work done by the tradesman, GST payable, income tax payable.....you get the point. )
All that revenue from someone saying "I can earn more with this money than you can."
Utopia for the government coffers is a country where we have jobs, believe they are there to stay, are making a profit as a household and can afford to invest in our own futures independent of government involvement. Under those conditions people are more comfortable using leverage. If we have a government that believes that we will be better off as a country.
I'd rather they hit super with the massive force that they want to and then leave it alone for 20 years so that people can adjust. This incremental sliding has been going on too long to be acceptable to people as a temporary phase and has become the new normal.
People receiving good advice would have been the only people using it. Everyone else would pretend it isn't there.
Not yet mate. There is still plenty of scope to excel in this country. Quite frankly though, unless the calibre of politican improves then we'll be left with dickheads on both sides of the fence.
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