Superannuation, the ultimate government cash cow?

[medicowallet]

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I am devastated completely devastated I tell you for those who have to pay the deficit tax:

http://www.brisbanetimes.com.au/fed...ring-an-age-of-inequality-20140516-38fc9.html

We have an excellent system that allows people to retrain / and have excellent opportunities in the system regarding employment that allows many to work overtime or get a second job.

Then again, incentivising people to forge their own path is more difficult than handing them other people's hard earned.

MW

I know this can sound callous, but so is the taxation treatment of people's income past 40 or 50 or 60 hours per week.

 

[Judd]

I haven't heard anyone complain about the increased tax levy and medicare levy on those earning $180k.

This thread is about superannuation.

Damn. Ever had one of those days when you wished you didn't cancel the appointment with the ophthalmologist?

 

[Judd]

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We have an excellent system that allows people to retrain / and have excellent opportunities in the system regarding employment that allows many to work overtime or get a second job.

Then again, incentivising people to forge their own path is more difficult than handing them other people's hard earned.

MW

I know this can sound callous, but so is the taxation treatment of people's income past 40 or 50 or 60 hours per week.

And are those hours worked by choice or by requirement. As one of many I assume, I have in the past worked weekends and after hours without additional pay or time off in lieu. Seems my tax stayed the same as did my pay.

 

[sptrawler]

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We have an excellent system that allows people to retrain / and have excellent opportunities in the system regarding employment that allows many to work overtime or get a second job.

Then again, incentivising people to forge their own path is more difficult than handing them other people's hard earned.

MW

I know this can sound callous, but so is the taxation treatment of people's income past 40 or 50 or 60 hours per week.

Yes medic, like the fifo's, 84hrs/week.lol 3weeks on 1 week off, 12hour shifts.

 

[sydboy007]

Yes, shame on the people who earn $180000 trying to minimise their own taxation by sacrificing to super WHICH IS TAXED EVERY YEAR AT A COMPOUNDING RATE, also funding their retirement so as to not be a burden on the following generations, whilst paying for an awful lot of things along the way, and often sacrificing their time and ability to experience life events to achieve their financial goals.

And what they can sacrifice (as it is taxed) is STILL taxed much higher than the effective marginal tax rate of lower income earners after government assistance.

shame shame shame.


I have no problems paying tax to support those who are in need, but to be insulted as they make an assumption that I get an unfair tax benefit by sacrificing to super (which as before is capped) is plain annoying. It shows a poor understanding of where net income tax revenue (after govt assistance) comes from

MW

With super "costing" around the $30B mark, that cost growing 3 times faster than the aged pension, is the current "plan" we have to help ameliorate the aging population actually the cheapest way?

Factor in the roughly $20B a year in fees to run it and the current plan costs more than the aged pension, and as things are currently going it will NEVER be cheaper than the aged pension. I just think it's not sensible to have a policy to save future spending that will always cost more than the savings.

So unless we can somehow get the Government to go the hard yards in explaining why we need to move away from taxing hard work and savings and towards taxing land, consumption and use of finite resources, not much is going to change.

I personally think it's silly to "pay" people lots of money to save when they would generally do the savings themselves.

Conversely I find it repugnant to charge poor people to save within super. Do you think it's fair to provide a bigger income in retirement to the already well off via tax expenditures? Sadly that's what the current super system is doing?

I'm not sure how we counteract the spend now rather than save for later mentality most people have, but maybe we have to slowly move towards the Singapore way where employers and people put in significantly more into their version of super - IIRC a combined 38%. We'd also have to cut back on the tax breaks otherwise income and other taxes will have to remain ridiculously high. The $30B cost of super is something like 20% of income tax receipts, so it's not an insignificant amount. Personally I think we'd be better off with lower income taxes and super contributions fully taxed with a tax discount on earnings. Tax free super pensions are also going to become less and less affordable unless you get the tax via a broadened GST. I don't think a taxation cum welfare policy based on age rather than need is also particularly generationally fair.

 

[sptrawler]

With super "costing" around the $30B mark, that cost growing 3 times faster than the aged pension, is the current "plan" we have to help ameliorate the aging population actually the cheapest way?

Factor in the roughly $20B a year in fees to run it and the current plan costs more than the aged pension, and as things are currently going it will NEVER be cheaper than the aged pension. I just think it's not sensible to have a policy to save future spending that will always cost more than the savings.

So unless we can somehow get the Government to go the hard yards in explaining why we need to move away from taxing hard work and savings and towards taxing land, consumption and use of finite resources, not much is going to change.

I personally think it's silly to "pay" people lots of money to save when they would generally do the savings themselves.

Conversely I find it repugnant to charge poor people to save within super. Do you think it's fair to provide a bigger income in retirement to the already well off via tax expenditures? Sadly that's what the current super system is doing?

I'm not sure how we counteract the spend now rather than save for later mentality most people have, but maybe we have to slowly move towards the Singapore way where employers and people put in significantly more into their version of super - IIRC a combined 38%. We'd also have to cut back on the tax breaks otherwise income and other taxes will have to remain ridiculously high. The $30B cost of super is something like 20% of income tax receipts, so it's not an insignificant amount. Personally I think we'd be better off with lower income taxes and super contributions fully taxed with a tax discount on earnings. Tax free super pensions are also going to become less and less affordable unless you get the tax via a broadened GST. I don't think a taxation cum welfare policy based on age rather than need is also particularly generationally fair.

One hopes the 'white paper' comes up with a fair and equitable system.

I heard in the budget, the income from super will be deemed and the pension reduced by 50c for every dollar above approx $7500. Can't see that encouraging people to put extra in, but should save some money,maybe.

 

[sydboy007]

One hopes the 'white paper' comes up with a fair and equitable system.

I heard in the budget, the income from super will be deemed and the pension reduced by 50c for every dollar above approx $7500. Can't see that encouraging people to put extra in, but should save some money,maybe.

Super is a tax effective way to save for retirement.

We have to stop talking like it's the ONLY WAY to save for retirement.

I somehow doubt the rentier class will be as likely to want cuts to the tax expenditures they receive as they are with cuts to welfare and other forms of Govt spending. The problem is this Government is being too ideologically based in most of it's decisions. They need to be far more inclusive on the reports they've commissioned. They might actually get a better buy in from the public if they did.

I'm fully supportive of the direction Abbott wants to go, but so far I'm mostly against how he wants to get their.

 

[sptrawler]

Super is a tax effective way to save for retirement.

We have to stop talking like it's the ONLY WAY to save for retirement.

I somehow doubt the rentier class will be as likely to want cuts to the tax expenditures they receive as they are with cuts to welfare and other forms of Govt spending. The problem is this Government is being too ideologically based in most of it's decisions. They need to be far more inclusive on the reports they've commissioned. They might actually get a better buy in from the public if they did.

I'm fully supportive of the direction Abbott wants to go, but so far I'm mostly against how he wants to get their.

The problem for the rentier class is, welfare is by far the biggest Government cost and it is growing the fastest , therefore it is obvious it will be reigned in first. Sad but not unexpected.

 

[Julia]

I personally think it's silly to "pay" people lots of money to save when they would generally do the savings themselves.

If they did generally do the saving themselves, of course everyone would agree with you.
The problem is that most people don't. Even with the compulsory super, most people don't even take a few minutes to work out whether that will, over their working lives, provide a sufficient income in retirement.

As is all too evident from current stats on super balances at retirement, it's on the whole massively inadequate.

 

[sptrawler]

If they did generally do the saving themselves, of course everyone would agree with you.
The problem is that most people don't. Even with the compulsory super, most people don't even take a few minutes to work out whether that will, over their working lives, provide a sufficient income in retirement.

As is all too evident from current stats on super balances at retirement, it's on the whole massively inadequate.

Very true Julia, the super system was introduced because Australia had poor savings and exposed us to a huge fiscal shock in the 1987 stock market collapse.
Westpac, ANZ and NAB nearly collapsed, because all their funding was from overseas and they had huge exposure to highly geared Australian companies, eg Bond, Skase, Adelaide Steamships.
When the dust settled Hawke/Keating introduced the super gaurantee sytem to build an Australian savings fund, that the banks could access.

Even Keating, the other night on lateline, said it was a furphy that the super system was costing money.
It is a smoke and mirrors B.S story that is beat up.
If we didn't have super, there wouldn't be the money there to tax, it would have been spent.

 

[sydboy007]

If they did generally do the saving themselves, of course everyone would agree with you.
The problem is that most people don't. Even with the compulsory super, most people don't even take a few minutes to work out whether that will, over their working lives, provide a sufficient income in retirement.

As is all too evident from current stats on super balances at retirement, it's on the whole massively inadequate.

Then rather small tinkering around a system that doesn't achieve the aim of reducing the aged pension costs on the budget, that only benefits the top 10-15% of income earners and the minority below that who have the ability and sense to take advantage of the tax benefits.

So we have a very well known problem that the current 9.25% of super will not benefit the majority of people. We've known this for over a decade. Why haven't we done anything about it? Why is it still not on the agenda?

 

[sydboy007]

If we didn't have super, there wouldn't be the money there to tax, it would have been spent.

Um, I somehow don't theink the 1.8T of money would have magically disappeared. It would have just been standard income taxed at standard income rates.

I'm not saying don't have super, I am saying we should be moving towards a much higher level of saving, along with a a cheaper and simpler system. We could look to Singapore and Norway and take some of the better parts of their systems and introduce them. We don't have to reinvent the wheel.

 

[sptrawler]

Um, I somehow don't theink the 1.8T of money would have magically disappeared. It would have just been standard income taxed at standard income rates..

We didn't have national savings pre super, we wouldn't have had national savings post super.
One just has to look at the debt binge since the 80's, if you think people would have put away money for their retirement, you're away with the fairy's.

I'm not saying don't have super, I am saying we should be moving towards a much higher level of saving, along with a a cheaper and simpler system. We could look to Singapore and Norway and take some of the better parts of their systems and introduce them. We don't have to reinvent the wheel.

And no doubt we will, at present the system is in its infancy, the problem is everyone wants a piece of it. Most people nearing retirement, that I know have $100 - 200k in super.
Using Singapore is silly, it is a one party democracy, that owns most of the residential property. You pay for your pension, you buy your flat off the government.

 

[sptrawler]

Then rather small tinkering around a system that doesn't achieve the aim of reducing the aged pension costs on the budget, that only benefits the top 10-15% of income earners and the minority below that who have the ability and sense to take advantage of the tax benefits.

So we have a very well known problem that the current 9.25% of super will not benefit the majority of people. We've known this for over a decade. Why haven't we done anything about it? Why is it still not on the agenda?

Another thing that could be done Syd, why not have all Lotto wins above say $250k have to be put in super, why should people be allowed to spend their wins and pick up a pension. They picked it up tax free

Also if you inherit money or property to a value greater than $250k it must be put into super, why should they be able to spend it and obtain a pension. They picked it up tax free.

Why are you only worried about people who put their own money in super spending it? They paid tax on it.

Just wondering

 

[medicowallet]

Sure sydboy.

Instead of the costs of the 30k per year into super then hiw about the people just negatively gear a new inv property every few years or so it costs the gov and society even more


Gee next thing you will be calling for no tax deductions for people on gigh incomes because they benefit more from them as opposed to people who pay no net tax


When you eventually start earning a high income and are paying more tax then most earn, i am sure that each hour of overtime or each weekenf you dont spend with your children will be offset by the warm fuzzy feeling you get knowing that your middle income neighbour had a barbecue with their kids in their mcmansion subsidised by fta ftb etc. It is mcw that is draining the tax take, not the tax take of high income earners

Mw

 

[FxTrader]

Can I just say WOW that the top 10% of income earners get more super tax breaks than the bottom 60%

The present system for taxing superannuation contributions is blatantly inequitable. An individual with an income of $60 000 faces a marginal tax rate of 32.5% (not including the Medicare Levy), and pays 15% on super contributions. This is a concession of 17.5 percentage points. A high-income earner on $180 000 or more receives a concession of 30 points

Quantifying this tax concession imbalance for those under 50 on the top marginal rate, the net benefit is $3,125. For those over 50 it's $4,375. This benefit is capped by maximum contribution limits of course. IMO, the best way to deal with this inequity is to reduce or eliminate contributions tax for lower income earners (as with the LISC) - something the current government will not do because their core constituency are the wealthy (Abbott and co. clearly believe in trickle-down economics). It should now be quite clear to low and middle income earners who voted for the Abbott government that they have been deceived.

Treasury analysis shows that high income earners benefit far more than low-income earners from superannuation tax concessions (including those associated with contributions, earnings, and withdrawals).9 It shows that the top 10% of income earners received 38.2% of superannuation tax concessions in 2009-10. This is more than the share of the bottom 60%, combined. The bottom 10% received a negative share of the total, as they paid more on their super than on other income. The analysis also shows that the support given to high income earners in the form of superannuation tax concessions exceeds that enjoyed by lower income earners in the form of the age pension. The Treasury found that “the top 1 per cent of income earners received the most combined support,” taking both the age pension and super concessions into account.

Not doubt this data is explained by the fact that the wealthy can afford to contribute the maximum amounts permitted.

Tax expenditures associated with super are estimated to be worth $31.8 billion in 2012-13, rising to $44.8 billion by 2015-16.10 Unions support the concessional taxation of superannuation, but these concessions must be sustainable and equitably distributed. This is not currently the case. The Commission must recommend reform to the size and distribution of these tax expenditures if it is to seriously grapple with the medium to long-term budget pressures facing the Commonwealth.

There must be an incentive for people to save for retirement with more becoming self-funded. The cost of funding pensions for an aging population into the future is more of a concern than the immediate cost of tax concessions for super.

There are other uncapped tax concessions that deserve more of your and the governments attention like those provided to property investors, capital gains tax reduction, dividend imputation etc. It's tax advantaged vehicles such as this that are major contributors to wealth concentration in society.

 

[sptrawler]

There are other uncapped tax concessions that deserve more of your and the governments attention like those provided to property investors, capital gains tax reduction, dividend imputation etc. It's tax advantaged vehicles such as this that are major contributors to wealth concentration in society.

+1 hit the nail right on the head there fx trader.

 

[medicowallet]

+1 hit the nail right on the head there fx trader.

yeah but it is not politically or socialistically cool to do so because only the people who contribute by far the most in tax do it.

Everyone else does negative gearing into property which is far more detrimental to society and government finances, although it is sooooo cool to rip people off behind the guise of being a battler.


MW

 

[Bill M]

Be warned everyone, particularly younger people, even 50 year olds take note. Joe Hockey has mentioned that they are going to look at changing when you will be able to access your super, it's on his mind and Abbott's mind. Be careful!

Go to the "retirement age" section at around the 56th minute. Watch the section with the guy in the red polo Shirt.

http://www.abc.net.au/tv/qanda/txt/s3989246.htm

If I was a younger person I would think long and hard before I put anything extra into super, you might not be able to get it until 70........

 

[rryall]

Be warned everyone, particularly younger people, even 50 year olds take note. Joe Hockey has mentioned that they are going to look at changing when you will be able to access your super, it's on his mind and Abbott's mind. Be careful!

Go to the "retirement age" section at around the 56th minute. Watch the section with the guy in the red polo Shirt.

http://www.abc.net.au/tv/qanda/txt/s3989246.htm

If I was a younger person I would think long and hard before I put anything extra into super, you might not be able to get it until 70........

Yeah I have to admit this has me a little concerned. I'm a 30yo business owner making the maximum 25k contribution each year for tax purposes. I think he mentioned a 5 year differential between the pension age and accessing super which would mean 65 for accessing super down the track. I'll certainly be frustrated if I have a nest egg saved up which I can't access because the goal posts have been shifted after I have made my contributions. Long live the baby boomers..