Superannuation, the ultimate government cash cow?

[Bill M]

Take as much money out of your super as you can between now and May 2013.

Because Wayne Swan will tax it mightily if you take it out after that date.

Nah I don't think they would be that silly to do it during an election year. It would only be more amo for Abbott to use against labor and would alienate some of their supporters. I reckon they will leave it alone for this year.

If they go down that track, why would people put money into super, currently a married couple can recieve $36k before paying income tax.
I can see they may remove the tax free pension after 60 and replace that with a standard 19% offset.
This would bring it more in line with standard income tax brackets.

Exactly, the more they slug the less likely people will contribute. I am sweating it as it's near collection time for my wife and I and the last thing we need is a big change at this time.

 

[sptrawler]

Nah I don't think they would be that silly to do it during an election year. It would only be more amo for Abbott to use against labor and would alienate some of their supporters. I reckon they will leave it alone for this year.



Exactly, the more they slug the less likely people will contribute. I am sweating it as it's near collection time for my wife and I and the last thing we need is a big change at this time.

Snap, you're not Robinson Crusoe, if they keep messing with super people will get out.
Prior to super being introduced, everyone spent what they earned and hoped to pay off their house, by the time they retired.
Now people have placed faith in the super system and saved money to fund their retirement. The government is seeing those savings, which previously wouldn't have been there as a loss of tax base.
Typical dumb ideology, well tax the crap out of it, I for one will pull my contributions out and as GG says, enjoy myself spending. For the first time in my life.

The other thing that gets up my nose is, I have worked continuosly since I was 15 and paid tax.
Yet because I have saved and done without, I'm told I am likely to spend my money in order to access some welfare. These people adopting this attitude must be judging me by their own principles and don't seem to give any credit to the retiree.
What about people who haven't paid any tax in their life and recieve a full pension?
What about people who come here in their 40's or 50's and recieve a full pension?
No much easier to tell the ones who have done without and saved, to spend all their savings. Yes that sounds fair and reasonably and promotes a society of workers and savers. What a joke

Maybe adopt the German model, where the maximum amount of pension you qualify for is proportional to the number of years in the workforce. Obviously someone has to be fit and able to work.

 

[prawn_86]

promotes a society of workers and savers. What a joke

When has any government every encouraged savers? The whole Western capitalist ethos is based around consumption and spending. In fact you are better living outside your means, or at least treated equally, especially if you are a too big to fail institution...

 

[sptrawler]

When has any government every encouraged savers? The whole Western capitalist ethos is based around consumption and spending. In fact you are better living outside your means, or at least treated equally, especially if you are a too big to fail institution...

Well maybe the focus is too much on the retiree.
How about, the earnings in accumulation phase is taxed at the marginal tax rate of the individual. They are getting a tax break putting it in. As the capital increases so the tax increases. The rich who put more in, pay more tax.
Then make access to the pension, as I've said, proportional to years in the work force, while still making it means tested. Then people sitting on their ar$e on welfare, will think twice. No different really than making single parents go on job search, when the kids are 8 years old.

 

[sptrawler]

Actually I wonder what Sydboy thinks of the concept?
It would make super much more of a level playing field. Low income earners pay no contribution tax, higher income earners pay 15% with a cap of say $50k.
Then the earnings are taxed at the tax payers gross income rate, that would stop tax effective loans to reduce taxable income.
Cuts out middle class welfare, gives low income earners an incentive to save and stops high income earners dumping after tax money into super.
To keep focusing on diminishing the end benefit, is counter productive, to build equality in the amassing of the benefit is intelligent.
But I haven't seen anything yet to convince me someone really cares, as long as they have someone to blame.
At the end when you draw a pension, all the earnings are tax free and the income is treated as taxable.

 

[IFocus]

Nah I don't think they would be that silly to do it during an election year. It would only be more amo for Abbott to use against labor and would alienate some of their supporters. I reckon they will leave it alone for this year.

Exactly, the more they slug the less likely people will contribute. I am sweating it as it's near collection time for my wife and I and the last thing we need is a big change at this time.

It was Labor (Keating) that drove super and had plans to raise it higher under Howard he refused to raise the level instead bought votes from the middle class (Howard battlers) instead we all know how thats going.

I wouldn't expect Labor to hurt super (but who knows) but the coalition will win government this year and have promised surpluses, Sydboy has pointed out the $30 bil pot of gold who knows where it will go but I don't expect any enhancement for super.

If any thing expect tax and rules for mandatory contributions.

 

[sptrawler]

It was Labor (Keating) that drove super and had plans to raise it higher under Howard he refused to raise the level instead bought votes from the middle class (Howard battlers) instead we all know how thats going.

Well If you think about it there is a problem already with the contributions at 9%.
One would assume that problem is going to become bigger as contributions rise to 12%.
It is obviously another case of this government going off half cocked as usual.

 

[banco]

Snap, you're not Robinson Crusoe, if they keep messing with super people will get out.
Prior to super being introduced, everyone spent what they earned and hoped to pay off their house, by the time they retired.
Now people have placed faith in the super system and saved money to fund their retirement. The government is seeing those savings, which previously wouldn't have been there as a loss of tax base.
Typical dumb ideology, well tax the crap out of it, I for one will pull my contributions out and as GG says, enjoy myself spending. For the first time in my life.

I would be surprised if, within the next 5 years, there weren't limits imposed on how much you can withdraw and spend from super.

 

[sptrawler]

I would be surprised if, within the next 5 years, there weren't limits imposed on how much you can withdraw and spend from super.

Well then why would you put extra money in?
Why wouldn't you just enjoy the money now? and allow the government to pick up the slack.

I think there won't be a limit of withdrawls when in the pension phase, because as everyone says, it's costing a fortune(better they take it out).
Therefore there is more chance of an increase of taxing on the accumulation phase.
Even if they place an exit tax on withdrawls it can only be on taxable contributions, after tax contributions have to be tax free otherwise it's double taxing

 

[banco]

Well then why would you put extra money in?
Why wouldn't you just enjoy the money now? and allow the government to pick up the slack.

I think there won't be a limit of withdrawls when in the pension phase, because as everyone says, it's costing a fortune(better they take it out).
Therefore there is more chance of an increase of taxing on the accumulation phase.
Even if they place an exit tax on withdrawls it can only be on taxable contributions, after tax contributions have to be tax free otherwise it's double taxing.

Admittedly I haven't seen figures that confirm this but I suspect the ones that have the cash to put much extra in aren't the ones that are likely to end up on the age pension because they run out of cash relatively early in their retirement. In other words if the net effect of generous treatment of extra payments into super is that well off retirees have a more comfortable self-funded retirement then they otherwise would have it's not clear that it's a good trade for the taxpayer.

I'm not sure a cash strapped Government will share your philosophical opposition to double taxation.

 

[sptrawler]

Admittedly I haven't seen figures that confirm this but I suspect the ones that have the cash to put much extra in aren't the ones that are likely to end up on the age pension because they run out of cash relatively early in their retirement. In other words if the net effect of generous treatment of extra payments into super is that well off retirees have a more comfortable self-funded retirement then they otherwise would have it's not clear that it's a good trade for the taxpayer.

This is what I was alluding to, the younger ones are going to be enticed to cut off their nose to spite their face.

At the moment the numbers being thrown around are garbage IMO. They are saying the money in super(if it was taxed as savings) are costing them a fortune, just more smoke and mirrors.

Before super the exposure to overseas borrowings was massive, we were the same as Greece, Spain ,Italy.

Now that there is compulsory saving (which was taken out of wage rises) the government sees it as a loss of revenue.
Well why don't they ask the workers, would you like your super raised to 12% or a 12% pay rise?

The ones that put extra money in will obviously have a better retirement, that is how it is meant to work. Why else would you put extra money in?

 

[sptrawler]

I'm not sure a cash strapped Government will share your philosophical opposition to double taxation.

On that basis, if you put your after tax contribution into super, its earnings are taxed at 15%, no tax free threshold.
If they decide to tax your withdrawl of that money, why would you put it in super?
They would have a mass exudus of after tax withdrawls, super funds would collapse overnight.lol

Its a bit like having money in the bank, if they taxed you on the interest and then tax you when you take it out. Why would you put it in the bank?

 

[banco]

On that basis, if you put your after tax contribution into super, its earnings are taxed at 15%, no tax free threshold.
If they decide to tax your withdrawl of that money, why would you put it in super?
They would have a mass exudus of after tax withdrawls, super funds would collapse overnight.lol

Its a bit like having money in the bank, if they taxed you on the interest and then tax you when you take it out. Why would you put it in the bank?

I don't think the supersystem as a whole is nearly as dependent on additional payments as you think. Withdrawals could still be taxed at a concessional rate (rather than as ordinary income).

 

[gav]

Its a bit like having money in the bank, if they taxed you on the interest and then tax you when you take it out. Why would you put it in the bank?

My income gets taxed. I then use part of that taxed income to buy some shares. I sell 6 months later at a profit. I get taxed again. I then put that money in a savings account, which gets taxed again.

 

[sptrawler]

I don't think the supersystem as a whole is nearly as dependent on additional payments as you think. Withdrawals could still be taxed at a concessional rate (rather than as ordinary income).

I agree, what I'm saying is that your after tax contribution can't be taxed when you withdraw it.
Of course, the taxable, component can be taxed any way they see fit.

Of course the proportioning rule complicates it somewhat, but that is another issue.

 

[sptrawler]

My income gets taxed. I then use part of that taxed income to buy some shares. I sell 6 months later at a profit. I get taxed again. I then put that money in a savings account, which gets taxed again.

Obviously I phrased something wrong.
The banking example, was saying, if you put $1000 in an account and it earns 10%. Then the $100 is taxed at your marginal rate, if then you decide to withdraw that $1000 they can't tax you on it.
The same goes for super, if your account has $1m of that $500,000 is after tax contributions and $500,000 has had a concessional treatment. Therefore 50/50 ratio of funds are taxed and taxable
When you withdraw the funds, the original after tax contribution 50% has to be returned tax free.
If when you withdraw it you buy shares or make an investment with it. Of course then any earnings are taxable, the original investment isn't.

Obviously we are drifting off track.

 

[sptrawler]

Now this is the super everyone wants.

http://www.heraldsun.com.au/news/retiring-mps-have-income-for-life/story-e6frf7jo-1226570330900

$120,000 tax free and indexed for life, starting from when she leaves parliament. All that after just 15 years, not bad if you can get it.
The same people say our SMSF are unsustainable. What the

 

[sptrawler]

At last someone has started to think about the issue, I can see a backlash coming.

http://www.abc.net.au/news/2013-02-06/kohler-super-budget-dilemma/4503262

 

[Julia]

"The Australian" is reporting that the government is considering the threshold for this as only $800K!!

 

[sptrawler]

"The Australian" is reporting that the government is considering the threshold for this as only $800K!!

This would be the first stage of the Government taking over super.IMO
$800K would only give a return similar to the pension, therefore it would indicate, anyone earning more than the pension should be taxed.
I don't think workers will like this one. It will be as bad as work choices was for the Libs