Superannuation, the ultimate government cash cow?

[Julia]

The UK might have a similar system to NZ which has universal superannuation. It is not means tested but forms part of an individual's taxable income. There is no tax free threshold in NZ. Every dollar of income incurs tax.

Probably a whole lot more simple to administer and probably more functional.

 

[sptrawler]

The UK might have a similar system to NZ which has universal superannuation. It is not means tested but forms part of an individual's taxable income. There is no tax free threshold in NZ. Every dollar of income incurs tax.

Probably a whole lot more simple to administer and probably more functional.

Yes, absolutely a better system.
We had the same system, before the Government absorbed the universal welfare tax, and said they would pay pensions from consolidated revenue.

The NZ welfare model is certainly standing up better than ours.

 

[sydboy007]

Another thing Syd, why do you keep using hyperbole terms, to make mileage.

A while back, I, with limited knowledge of accounting posted. On 15th June #932.

Also you say super tax expenditure will cost $x that is a bit of a furphy, it isn't an expenditure, isn't it a non collection.
Expenditure is an outgoing, from memory, like the pension.

Now when I get back from a trip away apparently you're still going on about it, I'm sure Craft knows what he is talking about, even if I don't. On 19th June # 971.

Its notional revenue not raised - not expenditure.

If there was no super pool their would be no revenue at all from Super. Would the savings pool exist in some other fashion? Maybe but probably no where near as large and it would still be undoubtedly sheltered some other way like negative gearing, main residence exemption from Capital Gains, family trusts, corporate structures, tax haven accounts etc.

So a notional revenue forgone figure is riddled with fairy-tale assumptions.

Can't isolate super and try to fix it - the approach has to be comprehensive.

You immediately move away, on both occassions, from answering the subject. One thinks you're debate might not be as it seems, me thinks.

All good intentions, become a rant, when not based on truthfull intent.

From what I've read a tax expenditure is pretty much equivalent to spending within the budget.

If you have to raise a certain amount of revenue and you choose to tax certain forms of income at lower or nil rates, how is that different than taxing them at the full rate and then providing a refund / rebate to bring the net tax rate.

I do acknowledge that if you start to reduce or remove the tax expenditures around super that the funds flowing into the system will likely change, so small changes aroun tax levels, or introducing RBLs again, are likely to cause large reductions in the lost revenue.

that's why we need meaningful reform with the tax system, including NG, CGT, super, better targeting of the aged pension from age based to those in need.

My beed with the super system is:

* over $20B a year to run which is quite expensive
* tax expenditures are nearly equal to the cost of the aged pension
* generally those who would likely be able to save enough to reduce or remove their reliance on the aged pension get the most help, while the poor get little to no benefit, so the cost of the system does not appear to actually help the budget actually cope better over time with the cost of the aged pension.
* there is no legal obligation for someone to use their super to reduce their reliance on the aged pension

I do no believe a super system that sees revenue leakage increasing at 12% a year is sustainable. I do not believe a super system that has no legal obligation for someone to use their balance to reduce their aged pension payments is sustainable. I do not believe a super system that provides tax free income for those over the age of 60 is sustainable when combined with a falling participation rate.

So unless we're going to continually increase the overtaxing of labour and corporate profits, which are the 2 most inefficient taxes, then either services have to continue to decline, or Govt debt will increase

 

[sydboy007]

The UK might have a similar system to NZ which has universal superannuation. It is not means tested but forms part of an individual's taxable income. There is no tax free threshold in NZ. Every dollar of income incurs tax.

Probably a whole lot more simple to administer and probably more functional.

I'd be quite happy if we had something similar to the Singapore system with their provident fund where employees and employers both contribute around 20% into the fund each and the Government runs it.

There has to be a cheaper way to save for retirement than the Australian super system. Plenty of overseas examples we could look to, but the FIRE sector is way to powerful. Think it's now ~40% of the ASX so that gives you an idea of the economic and political power they're able to wield to stop changes that would have a negative consequence to their ability to ticket clip and make monopoly style returns. It's a sad indictment that the average level of fees has gone UP in the last decade.

 

[craft]

From what I've read a tax expenditure is pretty much equivalent to spending within the budget.

If you have to raise a certain amount of revenue and you choose to tax certain forms of income at lower or nil rates, how is that different than taxing them at the full rate and then providing a refund / rebate to bring the net tax rate.

So on the same basis should we say in relation to business that X amount is ‘tax expenditure’ because the corporate tax rate is flat and lower then the income tax scales?

Trying to make up and hang a ‘tax expenditure’ number on super seems to be about big number theatrics rather than common sense.

End of the day the pension is transfer system (from one person to another) and we do need to consider who pays for it and who gets it.

The super system is a self sufficiency system. (Where the transfers is from you to you over time)
The cost (costs being real expenses not fairy-tale ‘tax expenditure’ assumptions) of it is a legitimate concern.
Limiting the upper end utilisation of it is also a legitimate consideration but this point needs to be thought of in the context of there being a defensible argument for taxing capital lightly to grow the economy – and that is the philosophy of our current government. Just closing down the top end of super and leaving all the other wealth protection avenues open would only be a political exercise if it was to occur and would capture very little extra tax revenue.

Ideology (subconscious or otherwise) in this thread prevents a really good discussion. Just like the national discussion really.

 

[sydboy007]

So on the same basis should we say in relation to business that X amount is ‘tax expenditure’ because the corporate tax rate is flat and lower then the income tax scales?

I don't believe your example meets the criteria for a tax expenditure. You've also ignored theose on the lowest tax rates, so by your aguemtn they are receiving a tax expenditure compared to corporate taxation and those on higher marginal rates.

A tax expenditure program is government spending through the tax code. Tax expenditures alter the horizontal and vertical equity of the basic tax system by allowing exemptions, deductions, or credits to select groups or specific activities. For example, two people who earn exactly the same income can have different effective tax rates if one of the tax payers qualifies for certain tax expenditure programs.

Trying to make up and hang a ‘tax expenditure’ number on super seems to be about big number theatrics rather than common sense.

If the concessionally taxed super contributions were received as income, the extra tax revenue could be used by the Govt to be put into some fund that would serve the purpose of paying our future pension liabilities. If people want a higher retirement income than this they are free to save to achieve that goal.

End of the day the pension is transfer system (from one person to another) and we do need to consider who pays for it and who gets it.

All welfare fits that criteria.

The super system is a self sufficiency system. (Where the transfers is from you to you over time)
The cost (costs being real expenses not fairy-tale ‘tax expenditure’ assumptions) of it is a legitimate concern.
Limiting the upper end utilisation of it is also a legitimate consideration but this point needs to be thought of in the context of there being a defensible argument for taxing capital lightly to grow the economy – and that is the philosophy of our current government. Just closing down the top end of super and leaving all the other wealth protection avenues open would only be a political exercise if it was to occur and would capture very little extra tax revenue.

Why is the loss of tax revenue irrelevant, especially if in the near future it will cost more than the aged pension.

I've regularly argued that changes to super need to occur within meaningful tax reforms as well. Bring in RBLs and you will need to make changes to NG like quarantining it to the asset's income and maybe even on only new asset formation. If you believe capital should be lightly taxed, then increase the time an asset has to be held to get a reduce tax rate. maybe bring the reduction in as 10 or 20% a year instead of halving after a year. Lightly taxing capital means other taxes have to be higher to provide the same level of services, and we're already overly reliant on income and corporate taxes.

With a steadily declining participation rate, rapidly rising tax free pension system, how is it sustainable in the long term? Unless we start taxing land / consumption / resources more we're doomed to either massive deficits or head towards third world levels of Government services.

Ideology (subconscious or otherwise) in this thread prevents a really good discussion. Just like the national discussion really.

Then why don't you share your views rather than just criticising?

 

[craft]

I don't believe your example meets the criteria for a tax expenditure. You've also ignored theose on the lowest tax rates, so by your aguemtn they are receiving a tax expenditure compared to corporate taxation and those on higher marginal rates.

I have no idea what meets your criteria of a tax expenditure - the whole concept seems whacked to me. But it would seem if you hold the logic steady then the low income are indeed receiving a tax expenditure. Nearly everything could be seen as a tax expenditure dependent on what rate of tax you think should be the base case.

A tax expenditure program is government spending through the tax code. Tax expenditures alter the horizontal and vertical equity of the basic tax system by allowing exemptions, deductions, or credits to select groups or specific activities. For example, two people who earn exactly the same income can have different effective tax rates if one of the tax payers qualifies for certain tax expenditure programs.

Perhaps if quoting Wikipedia you could have included their disclaimer

This article has multiple issues. Please help improve it or discuss these issues on the talk page.

This article needs additional citations for verification. (January 2011)

This article is written like a personal reflection or opinion essay that states the Wikipedia editor's particular feelings about a topic, rather than the opinions of experts. (January 2011)

If the concessionally taxed super contributions were received as income, the extra tax revenue could be used by the Govt to be put into some fund that would serve the purpose of paying our future pension liabilities. If people want a higher retirement income than this they are free to save to achieve that goal.

Is it concessionally taxed? Its a savings system designed with a flat rate. The corporation rate is also a flat rate system and doesn't cop all the concessionally taxed rhetoric.

Why is the loss of tax revenue irrelevant, especially if in the near future it will cost more than the aged pension.

I've regularly argued that changes to super need to occur within meaningful tax reforms as well. Bring in RBLs and you will need to make changes to NG like quarantining it to the asset's income and maybe even on only new asset formation. If you believe capital should be lightly taxed, then increase the time an asset has to be held to get a reduce tax rate. maybe bring the reduction in as 10 or 20% a year instead of halving after a year. Lightly taxing capital means other taxes have to be higher to provide the same level of services, and we're already overly reliant on income and corporate taxes.

With a steadily declining participation rate, rapidly rising tax free pension system, how is it sustainable in the long term? Unless we start taxing land / consumption / resources more we're doomed to either massive deficits or head towards third world levels of Government services.

Who receives benefits and who pays is not irrelevant but there are many defensible views from capitalist to socialist perspectives and every degree in-between.

Then why don't you share your views rather than just criticising?

Not intending to criticise - just observing and its an observation applicable to myself as well.

I have put my views here quite a few times (probably too many) and in many ways they are similar to you in that I basically come down on the side of labour being overtaxed and society facing increasing inequality - but that's my ideology and I try to not let it stop me from taking on board the views of those that want to tax capital lightly to drive economic growth and get trickle down benefits to minimise the need for government transfers.

 

[Junior]

I am strongly opposed to the view here that 'tax expenditure' is the same thing as welfare. They are very very different. One is an expense, the other is a reduced level of revenue. Revenue and expenses.....not the same.

The government has to budget for the age pension. It does not have to budget and plan long term for a tax concession, it's not a long term commitment, they do not have to find revenue to fund a tax concession as there is no payment or obligation to meet. It's simply applying a lower tax rate than what it would otherwise be, and therefore results in less revenue.

Put it this way, in the event of a budget crisis (ACTUAL crisis, not the imaginary one we currently have) it would be very easy for the government to immediately scale back tax concessions within a 1-3 year period. This would result in a quick boost in tax revenue. This is because it is a concession which applies to those in our society who can afford to be paying tax in the first place...

It would not be possible, however, to suddenly reduce welfare expenditure. This would need to be implemented over a long timeframe as there are individuals relying on this welfare to survive, i.e. pay for shelter, food, utilities, medical.

WHY? Because this is outright spending, it's welfare, actual PAYMENTS which must be funded. Outgoings. Tax concessions are a reduced rate of tax which apply to individuals have have enough wealth and earn enough income to pay tax. They affect the revenue side of the ledger, they are unrelated to spending.

Apologies for the rant, I just can't get over this tax expenditure issue.

 

[sptrawler]

I am strongly opposed to the view here that 'tax expenditure' is the same thing as welfare. They are very very different. One is an expense, the other is a reduced level of revenue. Revenue and expenses.....not the same.

The government has to budget for the age pension. It does not have to budget and plan long term for a tax concession, it's not a long term commitment, they do not have to find revenue to fund a tax concession as there is no payment or obligation to meet. It's simply applying a lower tax rate than what it would otherwise be, and therefore results in less revenue.

Put it this way, in the event of a budget crisis (ACTUAL crisis, not the imaginary one we currently have) it would be very easy for the government to immediately scale back tax concessions within a 1-3 year period. This would result in a quick boost in tax revenue. This is because it is a concession which applies to those in our society who can afford to be paying tax in the first place...

It would not be possible, however, to suddenly reduce welfare expenditure. This would need to be implemented over a long timeframe as there are individuals relying on this welfare to survive, i.e. pay for shelter, food, utilities, medical.

WHY? Because this is outright spending, it's welfare, actual PAYMENTS which must be funded. Outgoings. Tax concessions are a reduced rate of tax which apply to individuals have have enough wealth and earn enough income to pay tax. They affect the revenue side of the ledger, they are unrelated to spending.

Apologies for the rant, I just can't get over this tax expenditure issue.

Well put Junior.

Another thing with expenditure is, it can be reduced or increased with minimal effect to the operation of the economy. As you say most of it is welfare and generally is spent on lifes necessities. Therefore if welfare payments grow at a slower rate, the welfare component of the gst take grows slower, but there is a corresponding reduction in welfare cost.

This is not the case with taxes. Increasing taxes will have some effect as the sector that you increase the taxing on, change their spending pattern.
If it is a company, they will reduce investment spending or cut back costs, if it is the individual they will reduce their consumption or investment spending.

I don't think it is as easy as people think, to just increase a tax and reduce another one, the flow on ramifications could be far worse than expected.
I'm no expert on the subject, but I would think it will be a massive job to overhaul our tax system, however I do think it needs to be done.
The ad hock approach by the last government, is an example of the chaos that can happen, with poorly thought out changes.

 

[sydboy007]

I am strongly opposed to the view here that 'tax expenditure' is the same thing as welfare. They are very very different. One is an expense, the other is a reduced level of revenue. Revenue and expenses.....not the same.

The government has to budget for the age pension. It does not have to budget and plan long term for a tax concession, it's not a long term commitment, they do not have to find revenue to fund a tax concession as there is no payment or obligation to meet. It's simply applying a lower tax rate than what it would otherwise be, and therefore results in less revenue.

Put it this way, in the event of a budget crisis (ACTUAL crisis, not the imaginary one we currently have) it would be very easy for the government to immediately scale back tax concessions within a 1-3 year period. This would result in a quick boost in tax revenue. This is because it is a concession which applies to those in our society who can afford to be paying tax in the first place...

It would not be possible, however, to suddenly reduce welfare expenditure. This would need to be implemented over a long timeframe as there are individuals relying on this welfare to survive, i.e. pay for shelter, food, utilities, medical.

WHY? Because this is outright spending, it's welfare, actual PAYMENTS which must be funded. Outgoings. Tax concessions are a reduced rate of tax which apply to individuals have have enough wealth and earn enough income to pay tax. They affect the revenue side of the ledger, they are unrelated to spending.

Apologies for the rant, I just can't get over this tax expenditure issue.

Considering the near impossibility of making changs to NG, I don't believe making changes to tax concessions is as easy as you say. Just look at the changes Labor proposed with the statutory method for car FBT and the uproar fanned by the media, and how the then opposition ran to protect those benefiting from the current system. Meaningful reforms are quite difficult without bipartisan support. Scare campaigns and appealing to those benefiting from the status quo is far easier.

Back in the 2010-11 tax year wages totalled $521B. I doubt there's any easy way to attribute this to the various tax rates.

For simplicity lets say that 9% of that income was put into the super system ie. $46.89B - this would be the minimum amount as there's a decent level of salary sacrificing going on.

If it was taxed at 30% - then govt revenue would be $14B
In super with 15% tax the Govt revenue would be $7B

So wouldn't there be a revenue loss of $7B from this situation? Doesn't that mean other taxation has to be higher to compensate? How is the current system any different to full taxation with a rebate of $7B?

Making non concessional contributions also makes sense for those on higher incomes since you can receive over 20% lower tax rate on earnings which is a 60% reduction in taxation.

I'm not sure what he best way is to meet the retirement needs of the country, but the current system isn't meeting them. It's expensive to run, after 20 years hasn't reduced the cost of the aged pension to the budget in any material way and from reports I've read something like 80% of retirees will still get some form of aged pension even by 2040.

It seems silly to me that there's no legal requirement to use a super balance to provide retirement income. It's all revenue drain and no gain.

 

[McLovin]

For simplicity lets say that 9% of that income was put into the super system ie. $46.89B - this would be the minimum amount as there's a decent level of salary sacrificing going on.

If it was taxed at 30% - then govt revenue would be $14B
In super with 15% tax the Govt revenue would be $7B

So wouldn't there be a revenue loss of $7B from this situation? Doesn't that mean other taxation has to be higher to compensate? How is the current system any different to full taxation with a rebate of $7B?

Syd, I think this a very strange way of looking at the tax system. The purpose of super is to reduce government liability in the future (yes, it's not a perfect system, I think we all agree on that). When you create these tax expenditure examples, you're only looking at the revenue side today, not the spend side tomorrow.

 

[Junior]

Considering the near impossibility of making changs to NG, I don't believe making changes to tax concessions is as easy as you say. Just look at the changes Labor proposed with the statutory method for car FBT and the uproar fanned by the media, and how the then opposition ran to protect those benefiting from the current system. Meaningful reforms are quite difficult without bipartisan support. Scare campaigns and appealing to those benefiting from the status quo is far easier.

Agreed it's a politically difficult/impossible, but it wouldn't increase poverty or smash the lower class in the way that cutting a welfare payment like Age Pension would.

It seems silly to me that there's no legal requirement to use a super balance to provide retirement income. It's all revenue drain and no gain.

I agree and disagree with this...I mean superannuation does not belong to the government, so they shouldn't have the power to dictate when and how you spend it. But perhaps this does need to happen to an extent in order to reduce reliance on government pension.

My preference is to simply tighten up income and assets test, and index pension payments to CPI only.

I personally believe that the superannuation system isn't that bad, we just haven't seen the benefits of it yet as current retirees didn't benefit from 45 years of SG contributions.

 

[sydboy007]

Syd, I think this a very strange way of looking at the tax system. The purpose of super is to reduce government liability in the future (yes, it's not a perfect system, I think we all agree on that). When you create these tax expenditure examples, you're only looking at the revenue side today, not the spend side tomorrow.

But there's an immediate impact to Govt revenue from super. You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.

I've not been able to find any research that can conclusively show the tax revenue forgone via the super system will eventually be eclipsed by the reduction in aged pension. The amount of revenue forgone so far would be quite considerable.

A good first start would be getting the cost base of super down to at least the OECD average. That's at least $13B a year in savings or over a 1/3 of the current aged pension.

 

[sydboy007]

Agreed it's a politically difficult/impossible, but it wouldn't increase poverty or smash the lower class in the way that cutting a welfare payment like Age Pension would.



I agree and disagree with this...I mean superannuation does not belong to the government, so they shouldn't have the power to dictate when and how you spend it. But perhaps this does need to happen to an extent in order to reduce reliance on government pension.

My preference is to simply tighten up income and assets test, and index pension payments to CPI only.

I personally believe that the superannuation system isn't that bad, we just haven't seen the benefits of it yet as current retirees didn't benefit from 45 years of SG contributions.

I'd prefer if the Govt had a system whereby fully taxed income was put into super and a tax rebate provide to get it back to 15% avg. The tax rebate is locked in to being used to fund a retirement income - it's tax payer rather than an individuals money. The individual can decide what to do with their share of the super balance, but there should be some financial carrot and or stick to push them to minimise their drain on the public purse. RBLS seemed to do this relatively well. It doesn't seem fair to remaining tax payers that someone can spend their super balance in a way to maximise or at least increase their access to the aged pension. it seems to be counter to the main purpose of saving for retirement.

 

[McLovin]

But there's an immediate impact to Govt revenue from super. You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.

I'm not disputing that, I just don't understand your obsession with it. There's millions of different scenarios we could come up with that result in differing spend/revenue assumptions. I just don't see the big difference between a cash handout and a "tax expenditure". They're both redistributive. The rest just seems to be semantics.

 

[craft]

I'd prefer if the Govt had a system whereby fully taxed income was put into super and a tax rebate provide to get it back to 15% avg. The tax rebate is locked in to being used to fund a retirement income - it's tax payer rather than an individuals money. The individual can decide what to do with their share of the super balance, but there should be some financial carrot and or stick to push them to minimise their drain on the public purse. RBLS seemed to do this relatively well. It doesn't seem fair to remaining tax payers that someone can spend their super balance in a way to maximise or at least increase their access to the aged pension. it seems to be counter to the main purpose of saving for retirement.

Treasuries Main residence exemption estimate for 2013/14 was 30 Billion. Should this ‘Tax expenditure’ be quarantined to provide provision for retirement? The wealthier you are the more expensive your house the bigger your tax expenditure benefit. Not only do we not expect people receiving this tax expenditure to mandatorily fund their retirement with the tax expenditure benefit they received we actually exempt homes from the pension assets test. Why should the expectations for receiving tax expenditure for housing be different to receiving tax expenditure for saving?

Is super really that bad? If the super pool wasn’t there, most private savings (to the reduced extent that they would exist) would most likely be in housing, benefiting from main residence exemption or negative gearing and contributing less then what the government actually collects from taxing super at 15%.

 

[sptrawler]

But there's an immediate impact to Govt revenue from super. You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.

I've not been able to find any research that can conclusively show the tax revenue forgone via the super system will eventually be eclipsed by the reduction in aged pension. The amount of revenue forgone so far would be quite considerable.

A good first start would be getting the cost base of super down to at least the OECD average. That's at least $13B a year in savings or over a 1/3 of the current aged pension.

Isn't the $13billion more in tax revenue, that you are talking about, $13billion less in superannuation deposits. Won't this show up at a later date as a shortfall on the savings ledger, that may result in increased pension obligations?

A bit like your assumption that $1m in super is adequate, what happens if there is a period of high inflation and or a large currency correction.
The $1m could be rapidly devalued and the members may not be in a financial position to recover the capital base, or be too close retirement to recover. This then again loads up the Government pension costs as more qualify.
It is o.k looking at things in a simplistic manner, however things seldom pan out as we expect.

 

[Vixs]

Just wanted to address a previous post by Junior that I was reluctant to respond to for want of keeping the thread on topic, but that I think shouldn't be left where it was.

SPOILER: THIS IS LONG AND NOT ON-TOPIC.

As a member of the Financial Planning industry for 10 years now, I'm disgusted at the watering down of FOFA. The big 4 banks control this country, and this government has ensured that we will continue to see Storm Financial, Timbercorp, Great Southern etc. regularly going forward. These collapses come at a huge cost to the taxpayer and devastate 1000s of families.

What about the removal of constant opt-in agreements, fee disclosure statements for legacy clients and allowing existing advisers to transition their businesses to other licensees without loss of current income is going to bring about the next Storm Financial or Timbercorp?

Through the removal of all investment product commissions, which is still in place, the inability to charge percentage based fees on geared portfolios, which is still in place, the removal of the accountant's exemption, and the inclusion of the best interests duty, which is STILL IN PLACE there have been solid impediments to the repeat of those exact events you've mentioned above. It's not even a loose correlation - it's exactly what these changes will impact.

Something to consider re MIS, more than $1 billion was invested in Timbercorp schemes alone....as these schemes only ever made losses, this amount was claimed as a deduction against individuals income, with the expectation that at some point these schemes would be profitable and the earnings taxed. The end result is that these were never profitable, and the only parties to extract profits were the directors of Timbercorp, accountants, financial planners and then solicitors/liquidators. Wealth transferred to these groups from the lower, middle class and taxpayers.

It was the poor and average Bob & Jane that were hit hardest by forestry schemes, was it? Were they the ideal candidates for being sold upfront tax deductions to the tune of millions of dollars, with loans paid for using borrowed funds? It was those that needed the tax relief? What absolute garbage. The investors burned were the lawyers, the doctors, successful investors and the rest of the high income earners that were seeking relief from high income tax bills with a sweetener of a 'high performing' investment.

The only thing I agree with is that it was a wealth transfer to those involved in the manufacture and distribution of the schemes, and some did very well out of the sale of those investments.

In my opinion the minimum education standard to become an FP is still the biggest issue. You can be qualified and giving advice after completing a short course which your average 15 year old would be able to breeze through. Should be FP specific bachelors degree at a minimum, with the CFP course compulsory if you have completed a non-business degree.

Sorry to get off-topic!

This is not the biggest issue. The biggest issue is that you can't educate someone that lacks ethics into being an ethical operator.

To tout that the FPA has the answer and that a degree is the basic requirement is absurd. The bulk of my colleagues are tertiary educated and yet can't write, interpret or problem solve to the level needed to add value. University standards aren't high enough in this country for a degree to be a measure of someone's capability - maybe that used to be a reliable indicator, but it's not anymore.

For planners performing the tasks needed to help every day Australian's improve their finances, greater knowledge than an Advanced Diploma seems that it would rarely be worthwhile. You are taught about life insurance, investments, superannuation, leverage, SMSFs, basic knowledge of financial structures, social security and retirement planning, and how to apply the technical to the problems they face. In order to provide accessible advice to these people, you don't need 5 years of formal education - you need to be able to articulate to them how they repay their home loan sooner, what's the most cost-effective way of financing their new car, how do they pay for school fees, and once that's all said and done, how do they live a dignified and stress-free retirement?

For those with more complex situations, business operators, those with family with disabilities that may utilise special disability trusts, high net worth individuals with diverse holdings and interests, investors using various structures to hold their investments and people that want to utilise complex strategies in wealth creation, their needs will be greater. These people, often successful in their fields, will do what they've done in the past - seek out intelligent, well educated experts with shared interests and drive, to get meaningful financial advice from. They will choose the more capable advisers, they don't need mandated bachelor degree educated people that are otherwise unremarkable in their own field.

The firm I work for has a huge client base of people affected by wealth destruction as a result of forestry schemes. They were sold, every single one of them, by CFPs and CPAs. Tens of millions of dollars of wealth from medical specialists and high profile lawyers incinerated because of the failed products they had invested their money in thanks to planners and accountants that were educated and members of professional bodies. They didn't lack education, they lacked integrity.

Lack of education is not the problem. Business models that provided incentives for transactional business that was at odds with client needs is the problem. Lack of enforcement of the laws, standards and codes of conduct and practice that are already in place, and that FOFA in the form being recommended has delivered and added upon - that is the problem.

As someone who has been a member of the industry for 10 years now it is a shame that you would think more pieces of paper are the answer, and that you don't recognise the immense change that is already underway and has occurred. At a time when good financial planning is going to become more important than ever, and with such drastic change in businesses in the industry moving forward, it would be nice if the participants of said industry could get off the bandwagon and stop tearing strips off their own reputations.

I am sorry that this had nothing to do with superannuation being a government cash cow, (it's a revenue! it's an expenditure! it's a revenue! it's an expenditure!) however I couldn't ignore it, and I didn't feel it warranted a thread of its own.

Perhaps if others want to continue this discussion we should do so in a new thread.

 

[medicowallet]

But there's an immediate impact to Govt revenue from super. You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.

.

You could make the top marginal tax rate 15% and then there would be no problem.

Funny thing is that is ok to expect high income earners to pay approx 50% tax to fund socialist's lifestyles, but then be highly critical of a scheme which helps fund their retirement, has limited ability to tax minimise within the vehicle and offers a very stable revenue stream for the government.

I'll take a flat 15% income tax for all Australians thankyou very much, as opposed to paying more than my fair share at times!

MW

 

[sydboy007]

I'm not disputing that, I just don't understand your obsession with it. There's millions of different scenarios we could come up with that result in differing spend/revenue assumptions. I just don't see the big difference between a cash handout and a "tax expenditure". They're both redistributive. The rest just seems to be semantics.

Deloitte superannuation adviser Wayne Walker said it was important Australians not get too complacent about the compulsory retirement savings system, which now accounts for $1.8 trillion…

The ‘Adequacy and the Australian Superannuation system’ paper forecasts that 75 per cent of retirees will still be eligible for all or some of the aged pension in 20 years time.

From John hewson

As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners.

So why are we redistributing from the bottom 10% to the top 10% and 1%?

If we cut back on the assistance going to the top, we could either lower income and corporate taxes and / or increase spending on services. The $ figures are in the billions. This is not small change semantics.