Superannuation, the ultimate government cash cow?

craft · 6 February 2013

Superannuation is a tax advantaged structure for retirement savings.

I think there should be a limit on the amount that can be accumulated at a tax advantaged rate. The flip side should be any amount above the tax advantaged amount should be accessible immediately.

I would be affected by this change – but think it fair.

The contribution caps as the limiting mechanism are ridiculous and very punitive compared to the regime not that long ago. Those with already high balances are not affected by the contribution caps at all as they have no need to add further. A cap on total balance is much cleaner and fairer

Where should the max balance cap be set?

McLovin · 6 February 2013

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

This doesn't surprise me in the least. How much should you be allowed in super before it's being taxed? Social security transfers already eat up most income tax revenue and this is only going to deteriorate over the coming decades. It's impossible to have such a large cohort of people retiring and expect those still working to pay not only for government paid pensioners but also to subsidise the fare for self-funded retirees. I'm not making a social/moral statement, just an economic one.

I'm pretty certain that within ten years there will be a cap on lump sum withdrawals and a cap on the tax benefits flowing to super balances over a certain amount.

I continue to keep my super balance low.

craft · 6 February 2013

craft said:
Where should the max balance cap be set?

The current income cut out for a single age pension is $44,248.43 pa.

At the current deeming rates a capital amount of $953,000 would be required to generate that income.

Around 1 Million seems intuitively low to me but it equates to the upper limit where tax payers currently subsidise pensioners to some degree – Should self funded retires receive tax subsidy for higher incomes? Somebody has to pay for the subsidy.

sptrawler · 6 February 2013

craft said:
Superannuation is a tax advantaged structure for retirement savings.

I think there should be a limit on the amount that can be accumulated at a tax advantaged rate. The flip side should be any amount above the tax advantaged amount should be accessible immediately.

I would be affected by this change – but think it fair.

The contribution caps as the limiting mechanism are ridiculous and very punitive compared to the regime not that long ago. Those with already high balances are not affected by the contribution caps at all as they have no need to add further. A cap on total balance is much cleaner and fairer

Where should the max balance cap be set?

Well the average wage is approx $70K so it should be linked somehow to that, cpi and government bond rate.
In the current climate at bond rate of say 3%, it would require, ball park $2.5m to achieve that return.
It will take some spin to make people believe they are a fat cat, if they have $800K in super.
The next step would be for the government to take over super balances upto $800K and pay the individual a pension.
Also even if it is $1m is that per couple or individual? Lots of super is in the male partners account.

banco · 6 February 2013

sptrawler said:
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

The people who GAS about this are probably most liberal voters anyway (which is why Howard lavished superannuation goodies on them when he was in Government).

craft · 6 February 2013

sptrawler said:
Well the average wage is approx $70K so it should be linked somehow to that, cpi and government bond rate.
In the current climate at bond rate of say 3%, it would require, ball park $2.5m to achieve that return.
It will take some spin to make people believe they are a fat cat, if they have $800K in super.
The next step would be for the government to take over super balances upto $800K and pay the individual a pension.
Also even if it is $1m is that per couple or individual? Lots of super is in the male partners account.

Why should the whole average wage be subsidised? The person who has to pay that subsidy is you in your working life. Are you suggesting **** loads of tax when you are working and none when retired is the way to go?

Based on the above post I’m saying there is a basis for 1 Million per person. I’m sure balances or caps could be transferred between partners it the legislation is so written.

I don’t for a second buy any crap about the Gov’t taking over/confiscating etc super..... The worst I see is tax advantages being reduced and perhaps limits on capital withdrawals to ensure the funds that have been tax advantaged are used for the reason they received those advantages.

banco · 6 February 2013

For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs. I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.

drsmith · 6 February 2013

craft said:
The current income cut out for a single age pension is $44,248.43 pa.

At the current deeming rates a capital amount of $953,000 would be required to generate that income.

Another dilemma for the government ?

The RBA has cut the cash rate twice since the current deeming rates were announced.

http://www.rba.gov.au/statistics/cash-rate/
http://www.humanservices.gov.au/customer/enablers/deeming

drsmith · 6 February 2013

banco said:
For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs. I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.

The issue to me is that as per the title of the thread, the government is not interested in reforming super, only milking it.

The Howard government was no different in its early years with its superannuation surcharge.

prawn_86 · 6 February 2013

banco said:
For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs. I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.

While i agree. 800k - 1m is not a large figure to have accumulated over a lifetime for those who were diligent so it once again appears that those who save hard are being penalised.

Moral of the story is dont save, or if you do, try and make sure the government doesnt know about at least a portion of it. Offshore acounts, physical metals etc

McLovin · 6 February 2013

prawn_86 said:
While i agree. 800k - 1m is not a large figure to have accumulated over a lifetime for those who were diligent so it once again appears that those who save hard are being penalised.

Except we all subsidised their saving.

medicowallet · 6 February 2013

McLovin said:
Except we all subsidised their saving.

People who have substantial super probably pay more tax per year than the people who believe that they subsidise what these "wealthy" people earn.

MW

medicowallet · 6 February 2013

banco said:
For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs. I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.

Bingo!

You should see the wasted dollars in the hospital system!

MW

sptrawler · 6 February 2013

McLovin said:
Except we all subsidised their saving.

What if it is 80% after tax contributions?

sptrawler · 6 February 2013

craft said:
Why should the whole average wage be subsidised? The person who has to pay that subsidy is you in your working life. Are you suggesting **** loads of tax when you are working and none when retired is the way to go?

Based on the above post I’m saying there is a basis for 1 Million per person. I’m sure balances or caps could be transferred between partners it the legislation is so written.

I don’t for a second buy any crap about the Gov’t taking over/confiscating etc super..... The worst I see is tax advantages being reduced and perhaps limits on capital withdrawals to ensure the funds that have been tax advantaged are used for the reason they received those advantages.

Why wouldn't the government just apply the 15% rebate to all withdrawls same as under 60's pay now?

RandR · 6 February 2013

prawn_86 said:
While i agree. 800k - 1m is not a large figure to have accumulated over a lifetime for those who were diligent so it once again appears that those who save hard are being penalised.

Moral of the story is dont save, or if you do, try and make sure the government doesnt know about at least a portion of it. Offshore acounts, physical metals etc

The fund I work for has the highest 'per member' balances in the country in the baby boomer .. 45/50+ generation. the vast majority are nowhere near touching 800k let alone 1m+

Probably less then 1 in a 100 of our members in the baby boomer age have super balances of 800k plus.

I cannot honestly see how the government could raise any meaningful level of taxation from such a levy like that. the reality is any money lifted from such a strategy wont really comethrough in any real and meaningful sum until Gen X matures as naturally their balances will be quite larger then the baby boomers as a generation in dollar amount and a higher proportion will be affected.

Out of the miniscule number of people that would be affected by such a cap/tax. Most of them arnt even wealthy despite having giant super balances, most of the giant balances in that age range have come from state/federal defined benefit plans inherited by 70 something widowed housewives who dont want to spend or draw down a cent

drsmith · 6 February 2013

The lowest hanging fruit will be the tax rate on contributions and/or earnings.

sptrawler · 6 February 2013

RandR said:
The fund I work for has the highest 'per member' balances in the country in the baby boomer .. 45/50+ generation. the vast majority are nowhere near touching 800k let alone 1m+

Probably less then 1 in a 100 of our members in the baby boomer age have super balances of 800k plus.

I cannot honestly see how the government could raise any meaningful level of taxation from such a levy like that. the reality is any money lifted from such a strategy wont really comethrough in any real and meaningful sum until Gen X matures as naturally their balances will be quite larger then the baby boomers as a generation in dollar amount and a higher proportion will be affected.

Out of the miniscule number of people that would be affected by such a cap/tax. Most of them arnt even wealthy despite having giant super balances, most of the giant balances in that age range have come from state/federal defined benefit plans inherited by 70 something widowed housewives who dont want to spend or draw down a cent

Good post, so what is the motivation, behind all the hype.
As I've said on numerous occassions, if someone has a large super balance a majority of it would have to be from after tax contributions.
If the government wants to tax it more, it can only be on earnings or taxable components, the rest is the individuals money.
As McLovin said he is placing minimum in super, if the uncertainty continues, many more will follow.
Then we go back to everyone on a pension.

It is just another vote grabbing "bash the rich" prank, by Labor.
How about taxing pollies pensions as income with the 15% rebate, Know that would save some money.

Julia · 6 February 2013

From "Business Spectator" today:

Prime Minister Julia Gillard has ruled out taxing withdrawals on superannuation for people aged over 60 while challenging the opposition to show how it would have achieved budget surpluses during the global financial crisis.

According to media reports, Ms Gillard made the commitment during in parliament, as she came under increasing pressure over proposed changes to the government's superannuation program.

The Australian reported that Ms Gillard repeated her 2010 vow that tax-free benefits would "never" be removed for over 60s.

Yeah, right. Just as she said "there will be no carbon tax under a government I lead".

That's the trouble, Ms Gillard, with your promises: you have no credibility any more.

sptrawler · 6 February 2013

Julia said:
From "Business Spectator" today:

Yeah, right. Just as she said "there will be no carbon tax under a government I lead".

That's the trouble, Ms Gillard, with your promises: you have no credibility any more.

If there is an issue with the impact of future loss of revenue, they have the tools to reduce the problem.
They have reduced the concessional cap to $25K, they can reduce the personal cap from $150K to $0, for funds with a balance above a certain $ value.
Workers will be in a complete spin, trying to work out where the government is coming from.

I think this kind of speculation and feeling the water by the government, will encourage people to do what GG suggests.
Must go down and check out that Road King tommorrow and thankfully I've bought the van.LOL

Superannuation, the ultimate government cash cow?

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