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Tag Archives: superannuation

Tax And The Bleeding Obvious!

Ok, most of the focus on discussions about the GST has been about how it’s a regressive tax and how it affects the poor more than the rich.

But there’s one other thing in this debate that hasn’t been prominent in discussions or commentary. If the GST is widened to include items currently exempt, how will that affect Health spending?

Given that a large chunk of health spending is paid for by the various governments, will they just be charging themselves more, or will the rebates stay the same and it’ll be up to the patient to make up the difference. In other words, will it be a “price signal” by stealth?

Even if the government does the right thing and increases its share by the increase in the GST, this will obviously lead to a blowout in Health costs which, of course, will have politicians arguing that it’s just not sustainable. (Interesting that the blowout in the costs of offshore detention never leads to screeches of how this spending isn’t sustainable. On a state level, one never hears that the massive increase in the cost of running prisons doesn’t mean that the “tough on crime” policy isn’t sustainable!)

Either way, it fits in well with the Liberals’ plan to destroy Medicare. Why they want to do this is a mystery to me, but it’s always been their policy either explicitly or part of their hidden agenda since Gough first introduced it.

Of course, the likely scenario is that widening the GST base will be discussed, but dismissed on the grounds that it would make it unfair on those struggling with their grocery bills, health costs or school fees. And when, Malcolm magnanimously rejects broadening the base, then a mere extra five percent will seem the reasonable alternative – in much the same way that removing Abbott led to the big poll bounce. “Gee, Malcolm answered that question by talking on something vaguely related to the actual subject and he didn’t way anything about stopping the boats. He’s so much better!”

Of course, the Liberals do some very strange things. I’ve never been able to fathom why they stop any increases in the superannuation guarantee every time they get into government. Howard froze it when he got in, and Abbott did the same. Given their rhetoric about people needing to plan for their retirement and the government not supporting them, one would have thought that increasing everyone’s super would be something they’d be right behind.

When it comes to superannuation, I’ve always wondered why it’s subject to a flat tax of fifteen percent. I’ve always thought that it would be better if there was a threshold before it was taxed. For example, imagine the first five thousand dollars was exempt from tax and the rest was taxed at twenty percent. This would be a big boost to the lower income earners and people would need to be on an income of more than $100,000 before they were paying more. The tax on super earnings could also work on a similar arrangement.

But I don’t expect we’ll hear much about changing the taxes on superannuation. It’s about as likely as the government using the phrase “a great big tax on everything” when refering to the GST.

 

What’s the diff?

With Tony Abbott keen to make superannuation an election issue and a point of differentiation between the parties, it is worth revisiting the Coalition’s record.

In 1985, the government and the ACTU struck a deal which saw the trade union movement forfeit a claim to 3% productivity improvement as wages to instead be paid in compulsory superannuation – endorsed by the Arbitration Commission and managed by superannuation funds with equal representation of the unions in the industry and the employers.

Leader of the Opposition, John Howard, reacted by saying:

“That superannuation deal, which represents all that is rotten with industrial relations in Australia, shows the government and the trade union movement in Australia not only playing the employers of Australia for mugs but it is also playing the Arbitration Commission for mugs”.

The Coalition has steadfastly opposed every increase in compulsory superannuation since that time.

In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.

Howard went to the 1996 election promising to “provide in full the funds earmarked in the 1995 — 96 Budget to match compulsory employee contributions according to the proposed schedule” but, 6 months after releasing the policy, dropped the plan in the 1996 budget because it was “too expensive”.

In 2007, facing a tough election, Howard went on a vote-buying spree making radical changes to the superannuation rules which had a huge impact at the time and whose effects we are grappling with today.

The majority of workers could now withdraw their superannuation tax-free upon reaching the age of 60. Most self-employed could claim their superannuation contributions as a tax deduction. In addition, semi-retired people could continue to work part-time, and use part of their tax-free superannuation to top up their pay.

Despite the relatively generous tax treatment of capital gains, the new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.

People were allowed to transfer up to A$1 million into their superannuation accounts before  June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous. In the June quarter of 2007, A$22.4 billion was transferred to superannuation accounts by individuals. This compares with A$7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.

In 2010, Abbott went to the election with a superannuation policy that was criticised by the industry as “failing to address retirement income adequacy and the challenge of Australia’s ageing population.”

The Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) said in a joint statement that a failure to increase the superannuation guarantee (SG) to 12 percent, the failure to raise the concessional caps for individuals over 50 and the failure to provide a super tax contribution rebate for low-income earners would adversely impact Australian workers.

In 2011 Abbott did a backflip, reversing the party’s position insisting that the Coalition would not rescind the higher guarantee.  This was done without consulting the party room.

In 2012, John Roskam from the IPA wrote

“Compulsory superannuation offends practically every principle of what should be Liberal Party philosophy. If an Abbott government does keep compulsory superannuation it must, at a minimum, make drastic changes.”

Moving forward to February 2013, we were receiving mixed messages from Abbott and Hockey.

In a doorstop interview, when asked if he would cut those initiatives, Hockey replied “Absolutely, you can’t afford them.”

Two hours later, after the PM’s office went into a flurry of denial, Hockey tweeted

“Would be nice if Nine News had checked the facts…Coalition remains committed to keeping increase in compulsory superannuation from 9-12%.”

In April 2013 Tony Abbott  said “We will ensure that no more negative unexpected changes occur to the superannuation system so that those planning for their retirement can face the future with a higher degree of predictability.”

One month later Abbott announced he would delay the compulsory superannuation guarantee increase for two years and do away with co-contributions for low income earners so it appears Joe had let the cat out of the bag a few weeks early.

Abbott also promised to do away with Labor’s plan for a 15 per cent tax on superannuation pension earnings over $100,000 saying it was too hard to implement.

According to the chief executive of Industry Super Australia, David Whiteley, this resulted in 3.6 million Australians on low incomes being out of pocket $500 a year, while just 16,000 of the nation’s top earners benefitted from the scrapping of the 15 per cent tax.

After winning government, the Coalition has made further delays in the increase of the superannuation guarantee freezing the rate at 9.5% for seven years after which it increases gradually to 12% by 2025 rather than 2019 as originally scheduled.

For an average worker who has recently joined the workforce, that could reduce retirement balances by about 5 per cent, or $40,000.

For those on lower incomes, the impacts will be magnified if the Low Income Super Contribution (LISC) scheme is shelved, as planned, in 2017.  LISC ensures that people earning relatively low incomes do not end up paying a higher tax rate on their super contributions than they pay on their ordinary income.

Abbott is committed to cutting costs for employers and protecting the income of wealthy retirees at the expense of entitlements of workers and those most likely to need a top-up in retirement.  Freezing the SG has not led to wage increases despite Abbott’s assertion that this puts more money into the pockets of workers.

With the cost of superannuation tax concessions set to overtake the age pension, it indeed should be an important point of differentiation between the two parties at the next election.

Cost-of-aged-pensions-and-superannuation-tax-concessions

 

 

 

 

 

 

 

 

 

 

 

Tony Abbott could never be trusted with your superannuation

In a 2013 election pitch Tony Abbott promised there will be no ”negative unexpected changes” to the superannuation system. His government’s plan to pause the rise in superannuation contributions at 9.5 per cent until 2021 joins a very long list of broken promises.

Many may have been surprised at his back-flip on something as sacrosanct as superannuation. Long-term observers, however, were not.

What we have learned about Tony Abbott is that whenever he makes an announcement about any issue – anything – there is a wealth of contradictions from the same mouth that we can easily source. It’s a pity that not too many people search for them. The biggest culprits, of course, are alleged journalists from our mainstream media or those gullible enough to believe what they or Tony Abbott have to say.

Which brings me back to Tony Abbott and superannuation. What we keep hearing today, or yesterday, or last year, is at odds with what he mutters when not under the public spotlight.

It only seemed like yesterday that as Leader of the Opposition – and as defender of the affluent – Tony Abbott was enraged over the then Treasurer Wayne Swan’s announcement that super pension and annuity earnings greater than $100,000 would be taxed at 15 per cent, instead of being tax free (a move that would affect an estimated 16,000 people). Striding up to the nearest microphone he promised he:

. . . would “fight ferociously” changes that would play havoc with people’s retirement plans.

That would have been admirable, of course, if it weren’t for this:

Mr Abbott repeatedly refused to guarantee to wind back the government’s proposed changes, saying only that the Coalition would not make matters worse.

”We aren’t going to do any more damage,” he said.

That comment certainly made his threat to fight ferociously appear rather shallow.

Nonetheless, his opposition to the move had been most vociferous. You may recall seeing it headlined – nay, bashed to death – in the Murdoch media. Here’s an example:

Opposition Leader Tony Abbott has taken his “hands-off superannuation” message directly to those most worried by reported government changes – older Australians.

He rammed home the message to retirees on Sydney’s northern beaches on Tuesday that superannuation “piggy banks” were not government money but people’s money.

Raiding their piggy banks to fund the government’s “out-of-control” spending was a breach of faith and a betrayal of trust, he told the grey heads at the Dee Why RSL club.

He continued his attack via the LNP website:

The Prime Minister should end the class war and the latest escalation on the class war is the Prime Minister and the Treasurer’s coming attack on your superannuation. I want to say to the Australian people – your superannuation is safe under the Coalition. Your superannuation should be sacrosanct. There is no way that your superannuation should be raided by a bad government to get itself out of a hole. The Government should not be damaging your future to secure its future. The Government should not be raiding your money to get money for itself. It is a sign of just how debauched this Government has got that when it is in a hole, a hole of its own making, it should be seeking to trash your superannuation – trash, in fact, Labor’s historic legacy – to try to fix up a problem which it has caused.

But to Mr Abbott it was more than just a fiddle with people’s retirement plans – of which he was the now self-appointed defender – it was also a cash-grab from the Government:

“On balance, this is a $1 billion hit on people’s retirement savings,” he told the media in Melbourne.

“It is a $1 billion hit on savings that belong to the people, not the Government, and it shows that this is a government which is prepared to tax the people to fund its own spending.”

And it would only get worse, he warned:

If they get away with attacking the so-called rich today, they’re going to come for you tomorrow. That’s the truth about this government. If they get away with this, they’ll think they can get away with anything.

The man must have been an emotional wreck; all that caring, all those concerns. Well, yes, he certainly had put on a sad face. He bled for those poor people raking in over $100,000 a year. The whole 16,000 of them.

Now let’s have a look at what Tony Abbott really thinks about superannuation, especially the superannuation of the battler.

It’s a con job, he once said, while elsewhere savaging it as nothing but a gravy train for union officials. He even opposed an increase in the Super Guarantee – changes that would have seen 8.4 million Australians receive an increase in their retirement incomes. In effect, he opposed:

  • An additional $108,000 in the retirement income of a 30-year-old on average weekly earnings.
  • An additional $78,000 in superannuation for a women aged 30 on average weekly earnings, who had had an interrupted work pattern.
  • Australians who were over 50 and have low super balances, the opportunity to contribute up to $50,000 a year into superannuation at a concessional tax rate.

That ‘policy’ of Abbott’s confirmed his apathy towards superannuation. Here it was in a nutshell:

Opposition leader Tony Abbott confirmed plans to axe a super tax break worth up to $500 a year for 3.6 million low-income earners.

And significantly:

. . . his plan to axe the $500 superannuation benefit for low-income workers will hit more than two million women, including 11,000 female voters in Tony Abbott’s own electorate.

It’s safe to say that in total, more people in his electorate would have been effected by this measure than the number of people effected Australia wide by the previous government’s plan. In total, it would have tightened the financial thumbscrews on 3.6 million Australians.

Now he has tightened the screws on everyone.

To me, this latest move to pause the rise in superannuation contributions is not a nasty surprise. It’s just nasty. Not surprising.

Tony Abbott could never be trusted with your super. He’s been telling us that for years.

Superannuation is just another issue on which he was willing to say anything to the contrary to anybody in order to become prime minister. Follow the trail of deception and it will lead you straight to Tony Abbott.

Never-ending story

In April I wrote an article about the Coalition’s history on superannuation.  This is an updated version.  Keeping up with their ever-changing promises is turning into quite a saga.

1972

Compulsory national superannuation was initially proposed as part of the 1972 Whitlam initiatives but up until the 1980s superannuation was solely the privilege of predominantly male professions, clustered in the public sector or available after a long qualifying period in the private sector.

1985

In 1985 then Leader of the Opposition, John Howard, said this:

“That superannuation deal, which represents all that is rotten with industrial relations in Australia, shows the government and the trade union movement in Australia not only playing the employers of Australia for mugs but it is also playing the Arbitration Commission for mugs”.

Howard was commenting on the deal between the government and the ACTU which saw the trade union movement forfeit a claim to 3% productivity improvement as wages to instead be paid in compulsory superannuation – endorsed by the Arbitration Commission and managed by superannuation funds with equal representation of the unions in the industry and the employers.

The Coalition has steadfastly opposed every increase in compulsory superannuation since that time, whether it be from 3% to 6%, or the 6% to the current 9.25%.

1995

In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.

1996

In its superannuation policy for the 1996 election, Super for all, the Coalition, which had hitherto been implacably opposed to Labor’s policies, promised it:

•Will provide in full the funds earmarked in the 1995 — 96 Budget to match compulsory employee contributions according to the proposed schedule;

•Will deliver this government contribution into superannuation or like savings;

•Reserves the right to vary the mechanism for delivering this contribution so as to provide the most effective and equitable delivery of the funds.

1997

So why don’t we have 15% superannuation now? Because John Howard and Peter Costello nixed it in the 1996 budget barely six months after it released its policy, insisting it was too expensive. They didn’t “vary the mechanism” so much as halted it.

2007

Significant changes were also made to superannuation policy in 2007. The majority of workers could now withdraw their superannuation tax-free upon reaching the age of 60. Most self-employed can claim their superannuation contributions as a tax deduction. In addition, semi-retired people can continue to work part-time, and use part of their tax-free superannuation to top up their pay.

Despite the relatively generous tax treatment of capital gains, the new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.

People were allowed to transfer up to A$1 million into their superannuation accounts before the June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous. In the June quarter of 2007, A$22.4 billion was transferred to superannuation accounts by individuals. This compares with A$7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.

2010

The Coalition’s superannuation policy  has drawn mixed reviews, with several major industry bodies expressing disappointment at the policy for being unsubstantial.

The Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) said in a joint statement that a failure to increase the superannuation guarantee (SG) to 12 percent, the failure to raise the concessional caps for individuals over 50 and the failure to provide a super tax contribution rebate for low-income earners would adversely impact Australian workers.

ASFA chief executive Pauline Vamos said that the majority of Australian voters would be disappointed that the Coalition’s only plan for superannuation was the promise of more reviews and delays.

AIST chief executive Fiona Reynolds said: “Australian voters are entitled to expect more than a policy document that has no concrete plans or even fresh ideas on how to address retirement income adequacy and the challenge of Australia’s ageing population.”

2011

OPPOSITION leader Tony Abbott has pointedly put down Victorian Liberal MP Kelly O’Dwyer after she questioned his controversial decision to keep Labor’s higher superannuation guarantee if a Coalition government inherits it.

Ms O’Dwyer asked at yesterday’s party room meeting about the process by which the Coalition’s previous position was reversed – saying it was her understanding such issues should go to the party room.

Mr Abbott said the party room had the right to change policy at any time. But there was no rule – and there should be no expectation – that every policy decision be brought to the party room.

“Mr Abbott, who several times made it clear he did not want to talk about the backflip, said the Coalition would have more to say on superannuation later, but repeated that it would not rescind the higher guarantee.”

Feb 2013

JOURNALIST:

So you would cut all those initiatives?

JOE HOCKEY:

Absolutely, you can’t afford them.

So there it was in black and white – the Coalition was cutting the increase in the super guarantee.

Except, apparently not so: a couple of hours later, Hockey was complaining on Twitter about being misrepresented. “What an MRRT debacle… Despite Govt’s failures we remain committed to not rescinding the increase in compulsory superannuation from 9-12%.” Hockey tweeted. After the Nine Network had accurately reported his remarks, he followed it up with:

Would be nice if Nine News had checked the facts…Coalition remains committed to keeping increase in compulsory superannuation from 9-12%.

Crikey understands Tony Abbott’s office moved immediately after Hockey’s doorstop to indicate there was no change in the Coalition’s support for the move from 9-12%

May 2013

Tony Abbott’s plan to delay the compulsory superannuation guarantee increase for two years and do away with top-ups for low income earners sets the tone for the Coalition’s policy on retirement savings to be announced in coming months.

The Liberal Party’s superannuation policy is likely to encourage individuals to make more voluntary contributions while scaling back government-directed super contributions.

The Coalition seems to be struggling with the concept of superannuation. The Coalition has lost a lot of their super knowledge over recent years with the retirement of many senior MPs, including Peter Costello, who was the architect of the 2007 changes that brought in tax-free super for over-60s, introduced caps on non-concessional contributions, reduced the caps on concessional contributions, and removed limits on the amount of super that you could withdraw at concessional rates. They have promised not to make any unexpected negative changes to super, but hey, a few weeks after making that promise, they announced they were freezing the Superannuation Guarantee increase for 2 years.

November 2013

Labor went to the election promising a 15 per cent tax on superannuation pension earnings over $100,000.

Treasurer Joe Hockey said on Wednesday the policy was too complex and it would be scrapped.

The Treasurer has also decided to cut superannuation co-contributions for low income earners

According to the chief executive of Industry Super Australia, David Whiteley, this would result in 3.6 million Australians on low incomes being out of pocket $500 a year, while just 16,000 of the nation’s top earners will benefit from the scrapping of the 15 per cent tax.

May 2014

Mr Hockey said the discussion on what age people should be allowed to access superannuation had begun inside the Coalition.

When asked if raising the superannuation access age was being considered, Mr Abbott said the government was keeping its commitments regarding superannuation.

”We went into the election saying that apart from a couple of very small already announced changes we weren’t proposing to make any changes to superannuation in this term of Parliament,” he told reporters in Canberra.

”We think that there have been lots and lots of  changes to superannuation over the years. Some which we were enthusiastic about, some which we were unenthusiastic about, a period of stability in respect of superannuation is right and proper and there won’t be any changes in this term of Parliament.

September 2014

Under a deal negotiated with the Palmer United party to repeal the mining tax, employer superannuation contributions will be frozen at 9.5 per cent until 2021 when they increase to 10 per cent.

After that, contributions will increase by 0.5 per cent annually until they reach 12 per cent.

As a result, Labor claims that a 25-year-old Australian earning $55,000 a year will be more than $9000 worse off by 2025.  Industry sources say the impact over a 40-year working life could be as high as $100,000, taking into account compound interest.

With the rise of influence of the IPA within our current government’s policy making, this article by John Roskam from 2012 should sound warning bells to us all.

“Compulsory superannuation offends practically every principle of what should be Liberal Party philosophy. If an Abbott government does keep compulsory superannuation it must, at a minimum, make drastic changes.”

Axing the taxes equates to self harm

I am trying to understand why we are repealing the carbon and mining taxes.

“The carbon tax is a $7.6 billion dollar hit on the economy. As you (the Minerals Council of Australia) noted in your submission to the Emissions Reduction Fund Green Paper, the burden on the minerals sector alone is estimated to be $2.6 billion by 30 June 2014.

There is no reason for the repeal to be delayed – the carbon tax is hurting Australian families and businesses and from 1 July is estimated to cost them $21 million per day.”

This is the spin from Greg Hunt.  They just love to say this is costing “a big scary number”.  When he says the carbon tax is a hit on the economy, he means it is a hit on polluters.  They are the ones who pay the carbon tax.  The fact that they passed on any imposte to the consumer is a failing in the legislation if you ask me.

And excuse me if I don’t think $2.6 billion very relevant in comparison to the superprofits that mining companies are making digging up OUR resources.

Why we are protecting profitable mining companies at the expense of families and small business is beyond me and seems contrary to the Coalition rhetoric.

The tax free threshold was set to increase to $19,400.  For low income earners, that would save $228 per year and it would mean those who earn between $18,200 and $19,400 would no longer have to fill in a tax return.  The repeal of the carbon tax will scrap this.

Low income earners will also lose the low income superannuation contribution scheme, which pays $500 to low-income individuals to boost inadequate retirement savings.

A family with three children, one at primary school and two in high school, and where both adults earn just above the minimum wage of $37,000, would lose $2050 from the abolition of the Schoolkids Bonus, according to the Australian Institute.

It is questionable as to whether this was even attached to the mining tax as it was actually introduced to replace a previous payment that was being underutilised –  the Education Tax Refund.

The government will also delay (scrap?) the move of the Superannuation Guarantee to 12%.  This will affect the retirement savings of all employees which, with the proposed increase in the retirement age to 70, and the lowering of indexation to pensions, seems a counterproductive move.

They are also scrapping the Income Support Bonus, which includes payments to the children of veterans and is a lump-sum supplementary payment made twice a year to people on certain income support payments.

They are hurting small business by unwinding the instant asset write-off. This policy allowed small businesses to write off depreciating assets costing less than $6,500, and the first $5,000 was offset against the mining tax.

They are also discontinuing the company loss carry-back, a benefit for small businesses, and dismantling the accelerated depreciation for motor vehicles.

And of course, we have to attack renewable energy.  Existing income tax law provides an immediate tax deduction for expenditure incurred when exploring or prospecting for minerals, petroleum or quarry minerals.  In 2012 this was extended to geothermal exploration.  They are cutting the deduction for geothermal but not for the hydrocarbons.

Add to all these cutbacks the cost of Direct Action should it pass the Senate.  I was going to work out the individual cost but Hockey’s budget says one thing in the text and another in the figures as pointed out in Business Spectator.

“The budget text states that the government will provide an “initial” $2.55 billion to establish the Emissions Reduction Fund, which is consistent with what the Coalition had promised prior to the election over the first four years of the scheme.

Yet the table which accompanies this text listing the hard dollars provides a contradictory and highly confusing story. It outlines a total funding allocation over the next four years of just under $1.15 billion.”

So who can tell?  I think we all are coming to realise this will never happen at any meaningful level.

As for the mining tax, that is also very confusing with the Coalition arguing so many different views depending on what we are talking about.

They say the mining tax has hurt investment while boasting “As Minister for the Environment, I have approved more than $500 billion worth of new projects in the mining and resources sector.”

They say the mining tax has cost jobs but everyone agrees that we are moving from an investment phase to a less labour-intensive production phase.  This shift is causing a loss of jobs but it would see an increase in revenue.

So what do we do?  Accept the inevitable job losses and forego between $3.4 billion (budget) and $4.4 billion (PEFO) projected revenue over the forward estimates.  We also increase the 457 visa intake and decrease the oversight of it so mining companies can have a fluid malleable workforce.

I cannot understand why anyone other than high polluting miners and their high falutin’ sidekicks would think that axing these two taxes is in anyway good for the country.

The Grey Army

Young people starting out in life are a great resource for our future. Investing in them, giving them a helping hand to get started, is the responsibility and obligation of this generation.  We must nurture them while they learn not only skills for employment, but life skills.  When they fall, we must help them get up, dust themselves off, and help direct them on a better path.  We must give them hope and reinforce that opportunities are available – help them to prepare for and recognise them and take advantage when they come around.  They must have choices.  The social and productivity benefits of this are obvious.

Cutting funding for the Gonski reforms, closing trades training centres, removing the tool allowance, saddling students with huge debts, cutting off the dole for 6 months a year, compulsory work for the dole, defunding youth advocacy groups and employment assistance programs – none of these measures seem to meet our obligation to our young people.  They have been given an ultimatum -“EARN OR LEARN” – but many crucial programs that would assist them in doing this have been abolished.

We are offering them the Green Army or the Gap Year Real Army or find someone to support you for 6 months and get good at taking rejection.

At the same time, we are raising the pension age to 70, indexed to prices rather than wages so progressively diminishing comparatively, driving more people into poverty in the future.

Because less than half of the population between 55 and 64 has any kind of paid job, and only 30 per cent has full-time work, we are also offering $10,000 to employers to take on an over-50 employee.  At the moment 400,000 fit and willing Australians over the age of 55 can’t get work.

I understand their stated reasons for doing these things, I just don’t think they have really thought it through or examined repercussions or alternatives.  They have also exaggerated/lied about projections (quel supris), at odds with the ABS, which may add another reason why funding to our national bureau of statistics has been slashed.

Hockey said that the number of Australians between 65 and 84 would “quadruple” by 2050 but on the ABS’s high-growth projection (they do high, middle and low) there will be 2½ times as many people in this age group by 2050 than there were in 2010.

Hockey said “the percentage of people of working age supporting those over 65 will almost halve”. Using ABS projections, the proportion of people “of working age” (defined by the statistician as 15 to 64) was about 67 per cent of the population in 2010 and will be 63 per cent in 2050. (This figure is based on the ABS’s middle projections.)

Hockey predicted that only 37 per cent of the population would be of working age in 2050, yet the best available estimates from the ABS show it is in fact is between 61 and 63 per cent.  Even if age-employment ratios stay as they are now, if productivity keeps rising at its present rate, average wages will rise by 56 per cent over that time. So those in full-time employment will be better able to provide support and services to the rest of the community.

Increasing the pension age to 70 will see a large increase in the number of people on the disability pension.  A higher proportion of people aged 65-69 will have a disability compared to those aged 60-64.  It would also give us the oldest retirement age in the world.  Several countries have moved to 67 as Kevin Rudd suggested, the UK is going to 68, but 70 is pushing it too far.

It is also inequitable.  Indigenous Australians have a much lower life expectancy than non-indigenous Australians.  Males 67.2 years and 78.7 years respectively, Females 72.9 years and 82.6 years respectively (ABS 2005-07).  The majority of Indigenous people would not make it to pension age at all unless we can close the gap.  People from lower socio-economic strata also tend to have a lower life expectancy, as do remote rural areas compared to urban living.

Australia currently has the fourth-lowest level of public pension spending of any OECD country and is projected by 2050 to have the third-lowest level of pension spending. Where Australia is unusual is that it has by far the highest level of tax concessions for private pensions in the OECD, at four times the OECD average.

An increase in the pension age reduces the pension wealth of lower-income groups proportionately more than it reduces the pension wealth of higher-income groups.  It favours the wealthy who are able to invest in superannuation.  Under current regulations, they can start drawing on this at age 60, get very large annual incomes paying far less taxation than workers on similar incomes, perhaps invest in a new family home, which will not be considered an asset should they find themselves eligible for a part pension when they hit 70 which, because they live longer, will be an expense on the public purse for longer.

As it will not come fully into effect until 2032 it also does nothing to help the current budget deficit.  On its own, it will not do much to help with future deficits as tax concessions for superannuation are set to outstrip it in a few years’ time.  Many complementary policies will need to be considered, including a requirement that superannuation be taken in the form of lifetime annuities to ease the pressure on age pensions. Affordable long-term care would also appear to be essential in preparing for population ageing, possibly through some form of long- term care insurance.

As with young people, this should be about choice and utilising a valuable resource, rather than viewing both our young and our old as a welfare burden due to some number on a piece of paper.  Older people should have the option of working and flexibility in their employment to allow for carer’s responsibilities for elderly parents, disabled spouses, or grandchildren.  They should not be in competition with young people, fighting over a dwindling pool of jobs.  Their experience, expertise, knowledge and service should be recognised, celebrated, and used in more creative ways.

Currently much volunteer work is done by retired people.  Upping the retirement age to 70 would see us lose some of that vital workforce.  Rather than a Green Army, we could have a Grey Army of volunteers who could transition to retirement or supplement their pension or superannuation with volunteer work that attracted some remuneration or concessions.  This work is often more attractive to older people who may be more suited to it and they could mentor younger people who may be interested in joining them.

Defunding Landcare and then tendering out the Green Army to private service providers (who collect a handsome fee for their free workforce with no workplace entitlements) is a decision that continues to baffle me.  They were such an obvious meld, dedicated passionate people teaching the young to value their environment and using their labour in meaningful ways.

Young people could teach older people how to use modern technology like computers and mobile phones and even remote controls.  This would vastly enhance the lives of elderly people and foster mutual respect rather than disdain or antagonism.

Obviously, the best solution would be to create more jobs and to close a few tax loopholes rather than forcing people into poverty, and to accept that there will always be some people who need our help, and always a small minority who will abuse our help.  Dealing with that small minority should not dictate social policy.

Our children and our aged have every right to expect our help and support and we have an obligation to continue to protect a society that sees this as an investment rather than a handout.

The Superannuation saga

Joe Hockey (Image by brunchnews.com)

Joe Hockey (Image by brunchnews.com)

While a pained Joe Hockey tells us his “truth” about the mess Labor has supposedly left, and that the old age pension is no longer affordable so we must work till we drop, it is worth remembering the Coalition’s history on superannuation. Had they listened to Whitlam, had Keating won, had Howard kept his election promise, had Abbott and Hockey stuck to their word, the future may not look so bleak for those who have worked for a lifetime yet still face a retirement dependent on the pittance the government chooses to give them.

1972

Compulsory national superannuation was initially proposed as part of the 1972 Whitlam initiatives but up until the 1980s superannuation was solely the privilege of predominantly male professions, clustered in the public sector or available after a long qualifying period in the private sector.

1985

In 1985 then Leader of the Opposition, John Howard, said this:

“That superannuation deal, which represents all that is rotten with industrial relations in Australia, shows the government and the trade union movement in Australia not only playing the employers of Australia for mugs but it is also playing the Arbitration Commission for mugs”.

Howard was commenting on the deal between the government and the ACTU which saw the trade union movement forfeit a claim to 3% productivity improvement as wages to instead be paid in compulsory superannuation – endorsed by the Arbitration Commission and managed by superannuation funds with equal representation of the unions in the industry and the employers.

The Coalition has steadfastly opposed every increase in compulsory superannuation since that time, whether it be from 3% to 6%, or the 6% to the current 9.25%.

1995

In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.

1996

In its superannuation policy for the 1996 election, Super for all, the Coalition, which had hitherto been implacably opposed to Labor’s policies, promised it:

•Will provide in full the funds earmarked in the 1995 — 96 Budget to match compulsory employee contributions according to the proposed schedule;

•Will deliver this government contribution into superannuation or like savings;

•Reserves the right to vary the mechanism for delivering this contribution so as to provide the most effective and equitable delivery of the funds.

1997

So why don’t we have 15% superannuation now? Because John Howard and Peter Costello nixed it in the 1996 budget barely six months after it released its policy, insisting it was too expensive. They didn’t “vary the mechanism” so much as halted it.

2007

Significant changes were also made to superannuation policy in 2007. The majority of workers could now withdraw their superannuation tax-free upon reaching the age of 60. Most self-employed can claim their superannuation contributions as a tax deduction. In addition, semi-retired people can continue to work part-time, and use part of their tax-free superannuation to top up their pay.

Despite the relatively generous tax treatment of capital gains, the new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.

People were allowed to transfer up to A$1 million into their superannuation accounts before the June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous. In the June quarter of 2007, A$22.4 billion was transferred to superannuation accounts by individuals. This compares with A$7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.

2010

The Coalition’s superannuation policy  has drawn mixed reviews, with several major industry bodies expressing disappointment at the policy for being unsubstantial.

The Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) said in a joint statement that a failure to increase the superannuation guarantee (SG) to 12 percent, the failure to raise the concessional caps for individuals over 50 and the failure to provide a super tax contribution rebate for low-income earners would adversely impact Australian workers.

ASFA chief executive Pauline Vamos said that the majority of Australian voters would be disappointed that the Coalition’s only plan for superannuation was the promise of more reviews and delays.

AIST chief executive Fiona Reynolds said: “Australian voters are entitled to expect more than a policy document that has no concrete plans or even fresh ideas on how to address retirement income adequacy and the challenge of Australia’s ageing population.”

2011

OPPOSITION leader Tony Abbott has pointedly put down Victorian Liberal MP Kelly O’Dwyer after she questioned his controversial decision to keep Labor’s higher superannuation guarantee if a Coalition government inherits it.

Ms O’Dwyer asked at yesterday’s party room meeting about the process by which the Coalition’s previous position was reversed – saying it was her understanding such issues should go to the party room.

Mr Abbott said the party room had the right to change policy at any time. But there was no rule – and there should be no expectation – that every policy decision be brought to the party room.

“Mr Abbott, who several times made it clear he did not want to talk about the backflip, said the Coalition would have more to say on superannuation later, but repeated that it would not rescind the higher guarantee.”

Feb 2013

JOURNALIST:

So you would cut all those initiatives?

JOE HOCKEY:

Absolutely, you can’t afford them.

So there it was in black and white – the Coalition was cutting the increase in the super guarantee.

Except, apparently not so: a couple of hours later, Hockey was complaining on Twitter about being misrepresented. “What an MRRT debacle… Despite Govt’s failures we remain committed to not rescinding the increase in compulsory superannuation from 9-12%.” Hockey tweeted. After the Nine Network had accurately reported his remarks, he followed it up with:

Would be nice if Nine News had checked the facts…Coalition remains committed to keeping increase in compulsory superannuation from 9-12%.

Crikey understands Tony Abbott’s office moved immediately after Hockey’s doorstop to indicate there was no change in the Coalition’s support for the move from 9-12%

May 2013

Tony Abbott’s plan to delay the compulsory superannuation guarantee increase for two years and do away with top-ups for low income earners sets the tone for the Coalition’s policy on retirement savings to be announced in coming months.

The Liberal Party’s superannuation policy is likely to encourage individuals to make more voluntary contributions while scaling back government-directed super contributions.

The Coalition seems to be struggling with the concept of superannuation. The Coalition has lost a lot of their super knowledge over recent years with the retirement of many senior MPs, including Peter Costello, who was the architect of the 2007 changes that brought in tax-free super for over-60s, introduced caps on non-concessional contributions, reduced the caps on concessional contributions, and removed limits on the amount of super that you could withdraw at concessional rates. They have promised not to make any unexpected negative changes to super, but hey, a few weeks after making that promise, they announced they were freezing the Superannuation Guarantee increase for 2 years.

November 2013

Labor went to the election promising a 15 per cent tax on superannuation pension earnings over $100,000.

Treasurer Joe Hockey said on Wednesday the policy was too complex and it would be scrapped.

The Treasurer has also decided to cut superannuation co-contributions for low income earners

According to the chief executive of Industry Super Australia, David Whiteley, this would result in 3.6 million Australians on low incomes being out of pocket $500 a year, while just 16,000 of the nation’s top earners will benefit from the scrapping of the 15 per cent tax.

With the rise of influence of the IPA within our current government’s policy making, this article by John Roskam from 2012 should sound warning bells to us all.

“Compulsory superannuation offends practically every principle of what should be Liberal Party philosophy. If an Abbott government does keep compulsory superannuation it must, at a minimum, make drastic changes.”

Could I suggest, Mr Hockey, that this problem is very much of your own making and your decisions to date are doing nothing to help.  Stick to your word, increase the SG, and encourage lower income earners to contribute to superannuation.  They are the ones more likely headed for the old age pension than your mates who have over $2 million tax free dollars invested with an annual retirement income of over $100,000 a year!  Your lamentations lack credibility as do your ever-changing promises and actions.

It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.

Hubert H. Humphrey

The truth about the mining tax

Photo by smh.com.au

Photo by smh.com.au

It has become increasingly apparent that the onus is on citizen bloggers to inform the Australian public of the truth. We certainly can’t rely on our politicians who are too busy misrepresenting the facts to make the other guy look bad.   And we can’t rely on our mainstream media who, in many cases, are under editorial instruction to present a certain view.

Today I would like to discuss that “anti-Western Australia” mining tax and put paid to some of the lies being repeated over and over from the Coalition script du jour. I wonder if they realise how annoying it is to listen to them repeat the same trite phrases regardless of who is being interviewed. This, to me, indicates that they either do not have a handle on the subject matter (I’m looking at you Tony) or that they are deliberately obfuscating the issue with whatever spin the advertising gurus tell them will resonate. Either way, it is treating us with contempt.

Most of our mining companies are majority foreign-owned and are receiving a huge windfall at the Australian taxpayer’s expense. Remember that these minerals are a finite resource – when they run out the money stops coming in. In 2001, mining companies paid approximately 40% of their profits as royalties to the state governments. Today they pay less than 20%. Clearly, there is a strong argument that the Australian people deserve to receive a greater share of today’s profits.

While parts of the Australian economy have benefited from the resource boom, other parts have suffered. Strong demand for our resources has pushed the Australian dollar higher, hurting farmers and manufacturers who export Australian-made products as their products have become more expensive to foreign buyers. The higher dollar has also impacted tourism and our foreign-student education industries. As a result, we have what has been described as a two-speed economy. The miners and associated service industries are doing very well, while our exporters are suffering.

The tax, levied on 30% of the “super profits” from the mining of iron ore and coal in Australia, was to be paid when a company’s annual profits reach $75 million, a measure designed so as not to burden small business. This affected approximately 320 companies. The money raised was to be spent on pensions, tax cuts for small businesses and infrastructure projects, particularly in Queensland and Western Australia.

Professor Ross Garnaut said, when the tax was proposed, that it would be a test of whether difficult economic reform remained possible in Australia, or whether powerful interest groups now had too much sway over the political process. I guess we have our answer.

When Australia’s richest person, Gina Rinehart, led a $22 million advertising campaign against the mining tax, the Labor Party succumbed to the bullying and allowed BHP Billiton, Xstrata and Rio Tinto to make up the rules. This was a huge mistake brought about by blackmail – give us what we want or we will make sure you lose the election. The concessions made meant that a proposed reduction of company tax could not go ahead so the miners not only screwed the Australian public, they also cost other businesses this concession.

Mathias Corman has been popping up everywhere saying that scrapping the mining tax will save the budget $13.8 billion. This is a ridiculous thing to say. How can cutting revenue save money? In fact, Hockey’s own dubious figures show that axing the tax will cost the budget $3.4 billion over the forward estimates. The mining companies were given generous accelerated depreciation concessions which, while they were in investment phase, they could write off against their record profits cutting the amount of tax due. Now, as they are moving into production phase, revenue is set to increase significantly into the future.

There have been two main arguments put forward against the mining tax. The first was that it would be a deterrent to investment, an assertion not borne out by the facts. A report by PriceWaterhouseCoopers says the possible repeal of the mining tax in Australia is unlikely to have much impact on Australia’s appeal to investors and that fluctuating commodity prices are much more of a determinant for future investment.

Another report recently released by the Chamber of Minerals and Energy of Western Australia found a number of factors are constraining private investment levels including a shortage of long-term, integrated planning for infrastructure, project structuring complexity, and a general investor aversion towards greenfield infrastructure projects. Still no mention of the mining tax.

In a glaring example of how Tony Abbott is willing to mislead the Australian public, he blamed the delayed expansion of the Olympic Dam project on the mining tax, even after it was pointed out to him that the mining tax only applies to iron ore and coal, not to the copper, uranium or gold extracted from the Olympic Dam mine. Stupidity is one thing, cupidity is another.

The other emotional string pulled in the mining tax debate is that of jobs. Whilst the mining sector contributes about 10% to GDP, it is not a big employer (currently 2.4% of the workforce) and this is set to fall as they move into the less labour-intensive production phase. Since the announcement of the repeal of the mining tax we have continued to see many job losses in the mining industry.

From a peak of 85,819 positions last year, the construction element of the resources boom is expected to dive to just 7700 in 2018, with 78,000 jobs lost, according to the 2013 resources skills study released in December by the Australian Workforce and Productivity Agency. Job losses are expected to be gradual in 2014 – down to 83,324 – and then rapidly accelerate to 2018.

The dive in construction jobs will be only partially offset by a rise of nearly 40,000 resources operations jobs, led by the oil and gas sector where employment should rise from 38,943 this year to 61,212 in 2018. Mining operations jobs should increase by 17,560 from 236,690 this year to 254,260.

In fact, repealing the mining tax will cost jobs as mining profits are stripped from our economy and sent to overseas investors. Instead of those billions circulating through our economy, they will be lining the pockets of foreigners.

The arguments about investment and jobs being dependent on the mining tax have been refuted from every corner, including the industry itself, and by every study that has been done. It is quite simply a lie and the government knows it, or at least they should if they have read any of the countless reports done on the matter. But there will be a cost and it will be us that pays. Tony’s pander to Gina will see

1. The abolition of the low income superannuation contribution

2. Unwinding the instant asset write-off for small business

3. Delaying the superannuation guarantee increase so it remains fixed at 9.25 per cent until 2016–17

4. Discontinuing the company loss carry-back, a benefit for small businesses

5. Dismantling the accelerated depreciation for motor vehicles

6. Ending geothermal exploration treatment

7. Scrapping the Income Support Bonus, which includes payments to the children of veterans and is a lump-sum supplementary payment made twice a year to people on certain income support payment

8. Abolishing the Schoolkids Bonus, a lump-sum payment to parents of school-aged children twice a year, even though this payment was not attached to the mining tax and was introduced to replace an existing education tax refund.

Mining shareholders will be smiling, a smile paid for by our children, our workers and our small business owners. Thanks Tony.

Fair suck of the sav, Tony

fair suck of the sav

Photo: Sydney Morning Herald

When you get all of your advice from the business sector of the community, it is hardly surprising that profit becomes your foremost goal and privatisation and deregulation the means to achieve it.  But who amongst these advisers considers the greater good?  Who will offer protection from corporate greed and safety to our most vulnerable?  Who is courageous enough to look at the long term consequences of decisions?  Who will decide what is fair?

Australia had the highest per capita CO2 emissions in 2012 at 18.8 tonnes. In the US, emissions per capita were 16.4 tonnes, and just behind came oil-rich Saudi Arabia with per capita emissions of 16.2 tonnes.  The EU and China – both major emitters in absolute terms – had much smaller per capita emissions, at 7.4 and 7.1 tonnes respectively.

While Australia’s domestic greenhouse gas (GHG) emissions represent some 1.5% of the global total, its global carbon footprint – the total amount of carbon it pushes out into the global economy – is much bigger.

Australia is the world’s largest coal exporter. By adding emissions from exported coal to our domestic emissions, Australia’s carbon footprint trebles. Its coal exports alone currently contribute at least another 3.3% of global emissions.

In aggregate, therefore, Australia is at present the source of at least 4.8% of total global emissions. That’s without considering natural gas exports.

The proposed “mega coal mines” in Queensland’s Galilee Basin, producing for export, will be responsible for an estimated 705 million tonnes of CO2 per year and would turn that region alone into the world’s seventh largest contributor of emissions.

Countries such as Australia, Canada, the Russian Federation, and Saudi Arabia fail to accept any responsibility for the emissions caused by the fossil fuels they export.  They also ignore the carbon footprint of manufactured goods they import from other countries like China.  To say our contribution is miniscule is a deliberately contrived falsehood.

Is it fair for us to try to gain a competitive advantage in the market by ignoring action on climate change and leaving it to others?

The Abbott government is preparing Australians for an overhaul of the welfare system, with Social Services Minister Kevin Andrews indicating too many depend on the government for their incomes.  Mr Andrews said the review shows that more than five million Australians, or about one in five, now receive income support payments.

In his 2009 book, Battlelines, Mr Abbott wrote that one of the Howard government’s most significant achievements was “slowing the rise in the number of people claiming the disability pension”.  Mr Andrews suggests that the difference in indexation between Newstart and pensions leads to a “perverse incentive for people to get onto the DSP”.

Parenting payments and the disability support pension were two areas of welfare that “would be sensible to review again”, Mr Andrews told the ABC.

Cassandra Goldie, chief executive of the Australian Council of Social Service, whilst admitting a very small proportion of people did not do the right thing, rejected the idea that the disability support pension was an easy “rort” to sign up to. She said the previous Labor government had made it even more difficult for people to get disability pensions, and as a result more people were going on the Newstart unemployment payment of $36 a day.

“The disability support pension is now extremely hard to get on to,” she said. “It’s confined to people who are subject to rigorous testing.”

Mr Andrews flagged the idea of preventing welfare recipients from refusing to take a job on the grounds that it was more than 90 minutes travel from their home and said it was his “inclination” to consider splitting the Newstart unemployment benefit into different “tiers”, which could apply to the payment rate or the conditions attached to receiving it.

Is it fair to be targeting the poorest sector of our community whilst announcing an amnesty for wealthy tax evaders who hide their income offshore?  Is it fair to reduce welfare to our most disadvantaged whilst providing billions of dollars of corporate welfare to mining companies, banks and private health insurers?

Is it fair to maintain generous tax breaks for around 16,000 wealthier Australians while cutting tax concessions for 3.6 million workers on lower incomes and scrapping the planned increase in the superannuation guarantee?  The superannuation policy change announced by the Coalition costs the budget even more money – mostly via the huge concessions granted to higher income earners – while doing little to relieve the strain on the aged pension, since those most likely to require the pension in old age will receive an even smaller share of the superannuation concessions.

The continuation of the existing superannuation rules by Hockey would significantly exacerbate inequities in the superannuation system, since under the flat (15 per cent) tax an even greater share of tax concessions – a direct hit on the budget – will flow to those on higher incomes, whilst lower income earners will receive next to no tax benefit.

Is it fair to ask us to tighten our belts whilst paying for a Paid Parental leave Scheme which will see wealthy women paid almost five times as much ($2885 a week) as low income earners to stay at home for 6 months with their babies?

Is it fair to ask us to pay polluters bribes rather than them paying for the destruction they cause?

Is it fair to lock up asylum seekers and to leave the burden to other countries?

Fair suck of the sav, Tony.  It’s time you got, as you are wont to say, fair dinkum!

Short Term Tony

“You can always amend a big plan, but you can never expand a little one. I don’t believe in little plans. I believe in plans big enough to meet a situation which we can’t possibly foresee now.” (Harry S. Truman).

Whilst there has been much speculation about whether our Prime Minister will become One-Term Tony, another title is already definite.  Tony Abbott will most certainly be remembered as Short-Term Tony.

The short-sightedness of the Coalition is seen in their approach to pretty much all of their decisions.  Immediate political expediency outweighs the greater good.  Priorities have been shifted from safety for our most vulnerable to increased wealth for our richest.  Planning beyond the next election is basically non-existent.

Action on climate change is one glaring example of this.  As the rest of the world gears up for the inevitable move from fossil fuels, we repeal carbon pricing, approve huge new coal mines, get rid of the profitable Clean Energy Finance Corporation, renege on our Emission Reduction and Renewable Energy targets, and sign Free Trade agreements that will allow foreign corporations to sue us for laws which may affect their profitability.  We remove the right of challenge to environmental approvals, and abandon development of renewable energy industries.

As the rest of the world recognises the need for fast, reliable broadband speeds, we are spending billions on a national broadband network that will only deliver those speeds to a very small percentage of the population.  This will limit the benefit of the system and have flow on effects in housing and rental prices.  We are building infrastructure that barely copes with today’s needs let alone the explosion of future applications this technology will undoubtedly unleash.

To date, Australia has avoided the high unemployment levels seen in other countries, but there are warning signs that it is on the increase.  Slashing public service jobs and assistance to manufacturing industries is only serving to exacerbate the problem.  Rescinding the instant asset write-off for small business removes one small avenue of assistance for the largest employer in Australia.  Scrapping trade training centres will add to the skills shortages that will see more foreigners on 457 visas occupying jobs that our children and unemployed should be training to fill.

Refusal to guarantee funding reform in the education sector beyond four years indicates that the notion of needs-based funding will be scrapped as soon as they feel they can get away with it.  The states who signed up late to the deal have already been released from their obligation to co-contribute and to have their funding dependent on assessed progress.  Rewriting a curriculum that has just been developed after extensive consultation seems an unnecessary waste of time and money.

Much has been made of Tony’s desire to be the ‘infrastructure Prime Minister building the roads of the 21st century’.  Once again, this appears a very short term goal when we should be concentrating on urban and high speed rail as alternatives to road transport.  Cars contribute to pollution and congestion in our cities where parking has become a luxury, and the rising price of petrol is an increasing burden on our cost of living.  Facilitating more people working from home or using public transport should be a priority.

We have been told that our welfare system is in danger of becoming unsustainable, sparking an overdue review.  With our aging population, the old age pension will become an increasing burden but, rather than encouraging low income earners to contribute towards their retirement through superannuation, Tony Abbott canned the co-contribution and the rise in the superannuation guarantee, thus reducing the capacity of the very people who would qualify for the pension to save towards their own retirement.  At the same time, he has allowed very wealthy people to use superannuation as a legal way to avoid paying taxation.

Instead of increasing taxation and closing loopholes, Tony announces an amnesty for rich tax cheats so anything they got away with over 4 years ago will be forgiven.  The timing of this is baffling as the information and agreements necessary to prosecute these people have just been made available.  Since this information-sharing has begun, the Australian Taxation Office has collected $1.7 billion, recouping half-a-billion dollars via these international exchanges just in 2012-13 alone.

Right at the time when mining companies are moving from investment to production phase, when we might see some return on the billions of dollars profit that these companies and individuals make developing resources owned by us, we rescind the mining tax.  Contrary to what they would have us believe, mining is a very small employer in the Australian labour market, and the vast majority of their profits go off-shore thus being lost to our economy.

We are being asked to embrace a paid parental leave scheme that is not means tested and will cost billions each year, with women who earn anything over $150,000 a year eligible to receive $75,000 to stay at home with their baby for 6 months.  At the same time we see wage rises to childcare and aged care workers rescinded and, in perhaps the cruellest move yet, the government wants the most vulnerable workers in the Australian economy – intellectually disabled employees in managed workshops – to waive their legal rights to a wage claim in return for a one-off payment of backpay. These workers, who are pressured to sign away their legal rights, are currently paid around $1.77 an hour.

By hiding the boats and infringing on Indonesia’s sovereignty, we are being asked to believe that we are successfully addressing the asylum seeker problem.  By illegally incarcerating innocent people in dreadful conditions in off-shore detention camps, we are being told we are fulfilling our obligations to the Refugee Convention.  By cutting foreign aid and ignoring human rights abuses, we are contributing to the reasons people flee thus adding to the huge numbers of refugees worldwide.

The promise of a surplus has receded to the unforeseeable future amidst cries of Labor mismanagement and crippling debt, though it is hard to take these cries seriously when one of Mr Hockey’s first actions was to give the Reserve Bank $8.8 billion they had not asked for nor expected.  We shall see if the rumours of a short term gamble on the exchange rate are true if Mr Hockey attempts to withdraw dividends just prior to the next election.

We have seen the disbanding of advisory groups on climate change, preventative health, positive aging, and crime prevention.  Instead we are paying polluters, charging for doctors, cutting aged care wages and superannuation, and locking up people who have committed no crime.

Rather than being a visionary government, we have been saddled with a myopic group whose overriding goal is re-election on the back of big business and billionaires, paid for by our poorest and most vulnerable.  Tony’s short-term decision-making is, I fear, going to have very real long-term consequences, and none of them are good.

The Ark of the Coalition

elderly

Joe Hockey keeps insisting that he wants to “lift the tide”, but the Coalition is building an Ark that will accommodate very few of us.  This article looks at our aging tsunami and the Coalition’s history on superannuation.

The Productivity Commission warns the longevity of Australians has been underestimated and that taxes would need to rise 21 per cent unless steps are taken to pay for Australia’s extra health and aged-care costs.

The Business Council of Australia has warned that intergenerational pressures could see Australian governments collectively running deficits of $70 billion a year by 2050 and facing ballooning debt

Everald Compton, the chairman of the previous federal government’s advisory panel on positive ageing, said the greying of the population should have been a key issue in the campaign but had been ignored by the government and the Coalition.  Mr Compton said the ageing issue would render unreliable promises on future revenue and welfare spending.

Deloittee Access Economics predicts that by 2049-50, health and ageing will account for 46 per cent of federal government spending, from less than 28 per cent in 2009-10. Funding this would result in drastic cuts to spending on education, transport and other programs, or heavy tax increases, Mr Compton said.

On election, Tony Abbott sacked Mr Compton and disbanded the Advisory Panel on Positive Ageing at a saving of just over $1 million a year.

“Many of these non-statutory bodies have outlived their original purpose or are not focused on the government’s policy priorities.”

Mr Compton told ABC Radio: “We’ve only got six months work to go and we can give the government a blueprint on all the legislative and policy and financial changes that need to be progressively made over the next 25 years to make sure we turn ageing into an asset rather than a liability. And I find it a little hard to understand why, when we’re so close to finishing something that we’ve had some years of work in, that it’s chopped off and that the government does not appear to want a report on how ageing is going to hit Australia.”

Like climate change and overpopulation, an aging population is a challenge that must be planned for well in advance.  Reducing the burden on the old age pension through superannuation is one tool in this plan.

Tony Abbott has promised certainty, no surprises, guaranteeing that the Coalition will keep their word.  My question is WHICH word?

The Superannuation saga…..

1972

Compulsory national superannuation was initially proposed as part of the 1972 Whitlam initiatives but up until the 1980s superannuation was solely the privilege of predominantly male professions, clustered in the public sector or available after a long qualifying period in the private sector.

1985

In 1985 the then Leader of the Opposition was John Howard. Howard said this:

“That superannuation deal, which represents all that is rotten with industrial relations in Australia, shows the government and the trade union movement in Australia not only playing the employers of Australia for mugs but it is also playing the Arbitration Commission for mugs”.

Howard was commenting on the deal between the government and the ACTU which saw the trade union movement forfeit a claim to 3% productivity improvement as wages to instead be paid in compulsory superannuation – endorsed by the Arbitration Commission and managed by superannuation funds with equal representation of the unions in the industry and the employers.

The Coalition has steadfastly opposed every increase in compulsory superannuation since that time, whether it be from 3% to 6%, or the 6% to the current 9%.

1995

In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.

1996

In its superannuation policy for the 1996 election, Super for all, the Coalition, which had hitherto been implacably opposed to Labor’s policies, promised it:

•Will provide in full the funds earmarked in the 1995 — 96 Budget to match compulsory employee contributions according to the proposed schedule;

•Will deliver this government contribution into superannuation or like savings;

•Reserves the right to vary the mechanism for delivering this contribution so as to provide the most effective and equitable delivery of the funds.

1997

So why don’t we have 15% superannuation now? Because John Howard and Peter Costello nixed it in the 1996 budget barely six months after it released its policy, insisting it was too expensive. They didn’t “vary the mechanism” so much as halted it.

2007

Significant changes were also made to superannuation policy in 2007. The majority of workers could now withdraw their superannuation tax-free upon reaching the age of 60. Most self-employed can claim their superannuation contributions as a tax deduction. In addition, semi-retired people can continue to work part-time, and use part of their tax-free superannuation to top up their pay.

Despite the relatively generous tax treatment of capital gains, the new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.

People were allowed to transfer up to A$1 million into their superannuation accounts before the June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous. In the June quarter of 2007, A$22.4 billion was transferred to superannuation accounts by individuals. This compares with A$7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.

2010

The Coalition’s superannuation policy released this week has drawn mixed reviews, with several major industry bodies expressing disappointment at the policy for being unsubstantial.

The Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and the Financial Services Council (FSC) said in a joint statement that a failure to increase the superannuation guarantee (SG) to 12 percent, the failure to raise the concessional caps for individuals over 50 and the failure to provide a super tax contribution rebate for low-income earners would adversely impact Australian workers.

ASFA chief executive Pauline Vamos said that the majority of Australian voters would be disappointed that the Coalition’s only plan for superannuation was the promise of more reviews and delays.

AIST chief executive Fiona Reynolds said: “Australian voters are entitled to expect more than a policy document that has no concrete plans or even fresh ideas on how to address retirement income adequacy and the challenge of Australia’s ageing population.”

2011

OPPOSITION leader Tony Abbott has pointedly put down Victorian Liberal MP Kelly O’Dwyer after she questioned his controversial decision to keep Labor’s higher superannuation guarantee if a Coalition government inherits it.

Ms O’Dwyer asked at yesterday’s party room meeting about the process by which the Coalition’s previous position was reversed – saying it was her understanding such issues should go to the party room.

Mr Abbott said the party room had the right to change policy at any time. But there was no rule – and there should be no expectation – that every policy decision be brought to the party room.

“Mr Abbott, who several times made it clear he did not want to talk about the backflip, said the Coalition would have more to say on superannuation later, but repeated that it would not rescind the higher guarantee.”

Feb 2013

JOURNALIST:

So you would cut all those initiatives?

JOE HOCKEY:

Absolutely, you can’t afford them.

So there it was in black and white – the Coalition was cutting the increase in the super guarantee.

Except, apparently not so: a couple of hours later, Hockey was complaining on Twitter about being misrepresented. “What an MRRT debacle… Despite Govt’s failures we remain committed to not rescinding the increase in compulsory superannuation from 9-12%.” Hockey tweeted. After the Nine Network had accurately reported his remarks, he followed it up with:

Would be nice if Nine News had checked the facts…Coalition remains committed to keeping increase in compulsory superannuation from 9-12%.

Crikey understands Tony Abbott’s office moved immediately after Hockey’s doorstop to indicate there was no change in the Coalition’s support for the move from 9-12%

May 2013

Tony Abbott’s plan to delay the compulsory superannuation guarantee increase for two years and do away with top-ups for low income earners sets the tone for the Coalition’s policy on retirement savings to be announced in coming months.

The Liberal Party’s superannuation policy is likely to encourage individuals to make more voluntary contributions while scaling back government-directed super contributions.

The Coalition seems to be struggling with the concept of superannuation. The Coalition has lost a lot of their super knowledge over recent years with the retirement of many senior MPs, including Peter Costello, who was the architect of the 2007 changes that brought in tax-free super for over-60s, introduced caps on non-concessional contributions, reduced the caps on concessional contributions, and removed limits on the amount of super that you could withdraw at concessional rates. They have promised not to make any unexpected negative changes to super, but hey, a few weeks after making that promise, they announced they were freezing the Superannuation Guarantee increase for 2 years.

November 2013

Labor went to the election promising a 15 per cent tax on superannuation pension earnings over $100,000.

Treasurer Joe Hockey said on Wednesday the policy was too complex and it would be scrapped.

The Treasurer has also decided to cut superannuation co-contributions for low income earners

According to the chief executive of Industry Super Australia, David Whiteley, this would result in 3.6 million Australians on low incomes being out of pocket $500 a year, while just 16,000 of the nations top earners will benefit from the scrapping of the 15 per cent tax.

With the rise of influence of the IPA within our current government’s policy making, this article by John Roskam from 2012 should sound warning bells to us all.

“Compulsory superannuation offends practically every principle of what should be Liberal Party philosophy.

If an Abbott government does keep compulsory superannuation it must, at a minimum, make drastic changes.”

It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.

Hubert H. Humphrey

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