Wealthy people must have bad backs
While we sit here and criticise the politicians for using simplistic slogans or failing to get their message across, or the media for failing to provide analytical journalism, I wonder whose fault that is. Which headline would attract more readers – “A frank discussion about taxation reform” or “Asylum seeker charged with sexual assault”? Which program would attract more viewers – “The carbon cycle” or “Mystery plane vanishes”? Which Alan Jones show would get more listeners ringing in – “Education reform” or “The role of Juliar Gillard in the AWU slush fund”?
We do not yet have a debt or deficit emergency and we are well-placed to make the reforms necessary to deal with the challenges of the future. The thing we seem unable to do is to have an “adult” conversation. The country has split in two with each side firmly convinced that the other are lying bastards, possibly with good reason.
Far too much time and energy is wasted hating on each other, achieving nothing more than to shut down sensible discussion. This government is hell bent on repealing reforms purely because they were made by the previous government. What an immature, selfish approach. Likewise, dismissing everything in the Budget because it came from the mouth of Hockey and Abbott is counter-productive.
I said on another thread
A line that I hate hearing from Labor MPs:
“We are not in government. It is not up to us to find a solution. We will listen to what Mr Abbott has to say and consider our response.”
You were ALL elected to represent your constituents in running this country. If the best you can do is just say yes or no to Abbott’s ideas then move over. You know what the problems are. Haven’t you already thought about how you will fix them? Are you keeping it a secret so Tony doesn’t steal your ideas? Perhaps you are working on a whole heap of amendments? The silence is deafening and disappointing.
So rather than being frustrated, let’s have a discussion about what Abbott is suggesting and how we might better deal with paying for our aging population.
Australia’s retirement system is both inequitable and unsustainable, and desperately in need of fundamental reform. The Grattan Institute argues that subsidies for older people need to be far better targeted.
Superannuation is a particularly large problem. While the system was originally designed so that a younger generation could pay for its own retirement, it has instead become a mechanism whereby older people pay less tax given their income than everybody else, with the lion’s share of benefits also overwhelmingly going to richer people.
Hockey last night called for “a national conversation” about retirement savings, including changing the superannuation “preservation age” to better align with the retirement age.
Without a lift in the preservation age the government risks seeing an increase in the number of low-balance superannuation fund members qualifying for a pension, largely because they will have burned up much of their super in the first years of retirement.
Why is Hockey focused on making it harder for those who don’t have much to access the little they do have while giving the wealthy even more concessions?
The Abbott Government has announced the following changes to the taxation of superannuation:
1.Increase the tax on superannuation paid by workers earning less than $37,000 from 0% to 15%
2.Reduce the tax on superannuation paid by workers who earn over $300,000 from 30% to 15%
The increased tax on super will negatively impact 3.5 million low-income workers who will now miss out on about $830 million dollars in retirement savings (based on Government forward estimates).
Under the Abbott changes, workers who earn $35,000 will have their super contributions reduced by $485.62 or 17% while people who earn $300,001 receive $4,162.50 in tax savings into their superannuation accounts. Those earning over $300,000 will be paying the same tax rate on their super as the country’s lowest paid workers. Those most able to afford to pay for their own retirement (earning more than $180,000) get a 30% discount on money they put into super while those who are worse off actually pay more tax than normal on their super.
A report released early this year by the IMF revealed that Australia has the highest tax expenditures (ie revenue foregone through concessions) in the OECD when measured against GDP.
The IMF estimates that tax expenditures reduce Australian government revenue by around 8% of GDP – theoretically enough to eliminate Australia’s Budget deficit. In fact, the huge loss of revenues to tax concessions explains why Australia simultaneously has some of the highest personal and company taxes in the world, yet is also one of the lowest taxing countries in the OECD – a contradiction in terms.
One of the biggest tax expenditures is superannuation concessions, which already cost nearly as much as the Aged Pension ($44.8 billion compared to $44.9 billion in age pension), but are also growing more rapidly, meaning they will become a bigger Budget burden over time.
John Hewson wrote
Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners.
Surely, we don’t believe that the top 1 per cent require that much incentive to adequately save for their retirement.
These tax concessions not only skew heavily towards high-income earners: low-income earners are actually penalised for saving (you read that right: penalised)…
As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised.
Aside from losing us billions in revenue, this also does little to reduce the burden on the old age pension as the top income earners were never going to be eligible for it and those that are most likely to need it – lower and middle income earners – receive minimal (if any) concessions, which both hinders their ability to build-up a retirement nest egg and discourages them from making additional contributions.
Rather than reducing concessions for the wealthy, contribution limits will rise, effectively allowing a couple to put more than $1 million into superannuation.
If you’re under 50, the annual concessional contributions cap will rise from $25,000 to $30,000 from July 1, the first time the cap has risen in five years.
If you are aged over 49 then your limit will be $35,000. The cap on non-concessional contributions (those contributions made from after-tax income) has risen from $150,000 to $180,000.
So the bring forward rule on non-concessional contributions means you can roll three years up into a cap of $540,000 instead of $450,000.
For those of us unable to take advantage of making large deposits in our superannuation funds, and who will ultimately have to rely on the superannuation guarantee and/or the pension, the budget is not good news.
The increase in the superannuation guarantee to 12 per cent is now going to take another year. It will rise to 9.5 per cent from July 1, 2014 but it will then be kept at 9.5 per cent until June 30, 2018. It will resume increasing by 0.5 per cent increments on July 1, 2018 until it reaches 12 per cent in 2022-23.
To address the inequity and improve sustainability of our retirement system, Leith van Onselen makes the following suggestions
- Increasing the eligibility age for the Aged Pension to 70 years (from 65 currently and 67 from 2023);
- Increasing the access age to superannuation (from 60 years currently) so that it more closely matches the pension access age;
- Reducing the ability to draw superannuation as a lump-sum;
- Providing everyone with the same superannuation concession (e.g. 15%); and
- Including one’s owner-occupied home (or some part thereof) in the assets test for the Aged Pension and related benefits, and/or reducing the eligibility thresholds for income and financial assets, so that welfare flows only to those in genuine need, rather than those well capable of taking care of themselves.
The Grattan Institute argues to raise the pension age to 70, limit superannuation tax benefits for higher income earners, and include the family home in the pension assets test, which it claims would save the budget around $27 billion a year. They also propose capping concessional superannuation contributions to $10,000 a year, instead of $35,000 currently. This would raise around $6 billion a year and have almost no impact on the bottom 20% of the population.
It seems there are many avenues available to tackle this problem but this government is only looking at the ones that hit the low income earners the hardest. Go figure. Are wealthy people immune from “heavy lifting” due to bad backs?
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“The disputed budget tax increases and spending cuts that would be at the new Senate’s mercy totalled $12-18 billion over four years. Retaining carbon pricing and rejecting the government’s Emissions Reduction Fund would reduce the deficit by $6-7 billion in 2014-15, and a total of $6-12 billion in the following three years.”
Why must they be so stubborn?
I am just watching Hannibal at accos, spinning the shit
So I rang his office and said”we know, where’s the 8 bill,
No charter of budget honesty, we are to broke, just cooked Tthe books
Myefo and perform thing, we know text or gobbles days are over
We know you are trying to push dollar down, so you can make a big fat profit hey,
It’s over, the plan is exposed
They stopped accos being shown bout 10 mins after I rang his office
They know hannibals getting a mincing, and the Biggest Australian lie ever is out
Re a line I hate hearing.. Did you mean Labor Mp’s? And I still don’t understand why all or part of the value of the family home should be included in consideration of pension. Does ownership contribute to income in any other way than saving rent?
Hey check this out, they are letting the people know, the real threat, and it’s not enough money, go the guardian
yes I did mean Labor MPs. Thanks for that I have edited it.
Re including the value of the family home…
They have found that some wealthy people were taking a lump sum on retirement and buying an expensive home so they can then qualify for the pension. It also leads to some people staying in their large homes because if they sell them they lose eligibility for the pension which is a poor usage of housing.
You should be a detective Kaye
Ohh that’s right you are, cos where are our detectives,/protectors
Ohh they are busy looking after King Tone’s,
They said it would of taken at least 50 of our cops off their jobs,
And that’s crap, more like 500 cops mmmm
Map thine,is calling the protestors a” minority” and it’s a sad day for our democracy when our PM can’t visit here,,, I reckon some premiers are in on plan
“The advice from the Australian Federal Police was that they were concerned about the safety, particularly of innocent bystanders, because [Wednesday] is the students’ national day of action, so-called, where they’re protesting against having to contribute more to their own education,” Pyne told the ABC’s Lateline program.
The poodles at it again, demonising our young as they are silly, and have no idea
Fact check, the big research centre will not be the biggest in the world
As hockey said in parliament,,and they have been workin for us, what a joke,
I cry for my country and peoples.
How could this happen, what are these sickos doing and think they were going to get away with it… Got news for them insane criminals
Night of election
“Australia is open for business”
Nooooo Tones,, it should of been
“Australia is for sale and it’s people”
“And we will help you with this policy”
Go Chris Bowen, he is at press club,tellin the truth,,the reporters look a bit shocked at the deceit.chris Bowes electorate would be the worst off after this budget
They have to go TODAY,,come on Aussie rise and say NO to Hitler and his Gestapo
What completely baffles me (among a number of other things that baffle me) is why the government is abolishing the Pensioner Education Suppliment. We hear them say – rather monotonously – that people should be encouraged to ‘earn or learn’. So why then cancel the PES? Without the $65 a fortnight to help them out, I would imagine it might make university unaffordable.
‘Earn or learn’ my arse.
As inexplicable as ripping almost $1 billion out of trades training centres. How do you earn or learn if they defund courses or make them prohibitively expensive and there are no jobs?
Cos they want to destroy everything and start again. So they can say we have got you through our worst recession, after they make profits off 8 mill,
then sort of wipes out labor getting us through the GFC, it is in our distant memory then,,they are our real saviours then,,bullshit, they are the destroyers
Kaye, I contributed to super all my career & paid tax on a fair bit of those contributions. I don’t think it’s fair that I pay tax on it again.
These Libs being AGAINST ANY mining tax,shows and says it all about who they represent: MEGA RICH MINING MAGNATES who “Bribe” I mean pay donations to this Liberal party.
Education Minister Christopher Pyne told ABC’s Lateline last night: “The Prime Minister made the decision and his office that it would be wiser to not go and to create that tumult at Deakin University so students can get on with their studies unmolested by the Socialist Alternative, which seem quite intent on shutting down democracy in Australia.”
I’ve seen several comments from witnesses who say that the protest is non-violent.
The hypocritical liars complaining that protest will shut down democracy.Protesting is part of a democracy.
If you were in a high tax bracket then you paid less tax than you would have had you not invested it in super. If low income earners invest in super they pay more tax than they would have had they not. The inequity must be addressed.
We own a very modest house we built ourselves to be an energy saver, but because it is on a few acres( which could potentially yield very little in wetter years, and nothing in drought ) it affects our potential to get a pension. We don’t own big cars, don’t travel , wine and dine , so manage . Yes, if you reduce your lump sum with a big house, cars or travel, you should have house value included. Better still, all super should form an income stream, not be payouts.
Chris Bowen was very good at the Press Club: seems we have forgotten what a politician who answers questions frankly sounds like.
On the other hand Abbott on ABC radio talkback this morning was stumbling and at times incoherent, also he made mistakes on the application of the $7 Medicare co-payment and on the university course fees.
Peta must be pulling her hair out and wondering can she possibly let him out on his own again, beyond the gentle embrace of 2GB .
Now that Hockey has set the precedent on Q&A I imagine Abbott will have to follow; that could be his undoing.
Does anyone else grind their teeth when they hear retirees refer to themselves as self-funded? They are usually supporting the liberal party or criticising those on pensions. There needs to be a new term for these people; something less flattering and more reflective of the truth of their more than ample assistance.
[So why then cancel the PES?]
Because that money most likely does not necessarily go into private hands. People might do TAFE courses.
The LNP never do anything that does not expand or create a private market for government funds to be spend within.
It is their prime game.
So they will give 10k to some business owners who will pretend to reemploy their dad and mum, whom have already retired, and send them off to a “training resort” for two years specially set up to cater for this gift horse. Their tax agents will love this umm policy.
Found this article on the loving thieves
Babbage is no good, oh and she predicted the GFC
she is a guru, she is the mastermind work for deutch bank
Biggest bank in world, how did she predict last GFC, cos they engineered it
And trying it on here now, well well Ms Babbage, payback time, I feel an accident is in store for her, she needs putting out of action, and mostly my predictions come true
Ask Sinodinos LOL
My long term employer refused to pay my super, he liquidated the company over and over again to avoid tax, super payments and creditor payments. I have lost years of super as the ATO cannot extract money from a dead company. Some retirement plan I have got to look forward to? Self funded retirement for me is just a pipe dream, I will need a pension!
Paula, “There needs to be a new term for these people; something less flattering and more reflective of the truth of their more than ample assistance.”
You are entitled to your opinion, but I feel your sweeping statement is completely unfair to many people.
I will be retiring at 69 later this year. I have contributed as much as I could to super for the past 20 years as I believed it was the socially responsible thing to do.To do this I have lived on the minimum amount I could afford to. I am a middle income earner, and still have a mortgage to pay off when I retire. I will not get the pension.This does not worry me, as I believe there are people who have been less fortunate than I who have not been in the position to save for their future through no fault of their ow. They deserve to be supported by the government.
However, I will be a self funded retiree. I have not received “ample assistance”, have not been in the position to put large lump sums of money onto my super and do not criticise those who receive pensions and benefits. I have NOT supported the Liberals ever and never will. There are many other self funded retirees like I will be. We are not all fat cats. Sorry – end of rant.
"Wink is no laughing matter for Prime Minister with a 'women problem'"
"Tony Abbott's friend linked to $60,000 scholarship for Frances Abbott at private college"
"'Lying and fear-mongering': Tony Abbott cops a grilling on talkback"
"Tony Abbott contradicted by universities, Education Department on how deregulated fees will be applied to new university students"
"What's inside Joe Hockey's head?"
"Retail politics' clash with retail reality as budget wreaks havoc on consumer confidence"
"Over 100,000 young unemployed to go without benefits"
"Thousands of university students protest in Melbourne against federal budget"
All headers from todays "The Age" (Fairfax Media).
Someone at Fairfax Media has their nose seriously out of joint.
This type of lead has never been seen against Abbott.
And I love it !
Some one has seriously blotted his copy book! Isn’t it wonderful!
He is faarked ,
,and I don’t drink, but cheers everyone
every dog has its day,
today happened cos they panicked,,THEY panicked,, so they went from one cock up to next, Tone’s is on fire, not the country, you fool of a thief, not even a good actor
just a large loud mouthed pack of fascists, bigots, overindulged pigs, that have assaulted this country and kind people,
we have been punched, kicked, verbally attacked, emotionally wrecked
and its left a lot very confused, now the economy,
that was their plan, hard to fight back when you are being abused al the time, how much did we pay to be beaten around?,,oh they will PAY
BUT we will be okay, and will come out even smarter and stronger nation and peoples
next thing is to dismantle, those camps that are experiments on human misery, and help our fellow man, that they are using for psychological torture ,,what to see how humans react,,
this gov are dangerous to all mankind
Response to Paula Fairbairn
We all need to deal with nuance in this debate. My parents (89 and 85) are self funded retirees with no (zero) superannuation. They were too old to choose to use super when it was brought in so every cent of their savings has been fully tax paid at the rate that was in place in the decade they have earned it. They file tax returns and pay tax (at whatever current rates) every year.
I agree that that the Costello amendments were ridiculous and with much of what Leith VO on Macrobusiness says.
But there are a group of folk who are truly “self funded retirees”.
As KL has said the challenge moving forward is to debate the options based on the facts. We all need to take responsibility to spend the time to read the background and be informed so we don’t waste time dealing with misinformation.
Listening to ABC radio late last night, I heard one of the most spurious arguments ever from Paul Clitheroe who seems to have a segment talking about managing money.
The discussion centred around the budget and the Liberals long-term intention and need to reduce company tax and flatten the progressive income tax scale (I presume this means reduce the top marginal rate), because both supposedly “acted as a disincentive for people to improve their job and their earning capacity”.
Allegedly, people simply aren’t working to find higher paid jobs because of the risk of them falling into a higher tax bracket. That would never have occurred to me.
So I should knock back that $700k a year pay increase because I’ll have to pay more tax?
It’s astounding we are able to find any people willing to work as CEOs for the banks and all those major corporations offering multi-million dollar salaries. You’d be a fool to take one of those jobs because of all that extra tax you’d have to fork out. How do they do it? How do the rich manage to survive when the evil bureaucracy keeps sucking every cent out of their earnings? It’s a modern day tragedy.
– – – – –
And speaking of modern day tragedies, did anyone see the ludicrous situation at Aldi? Offering $600 bottles of scotch for the bargain basement price of $400, but not having enough stock on hand to meet the explosive demand.
Atrocious, disgraceful, disgusting behaviour and false advertising.
I don’t mind telling you, I was livid with rage and immediately made several call to the Alan Jones program, so all those other badly affected people on “struggle street” were aware and could express their outrage in a suitable manner.
Even Tony took the time to acknowledge how hard done-by we were and with a subtle nod and a wink he assured us his government would be making sure Aldi pays for disrespecting us battling whiskey consumers.
Is it any wonder I swear so frequently?
A few comments:
Seems to me that including the value of the home in any ‘assets test’ is totally sensible. Put simply, why should any asset class be exempt? When I was a property investor, I paid capital gains on the assert appreciation. Now that I invest in equities, I will again pay capital gains (that is if there are any such gains).
My residence is a somewhat modest two-story building which has certainly appreciated over the years and under ‘rational’ circumstances, I would expect to pay some tax on this ‘gain’, particularly when the capital appreciation is down to ‘chance’.
Then ian saffin said:
So did I but I have a different ‘take’. My super ‘earns’ (depending on year) more than I draw down. Over the last 15 years that I’ve been retired, my super has grown in both absolute and relative terms, while at the same time my level of state ‘dependency’ (mainly in the form of medical assistance) has increased somewhat.
Why should someone who has a super income of more than $1 million a year (yes they do exist) and not pay tax on that income? It’s a complete nonsense. By all means, have a scale of exemptions but let’s not have absolute non-payment of tax on super income.
Paula Fairbairn said:
Yep. The ‘self-funded’ descriptor masks the fact that they legitimately avoid what I consider to be legitimate tax obligations while at the same time fail to recognise the ‘assistance’ received.
Probably! But not in my case.
That’s absolute bullsh#t. But it’s a myth that’s constantly advanced. For a start, one needs to understand that before one has to pay tax, one must earn.
BTW, I well remember a golfer on the Gold Coast scoring a hole-in-one (and therefore winning a luxury unit) then bemoaning the fact that he would have to pay tax on same. Poor dear. When I offered to take the Unit and pay the tax, he lost interest. Still trying to work out why.
Second, such an assertion completely ignores the fact that sociological concepts such as status, prestige, power and like can often be more important than financial rewards. Just ask Malcolm Turnbull or Kevin Rudd for that matter.
The notion that tax liabilities extinguishes the work incentive is vastly over-rated.
John Hewson was one of the most visionionary should have been PMs we never had. Politics over policy won as it has ever since. One of your better articles Kaye and I will say that I like the guys like leith because they are independant. Give them more of a run because they are centrists and realists like myself. As for the comments about disliking self funded retirees, let’s be honest. Most of them have made massive sacrifices and given up holidays while many have aimed for the pension. That is the issue I have and it it is disgraceful of the likes of Paula to insult the likes if MissPamela in that way. No multi millionaires would ever waste their time coming here so maybe the likes of Paula should instead thank MissPamela so they can collect their benefits and pay for the internet to write here. As for DanDark, six kids? Get a job a stop whinging all day. Never seen somebody with so much time to just whinge considering the choices you have made (apologies if you had quadruplets but otherwise wtf?).
I thought I saw Murdoch driving a fire engine a few minutes ago.
Did anyone else see him ?
It’s Tone’s pants
Liar liar pants on fire, and his doomed
Dutton tonight, what a piece of lying excuse of a human being
God they have all been brainwashed
he said 9 percent rise 50 bloody times,,,,no the truth mate
They won’t let plan go idiots
Abbotts old man was a nazi sympathiser I feel,
he was a want to be priest but failed, he ended up a dentist
So guessing tones next job, got something to do with mouths
Oh that’s it, he will have his lips sewn together, so no one has to listen to him ever again
They are syphoning money to catholic church,richest ,most powerful church in world
Pell in Rome now, how conveinent for Tones, he is Tones’s best buddy, taken a real battering having to pay victims of their very own pedophile ring,
Got to give it to tone’s he mixes with a lot of elite
A bloke, who gave his daughter a 60 grand scholarship,
And if we wait just a bit the Guardian will come in with the final blow on
Those thieving, violent twits
I have a few jobs Stephen,
So you need to put that porn away
You jerk,typical twit
And Hewson is the biggest failure of a politician you will ever see
Oh and he is a LIB
Go back to your cave hey, and leave decent folk alone…jerk
And watch your back, stephen
You judgemental prick, this is what’s wrong with this country
F*wits like you, and this pack of feral blokes running our country
“Whinging” sounds familiar, murdochs minions words
Similar to last time I posted, I had a discussion with my employer (a staunch LNP supporter) this morning about the changes to the dole for people under 30.
He went into an impassioned speech about how its about time someone gave dole bludgers a kick up the bum. I was trying to compromise so I said I agree for people who it is obvious are rorting the system, for example if it is obvious they make no effort to look for work over a long period of time. But what about for example a 28 year old low wage council worker who has worked since they left school, suddenly made redundant due to government layoffs, and who just needs some help to stay on their feet while they find other work? They will receive no income for six months. Where will they live? How will they eat?
My employer become angry at this, ‘well why should I have to pay to keep them alive, if my business goes under no one is going to bail me out. Where does it end?’. I pointed out that several well known people had been unemployed and picked themselves back afterwards with some help, like Clive Palmer and Richard Branson. He snorted and said he greatly doubted those stories were true.
I feel like the Australia of the fair go, where people helped other people down on their luck to pick themselves up and dust themselves off is quickly disappearing. Our country was like a beautiful flower garden. Now grotesque weeds of selfishness hate and bigotry have silently flourished, and rise to choke the flowers and destroy their beauty. I have found it difficult to believe people I respect, friends, family, colleagues, people I thought I knew I didn’t know at all, that they lack basic human decency and compassion for the plight of others. But it is true, and I have been shaken by it.
I want to fight to save the country, if only I knew how and what I had to do. In the ancient story of King Arthur, Camelot was less of a physical place, and more a symbol of humane ideals. Australia was, and should be again the same thing. An analogy to what we have now is the rise of fascism in Germany in the 1930’s, slow, silent and devastating.
“Poorest families pay most in budget”
OnceGreatNation, i agree with you. I have grown ashamed of being an Australian. So many of us have turned into selfish, nasty, inconsiderate people. It’s a cancer upon our society.
So Superannuation was put in place for people to self fund retirement. Now after starting with a neutral tone the writer goes quite quickly into an attack on the above average earners saying they get more tax concessions than low income earners. It`s hard to get a tax concession when you don`t pay any tax! Australian marginal income tax rates start at 19% above 20k. That would mean anyone paying income tax is getting a tax benefit, unless someone is earning less than 20k no one is paying more tax to contribute to Super.
The super rich couldn’t care less about Super, they have enough either way. The middle and upper middle class though is full of people trying to get themselves a better life style in old age. They get tax concessions for saving for their retirement. But guess what they are still paying the lions share of tax.
The low income and no income are being subsidized now and will be in the future but the argument that they don`t get a fair chance at Super tax breaks is just plain crazy.
Regards the argument from OnceGreatNation isn’t it correct that if a council worker has worked since school and loses their job they would receive unemployment straight away as they have been working more than 6 years (the waiting period is reduced 1 month by each year)? Do they fall off unemployment after 6 months? I have seen mixed reports of this and if so it`s unconscionable to leave people with no “income” for 6 months at a time. It just can`t work that way and if so is an embarrassment to the nation.
But the old age pension of the future will be for those who didn’t contribute to super (so probably never worked or worked little). People my age (approx 40) have only themselves to blame if they can`t fund themselves in retirement.
The comment about capping contributions at 10k a year is ludicrous. For people on middle/ upper middle class they simply have no way of funding retirement at only 10k a year. These people are capable and willing to not require funding in retirement. Best we get out of the way and let them.
As far as houses being included it`s hard to use a house to fund retirement and still live in it at the same time! Maybe the government is looking to force people into Reverse Mortgages? This would be ok as long as no old folks start getting kicked out of their houses for living too long! Imagine how that will go down.
PS I don`t live in Australia any more and haven’t for some time. I don`t vote and have no allegiance to either party.
“The comment about capping contributions at 10k a year is ludicrous. For people on middle/ upper middle class they simply have no way of funding retirement at only 10k a year. These people are capable and willing to not require funding in retirement. Best we get out of the way and let them.”
Brian, I agree with your comments on superannuation. I’ve been disappointed at some of the scorn for super I’ve read on this site. Low and middle income earners who manage to fund their retirement should be praised, not judged. Along the way they have made lots of sacrifices so that they could live comfortably in retirement and they are leaving more in the government coffers for other projects. I’ve never assumed that age pensions will be available when I reach retirement age.
Personally I think excessive immigration is a significant factor in reducing the spirit we had in the 70-90’s.
There are many other factors though – modern technology and a corrupt media being perhaps the biggest negative affects.
“after starting with a neutral tone the writer goes quite quickly into an attack on the above average earners saying they get more tax concessions than low income earners.”
Of course they get greater concessions. Someone on below $37,000 has no income left over to put into super. If they do they will get a concession of 4% up to a penalty of 15%. You also ignore the fact that the 19% is only paid on income over $18,200.
People who are on the top marginal rate have the ability to, given certain conditions, put $1 million into super. Their concession is over 30%. They were also never going to qualify for the old age pension so these concessions don’t help the future cost of welfare – they just make the rich even more individually comfortable while contributing less to the common wealth.
Lost revenue due to superannuation tax concessions will outstrip the old age pension soon. Who should contribute to belt-tightening? Those who have saved 30% on tax because they earn over $180,000 or those who have saved 4% because they earned less than $37,000?
Rich people have many avenues open for retirement investment. The reason they choose super is because it gives them the greatest return, not because of any altruistic wish to not be a burden on the nation. Anyone with an accountant is working actively on how to minimise their contribution to the collective pool whilst maximising their takeout.
“it`s hard to use a house to fund retirement and still live in it at the same time! ”
You miss the point. The expensive family home is used to hide assets to qualify for a part pension (in some cases).
What is this superannuation change all about? The tax on super is already a flat 15% across all marginal tax rates. Yes this is a rort, but it’s not something new that Abbott’s government is introducing.
The tax on super payouts of over 100,000 a year were going to be taxed at 30% rather than 15%. Hockey got rid of that change. They also upped the amount that can be put into super depending on your age.
“Hockey got rid of that change…”
Because expecting the rich to pay more tax is… CLASS WARFARE!!!
I don’t ignore the fact that 19% is the MARGINAL tax rate. It’s quite clearly stated in my use of the term MARGINAL. If someone makes a super contribution where does it come from? Their top tax rate, unless they contribute so much they fall into the tax bracket below. I don’t really expect people earning under 18k are contributing to super, they are probably struggling to get by now and they will most likely receive a full pension as they will have no savings. I don’t see how $1million in Super is excessive? I live in retirement for 30 years it’s just over 30k. It’s been taxed (at concessional rates I admit) but these people have paid plenty of taxes and deserve to enjoy the retirement they saved for. People still have to live. For someone on 100k to sacrifice 30k is a major savings sacrifice for now. For someone on 300k they probably don’t notice it, but they are already paying tax on the other 270k.
I would love to see some statistics on people upgrading their home to hide their assets. If you have that kind of money why would you move home to get a partial pension. The money is not just worth it.
My mother has just retired, my father is deceased. She has enough money in Super that she should never need a pension. All she wants to do is live a happy retirement in her home of 35 years. I would hate to see others forced out of their homes because they aren’t in the same situation and forced to liquidate their assets because they no longer qualify for a pension. It would be political suicide also. Maybe some form of Govt Reverse mortgage scheme could work. Guaranteeing people keep their homes until passing.
So I guess my point is, yes under Superannuation people are avoiding tax to provide themselves a better life, they are already paying plenty of tax anyway (300k guy or gal) or they are lifting themselves to a better standard of retirement while getting off the need for a public pension (100k guy or gal)
I don’t view super as a rort. The high income people I know don’t use super to save for their retirement. They are investing in property and shares and have family trusts. There needs to be some incentive to encourage people to save for their retirement. I’m not currently able to afford to contribute as much as I would like and I’m making sacrifices now because I don’t know whether there even will be a taxpayer funded pension when I retire. Based on the current projection, I won’t be able to live very long past retirement if that is all I have to live on. So please, enough of the knives in the backs of people who contribute to super. There are plenty of people out there who squander every cent they have, spend on a whole lot of unnecessary stuff, live beyond their means and then expect the government to bail them out. Yet not one word of judgement is passed on them here. Yes there are people doing it tough through no fault of their own. Let’s not deny though some of them are doing it tough as a result of their own doing. Then they begrudge anyone who was sensible enough to put money away for a rainy day.
My mother is an age pensioner, has a small amount of money saved away, living in public housing, with no assets to speak of. She also sees 4 specialists on an ongoing basis for incurable conditions, plus is managed by her GP for a couple more. She lives in the country, so does not have access to public transport, free or otherwise, like her city-based counterparts. She has her own well-maintained car (small and economical to run), although having a son who is a mechanic helps there. She also needs to travel to the city multiple times each year to see her specialists. She says the budget won’t affect her much at all and she is quite satisfied with what she gets from the government.
I dispute this is an attack on superannuation. My mother lives on her super and as an employer, no-one contributes for me through a superannuation guarantee so I do it for myself as well as other investments.
When you say “The high income people I know don’t use super to save for their retirement” it all depends on what gives the best return. When John Howard allowed people to put $1 million into super in one year in 2007, personal contributions exceeded employer contributions for the first time in history. If you can save over 30% by investing in super, it is hard to find another investment that brings a better return. The reason we have other investments is because there is a cap on how much we can put into super and get this saving.
Superannuation is a necessary part of retirement financial planning, but income inequity is a huge and growing problem and our current laws only add to it. We must address the growing divide between the rich and the poor.
There are honourable people and rorters in all stratas of society. Why are we concentrating on the minority that rort the welfare system as opposed to the wealthy who take advantage of the rorts available to those with capital.
I do believe only a minority are rorting welfare. However, the number of people who are living beyond their means unnecessarily and spending money on items they seldom or don’t use is much higher. Blatant consumerism is everywhere. The gap between rich and poor can be smaller without the government doing a thing.
Not everyone has had superannuation all their careers as an option. The 2007 year allowed people who had saved money outside of superannuation. They had already paid tax on it. Yes they get better taxation on the returns of investment. They also get to not see their money again until retirement age. That`s exactly what it achieved, a catalyst to enable people probably retiring about now into the next ten years a chance to gain which people of my age will have had, superannuation their whole career. It was perfectly fair to all taxpayers. I doubt their were a whole lot of people lining up with their cheques for a million but I am sure people took advantage of it the best they could. Keeping in mind that money is gone until retirement and better yet got devalued in the GFC.
Your comments on people hiding their money in housing are illogical. For old age pension the government assumes your assets will produce 3.5% max and the scale down is 50c in the dollar. So I can pump $100k into a house to avoid a loss in pension of half of $3,500, which is $1,750 or I could just stick the $100k in a term account at a better rate and get far more cash from the bank than the government. If someone adds transaction costs that would be involved if someone is moving home rather than renovating and it goes from bad to worse. There is no incentive to hide money in the house. Its also incredibly illiquid compared to the bank deposit.
Your point about tax concessions relating to super vs old age payments is at best nonsensical or possibly supports the notion super works. Long term this is what is supposed to happen! But you are comparing old age payments to current pensioners with tax concessions to future pensioners. How many pensioners are their? Way fewer than the total workforce contributing to Super. The pensioners are pulling full capacity, although some will be using their ill gained Super, while the whole workforce (probably close to 3 times the amount of OAPs) are candidates for Super savings. A true comparison would be Super tax concessions given to current retirees vs savings in OAP payments from said concessions.
Yours is not an attack on Super, it`s an attack on those that have, aimed at Super.
You claim we need to bridge the gap between the rich and the poor and that our laws do the opposite. I would disagree that Australian laws do, although I have some concerns about some of the budget changes especially regarding Newstart. Secondly, is it our job to define that gap? For me that ideology borders on Communism. For me it`s important that a minimum standard of living is available for all Australians. In the past I believe that has been there, again I have concerns about the proposed changes to Newstart. But if the well off build themselves a better standard of living through hard work and taking advantage of opportunities available to all Australians then why shouldn`t they move ahead? I have lived in a number of countries and the education, welfare, and healthcare systems are by far preferable for the less fortunate in Australia than a number of places (especially the US).
“They had already paid tax on it”
No Brian, they hadn’t and that’s the point. Howard allowed them to hide a million in income and not pay tax on it.
You may wish to read up on the Coalition’s history with superannuation.
“They also get to not see their money again until retirement age.”
I am sure they don’t invest money that they need for food this week. Investment portfolios have short and long term investments.
“It was perfectly fair to all taxpayers.”
How do you figure that? A very wealthy person who could afford to invest $1 million avoided contributing $450,000? (without checking top marginal rate back then) to the common wealth and instead put it towards their individual wealth albeit in the future.
“Your comments on people hiding their money in housing are illogical.”
Are you purposely missing the point? Let’s say I have $5 million in cash. I do not qualify for the pension. Let’s say I use that to buy a $5 million mansion that is now my family home which does not count in my assets. I now qualify for the pension.
“Your point about tax concessions relating to super vs old age payments is at best nonsensical or possibly supports the notion super works.”
My point is that expenditure on tax concessions for superannuation will outstrip expenditure on OAPs. If we need to address retirement expenditure surely you would look at asking those who are most able to contribute rather than those that are least able?
“Yours is not an attack on Super, it`s an attack on those that have, aimed at Super.”
What rot. It is an attack on inequitable laws that favour the wealthy – laws that I myself take legal advantage of while recognising their unfairness.
“You claim we need to bridge the gap between the rich and the poor … is it our job to define that gap? For me that ideology borders on Communism.”
For me it represents a social justice that our country can well afford. The economic benefits of lifting people from poverty are enormous in saved health costs and increased productivity.
“the well off build themselves a better standard of living through hard work and taking advantage of opportunities available to all Australians”
Let me guess…you went to a private school? Are you a Young Liberal perchance?
“Let’s say I have $5 million in cash. I do not qualify for the pension. Let’s say I use that to buy a $5 million mansion that is now my family home which does not count in my assets. I now qualify for the pension.”
No one will be able to maintain a $5 million home and pay their council rates on an age pension.
Lee, they are allowed to have other assets to well over $1 million. They can also receive some income and get a part pension.
I went to Rutherford High School, a very exclusive school indeed 😉
You don`t get it. If someone buys a $5m house to pick up the pension they forgo the $250,000 per year they could get (minimum there are better investments out there that`s at 5%, they could keep it in Super and the return is tax free) and to pick up the OAP pension of how much? So I can live in a $5m house and rake in $30k (I am guessing but see link below) http://www.humanservices.gov.au/customer/services/centrelink/age-pension
or I can stick $4m in St George for a year at 3.35% and buy a $1m house with a return from St George of $134,000 which do you
think people will do?
A house is also illiquid and as stated by Lee you would require hefty assets to maintain and whiile it`s true you can have a lot of assets and get a part pension, now you are talking about a $5m house, $1m in the bank, and a pension of about $14,000. But you know what, if someone`s 1) Stupid enough to do this 2) Has paid tax legally on their earnings over the course of their lives ( which assuming they saved $6m they have paid a motherload in tax) they can scam the government for $14k per year.
The amount of people generating income of $1m per year is very very small. There would be very few who could take advantage of these tax savings in one year but even then;
Read the above, please not specifically the definition of NON CONCESSIONAL contributions
Please read the definition on non concessional contributions, they have already been taxed. So you`re argument about avoiding $450k in tax is false.
I never condoned putting people below the poverty line. Your article has no facts about how a low income person fares today vs that of 10 or 20 years ago. It`s pretty plain what I said but you go twist that the way you like. I clearly stated concern about some of the budget reforms which I disagree with. Some of them, not all of them.
They can have assets OR income, the assets are deemed to earn income at a rate (starts at 2% for first tier of assets ($46k), goes up to 3.5% which is generous to the rich bloke because he can do better ) but someone with $2m in assets can easily generate the 75k per year (real income and/or asset allocatted) which would avoid 1c of pension.