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?
