Superannuation: changes only hope of fixing deficit

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According to the Grattan Institute, if the Government can’t see its super changes legislated then there is no hope of it being able to successfully fix the budget deficit. 

In its paper released today, the Grattan Institute is clear that it’s the changes to superannuation announced in Budget 2016/17 that will prove the defining issue of this Government’s term, “not because our major political parties are at loggerheads, but because they largely agree”. 

With Labor supporting the changes, subject to clarification that the $500,000 lifetime cap on non-concessional contributions isn’t retrospective, Grattan Institute CEO John Daly is urging the Government to push ahead, “There’s a grand total of one thing that the ALP disagrees with the government on that costs the Budget money. There’s a whole list of things it agrees on that saves money,” he says.

“If you can’t do a deal with all of that going for you, it’s hard to see how they will get anything worthwhile done. If we cannot get reform in this situation, then there is little hope for either budget repair or wider economic reform.

The Government has already signalled amendments to its proposed changes to appease those within the Coalition who believe the hard fought nature of the election campaign was due to public objection to the changes. The Grattan Institute, however, notes that there is little evidence to support this, “Polling suggests that support for the changes is highest amongst older people on high incomes, perhaps because they understand that the current system is unsustainable,” the report says.

The report continues, “For more than a decade, superannuation tax breaks have been absurdly generous to older people on high incomes.” It also says this is the reason that households over the age of 65 are paying less tax in real terms than they were 20 years ago as a result of such tax breaks, while those between the ages of 25 and 64 are paying more tax.

“Even after the reforms, super tax breaks will overwhelmingly flow to high-income earners who do not need them,” the report also states.

And while the superannuation industry claims that nine per cent of superannuation account holders will be affected by the changes, Grattan refutes such calculations. It claims that the nine per cent is due to double counting and says this figure is more around 4.2 per cent, close to the Government’s estimate of four per cent. 

Read the working paper, A better super system: Assessing the 2016 tax reforms

Read more at TheAge.com.au
Read more at News.com.au

Opinion: Super just the tip of the retirement iceberg

The theory behind the proposed superannuation changes is noble one indeed: to redress the balance between the wealthy and the not-so-wealthy in retirement. But until such times as Australia’s retirement income system receives a full and effective overhaul, then it’s really just paying lip service.

As we’ve stated time and time again, the superannuation system as introduced in 1992 by the Keating government was based on the principle that working Australians would have at least 40 years of superannuation savings to sustain them throughout retirement. A determining factor of the success of superannuation as a retirement income savings means was that the superannuation guarantee would rise to 15 per cent.

Fast forward some 24 years and we have a system that has been tinkered with so many times that people are losing their faith in ever being able to save enough for their own retirement. The closest we are to having a superannuation guarantee of 15 per cent is the current legislation that will see it rise to 12 per cent by 2025 – a fat lot of good that will do anyone hoping to retire in the next 10 years.

The failure of successive governments to fully understand the important of superannuation as a retirement income savings tool rather than a tax revenue vehicle has resulted in an increasing reliance on the Age Pension for those entering retirement. And as a result of this reliance, we’re now being told that our welfare system is unsustainable. It all seems a little chicken and egg to me.

In May we were told with conviction that our superannuation would be changed for the better. Yet, just four or five months on, we’re seeing increasing reluctance from within the Coalition to support these ‘necessary’ changes, largely due, one suspects to the act that it is the high-income earning Coalition supporters that will be affected by such changes. Despite having the support of the voting public and the Labor Party that is needed to see such changes legislated, the Government has responded by indicating that a few tweaks will be made to make the changes ‘fairer’.

But surely fair is to give every working Australian the equal opportunity to save for their retirement?

What do you think? Should the Government have the courage of its convictions to see the changes legislated? Is there any aspect of the proposed changes you would like to see readdressed? Do you think there’s any chance that our retirement income systems will ever be fair for all?

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Written by Debbie McTaggart

75 Comments

Total Comments: 75
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    My dear old dad said to me in 1992 when super was available to metal workers,he said son the goverment will rape the hell out of it because they will be thinking it’s their piggy bank you will have to fight to get your just rewards.synical my old dad was but you know he was right about the rapeing .im sorry but you just can’t trust any of these freeloading pensioner bashing blind and deaf to anything except their own gratification politicians

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    I am surprised at how many people continue to complain about the superannuation changes. There must be a lot more people with $1.6 million in super than I thought. I wish that I was one of those affected but I am sure that I would not be able to spend that much money in the next 20 years anyway. The people complaining about retrospectivity obviously have not read the details. FUTURE income earned on your excess above 1.6 million will be taxed. What a shame. Someone has to pay for roads and health care. My children are doing it tough as it is, without burdening them with supporting the retired generation’s costs.

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      Agree retirees and pensioners have it easy compared to our young folk.

      People are complaining because simply it is a change and there is uncertainly how it will effect them. That is why AMSF contributions were down 34% last year. Most money goes in in the last couple of months of the year so people held off with the uncertainty of the budget measures. Many people are also thinking that super has become too hard and thinking seriously of pulling the pin on it or cashing it out as soon as they can now.

      This is not good for the future at all.

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      Good post Lorrainehk. Sort of tells a story when people complain about tax on amounts over $1.6 million.

    • 0
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      They only look after the top end of town.

    • 0
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      Lorrainehk, in your example that means if a member has a balance o say $3.2m then half of the income will attract a 15% tax, the other half of the income will not have the same concessional treatment.
      People like MICK and fred will happily try to reverse the facts to make it appear that well off people are getting special treatment. There is no mention of the additional benefits to low income earners, especially women. Kinda makes you wonder what sort of good news will stop these people from whinging?

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      ”Agree retirees and pensioners have it easy compared to our young folk.”

      Really, OG? I heard the other day that average young couple spends a whopping $65,000 on their wedding. I don’t know a young family that hasn’t travelled overseas for a holiday. There are 2 near-new cars in nearly every family garage. A house isn’t a home unless it’s got 4 bedrooms, 2 bathrooms, 3 living rooms, a professionally landscaped garden and a swimming pool.

      My neighbour is hard up. Can’t afford to pay the rates. New 5-bedroom home. 3 kids in private schools. Holiday in Bali. But they are REALLY struggling!

      Honestly, I wish I could find these young folk who are doing it tough. My daughter would be doing it harder than 95% – with only one very modest income and a disabled child. But she is still managing to pay-off 2 investment properties (with repayments now mostly covered by rent).

      I agree the disabled and long-term unemployed are doing it tough, but so are many of our aged, and it’s sickening to see the contemptuous manner of some here who are well off. Social division doesn’t help anyone, and generalizations display gross ignorance and arrogance. It’s got nothing to do with age. It’s mainly about the lottery of birth and the opportunities one has enjoyed. True, some are able to make more of scant opportunities than others, but that’s because they scored high in the lottery of birth on one or more factors. Good health, natural aptitude, access to strong mentors, etc. make a huge difference. There’s no such thing as a ”self-made” man or woman. It’s just that people prefer to beat their chests than to admit to their blessings.

  3. 0
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    The report is informative, here is an early take, “The analysis shows how either of the reform packages proposed by both major parties would be a big step in the right direction. It explores how the current system provides much larger benefits to those with such ample resources that they will never qualify for an Age Pension. And it shows how the proposed changes would affect them – and pretty much nobody else.”

  4. 0
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    Why not keep it simple. Change all superannuation over to the Future Fund. After all this was set up with taxpayers funds. One bucket for all to share, and one set of rules for all
    So simple.

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      4b2, – I don’t have any idea how changing over to the Future fund would help, an Argument I read states, “First and foremost, the proposed reforms to superannuation announced in the 2016 budget are about making super better, and fairer.

      Tax breaks should only be available when they serve a policy aim. The purpose of super identified in the budget and due to be defined in legislation is to provide income in retirement to substitute or supplement the Age Pension. Super tax breaks don’t fulfil this purpose when they benefit those who were never going to qualify for an Age Pension in the first place.”
      Would not the super rich just rort the future fund instead?

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      The issue about HIGH income earners is that they do not need the superannuation scheme at all. They only use it as a vehicle to minimise their tax and would invest for their retirement with or without the superannuation system.

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      They only look after the top end of town.

  5. 0
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    I think that before any further deliberation is made on superannuation policy that all politicians should pass a motion in order to clear their minds, get back to reality, and think about Age Pensioners’ welfare for a change.

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      Hi Fast Eddie, isn’t it the danger that the Govt will take their deficit from the Age pension, – so it makes more sense to take it from those much too rich to get the age pension, – by not giving them the expensive tax cuts?

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      Look far, in a word “Yes”.

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      Nay it has the purse strings on the OAP so it is so much easier to get money out of than super. More changes to come with the OAP.

    • 0
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      The tax concessions currently afforded superannuation are unsustainable. We are 38 billion short and most of it due to tax concessions.

    • 0
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      It’s a Catch 22 – incorrectly tax those who may never need to access the pension and you will cause ‘x’ of them to eventually fall back on the age pension.

      This will apply more pressure as the age pension budget increases – and governments will likely to have to cut age pensions further.

      You always have to be careful what you wish for – there is always cause and effect when attacking any group.

    • 0
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      Lookfar: governments normally go after the easy marks. That’s ordinary citizens. The big end of town has the money to fight and will likely drag any government which deprives the top end of town of their affluence through the courts….and will stop funding/supporting its government until it backs off. So predictable methinks.

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      Well said MICK, the top end of town again, you are so astute methinks. The top end of town are in charge.

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      There’s no ”Catch 22” here. Reasons. The current system is giving bucket loads to the richest 5% and nothing to the poorest. It’s a disgrace! And the same people who are whinging about limited superannuation tax concessions are endorsing pension changes that slashed up to 1/3rd of the incomes of battlers who have only half of what those who would be affected by superannuation changes have, and no hope of accruing more. Apparently it’s fine to steal the personal savings of people who never had super – or any other benefits funded by taxpayers – but not to reduce the obscene WELFARE to the WEALTHY.

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      No one is stealing from anybody. People have had it too good for too long and now it is time for everyone to take a cut whether an OAP or a self funded retiree.

      The wealthy already pay more than their fair share and get nothing more than anyone else in return. So stop criticising the wealthy for doing more than their fair share.

    • 0
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      Where ever they are getting their money from they are wasting it hand over fist……I”M stunned
      http://www.9news.com.au/national/2016/09/08/17/38/ministers-defend-money-spent-on-afl-trip

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      OG, nobody is criticizing the wealthy for ”doing more than their fair share”. They are CORRECTLY criticized for TAKING MORE THAN THEIR FAIR SHARE. They don’t pay anything like a fair tax. They have concessions by the bucket-load and they pay fancy accountants to manipulate and dodge all over the place.

      It’s the strugglers who are paying more than their fair share – the folk who don’t earn enough to get more than 15c in the dollar superannuation concession (or none at all) and couldn’t dream of investing to get negative gearing or capital gains tax concessions. As wage earners, they don’t have access to those ”grey area” business deductions. They pay the prescribed rate on every dollar they earn.

      Wealthy are leeches are bleeding this nation, and beating their chests and boasting about being ”self-funded” in old age (except they are NOT.)

  6. 0
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    Super reform and many other cut backs would not be necessary if we stabilised our population and let our overworked infrastructure catch up, instead we sell up money making public assets to pay for our stupid immigration policy.

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      Stop immigration then.

    • 0
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      Hear hear eddie.

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      Now that is a good observation looney. I don’t think Australians understand how much money is going to and will continue to go into infrastructure upgrades des to new citizens. Of course the media avoids any mention of the relationship between fast population increase (from importing citizens) and the sale of public assets to try and provide infrastructure, housing, food and jobs for our newcomers.
      The do gooders with their heartfelt empathy have a lot to answer for. Whilst we all feel sorry for people in poor countries we need to remember that IT IS NOT FREE when they arrive here. If it were up to the toxic Greens we’d double our population with nigh a thought about anything other than feeling good.

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      I do not believe assets were sold to pay specifically for immigration policy.
      The issue for retirees is that regardless of whether we had immigration or not retirees would not be a priority. We have billions to spend on submarines and Gonski but have to take money from retirees. Go figure.

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      you know they tax you when you put money away into super, then when you wanna draw on it. they don’t really know how to be careful with money, and its quiet obviously seen here.
      And these buggers are supposed to be looking after us……..
      WE should not be trusting them with anything they have to offer. GET them out ASAP
      http://www.9news.com.au/national/2016/09/08/17/38/ministers-defend-money-spent-on-afl-trip

  7. 0
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    Way to go Fast Eddie.

    • 0
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      Looney, not sure the immigration policy is costing much, times are tough for immigrants, – can not get pensions for 10 years, have to pay thousands of dollars to various Govt departments, Govt saves lotsa money not having to train them, – the ones who suffer are probably the younger generation, not able to compete for jobs, although many immigrants start businesses so offsetting that, I doubt that the immigrants are to blame for much expenditure, more likely they are being scapegoated to take our attention away from the Pollies.

    • 0
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      The hidden costs of immigration are ernous Lookfar. It’s just that we don’t see them like we see cost of housing and welfare. But they are there and one needs to watch the nightly media circus to see new projects unfold and sale of public assets to fund them. The recent sale of the electricity grid in NSW was to fund Westconnect I believe and this is the tip of a very large iceberg which has been surfacing for years.

  8. 0
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    Time for the Libs to Govern……not dictate!
    Negotiation & Compromise is how you Govern!
    It will be their own Death next election if they refuse to negotiate and keep putting forward the same dictorial legislation and refuse to negotiate a compromise to lessen the Deficit!
    By their own words….the current super system is Unsustainable…..and they need to fix it!
    They simply cannot give tax cuts to anyone NOR Continue to give tax benefits to those who do NOT NEED THEM!
    Besides that…..to continue attacking the Aged Pensioners & unemployed……will be their Death at the next election!

    • 0
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      Talkbull is no leader, he has NO policy or even a clue about what to do in office, he deflects and skirts issue every day, he has no path whatsoever to follow regarding priorities because he has none, everything thing he is confronted with he either ignores or puts off to a later date, he is afraid to make any decisions of any kind, he talks and says nothing, and in general is a waste of time, our taxpayer dollars, our future, our reputation, our welfare, and our future safety and stability as a free country as we once knew it. God help us!

    • 0
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      Agreed Not Senile Yet. Unfortunately the DNA of this coalition government is more of the genre ‘my way or the highway’. Just imagine what Gillard could have achieved if Mr No Abbott had supported some of Labor’s policies rather than veto everything.
      I do hope that SHorten sticks to his word of supporting good policy as he indicated during the election. Australia needs one side of politics which has the nation at heart rather than the vested interests.

    • 0
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      The top end of town have vested interests MICK but what can we do?

    • 0
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      Thanks Mick. It is a worry that Bill Shorten has not objected to the upcoming Omnibus Bill with some of the meanest and severest cuts aimed at the most disadvantaged. Even the conservative media have come out in force against it but there is still no word from the Labor Party.

    • 0
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      I reckon your darn right there eddie, check this out. MORE being wasted.
      http://www.9news.com.au/national/2016/09/08/17/38/ministers-defend-money-spent-on-afl-trip
      and i’m sure there could be more instances, that we don’t know about.
      NO polly seems to know how to be careful with the pensioners monies.
      IN Canada my cousin got Apension from the gov, and got a super annuation pension as well…….They doing well over there.
      Why is it they can’t do anything good for us over here.
      When they go on their trips over seas spending more of our hard earned money, they not learning much of anything it seems.
      Except how to sell of our country bit by bit!!!
      When is it going to stop???

  9. 0
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    People who work and do the right thing by paying tax should be able to save as much as they can without being penalised by the government and not have the need to rely on the age pension.This would make perfect sense to me.

    • 0
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      KB, further to the earlier posts about the Gratton report,
      ” The plans of both the government and the ALP would be big steps towards aligning super tax breaks more closely with their purpose. They would trim the generous super tax breaks enjoyed by the top 20% of income earners – people wealthy enough to be comfortable in retirement and unlikely to qualify for the Age Pension.

      Retirees with large superannuation balances will start paying some tax on their superannuation savings, but still pay much less tax than wage earners on lower incomes. For a small proportion of women with higher incomes later in life, the changes will reduce their catch-up contributions. Yet the changes will reduce the tax breaks far more for wealthier old men.”

    • 0
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      But taxpayer subsidies should be wound back at some level of income because people can and will save for their retirement if they know there is not a blank cheque waiting for them.
      The issue as described well by Debbie is that (taxpayer) money is going to those who do not need it other than to live a more extravagant lifestyle.

    • 0
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      It’s the top end of town again, it’s all their fault.

    • 0
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      So do you oppose the aged pension changes that strip people who worked hard and paid loads of taxes of their personal savings while handing out to folk who partied, cruised the world, and gave bucket loads to their kids, KB. Or is it only the rich elite who are allowed to keep what they earn, and it’s okay to penalise battlers for saving?

  10. 0
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    Of course the government should agree with labor on the changes. If it doesn’t they will only be bloody minded and do not deserve to be in power. Labor is not asking for a lot in this instance and an agreement will go a long way towards what is hoped to be a sensible opposition.

    While there has been criticism about the super changes, most of it has centred on the retospectivity aspect with the government denying it and Labor saying that there is. To add to this we also have an imagined group of government backbenchers wanting the retrospectivity removed. What we actually have is a group of government backbenchers desperate to keep their jobs and want the retrospectivity lifted because the voters agree with Labor and the media. It is not so much who is right and who is wrong, the perception is what matters and there is a perception out there that Labor is right.

    Keating’s superannuation policy in its idealistic form is a perfect way to improve the retirement lives of Australians when it is fully working. The downside is that the amounts held by the various superannuation trustees is becoming a magnet for politicians of all sides. They are thinking that we may not notice how they are wanting to strip funds from holders because it’s not like a pay packet but something that won’t come into play for, in some cases, decades. We need to establish a firm set of rules for super funds which can only be changed by a vote of 2/3rds of the parliament and 80% of the Senate.

    • 0
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      Unfortunately what Labor is asking for hurts the poor not the wealthy which I find very odd indeed.

    • 0
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      Well Old Geezer isn’t that what negotiating is all about? A wants x; B wants y and they settle on z, Win/Win.

    • 0
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      How will it hurt the poor, OG? It affects people with more than $1.6 million in retirement savings and people who can dump $500,000 into super on a whim! Goodness, you are hypocritical. You claimed couples with only $820,000 and no chance of ever earning another cent were ”wealthy”. Now you are screaming that people with twice that much are ”poor”?

    • 0
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      Well said Old Man, could not agree more!
      The odds are stacked against a favourable outcome though. 🙁

    • 0
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      Labor wants to disallow those parts of the package that allows people with small balances to catch up in later life. That is how it effect the less well off.

    • 0
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      News flash, OG. The poor can’t catch up in later life, or ever!

      Only the well-off will EVER have funds to exceed the limits Labor is proposing. Obviously you are so privileged and have your head so locked in the sand that you don’t know what ”poor” is! No wonder you rant with so much BS assumptions about what YOU think people don’t need!

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