Super tax breaks back on agenda

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Superannuation tax breaks for the rich are back on the agenda after the head of the Government’s Financial Services Inquiry (FSI), David Murray, urged the new Prime Minister to rethink his predecessor’s stance. The current framework for super tax concessions favours the rich, with Mr Murray labelling the existing scheme “particularly harmful” to low income earners. Superannuation tax concessions cost the Government close to $35 billion a year, and this amount is expected to continue increasing.

The Financial Services Inquiry has called for a full review of retirement income policy, including Age Pension, tax, superannuation and other welfare policies. The change in federal leadership has delayed a cabinet meeting that would have approved the government’s response to the inquiry. Mr Abbott and Mr Hockey both publically promised “no adverse or unexpected changes to superannuation” even before receiving the findings of the inquiry.

“In order to deliver value to the Australians in the superannuation system, policymakers will have to come to grips with the fact it doesn’t deliver the value it should, given the vast amount of money people are putting into it via contributions and as taxpayers,” said Mr Murray.

“By reforming superannuation tax concessions for the wealthy, the Turnbull Government could deliver a fairer system and save billions of dollars,” said Australian Council of Trade Unions president Ged Kearney.

Read more from The Age.

Opinion: Time for real leadership

Under Tony Abbott’s leadership, Australians were left to wonder why money was being spent on Financial Services Inquiry when the Prime Minister and Treasurer were steadfastly stating that any recommendations from the inquiry would have no bearing on their superannuation system stance.

The FSI white paper was created to provide the Government with a list of recommendations that aim to improve Australia’s financial system. More importantly for the Turnbull Government, it provides a framework for change to take to the next election. The timing of the leadership change couldn’t have been any better for lower income earners, as the cabinet was expected to meet last week to sign off on the Abbott Government’s response, which has now been delayed.

Prime Minister Turnbull comes across as an extremely smart and financially savvy man, so let’s hope he heeds the call of the Financial Services Inquiry head David Murray before releasing the new government’s official response.

What do you think? Should the Government consider significant changes to the current retirement income policy? Specifically, should the generous tax concessions on the superannuation of wealthy Australians be wound back? Is Prime Minister Turnbull the man to make this happen? 

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Written by Drew

Starting out as a week of work experience in 2005 while studying his Bachelor of Business at Swinburne University, Drew has never left his post and has been with the company ever since, working on the websites digital needs. Drew has a passion for all things technology which is only rivalled for his love of all things sport (watching, not playing).
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66 Comments

Total Comments: 66
  1. 0
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    Yes I believe PM MT can make an informed decision on how to moderate Super to help the ‘battler’. It is currently tilted towards the rich. The Super is a saving (enforced) for retirement but myst be able to help in funding Health Insurance which is becoming exhorbitant to the retiree.

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      Seeing is believing. The rich have fought long and hard to keep their Tax Shelter and it will be interesting to see if Turnbull can fix this with the pressure which will be on him.
      Whatever way things turn out you can bank on the fact that the rich are getting tax cuts. My bet is that their company tax rate is dropped by at least 5% whilst wage and salary earners get a very small sweetener so that they do not look too closely at what has happened. Never changes.

  2. 0
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    I’ll be voting for a Govt. that does clean up this mess.

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    What a joke with pensioners and less well off self funded retirees, who are fortunate enough to have a few bucks in a bank paying tax on the interest and after allowing for inflation having their capital erode. Let it not be the be all and end all of financial reform- negative gearing, trusts, fringe benefit tax, diesel tax rebate and tax compliance by multi nationals should all get a good going over. If MT could pull this off he’d get my vote, the first time liberal in nearly 75 years.

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      Saving for old age in super should not be taxed …we should look to maximise super savings so saving the taxpayer paying state pensions .
      In the meantime we should raise the pension . And cut family benefits and free doctor visits for those not on health card ..

    • 0
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      Come on Drew your better than this …

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      You missed the superannuation tax shelter the rich have been milking for decades to avoid the tax system.
      I think that many Australians understand that the system favours people with big incomes. That’s how it was set up Jack.
      Your account of what retirees are being hit with is bigger than even your list. Whilst trying to avoid drawing a pension retirees not only pay tax with many making a negative return once inflation is factored in but then the real sting in the tail comes with Capital Gains Tax if you sell any assets which you want to recycle into better performing assets. And then there are costs like stamp duty as well. Its a minefield and I have to wonder why people who have prepared for their retirement bother. Easier to land on the social security system and hold the hand out. We lve in a strange world!

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      Spot on, Jack. The current pension system is a recipe for economic disaster and brutally unfair. It richly rewards the irresponsible big spender and harshly punishes anyone who battles to achieve near-self-sufficiency in old age. It purposely grinds the lower middle-class or upper working-class battler into hardship while super concessions deliver obscenely generous benefits to the rich and privileged at taxpayer expense. It is exceedingly generous to immigrants who draw pensions from their own country and from ours as well; to former government employees who had generous superannuation schemes; and to those who maintain their health and continue to be able to supplement their pension with earnings – but it crucifies anyone who is now unable to earn but struggled to save a nest egg for old age, and the incapacitated who were awarded compensation payments that SHOULD give them access to better health services and care, but instead must be spend on daily living costs to compensate for pension loss.

      The recent changes to the means test are a classic example of stupid economics. They position moderately affluent retirees such that they will gain approx $178000 over a 10 year period by quickly spending $100,000 on a world cruise. Given that nobody in the current climate could reasonably expect to convert $100,000 of investment into $178,000 in a 10 year period, and that qualifying for a pension gives access to substantial other benefits, many with moderate savings will be sorely tempted to splurge on luxury travel and then come home and put their hands out. Meanwhile those who maintain the responsible stance will see their savings dwindle steadily until they are lowered to the status of average aged pensioners and forced to impose on the State for care in old age. And at the same time aged care homes are allowed to raise their accommodation charges so that residents have to pay more than the cost of an average family home to secure a 3m x 3m room with attached toilet, shower and basin – in addition to paying 85%+ of the aged pension every fortnight in care fees. Which of those who saved for old age will still have enough to meet accommodation costs after 30 years of inflation?

      I would have thought it blindingly obvious that you can’t expect to increase government revenue by allowing the privileged to evade tax and expecting to draw needed funds by taxing the poor and reducing the spending that is desperately needed to stimulate employment growth.

  4. 0
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    Whats rich???? we all seem to have different views on this I would suggest that rich is a lot more than 1 million given todays financial climate particularly given current stock market and dollar values. I expect that some will say $500,000 is rich. The notion of the word rich is what the perception of the person making the judgments financial position is at a particular time. Just saying rich in any context is non specific and open to interpretation by vested interests

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      Superannuation is to provide an income in old age . The rich are not interested in super …
      The problem with super as it stands is it does not achieve its purpose . We should be designing a system to increase the pot not taxing it more …

    • 0
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      You are right. What has happened is that workers have been forced to save so that they achieve a similar or marginally better pension than the aged pension but without the added benefits of cheaper medical,perscriptions, rates, regos etc.

      It doesn’t make much sense for the individual who could have used the money to pay off a mortgage faster or to have bought an extra property to collect the rents.

      Wealthy people don’t save into superannuation as the risk of government changes is higher than market risk.

      Why save hundreds of thousands of dollars to achieve an income that you could have had simply by not saving at all?

    • 0
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      Pete, what you say is true, but I see no virtue in robbing the common taxpayers to benefit those who already have wealth beyond their life needs. Meaning what they need to live on – food, shelter and access to medical and dental treatment. Cruises and luxury spending need not be subsidized by the tax payer.

    • 0
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      Sarge: rich might be better defined as the income one can derive from assets (deeming?). People who are earning over $150 000 pa are certainly ‘rich’. Those earning $50 000 are clearly not.

    • 0
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      Correct, Mick. Which is why asset-testing pensions is counter-productive and unfair. The Labor proposal to adjust the means test to focus on income, and to, at the same time, address tax concessions on superannuation to ensure the concessions benefit low to middle income earners and NOT the wealthy, was sound policy and should be implemented.

    • 0
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      The average wage is around $76k. People earning over $100k are getting welfare. Sarge given that there are only 2 ways to make money, in my mind a rich person has enough money invested, which returns income equivalent to what he would earn from personal exertion plus a growth of capital equal to inflation. So let’s say this rich person earns $76k pa.
      His investments would therefor provide a dividend yield of say 4% plus growth. That extrapolates to a lump sum of $1.9m. Of course he would have a home, car, boat and golf buggy. When 60% of people don’t like their job, a rich person is one who works because he wants to, not because he must.

  5. 0
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    This could well be the measure by which Malcolm Turnbull will be judged.
    Some comments posted either do not understand just how skewed the system is at the moment or are beneficiaries and are protecting their own territory.

  6. 0
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    Be careful about cutting the diesel tax rebate right across the board. Doing that for all industries would push up the price of food, transport and many other daily essentials.

  7. 0
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    Pension raise is a joke can’t even get a cup of coffee a week.shamefull.got me a part time job but with fuel,licences first aid cert uniform upkeep shoes wear and tear on car.loss of tax threshhold 800 extra Medicare.begining to wonder if it’s worth the effort.

    • 0
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      The taxpayers funded pension rises twice a year in line with CPI or male earnings whichever is the highest . If you are capable of working why aren’t you …?

    • 0
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      Yes but it is a pity CPI isn’t an accurate measure of inflation. Even pork spare ribs are $25.99 a kilo and mostly bone. No I didn’t buy them. Does anyone know why meat is so expensive now?

    • 0
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      Do not know what you expect from the pension system Hairy. Sounds pretty good to me.

    • 0
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      Rae… Look no fur4ther than Halal certification!

    • 0
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      pete I am quite capable of working that’s not the issue for some like me I left work in may living of my super. I just could no longer cope with 4hrs travelling each day and then having to buy a new car every 5yrs. after 18yrs of the travel decided either I am better of dead or leaving

  8. 0
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    If the government brings on in 2017 the changes proposed to the assets and incomes tests, considering the very low interest received from term deposits,many part pensioners will be forced to draw down from their capital in order to live . This will have the effect of reducing their assets which in turn will mean that the government will end up paying more age pension which is completely opposite to what the government hoped would happen.
    I hope the new PM will realise the adverse effects of the new laws and make provisions to reverse them. eli

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      The whole idea of accumulating assets during working life, be it Super, or savings in cash, or investment in equities, or properties, is to provide for your retirement living. Not to live off the pension so that you can leave the accumulated funds to the kids.

    • 0
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      A lot of people will simply spend the extra money if they have it. The added advantage of the pension is worth about $3500 in lower rates, regos etc which means those just above the cut off will be thousands of dollars out of pocket.

      As Sceptic says the whole idea is to provide for your own retirement but why would you when the aged pension and extra benefits pays more than the accumulated hundreds of thousands of savings. It doesn’t make financial sense.

      If they made aged pensioners pay back funds from an estate that might make sense but would be very mean indeed.

      The fact is returns are dismal and the promise of a better pension from superannuation has not happened. Many savers will be worse off than if they had never saved. The Superannuation system is broken I suspect.

    • 0
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      eli: what do you think this government want to happen? Joe Hockey made it clear that people should sell their assets and live off the proceeds. Funny but Costello told Australians to “buy a house or two”, presumably to live off the rent. Conflicting messages and shows that governments are NO to be trusted. None of them.

    • 0
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      Eli and Rae are right, Sceptic. The government is rewarding people for living it up and harshly punishing those who save for old age. Many who lose their pensions under the changed means test provisions will be far worse off than pensioners until they have eroded their savings and are reduced to the status of the average pensioner. In fact, they have a strong incentive to splurge on world travel and come back and claim a pension that will enable a far better lifestyle than they can achieve from returns on investments.

      You cannot increase national wealth by destroying incentive and reward and impoverishing people who worked hard to be nearly self-sufficient in old age.

      As for leaving accumulated funds to the kids – well, it depends how those funds were accumulated I think. If X spends $500,000 on world travel and Y goes without luxuries to make future generations better off, why should X get a pension and not Y? And under the current system, you can GIVE the money to your kids before turning 60 and claim a full pension, so why should you be denied the right to a similar pension just because you might leave an inheritance to your kids?
      After all, if our kids inherit a little, THEY will be less dependant on the taxpayer, won’t they?

  9. 0
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    No great fan of his but at least MT may have the intelligence to do the numbers.

    The present set-up is bad enough (ie re the assets test).

    Hockey’s proposed one means that (for a single person) there is no point in putting aside any more super once you get to around $250,000 – not unless you can be certain of getting into the million plus zone where the tax breaks start to compensate for the loss of age pension.

    In the normal $250,000 – $1,000,000 range – (which is where most people with super are – most in the lower part of that range) all you do is live on your own savings while others live on your taxes (past and present). When you savings above $250,000 are exhausted you’re in the same boat as those who never saved.

    Once people wake up to that simple fact the bleatings from the super industry – that we should all be saving more to ensure a comfortable retirement – will be realised for what they are – a bare-faced lie.

    MT needs those twisters on side (he’s close to them – remember he was once a partner in Goldman Sachs) and he might even win some floating voters over if he took the initiative to give ordinary hard-working people the chance to get some value from their savings in old age.

    Once dubbed a working man’s paradise, this nation’s idea of social security is the most backward in the developed world – although we’re pretty good at lining the pockets of unproductive spongers and scroungers (and I don’t just mean our politicians).

    It’s a sad fact ordinary hard-working people are the only ones who don’t have a pressure group batting for them.

  10. 0
    0

    At a recent seniors meeting, it was proposed that up to 560000 retirees and soon to be retired middle class who worked and saved hard for their retirement would have their retirement plans smashed by Hockeys changes to part pension plans. He called them the wealthy home owners. NO. They are the hard working middle class. The real wealthy havnt been touched. It is estimated that 560000 will NEVER vote Liberal again. Someone had to pay for B Bishops and Hockeys personal excesses somehow.

    • 0
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      You’re assuming that those 560,000 retirees all realise what is happening. We’re all on the curve. The idiots, the selfish, the informed and the decent are spread pretty widely, Mike.

    • 0
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      Right on, Paulodapotter. Sadly, most of those 560,000 haven’t yet figured it out. But watch out when they do. The claimed savings will evaporate as people hasten to adjust their affairs. I know many who are already booking world cruises or making large gifts to their children so that they restore their entitlement to benefits.

      The change to the assets test was a detrimental move that will result in dramatically INCREASED costs to taxpayers over the medium to long term by destroying incentive and reducing saving. It’s not just grossly unfair. It’s actually thoroughly STUPID.

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