3 ways to defuse intergenerational anger

1.Close borders (unfortunately our population will reduce as we're not replacing ourselves quickly enough, reducing the tax base and our economy wont grow)
2. Unskilled workers do a lot of the work that current residents wont do. Look at the personal care industry.
3. Climate change is a hoax and forget about equity of access. Not the sort of country I want to live in.
4. No rules. Forget building codes, height limits, safety on worksites. Drill baby drill. Really?
5. Add history, so that we don't repeat the mistakes of the past. History is very underrated. Is that woke?
6. Subjective - where do we start? Healthcare, research, roads...
7. I can go one better - perhaps start by charging the big miners and gas exporters properly and we can set up a fund like Norway has done to make tertiary education and childcare free (hope that isn't too woke)

Dear Annabel.
1. Not true. The population is still growing and the linkage to GDP growth is tenuous.
2. I thought you were concerned about tax generation in point 1? Unskilled generate little.
3. Who cares about what country you want to live in. Typical liberal attitude that assumes you are right and the majority must agree with you.
4. Nobody said no rules. LESS rules and restrictions. Duh.
5. I like history too. Curious what mistakes of the past. My guess is you are thinking woke stuff.
6. Who can disagree with cutting WASTEFUL govt spending. Cut it even if it hurts the bureaucrats that benefit from it.
7. Why charge miners and gas exporters only? How about reducing tax incentives for wasteful green initiatives and use monies instead for these future generation funds?!?

Norway has the courage and foresight to make use of its oil and gas fields.

The foolish government we have need to stand up now to the gas cartels and tax them up to 35% more on future profits which will be significant due to the war & the damage done.
There are crisis provisions to enable that, which would bring us an extra 60 billion in profits, then you could leave the retirees alone, and the tax incentives on owning more than 2 houses should disappear, leaving an influx of cash going into Australian shares, but politicions would naturally not like this idea.
We could also bargain with Japan etc. With gas for diesel seen as shortages will occur now.
The cost of the ridiculous gun buy back should be cancelled ( 3 guns per license) and the expected cost put into funding refinery upgrades & a new one built for fuel & food security.
Net zero should be forgotten due to the very low emissions this country makes.
Immigration needs to be cut dramatically & overseas buyers of land sales & properties finish as NZ & Canada have done....
No more giveaways to other countries as Albo seems free to do as he likes with our money which needs to finish....

Deficient agree with having overseas buyers to this country. Other countries have it right. Help your own radishes. Overseas people who buy property in Australia to "land bank' then don't live here ( or have one of their relatives live in the house on their own whilst attending australian schools, then go home every holiday ( ie not spending any money in Australia) needs to be stopped .

Totally agree Alan.
All sounds so obvious.
Where are we going wrong.
Jenny

Quoting from the above article “ Retirees have contributed years of taxes to fund the pensions they are collecting”.

No. Their taxes did not pre-fund their age pension. Their taxes were spent on the government budget of the day - healthcare, education, etc. Age pensions are paid out of current working people’s taxes.

Spot on, Eve....saved me from saying the same thing.

I agree that is technically correct but there is some merit to the argument. Current retirees funded the generation before them and expect the same thing to happen after they’ve retired. We can't all simply fund things exactly when we need them - only paying taxes for education when your children are school age, only paying for disaster relief when the disaster impacts where you live, etc. I still think the means test for the pension should change but so often these debates come down to what some person or generation “deserves” while not acknowledging they made any contribution.

Eve, "Their taxes were spent on the government budget of the day - healthcare, education, etc. Age pensions are paid out of current working people’s taxes. " - that's a bit of a flat-out contradiction.

If "Age pensions are paid out of current working people’s taxes" then "Their taxes were spent on the government budget of the day - healthcare, education, etc" ... AND paying the Age Pension.

Whether or not their taxes "prefunded" their age pension is a matter for how the government internally handles its money. If they run an investment fund for pensions funded by tax dollars, then it would pre-fund it, if it comes out of current cashflow it doesn't, but either way the system is contribute now and be supported later. In practice, it does come out of current budget as you say, but some public sector pension payments come from the Future Fund.

Mark and Eve, The Baby Boomers paid the age pensions of previous generations as they should. The current system of means testing is generally fair although it could do with some tweaking. Many boomers should get age pensions because they were not fully part of the Superannuation system, particularly those who were born between 1946 and 1960. When superannuation came in about 1992 the employee contribution was 3 % and has only recently reached 12 %. I had been working for 23 years before the start of the superannuation system. Workers starting out now will not need the age pension. The only asset boomers could save was their home. It is only right that it should be substantially exempt from the assets test. In any event no Government is going to change that or tax the family home. At least not until most of the boomers are gone and even then it will be difficult . Particularly how aged care costs are going with $100 showers and meals. Death duties by another name.

Mark's suggestion to include family home in the assets test was the only part I agreed with.

"Age pensions are paid out of current working people’s taxes.":

Almost all from taxes of people who will never receive any Age Pension under the current Mean Testing regime.

Yes this is always overlooked reality. The top 20% effectively pay all the taxes and receive no rebates. Is there a moral obligation upon recipients of the Age Pension not to game the system via the home? Lots of examples of people with $5M homes and collecting +$1M of age pension over their retirement.

So let the current working people with such benefits as childcare which we all pay for too, but never existed before along with 12% super. The previous generation did it hard with low wages and high interest rates even though houses were cheaper. The present gen.wants it all now, and then their inheritence as soon as possible, they lack the ability to work for lives, to save, or to show any respect for the the infrastructure that was left for them..

"The previous generation did it hard with low wages and high interest rates even though houses were cheaper"

No they didn't. It is a mathematically impossibility to "do it hard" with low wages, cheaper houses (better quality ones than today's houses, too) and higher interest rates when the wage to house multiple was lower and interest rates as a function of that and wages were comparatively lower.

17 percent of a $75,000 will always be lower than 6 percent of a higher number (in this case, the average house at $908,000 to over $1 million and growing at around 9 percent), adjusted for inflation.

(In 1985, the average or median house price in Australia was approximately $67,000 to $75,000, with capital city dwelling prices in early 1985 averaging around $81,000. In 1985, homes cost roughly 3.3 times the average annual income, a sharp contrast to the 9–10 times income seen today. I can't exactly see house prices being much more expensive than this 4 years later when interest rates were at 17% and they didn't last THAT long either.)

Do the numbers - inflation adjusted - and you'll see that it's actually Gen-X and everyone else after them that paid higher multiples for lower quality houses that are further outside of the city ring.

Yes, "childcare"; a thing that wasn't needed when you could afford a house, a car and to raise a family on one wage with a basic trade or school education, and hence, housewives and 'stay at home mums' were commonplace, even when they could work, they didn't have to.

Growing up as a working class Gen X, we were ALL latchkey kids. Childcare wasn't a thing.

“Do the numbers”

If you "do the numbers" you see an interesting correlation between debt servicing burden then and now. When houses cost 3.3 times average annual income and interest rates were 17%, the debt servicing burden was 17% X 3.3 average incomes = 0.56 average incomes. Now that houses cost 9 times average annual income and interest rates are 6%, the debt servicing burden is 6% X 9 average incomes = 0.54 average incomes. Hence the main reason that the price of houses gets bid up to 9 times average incomes is that borrowing capacity has improved by a factor of 17/6=2.83 while the debt servicing burden has remained substantially unchanged (0.56 then and 0.54 now).

"Do the numbers - inflation adjusted":

Show the calculation.

Interest 17% / y, inflation 7% / y, term 25 y, initial principal / income 330%, final principal 0%:
= PMT((1 + 17%) / (1 + 7%) - 1, 25, 330%, 0%)
= -34.54% of income (= - payment in).

= PMT((1 + 6%) / (1 + 3%) - 1, 25, 800%, 0%)
= -45.50%

Adjust values to match history.

Too much spending not enough saving; both due to negative or insufficiently positive real net interest rate.
Intended to make hone ownership more 'affordable'.
Back-Fire.

The amount of pension you receive has NOTHING to do with the amount of tax you have paid. It only depends on your age, your residency status, your assets and your income.

As it should be. Can't stand the bleating boomers "eeeh, I paid taxes all me life"; did you use roads, hospitals, schools etc. ? Yes, you did.

The biggest mistake everyone made was thinking that any entity - company or government - was going to look after them, just simply for paying taxes or staying in one position all their lives.

They can't even afford to run the country as it is and the old pension schemes proved too expensive (hence you can't get them anymore), what makes you think they can afford to look after you for 35+ years in your retirement ?

Have you actually spoken or listened to a sample of Gen Ys and Zs? Their expectations are far different from earlier generations. They've been mollycoddled throughout their lives, taught but never learnt to be frugal, expect to take an overseas gap year, go to concerts, eat out whenever, regular shopping sprees and a BMW as their first car. Their sense of lifetime entitlement gives rise to expectations of fully equipped housing un their choice of location at no effort. Then they have the audacity to blame older generations for not getting immediate gratification. Our efforts to give them all the things we couldn't afford when growing up has produced a generation of spoilt brats, who have become spoilt entitled adult brats, still whining when they can't get what they want, when they want it.

JamesA, Don't remember any whining about older generation when younger, people just got on with it as best they could with what they had and if disciplined, saved 10-20% of wages for a few years towards home deposit. Don't recall any moaning, rather that older folk were held up as a shining light on what one may achieve.

JamesA & Lyn,
Thanks for telling a few home truths about the current younger generations, as a recently retired 70+ that worked 2+ jobs for over 20 years to have children go to private school & be a self funded retired person, you have stated all that needs to be said.

How can you talk about "Housing prices are being boosted by entrenched tax incentives that benefit older homeowners while pricing new homeowners out of the market." but not once mention the extremely high levels of migration which is almost certainly placing the strongest pressure on dwelling availability and hence prices? The article's failure to address this issue renders the article shallow and largely irrelevant.

Hi Bernie -

I was paraphrasing the prevailing narrative from younger voters. Whether you agree with that or not it is likely to influence the policy proposals in the upcoming budget. My point was to try and propose alternative approaches and admitted they didn’t address property prices.

I think that young people seeing entrenched tax benefits as the cause for expensive housing, and not excessive demand from population growth exceeding supply growth of housing is part of the communication problem. And part of that is the current trendy and somewhat misplaced use of the word "intergenerational", usually used by the younger "journalists"/influencers. As alluded to by someone else, some basic literacy around finance wouldn't go astray. The basic concept of supply and demand (and the manner "price" tries to balance the two); the bleeding obvious concept that those who have earned an income for longer (and saved) amazingly have more money than those just starting out; and finally that those who pay the most taxes usually get the most value from any tax benefit (there's lots of talk about who gets the most benefit but the reason they do so, that is they pay alot more tax to start with (the top 1% pay nearly 20% of income tax, and the top 10% pay nearly half of all income tax and around 40% of adults pay zero income tax), is usually conveniently left out of the conversation). But lets just stick with "intergenerational", the media just love to stir up a fight rather than trying to be factual and educate.

Unfortunately the author and others are being sucked into the narrative that this most divisive government I have seen for sometime wants to put out for political purposes. I see the whole issue as a blatant grab for more tax raising rather than reform. Governments at all levels but specifically the national level have created a huge issue in our society. Let's look harder at supply and specifically demand issues that have been created. Mark does raise some very worthwhile issues but are they the main game?
Productivity....well, most things this government has done is a drag on it- like reunionising regions, massive increase in public service at the expense of private enterprises, unskilled migration, high energy costs then putting taxpayer money into supporting uneconomic operations, pet projects, .....and the list goes on and on and on

Bernie
I was going to reply to the author Mark at Morningstar that to ignore immigration as a driving force with buying and renting shows a total lack of real life experience.
I hope Mark was not asleep in his economics class when supply and demand was the topic.

I was trying to come up with solutions that wouldn’t be economically disruptive. It is easy to blame immigration for housing issues but immigration is also the only reason the economy is growing given productivity issues.

Things the government, not property investors, has done (and could undo) to impact younger generations ability to save/afford a house or to lead any decent lifestyle that their parents/grandparents didn't face?

* Compulsory 12% Super.
* HECS/HELP debt is too high
* Bracket Creep - the governments dirty little secret to lazily increase taxes.
* Population - in 1980s Australian population was 14M, hence the relative demand (and hence price) for that house was, by definition, lower.

I am dismayed that my 20yo and 22yo children work in part time jobs, where 12% of their earnings is "withheld" until they are 60yo, whilst meanwhile they accrue an annual $17K HECS/HELP debt which must be paid off and impacts ability to get a mortgage, and they can look forward to joining the work force effectively paying a 30% (ATO) +12% (SGC) + 15% (HECS) = 57% marginal tax rate.

10% super should be more than suficient over a working lifetime as long as the fund manager performs properly and not fraudulently

The 12% of their earnings going to super should be in a High Growth fund which will deliver 5+%pa real after tax. The HECS debt interest rate is 0% real. It is a no brainer to preference super contributions over HECS debt repayments.

There is a problem here that many young people are encouraged to go to University and accrue HECS debts. Whilst many benefit, others drift and are unable to find employment -yet our trades are suffering through lack of trades-people. Migration has not addressed this issue, with so many family reunions for older parents who are not able to contribute taxes. Universities endeavour to attract large numbers of overseas students, and quality of degrees is suffering. Aspiring University applicants need to assess whether there will be employment for them. Personally I had to contribute 5% of my small pay from 1962 into a Bank's Provident Fund, and then 50% to cover boarding costs for mandatory country service until I married. At least a banking career cut short by retrenchment at 49 taught me how to manage my, and customers' finances.

“Things the government… has done …(that their parents/grandparents didn't face?”
"HECS/HELP debt is too high"

My generation didn’t have HECS/HELP debt but we had to pay for our education up front or miss out (uni was not free until 1974) - at least the current generation has an option- pay up front or borrow and pay back over time.

"Bracket Creep - the government’s dirty little secret to lazily increase taxes"
Bracket creep affected all generations, particularly during periods of very high inflation as occurred during the 70s and 80s, because it was every government's dirty little secret and no government wanted to introduce a measure (such as indexation of tax scales) that deprived them of more income without appearing that they were increasing taxes.

BMC, you are repeating a commonly-held misconception. Your children are not having 12% of their earnings withheld. Rather, your childrens' employers are paying your children 100% of their earnings, less tax at their marginal rate, and THEN those employers are paying 12% in addition to those 100% wages, as Superannuation Guarantee Contributions, to your childrens' complying fund/s. As an small-business employer for many years I endured that creeping Government-mandated impost at every payday, which has finally plateaued at 12%. Whether, by cancelling that mandate and maintaining their employers' outgoings to your children at what would be 112% of their current earnings, the difference for them to spend or save as they see fit and thus forego the long-term compounding returns of super, they would be better off in the long run, is a decision for them as voters to make.

Government has made this problem worse with excess spending, give aways to other countries & groups, immigration out of control and not being corrected, complete waste as seen with Vic. Government, & ridiculous waste on net zero when our countries emissions are so low, and now they come after retirees who have always paid their way, and houses go to their children who cannot waite...correct these problems and let the younger generation work, save and waite for their handouts and they will end up with house, savings and super, but need to have respect for the way retirees did it the hard way....

Australian inequality is subsidised by the tax system. While countries like Germany and France prioritise renter stability (indefinite leases and rent caps), Australia treats housing as a tax advantaged investment rather than a basic utility. Taxing work to subsidise wealth.

Politicians need to grow some and do the right thing!

"Australia treats housing as a tax advantaged investment"

This comment now excludes the state of Victoria which treats housing as a tax DIS-advantaged investment spawning an investor exodus and making Melbourne a standout under-performer. Mooted changes to CGT and/or negative gearing at Federal level will be the final nail in the coffin.

Thank you VIC, my Melbourne based youngest son and his wife, in their late twenties have purchased a home and their first bay is due next month.

Sydney based sons are renting and can’t afford a dog, let alone a house to start a family.

"Thank you VIC"

While those that can afford to buy may be grateful, long term renters are not grateful because "affordable" rentals are skyrocketing and there are reports of 140 people queuing for a single "affordable" rental. Moreover nobody is prepared to build into a market where up to 8000 new apartments remain unsold because they are no longer viable investments.

Oh how quickly we forget. In the last 20 years there has been no change to the tax system but, the world has experienced two major financial shocks - the GFC and the global pandemic - which threatened to plunge the global economy into deep depressions. In both cases central banks flooded the economy with cheap money through quantitative easing and extremely low interest rates.

While the mechanics of quantitative easing are complex, the purpose is not. Central banks printed money that retail banks were strongly encouraged to lend out at extremely low interest rates. Since there is nothing easier to sell than money, cheaper lending encourages spending and investing. The aim and effect of this deliberate policy was to raise asset prices, thereby fuelling inflation. Heh presto house prices exploded.

But the benefits of quantitative easing are not evenly spread. Asset owners who are typically older, benefit from increased asset prices, whereas young people and renters did not. In averting financial disaster it is possible that the central bank saved their jobs, because in a depression, large scale unemployment affects many unskilled workers, but they continue to be hurt by elevated house prices.

We know that inflation is always and everywhere a money supply problem. But, instead of reducing the money supply, the monetary response is always to raise interest rates to make credit more expensive. And once again this has an asymmetrical impact on the young and renters.

Governments could apply a fiscal response to reduce excessive consumer spending by raising taxes or withdrawing subsidies but that has a political dimension, governments prefer not to contemplate.

"inflation is always and everywhere a money supply problem":
'money supply is the total value of currency and liquid assets circulating in an economy at a specific time, including cash, checking accounts, and savings deposits.'

If real net bank savings deposit interest rates are positive, assets are sold and the cash flows into bank deposits, increasing money supply as measured by the amount of money in banks.

If real net bank savings deposit interest rates are positive, cash is not borrowed from banks, reducing the actual money supply which is the movement of money / cash.

Positive real net bank savings deposit interest rates are an assistance to the slow saver first home buyer; decreasing the time to save to buy a home by compounding savings quicker and reducing home price inflation. The fast saver outguns savings compounding and home price inflation.

No dudley, if an asset is sold then the person who buys it takes money out of their bank account, only to be put back in by the seller, so that doesn't result in a change in money supply. Only two things change money supply: (1) when government deficits are funded by the central bank rather than selling bonds to the private sector (monetising the deficit) and (2) when banks use their equity to write a new loan, which puts money into the borrower's pockets either going into their bank account or they spend it on builders, furniture suppliers , etc who put it in their bank accounts, thus creating money. The 2nd reason is why monetary policy is conducted via interest rates, as an attempt to influence the demand for borrowing and thus how much lending the banking system does.

"an asset is sold then the person who buys it takes money out of their bank account, only to be put back in by the seller, so that doesn't result in a change in money supply.":

Correct. Cash changing hands does not affect the quantity of money but can affect the velocity of money.

"Only two things change money supply":

Third: Cash realised Profit.
When non-cash labour / goods / assets are sold, less costs, realised as cash profit.

Jon, I generally agree with your comments and with your last sentence in particular. The RBA's interest rate mechanism is a blunt instrument that disproportionally places the burden of trying to quell inflation on one group of the population - those with high amounts of debt. You can make arguments about recent generations taking on more debt than they need to but ultimately taking out a substantial mortgage is all but unavoidable for most new homeowners. A fiscal response, as you say, such as raising taxes will ensure the entire working population share that burden and the effect is immediate. Unfortunately, as it stands, it's politically easier to let the RBA do the dirty work. Perhaps an independent body or meninism could still determine the need for the fiscal response to avoid it being seem as a political one.

Definitely agree with including the value of the family home in an altered age pension assets test. My parents would just do a reverse mortgage earlier, so currently everyone is paying tax so I get a bigger inheritance.
Bracket creep has been around I think since income tax started. I expect most are OK with an annual CPI increase of thresholds.
Extra rent protections could reduce the number of investors. and push up rent prices.

The Treasurer has shown he is is very good at drawing the media's (including economists) and voter's attention away from the underlying problems in the economy, including the significant increase in Government spending, requiring increased taxation; inflation which is now at much higher risk of being embedded; lack of productivity improvement in the workforce; and in housing the failure by a significant margin to deliver the housing supply targets which the Government itself set.

Rather than be diverted into a tax debate by the Treasurer, let's focus on the issues that will provide housing that younger generations can afford to purchase. The issues are primarily on the supply side:

- Lack of trades partly contributed to by an infrastructure construction build which is much higher than a decade ago and requires significant trade input. As an example - Do we really need to construct the Suburban rail loop in Victoria now?

- The fall in productivity in the construction sector. No one cause, but a variety of issues including changes in workplace laws and increasing regulatory and safety requirements by Federal & State Governments and local councils. Some of the requirements are sensible - others over the top. Some simply create the need for expensive reports that are largely copy and paste.There must be a better way. Do we really need 4 stop and go personnel to ensure safety when a single person monitoring a light set (or remotely multiple sets!) could do the job. Other regulations require higher standards than in past decades. Some are justifiably so e.g asbestos. But other requirements e.g. Basix rules, sometimes just add to cost for little benefit.

Improve productivity, and significantly shorten the build time, by increasing the use of manufactured and prefabricated technologies. There is a important role for government play as this needs a commitment on minimum quantites over a time period due to the set up period. It also requires good modular designs to meet varying needs and family sizes which impacts the minimum quantity. Surely this should be a much higher priority for Government expenditure than building solar panels?

And very importantly, the priority and level of commitment given to the creation of communities in new areas. This is not easy but if it was genuinely given priority and a sense of urgency imparted by all levels of government it could be done. At the basic level this requires essential infrastructure supporting housing development - power, water, sewerage, roads. At the next level it is provision for commercial, business and manufacturing centres, schools & universities, hospitals. Why is so much of our infrastructure spend focused in already developed areas, when the cost of the housing build itself in greenfield areas is much cheaper than brownfield housing built in inner areas?

If a pensioner couple had to draw against a fund calculated on all the income tax they ever paid, it would not cover even three years of pension. This would especially be the case for those in their seventies and eighties as many relied solely on the man's pay as many women stayed home and never entered the work force when the kids left school.So in many ways the current system is pretty generous as the taxes they paid were used up by the government of the day.each . It seems a long time ago that Peter Costello produced five budget surpluses to ostensibly fund future pensions
Regarding BMC's comment on his overtaxed children , I recall paying 60% tax and 66% Provisional Tax on not a large income from business income that was invested back in the business and was very hard to pay

New taxes are not the answer.
Living within our means is the only answer and by that, I mean, the government living within its means.
Also the highest tax threshold changed for the first time in 2024 from 2008.
In 2008 it was $180k with 1.5% Medicare.
In 2014, Medicare levy was increased to 2% - no other changes.
In 2014, the highest tax threshold was increased from $180k to $190k. There is the issue right here. In 2024 terms, $180k should be worth about $270k to $285k. There is no incentive to work hard to get ahead, so other avenues are looked at.
Prior to 1985 there was no CGT. CGT concessions did not increase the cost of housing as is often quoted. Treasury says that CGT Concessions "cost" the government in lost revenue. They would have us believe this but it is not true, seeing as though before 1985 there was no CGT.

“Housing prices are being boosted by entrenched tax incentives that benefit older homeowners while pricing new homeowners out of the market”

Unfortunately this narrative ignores what IMHO has been the PRIME driver of ballooning housing prices over the past 30 years or so, namely the dramatic DECREASE in the cost of borrowing money. For example a $500k mortgage in the early 1990s cost at least $60k per annum just to service the interest on the debt. That same mortgage today would cost about half that amount even after the recent rate increases are factored in, meaning that the same income could now service a $1M debt. This is the main reason that house to income ratios have ballooned dramatically.

In contrast and based on recent reports and economic modelling from Treasury and independent institutions, reducing the 50% Capital Gains Tax (CGT) discount is generally estimated to have only a modest downward impact on house prices, with estimates typically ranging between 1% and 4% lower than they would otherwise be.

"dramatic DECREASE in the cost of borrowing money":

Herding of home buyers into mort-gages by negative real net SAVINGS rates.

Biggest issue is that the Governments have no plan for economic growth, everything is looked at through a political lens, not an economic one….

Intergenerational angst, property fomo,in other words, is purely a consequence of low interest rates for too long. They are still too low

My view - the present Labor Govt. is so busy trying to divide the cake up equitably rather than working out how to bake a bigger cake (for all) - it is just not in the DNA of Labor socialist governments

In Australia super contributions are compulsory and are taxed as high as 30%. Super investment earnings are also taxed at 15% every year for 40 years. In pension phase the super fund investment earnings become tax-exempt and any withdrawals from the fund are also tax exempt once members reach their preservation age.
This tax treatment is the source of much inter-generational envy because tax in retirement appears to be based on age rather than income.
Before the Costello changes in 2007, the money withdrawn from super was taxable income in the hands of a member but it collected little tax. It is best illustrated by an example. Assume a 64 year old member has $2million in their super pension fund and they draw the minimum 5% pension. The annual pension is $100,000. The tax on that personal income in 2026 is $22,788 (including Medicare levy).
But because of the tax previously paid by the super fund in accumulation phase, this pension payment was entitled to a 15% tax rebate or $15,000. So the tax on this pension is reduced to $7,788. However, this personal tax only applied to the portion of the pension that derived from fund’s concessional contributions. Let’s assume that this pension fund has 10% of its capital derived from non-concessional contributions from the sale of an investment property, for example. The taxable part of this pension then is $90,000 and the tax is $19,588 and the rebate is $13,500. The tax is now $6,088.
The rebate cancels out the tax payable if the taxable portion is below $54,225. With the tax cuts due in 2027, that figure is $57,500.
Note that the tax payable on this super withdrawal is a function of non-concessional contributions. Secondly, 10% or $10,000 of this pension payment is the return of the members own capital. The same calculation applied to lump sums at the time and still applies to death benefits.
It is clear that a member of a large fund, with a large proportion of personal contributions, paid little personal tax on super withdrawals because each withdrawal was regarded as largely a return of capital and a member of a small fund paid very little tax because of the 15% rebate.
Costello decided that the juice wasn’t worth the squeeze and won political accolades by making all withdrawals from super tax free after age 60, thus making all withdrawals a return of capital, not taxable income - and no government since, in the search for revenue, has sought to reverse that decision.

I agree with the proposal to incorporate the value of the house into the Assets Test for the Age Pension, the issue will be how to do it in a somewhat "fair" way and also in a way that Centrelink can actually make work. I'm not sure which of those will be more difficult, but neither of them are likely to be easy.

How about just reduce the fortnightly Home Equity Access amount off the Age Pension. Those with houses could either bear it or themselves access the offset themselves?

Simple

Mark, Thanks for the article.
I agree with many of the points you raise, especially indexation. I would state it more strongly, though: every threshold throughout personal income tax, super and the age pension should be indexed in exactly the same way, preferably in the same way as the full age pension (which attempts to maintain its value relative to living standards).
The guiding principle here, is twofold in my view: first, every independently adjustable parameter is another button for the politicians to play with, making the entire system ever more complex and unintelligible; and second, if different thresholds are indexed differently, their relative values change over time, so an element of instability is built in.
Another really important point is the interaction between asset values and the age pension. For example, any tax on super (at any stage) which reduces the value available to fund retirement can be counter-productive, because it will increase age pension cost for anyone affected by the assets test at some point in their retirement (not necessarily at the start). Forced withdrawals from an account-based pension have the same effect. I see no evidence that the government or Treasury has ever bothered to think this through.
It is commonly believed, as you say, that the age pension asset test does not assess the pensioner’s home. Indeed, Centrelink says as much (https://www.servicesaustralia.gov.au/asset-types?context=22526): “We assess most of the assets you own in your asset test. This generally doesn’t include your principal home …”
But compare the asset limit (value at which the test reduces the pension by $78 per annum for every extra $1,000 of asset value) for a single homeowner with that for a single renter: $321,500 versus $579,500. Effectively, the homeowner has an extra $258,000 added to whatever other assets he or she has, when calculating the assets test.
In other words, the value of the home is assessed (deemed) as $258,000.
Why does Centrelink lie about this (as they have for a long time)? Why does the financial industry let them get away with it? Why $258k, and not some other value?
And, with respect to this article, by how much would you suggest increasing the deemed value of the home? And how would you expect an affected pensioner to respond?

Jim, "especially indexation. I would state it more strongly, though: every threshold throughout personal income tax, super and the age pension should be indexed in exactly the same way, preferably in the same way as the full age pension (which attempts to maintain its value relative to living standards)." - amen! :)

I'd add a couple of specific examples to that, on the super front, the $500K threshold for using "catch up" non-concessional contributions and the Division 293 tax for earners over $250K .... EVERY threshold should be indexed. If you think the nominal $250K threshold was a fair threshold when it was introduced, then it should be significantly higher now if it is to cut off at similar real income levels. The government hasn't adjusted these thresholds and should have - just index them and have them adjust automatically.

Thanks, Lauchlan. It's a long list.

I'd also add the superannuation downsizer contribution - intended as an incentive to encourage the oldies to free up their homes to younger folk with families, by moving into something smaller. The concept fits perfectly with the current intergenerational rhetoric, yet the amount of the contribution has languished at $300k per person since 2018.

Jim, yep! Index everything!!! :)

Make all thresholds in real terms, not nominal terms :)

If we incorporate the value of the house into the Assets Test for the Age Pension, we should also remove stamp duty on the sale of houses. It's a vicious tax on any retiree who wants to downsize or a worker who wants to improve their life by moving to a better job.

When talking about property prices it's essential to look at supply. We need to analyse the myriad costs and hurdles involved and make it much easier for any individual or company to build more housing. That's a massive part of the problem.

And, of course, restrict immigration to people who have the skills and attitude needed to make Australia a much better place in which to live.

I want to say I agree with all three of your proposals, and emphatically so on indexing the personal income tax brackets.

The one thing I’d quibble about is around how you’d account for the value of the family home in relation to the Age Pension. I think having a house to live in is an asset to both the retiree and the government, as it means they don’t also have to pay rent and therefore the government isn’t on the hook for more money to cover rental payments. So I think there should be a threshold of some sort, e.g. if the value of the property is not more than 25% of the median house price in that city or that suburb, or more than 50% of the median house price in that city. That means people with “mansions” and high end properties would not be, in effect, subsidized for the Aged Care pension, which clearly they don't need (they could just downsize). The flip side, I think, is that the government should tie rental support for the Age Pension and for unemployment more realistically to what it actually costs to rent in the areas that people live in.

On a second front, you talk about intergenerational issues. I think there are two real and major intergenerational issues - housing affordability and the state of the planet in relation to the climate crisis. I don’t think the government is serious about solving the housing affordability problem, because it’s too hard on the policy front and too difficult on the political front (1/3 of Australians own their house outright, 1/3 own with a mortgage, and 1/3 rent, so 2/3 have a vested interest in their properties value). All the economic modelling shows that getting rid of the CGT discount and negative gearing will make a once-off difference of maybe 1-4% on house prices, and as you note there will be readjustments (e.g. impacts on rental markets). I don’t think the government’s particularly serious about the climate crisis either, and the coalition seem to be for the crisis (rather than addressing the crisis).

But what many pundits are talking about is intergenerational tax equity, which is meant to mean that the older, wealthier people have an advantage that younger, working people don’t because they are taxed differently. So cut back on the tax concessions to older, wealthier people to fund income tax cuts to younger, less wealthy workers. The fact that Labor and pundits on the left are talking about perhaps reducing the top tax tiers so high income earners have less incentive to invest in property to reduce their taxes is absurd and bordering on hypocritical given their earlier stance on stage three tax cuts, but it is also fundamentally incoherent since the younger generation of today become the older, wealthier generation of tomorrow - with the same (or much the same) tax benefits then as we have now. There is no “intergenerational tax inequity”, there are just different generations.

Nowhere is this clearer than when we talk about superannuation. Never have we had a generation that has had 12% contributions since entering the workforce. Never have we had a generation that is likely to receive advice that they have a long time horizon, put it in a high-growth option. For example, a worker starting at 25 today and working for 40 years on the average income of around $100K today, adjusted with inflation each year, with inflation at 3% and a high growth account earning 10% p.a. over the 40 years before inflation would end up with $2M in super (in today’s dollars).

If we think that long term growth rate is too high, make it 9% and they still end up with more than $1.5M in todays dollars.

That is not generational inequity, that’s a generational advantage. The only risk is that this government might start taking away their future benefits (e.g. tax-free superannuation income in the pension phase) in the name of “intergenerational equity”.

" it is also fundamentally incoherent since the younger generation of today become the older, wealthier generation of tomorrow - with the same (or much the same) tax benefits then as we have now. There is no “inter-generational tax inequity”, there are just different generations"

This truism is so self evident that it should have shut down peddlers of inter-generational inequity narratives long ago. The fact that they persist indicates that it has now morphed into a political narrative to justify political ends and political narratives with political ends are not always coherent.

If they include the family home in the pension asset test, no pensioner will get the pension. Median home is australia is 1m. The asset is under that, therefore no pension. Policial suicide!

I agree with all three of the author's suggestions (as well as with Allegra Spender's).

- Indexing income tax brackets would mean I'm not penalised when my nominal salary goes up slightly, yet in real terms is not worth more than I was paid 10 years ago. There are plenty of stories about workers being worse off now than years ago, on a "higher" salary.

- Better protections for renters - yes please. Having to sign a yearly lease and never being certain when I might have to leave, the indignity of having my home inspected twice a year, landlords able to get away with never repairing broken windows, walls, peeling ceilings, etc. Improving the lot of renters would bring more dignity and less resentment, and eventually perhaps an improvement in the status of renting as being perpetually looked down upon as something you have to 'escape'.

- Recognise the value of the primary place of residence in pension asset tests - yes to this. It's perverse that the test treats a home as worth only $258,000 (the difference in assets allowed between a non-homeowner and homeowner). Just think - if I don't own a home, there is no way I'd be able to buy one for $258,000. Non-homeowners (even if they have assets elsewhere) are exponentially worse off. And to go further, how about those tax-free capital gains that homeowners get?

Generally a sensible approach, so unlikely to have much impact I am afraid.....
Regarding the vexed question of including the primary residence in the asset test for pensioners: the easiest and fairest way to determine which value to exclude is to include the value of the primary residence and eliminate the distinction between home owners and renters for the asset test. What has been determined to be a fair amount of excluded capital for renters should be a fair value for home owners.
Superannuation: an easy and reasonable solution would be to require compulsory withdrawal of the age-based minima and do away with the distinction between pension and accumulation accounts. Once you achieve pension age, you must withdraw. If you don't need the money, just invest it outside the tax sheltered super environment. That also takes away a lot of complexities.

Agree on the superannuation point, but your suggestion of simply including the full value of the PPR may seriously disadvantage those in rural and regional areas, where house prices have not grown by anything like those in the capital cities, thereby possibly entrenching further the city/country divide.

A % weighting on the house value by postal code perhaps?

Firstly, inrelation to investment properties. ABS and ATO data shows that approximately 20% of investment properties are owned by boomers, with the remaining 80% mostly owned by GenX and GenY age groups.
Secondly, many elderly persons sell their home to pay to enter aged care facilities. Including the value of the family home in the asset test will not effect self-funded retirees, but for aged pensioners, this will see a reduction in capital equity which overtime will see families have to fund the $700k+ fees each for their parents to enter aged care facilities or the government will have to fund the increased costs.
Finally, superannuation was designed to fund retirement. The big change to superannuation that would reduce aged pension costs is to stop access to lump sum payments and make access by regular fortnightly payments with maximum annual withdrawal linked to average weekly earnings. To many people are withdrawing large lump sums and spending to enable access to the aged pension.

"people are withdrawing large lump sums and spending to enable access to the aged pension":

Then they would spend lumps more before retirement on gilding their homes to coast into the Age Pension on retirement.

Better to abolish Mean Testing Age Pension. Then people will 'calculate' themselves their best fit of home and retirement assets and not be driven into an ill fit forced by one size fits all Age Pension Mean Tests.

If lump sum withdrawals from superannuation were abolished they would not be able to spend superannuation savings, noting also the requirement to be retired or transitioning to retirement to access superannuation. How people spend their savings outside of superannuation, there is not much governments can do.

@Michael. Is more regulation and control of your money really the answer? Do people really think that big government sticking their nose into everything including allocating capital is devoid of bias and political opportunism? Over regulation and the costs associated with compliance are killing this country and costing tens of billions annually. Plenty of egregious examples too of government NOT being the answer, especially since the brightest and best rarely float to the top (if they were ever in the pond to begin with)!

Yes a pretty glaring weakness of a system forced on people to "pay for their retirement" but no means to ensure the savings are used for this "primary purpose". It's like gifting your kids some money to pay for education or a house deposit and they decide to blow it on a new car or world trip. Perhaps a new tax "incentive" (of the "stick" variety, to counter the loss of the initial "carrot" variety. The tax incentives behind super (in accumulation) means the amount you have in super is greater than if you had just saved some after tax income; that is one of the main points, to help achieve a higher balance in retirement. So some of the final balance is effectively foregone tax (which was deliberate of course, to make lifelong compulsory saving "fair"). So one could argue that to just spend the money that was tax advantaged for the primary purpose of retirement, on something other than retirement, one should forego any tax benefit accrued. That is, if you keep your money in super and use it to fund a pension, the rules would stay as-is. But if you withdraw to pay for a cruise or pay off a house extension, or anything else really, the lump sum should be classed as taxable income.

"But if you withdraw to pay for a cruise or pay off a house extension, or anything else really, the lump sum should be classed as taxable income."

Somewhat draconian and not cognizant of the many, varied reasons people may need to tap into a super lump sum e.g. divorce, getting a mortgage late in life and therefore unpaid on retirement, unexpected job loss over age 50+ etc. By the same logic we should demand accountability for how all Centrelink payments are spent too then!?

Last time I checked it is your money, with sufficient restrictions and rules without those on the sidelines suggesting even more regulation and conditions. "The road to hell is paved with good intentions." We are already a nanny society. Perhaps those who want bigger government and socialism can make a voluntary election for government to control more of their lives! Let's not make it compulsory please!

James# the "sole purpose" of super is to provide retirement income. If you spend on something else it should convert to the equivalent after tax amount you would have had if it was taken as normal income. Yes, it is your money, at least most of it. But a portion was foregone tax, not really "your" money. Of course some considerations like divorce if the amount is rolled over to the spouses account etc but the basics are why do the rest of us have to give someone a tax break just so they can go on a world cruise and then put their hand out for a pension?

@Steve. By your logic then we should demand that Centrelink recipients should only spend the tax payer money they are given on appropriate things too? What if they are spending it on alcohol and drugs? Is that the intended purpose of Job Seeker or the age pension? More rules, regulations and government intervention are not the answer.

No matter what you do there will always be unfair elements. Within the next few years, I intend to make a lump sum withdrawal from super so that it becomes part of my estate and gets distributed how I want rather than trustees making the decision! Also avoids passing a tax liability to dependants because in my hands it is tax free. Why should I be penalised for that?

"distributed how I want rather than trustees making the decision":

'non-lapsing binding beneficiary nomination' of your estate as recipient of death benefits.

Withdraw super capital when earnings on it are consistently less than less income tax tax free threshold after offsets and rebates.

Yes, I know people who had better wages than most, who spent up like drunken sailors just to get on the part-pension with all its benefits

Agree with the author's suggestions.

In addition, the tax rules for superannuation are needlessly complex, are contributing to intergenerational inequity and exacerbate the revenue hole we will see as the population continues to age. Here is how the superannuation system should've been structured:

- system remains compulsory with no withdrawals until retirement;
- 0% tax on contributions and on income within superannuation accounts;
- annual limit on contributions;
- drawings from superannuation accounts taxed at marginal tax rates.

Obviously huge difficulties in trying to transition at this point however it could at least be introduced for those entering the workforce now and there may even be a workable approach to create an (indexed) credit for tax paid which can be applied against tax on future withdrawals.

Stuart, I agree that that's a sound approach ... except for the "annual limit on contributions" part. I don't see why people should be limited in their non-concessional contributions - but in your plan they are all concessional contributions ("0% tax"). I think there should be a limit on concessional contributions (but higher than it is now) but I don't see why non-concessional contributions should be limited - particularly when under your scheme, it gets taxed on the way out anyway.

The age pension / family home conundrum is readily solved. The family home is a financial asset, especially to your estate, and it saves you the cost of rent. That’s why non-homeowners can have more assets, simply to generate more income to pay rent.

We should include the deemed income (and the rent saved) from the family home in the income test and that will level the playing field between home owners and non homeowners. We would then need to increase the threshold on the income test before the age pension is reduced and thus increase the incentive for retirees to continue working part-time while they are able.

"The age pension / family home conundrum is readily solved. The family home is a financial asset, especially to your estate, and it saves you the cost of rent."

- a "financial asset" (subjective) only if sold. Before then it is a cost to maintain and live in.
- "rent" has been paid for decades to service interest on a mortgage. Should it never end?
- Yes let's "level the playing field" by bringing people down to the same level! Great Australian tall poppy syndrome!
- also great idea lets have everyone working until we expire rather than retire!

Sounds like dystopia to me. Perhaps socialist nirvana to some. No thanks!

My suggestion for inter generational fairness won’t be popular but with so much wealth tied up in untaxed family homes, my suggestion would be to allow any welfare payments to have first charge on deceased estates. I have seen so many instances of people collecting millions of $ in welfare over their lifetimes with little financial help from families, yet after death those same family members collect $3m plus tax free from the sale of an average Sydney home. That doesn’t seem fair.

The exemption of the family home from the old age pension asset test is crazy. The way to deal with it is to claw back the "extra" pension from the Estate on death. With or without interest adjustment. I managed my Mother's affairs for 30 years, making sure she got the maximum pension. When she died, my sister and I shared the million or so proceeds of sale of the house. ...... All legal. But crazy. Clawing back at death is an easy and fair fix which should (?)be politically feasible. It causes no disruption and no need to delay. Just claw back extra pension paid from today.

That is just the worst abuse of the family home, but the exemption of the family home from CGT must be the biggest dollar leakage. All sorts of possible solutions. None easy. Maybe tax gains above a threshold or gains on properties selling above a threshold..... The theoretically best option may be to tax all land values annually and progressively regardless of realisation. The higher the thresholds the easier to sell politically but the less it raises.

Thanks for your contribution which I think are balanced and, more importantly, achievable.
I find it it interesting that a lot of people believe the age pension is an entitlement. It's not. It is welfare for those who didn't adequately prepare for their retirements. There are already conditions around eligibility which I (and many on here) consider overly generous compared to the punitive conditions applied to working age income supports. Adding more, including around the family home, would force those with the means to sustain their own retirement themselves to do so and thereby lessen the already high burden on younger tax payers.
Unlike for previous generations, the ratio of elderly to working age is getting worse, so whatever compact that existed for boomers (who vastly outnumbered the pensioners that they then were footing the bill for) is over and unless we want to see Australia become a gerontocracy where a small pool of younger people are forced to pay the bills of a growing army of older folk, something has to give. Before people rattle on about reducing migration, they perhaps ought to recall who is paying the taxes that subsidises the lifestyles that many themselves didn't prepare for. Smashed avo wasn't around then but there were a legion of other vices that previous generations indulged in to excess but who now claim monastic lifestyles that would make make Ghandi wince.
According to Services Australia data, there are over 20,000 people on the full pension residing in homes that are valued at over AUD 3m. These people can afford to pay their way and should.

Mark, some good points and by the volume of replies an emotional topic for all ages. One aspect that seems to me to be in need of addressing (v's all the symptoms) as it relates to the ever growing "price of a home", is the Property Investment Industry that pushes the property wealth theme. If the government (all parties) desires (and this in not crystal clear due to personal conflicts of MP property owners), then it has to put in place policies that cap property price growth (perhaps to CPI) and where investing in industries (domestic & export production) that add value to the country is rewarded and shut down incentives for investment property wealth concept. All the surplus people from the property industry due to a significant decline in sales volumes could then get their hands dirty building houses (they may have to reskil) and actually add value to the country.

"none of these changes will address the source - property prices":

'Death to mort-gages' would reduce prices.
That would force s-S-SAVING to buy a home. Or demands that the olds paid c-C-CASH to get rid of the non-s-S-SAVERS sods.

Those paying off a mort-gage would be non-too-pleased.
Positive real net interest rates operating over a long term would be middle ground.
Soothing savers and saving spenders.

"none of these changes will address the source - property prices":

'Death to mort-gages' would reduce prices.
That would force s-S-SAVING to buy a home. Or demands that the olds paid c-C-CASH to get rid of the non-s-S-SAVERS.

Those paying off a mort-gage would be non-too-pleased.
Positive real net interest rates operating over a long term would be middle ground.
Soothing savers and saving spenders.

Introduce long term housing leases and cut out the spruking real estate lobby. Introduce stability and reduce housing stresses including FOMO.

Stability further banks, investors, owners and renters, short term leases are part of the fear generating cycle, hurt all parties.

Another inequity in the tax system here that has not been addressed, is that age pensioners currently receive tax free account based pension income, then taxable age pension, but a far higher tax free threshold than workers due to SAPTO. How about we tax retirement incomes more fairly? If ABP income is already tax free we don't need SAPTO for age pension. Or if they have SAPTO for age pension, perhaps ABP income can be taxed at marginal tax rates.
Also to increase housing equity, how about a tweak to negative gearing - like capital gains, deduction of a rental loss can only be applied to rental income, not other income, and can be carried forward to offset future positive net rental income? This would be in alignment with the principle that expenses are deductible only where the investment has a genuine purpose of producing taxable income - many housing investments are made on the basis of expected capital gains and immediate tax writeoffs, far more than the expectation of positive income.

All Commonwealth payments and allowances (except the blind pension) are taxable income. SAPTO, which increases the tax-free threshold for people of pension age to $30,994 for a single and $61,988 for a couple, was introduced so that age pensioners could earn a little extra on top of the age pension and pay no tax - and need not complete a tax return.

Remember that a single pensioner can have $321,000 and a couple can have $481,500 in assets before they start to lose some of their pension. They can have a whole lot more before they lose all of their pension. The income from those assets is also taxable.

The money you draw from your super account is capital, not income, just like the money you draw from your bank account. We don’t tax capital - except as a death benefit. Super withdrawals are not tax-free, they are tax-paid (just like the money you draw from your bank account).

Sorry John, have to call you out this misdirect/misrepresentation.

"The money you draw from your super account is capital, not income"..really?? Yes there will be some capital but if you draw a min pension at age 70 then 4% roughly would likely be income to a standard portfolio (interest, dividends, fr credits - fully refunded ones at that!!). As the minimum for 70 yo is 5% then 80% of the pension income is actually income and it is not taxed at all, never, nada.

Further a couple with almost half a million and a multi million dollar property not only receives the full aged pension, but costs a bomb in health care and pharmacy, gets discounts for gas, electricity, car rego, rates etc which are not available to parents with kids struggling to pay a mortgage. Secondly your comment "The income from those assets is also taxable" in relation to the aged pension asset test comments is only true if these assets are held outside of pension phase super. Otherwise there is zero tax as you've already pointed out. Super withdrawals are "tax paid" in name only. The rates are grossly unfair, especially compared to PAYG rates of taxation.

I think if the young actually understood how good the oldies have got it there would be armed rebellion.

Of course almost all the readers of this column are oldies so we are safe as long as the secret doesn't get out.

@Widcat: " I think if the young actually understood how good the oldies have got it there would be armed rebellion."

Subjective, at best, especially from generations that have no patience and prefer instant gratification (I tried to raise 2 of them reasonably successfully). Plenty of oldies don't actually have it that good!

Perhaps the young should be careful what they wish for because they too may be lucky enough to be old one day!

Wildcat, you are confusing the super fund with the member of the fund. The fund, not the member, is the owner of the assets and has responsibility for all the tax on the income earned on those assets. A pension fund is tax exempt because, of the tax paid on contributions and investment earnings in accumulation phase over 40 years. As an experiment, trying modelling a hypothetical fund in accumulation for a given rate of return, compounded over 40 years. Then do it again but compounding with only 85% (after 15% tax) of that return over 40 years. You will find that super is already quite heavily taxed.

Secondly, once you reach your preservation age, there is no upper limit on how much you can withdraw from your super. Therefore, you are withdrawing capital, and that is why it is tax exempt - it doesn’t even appear on your tax return. Mandatory super pensions have nothing to do with the income earned by the fund and everything to do with reducing the concessionally taxed capital that is passed to your estate.

John, not sure what your constituency is but your spin would be admired by the Labor party. Technically yes the trustee is the tax payer but the member reaps the full benefits of the tax concessions. Secondly you are conflating two completely different concepts. "there is no upper limit on how much you can withdraw from your super. Therefore, you are withdrawing capital, and that is why it is tax exempt", to suggest the lack of withdrawal limits means its capital in a zero tax environment is just plain bunkum. You have a $1m, earn 5%, you withdraw $1.05m, its all capital?? I know you know the system better than this statement so it is a complete misdirection and not ignorance on your part.

And to say superannuation is "heavily taxed" in accumulation I actually burst out laughing. Do the same calcs for someone on $150k salary and look at that tax outcome after 40 years. FFS.

You are also obfuscating concessional contributions with NCC's. And even if you weren't, CC's allow you take PAYG income (up to 47%) and convert it to 15% (30% if you have D293). You then withdraw it in pension phase having only ever paid 15%. Who but the very bottom or our economic strata (and the elderly) get such generous concessions?

As I said I don't know what constituency you are pandering to but your perspective is very heavily slanted away from the young and towards the older generation and is, I'm sorry to say, sadly lacking in objectivity. The selfishness of our older generation will end up destroying the country, our kids can't afford to have kids or buy a house as the older generations just keep putting their hand out and backing that view to the ballot box,

Follow the money as they say.

"You have a $1m, earn 5%, you withdraw $1.05m, its all capital?? "

Its arguable that with inflation approaching 4% and rising, it is all inflation adjusted capital

"You have a $1m, earn 5%, you withdraw $1.05m, its all capital??":

Income is money in-coming which is not capital; ie is dividends, interest, wages, gains.

Once in-coming money arrives it instantly becomes capital.

Does not stop taxes being calculated and paid on income that actually came-in.

The income tax payer uses their capital to pay income tax.

Mark (the author) I think you are missing a key point. Everyone thinks we need more protection from evil landlords due to the rental queues. You are treating the symptom and not the cause. Obviously migration needs to be drastically cut, at least for a while. But persecuting the only standing rental providers since the governments (state and federal) totally abdicated their responsibilities with social housing is a really dumb idea. I don't mind quarantining negative gearing losses to the property but these are on income account and the capital gains is capital account, some methodology would have to be developed to allow this to work but there would be a way to do it. CGT should be inflation deflated, period, 50% is ridiculous and inequitable.

The current rules however are now so in favour of tenants it's not funny. You think getting a rental now is hard and expensive. Keeping biting the hand that feeds you and living in cars will become an option for more people than we would like as a society I am sure.

People could work part-time until 75 years old, when they can no longer put money into Superannuation, if they have tried to say healthy.
Perhaps government should give incentives to exercise, eat properly, not overindulge. We are urged to look after ourselves, but it costs money for gyms & good fruit & veges. It costs government to subsidise NDIS.
Baby Boomers did not inherit money from their parents who went through World War II. Youngsters feel entitled to an inheritance instead putting extra into Superannuation.

"People could work part-time until 75 years old"

Wishful thinking! AI heralds a new, truly revolutionary Industrial Revolution. The doubling of AI capability is accelerating and as soon as AI systems become more intelligent and capable than the average human being (most of us) corporate adoption will accelerate. White collar roles will be the first to go, followed by more use of physical robots for many tasks in the future.

As for advocating essentially fat and health police (stick) or even the carrot approach.... good luck with that! Human nature is what it is!

Fake narrative to generate a discussion. Everyone's got an opinion how to divvy up the money they do not have. Bring back Peter Costello.

"exemption of the family home from the old age pension asset test":

non-homeowner receive rent assistance, and,
have additional $258,000 exempted:
Your situation Homeowner Non-homeowner Difference
Single $321,500 $579,500 $258,000
A couple, combined $481,500 $739,500 $258,000

An extra $18,000+ y, the gross yield on a $460,000 home.

Thanks Mark, well reasoned points. The family home and asset test point is interesting and people take it personally. An interesting stat would be - there are x people getting part pension and own a home valued over $x. A reverse mortgage to cover that pension would only be 0.x% of the property value

There seems to be some disagreement about the purpose of super, particularly by younger members who think they are being unfairly treated vis a vis older members. Super was set up to reduce reliance on the aged pension. It has been successful in doing that. Just imagine where we would be now if super had never been introduced. All retirees would have been receiving aged pension. Treasury is fond of talking about super concessions and their effect on the budget. No mention is ever made about savings to aged pension costs. Also given the cost of living now it is more than likely that in a non super world there would have been great political pressure to substantially increase the aged pension above where is is now. Until the super system is fully mature ( 12 % contributions over 40 years ) there will still be a need for part pensions and means testing. That is only fair. In time more retirees will not get any pension. The system set up in 1992 will fully achieve its goals. And super members will have honored their part of the deal to leave their money in super for 40 years when they could have used it in other ways. On tax , contributions are taxed at 15 % going in and earnings are also taxed at 15 %. That was the deal which super fund members agreed to. They could have used it in other ways such as reducing their mortgage costs. The tax on that money rises to 30 % when the super member dies. Or possibly 32 % with medicare levy. That is hardly concessional. Maybe compare it to the average tax rate of a PAYG employee.

"Just imagine where we would be now if super had never been introduced. All retirees would have been receiving aged pension.":

Age Pension Mean Test abolished, then 'All' would receive.

In the absence of Super, some hardy pre-retirees would save fast enough to have savings exceeding the Age Pension Assessable Assets part pension threshold; as was the case before Super for the Commoners.

"there will still be a need for part pensions and means testing":

Abolition of Mean Test is affordable and would abolish Age Pension 'gaming'.

I am curious about your not having included negative gearing and capital gains tax discount which are so repeatedly cited as such big contributors to the tax problem. My mother's tale of her mother's early demise in times when inheritance tax was payable in Brisbane, might have scarred me (grieving family dealing with tax inspectors so soon after death, poring over everything the house could offer them) but I frequently declare to my younger generation that I prefer to pay taxes in my lifetime that upon my death