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Six ways the Budget Office is probing super taxes

Last week, the Parliamentary Budget Office (PBO) released its first Budget Explainer on ‘How super is taxed’. The PBO’s role is to improve transparency around fiscal and budget policy issues, and no doubt there are several superannuation specialists among its 44 staff. The Superannuation Guarantee (SG) system is now over 30 years old, super holds $3.4 trillion or 150% of GDP, and it is both a major source of revenue and a major cost due to tax concessions, depending how it’s viewed.

Why issue a paper now? Because super is too big to ignore, and the Government is looking for savings, as evidenced by the new $3 million tax. The PBO says:

“From a fiscal perspective, super is an important source of Australian Government revenue, accounting for around 5% of total tax revenue in 2021-22. This is the fifth largest source behind personal income tax, company tax, goods and services tax (GST) – which is passed to the states and territories – and customs and excise duties.”

In Treasury’s Tax Expenditures and Insights Statement (TEIS) 2023, the three top tax expenditures are

  • Income tax deductions for personal and business income taxes
  • Capital Gains Tax deductions
  • Superannuation concessions

Treasury estimates a cost of revenue foregone due to concessional taxing of superannuation at about $25 billion a year, with almost three-quarters of the tax savings going to the top decile of taxable income earners. Of course, this is the case because these are the people who pay the most tax so any concession will be worth more to them, but it is ammunition to cut back on concessions to high income earners.

Some highlights from ‘How super is taxed’

A check on the wording and emphasis in the PBO Report shows where the Government and its advisers may be looking when considering ways to save on superannuation concessions.

Here are six highlights from the Report.

1. Australia’s taxing of retirement savings hits earlier

Superannuation can be taxed at three different points:

  • When contributions are made into a super fund
  • When super fund assets earn investment returns (earnings)
  • When withdrawals are made from a super fund.

If each taxing point is denoted as either ‘T’ for Taxed or ‘E’ for Exempt, Australia is said to have a ‘TTE’ super tax system. Contributions and earnings are taxed, while withdrawals are untaxed after a qualifying age. Unlike most OECD countries, Australia taxes earnings on super during working lives rather than when pensions are drawn after retirement.

The crucial point is that contributions made earlier in life are hit by taxes more than those made closer to or after retirement due to the impact of compounding over time. Australia’s taxing of contributions and earnings also raises revenue sooner than taxing withdrawals.

2. Some contributions are taxed at marginal personal rates

It is often assumed that all super contributions are taxed at concessional rates, but there are three ways to contribute to super:

  • SG contributions, made by employers
  • Voluntary concessional contributions, made by employers or individuals
  • Non-concessional contributions, made by individuals.

This third method sources super from after-tax income, and tax at full personal rates has already been paid. For many people with large balances, because concessional contributions are capped at $27,500 a year, it is the non-concessionals which create the high balances, and they have already been heavily taxed. This should be recognised more when large balances are targeted and criticised.

And those earning more than $250,000 (inclusive of their contributions) are subject to Division 293 tax, an additional 15% on contributions.

3. Large funds cannot calculate tax for members with over $3 million

Judging by comments received from many readers, there is little understanding of how a large fund with both pension and accumulation members calculates tax. The PBO explainer demonstrates why the $3 million tax is designed in such an unusual way.

Large super funds know which of their members hold pension funds and which are in accumulation funds, and both are invested in the same pools. But they do not know which members hold more than $3 million in total super balances, and have no way (currently) of imposing the additional 15% on these large balances.

A super fund’s tax return includes all fund earnings and then subtracts the earnings applicable to pension accounts, which are tax free. The most volatile earnings sources are generally capital gains and foreign exchange gains and losses, with dividends and franking credits usually less volatile, depending on large share buyback activity. Net capital gains receive a 33% discount for gains on assets held for at least 12 months.

In the example below, the tax liability of super funds was about $21 billion but the super funds themselves paid only around $11 billion as half of the tax liability was paid in advance by companies paying franking credits to the funds. This is a good summary of what is happening with the super in industry and retail funds.

4. Super tax concessions vary significantly by income

The PBO provides a handy chart to determine which taxable income bracket receives the most concessional treatment versus personal marginal tax rates. 

Everyone with taxable income from $37,000 to about $225,000 pays the same tax rate of 15% on concessional contributions, but the sweet spot for most benefits is $180,000 and $225,000, before the Division 293 tax starts kicking in.

Source: PBO, see page 12 of Report for more details

PBO gives an example of the benefit of super to high income earners:

“For instance, an individual who earns $200,000 in 2022-23 faces a marginal tax rate of 47% (including the Medicare levy). If a dollar is paid to this individual’s super fund, the super fund pays 15c of tax on their behalf. If that dollar was instead paid to the individual directly, they would pay 47c of tax. This means that for every dollar contributed to super the individual forgoes 53c in post-tax consumption while their super balance increases by 85c. The ratio of these (85c/53c) shows that, for each dollar of post-tax consumption forgone, this individual’s super balance will increase by $1.60.”

5. Comparison of super against other investments

Investors frequently make comparisons between the benefits of using superannuation as a savings vehicle versus other structures, and this will increase with the new tax on balances over $3 million. As the PBO notes, super is not the only place where tax concessions are available.

The table below shows how the tax treatment affects returns over 10 years, based on someone in the tax bracket of 39% in 2022-23. It assumes all investments earn either a 5% return or 5% capital growth each year. 

The PBO advises that holding money in a super pension versus a family home make the same returns after tax, based on these assumptions:

“Over a 10-year period, super earnings in the accumulation phase make a slightly higher after-tax return than capital gains outside of super, but a much higher return than investments outside of super that are taxed at a marginal rate of 39%. Owner-occupied housing, for which no tax is payable on the capital gains, makes a higher return, equivalent to the tax-free earnings in the super retirement phase.”

6. Dramatic impact of tax rates compounded over 45 years

While compounding earnings creates spectacular results over long periods, it also highlights the profound impact of different tax rates. When investing in super starts, the vast majority of the super balance comes from contributions, but over time, the compounding of earnings dominates. Thus the impact of the T or E taxes changes over time.

The PBO gives an example of an individual who makes a $10,000 post-tax contribution at the age of 22. If this individual retires at age 67 (45 years later), that $10,000 contribution has increased to $125,000 based on an average return of 5.2% plus net capital gains of 1%, taxed at 15%. If earnings were taxed at 30%, the final retirement balance would only be $84,000, or about one-third lower. If earnings were not taxed at all, their $10,000 contribution would increase the final balance by $185,000, nearly 50% higher than with a 15% tax and more than double the balance under a 30% tax.

Some final points of PBO emphasis

The PBO recognises that tax concessions are required to encourage people to save for retirement:

“Individuals usually prefer consumption today over consumption in the future. Tax concessions on super contributions provide some compensation to individuals for forgoing today’s consumption. But the tax concessions on contributions do not compensate individuals equally.”

The PBO also acknowledges significant changes already made to superannuation over the years, and in fact, that prior to 1988, withdrawals were taxed and Australia had an EET super tax system. It then moved to an TTT before today’s TTE system came in from 2007-08 when withdrawals became tax free. But the PBO does not favour any one structure, and states:

“In terms of the overall impact of taxes on final retirement balances across a working life, Australia’s TTE scheme is broadly equivalent to an EET scheme.”

Anyone advocating more taxes on withdrawals should therefore consider whether this means contributions and earnings should be taxed less, as it’s the complete picture through a lifetime of super saving that matters.

 

Graham Hand is Editor-At-Large for Firstlinks. The full paper, How super is taxed, is provided by the Parliamentary Budget Office.

 

36 Comments
Jack
May 09, 2023

It’s true that some individuals benefit from tax concessions from super contributions, but the bulk of tax concessions flow from super earnings over many years. Therefore the bulk of tax concessions flow to super funds, not individuals. On top of that my super fund doesn’t know how much I earn nor how much tax I pay.
So how can the PBO claim that two thirds of super’s tax concessions flow to the top decile of income earners?

OldbutSane
May 08, 2023

The comment in Point 3, whilst true, is easily solvable. when the previous Government introduced the pension balance limit of $1.6m individual super funds did not know which members had more than that amount in pension phase as some members would have had pensions in more than one fund or a defined benefit pension. As the limit was introduced at a point in time it was up to the individual (especially where there was a defined benefit pension) to obtain the relevant data and transfer the excess back to accumulation phase. There is no reason this same system cannot be used to identify individuals with more than $3m in super, but it needs to be done at a point in time.

So, for example, if that point in time was 30 June 2024, then anyone with more than $3m in super (pension and accumulation) would have to transfer the excess into a new "Excess Accumulation Account", the earnings on which would then be taxed at 30%. The main issue here would be what to count as the pension amount eg do you count the actual balance or the persons used transfer balance cap (or the lower of the two?). Yes, super funds would have to replicate the existing accumulation fund software architecture to accommodate the different tax rate (which surely can't be too hard). This gets around all the problems with unrealised gains, planned lack of indexing which surely must change as the pension limit will be over $3m in the next 5-10 years and who pays the tax. Yes, a few extra SMSF's might have to get an actuary's report (as those who currently have both pension and accumulation accounts do) to split the income between different accounts but this is not a major cost.

John Abernethy
May 07, 2023

Hi Graham,

A really outstanding commentary and one that needs to be widely distributed.

Many of the comments are thoughtful as well and shows that retirees ( in particular) can debate issues in a much more thoughtful way than our politicians.

Just reflecting on the “Former Treasury policy maker” the original wages accord included the original 3% super contribution. Subsequent increases have not ( in the main) been similarly
negotiated.

In any case the wages accord does show that there is a policy response to dampen down inflation that the Treasurer and Treasury will ignore on Tuesday night . A tax reduction for low income earners for an agreement to limit wage increases. A tax reduction which should be aggressive - for example $52,000 tax free threshold for wage earners ( note - not from any source eg investment income) should be granted to lift after tax income for low income earners.

In this way - as happened in the 1980s, rampant wage claims can be negotiated away by a sensible taxation adjustment. Services inflation ( ie wages) would be addressed early in this cycle and the RBA could support by not raising interest rates with the plan of creating unemployment, creating economic stress and blowing out the deficit.

D Ramsay
May 06, 2023

Great article thanks - i agree - Well said, Former Treasury policy maker.
Maybe they never got to play with plasticine when very young ?
Objects (models) made from it distort , often in an undesired way, when one part of it is squeezed

Andy R
May 05, 2023

Classic Camel’s Nose Under The Tent..

Govt claims it’s intended to target tax rich. Then with time policy is slowly watered down so the average punter is caught in the net...

Chris
May 08, 2023

Or inflation will do the work for them, because by the time Gen-X and especially Y/Z retire, $3m in the bank will be nothing special

Paul
May 05, 2023

It has been clear for many years the design of Australian compulsory super was flawed from the outset. Money in to super and earnings on same should not be taxed with limits in place as to how much can be put in each year, maybe with catch up provisions if you don’t contribute your maximum each year. Withdrawals to be taxed at marginal rates and subject to similar minimum drawdowns as at present. Compulsory drawdowns from age pension age. No borrowing within super.

That Treasury and the politicians would have to wait a generation to see any meaningful tax inflows is why we were never going to have such a simple, rational system.



Jim Bonham
May 05, 2023

Thanks Graham for this useful summary.

What stands out for me in the PBO document is it’s failure to discuss the enormous difference between a dollar that can be spent today (ordinary income) and a dollar that cannot be spent for 10, 20, 30 years or more (super in accumulation phase).

There really is no rationale for directly comparing taxes on super with taxes on ordinary income.

It will be interesting to see how the follow-up document treats the interaction between super and the age pension.

Warren Bird
May 05, 2023

Graham, thanks for this summary of the PBO's document and in particular for your final statement: "Anyone advocating more taxes on withdrawals should therefore consider whether this means contributions and earnings should be taxed less, as it’s the complete picture through a lifetime of super saving that matters."

I wrote a couple of articles for FirstLinks back in the discussion about Shorten's proposal to stop franking credits that are relevant to the discussion as well, I think. In particular this one (https://www.firstlinks.com.au/zero-tax-rate-pensions-right-fair) touches on the need for no tax on withdrawals. Especially some of the discussion in the comments section is relevant - and I still see comments from some people who don't appreciate that when someone in retirement withdraws from super TAX HAS ALREADY BEEN PAID. The withdrawal has to be seen like a withdrawal from your bank account - you pay tax on the interest, but the money that went in had been taxed and so the capital that comes out shouldn't be taxed again. The only issue ever is whether 'enough' tax has already been paid and my article argued that it has because of taxes on contributions and the limit on how much can be kept in tax free income in pension phase.

BTW I notice that today Mr Chalmers has affirmed that the current government is not 'after' franking credits, but only schemes that look and smell like manipulations of the intention of the imputation system, and that franking credit refunds are not going to be cut off like Shorten proposed. I hope that means that we won that debate with Shorten, Bowen and the ALP and we don't have to revisit it again.

Graham Hand
May 05, 2023

Thanks, Warren, yes good point. Nobody should expect if you invest $100 of your capital (perhaps after paying 47% tax) into super and then withdraw $10 of the capital, that you should pay tax on it. As you say, imagine if someone put $100 in a term deposit and then withdrew $10 on rollover and reinvested $90. Does anyone argue you should pay tax on the $10?

Lyn
May 05, 2023

Exactly to Warren and Graham, but that's too difficult for Govt personnel to grasp apparently. In my case all is from after-tax contribution and as someone said elsewhere here, how much tax will ever be enough?

Warren Bird
May 06, 2023

just for the record, I don't agree with Lyn's somewhat personal comment that 'government personnel' find concepts like those I've written about 'too difficult to grasp'. I don't find comments like that at all helpful to the discussion. The intelligence and capacity of our policy makers is actually quite outstanding - I got a fantastic training in this during the early years of my career in Canberra and all those I've dealt with since have been thoughtful, intellectual and well-informed. And positively motivated.
I well remember the debate 20 years ago about whether the government bond market should be shut down because the budget was in surplus and debt could be paid off. That idea was proposed, but a public discussion followed and folk like Martin Parkinson and Blair Comley from Treasury listened to arguments like those that practitioners like Stephen Halmarick and I made at various forums, and the decision was taken not to shut the market down. It was a terrific process centred around discussing the issue not the integrity or ability of those who held various views. I wish all conversations about policy could be like that!

Kym Bailey
May 08, 2023

This is being disingenuous. The earnings on the capital in retirement phase are tax free which in itself is a pretty good tax deal. The capital can be withdrawn at any stage without tax but then, if placed in non super investments, the earnings after, around $20k, are taxed.
Where super pensions are taxable, It is only after the compulsory pension factors cause more than the income to be withdrawn that the capital itself is taxed. The previous TTT system had a 15% tax offset at the drawings stage to compensate for super tax, even though the pension phase was, and still is, tax free.
Re-introducing end benefit tax is preferred over a new tax on earnings that taxes unrealised gains. "Equity" can be achieved by the tax system whereby lower income earners are exempted.

Denial
May 09, 2023

Kym is correct. Tax base is becoming too narrow not to tax income/CG in pension phase.

As for Warren's comment on his background with policymakers listening to his input. This would appear to be the exception to the rule over the past decade with so many poorly executed policies (Stronger Super, YSFY, FOFA etc etc) and show trials (Royal Commission into misconduct.......or the 0.00001% of transactions).

Jon Kalkman
May 09, 2023

There is a nostalgia for the pre-Costello taxes on withdrawals from super in retirement. But people seem to forget that the tax only applied to the concessional portion of that withdrawal. Large funds (more than $5million) only got there with large dollops of non-concessional (tax paid) contributions. So their concessional portion was very small and they paid little tax. Smaller funds have larger proportions of concessional money but the 15% tax rebate meant they also paid little tax.

Note that the tax on death benefits still only applies to the concessional portion of the super balance - so large funds don’t pay much tax here either, but the 15% rebate does not apply here.

Angus
May 05, 2023

Any change in the tax treatment of Superannuation balances should be grandfathered just as the Capital Gains Tax was when it was introduced by Mr Keating in 1985.
Policy makers in the Federal Government seem to be forgetting that Superannuants with high balances entered into a compact with Government that has gone on from the 1992 introduction of Superannuation until today (31 years so far).
That compact was that people would be encouraged by reduced, but still very significant one-off and annual income and capital gains taxes, to save into their Super over those 31 years on the basis that they had no access to those funds (access was granted only in particular specific circumstances and often came with a penalty) until they turned at least 55 years old at the earliest. In other words, in return for not consuming the funds over that period and effectively relieving Governments of age pension expenditures they paid reduced but still considerable one off and annual income and capital gains taxes to incentivise them to act as the Government wished.
Now, having abided by those rules for, in many cases those full 31 years (hence the bigger Super balance), they are being penalised retrospectively in older age.
They would have been much better off had they invested in their principal place of residence in one of the major capital cities with NO tax to be paid either over each of those 31 years or in retirement. And then pick up the age pension.
What is happening now under the current Federal Government is entirely UNFAIR and INEQUITABLE.
Those that have done the "right thing" are being penalised to the benefit of those "who haven't".

Mark
May 05, 2023

Except Superannuation had reasonable benefit rules applied to it. Those RBL's were removed by Howard and Costello. Did you complain about those rule changes?

Daniel Van Essen
May 07, 2023

Hey Mark, Angus is right, I feel the same way, this argument is not about political persuasions, it’s about all governments of all alliances who retrospectively change the rules and now penalize those groups who have done the right thing in the past (benefiting the economy then and into the future) to line their coffers.
Dan

Mark
May 07, 2023

@Daniel. There have been many changes to Superannuation rules over the years yet most people didn't bat an eyelid at them because they weren't affected.

There were changed made that affected me that were not Grand Fathered.

Two notable ones that come to mind, no longer being able to leave the country and take your Superannuation with you. It has to stay until your preservation age. I could be retired living in Thailand on a retirement Visa now if not for that change.

Changing the age of TTR to 60 from 55, I could be semi retired now if not for that change.

Even though I am affected by this new change, I'm in agreeance with it. Superannuation was designed to help us fund or part fund our retirement, not to become a wealth creation tool due to its low tax benefits.

Grandfathered or not, some rules should never have come about in regards to Superannuation.

Removing RBL's and letting the wealth deposit millions into their Superannuation accounts 2 prime examples.

David
May 07, 2023

This last sentence is the very essence of the welfare system as we know it. Take from those who made the right economic decisions in life and give to those who didn't. I can't see this changing anytime soon. Democracy will ensure that, because the majority, unfortunately, are in the latter category, not necessarily through any fault of their own.

SMSF Trustee
May 08, 2023

David, that's quite the wrong attitude and could actually be interpreted as a disgusting view of your neighbours. Sure, there are some who received government financial assistance who have made the wrong choices, but the majority are not in that boat.

One group that definitely doesn't deserve such opprobrium are those who've worked hard in manual, low to modest income paying jobs all their lives - to keep your house free from garbage for instance, or to cut the timber that is holding your house up or any number of other important jobs that are beneath folk like you, I guess - but not been able to save a great deal in super and often haven't been able to afford to buy a house. They retire in a situation that is often poverty or close to it. To argue that they shouldn't receive any support from old age pension or other 'welfare' because they weren't smart enough to choose the same job as you did is despicable.

David
May 08, 2023

This comment is addressed to the reply by SMSF Trustee about my earlier comment referencing the final sentence by Angus and was meant to be short pithy remark on the way things are. I could have phrased it better, as I completely respect workers who do those jobs we all rely on and take home a modest wage because of it. I used the word "right" in the sense of "generating more wealth", not suggesting that those who spend their life with other priorities are "wrong". Those who dedicate their lives in charities and in the service of others are needed and valued, but not economically. Theirs is a different happiness and satisfaction. The sick, the disabled, the victims of domestic violence need looking after. Where is the money to come from? From those fewer who took risks, worked when others relaxed, studied hard to get good careers, saved, made good investments. Fact of life. No blame attached. No rancor. I once thought libertarianism could work. I no longer do. I look at the brave Ukraine soldiers defending their homeland. They volunteer to do this because they all get a fair deal out of Ukraine. The same would happen in Australia. We can never have a system where people get such a raw deal that they would not fight for their country. There is no alternative to the old age pension for many and I never said, nor implied they should not have it.

SMSF Trustee
May 09, 2023

Relieved to read your clarification David.

John
May 04, 2023

"The PBO gives an example of an individual who makes a $10,000 post-tax contribution".

Like that's a common scenario. Today, most 22 year olds are either still studying or have only recently taken up paid work. In either scenario, there is no way they would have a lazy $10k (post tax) to contribute to super. And nor should they do so. Every time government gives examples of superannuation concessions it always chooses the most extreme outliers it can create, because in the absence of such fictional examples, their case for change has no basis. Tell the PBO to get real.

Graeme Taylor
May 04, 2023

Fully agree
Graeme ret CPa , GIA etc
Concess is taxed in ,along the way , annually & finally when paid out to non tax dependants....leave it as is is !
Isnt a blessing for those that have saved prudently ARE NOT on Centrelink & adding to the massive cost of the bureaucracy.
Narrow minded Treasury & Labor!
Why not look at transfer pricing with Multi national coys & massive lost revenue & I dont think ATO has the skills to sort it in this area.
Its simple have a flat tax of say 10% on gross revenue if otherwise tax paid on Aust derived income would be less

Dudley
May 04, 2023

In addition to imputed rent tax free, market indexed, and capital gains tax free, the home owning full Age Pensioner couple receives free $42,000 income, capital free, tax free and indexed courtesy of the tax payers.

After tax returns on original investment =$42,000 / $0.00 = infinite.

Value of home limited to: local government taxes <= $42,000 - household expenses - contingency for local government tax increases.

Mark
May 04, 2023

Preservation age is fast approaching for me and I like the tax free status on withdrawals.

That being said if I was younger, I'd prefer no tax on deposits or earnings and the paying tax on withdrawals at the pension phase

Dollar value would be higher then.

Government wins with the status quo.

Dauf
May 06, 2023

Yep, much more sensible…but Keating needed to still collect some tax so we have a poorer systems in my opinion. However, like you i am close to preservation and so dreading that they would have the nerve to convert the system now.

I think the best way to guess what they will do is to ask, what would hurt SMSF but not disadvantage our mates in industry funds? Seriously, most people would be better off over their lifetime with their own SMSF invested in an index fund…compare the pair makes that clear

Mark
May 04, 2023

All the more reason to let those with more than $3M in Superannuation access the amounts over if they wish too regardless of age.

Former Treasury policy maker
May 04, 2023

Sorry, I'm not sure if this comment relates 100% to this article, but reading it has prompted me to recall an aspect of our super system that was important at the time it was kicked off, but doesn't get any coverage these days.

Compulsory super was part of the policy approach to tackling our high inflation of the 1980s. (And by high inflation I mean consistently above 8%.) It was negotiated in the context of the Prices and Incomes Accord, as a replacement for what would have been inflationary wage increases.

So how about Budget Office and Treasury and Grattan and others go back and model what would have happened if we'd just had a continued wage-price spiral, with the resulting higher interest rates, deeper recessions and entrenched structural problems in the Australian economy. How much do they think that not having our system in which superannuation is taxed concessionally would have cost us in terms of higher inflation, higher interest rates, lower tax revenues, and much higher cost of the aged pension, etc?

Spare me days, this narrow focused partial analysis of 'tax concessions' as if they operate in a vacuum from both other policies and as if they don't contribute to overall economic outcomes is driving me nuts.

Neil
May 04, 2023

Historical context for policy formation is always important. The younger the average parliamentarian gets, the worse off we are.

By the way, the other important policy factor that gets (conveniently?) forgotten is that the 50% CGT discount was introduced as a simplification measure for investors who had to do indexation calculations across many tranches (ie. many different dates) of an investment's cost base. This was underpinned by the policy intent that investors should not be taxed on the inflation-part of their investment gain. The 50% was appropriate for the CPI rates around at the time it was introduced, but perhaps became a "windfall" for investors in a low inflation environment over the last 15 years (until mean reversion started taking place over the last 12 months).

Bill
May 05, 2023

Neil, I agree that the 50% CGT discount is a fair attempt to avoid a capital gain being taxed as though the whole gain accumulated in the last year of owning the asset. Under the old system, an indexing process was employed to recognize that the gain had occurred over several years, but the process was complicated and hence replaced by the current system of the 50% discount. Any attempt to remove the 50% discount needs to recognize why it was introduced and why it is not some kind of concession or rort.

Ian
May 05, 2023

And as I recall there was an option of taking the Indexed Cost Base or the 50% discount. Perhaps we should go back to indexing the cost base as the fairest way of doing it - especially as now we have computers to do it for us. Some commentators, who should know better, seem to have forgotten the principle of not taxing the inflation portion of the capital gain.

At 7% inflation, it would only take 6 years for the 50% discount to start to cause taxation of capital gains.

Sue
May 04, 2023

Well said, Former Treasury policy maker.
It's too easy for money hungry Governments to look at the "costs" of concessional superannuation taxation and forget why it was introduced in the first place.
It's also too easy for commentators who don't have a long enough memory, and who are looking jealously at the large super balances enjoyed by very few people to try to come up with some magic "equalising" formula.
Same as the ones who look at the elderly members of our population who still live in their family homes in (often) inner suburban locations and want to move them in retirement homes while at the same time forgetting that those inner suburban locations were on the urban fringes and comparatively expensive at the time they were purchased.
Policies based on greed and envy are never good policies.

Chris
May 08, 2023

So, to tackle high inflation, just make it so that they stick MORE into super and you forego the payrise, just like what happened when superannuation was introduced. Same same.

What that will do is mean more people get to the $3m limit faster and then you can tax them even more for it when they get there. Oh, that's genius...the Government are lucky people like myself exist who have worked out a solution for their current inflation problem, but I prefer the term "seen their sleight of hand move for what it will be". Gen X, Y and Z, watch this space and don't say you weren't warned...

Denial
May 08, 2023

"...is narrow focused partial analysis of 'tax concessions' as if they operate in a vacuum" very succinctly put.

This is not a honey pot Jimmy. Why not tax the pension side if you want to broaden the tax base? Complete short termism targeting the ultra-wealthy as they'll never end up paying anyway. Add nothing long term.

The equity is the current system is self evident via who pays extra tax and those with readily access to the Age Pension (best $1.2M lifetime guarantee available) so it just needs a laser focus on sustainability........

TAX the PENSION side as it can be shown to be progressive for 90% of those earning under the Age Pension entitlement.

 

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Debates about retirement tend to focus on the financial aspects: income, tax, estates, wills, and the like. Less attention is paid to the psychological challenges of retirement, which can often be more demanding.

Strategy

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Taxation

The mixed fortunes of tax reform in Australia, part 1

While there have been numerous tax reviews at the Commonwealth and state levels, most have not resulted directly in substantive tax reforms. This two-part series looks at that history and explores the pathway forward. 

Investment strategies

America, the world's new energy superpower

The US has become the world's new energy superpower, combining production, technology and capital in a way never previously achieved – a development sure to have global implications for decades to come.

Investment strategies

Could Korean corporate reform trigger a Japan-style market rally?

Corporate governance reforms in Japan have helped spur a 45% rise in the share market over the past 12 months. Korea looks set to follow the Japanese reform playbook, and may be poised for a similar bounce.

Property

How AI will transform the real estate sector

The real estate industry, traditionally characterised by its cautious adoption of new technologies, is now at a pivotal juncture. The emergence of AI promises to fundamentally change the way we live, work, and play.

Investment strategies

Charitable giving and tax deductions

With impending Stage 3 tax cuts incentivising taxpayers to bring forward future tax deductions while tax rates are higher, it’s a good time to explore how to bolster your tax savings and community impact through structured giving.

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