Grace Collier (“Super folly will cost Libs dearly”, 23/7) correctly identified some of the unfairness that the proposed caps on superannuation contributions and superannuation balances will cause for women. Similar issues will also apply to married couples where only one partner has superannuation or each has very unequal superannuation balances.
This may have arisen because only one partner worked or one had a better paying job, or because one partner made lump sum withdrawals to pay off a mortgage or to recontribute into the other partner’s fund to reduce administration fees.
Another possibility is that they have been planning for years to top up their superannuation when an investment property is sold.
There should be transitional provisions to allow couples (and others) who are seriously disadvantaged by the proposed, clearly retrospective, changes to rearrange their superannuation balances.
A more serious issue is the unworkability of the cap on tax-free balances. Not all assets in a fund earn at the same rate and some of the annual increase in a fund may be unrealised capital gain. For shares, that amount will vary daily. Who will decide which gains are taxable, especially if a person has more than one superannuation account? One thing is for sure, administration fees will rise.
A far simpler scheme would be to impose a tax on the actual earnings of the total superannuation holdings of each individual.
The relevant amounts can be easily calculated by the fund and forwarded to the contributor for inclusion in their annual income tax return if the tax-free limit is exceeded. A special concessional tax rate could be set for these excess superannuation earnings.
Surely the superannuation debate is being approached from the wrong direction.
Let people contribute as much as they want (after all, it is an investment in various activities of the country’s economy) but apply a modest tax to what is withdrawn.
At a time of good government revenues, John Howard and Peter Costello were over generous when tax was removed completely from the amount withdrawn from a fund on the basis that it had already been taxed, albeit at 15 per cent. Let’s say that the first $100,000 drawn down is tax-free, the majority would not be affected.
Then a tax of say 10 per cent could be applied to amounts between $100,001 and $300,000, and 20 per cent tax above that.
Applied to all superannuation pensions, whether from defined benefit schemes or others, this would be a much fairer process, particularly in relation to the extravagant pensions awarded to retired parliamentarians.
In your editorial (“Super solutions must be Prime Minister’s priority”, 22/7) you correctly highlight Janet Albrechtsen’s critique of the government’s failure to grandfather superannuation arrangements to budget night.
Unfortunately, a serious defect in Scott Morrison’s Treasury-concocted Robin Hood superannuation changes — taking from the wealthy to give to the poor — is that these taxed savings of the wealthy will gradually dwindle with time and their wealth will be redirected into other tax minimisation arrangements, while the cost of entitlements handed out to low-income earners will rapidly escalate, as all government entitlement programs have in the past, leading to greater budget deficits — such are the unintended consequences of little- though-out grandiose government plans seeking an appearance of fairness while attempting to raise more revenue.
Grace Collier’s elegantly written article clearly spells out how the heavy-handed nature of the Coalition’s proposed changes to superannuation will particularly deny middle aged women the ability to amass sufficient savings in superannuation to provide a reasonable retirement income.
In mathematical terms the Coalition has over-specified their model of change with too many constraints, such that few will be able to achieve the objective of a tax-free limit of $1.6 million in superannuation savings.
Grace is right; keep a tax free limit but “let people reach that cap in whatever way they can”.
Until I read Grace Collier (“Super folly will cost Libs dearly”, 23/7), I didn’t understand how bad are the Turnbull-Morrison super changes.
Come, come Grace Collier, self-reliance and personal responsibility are such old-fashioned virtues.
So, Scott Morrison is still our federal Treasurer and Mathias Cormann remains as Finance Minister. These two mugs should get together and form a Lotto syndicate, they must be the luckiest blokes in Australia.