Category: Save Our Super Articles

An Open Letter from Eugenia Mitrakas to Malcolm Turnbull

Budget Superannuation Proposals

malcolmturnbull

Australian Prime Minister Malcolm Turnbull. PHOTO: AAP/LUKAS COCH

22 Jun 2016

EUGENIA MITRAKAS

Dear Mr Turnbull,

I am a Greek born solicitor in private practice in South Melbourne. I migrated to Australia as a young child with my family in the mid 1950s. I attended all the local primary schools. I have lived and practiced in the South Melbourne/Albert Park area for most of my life. I currently live in Albert Park. I have been in private practice (since 1972) running a small legal business for all my working life employing from time to time 2-5 persons.

I have worked extremely hard for more than four decades and I carefully planned for my retirement. I have, to date, used Superannuation as the main vehicle to fund my retirement. My family was brought up on a hard working ethic and having a government funded retirement benefits or pension in my family was looked upon as an indication of failure in your chosen profession and in small business.

I worked in the family businesses (running boarding houses and running the family fish and chips shops in my younger years during my student years and for a few years, as a young lawyer. I was brought up to believe that any hard work, no matter how menial was honourable and where hard work was considered an asset and, that one is always rewarded by their hard work. I continued to work in my parents’ fish and chips shop for the first few years of running my legal practice. My parents instilled in me a pride in hard work so long as it was honest work. This modest work moulded and helped in building my hard work ethic.

I have worried a lot in recent years about the fate of my county of birth, Greece and the desperate and sad financial position that Greece and the Greek people are faced with.

I have been a proud Australian and considered myself lucky to have had the opportunity to grow up in Australia and have an excellent education. I have indeed been very grateful for the many opportunities that Australia has given me, and in return, I have endeavoured to give back to the general community in Australia in order to repay my “debt” to Australia and to the community at large for giving me this great opportunity. At the same time, I have retained my Greek identity and pride in my Greek background, history and culture. I have an immense passion for the Glory of Classical Greece and its contribution to law health and justice of the modern day. I am a product of a multicultural Australia. I married an Australian who became a multicultural Greek. He read widely on modern and classical Greece and on the glory of Greece. He was the “Australian Skippy”. I brought up two Australian step children who are also proud of their Greek connections. This is a success story in Australia’s multicultural policies.

I do not have any sense of entitlement and have worked extremely hard to reach and achieve my goals. Australia is a country that rewards people who are prepared to work hard to achieve their goals, no matter how ambitious or modest.

I have at all times planned for my retirement and have used Superannuation as a vehicle in achieving this. I do not want to, nor do I expect the Australian people or the Australian government to fund my retirement.

I am currently on a transition to retirement. I have been very interested in the current debate about the changes to the policies about our superannuation.
I have, in the last few years, preached to my friends and relatives in Greece about their attitude and views to their retirement and to their sense of entitlement, which I believe has been a major contributing factor to the current financial crisis in Greece. I informed them of our policies and how our government planned to eliminate old age pensions and promote a community of self­ funded retirees.

I am, accordingly very disappointed with the proposed changes and the effect that these will have on hard working responsible Australians. I invested funds after tax into my self-managed super funds (SMSF) to fund my retirement and ensure that I was able to maintain my same lifestyle in retirement. I have worked in the family businesses since the age of nine and deserve to be able to enjoy my retirement. I came from a very humble background, encountered all the known and well documented prejudices but through hard work and determination, I was able to overcome them.

The proposals that were announced in the Budget Papers in May of 2016 are, in my view, very unfair to people who, like me, have worked hard to fund their own retirement.

In recent weeks, I have been forced to review my plans to retire and have taken active steps to continue working for an additional 5-10 years to enable me to fund my retirement goal.

The persons who will be caught by the new proposals are innocent hard working members of the community who have worked very hard to grow assets in super strictly within the confines of the law. They should not be penalised for saving in accordance with such laws. These people were actively encouraged by the government to plan and fund their retirement in order to reduce the welfare burden of the government in the future. They have done so with the encouragement and support of the law of past and present governments, both Labour and Liberal/National Parties.

If the government persists with their proposals to change the policies relating to our super, then there must be a grandfathering clause to ensure that persons who have worked hard to fund their retirement in accordance with the law, are not unjustly penalised.

I have followed closely the debate in the media about the new proposals of the Liberal National government. I have read the article which appeared in The Australian Newspaper on 8 June 2016 on page 7, outlining an interview with Mr Jack Hammond QC who has spoken against these proposals.

I fully agree and support the Proposals of Save Our Super that are set out on their web-site: www.saveoursuper.org.au which calls for bipartisan superannuation policies from Australian major political parties. They call for the following actions; which will grandfather the following Budget 2016 superannuation proposals:
– the introduction of a transfer balance cap of $1.6 million on amounts into the tax­ free retirement (pension) phase from 1 July 2017.
– after commencement, if individuals already in retirement as at 1 July 2017 retain balances in excess of the $1.6 million cap and do not transfer the excess out of the retirement phase account, a similar tax treatment that applies to excess non­-concessional contributions will be applied to that excess at the top marginal rate of tax (ie: 49 per cent for the 2014 to 2016 income years);
– establishment from 3 May 2016 of a life-time non-concessional contributions cap of $500,000 on all non-concessional contributions made since 1 July 2007.
– after commencement, if individuals make contributions that cause them to exceed their life-time non-concessional contributions cap do not withdraw their excess after notification by the Australian Tax Office, the tax treatment that applies to excess non-concessional contributions will be applied to that excess at the top marginal rate (ie: 49 per cent for the 2014 to 2016 income years);
– introduction of commensurate measures to defined benefit arrangements;
– removal of the tax exemption on earnings which support Transition to Retirement Income (pension) streams; which will grandfather the following

Opposition’s superannuation policies;
– reduction of the tax-free concession available to people with annual superannuation (pension) incomes from earnings of more than $75,000. From 1 July 2017, future earnings on assets supporting (pension) income streams will be tax-free up to $75,000 a year for each individual. Earnings above the $75,000 threshold will be taxed at 15 per cent. Note: under the proposal, capital gains are to be grandfathered;
– similar concessions reduced for defined benefit superannuation schemes by removal of the 10 per cent tax offset for defined benefit income above $75,000; which will protect all Australians against any legislation which changes the rules of the game for existing superannuation savings and actions taken in reliance on those rules and savings, by including appropriate grandfather clauses.

I am fully cognisant that the government has to “balance the budget” in order to reduce our ever growing debt, but we should not punish innocent persons along the way.

Penalising hard working and responsible members of our community is an unfair way of trying to ‘balance our books’ and encourages people to live on welfare. These persons who have accumulated assets in super are also running a small business and employ a small number of employees. This policy, if implemented, will have a detrimental effect on small business.

I have sent a copy of this letter to the press for publication.

Please let me have your response on or before 27 June 2016 to assist me and my family in making our decision on how to vote at the General Election on 2 July 2016.

Yours faithfully,
Eugenia Mitrakas BA. LLB. OAM”

Scott Morrison’s 12 tax-free superannuation promises : May to June 2015

4 May 2019 – Due to an inadvertent transposition, the quotes in this document do not match the proper source. We have corrected the document. The update can be found here:

Scott Morrison’s 12 tax-free superannuation promises : May to June 2015 – Updated 4 May 2019

3AW – 19 June 2015

MINISTER MORRISON: Well we do want to encourage everyone … to be saving for their retirement and particularly when you are drawing down on that when you are retired we don’t want to tax you like Chris Bowen does.

2GB – 25 May 2015

My own view is that the superannuation system, for example, meant I don’t want to tax people more when they’re basically investing for their own future… That’s why I think Chris Bowen’s idea, …of …taxing superannuation incomes, is a bad idea, I don’t support it…

Question Time – 25 May 2015

And when they get into their retirement, we are going to make sure that their hard-earned savings in their superannuation will not be the subject of the tax slug that those opposite want to impose, … Those opposite see it as a tax nest—a tax nest for those to plunder.

The shadow minister earlier referred to ‘trousering’. The ‘trouser bandit’ sits over there because he, together with the shadow Treasurer, wants to come after the hard-earned superannuation savings…

What we will do for them is: we will not tax them like the ‘trouser bandit’ opposite.

3AW – 18 May 2015

It’s the Labor Party who wants to tax superannuation, not the Liberal Party, particularly the incomes of superannuants and I think that’s a fairly stark contrast that’s emerging.

Doorstop – 8 May 2015

The Government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future.

… unlike Labor, we are not coming after people’s superannuation…

Press Conference – 7 May 2015

MINISTER MORRISON: What we are not going to do is we are not going to tax those savings, like Bill Shorten wants to do. That is the difference, we will not tax your super, Bill Shorten will.

MINISTER MORRISON: Yes, and there are other taxation arraignments that apply to superannuation already and we are not going to increase those taxes as the Labor Party does and nothing we have done with the Greens has in any way changed the Government’s position on not taxing your super. We will not tax your super.

ABC AM – 5 May 2015

what is not fair is if you save for your retirement and you create yourself a superannuation nest egg and the Government then comes along and taxes that income; which is what Labor are proposing to do.

ABC RN – 5 May 2015

We don’t think that people who have done that should be punished with higher taxes, Bill Shorten does, and so does Chris Bowen and I think that’s a stark difference between the Government and the Opposition on these issues.

3AW – 1 May 2015

The Government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement.

Source:

Prepared and edited by Save Our Super from:

Labor media release:

CHRIS BOWEN MP

JIM CHALMERS MP

WEDNESDAY, 20 APRIL 2016

Why I formed Save Our Super

Initially, I viewed, through the narrow prism of my own self-interest, some of the Government’s and Opposition’s proposed changes to the superannuation system. I, and many people like me, will shortly retire and rely, in our retirement almost entirely, if not exclusively, on our superannuation savings built up over many years.

However, my self-interest was quickly overwhelmed by a deep feeling of anger and dismay at what I saw as a breach of trust by the Government.

Over many years, we did what the Government wanted and encouraged us to do with our superannuation savings. We accepted and complied with the superannuation rules which the Government made. We put our savings into superannuation in preference to many other choices which were open to us.

Now the Government, without any notice or consultation with us, proposes to penalise us for the decisions we made at their behest.

On any view, that is manifestly unfair and unreasonable.  

I discovered that I was not alone in that feeling. It caused me to form Save Our Super in May 2016. I’ve since discovered that the feeling I felt is uniformly felt by others affected by the proposed Government changes.

It has cost me time, money and lack of sleep to establish Save Our Super. I could have simply shrugged my shoulders and accepted the proposed changes. I could have simply sought good professional advice, paid for it and then gone quietly into retirement, enjoying my other interests and more time with our children and grandchildren. However, the Government’s breach of trust was too important to ignore.

Millions of working Australians are effectively compelled by the Compulsory Superannuation Scheme to put their hard-earned savings into the Government-mandated superannuation system.

They trust, as they must, that every Government of the day will treat them reasonably and fairly when changes are to be made to the Australian superannuation system.

They trust, as they must, that when the Government says, as Scott Morrison said in May 2015, “[t]he Government has made it crystal clear that we have no interest in increasing taxes on superannuation either now or in the future. … unlike Labor, we are not coming after people’s superannuation…” that those promises will be kept and honoured. That their compulsory superannuation savings, whatever the amount, will be respected, and not be subject to the possibility of being depleted by deliberate government action.  

But they, unlike me and some others like me, unfortunately do not have the knowledge, skills, time, contacts, influence, and resources to do anything about it if a government breaches their trust.

We do.

I, and some people like me, want to ensure that some of the proposed superannuation changes are grandfathered, if those changes significantly affect Australians who, encouraged by  government, have relied on, and acted on the then rules of the day. Australians should not be penalised for having so acted, when a government wants to change the rules later.

That is our modest goal. But that goal, if achieved, will create a precedent which will benefit millions of working Australians, now and in the future. Not only me and people like me.

 

Jack Hammond QC

Melbourne, 13 June 2016

Save Our Super

Save Our Super is an apolitical community-based group which makes the public aware of the implications of the Coalition’s superannuation legislation and Labor’s superannuation policies.

Some of our supporters vote Liberal/National; some vote Labor; others vote for other parties or independents. But we are united in Our Call For Action by the Federal Parliament.

Grandfathering Justified In Proposed Legislation

The historic use of grandfathering to protect those who were significantly affected by major superannuation rule changes, justifies its use in the proposed legislation.

Unfair and unreasonable

It is manifestly unfair and unreasonable to individuals who now, or will, rely on their superannuation savings for a retirement income under the then existing rules to make new rules which significantly affects them.

Therefore, appropriate grandfathering provisions need to be put in place to protect all significantly affected Australians.

Undermines trust

A Government’s right to govern is based upon the bond of trust between the people and their Government. Trust is the currency of Government. When, by a breach of trust, a Government debases that currency, the people lose confidence in their Government.

And so it is when Governments make major rule changes to an existing superannuation system. If they do not provide appropriate grandfathering provisions, Australians will lose faith in the superannuation system.

Those who will lose faith include the millions of Australians who are effectively compelled by the Australian Compulsory Superannuation Scheme to place their trust in the Government.

Furthermore, those who are yet to enter the superannuation system need to be assured, before they commit their savings to the superannuation system, that they can trust Governments to always treat them fairly and reasonably.

Superannuation – A Long Term Savings Plan Under Threat

Australians’ investment in superannuation is an almost life-long savings plan. It starts from the first superannuation contribution and lasts until the final pension payment.

In 1991, the Superannuation Guarantee levy was imposed. Australian’s participation in superannuation has accelerated from about 30% of employed persons to over 90% today.

Since the 1980s, Australia’s accumulated superannuation savings have risen from an amount equivalent to about 30% of GDP to about 120% of GDP today.

Over time, if more Australians contribute more super funds for longer proportions of their working lives at higher rates, average superannuation balances at retirement should continue to rise.

However, that growth is threatened by the Coalition’s superannuation legislation and because appropriate grandfathering provisions are not included in that legislation.

Opposition’s superannuation policies which should be grandfathered

Labor dumped their election superannuation policies and made an increased tax grab on 26 June 2016 despite saying, just over a year ago, “If elected, these are the final and only changes Labor will make to the tax treatment of superannuation”. Labor has not announced any replacement superannuation policies.

Budget 2016 superannuation proposals which should be grandfathered

As from 15 September 2016, the current Budget 2016 superannuation proposals include:

  • the introduction of a transfer balance cap of $1.6 million on amounts into the tax-free retirement (pension) phase from 1 July 2017.
  • after commencement, if individuals already in retirement as at 1 July 2017 retain balances in excess of the $1.6 million cap and do not transfer the excess out of the retirement phase account, a similar tax treatment that applies to excess non-concessional contributions will be applied to that excess at the top marginal rate of tax (ie 49% for the 2014 to 2016 income years);
  • introduction of commensurate measures to defined benefit arrangements;
  • removal of the tax exemption on earnings which support Transition to Retirement Income (pension) streams.

On 15 September 2016 the Government abandoned the following proposal:

  • establishment from 3 May 2016 of a life-time non-concessional contributions cap of $500,000 on all non-concessional contributions made since 1 July 2007.

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