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Government does help rich to get richer

Letter to editor of AFR. not published

Dear Sir/Madam.

The article “Government does not help the rich get richer” AFR 18’th Aug.2010 page 33 should not go unchallenged.

Take retiree: 1)
Worked for 45 years and paid taxes, but did not accumulate enough assets to be completely independent of the age-pension. For every dollar of extra income for him and his wife above $6,500, the couple loses $0.50 of age pension, and if their income exceeds $45,000 per annum, the couple will pay tax of $0.315 in the dollar including medicare levy, leaving them with an income of $0.185 from every dollar extra income. For the defined benefit income a 10% tax-offset applies if paid from an Australian super fund, but not if the income comes from an overseas fund.

Retiree 2)
Has accumulated assets of $1.5million and the assets are in a so-called taxed Self Managed Super Fund. To be very conservative, the assets are in a term deposit earning 7.0% income of $122,500 per annum and even if the retiree is single, he/she will not pay a cent of tax.
Now if the assets are in fully franked shares, like banks and return $100,000 worth of franked dividends, he/she will again pay no tax on the dividend, and the government will send him/her a cheque of $30,000 for the franking credits.

Retiree 3)

Is an ex-politician or highly paid public servant, in receipt of a defined benefit pension of $100,000, on which he/she will have to pay tax, but he/she gets a 10% tax offset, which equals %10,000 after reaching retirement age, but before retiring, the public servant can establish a SMSF and contribute into it extra with tax concessions if the $25,000 total for under fifty and $50,000, if over fifty is not exceeded and in addition he/she can contribute $150,000 from after tax income, and the earnings from the SMSF will only attract 15% tax, and when the person reaches the age of 60 even the income will be completely tax-free from the SMSF.

What Ken Henry should have recommended is, abolish all tax concessions for super, abolish the means test for the age pension so that even millionaires get the full pension, but then the retirees should pay the same tax as do the workers.

The Australian compulsory super is a ticking time-bomb and one day it will financially explode.

Is there anyone prepared to go into bat for the so-called battlers.

Hawil

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