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E-mail correspondence with SA Superannuants committee members.

September 18th, 2012 Leave a comment Go to comments

Hi Ray and Peter.
Here is my response to Ray’s e-mail.
Regards Willi.

Hello Willi,
Peter Fleming has forwarded me an e-mail he got from you on 6 September.
I have read something written by Richard Dennis that seems to match your e-mail. It says that people with high incomes have been able to reduce their tax to a huge extent by making salary sacrifice superannuation contributions. In this way a very big percentage of the tax savings being made through the superannuation system is flowing to a small percentage of the population (those with high incomes).
The article accused the government of cowardice for allowing this but the current Government has put a brake on this with its cap of $25,000 p.a. on concessional contributions. If the current Government holds the line on this, and a replacement government does so as well, then no-one will be able to amass multi-million dollar superannuation assets through contributions that are taxed at only 15%. I hope this turns out to be the case but I won’t be betting on it.

How many people can afford to salary sacrifice $25,000 into super?
What about the $150,000 a person with the assets can put into super every year, the earnings on this only attracts 15% while in accumulation stage.

In my opinion the best thing that ever happened to working people in Australia was the superannuation guarantee. Before the superannuation guarantee most people with incomes around or below the average reached retirement with very low levels of private financial resources and lived on a full age pension plus just a bit more. There are now many more people earning modest incomes during their working lives who are getting to retirement with private financial resources that see them being better off than before, thanks largely to the superannuation guarantee.

You mean they are forced to save a little bit, yet if anyone is prudent on low income and paying off a mortgage the money would be more beneficial to them, and the workers had to forfeit wage rises in favour of super.

Your e-mail suggests that the Association ought to be critical of the three pillar policy. Speaking only for myself, and not necessarily for the committee, I say this is a good policy and all it needs is for limits to apply to the level of private savings a person can accumulate through concessionally- taxed contributions. So I would say to any government – continue with the three pillar policy but set limits on the tax advantage it provides (the current government is trying to do this). If people are not satisfied with these limits and want to put away more super I would say make them do it through contributions made from after-tax income.

I,am sure that the government is well aware of the view ACPSRO and its affiliated Associations have on the whole social system, and many other organizations like COTA, ACOSS,etc. act in a similar manner, so I,am wasting my time to fight the government on this issue.
I assume your dissatisfaction with the three pillar policy is based mainly on the fact that the age pension pillar is means-tested. In my opinion a means-tested age pension is sound policy just as a policy that restricts superannuation tax breaks for high income people is sound policy. The severity of the means testing for the age pension and the severity of taxation of superannuation contributions are things that people can argue about, in good faith, without one side being completely right and the other being completely wrong. It seems reasonable to me for people with low private means(income) to get more age pension and pay less tax than people with high private means (incomes). I think this makes for a fair and humane society.

Recently the Chief Justice retired from office on a super of $260,000 per annum, for which he will get a 10% tax-offset, which is $26,000, almost as much as a pensioner couple gets a year, besides he could have half a million or more in a SMSF, whose earnings would be completely tax free; now would he be better off if he received the full age pension, but loose all the tax concessions? And there would be many in the same financial position.When I think about how retirement income policy affects people getting Super SA pensions I always remember that our personal contributions would, at best, have provided about one quarter of the pension. So a $30,000 p.a. pension, without the employer contribution, would be a $7500 p.a. pension. A person, or a couple, with $7500 private income and a full age pension would be much worse off than they are with the $30,000 Super SA pension and a means-tested part age pension. On this basis it seems to me that the three pillar policy works well for most Super SA people including those with average and smaller pensions.

Here is an extract from a select committee, of which Penny Wong was a member:
As mentioned in the “Select Committee on Superannuation” report of 2003, Australia is the only OECD country which has a means test for the basic pension, and it is mean.
Cheers,
Ray

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