Archive for January, 2013

Treatment of three different retirees

January 11th, 2013 No comments

This is how different groups of current retirees are treated.

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,mostly with huge tax concessions, 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.
Retiree’s 2) are well represented by the media and the super industry and retiree’s 3) are represented by the government and ironically by the leadership of various retiree Associated, like ACPSRO and its affiliated Associations, but who represents retiree’s 1) who are robbed of a decent standard of living in retirement by the means-test of the age pension
What is the fairest solution; scrap the mean test of the age pension and scrap all tax concessions for super.

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ACPSRO on means test of age pension

January 1st, 2013 No comments

ACPSRO Australian Council of Public Sector Retiree Organisation.
On means-test of the age-pension
The means test of the age pension keeps, and will keep the retirees dependent on some age pension, and that is some 70% of retirees, close to poverty line, while retirees with incomes well above the age-pension entitlements enjoy tax concessions in excess of the age pension, if their income comes from a so-called taxed super fund, which accumulated the assets with huge tax concessions.
Tax-free super for over-60s remains in place
By Trish Power on December 16, 2012
Filed under: Accessing super, Retirement planning, Super & tax
Although there has been a lot of scaremongering in the media about the federal government clawing back promised tax concessions from superannuation fund members, this has not occurred. Tax-free super for over-60s remains in place – thank goodness!
Tax-free super has always been a feature of Australia’s retirement system but, before July 2007, you usually had to hire advisers and get involved in creative gymnastics to make it happen — not unlike what you still have to do to secure tax-free income when you retire before the age of 60. And before July 2007, how much super you could receive at concessional rates was limited.
Is this a fair social system? The majority of the retirees are kept as poor as possible, while rich retirees virtually swim in money.
The tax-free super was introduced by John Howard in 2007, but Trish Power writes that with financial know-how, it was even available then.
With the Labour government, one would think that it would rectify this unfair anomaly, but no such thing; because all the politicians and ex-politicians benefit from the tax-free super.
When Howard introduced the tax-free super for over sixties, if the income came from a taxed fund, he had to give the recipients of defined benefit super, also some benefit, which came in the form of the 10% tax-offset for their super income, but this was denied to recipients of super from overseas funds. At the same time, the means-test for the age pension was relaxed, by reducing the age pension for part-pensioners by only $0.40 of every dollar extra income instead of a reduction $0.50; but this only lasted for a short time, because when the government increased the pension for single pensioners, it reversed the previous change, by bringing the reduction for part-pensioner back to $0.50 in the dollar, thereby the increase of the pension for single pensioners was paid by the part-pensioner.
How can the government get away with this unfair treatment of part-pensioners by using the ‘meanest’ means test of the age pension, for which the majority of the pensioners paid taxes for at times 45 years or plus of their lives?
1. There are a number of Associations, mostly affiliated to ACPSRO
(Australian Council of Public Sector Retirees Association), of which SCOA, would probably be the largest, then the SA Superannuants, Defence Force Welfare Association, etc.
The majority of the members of these Associations are on super of $25-30k and are dependent on a part Centrelink pension, yet the leadership of these Associations did nothing when the tax-free super was introduced, or the reversal to the higher means test took place.
If these Associations would urge their members to vote against politicians who oppose the abolition of the means test of the age pension, the politicians would soon change their mind and start listening to their voters. The best example is the powerful American Rifle Association.
As long as the leadership of these Associations remain silent on this issues, they are tacitly approving the policies of the government and not truly representing the welfare of the majority of their members, and that is just not fair.

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