Hedge Clippings | 24 February 2023
Beware of the Politician with his hand in your pocket...
The government set the proverbial cat among the pigeons this week with the "floating" of ideas to change the superannuation system - with a particular emphasis on the top end of town, and it seems those fortunate - or smart enough - to have a super balance of $3 million or more. Depending on where you sit - or maybe that should be where your super balance sits - this is either irrelevant or a clear breach of then shadow treasurer Jim Chalmers' statement on the ABC in March last year that "Australians shouldn't expect major changes to superannuation if the government changes hands."
Chalmers is on electorally safe ground for two reasons: Firstly, it's a fair bet that Labor will stay in office for at least one term after the present one, and secondly, he quotes the statistic that the average balance in super is about $150,000. Of course, this is misleading, presumably deliberately, so as not to alienate the "average" voter. The average balance includes those who have only recently joined the workforce - and by recently that would include those on "average" wages who've been working for the past 20 years. According to AMP, you'll need to be closer to 50 than 40 to have a super balance of $150,000 while the average super balance of a 65-70 year old male is $414,380, and $370,042 for a female.
Unfortunately, AFSA calculates that a comfortable retirement lifestyle requires a balance of $640,000, so the average is not going to be enough for the average retiree. Super is great, but for the majority is not enough.
Chalmers, Albanese, and Assistant Treasurer Stephen Jones have all hit the airwaves to re-iterate that any changes are fairly and squarely aimed at the top end of town, and unlikely to resonate elsewhere - although they should. For far too long superannuation has been tweaked by both sides of politics to the extent that it is incomprehensible to the average (there's that word again) worker. Successive governments have used a combination of carrot (tax incentives for voluntary contributions) and stick (legislation to compel employers to pay or deduct from wages) to reduce the reliance on welfare in retirement. Both have been successful but only up to a point.
The stick has helped, but not enough to provide a comfortable retirement to the average retiree. Meanwhile, the carrot has, for those in the treasurer's sights, been overly successful, such that he wants his share of their success! You can't offer a carrot, then take a stick to those who make the most of it. You know what they say about the dangers of having a politician's hand in your pocket...
While it seems the devil will be in the detail, hints are that the aim is to limit the amount one can have in super to $3 million. This seems patently unworkable to a simple mind such as ours. More logical would be to set a reasonable tax rate for income over a certain level (excluding capital withdrawal) from super in retirement. That won't be popular either, because once a tax has been introduced it will only be a matter of time before it is increased.
Chalmers is trying to avoid the stuff-up Bill Shorten made suggesting changes to franking credits before his 2019 election loss. His other target might be negative gearing on property, but too many pollies have second properties (Albo included) so that's not likely as too many votes would evaporate. Taxing the super of the rich (and the not so rich) is a much safer option.
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