Never get between a rich person and a tax rort.
Today, the self-managed superannuation fund (SMSF) industry – which typically represents Australia’s wealthiest retirees – are the latest pack of super rent-seekers to decry the Coalition’s and Labor’s proposed “retrospective” reforms to superannuation. From The Australian:
Morningstar’s head of equities, Peter Warnes, says self-funded retirees are “at boiling point” over the government’s proposed budget superannuation changes, describing the government’s proposals as worse than “Ned Kelly”.
Writing in his latest weekly newsletter to clients, Mr Warnes said the government could be “headed to the gallows” if it did not make changes to its budget proposals.
“The blood of self-funded retirees and many other superannuants reached boiling point in the aftermath of the budget,” Mr Warnes said…
“After carefully planning their retirement according to government legislation, self-funded retirees have been bushwhacked by an un-Australian bushranger.
“Retrospectively, Ned Kelly was not this brazen and unless there are meaningful changes the government could be headed for the gallows”…
While the proposals favour those on low incomes, the changes for those who have substantial savings in superannuation has angered many people who would normally be Coalition voters.
Geez this is getting tiring.
First, the changes are not retrospective since the changes would apply only to future super earnings, not income earned in the past.
It’s no different to when generous changes were made to superannuation by the Howard Government, which significantly lowered taxes on superannuation earnings for retirees. Under those reforms, those already with accumulated superannuation balances were allowed to enjoy the new (lower) tax regime. And yet we heard no complaints about “retrospectivity” then.
It’s also no difference to the Coalition’s proposed changes to family tax benefits, which would impact existing families as well as prospective families. And yet there are no howls about “retrospectivity”? Surely those that planned having a family around the current tax structure should be crying like babies too at being “bushwhacked by an un-Australian bushranger”?
What makes the SMSF’s lobbying so galling is that the resultant tax increases would amount to mere ‘pocket change’ for the rich.
As illustrated yesterday, consider the following hypothetical example showing the modest impact of the Coalition’s reforms:
- Sam and Jenny, a retired Melbourne couple, fully own a $1.5 million home in Melbourne’s East.
- They have $2.6 million in superannuation, which delivers on average $130,000 in income (5% return) per year, which is currently untaxed.
Under the Turnbull Government’s policy, Sam and Jenny would have to move $1 million of their superannuation savings out of their tax free retirement account into an accumulation account, which would be subject to a 15% earnings tax (the same as applies to under-60s).
Still assuming a 5% return, Sam and Jenny would now be required to pay Just $7,500 tax ($1 million x 5% x 15%) on $130,000 in income, or only 6% total tax. And this assumes no clever tax planning to avoid paying tax, such as super-splitting.
By way of comparison, somebody earning $130,000 via wages would be required to pay $36,000 plus the Medicare Levy.
It’s hard to feel sorry for someone with an expensive home and a high income being required to contribute a small amount of tax in their final years.
To the super rent-seeker, it seems budget prudence is something that only applies when it affects someone else, most notably the younger generations or the poor.
