I think the Fairfax editors must be permanently out to lunch when such complete rubbish is published. (And those industry super funds must have such fun briefing eager young journalists in their campaign against self-managed superannuation)
Here’s the piece in question – at least it was not put on page one as has been the case. Perhaps the editors got back from lunch just in time. Of course, when she starts quoting the research arm of the Greens, The Australia Institute, you know to stop reading.
The cost to the budget of giving tax breaks to self-managed super funds has continued to soar, putting fresh pressure on the Abbott government to reconsider its refusal to examine generous incentives for wealthy retirees.
Australian Taxation Office data, analysed by Fairfax Media, shows 300,000 self-managed superannuation funds (SMSFs) legally eliminated or reduced their tax bills in 2012-13, the most recent year for which data is available.
I know 65-year-olds think they are special and deserve a free run through the tax system … but they have no argument on principle, it’s an argument based on selfishness.
John DaleyBut while the number of funds claiming tax breaks has remained virtually the same, the dollar value of tax breaks is increasing, thereby reducing government revenue.
The two major tax breaks offered to about half a million SMSFs come through franking credits – which allow the funds to avoid paying tax on the dividends they get from listed companies – and exemptions for taxpayers whose super funds are funding their pension income.
The combination of the two tax breaks allows some wealthy retirees to reduce their tax bills to zero.
The ATO statistics show the dollar value of franking credits rose to $2.68 billion, an 8.2 per cent jump compared to the previous year.
In addition, there were almost 450,000 funds that generated gross taxable income of $25.8 billion. About $16.8 billion of that was entirely exempt from income tax because the funds were in the pension phase, which doesn’t incur income tax. This is a 10.6 per cent rise from the previous year.
The head of the government’s own financial systems inquiry, ex-Commonwealth Bank chief executive David Murray, has repeatedly said that superannuation concessions are inequitable and should be examined in the tax white paper.
Mr Murray has also noted in his report to government that there’s less justification for the dividend imputation system (which allows franking credits to be dished out) than in the past.
Franking credits are granted to shareholders because the company in which they own a share has already paid its tax liabilities, based on the 30 per cent corporate tax rate. That rate is often less than the top personal marginal tax rate.
While larger funds are also entitled to the exact same tax breaks, 99 per cent of all Australian super funds are SMSFs and they hold 30 per cent of the $1.9 trillion of total super industry assets. There are currently one million SMSF members.
Treasurer Joe Hockey’s tax white paper launched earlier this year, asked the question: “How appropriate are the tax arrangements for superannuation in terms of their fairness and complexity? How could they be improved?”
But Mr Hockey and Prime Minister Tony Abbott have ruled out making any changes to superannuation in their first term.
Shadow treasurer Chris Bowen said the current system of super tax concessions was “unsustainable and unfair”.
“In four years time the cost to the federal budget of super tax concessions will outstrip the cost of the age pension,” Mr Bowen said.
The Australia Institute’s modelling on superannuation tax concessions shows that the benefits of super tax concessions are mainly accruing to the top 10 per cent of households, who claim 41 per cent of the tax concessions, worth $12.2 billion.
The institute’s executive director Richard Denniss said the government needs to reconsider its position.
“The only reason that these loopholes in the tax system exist is that average Australians who never will use them, have no understanding of how lucrative they are,” Mr Denniss said.
“The whole system is a mess – it’s neither simple nor fair. And increasingly, it doesn’t collect much revenue for us.”
Australia and New Zealand are now the only two developed countries that have full imputation of dividends. ”This should be stopped tomorrow,” Mr Denniss said. “And income from superannuation should be taxed at your full marginal rate.”
Grattan Institute chief executive John Daley said the super tax breaks were “poorly targeted concessions that most provide benefits to those who need them least”. He said given Mr Murray and treasury secretary John Fraser have both cited merits in looking at superannuation tax concessions, the government should now use the tax white paper as an opportunity to do so.
Mr Daley said it would be better to tax the earnings of superannuation funds in pension phase at 15 per cent, rather than try to get rid of franking credits.
“There’s no reason you should pay no tax once you’re in pension phase,” Mr Daley said. ”Contrary to what the Liberal Party say, we would not be taxing peoples’ money. We’d be taxing the earnings on it. I know 65-year-olds think they are special and deserve a free run through the tax system … but they have no argument on principle; it’s an argument based on selfishness.” Continue reading