Peter Costello has a good article in the AFR that worth a read. Here is a taste
It [simplified superannuation with a contribution cap] was implemented in 2007 with bipartisan support. Importantly, the revenue implications were thoroughly examined by industry, the opposition and signed off by Treasury – in writing and in oral submissions before parliamentary committees – as thoroughly sustainable. Nothing has changed.
But Labor unleashed a huge increase in spending on school halls and pink batts and the like. The budget is still in deficit and some are suggesting that superannuation tax concessions are now a problem. So let us be clear. Labor’s problem is not superannuation. It is spending.
It has already been whittling away the contribution rules. In 2009 it cut the concessional amount that a person could put into superannuation from $50,000 to $25,000. In 2010, as part of the [RSPT] it said it would “share the benefits of the mining boom” and reinstate the $50,000 concessional cap but only for over-50s – and from 1 July 2012.
In 2011 it said it would delay indexation of the cap until 2014. Then in 2012, it said the $50,000 cap would be delayed a further two years – until 1 July 2014.
The contribution limit has been cut, partially reinstated, reduced by inflation and now delayed. It has been changed every year for the last four years. And it yet to take effect.
There are still two more budgets and one election before the (current) mooted start date!
These announcements were not directed at improving the taxation of superannuation. They were desperate attempts to get more money into the 2012-13 financial year.
…
In 1996 I introduced a surcharge on superannuation for higher-income earners. It led to enormous complexity and compliance costs. So in 2005 I abolished it. Labor opposed its introduction. Then they opposed its abolition! Since then they have reintroduced it.
‘Labor opposed its introduction. Then they opposed its abolition!’
So Labor OPPOSED the governments policies in opposition? That sounds a bit… negative doesn’t it. An opposition, opposing. Ha ha.
Turtle of WA
7 Feb 13 at 7:30 pm
“It [simplified superannuation with a contribution cap] was implemented in 2007 with bipartisan support.”
I call BS. Simple in theory, like a lot of Costello’s thinking, terrible in practice. The bureaucracy with concessional and non-concessional contribution caps is excessive and seemingly random in their application. Penalties can be draconionian if you make simple inadvertent mistakes. RBL’s were never that dangerous and were relatively simple to manage.
The opposition would do well to distance itself from one of the biggest super mistakes since 1985 (the biggest was taxing super on contributions).
Scott
7 Feb 13 at 8:01 pm
I disagree Scott.
The simplications brought in in 2007 were inevitable. RBLs are only relevant to defined benefit funds, and with accumulations funds being the only funds that should exist, RBLs had to go.
I don’t see why the concessional versus non-concessional is so difficult. If they don’t keep changing the rules every second year then they should present little problem. The only significant problems we have experienced relate to the $1m cap from 2006/07. Any subsequent problems have been minor.
Most super contributions are deductible at the 45% rate, the rest at the 30% rate. Until these rates are reduced the contributions tax at 15% is irrelevant. This tax is mostly eliminated by using franking credits on dividends.
eb
7 Feb 13 at 9:22 pm
Super should have been tax free to put in, tax free on what it earned, and taxed at marginal rates as it came out. But I suspect it is too late to change it now.
Tim
7 Feb 13 at 9:26 pm
Scott says
“The opposition would do well to distance itself from one of the biggest super mistakes since 1985 (the biggest was taxing super on contributions).”
I agree and the government (and Caolition)) should just back away very slowly from the increasing nanny statism over minding everyone else’s long term saving habits and business, for what government can take increasing cuts from.
Super – Its a freaking con and the GFC made everyone very well aware of tha as did the law changes saying when you can get your hands onb your own savings.
yeah right – it was such a sensible idea and now that they have raised the emplyer contribution rate % people will not get a pay rise for years after its in. Its a bloody wage cut – another 3% of the growth of the economy is what it is.
A cut taken from everyones wages and income in the guise of “we big NANNY, know best how you can save”. BS. They just want a piece of my labour income by any other name. Its a tax in disguise (theft actually) and its obsecene.
I dont care what Costellos says. Someone needs to arc up about this super game.
Aliice
7 Feb 13 at 10:26 pm
eb (@9.22pm) – I am interested to know why you say “RBLs are only relevant to defined benefit funds, and with accumulations funds being the only funds that should exist, RBLs had to go.”
My read on superannuation is that is largely a tax-arbitraged, income shift for most people. Most people trade off a 30% marginal income tax rate for a 15% contribution and earnings rate within super, the trade-off being it is locked up until 55 or 60 years of age. The old RBL limits prevented any massive rorting of super while allowing people significant flexibility about when and how much they contributed.
I’ve always thought that as super is largely shifted income it should be treated as tim (@9.26pm) sets out – just time shifted ordinary income taxed at the usual marginal rates.
Costello’s changes to make it tax free after age 60 was just another of Howard’s vote buying bribes.
H B Bear
8 Feb 13 at 12:19 am
RBLs were set up to limit benefits under the defined benefits super system. However, under accumulation funds you are limited by how much is in the fund, and as it has all been appropriately taxed already, there is no need to put any monetary limits on withdrawals.
I agree that super is time shifted income. Whether it should be taxed up front and then tax free on withdrawal, or the other way around as tim suggested, is open to discussion.
eb
8 Feb 13 at 8:52 am
So I borrow mortgage money at aprox 7%.
I get a return on my own money (which could have paid off my mortgage by now.) of aprox 3%.
What a fucking great idea. Not.
Winston SMITH
8 Feb 13 at 10:48 am