Hysterical article in the AFR this morning about Super and tax rorts:
A lot of these strategies involve “shuffling money” in and out of super funds to trigger a lower tax rate, or glean tax deductions on personal expenses.
The most popular is 55-year-old executives who start drawing a tax free pension from their fund, while tipping their entire salary into it and effectively reducing their taxable income from 46.5 per cent to around 15 per cent.
Another common strategy is to put money into super to get a tax deduction, then pull the money straight back out tax free.
Well yes, I’m not surprised. That is what the 2006 Howard-Costello Super reforms were designed to facilitate. This is what I wrote in the AFR at the time:
To maximise the value of super, the government should have abolished the contributions tax. The government, however, is not looking forward 40 years – it’s looking at the here and now.
A large number of individuals have probably not saved enough for their retirement and so need to keep working. This policy waives taxation on their forced savings. Of course, people should be allowed to work for as long as they are willing and able. By abolishing tax on lump sums, people will also be able to party at the taxpayers’ expense. This component of the policy should be dropped quickly, and quietly. This policy is a short-term fix. In fairness, it is the best short-term fix, but one that will be frequently revisited.
Okay – so the 2006 reforms haven’t been revisted – but they should be. They do create massive fiscal problems in the future.