Guest Post: John Adams – Will 2016 see the enactment of Super for HELP?

In February 2015, after putting forward a pre-budget submission to the Commonwealth Treasury for the 2015-16 budget, the national media covered my proposal and call for the Federal Government to introduce a voluntary opt-in scheme whereby individuals with a Higher Education Loan Program (HELP) debt are able to draw down on their superannuation capital to an amount of their choosing to retire their HELP debt. This scheme is what I now refer to as ‘Super for HELP’.

My original February 2015 submission to Treasury can be found here.

The media articles can be found here:

The Australian: Budget Call to Tap Super to Pay Off University Debt

AFR: Bid to broach super to pay off university debt

SMH: Call for students to use their superannuation to pay down help debts

Note that Super for HELP is not ‘Super for Housing’ (which was floated by former Treasurer Joe Hockey in March 2015, although according to one Minister I was apparently the inspiration for his thought bubble). While both proposals are early release of superannuation schemes, the impact to the Commonwealth budget and the broader economy are very different and therefore each proposal should considered on their separate merits.

(For the record, I do not support for Super for Housing as it will cost the Commonwealth Budget money and potentially inflate an already overheated housing market worsening housing affordability for those people struggling the most).

There are many arguments that explain why ‘Super for HELP’ is good public policy. The main arguments is that ‘Super for HELP’ delivers a simultaneous public-private benefit for both the Commonwealth and individual participants. Through this scheme, the Commonwealth is able to receive cash upfront from the repayment of HELP loans (which is an account receivable on the Commonwealth Government’s Balance Sheet) which can be used to pay down public sector debt or reduce the size of the deficit. Moreover, individuals, particularly in their late 20s and early 30s, who experience major life events such as cohabitation (i.e. getting married), household formation (i.e. purchasing real estate) and child rearing are able to obtain a significant increase in their disposable income at a time when they need the cash the most.

The rapid growth in HELP is also becoming an emerging policy problem that policy makers need to get their heads around. According to this year’s Commonwealth Budget Papers, the balance of HELP is expected to increase by more than 387% on 2007-08 levels to $62.9 billion by 2018-19. This is largely due to the Gillard demand driven reforms to higher education and the expansion of HELP into vocational education. What this means is that in future years, there will be a much larger cohort of individuals who will be experiencing major life events and will be saddled with relative large HELP debts.

Without major structural changes to monetary policy, this means that future Governments will be dealing with a larger number of Australians struggling with cost of living pressures at the same time as having to repay their HELP debt. This represents a potentially diabolical political mix for future Governments that don’t have any easy policy solutions with little political downside.

Therefore, it stands to reason that policy makers should seek to address this issue now before it becomes an acute public policy problem.

Note that currently most people within the late 20s/early 30s demographic are not actually reducing their consumption when they become cash constrained during these major life events. Rather many Australians are taken up large volumes of personal debt to meet their rising costs. According to the Reserve Bank of Australia’s own website, household debt as a proportion of disposable income is now exceeding 180%. From my understanding, this figure is at an all-time in the history of the Australian economy and imposes significant macroeconomic risks to the Australian economy (which some have likened to the Australian economy being in a pre-depressionary state – aka 1888 or 1928).

As noted by Senator Chris Back in an adjournment speech to the Senate on 2 December 2015 (available on Hansard) in which the Senator again publicly endorsed Super for HELP as policy which the Government and Parliament should enact, Senator Back and I have been working with the Parliamentary Budget Office (PBO) since March examining the implications of the Super for HELP policy under different scheme design models.

From the design models examined by the PBO, it would appear that the most attractive and palatable design scheme to policy makers is where individual participants are able to draw down on their superannuation capital to repay their HELP debt but are required to repay that capital back as well as earnings which would have been generated otherwise (i.e. the opportunity cost) from the time of participation up until preservation age (which is currently age 60).

Under this model, individual participants would be no worse off at preservation age than under current policy arrangements.

From my extensive consultations among policy makers in Canberra, the biggest underlying policy concern is to not implement structural reform which may result in individuals becoming a greater burden on the age pension system in the decades to come. Unfortunately, the belief that individual Australians can manage their financial affairs prudently is not high in the halls of federal power.

Discussions with policy makers and Treasury officials to date have been fruitful and productive. Many people who I have spoken are open to considering the virtues of the Super for HELP scheme under the pay back design scheme. As one Treasury official said to me, Super for HELP is ‘not bad [public] policy’ and that there legitimate reasons why a Government would enact this version of the Super for HELP scheme.

One question which came up several times in discussions and is worth noting is whether Super for HELP establishes a precedent for other interested parties to call on the policy makers to open up superannuation for other purposes such as housing. My position has consistently been that the litmus test for introducing an early release of superannuation scheme is the net impact on the Commonwealth budget, particularly given the state of the Commonwealth’s debt and deficit position. This is why Super for HELP is an attractive option for fiscally conservative policy makers whereas Super for Housing is not.

Using this litmus test, for those who want access to their own money or who believe that superannuation should be opened up to individual choice, Super for HELP is the only game in town. The current political reality of our times is that any policy proposals that are put forward to Government which will cost the Commonwealth money will struggle to gain traction.

As the policy & costing task has largely been done, the road forward on the super reform journey will be largely political in getting members of parliament to embrace Super for HELP as reform in 2016.

For those who read my previous oped in the Daily Telegraph from 30 November 2015 as mentioned by Sinclair on this blog, the political calculus for the Government in 2016 is not necessarily just winning re-election in the House of Representatives but it must be to strengthen their position in the Senate. Of the 40 senators up for re-election at the next election, 18 of those senators are from the Coalition. The Government’s strategic political task is to hold all 18 senators and pick up additional senators. To do so, the Government needs a political narrative enforced by a policy program which will have wild appeal across the political spectrum encouraging people to vote Coalition for both houses of Parliament at the next election.

From the feedback I have received to date, I believe that Super for HELP will resonate to a large group of Australians from the far left of the political spectrum to the far right within this late 20s/early 30s demographic. So whether it is the Coalition or other political parties, Super for HELP in my view represents good politics as well as good policy in 2016.

While I am not at liberty to release the PBO numbers as of yet, what I can say is that with very conservative assumptions regarding the take up rate of eligible individuals, Super for HELP has been shown to deliver an increase in disposable income multiple times larger than the repeal of the carbon tax and would deliver significant revenue for the Commonwealth over the forward estimates.

With the state of Australia’s debt and deficit situation as spelt out by the recent MYEFO statement released by the Treasurer, the Government has very few budgetary saving options which will lead to an increase in political capital or at the very least be political neutral.

As a member of the Canberra Press Gallery agreed with me in the past few days, Super for HELP represents a once in a generation to open-up access  to superannuation for working people on a sound public policy basis. Fail here and compulsory superannuation in its current structural form will continue for decades to come.

The next 6-12 weeks will be critical as to whether historic reform to superannuation can be achieved in the context of the 2016-17 Commonwealth Budget. If you have an interest in learning more about the policy and/or helping with making the case to Government and Federal Parliamentarians, please feel free to write to me.

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45 Responses to Guest Post: John Adams – Will 2016 see the enactment of Super for HELP?

  1. Hydra

    Or we could just make superannuation optional.

  2. Kool Aid Kid

    Compulsory super is a scam. It should be abolished. Then people can reduce debt of all kinds and future debt avoided. The very last thing we need is more policy based on compulsion in people’s finances. And by the way your assertion that it’s good to reduce hecs but not mortgage debt is the sort of thinking that gets us all into the hands of meddlers and con artists. The real issue with home prices is whether the cost of debt fully reflects the long term cost of its financing. We won’t know that until banks face a sustained change in global pricing of oz bank funding.

  3. Zyconoclast

    As a member of the Canberra Press Gallery agreed with me in the past few days, Super for HELP represents a once in a generation to open-up access to superannuation for working people on a sound public policy basis. Fail here and compulsory superannuation in its current structural form will continue for decades to come

    I don’t know if the ideas suggested or associated maths is correct. It might be exactly as you describe.

    The paragraph I have highlighted reads like the advertising from a Persian carpet salesman/scam artist who is having the final closing down sale.
    “BUY IT NOW! Limited stock. If you don’t get it now, you will miss out.”

    If it is such a good idea, it will still be useful and valuable at the 2019 election. No need to rush it through in 2016. That is unless the main motivation is getting Maocolm elected as PM.

    If this goes ahead, I suspect the next thing will be a call to increase the compulsory super levy to make up for what is lost to pay off HELP.

  4. Super for housing could run on the same lines: yes, take your super to pay for your family home only, but then you will be means tested for the pension on the house you bought with that super.

    Or, take the super and agree to sell the family home once you become eligible for the pension.

  5. Interesting points to get students to pay down their education debt, which i tend to agree with especially for those faux degrees.

    What i think would be a useful approach is to end the worker having to sign on to a union superannuation fund due to an industrial instrument, change the governance of the funds and curtail the funds ability to advertise, sponsor or pursue pet projects without the express consent of the fund holders.

    Further to this make it less onerous for individuals to have a SMSF.

  6. .

    I don’t want to add my own suggestions in full because it might take away from the submission our guest author has made. Well done! Allowing people a higher income now makes more sense than forcing them into a lower income and to save for the future. If there is no HECS debt left you are on a lower tax rate. The policy makes sense on many levels.

    My own suggestion very briefly is that we ought to end compulsion in super, return to the CSP system for universities, privatise the unis as non profits and make most courses internship based, reduce taxes in total to make investment easier with better realised returns and to make simple investments such as term deposits, home ownership and long term share investing easier and better. We probably had a better policy mix in the 1960s.

  7. .

    Personally I have more of an issue with the legal right of unions to decide the fund of choice for workers under a particular employer or industry.

    Section 32 (6) of the SGA Act needs to be repealed.

  8. herodotus

    Your money will earn more in super than you’re being charged for the loan.

  9. Snoopy

    I don’t see the problem. Either stay under the income threshold for HELP repayments or move off shore. Upon your death the debt is cancelled.

  10. Wayneof Perth

    “From the design models examined by the PBO, it would appear that the most attractive and palatable design scheme to policy makers is where individual participants are able to draw down on their superannuation capital to repay their HELP debt but are required to repay that capital back as well as earnings which would have been generated otherwise (i.e. the opportunity cost) from the time of participation up until preservation age (which is currently age 60).”

    Am I missing something here? You ‘borrow’ from your Super to pay off HELP then pay back that borrowing PLUS lost earnings to the Super fund. So you have a lower tax rate but higher super contributions. Where are the higher super conts coming from?

    A free lunch?

  11. Joe

    Either stay under the income threshold for HELP repayments or move off shore.

    I don’t want to move off shore. I want the government to get out of my life.

  12. Snoopy

    I don’t want to move off shore. I want the government to get out of my life.

    PAYG uni fees is an option.

  13. What can they do ? Doesnt ALLsuper Belong to the Grubbermint? You would think so the statements some polliemuppets make. Now confiscation of all funds woukd solve all the problems caused by career political fools ,and keave plenty to give to the u.n.communist world grubbermint and increase pollies pay out when they retire at 45 ,sort of like Greeks.!

  14. zyconoclast

    Interesting points to get students to pay down their education debt, which I tend to agree with especially for those faux degrees.

    Faux degrees should cost twice as much as they do now. Hopefully this will reduce the number doing this type of degree. Using debt to study such things is a waste of taxpayers money. If you really want to do it, you still can.

  15. Tel

    Or we could just make superannuation optional.

    Compulsory “forced saving” is the inevitable flipside of the Keynesian crushing of voluntary saving.

    After destroying every incentive for individuals to save, the State then makes it compulsory for individuals to save, and of course also removes the choice from the individual as to what those savings may be used for. It’s important to see this as a job lot package. Don’t nibble away at the heads of the Hydra.

  16. a happy little debunker

    Robbing Peter to pay Paul – does not bode well for Peter!

  17. Compulsory superannuation is theft.

    Once you get that salient point understood everything else simplifies enormously.

    In general anything that enriches the kakistocracy is a bad idea.

  18. memoryvault

    Doesnt ALLsuper Belong to the Grubbermint?

    Apparently, according to somebody who posted a lengthy explanation here a month or so ago, yes.

    Now confiscation of all funds woukd solve all
    the problems caused by career political fools

    Which is why that is precisely what they intend to do.
    This year. Only it won’t be called “confiscation”.

  19. H B Bear

    Robbing Peter to pay Paul – does not bode well for Peter!

    Exactly – once the super genie is out of the bottle look how many other arms of government will want to get hold of it. Super is the last pile of OPM that is politically acceptable to raid as everyone thinks it isn’t going to happen to them.

    Same thing with the GST – as soon as the States and Cth think that they can get away with moving off 10% without spending a decade in Opposition watch it soar.

  20. MV sequestration? Re adjustment? Voluntary contibutionism ,( thanks ruddie) remporary removal ?
    Suppose there are heaps of Wankwords to describe it ,there is no shortage of lies and bullshit in politics .

  21. memoryvault

    MV sequestration? Re adjustment? Voluntary contibutionism

    Fred, the terms used in the “Government Response to the Murray Financial Review” were:

    The Government agrees to support the development of comprehensive income products for retirement and will facilitate trustees pre-selecting these products for members.

    Trustees’ pre-selection of such products will help guide members at retirement

    Comprehensive income products for retirement could improve outcomes for retirees, including through increased private retirement incomes, increased choice and better protection against longevity and other risks.

    it will provide a framework for important discussions Australia needs to have about fairness, adequacy and dignity in the superannuation system.

    So, everybody’s going to get an “Income Product” pre-selected for them by the trustees of their super, in accordance with guidelines set down by the government. Note that it is “income” not a “withdrawal”. Income is taxable, a withdrawal is not.

    The process will be “fair”, “adequate”, and “dignified”. One of the last things Joe Hockey did before being ousted was define “adequate” – 70% of average weekly wage. So, to be “dignified” everybody retiring has to get at least that. To be “fair” those whose super contributions are not enough will get topped up, and those who can draw down more will be taxed on it.

    Basically an OAP by any other name, but at a variable rate, and paid from super funds, rather than general revenue. Presumably other income replacement pensions (SPB, DSP) will follow. That frees up around $130 billion a year for pork-barreling tax cuts, paying down debt, infrastructure etc.

  22. 1234

    This is just a money go round. A solution in search of a problem. Those in their 20s and 30s have low super balances anyway. The litmus test should not be the net impact on the budget (you are only bringing forward payments in any case) it should be student/citizen focused – how to smooth income and debt over a life time. In the total scheme of things, impact on the budget would be minimal in any case. There is also considerable risk associated with paying in capital and earnings foregone at a later date and I can see more special pleading further down the track as the real dollar cost of paying that back become evidemt. Also, how would you ensure those additional payments were in fact made? How about simply allowing the debt repayment to be deferred until 50/55? The whole proposal reeks of short termisn. I am not surprised that a liberal senator from WA supports this – the new white shoe brigade.

  23. johanna

    Leaving aside the merits of this particular proposal, the real problem is that you are not required to pay back a penny of your HELP debt until your income reaches an indexed threshhold, currently around $55k a year.

    How people doing the vocational courses being advertised on TV these days (e.g. beauticians, dog groomers, etc) will ever pay back any of it is unclear. What’s more, people with junk degrees in gender studies and the like are in the same boat. Women with kids who work part time don’t pay anything back either.

    But everyone who works at all pays something into super. Why would they want to raid the piggy bank for a debt that they otherwise wouldn’t have to pay?

  24. mundi

    The increase in the repayment limit to $55,000 is getting out of hand. Its needs to be lowered, even if its just 0.5% or 1% rate.

    I remember when I finally paid mine off and what a huge difference it made, I think I was paying 7%.

    Of course if it really does make such a big difference, why not allow people to use super to avoid income tax? Whats the difference?

  25. .

    How about simply allowing the debt repayment to be deferred until 50/55? The whole proposal reeks of short termisn.

    You’ve got to be kidding.

    I am not surprised that a liberal senator from WA supports this – the new white shoe brigade.

    The same could be said about super and the ALP – super is simply a vehicle to give the unions slush funds with taxpayer’s money. Look at who the “industry super funds” employ for IT, consultancies etc.

  26. Tel

    Leaving aside the merits of this particular proposal, the real problem is that you are not required to pay back a penny of your HELP debt until your income reaches an indexed threshhold, currently around $55k a year.

    I don’t have such a big problem with that, because after all the whole reason to get an education is to increase your income. What I do have a problem with is that the guy lending does not respond to the obvious incentive here, because it’s other people’s money.

    I think if there was some way for private funds to choose who to lend to, based on a bet of whether this person achieves higher income, then if they mess up and can’t deliver a worthwhile degree then they miss out, too bad, no one cries (but MOST of the time they would get it right). Then again, in the USA we have private funds with backstop guarantees from government, and that’s the worst way to do it. There has to be some penalty of loss when poor choices are made.

  27. 1234

    Kidding, why? 1904680 is a perfect example of short term myopic thinking.

  28. Tel

    Those in their 20s and 30s have low super balances anyway.

    You aren’t reading it closely enough… the proposal has nothing to do with the super balance, and everything to do with the 9% of your wages going into a super fund that would be redirected into paying down your debts *FIRST* before building up and equity balance. Thus, the debts get paid faster, and you can put money into your super balance *AFTER* that’s done.

    I admit I did read it wrong at first glance too, but I double checked before I posted, because I was nervous about looking like a dumbarse.

  29. .

    1234
    #1904685, posted on January 3, 2016 at 5:44 pm
    Kidding, why? 1904680 is a perfect example of short term myopic thinking.

    This is a robotic exposition of rhetoric.

    There is a looming 70 bn of liabilities from people who cannot pay it back and you think opposition to your idea is short term thinking?

    Just because you don’t want to pay back a debt for 30+ years doesn’t mean you have “long term thinking”.

    If you went to a bank with this proposal, your payback period would be 0. As would your principal, interest and indebtedness.

  30. Combine Dave

    Sweet. Waste your super paying off a useless degree then retire to the pension.

  31. ianl8888

    Yet another bright idea – another go at special pleading to perform a drive-by on superannuation. The number of special pleading ideas on superannuation raids increases monthly

    If even one of them is allowed to surface after festering, the floodgates will open and the concept of superannuation will be destroyed. Preserve me from people like John Adams who thinks he can spend other peoples’ savings better than they can

    As it stands, a person starting in the workforce at say, 25 years old, is compelled to DEPOSIT (note: NOT “contribute”) into a savings vehicle for about 40 years, with no right to access during that period. Fair enough, but that 40 years is about 13-14 fresh parliaments, each of which will institute its’ own drive-by on this irresistibly huge honey pot. It’s perfect – people are compelled to deposit, cannot touch it for decades, and Govt Executive can institute raids on this money trove any time it thinks there will be little or insignificant political blowback

    And then we add bright ideas like Adams proposes to this mix … right

  32. .

    You know, if it turns to crap, Adam’s proposal might actually see you better off.

    If you have nothing left before it is raided and no debt left…

    But the potential problems are why I suggest stuff like which I posted at 11.17 am today.

  33. Dan

    If you have nothing left before it is raided and no debt left…

    Huh?

  34. Ross B

    More schemes? This would be a scheme attempting to make a bridge between two existing questionable schemes. Where does that lead us?

  35. John Adams

    Hi all, thanks for those who commented on my blog post. From the comments that have been posted to date, all I can say is the following:

    * For those who are waiting for compulsory superannuation to be abolished, all I can say is that I have seen no evidence from my extensive discussions in Parliament that there is remotely a possibility. The only hope for this to get up, for those who wish this to happen, is if the LDP assumed a majority in the House of Representatives and the Senate. Even if this happened, an LDP government would have to make the choice between fiscal discipline versus personal liberty. The reality is that abolishing compulsory super would blow a massive hole in the Federal Budget which is something Australia can least afford given the state of our finances.

    Moreover, analysis from Treasury indicates that compulsory superannuation has led to additional (or new) savings than would otherwise be the case. So the public policy establishment will be asking how will the shortfall in national savings will be made up from abolishing compulsory super (I have my own views on this, but the solution will mean a lot of short term economic pain before getting the economy to the ideal state).

    * Re Zyconoclast, yes you are right, in a technical sense this policy could be enacted in 2019, but the question is on what public policy basis would we want to wait if everything is ready to go? The Government needs the revenue, the cost of living is the number 1 economic issue in Australia and both of these problems are likely to become worse. So why not act now when you have the chance to improve Australia’s circumstances?

    * Re Snoopy, the government introduced on 1 January 2016 (2 days ago) a requirement that Australians with a HELP debt and are overseas have to tell the ATO where they are and how much income they are generating as repaying this amount while outside of Australia is now compulsory. Minister Birmingham has issued a press release which I have reviewed. In terms of being under the threshold… who can survive in this economy with a taxable income under $54k?

    * Wayne from Perth – you have it right. lower tax, but higher contributions will see your disposal income go up. Under the preferred design scheme this would mean that my personal disposable income would go up by about $6000 per annum. My repayments would be made through additional contributions on an after tax basis between now and preservation age. The point being is that people in the late 20s/early 30s need cash to get through these major life events. For the record, I make no apologies that I am pursuing this policy on a self-interested basis. I want access to my superannuation to lift my disposable income to better provide for my family, given the costs associated with purchasing a house and having children.

    * H B Bear – the way to stop others from dipping into super, it is important to establish robust litmus tests which establishes a high threshold for policy intervention. Super for HELP is the only win-win (for individuals and Government) option on the table. Other options would either see individuals worse off or the government worsening the bottom line and therefore expanding the deficit when we can lease afford to.

    If we don’t get the national debt under control, then a future government will likely raid people’s super rather than go through a default or structural adjustment package such as Greece.

    * 1234 – I can assure you that the PBO modelling is not suggesting that the impact of Super for HELP on the Commonwealth budget would be minimal. On the issue re how to smooth income and debt over a life time, I believe that an individual should be able to choose how they wish to deal with their income versus debt portfolio. This is why Super for HELP is a voluntary opt-in scheme. This gives people additional choice to make more optimal decisions re disposable income if they wish. If you don’t want to, you don’t have to.

    In terms of how would you make people repay the money, I have written up a brief on how this should be done and is currently being assessed by relevant parties within Canberra. There are ways on how to do this.

    * Ian18888 – this is nothing to do with other people’s savings! I want access to my own money and to boost my disposable income, but I can’t just ask for special privileges can I? Hence, structural reform needs to happen to superannuation in order to improve my personal situation.

    As I noted above, it is in all of our interests to get the deficit and the national debt under control otherwise, a future government could well look at a $2 trillion pot of money as a bail out mechanism to avoid default or major structural reform such as what Greece is doing. This is something that advances both the national interest and my personal interest as well.

    All other proposals which come forward to government for consideration in this space won’t be able to meet this criteria. This is why Super for HELP is unique and therefore should be considered on its sole merits relative to other schemes.

  36. Simon

    Dot just read your 1117 post.
    That’s a better mix than what’s currently happening.
    Far less losers and far more winners.
    What do you mean by the 60’s reference though, is it specifically aimed at Uni/Super or just taxation in general can you please elaborate? Maybe a retort type submission yourself.

  37. .

    The policies I mention were basically what was around in the 1960s except for a much lower income tax rate.

  38. memoryvault

    It’s perfect – people are compelled to deposit, cannot touch it for decades, and Govt Executive can institute raids on this money trove any time it thinks there will be little or insignificant political blowback

    IanL8888,
    As I pointed out way upthread, they’ve already told us what they intend to do to “unprivatise” your super. Unless you’re retiring in the next few months, it’s gone. All you will ever see is a “retirement income product” that will be calculated for you by your super fund, in accordance with guidelines set down by the government. The base rate will be set at around 70% of the official average weekly wage.

    If the investment income from your accumulated contributions is insufficient to pay this, your income stream will be topped up. If your accumulated contributions mean you receive more than the 70%, you will be taxed on the difference at standard, progressive rates.

  39. .

    MV

    What are they going to do with SMSF or quasi SMSFs?

  40. memoryvault

    What are they going to do with SMSF or quasi SMSFs?

    Absolutely no idea, Dot. I only know what was in the Government Response to the Murray Review. There were no specific details, only the backbone of this (and other) plans, plus their timelines for implementation. In this case, to fit the stated timeline, there will have to be something curtailing lump sum withdrawals of super in the next Budget.

    The next change, actual implementation of the taxable income streams, will have to implemented by a Labor government, so that tells us who is penciled in to win the next election.

    Having said all that, I can’t see SMSF’s causing much grief. They are already subject to annual audit, so their asset value is known. That value will be compared to that from a similar accumulated contributions super fund, and the holder will be deemed to be in receipt of a similar income stream. Whether they actually are or not, will be their problem.

    Where the deemed income stream is less than the target of 70% of AWE, it will be topped up. Where it is more, it will be taxed, just like everybody else. It will be up to the SMSF holder to arrange his investments to return the actual deemed income, plus meet any tax obligation. I suspect there will be tax incentives to move funds from assets sold from the SMSF, back into the existing super funds.

    But that is all only speculation on my part, based on how they handle deeming provisions now in other areas. Have a read through the “assets test” section of OAP’s on the Human Services website.

  41. Zulu Kilo Two Alpha

    Unless you’re retiring in the next few months, it’s gone.

    Bloody glad I’ve got my filthy paws on what is, after all, my own money…

  42. Simon

    Thanks Dot, sorry about the delay, kids/beach.

    Weren’t the 60’s debt fuelled too, with a lot more military spending?

    My only problem with this whole proposal is the fact that the money has been spent, the result has been achieved, lots of Uni places. I may be wrong but I am really struggling to think of another government programme that has succeeded so well at it’s primary objective that it also wants it’s money back for the failures. Very few forms of welfare require you to pay it back. This is either welfare for Uni or welfare for people. The government is not a bank or a money lender and should not be acting like one.

    This was always a stupid way of dealing with the “higher skills” problem.
    But you are asking young people (mostly the less academically gifted) to chose a career path that includes university training, that excludes 99% from the top paying professions, yet they have to pay it back if they succeed or if they don’t.
    No offence to universities or the government but this honey trap is their problem and they should pay for it.

  43. Kool Aid Kid

    Mr Adams: the impact of compulsory super on the budget is negative because of its tax preferences. How much is debatable but you will find a number like $45 billion in the budget tax expenditures. Treasury does not say much about average savings outcomes but the only research I’ve heard of – by the accountants member body – said compulsory super made no difference to average savings.
    You need to get out more.

  44. mundi

    The real problem here is simply that taxes are too high.

    You can find yourself losing 10% to super before you even get your money, then 30% to tax, then 8% to repay education, then 10% gst when you spend it, then you are forced to use a over regulated extremely expensive child care industry, which even with the 50% rebate, is still insanely expensive (over $300 per child per week).

    You can easily surpass 100% marginal tax rate if you get a high paying job while you have young kids, because you are hit by the high income tax bracket, loss of all family tax benefits, pass into high hecs repayment zone, loss of child care benefit.

    A family with a small mortgage has less disposable income than a pensioner couple who owns their home.

    All these welfare systems, related education and regulated child care need to end, and income tax needs to drop.

  45. PeteD

    Two thoughts on reading this.

    I generally like this out-of-the-box thinking.

    The past five or so years have seen the federal government in pursuit of allegedly “market” things, massively increase the number of student loans being underwritten by the taxpayer and made repayable on an income contingent basis (at the same time as removing many incentives for upfront payment).

    Fee-deregulation for the universities in an environment of income contingent government loans to students would have made it worse, a fiscal time-bomb kicking current spending off into the future.

    Ultimately this would have meant recovery of HELP from estates etc would have become absolutely necessary.

    Two suggestions in this space

    1. Why should an individual have to make up the balance in their super? I’m not sure that is actually desirable. The government gets the money up front, reduces its receivables, and reduces the long term cost of these loans v the cost of their other debts.
    I presume for the moment that any repayment of HELP balances from Super would be in addition to any repayments required under the existing HELP scheme.
    2. One place where reform could work to help the budget balance is to link the maximum superannuation contribution base to the top marginal tax rate. Limiting the maximum compulsory contribution to those earning less than $45,000 a quarter seems to be a small step that will reduce the offsets in the system, let some people have more of their own money, and also increase the amount of revenue available for the government. If people want to save more (for whatever reason) they still voluntarily could up to the maximum contribution limits.

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