Most people spend very little time thinking about their superannuation. That’s a good thing for Treasurer Joe Hockey, who is spending a lot of time thinking about withholding superannuation from the public.
It is his likely answer to Australians’ rising life expectancy and the government’s growing expenses: raising the super “preservation age”, which is already climbing from 55 to 60 years of age (depending on your date of birth), would accompany plans already in place to raise the age pension eligibility from 65 to 70 years of age over the next two decades.
“It is on my mind and it’s on Tony Abbott’s mind,” Hockey said during last night’s Q&A program on the ABC. “We’re thinking about how we’re going to make sure that the quality of life for Australians into the future is sustainable.”
… Where is the outrage at Hockey’s suggestions that the super preservation age should be raised?
Sustainability is not the word which springs to mind given almost one-third of $39 billion in annual super tax concessions are currently enjoyed by the top 10 per cent of income earners, according to an analysis by The Australia Institute.
Worse yet, an estimated 3.6 million Australians are about to be penalised for the privilege of being forced to contribute to super thanks to the inequity of a 15 per cent flat contributions tax. It is a system which heavily favours the wealthy because they can dodge higher personal income tax rates of 45 per cent.
High-income earners were already richly rewarded by the Coalition in 2007 when it made all super withdrawals for retirees over the age of 60 tax-free. (Poor and middle-income earners rarely passed the $129,751 tax-free threshold on lump sum withdrawals at the time.)
That extraordinary decision has become so widely accepted that in April 2013, when Labor proposed a modest tax on annual super pension earnings above $100,000, the media led a backlash against the decision despite only 16,000 wealthy retirees (or 0.4 per cent of Australia’s 4.1 million retirees) set to be affected.
Industry lobby group, the Association of Superannuation Funds of Australia, even had to correct media reports at the time, stating that few, if any, individuals with less than $2 million in super would face the tax. It is a rare day when an industry body comes out against its own interests (super funds, like any industry, are seldom going to welcome a new tax on their customers).
So where is the outrage at Hockey’s suggestions that the super preservation age should be raised?
An estimated 3.6 million Australians are about to be penalised for the privilege of being forced to contribute to super thanks to the inequity of a 15 per cent flat contributions tax
Forcing people to work for longer – after already forcing them to save 9.25 per cent of their private income for retirement – is a blunt instrument which will become another burden to be carried by poor and middle-income earners, which comprise the bulk of Australians.
When Hockey told the Q&A audience that the Coalition’s budget was aimed at ensuring “the pain applies as fairly as possible across the electorate” it drew a smattering of laughter from the audience. That laughter may eventually turn to tears for the Coalition if it asks poor and middle-income earners to forgo their own retirement by continuing to underwrite super tax breaks for the wealthy.
Brendan Swift is a journalist who has been writing about superannuation and financial services for a decade