2015 Federal Budget: Superannuation Bluster, Then …. Nothing
For months the low and moderate paid media with little or no financial experience or nous, who almost invariably have next to nothing in their superannuation accounts and who are jealous of those who do, have been in a lather amongst themselves as to the gall of sensible people who forfeit spending ‘now’ for accumulating for retirement, trying to force the government to rob tax incentives built in to the superannuation system.
Here’s a newsflash for the media: if you are not a wealthy retiree, you’ll end-up relying on the Government for a pension. So the Government hasn’t budged on superannuation in this Budget.
The pension is not an entitlement – it is a welfare payment for those who need it. For those who have not provided for themselves, whether or not the superannuation system has not been around for long-enough during their working years, and have not built up their investment assets to fund their non-working years.
The idea of superannuation at least in the 1990s, was to change the mindset of Australians when the Government realised it could not continue to pay most Australians a pension into their old age, and this has become more acute as people have longer and more expensive lifespans, with a very good and amazingly expensive healthcare system.
To motivate and compel Australians to save for their own retirement and as part of labour and productivity and inflation control measures which were excellent and highly effective, the Government had to:
Force people to save, through compulsory superannuation;
Prevent people from accessing their retirement savings, for as long as possible, generally once retired;
Provide tax incentives (1) to encourage you to save more than the ‘compulsory’ amount, which alone would generally not be sufficient (2) help the balance grow by ‘concessional’ rates of tax on investment earnings and (3) help you fund yourself in retirement, with beneficial tax treatment of your self-funded private ‘pension’.
Without the tax concessions to make superannuation a better option that spending all your money on holidays or over-exposing yourself to risky negative gearing of investments, a meaningful percentage of the population wouldn’t bother and would end-up relying on the Government pension.
At an annual cost of around $44 billion a year, a bit more than the expected deficit for each 2015 and 2016, the apparently ‘over generous’ taxation benefits of superannuation is still not preventing people from relying on the pension. Even this single figure for age pensioner support is expected to hit $50 billion by 2019!
The only good thing about the generally poor media commentary in recent months is that hopefully, it contributes toward people thinking about superannuation.
Whilst our office does not provide ‘financial advice’, we encourage our clients to educate themselves and think for themselves and obtain professional, expert and independent and sensible financial advice where they need such support, as the current tax system means you need less money invested in superannuation to fund your retirement, than you would need to save outside of superannuation.
And you would generally have a much more rewarding and have far more options as a ‘wealthy’ retiree, by a self-funded multi-million dollar investment portfolio within the superannuation system.
And generally, with all investment earnings in the pension-activated superannuation fund, and all private-pensions tax-free, you won’t even need to lodge tax returns for yourself.
Of course, Tax Services Australia prepares tax returns (and other services) for a living, but we are advocating to our clients that if they can fund their own retirement with their own superannuation, you can be traveling the world and not need to lodge those pesky annual tax returns.
Rather than bleating (hello Media) about those people taking advantage of the superannuation system through the (deficient) tax incentives, why don’t you make decisions to aspire to being a wealthy retiree with several million dollars for your household, and never rely on future Governments whim and future taxpayers, to fund your retirement.
But if future Governments, such as Bill Shorten’s suggestion in office a few years ago (that went no-where because of technical difficulties) and again a few weeks ago, to tax investment earnings either above a certain threshold or where the underlying assets exceed another threshold, then (1) the superannuation system will be more complex and expensive to administer and (2) will compromise ‘wealthy’ retirees who had planned to fund themselves, more likely to rely back on the taxpayer again.