6 June 2020
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Super isn't the same and straightforward for all Aussies but some could feel screwed by the changes.

Do the Government super changes hate old and young Aussies?

Peter Switzer
24 August 2016

By Peter Switzer

Does the Turnbull Government super ‘hate’ old people? And if it does, does it super hate young people too? And if this is so, then do they super hate old and young people equally?

These were questions that sprung to mind when my Sky News colleague, Laura Jays, who hosts the Sky News program, The Latest (which is on between 6-7 pm each weeknight) was accused by an older viewer of “hating old people”.

Of course, Laura assured Roy and Colleen that she doesn’t but the couple had viewed her supportive statements about the Government’s changes to super as tantamount to hating them and people like them.

Being a political journalist (I talk about business and money stuff with her on her show when finance makes big news), it’s fair to say she primarily has accepted the Government’s reasons for hitting super.

As she and tax experts have argued, the low-hanging fruit for fixing our deficit and debt problems has gone, so the Government has to hit the generous aspects of super. There were very generous aspects of super, such as the transition to retirement pension, which meant anyone over 56 could tick a box and see their super earnings taxed at the best rate of all — zero.

These super changes announced in the Budget are expected to bring in $3 billion and they’re separate to the proposed $6.5 billion savings bill that the PM put forward recently. And in all fiscal fairness, they will help reduce the growth of our deficit/debt problem at a time when the credit ratings agencies are focused on us like a labrador watching a sausage cooking on a BBQ!

The toughest measure that has hurt older Australians is the $500,000 lifetime limit on non-work-related super contributions. Before the Budget, you could put in $180,000 a year and $540,000 in one go, but it meant you couldn’t put more in for three years.

So who could be screwed on the Government’s Budget changes to super?

Try this widow with a few years of work left in her at age 65, who lives by herself in a house in Sydney. She has little super (the median balance for a woman is about $28,000) but her home is worth $1.5 million. Her kids encourage her to sell the house to dump the money into super.

Under the old rules, she could get her money into super in under nine years. However, under the new system, she could put $500,000 in and that’s her limit for what is called non-concessional contributions. She then could put $25,000 in for say 10 years as a concessional contribution, so she gets $750,000 into super. However, the other $750,000 would be out of super and taxed at normal tax rates. 

This woman could think the Turnbull Government might hate her. There will be lots of examples involving small business people selling businesses, where their super outcome is less super post these Budget changes.

That said, the Government is sharing the hate because lowering the concessional cap from $50,000 for over 50s and $35,000 for under 50s down to $25,000 a year suggests young people trying to build up super have been stung too, but older people have been stung harder!

Of course, it’s fair to say that Labor and the Turnbull Government love themselves more than all super Australians because the GST would be a solution that might have meant that these tough super changes would not have been needed.

Accounting firm PWC says a broader and higher (15%) GST would give the government $50 billion and lower income Australians could be compensated for about $30 million, leaving $20 billion for money-hungry Premiers who share in the GST and there’d be some leftover for deficit/debt reduction.

However, this is seen as a political hot potato that no one is interested in catching! If our political masters did have a go at a GST, the credit agencies would back off, which would help our interest rate outlook.

On Roy and Colleen, my colleague Laura pointed out that Roy was over 75 so these changes could not affect him but if he had more than $1.6 million in his super, it could. This is the transfer limit in super, whose earnings will be taxed at zero. So if he has more, the earnings will be taxed at 15%, which could make him feel ‘hated’ by the Government.

And Colleen might be in her 60s and she might have been planning to put more into super, but as the lifetime limit dates back to July 2007, that might stop her putting large amounts into super!

This is the tricky thing about super — it’s not the same and not straightforward for all Aussies so we don’t know how many of us feel ‘hated’ by the Government because of these super changes.

That said, I suspect the close election result and the crazy-looking Senate had a little to do with these super changes.

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