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Superannuation no good for under 50s, invest the absolute minimum amount into Super; No salary sacrificing, no co-contributions, no non-concessional contributions. Ignore calls to save tax and boost your super
Topic Started: 7 Feb 2013, 08:25 PM (6,849 Views)
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Dear Under-50 Investor

February 6, 2013 by Roger Montgomery | Comments (26)

Superannuation will be no good for you if you are under 50 today, so invest the absolute minimum amount into super.

That means, no salary sacrificing, no co-contributions, no non-concessional contributions. Ignore the calls to save tax and boost your super. This is not advice but a challenge to others, much more qualified than I, to dispute it and explain why I am totally wrong. By the way, as a fund manager of course, I am financially delighted to be completely wrong on this one!

What I am saying is risky – I may be labeled a ‘generationist’. Note my tongue is firmly in my cheek during the writing of this entire rant (and that’s partly because I have only ever invested the bare minimum into super). More seriously however, I am also swimming against a veritable tsunami. There are so many on the teat of this topic that one risks offending with a ‘less is more’ stance.

What I am not saying is that you shouldn’t invest. You must invest, irrespective of your age. What I am questioning is the wisdom of investing through a structure that may not be as tax effective, nor may your funds be as accessible, in the future as it appears today.

Since about 1995 (when I was 24 years old) and my accountants at the time suggested I put more money into super, I have staunchly told anyone my age who would listen that they’d be mad to put extra funds into super. I have always thought ‘you’ll never see it’. The reasoning was simple enough; Super was set up by baby boomers, for baby boomers. And since I am not a boomer, the favourable tax environment enjoyed by the boomers, I believed, would be gradually eroded such that it wont be any advantage when it comes around to my turn. ‘No thanks’ was always the response I gave my accountants when they suggested I’d be wise to put additional funds into super.

A superannuation storm has now been stirred up by the Labour party and many investors, who have been maximizing their contributions, are screaming blue murder.

Like an episode of some Socialists Unite sitcom the outcome of my prediction is a benefit for the greater good but not for the people to whom this missive is directed.

As you read on you will observe a shift in policy towards to super. Individually, the seem like minor modifications. But taken chronologically, there’s a trend in place that may mean investing within the super structure is becoming less and less attractive for the young.

Now please don’t regale me with tables showing how Joe Citizen can save tax by stashing away a little extra into super or how a person on a low income will be better off thanks to the governments co-contribution scheme. What I referring to is a change, over many years, to the very rates of difference between investing inside and outside of super and an erosion in the benefits that exist today.

As the aggregate amount invested gets bigger, and as baby boomers get older, the temptation to tap into the giant pool simply becomes too great for the government to resist. In the 2013-14 financial year the total tax effectiveness on superannuation will be just over $33 billion. There will be many minor storms along the way. The current war appears to be about taxing withdrawals from accounts with very high balances. Over time however I expect it is inevitable (thanks also to poor economic and fiscal management – see my post here on The Balance of Payments and my meeting with Andrew Robb) there will be a gradual erosion of the attractiveness of super for younger people.

In the 1991 Budget, Treasurer John Kerin announced that from 1 July 1992 , under a new system to be known as the Superannuation Guarantee (SG), employers would be required to make superannuation contributions on behalf of their employees. When the Keating Labor government introduced the system in 1992 (The National Wage Case established guidelines to require new industry superannuation schemes to conform to Commonwealth operational standards) it was part of a reform that sought to address the inevitable climactic change in the government’s finances that would be brought about by a generational avalanche. In 1993, the World Bank endorsed Australia’s three pillar system for the provision of retirement income as world’s best practice.

There are however two points to note. Compulsory Super was introduced not because of some altruism on the part of the government of the day but because of the cost that would be imposed on governments of the future as baby boomers aged and required increasing medical assistance and to offset the cost of the pension as the bulge in the population approached and passed the qualifying age.

The second observation is this; it was introduced by baby boomers for baby boomers.

The proposed solution to the inevitable train wreck on government finances was a combination of a safety net (a means-tested Government age pension), a compulsory superannuation contribution by individuals (forced savings) and finally a voluntary version of the same thing.

The trade unions agreed (as they had done in 1986) to forego a national 3% pay increase in return for an equal contribution into superannuation. The 3% was matched by an employer contribution, which would increase over the years to total 12%. Between 1992 and 2002 contributions were progressively increased from 3% to the subsequently capped 9%.

Tellingly, the Howard government was criticised by former labour Prime Minister Paul Keating for not increasing the compulsory rate. Of course there would be more than double the amount of money in the super system today (not withstanding the impact of silly money management practices and GFCs) if the rate was 15% since 1996 instead of 9%.

And this brings me to my next point; the amount of money in the super system. There’s $1.4 trillion approximately and of that about $439 is being self managed. That’s $1.4 trillion. Hmmmmm. If I was a government number cruncher, I would find that $1.4 trillion more than a just tasty morsel. I wonder what would happen to the government’s coffers, if we taxed it just a little more here? Or perhaps we extend the age before people can get it there? And what if we cap the amount they can take out now that all our boomer mates have withdrawn what they need? Or what about taxing payouts? Gosh we could really do something fancy with all that money now that it is so temptingly locked up form people and they keep putting more in!

I think you get the drift. Recently I was at an awards ceremony and a popular expert on investing was giving a lecture on super with a long-winded history of the introduction of the pension.

Here’s the history taken from an interactive schooling website: “Coming into effect on 1 July 1909, the Commonwealth aged pension initially provided £26 ($52) per annum to men and women over the age of 65 years. This figure was just under one quarter of the ‘basic wage’ which was decided in 1907 by Justice Higgins. To be eligible for the pension, an individual had to be able to meet a number of criteria. They had to have resided in the Commonwealth for more than 25 years and to be of ‘good character,’ (despite the latter not being defined). Non-residents, the Indigenous people of Australia, Asians and Indigenous people from the Pacific Islands, New Zealand and Africa were completely excluded from claiming the pension.

To ensure that those who were most in need of the pension received it and also to limit the cost to the government, the 1908 Act also provided that the Commonwealth old-aged pension be means- and asset-tested. An individual who had an income of more than £52 ($104) per year or owned property valued at more then £310 ($620) became ineligible for the pension.

In 1910, around 34 percent of those over 65 were receiving the old-aged pension. The average life expectancy of an Australian was only 55.2 years for men and 55.8 years for women, which meant that not many people lived long enough to receive the pension. Today, the average life expectancy of Australian men is 77.6 years and 83.5 years for women. Since more Australians are living beyond 65 years of age, unprecedented numbers are becoming eligible for the aged pension. In 2004 the number of aged pensioners reached 72 percent.”

Interestingly our investing expert – a boomer himself – focused on the very last point along with a carefully placed reminder that Australians were never meant to qualify for the pension because they would be deceased, on average, a decade or so before they qualified.

Wham! There it is. Get people to start realizing that they were never meant to get the money anyway. Maybe, one day, we’ll hear the argument we’re not meant to qualify for our super until ten years after we’re deceased too. Don’t laugh. If government finances become sufficiently precarious and there aren’t any boomers left to upset, anything is possible.

The train has left the station and the evidence is everywhere. The government wants to get their hands on your super and they don’t want you to get as much of it.

Today the Gillard government is considering ending the tax-free status of super withdrawals. But this is not the first change that seeks to repeal some of the claimed largesse that individuals enjoy through the super of the pension. Way back in 1994 the pension age for women was raised to 65, in 1996 the superannuation surcharge was introduced to tax contributions above a predefined level.

These changes however were followed by a golden era – a period of apparent government generosity. To reduce the financial burden on the government a Pension Bonus scheme was introduced in 1998 and a person could accrue a pension bonus payment by deferring claiming the pension while still working. The maximum age for SG contributions increased from 65 to 70 in 1997 and then to 75 in 2002. The Super Surcharge was reduced from 15% to 12.5% in 2003 and co-contributions were introduced for low income earners. In 2004, the Treasurer released A more flexible and adaptable retirement income system as part of ‘Australia’s Demographic Challenges’ announcement. Amongst other things this report proposed to allow access to a person’s superannuation, in the form of an income stream, before they had left the work force (i.e. transition to retirement pensions) and to scrap the work test for those under age 65. 2004 was also the year that the Superannuation surcharge was reduced again from 12.5% to 10% and in 2005 Treasurer Costello abolished it altogether. In the same year the work test governing contributions made under age 65 ceased to operate.

Then in the budget of 2006 the generosity towards baby boomers really cranked up. In the Budget, Treasurer Costello announced plans to simplify superannuation. “Simpler Super” includes:

- exemption from tax on end benefits for Australians aged 60 or over from I July 2007;
- no tax on a lump sum;
- no tax on a superannuation pension;
- reasonable benefit limits to be abolished; and
- transferring super between funds made easier.

The implementation date was at the peak of the pre-GFC froth, 1 July 2007.
And the generosity continued into September that year when the Social Security assets test threshold was raised from $531,000 to $839,500 for a couple and from $343,750 to $529,250 for an individual. It was estimated that more than 300,000 extra people would be eligible for the age pension.

Next, the taste of blood.

In 2008, Labor’s first Budget contained details of a review of taxation – “Australia’s future tax system”, to be chaired by Dr Ken Henry and the terms of reference included the government’s commitment to preserve tax-free superannuation payments for the over 60s. But in May of that year Minister Sherry announced consultation on a measure (introduced by the Coalition Government) requiring future superannuation contributions and existing balances for temporary residents to be transferred to the ATO. If unclaimed after 5 years, the amounts would be confiscated. A forecast of up to $1 billion in additional revenue annually was predicted.

In December the same year the Act requiring temporary resident’s superannuation benefits to be paid to the ATO, if not claimed within 6 months of departing Australia, commenced operation. In 2009, the Act raising tax rates of Temporary Residents’ superannuation benefits when paid took effect.

In 2009 Minister Sherry announces a review (it later became known as the Cooper Review) followed by the terms of reference into the governance, efficiency, structure and operation of Australia’s superannuation system. In July of the same year the rate at which the government superannuation co- contribution was paid was reduced “temporarily” between 1 July 2009 and 30 June 2014 but would return to $1.50 for every $1 contribution (subject to income test threshold) on 1 July 2014.

In the same year, the limit on concessional contributions (formally known as tax deductible contributions) was reduced from $50 000 p.a. to $25 000 p.a. for 2010 onwards. The Pension Bonus Scheme was completely abolished.

The following year the government responded to the Henry Review and the Superannuation Guarantee rate was proposed to be raised to 12% between 2013–14 and 2019–20, and the Superannuation Guarantee age limit would be increased to 75 from 1 July 2013.

Meanwhile, the government proposed changes to the co-contributions scheme. And surprise, surprise, the government co-contribution rate would be set permanently at $1 for every $1 of personal contributions made by those receiving an adjusted annual income less than $31 920 p.a. So much for the “temporary” change and the promise to return to $1.50 made back in 2009. The qualifying age for the age pension would now also increase by six months every two years until it reaches 67 years of age on 1 January 2024.

In 2011 Superannuation Minister Bill Shorten confirmed that the amendment to abolish the age limit meant that from July 2013, up to 51,000 eligible workers aged 70 and over will receive the superannuation guarantee for the first time.

“Making superannuation contributions compulsory for these mature-age employees will improve the adequacy and equity of the retirement income system, and provide an incentive to older Australians to remain in the workforce for longer”.

It may be subtle to you but to me the shift is well underway. You cannot put $1.4 trillion of long-term equity in front of a government struggling to balance its books and expect them to not be tempted to tinker.

Today’s announcement by Gillard to end the tax-free status of super payouts for those with more than $1 million is another shining example that ‘generationism’ is well and truly underway and the battleground is superannuation.

I believe by the time someone turning 40 today is entitled to extract their super, the tax rates will be higher, the amount they can withdraw will be lower and they may not qualify at all because the age, at which they can qualify, will move. Remaining in the workforce longer will be something that younger people will need to get used to, to fund the profligacy of the generation before.

The government will argue that the greater good – infrastructure, healthcare et al – is best served with a sound balance sheet and so if you all keep contributing more super for longer we collectively will have better roads and cheaper healthcare. So much for funding your own healthcare with the proceeds of your concessionally-taxed super! I believe that in the longer term you will be funding the government’s expenditure by contributing to super. It is simply too big to be ignored.

Read more: http://rogermontgomery.com/dear-under-50-investor/
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Enjoy The Ride
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Government and a big pile of money, what could possibly go wrong?
Enjoy The Ride!

The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.”
― Friedrich A. von Hayek


"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.


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Barista
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Enjoy The Ride
7 Feb 2013, 08:43 PM
Government and a big pile of money, what could possibly go wrong?
There are a few sides to this.

On the one hand the scheme as is is very generous, particularly to those who have been in a position to be generous putting in. The failure to increase automatic contribution rates in the Howard years ultimately means that the whole system is not really in a position to fulfill the role Keating originally intended when he set it up.

So I tend to see for sure the tide running towards higher taxation of contributions and longer contributory periods before access.

But the Roger Montgomery article does raise some serious issues. Unlike him I don't see it as an under 40 issue, but more likely an under 55 (nearly) issue.

These people are seeing the Boomer set who have been in a position to set themselves up using the system stroll away with very big lump sums and pensions.

Quite rightly they are (if they are thinking about it) thinking that they will get less and wait longer for it.

At the same time they are likely to have mortgages for much longer in life, and about 3 times the size of the Boomers going before them, largely because this is the ‘market’ and have had to go into debt far more substantially than their predecessors. At the same time anyone casting an eye over Gregory and Garnaut yesterday couldn't help but suspect the employment market is going to become seriously ugly at some point possibly not far away.

The structure of the system as is is to some degree working as a redistributive tax towards those who have the largest share of the assets and wealth. The system as is works is now a redistributive tax channeling funds to those with the most assets and who have chalked up the most debt.

Those held to mortgage ransom after the boomers can wait longer to get anything from the system and presumably get less. Take into consideration that Generations after Boomers have much larger mortgages.

Presumably the ‘suck it up’ crowd will say there is no alternative to both the fiscal issues the system faces and turn a blind eye to the fairness and generational conflict issues super already encapsulates, and which presumably will come into sharper focus in the years ahead. They may have a point, maybe the system is so structured that Generations X (to some extent) Y and Z have no alternative. But ultimately as the old Irish saying goes if you force people to choose, some will choose to fight, and on this issue – particularly in its nexus with mortgages and debt – the younger generations should certainly be asking some seriously pointed questions.

All good stuff, but Australia’s dessicated two party political process and lapdog mainstream media really should be raising issues about the super system, and particularly its nexus with mortgages and debt (and maybe even incorporate the employment outlook – with a reference to yesterdays Gregory and Garnaut) to be raising issues and discussing ways to address them.

But we can be sure neither party will want to go too close to either, that mainstream press will be well paid not to, and that any raising of questions will certainly bring out the Spurious Vim and speciousness of the usual spruikers.

Anyone under not just 40 but arguably about 55 could well be asking what is in it for them.
Edited by Barista, 7 Feb 2013, 08:57 PM.
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peter fraser
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Barista
7 Feb 2013, 08:54 PM
There are a few sides to this.

On the one hand the scheme as is is very generous, particularly to those who have been in a position to be generous putting in. The failure to increase automatic contribution rates in the Howard years ultimately means that the whole system is not really in a position to fulfill the role Keating originally intended when he set it up.

So I tend to see for sure the tide running towards higher taxation of contributions and longer contributory periods before access.

But the Roger Montgomery article does raise some serious issues. Unlike him I don't see it as an under 40 issue, but more likely an under 55 (nearly) issue.

These people are seeing the Boomer set who have been in a position to set themselves up using the system stroll away with very big lump sums and pensions.

Quite rightly they are (if they are thinking about it) thinking that they will get less and wait longer for it.

At the same time they are likely to have mortgages for much longer in life, and about 3 times the size of the Boomers going before them, largely because this is the ‘market’ and have had to go into debt far more substantially than their predecessors. At the same time anyone casting an eye over Gregory and Garnaut yesterday couldn't help but suspect the employment market is going to become seriously ugly at some point possibly not far away.

The structure of the system as is is to some degree working as a redistributive tax towards those who have the largest share of the assets and wealth. The system as is works is now a redistributive tax channeling funds to those with the most assets and who have chalked up the most debt.

Those held to mortgage ransom after the boomers can wait longer to get anything from the system and presumably get less. Take into consideration that Generations after Boomers have much larger mortgages.

Presumably the ‘suck it up’ crowd will say there is no alternative to both the fiscal issues the system faces and turn a blind eye to the fairness and generational conflict issues super already encapsulates, and which presumably will come into sharper focus in the years ahead. They may have a point, maybe the system is so structured that Generations X (to some extent) Y and Z have no alternative. But ultimately as the old Irish saying goes if you force people to choose, some will choose to fight, and on this issue – particularly in its nexus with mortgages and debt – the younger generations should certainly be asking some seriously pointed questions.

All good stuff, but Australia’s dessicated two party political process and lapdog mainstream media really should be raising issues about the super system, and particularly its nexus with mortgages and debt (and maybe even incorporate the employment outlook – with a reference to yesterdays Gregory and Garnaut) to be raising issues and discussing ways to address them.

But we can be sure neither party will want to go too close to either, that mainstream press will be well paid not to, and that any raising of questions will certainly bring out the Spurious Vim and speciousness of the usual spruikers.

Anyone under not just 40 but arguably about 55 could well be asking what is in it for them.
Many under 55 Y/O are boomers. you're spoiling his point. That's why Montgomery used the age limit of 40, he could then turn his piece into an intergenerational rant. It gets him notoriety and sells his services to people who trawl the internet looking for people to blame - it's a Hansonite style of allure that just drags the little suckers in.

At least you took out the personal bickering in this issue - thank you for that.

Seriously what evidence does he or anyone else have of taxation levels on contributions or withdrawals in the future - the answer is none.

I hope that super continues to give tax advantages to contributers in the future. If it doesn't work for future generations, it won't be fully utilised and nor will it achieve what future governments want it to achieve.

Cheers...
Any expressed market opinion is my own and is not to be taken as financial advice
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Sunder
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For the majority of people, they will do one thing the year they can get their hands on their super. Pick from one of the below:

1. Pay off the remainder of the mortgage
2. Go on the holiday of a life time
3. Buy that boat/car they always wanted.

By year 2, the majority will be drawing a state pension anyway.

I agree there is significant legislaive risk to super, but my thoughts are that it will never be disadvantageous to voluntarily contribute to super, and I don't need the money now anyway, so the harm may be that I don't get any benefit, but unlikely to suffer any loss by contributing to super. Let's say I pay 15% on the way in, 15% on all earnings and 15% on the way out.

That's still less than the tax I'd pay if I took the money now and invested it outside of super. And I get to accumulate at a lower rate of tax for 35 years before beong charged on the way out. So what?
Property speculation is a type of gambling... But everyone knows that in gambling, the house always wins in the end.
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ozz
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Sunder
7 Feb 2013, 10:14 PM
For the majority of people, they will do one thing the year they can get their hands on their super. Pick from one of the below:

1. Pay off the remainder of the mortgage
2. Go on the holiday of a life time
3. Buy that boat/car they always wanted.

By year 2, the majority will be drawing a state pension anyway.

I agree there is significant legislaive risk to super, but my thoughts are that it will never be disadvantageous to voluntarily contribute to super, and I don't need the money now anyway, so the harm may be that I don't get any benefit, but unlikely to suffer any loss by contributing to super. Let's say I pay 15% on the way in, 15% on all earnings and 15% on the way out.

That's still less than the tax I'd pay if I took the money now and invested it outside of super. And I get to accumulate at a lower rate of tax for 35 years before beong charged on the way out. So what?
Most likely 1. People even though enjoying capital gains, always tend to spend just more than they have. Consumption is the only winner. People rarely see the gains in their property, even partly. A lot of people are even reliant on inheritance from parents to clear or service debt. Sad.

In the old days people purchased a home and paid it off. Not any more.
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nipa hut
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peter fraser
7 Feb 2013, 09:46 PM
Seriously what evidence does he or anyone else have of taxation levels on contributions or withdrawals in the future - the answer is none.

Oh, I don't think the recent stories in the AFR about taxing income from a super balance beyond a certain level ($800K?, $1M?) came out of nowhere.

The problem with superannuation in Australia, compared to similar programs in other rich-country economies, is that there is no long-established stability in the parameters of the program--e.g. contribution levels, degree of tax mitigation during contribution--let alone bipartisan support for maintaining such stability.

Labor under Gillard has already started to gut the program's previous universality to meet short-term budget goals, and they show every sign of wanting to go much further. The Coalition promises stasis in super for one whole year after election, should they form the next government, but there are no promises beyond that.

Instead of having a program stability measured in decades--i.e. suitable for retirement planning--Australian super is a political football, reshaped with every change of government.

It's a shameful, ludicrous, ridiculous way for the political system of a high-income country that is not under any existential budget pressure to treat the longterm economic interests of responsible taxpayers. And the worst part of it is, there has been no widespread outrage expressed at Labor's latest trial balloon.
Edited by nipa hut, 7 Feb 2013, 11:07 PM.
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Managing the megatrend mayhem

06 Feb 2013
Bernard Salt

I have a confronting proposition. The next 20 years will see Australia and several other developed nations struggle with the tension between community expectations and our ability to raise tax. And the reason why this dilemma is surfacing now is because of demographic shifts on a megatrend scale.

The 40 years to 2011 more or less coincides with cohort growth in the working age population: more people entering than exiting the work and taxpaying years of 15-64.

Over this period, an average of 150,000 extra Aussies ‘presented’ to the work and taxpaying years every year. Add in an escalation in workforce participation rates over this period due to the emancipation of women and you have a perfect storm: sustained effortless growth in the tax base.

Do this for decades and soon enough politicians and generations get used to the idea that the tax bucket just keeps on rising.

But here’s the thing. From 2011 onwards, the baby boomer generation will progressively exit the workforce in increasing numbers. Even the lifting of our yearly net overseas migration intake from 100,000 to 180,000, the so-called Big Australia scenario, will result in the work and taxpaying population increasing at barely 100,000 pa over the 2010s.

The point is this: we have become used to the prime tax-paying population rising by 150,000 every year, but we are going to have to get used to this cohort growing by barely 100,000.

All else being equal, there will be a one-third drop in the rate of growth in the tax bucket over the coming decade.

Now, of course this is confronting news to politicians. Pollies love tax. No, I don’t think you understand. Politicians get off on taxation. Do you know why? Because it allows them to buy votes. Okay, a tad cynical, but you get my drift. And nowhere in the electoral cycle is the need for, the desire for, the lust for, taxation greater than in an election year. We are in an election year.

The tax base might rise and fall with our economic fortunes, but underpinning it all is the demographic megatrend that is wrong-footing the taxpaying years.

Australia is hardly alone in this dilemma. The French prime taxpayer population (say 15-64) increased by 200,000 per year between 1963 and 2008, but thereafter growth in this cohort drops to zero. That’s right – no growth. So the only way the French are going to get tax growth later this decade is by raising taxation or by increasing participation rates.

The same logic applies to Germany, Japan and the UK. Even the US is susceptible to this demographic megatrend, albeit at a reduced rate because of this nation’s high birth rate (2.1 births per woman as opposed to 1.9 in Australia) and generally high levels of migration. Over the 40 years to 2008, the working-age population in the US increased by an average of 1.5 million per year. But over the coming decade this growth rate will fall to barely half that.

In other words, the days of effortless growth in the tax base are over, but the legacy lives on. That legacy is a culture of expectation and entitlement, as much from politicians as from the broader community.

The difficult years will not so much be the 2020s, but the 2010s. The reason is that it is the transition period, the time when we learn painfully that the ways of the past cannot be continued, that will be most challenging. That transition period is the current decade and the unrelenting issue will be our capacity to raise taxation versus our capacity to deliver services against community expectation.

And now for the bad news. If governments cannot get the taxation they need to curry favour with the electorates, or the segments, they need to remain in office, then they will return time and time again to proven taxation yielders. Like, say, the property industry.

You know when I said “and now for the bad news” it implies that there’s good news? Well, the bad news is that there is no countervailing good news.

The next decade in Australia and in other developed nations subjected to the demographic megatrend of diminishing cohort growth in taxpayer numbers will be marked by tension between populist governments and those who feel they already pay enough tax. This includes many segments of the business community and the put-upon middle class.

There will probably be a market for a political or cultural figure to emerge in Australia, perhaps in mid-decade, who manages to galvanise the thinking of the disaffected. But until then, the bad news is that rising and widely regarded unjust taxation hikes and impositions will mark the entire decade.

By 2020 the Property Council as a lobby group might be being run by a bunch of taxation accountants.

Bernard Salt is a KPMG Partner, social editor at The Australian and an adjunct professor at Curtin University Business School; bsalt@kpmg.com.au

Read more: http://www.propertyoz.com.au/Article/NewsDetail.aspx?p=56&mid=1917
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No super tax for over-60s, says Gillard

PUBLISHED: 06 Feb 2013 15:54:00
Gemma Daley and Sally Patten

Prime Minister Julia Gillard has ruled out taxing withdrawals on superannuation for people aged over 60, narrowing changes the government can make to the super system to pay for big spending promises.

Facing intense pressure over the past week about possible changes to the super regime that were leaked to The Australian Financial Review, Ms Gillard told Parliament Labor would keep its May 2010 assurance that people over 60 would not have to pay tax on payments from their superannuation savings.

“The government reaffirms that it will never remove tax-free superannuation payments for the over-60s,” she said, referring to a commitment made when it released a review of the taxation system by former Treasury secretary Ken Henry in 2010.

Areas the government might now consider changing include the 15 per cent tax rate on super contributions, which is forecast to cost the government $19.7 billion in foregone revenue in three years’ time, and the 15 per cent tax on earnings that some Labor members of Parliament believe favours the wealthy.

Ms Gillard came under pressure from the super industry, savers and former Labor ministers – including former superannuation minister Nick Sherry, who said the tax rules shouldn’t be changed – to clarify the government’s position.

Former treasurer Peter Costello, who simplified the superannuation rules, claimed Labor risked “killing” the system.

Government Whip Joel Fitzgibbon had cautioned Ms Gillard on the mooted changes, which he said might create uncertainty, although he noted there were some inequities and inconsistencies in the system that needed to be resolved.

“We do need to be very careful,” he told Fairfax Television on Wednesday.

“Aspirational Australia is sick and tired of changes, constant changes to superannuation and the uncertainty that brings. We need to be rewarding people for their efforts of the past.”

Mr Costello, who introduced tax-free super withdrawals in 2007, said Ms Gillard had “come to her senses” and pressed her to reinstate the annual super contribution limits of $50,000. The existing level is $25,000.

Read more: http://www.afr.com/p/national/no_super_tax_for_over_says_gillard_h1bXggz9z2J002C9On5OeI
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peter fraser
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Alex Barton
8 Feb 2013, 08:36 AM
Prime Minister Julia Gillard has ruled out taxing withdrawals on superannuation for people aged over 60, narrowing changes the government can make to the super system to pay for big spending promises.
Good outcome.
Any expressed market opinion is my own and is not to be taken as financial advice
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