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April 3, 2013
Thanks to Howard and Costello Australia allows the wealthy to park more and more of their earnings in super accounts at discounted marginal tax rates. The Gillard Government is considering reducing superannuation concessions to the top 1 or 2 per cent of earners who get 9 per cent of the total value of the tax breaks. The bottom 30 per cent of income earners get just 1.2 per cent of the total value of superannuation concession.
David Pope
The Coalition plans to scrap the super tax offset for low-income earners which means going after 3.6 million Australians on salaries of $37,000 or less. Despite this, some members of the ALP (eg., Joel Fitzgibbon) talk in terms of those on incomes of $250,000 being battlers on struggle street in western Sydney, whilst the Gillard/Swan proposal to reduce the generous tax concessions to the top 1 or 2 per cent of earners is seen as "trashing" the Labor brand.
What is going on within the ALP these days? Shouldn't they be talking about reform of the system to fix its many failings? One of those failings is the excessive fees are being skimmed from people's savings and a superannuation industry "living of the public teat".
Reforms to make the superannuation system more sustainable, given that the cost of the concessions is set to climb 9 per cent next year, then 14 per cent, then 13 per cent. Or reforms to improve the adequacy of the Age Pension for those who have little or no access to the benefits of the tax concessions.
Eva Cox points out that:
problems arise partly because superannuation’s basic design reproduces the inequities of the distribution of earned income. Compulsory contributions as a set percentage of pay, means the “savings” will reflect the frequency of contributions and their amounts.The more time in paid work and the higher the pay received means the range of savings will reproduce the relative inequalities of labour force participation and rewards. This has obvious gender implications as women tend to earn less when in jobs and take more time out of paid work as well, so end up with substantially less.
Superannuation is designed to give the biggest subsidies to those who need them least, yet members of the ALP are publicly defending the generous superannuation tax breaks received by the very richest Australians.
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Ross Gittens, in pointing out that super is taxed in a way that yields little benefit to the needy, but grossly favours the better off, says:
The cost to the federal budget in revenue forgone is huge and rapidly rising. It was $30 billion last financial year and is projected to reach $45 billion by 2015-16.