Sent: 15-02-2012 11:53:02
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The Greens Super Policy
There has been much discussion about the Green's super policy released last week.
Before I comment on this I should come clean and admit that there's not a lot that I like about the Greens or their policies. Their sanctimony grates just like the confected working class accent of our Prime Minister.
So what about their recent super policy? It attempts to remove the tax penalties in the super system that apply to lower income earners. This part is hard to disagree with. As I've mentioned before it is unacceptable that lower income earners are forced to save in a vehicle that pays more tax on their investments than they have to pay in their own names.
It seems to have been forgotten that in 2006 the Greens released a research paper on super which argued that it was cheaper for the Government to fund the Age Pension than it was to deliver tax concessions to the super system for lower income earners.
The future of compulsory super is now an open question although you won't quite see the issue put this way. This might shock a lot of you but it's a discussion that needs to be had. "It would be end of the world as we know it," said our good friend Sir Humphrey Appleby.
The problem for the Greens is that they want to deliver higher super tax concessions to lower income earners by offering lower tax concessions to middle and higher income earners. The rationale is that higher income earners will save for retirement regardless of the tax rate on their savings.
Quite frankly this is drivel. Higher costs - and tax is simply a cost - act as a disincentive to do anything. This includes earning higher income. Why earn more income when tax reduces or removes your incentive to work harder? This is not rocket science but it amazes me how few people seem to understand it.
The disincentive for income earners saving for retirement is that they deny themselves access to their money for many decades. If the tax breaks are insufficient then they'll direct their efforts elsewhere.
At present capital gains held for more than twelve months would be taxed at 23.25% plus the Flood Levy. The Greens want to tax super for wealthy people at 31.5%. How many people would bother with super funds during their working lives using this comparison? Even SMSFs might struggle with such a "fabulous" policy.
I have some sympathy with the view, often quietly stated, that the financial services industry has not been very good at selling their product in a competitive market. Perhaps more thought about how and why super as a long term vehicle is a place to start. High fees and appalling investment returns don't help.
Just before Christmas I published a revised version of my SMSF book. You can see all the changes that have been made between Version 5.1 and 6.0 (the latest edition).
You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
For details of the changes made from version 5 to version 6 visit: http://www.atcbiz.com.au/r.php?r=d5xcpch
As you'll see from the list there have been many changes.
Two purchase options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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