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Super concessions rob the poor to pay the rich


Nest eggEvery year Australian tax payers provide more than $27 billion to support the retirement savings of Australians with superannuation. A large chunk of this money goes to increasing the retirement incomes of some of the wealthiest people in the country. People living on or below the poverty line get no such support.

Superannuation assistance works so that people with the largest savings (earning the highest incomes) receive the most support, while those who earn the least receive little or no support. Those who can't work, or who care for other people who cannot work, receive nothing. It's unfair, but that is how our tax dollars are being spent.

At two per cent of GDP, $27 billion is a significant spend, falling just short of the $30 billion that goes to the age pension. However, tax concessions for superannuation are increasing at a faster rate than the amount we spend on the age pension. If we keep going at this rate, it won't be long before Australia is spending more on superannuation concessions than on the age pension.

The rationale for this generous taxpayer support is thin. Foremost is the fallacious theory that boosting private retirement incomes reduces the number of people on the age pension.

The last years of the Howard Government saw very large increases in the generosity of the means tests for the age pension. Under the new arrangements a couple who own their own home can have more than $1 million in super and still draw a part pension. The changes also made all income from superannuation tax free.

The changes saw a big increase in the disposable incomes of some of the wealthiest Australians, paid for by ordinary taxpayers, each year. Adding insult to injury, this group is now also eligible for the Commonwealth Seniors Health Card and around $800 of taxpayers' money every year to help with their utility bills, even if they are drawing hundreds of thousands of dollars tax free from their super.

Australians expect that their tax dollars will be used effectively and that some sense of balance will prevail. The average retiree will only have $100,000 in super, and hundreds of thousands of Australians will have no super at all. The support we do provide through the tax system could be much better spent supporting those people.

But the disparity runs deeper than this.

The superannuation industry estimates that a retired couple who have paid off their own home need around $55,000 a year in income to live comfortably. This includes weekly allowances for $100 for drinking and eating out and $40 for wine with dinner. It also includes an annual budget of $3000 for domestic holidays and a budget of $11,000 for an overseas holiday every five years.

Why are governments willing to spend tens of billions of dollars to address the imagined deprivations of very wealthy workers heading towards retirement, while being so apparently unconcerned about the very real hardships of people who try to live on sickness, disability or aged pensions of less than $20,000 per year?

And how can it be that a third of the superannuation concessions — around $10 billion a year — are directed to the top 5 per cent of income earners — a group that receives more than ten times the support, per person, than the other 95 per cent of people saving for their retirement?

Superannuation tax concessions provide dignity for a few, at an enormous cost, while ignoring the needs and dignity of many people who deserve better.

Robbing the poor to pay the rich would be anathema to most Australians, if only they understood this is what is happening with their tax dollars.

This week's historic Tax Forum will canvas many public policy issues. The most important questions are simple. Is our tax and transfer system fair and reasonable? Are we proud of how we redistribute our national wealth?


Lin Hatfield DoddsLin Hatfield Dodds is National Director of UnitingCare Australia and is a participant on this week’s Tax Forum. UnitingCare Australia released a discussion paper, 'What price dignity: Equity and entitlement in the Australian tax and transfer system' last week ahead of the Tax Forum. It examines retirement incomes as one example of the inequities in our tax system.

Topic tags: Lin Hatfield Dodds, GST, tax summit, UnitingCare, superannuation



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Existing comments

I agree, this is a subject that more church and other social welfare groups should be involved in . Perhaps instead of placing so much emphasis on so called moral issues.After all justice is one of the great themes in the bible.

David | 04 October 2011  

capitalism serves the capitalists only!!! so they can invest and invest! so they can keep capitalism for generations!!!

I'm not opposing it. there everyone just try to become rich. if you have will, you have way. the end result justifies your actions. humanity doesn't need humanity.

dog may eat dog.

AZURE | 04 October 2011  

You stretch the facts and guild the lilly.
A home owning couple can have maximum assets of $998,000 and draw a part pension which is what? Twenty cents? You forget that superannuation is actually the persons own money and the Government dictates minimum and maximum levels of withdrawal and the maximum level is certainly not hundreds of thousands. Tax free money! All super contributions are taxed going in, even employer contributions.

I don't know any over 65s with a million dollars, we were all to busy educating ourselves and our kids, and guess what, even now many of us have to support our kids in some way either by direct finance or free baby sitting so they can go out and work. Why is it so easy to hit pensioners for what they get after paying tax for 50+ years and forget what they never had access to: First home buyers grant, Baby bonus, was there something for a first baby, unpaid maternity leave knowing you had a job to return to, home insulation grants, job seek, the list goes on. May be you need to work out why you have these perks now and who won them for you.

Frederickof Townsville | 04 October 2011  

Super is a rort all round. Who really believes that this GFC assault is a one-off mistake? My super has gone backwards over the last few years in its industry fund and over the last five years, as I recall, it would have earned more being held as 'cash'.

There are far too many funds, all paying high wages to managers, all investing in exactly the same range of shares.

The ATO could do this, with a single fund, investing in exactly the same non-performing shares everyone else does, and we'd be ahead just on costs saved.

"At two per cent of GDP, $27 billion is a significant spend, falling just short of the $30 billion that goes to the age pension."

That $30 billion figure is the cost to the ATO in providing a free kick to religions in Australia.

Let's start taxing all the free-loaders, including the super rorters as highlighted in this story.

Harry Wilson | 04 October 2011  

There IS a problem here, but I agree with Frederick : you have stated the case simplistically and even misrepresent the numbers, in the way he drew attention to.

Further, the rationale for the concessions is not confined to attempts to limit pensions otherwise payabnle- from a social /economic point of view it provides communal savings that otherwise would not occur - and this provides a large source of investment capital for infrastructure, commercial facilities such as shopping centres etc that otherwise would not occur or come from foreign sources (and hence the earnoings would also go to those sources.

For an individual, the numbers you quote also work the other way- the top few
percent having high super means the great majority do not and hence the largest number of beneficiaries have lower "perks". And as Frederick says- it is our money- saved as deferred income over maybe forty years or even more.Please-, a more balanced argument.

Dennis Green | 04 October 2011  

Thank you. This has to be heard. Again and again.

Sara Dowse | 04 October 2011  

Many people have saved by paying a little more into their super funds whilst others spent the money on cigarettes and beer. There are very few of the so-called super rich and in all fairness, most of them would have paid their fair share of taxes helping to pay for pensions of others. In a modern country, pensions must be gradually be abolished and replaced by effective insurance. In Switzerland for example, most retired people earn actually more than during the working life. They have a mandatory Government controlled old age pension and private run superannuation. It means that people in old age do not depend on handouts from other tax payers. The real injustice in Australia is that many people having worked hard and saved up for their old age are getting less pensions then the person next door who may have spent every cent on booze. Real social justice would be if taxpayers who paid more would get more pensions and not less as promoted by some.

Beat Odermatt | 04 October 2011  

Your statement that income from superannuation is tax free is misleading. The tax has been paid by the superannuation fund if the money received is salary sacrificed. Normal tax rates have applied on pre-tax contributions. Therefore tax has already been paid on superannuation.

Desley Healy | 04 October 2011  

I wonder: why does Eureka Street persist in not identifying Lin Hatfield Dodds as a member of the Greens? Doing so would save a lot of prospective readers a lot of energy. You know, it might even reduce their carbon footprint a tad, if that's at all important.


HH | 04 October 2011  

Very light on facts with misunderstanding of superannuation taxation and the determinants of the size of the balance in any individual superannuation fund. Maybe it could be that those with the biggest funds have worked harder, earned more and paid corresponding higher level taxes for many years. This thesis has some shadows of the flawed old communist manifesto.

john Frawley | 04 October 2011  

Could some knowledgeable person at Eureka Street please write an article on the "Robin Hood Tax" for amateurs like me. It sounds too simple to be viable, but wouldn't it solve the kind of inequity explored here?

mary ellen | 04 October 2011  

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