The latest ideas to use super to buy homes are still bad ideas

Treasurer Scott Morrison wants to use the May budget to ease growing community anxiety about housing affordability. Lots of ideas are being thrown about: the test for the Treasurer is to sort the good from the bad. Reports that the government was again considering using superannuation to help first homebuyers won’t inspire confidence. The Conversation

It’s not the first time a policy like this has been floated within government. While these latest ideas to use super to help first homebuyers are marginally less bad than proposals from 2015, our research shows they still wouldn’t make much difference to housing affordability. Read more...

The government shouldn’t use super to help low-income savers

Compulsory superannuation payments help many middle-income earners to save more for retirement, but super is simply the wrong tool to provide an adequate support for low-income earners. Our analysis shows top-up measures targeted at helping this group save for retirement are poorly targeted and an expensive way to do so.

Australia’s superannuation lobby wants the government to define in law that the purpose of Australia’s A$2 trillion super system is to provide an adequate retirement income for all Australians. The government disagrees: it confirmed instead that the purpose of super is to supplement or substitute for the Age Pension. Read more...

The superannuation myth: why it’s a mistake to increase contributions to 12% of earnings

The Conversation, superannuation, non-super savings, savings outside super, retirement savings, 12% superannuation guarantee, mistakeSo much of the national conversation about superannuation simply assumes that “savings for retirement” is synonymous with “superannuation savings”. This is a big mistake.

This mistake partly explains why we got into such a mess with excessively generous tax breaks for super. It also underlies misguided plans to increase superannuation contributions to 12% of earnings.

Super doesn’t equal retirement savings

Any sensible conversation about superannuation policy must start by recognising how households save for retirement, and why. Read more...

A super test for Australia’s political system

The Conversation, superannuation, Budget 2016, Budget 2016/17, LaborIn the past week, both major parties have made welcome, albeit tentative, commitments to tackle much-needed budget repair. The Turnbull government has moved quickly to lock in budget savings that Labor supported in the federal election campaign. Now Labor has signalled its support for the bulk of the government’s proposed changes to superannuation tax breaks, while proposing some extra budgetary savings of its own.

The ALP has endorsed the main elements of the government’s package of reforms to super tax breaks. It has accepted the government’s moves to tighten the annual cap on pre-tax super contributions to A$25,000 a year, and to put a A$1.6-million cap on tax-free super earnings in retirement. Read more...

Tax-free super is intergenerational theft

The Conversation, Budget 2016 super changes, transition to retirement pensions TTR TRISA number of politicians have struggled this week to explain the Turnbull Government’s proposed changes to superannuation. Given the complexity of the area, that’s not surprising. And this complexity explains why intergenerational “theft” through superannuation has continued for so long.

Transition to retirement (TTR) provisions, introduced by the Howard Government in 2005, were supposed to encourage people to keep working part-time rather than stopping work entirely. Yet most people using a TTR pension have continued to work full time. In practice the provisions have simply been a gift enabling older people to pay less tax than younger people on similar incomes. Read more...

‘Who loses most’ is not always the right question

The Conversation, Federal Budget 2016/17, Budget 2016, superannuation changes, women, NATSEM modellingAny change in taxation invariably raises questions about distribution. Who loses, who wins – and who loses most – will always be an issue. But such analysis should be applied with care, lest it miss the bigger picture.

For example, a new report by the National Centre for Social and Economic Modelling (NATSEM) is said to show that women would be the hardest hit by the Government’s super changes. But taking a step back it is clear that the Government’s super changes will overwhelmingly affect rich old men, while better targeting super tax breaks at the objective of superannuation. Read more...

Super contribution cap changes could end up benefiting the rich

The Conversation, Federal Budget 2016/17, Budget 2016, superannuation, contribution capThe superannuation changes announced in last week’s federal budget will better target super towards its core purpose of supplementing the Age Pension. But in such a complex area as super, appearances can deceive. Parts of the budget package may make the system even more generous to high-income earners – and more expensive for the government.

Carry forward won’t help women and carers to ‘catch up’

Under the plan, people will be able contribute more to their super when they have not reached their pre-tax contributions cap in previous years. Taxpayers with a super balance of less than A$500,000 will be able to draw on unused caps from the previous four years to make “catch-up” contributions. Read more...

‘Retrospective’ claims on super changes are a furphy

The Conversation, Budget 2016, retrospective changes to superannuation a furphyIn his budget reply speech this week, Opposition leader Bill Shorten said Labor had “very grave concerns about retrospective changes” to superannuation being proposed by the government. The superannuation industry has been even more vociferous. But labelling the changes as “retrospective” in this case is a furphy.

For a decade, some older savers have benefited from superannuation tax breaks that did little to help younger generations. Understandably, they want to keep receiving these benefits. But they are wrong to claim the government’s proposed superannuation changes are retrospective simply because they adversely affect the future returns on their savings. Read more...