It's quite simple really ! If you want to retire with enough money to live comfortably you need to ensure you have sufficient funds in your "superannuation pot "to be able to withdraw at an appropriate level during those retirement years. The more salary you contribute while you are working, the bigger the sum available at retirement.
The rules that apply tend to favour high income earners. The tax office encourages contributions to superannuation by allowing them to lower a persons taxable income by excluding such payments from the tax take. Many make what is termed a "sacrifice " by accepting lower take home pay and putting more into their super pot to ensure a better old age - and now we are seeing some prudent people retiring and drawing hundreds of thousands of dollars a year.
A long time ago, whatever we managed to save by way of superannuation was our money, but then the government decided to take a bite out of "lump sum "withdrawals to encourage people to buy an annuity instead. The tax that applies is fifteen percent for sums under three hundred thousand dollars - and thirty percent for bigger amounts.
It seems that the politicians have reached a "political consensus " that the best way to balance the budget would be to take a bit more tax out of superannuation - but excluding the terms that apply to their own pensions of course. These days that is not as generous as of yore. Those who entered parliament before 2004 retire with a "Golden Handshake "which delivers an annual pension of $ 200,000, fully indexed. Those who entered after 2004 get a lesser "Standard " amount - but still generous when compared to what the average citizen receives.
Even a suggestion of changes to the tax applicable to superannuation will make many people uneasy. That seems akin to moving the goal posts in the middle of a game. Many have cheerfully sacrificed their present standard of living to ensure a comfortable old age and now have the prospect of seeing a tax raid on their superannuation pot - and having a comfortable old age snatched away. People who made their retirement plans by taking the superannuation rules into consideration may have taken a different course - perhaps investing in property instead - had these proposed changes been evident.
There seems a degree of "class resentment " in this proposal. Successful people who are big earners and live an opulent lifestyle want that standard of living to continue into retirement - and plan accordingly. Of course they are going to have more money that the little guys down at the bottom of the wage heap and that can be the cause of jealousy and resentment, but interfering with it is something we do at our peril.
If we make it impossible for achievers to comfortably retire and live their final years in Australia they will use the skills that put them in that elevated position to make other arrangements. The money in superannuation pots works hard to finance many aspects of Australian life and should we cause it to be squirrelled away offshore because of punitive taxation this country would be the loser.
There is a view from some in government ranks that those who manage to rise above the herd and either achieve high office - or create an asset that delivers rich rewards - are tall poppies that should be cut down to size. A few other countries with a socialist manifesto have put that into practice - with disastrous results. There is absolutely no doubt that the rich should shoulder their fair share of the tax burden and most would agree that there are many loopholes that should be closed to achieve that end, but imposing penury in retirement will be counter productive.
That is only a very short step away from something we rejected many years ago. It would certainly raise the spectre of the return of " death taxes " !
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