Labor drops the ball on super
The Labor Party's policy on superannuation once reflected a vision for Australians to be self-sufficient in retirement, but has since become an act of 'political window dressing'.
That would be the current government, of the same political persuasion as the one headed by Paul Keating who, 21 years ago, had the vision to introduce a compulsory a superannuation scheme.
Since then that industry has grown to be a $1.5 trillion behemoth, and, with the super levy rising from 9% to 12% over the next few years, can only keep growing exponentially.
With such dollars in the back pocket, the super industry does have political clout, especially with the trade unions (the industrial wing of the labor movement) having such a vested interest in the system.
So wonder why we see a constant source of tinkering and attention? I know I do.
To put that into some sort of perspective, it means, you, me and every hardworking Australian are contributing now to consolidated revenue through super. Don’t believe me? Read this.
“Most superannuation is concessionally taxed at a flat rate of 15% at two major intervals: 1) contributions, and 2) on earnings. The Capital Gains Tax component within the fund is taxed at a flat rate of 10% if the assets are held for longer than 12 months. Contributions in the form of employer superannuation payments, or if the member salary sacrifices, are taxed at this rate also.
“With regards to industry funds, the earnings tax is paid before profits are disbursed to members, so it appears as a lower level of interest on the member's statement. Members can also contribute funds into their super after income tax has been paid on it; in this case they are not liable for 15% contributions tax and may be eligible to receive a matching contribution from the government depending on income”.
What does this mean in dollars and cents? These taxes contribute over a whopping $6 billion in annual government revenue. Right now.
So the system is contributing. But that doesn’t mean superannuation shouldn’t enjoy tax breaks; if we want people to be self sufficient in retirement, that’s what’s required.
Which brings me to the recent announcement by the Minister for Financial Services, Bill Shorten, and the Treasurer, Wayne Swan. Various changes have been mooted. I could go into detail about these changes but suspect you are already across the details, and if you are not, it’s because you are like me and believe they are unlikely to see the light of day.
The federal election in September is more than likely to put paid to that.
But it is worth pondering the opening lines of the Ministers’ joint statement. “The Gillard Government today announced reforms to improve the fairness, sustainability and efficiency of the superannuation system.
“Labour is the party of superannuation – we established it, we have nurtured it and grown it, and we will protect it.”
So that is what all the turmoil of the past few months has been about? “Improving fairness, sustainability and efficiency;” demonstrating that “Labor is the party of superannuation”.
Well, I beg to differ. Labor was the party of superannuation. That was when people such as Keating and former ACTU secretary Bill Kelty had a vision for all Australians – to be self sufficient in retirement.
Today, it’s all about political expediency and trying (desperately) to keep the budget deficit to something that’s politically saleable.
It is simply political window dressing. It will be up to a Coalition government to return to the words of this government, restore real fairness, sustainability and efficiency to super.
Or will they find, like Labor, it’s a $1.5 trillion cookie jar that’s just too tempting.
About Chris Saunders
Chris is one of the co-founders of Instreet Investments Limited. A former Australian Rugby Sevens and NSW 1st XV Representative, Chris spent his off-field career in the financial industry, having spent over 20 years of diverse experience within the financial markets, funds management and financial services industries.
Chris spent 10 years in financial markets trading 90 Day Bank Bills, 10 and 3 year bonds on the Sydney futures exchange, for both boutique and institutional organizations. He has worked as a financial planner with Apogee FP, and since 2001 has held senior positions with Citicorp, Zurich Financial Services and Wilson HTM.
More recently Chris was CEO for a boutique financial planning business with assets totaling $2b and was Head of Private Wealth Management for Wilson HTM, responsible for the Financial Advisory and Financial Investment businesses.