16 March 2023
Throughout my twenty years as a financial planner, a frequent objection to my strategies is, ‘I don’t trust super’. The proposed new taxes from the Labor government further erodes trust in the Australian superannuation system. And in politicians.
‘We’ve said we have no intention of making any super changes. One of the things we’re doing in the election campaign is we’re making all of our policies clear.’
Anthony Albanese, May 2022
Whether or not Labor’s new 30 per cent tax impacts you as an individual, everyone will now be more wary about putting their money into superannuation. I know this because I’ve navigated these conversations with hundreds of people, and the constant tinkering and changes creates worry, stress, and uncertainty.
However, despite what the Australian Labor Party want you to believe, and no matter how much they downplay the changes, this great big new tax isn’t tinkering around the edges. It goes to the very heart of our superannuation system and will prevent many Australians from securing a self-funded retirement.
It’s no laughing matter Julian Hill MP, this is because the socialists deliberately did not index the $3 million level where the tax will kick in. So as inflation occurs, the $3 million will have a reducing present value.
Contrast this with the 1 July 2017 introduction of Morrison’s maximum $1.6 million limit which people could place in pension phase. This limit was indexed and will be moving to $1.9 million in July of this year. That’s 18.75 per cent higher in just 6 years; if the same had applied to $3 million, it would now be $3,562,500.
This illustrates how quickly inflation devalues money.
Let’s say you’re 60 now. If inflation averages 5 per cent over the next 7 years, the $3 million will have a present value of $2,132,044. And if, after the RBA has crushed the economy, the inflation rate then drops to 3.0 per cent, by the time a 50-year-old reaches 67, the $3 million limit will be $1,586,441 today’s dollars. For a 40 year old it’ll be $1,180,461.
Sure, still healthy balances, but not astronomically high.
In fact, it is getting very close to the current asset level where a single non-homeowner can start receiving some aged pension – $846,750. And in twenty years’ time, factoring in increases to the pension eligibility levels, it’ll be lower. The government will be taxing people’s superannuation at 30 per cent, whilst giving them pension payments. Classic socialist Labor.
This bastard move from Anthony Albanese and the ALP is very deliberate. They know full well what they are doing; how could they not? The government’s current proposed legislation on the objective of superannuation gives the game away:
They then define adequacy as ‘to support a minimum standard of living in retirement’.
This is what Labor want the super system to be; something that gives you a minimum standard of living. And as a matter of course, if their new tax is legislated, within a few decades they will have achieved their objective. There won’t be fully self-funded retirees, and everyone will be reliant on at least some payment ‘from’ the government.
Whilst ALP politicians try and make this a class war, the only war going on is between the politicians and the people. Albanese and his pension will not be impacted, many public servants on defined benefits won’t either, but average Australians certainly will.
Unfortunately, the lobby group for most of the actual superannuation funds hasn’t even put out a media release on Labor’s proposed new tax, or worked out what the impacts will be. This could be because the majority of member funds are union funds. But the AFSA show their priority by stating any assessment will factor in ‘importantly, the extent to which the associated tax savings will be used to address the gender retirement gap and to boost super balances for low-income earners’. You can see a list of what I believe to be activist super funds here.
To anyone under 50, your chances of a fully self-funded retirement just got significantly more unlikely.