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Blog Post: Raising the Age of Retirement

Emily Morris 15 April 2014 68

I should be up front. I’m one of those people (I imagine and hope we are very few) who spent their twenties and early thirties traveling the world, clocking up a solid log of fabulous experiences; sadly failing to accumulate any superannuation worth bragging about. So for me, I kind of know I’m going to be working, or attempting to work for as long as my bones will hold me up.

My father on the other hand has worked hard for more than 55 years now and at 73 is being forced into retirement, as jobs are hard to come by. All around who love and cherish him tell him he’s earned a break, along with the fairly measly pension that goes with it. But, he wants to keep working because he feels he can, even though he can essentially afford to retire.

With this in mind, I can’t help but wonder how raising the retirement age would actually work. What would it look like? In Singapore, where government supported retirement is nonexistent, there are a plethora of jobs seemingly created for the older generation. Not too physically demanding but enough to keep a small income coming in (in a country where the cost of living is on the increase this hardly covers basic needs, but the idea and infrastructure is there). Yet here we are automating as much as possible. When was the last time anyone saw a tea lady come around the office? Or, a janitor permanently on site to take care of things like spills and basic repair?

I heard something on the radio today about women in their 60s becoming an increasing population within the homeless. Mostly women who have lead their lives traditionally, taking care of a family, raising children, playing by the ‘rules’ – only to be left potentially with a broken marriage, no super and in many cases it would seem, no home. How do we expect these women to work until they’re 70 when they can’t find work in their 60s?

When was the last time your workplace employed someone new to the company who was over 60, or even 55?

To me, this is simply a shift away from paying a pension, toward potentially paying the dole. For people who have worked all their lives, played by the rules and contributed to the economy with taxes and required consumer behaviours, is that really a way for them to end their working lives? Would that merely add a bill for the mental anxiety and depression that would be likely to follow?

This is a cultural change and one that would need incentives for businesses to employ more experienced employees at times when they would traditionally be winding down their working patterns.

It may be a way of the future, but how much would need to change to make it viable? And how do we get onto it? I need to be working for a long time!


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Blog Post: Raising the Age of Retirement
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dungfungus 6:32 pm 24 Apr 14

HiddenDragon said :

From Joe Hockey’s speech to the Spectator magazine gathering yesterday:

“Of Australians over the age of 65, four out of five receive a full or part pension. If we also take into account the concessionary health card then only 14 per cent of older Australians receive no government payments.

At least for the Age Pension, this situation is unlikely to be much different in 2050. Despite spending billions of dollars in taxation benefits for superannuation, by 2050 the ratio of Australians receiving a full or part pension will still be around four out of five.”

From John Hewson, also yesterday (excerpt from AFR article – quoted here – http://www.macrobusiness.com.au/2014/04/john-hewson-end-the-superannuation-rort/):

“It’s worth reconsidering concessions granted for super: they’re as costly as the age pension ($44.8 billion compared to $44.9 billion in age pension), but are growing more rapidly…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners.

Surely, we don’t believe that the top 1 per cent require that much incentive to adequately save for their retirement.

These tax concessions not only skew heavily towards high-income earners: low-income earners are actually penalised for saving (you read that right: penalised)…

As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised.”

Faced with facts like this, it is difficult to escape the conclusion that the superannuation system, as it currently operates, is a very expensive way of taking pressure off the Age Pension.

John Hewson was the opposition leader that lost an election because he couldn’t understand how a GST was going to work so one shouldn’t give his deliberations much credence.
Take a self-funded couple with a SMSF in pension mode with a $1 million balance. If they are both over 65yo they have to draw a mandatory annual pension from the fund of at least 5% of the value of the fund, or $50,000.
This money is tax free taxable income under current legislation but even if it were made taxable and the retirees had no other taxable income they would still not reach the taxable income base for seniors.
The legislation could be changed to make income earned by the fund which is currently tax free taxable but I am sure there would be ways for trustees to minimise this
So, I think Mr. Hockey can forget about fiddling with pensions and funds in retirement mode which leaves only funds in accumulation phase as targets which will simply push the high income earners utilising superannuation contribution concessions back into negative gearing investments.
I still can’t see why negative gearing on property investment (which the exclusive domain of high income earners) is not even being mentioned for review.

Postalgeek 4:33 pm 24 Apr 14

Biggest tip for superannuation: don’t divorce later in life.

Of course, by 2050 I fully expect as an elderly retiree to be have been rendered down as Soylent Green the moment I ceased being productive.

Postalgeek 4:28 pm 24 Apr 14

VYBerlinaV8_is_back said :

dungfungus said :

VYBerlinaV8_is_back said :

All this goes to show is that if you want a comfortable retirement on your own terms, you need to invest substantially during your working life.

You’ve summed it up perfectly. It’s a simple matter of making choices and establishing priorities.

And the part a lot of people forget is that the earlier you start, the less you have to contribute yourself.

Financially, it makes far greater sense to knuckle down in your 20s and work like a dog, then have a decade of stuffing around in your 40s instead.

Or else drink and whore yourself to an early grave. That seems to be an equally valid strategy.

farout 2:55 pm 24 Apr 14

HiddenDragon said :

low-income earners are actually penalised for saving (you read that right: penalised)…

Paying 15% tax in a developed country to support social security for the less well off is too punishing?

HiddenDragon 11:29 am 24 Apr 14

From Joe Hockey’s speech to the Spectator magazine gathering yesterday:

“Of Australians over the age of 65, four out of five receive a full or part pension. If we also take into account the concessionary health card then only 14 per cent of older Australians receive no government payments.

At least for the Age Pension, this situation is unlikely to be much different in 2050. Despite spending billions of dollars in taxation benefits for superannuation, by 2050 the ratio of Australians receiving a full or part pension will still be around four out of five.”

From John Hewson, also yesterday (excerpt from AFR article – quoted here – http://www.macrobusiness.com.au/2014/04/john-hewson-end-the-superannuation-rort/):

“It’s worth reconsidering concessions granted for super: they’re as costly as the age pension ($44.8 billion compared to $44.9 billion in age pension), but are growing more rapidly…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners.

Surely, we don’t believe that the top 1 per cent require that much incentive to adequately save for their retirement.

These tax concessions not only skew heavily towards high-income earners: low-income earners are actually penalised for saving (you read that right: penalised)…

As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised.”

Faced with facts like this, it is difficult to escape the conclusion that the superannuation system, as it currently operates, is a very expensive way of taking pressure off the Age Pension.

VYBerlinaV8_is_back 8:12 pm 23 Apr 14

dungfungus said :

VYBerlinaV8_is_back said :

All this goes to show is that if you want a comfortable retirement on your own terms, you need to invest substantially during your working life.

You’ve summed it up perfectly. It’s a simple matter of making choices and establishing priorities.

And the part a lot of people forget is that the earlier you start, the less you have to contribute yourself.

Financially, it makes far greater sense to knuckle down in your 20s and work like a dog, then have a decade of stuffing around in your 40s instead.

dungfungus 4:02 pm 23 Apr 14

VYBerlinaV8_is_back said :

All this goes to show is that if you want a comfortable retirement on your own terms, you need to invest substantially during your working life.

You’ve summed it up perfectly. It’s a simple matter of making choices and establishing priorities.

VYBerlinaV8_is_back 1:25 pm 23 Apr 14

All this goes to show is that if you want a comfortable retirement on your own terms, you need to invest substantially during your working life.

wildturkeycanoe 8:30 am 23 Apr 14

dungfungus said :

wildturkeycanoe said :

Cripey! You people are talking about superannuation in terms of massive investment opportunities. At the age of forty-odd, I have less than $100k in super, having paid the regulated amounts and lost plenty in the crashes we’ve seen. At retirement, depending on the global economics and my relevant employer’s super scheme, it may be enough to survive maybe five years of retirement. Where do people come up with these millions of dollars of superannuation when a person’s lifetime of total money earned could be less than that let alone their “nest egg”? Stock crashes can cost you your superannuation pension, so where is the government guarantee that all these “investments” will keep them alive till they pass naturally? I have herad first hand how super would have been better off in a bank savings account at 5% interest than in the hands of foreign ownership as is forced upon us, so tell me why shouldn’t there be a safety net for us when we physically can’t use power tools or shovels? I am myself in the situation where I’ll be paying the last pennies off my mortgage at 60, yet I can’t work in a physical trade anymore. Who can afford a mortgage on an unskilled job that doesn’t involve manual labour? If anyone can tell me, please do so now because there won’t be any jobs for 60 to 70 year olds let alone those in their forties right now, unless the government plans ahead for them. You will have school leavers battling for the same job vacancies as their grandparents and guess who will win? This country has gone down the gurgler….

I wish I was forty-odd again with $100K in my super knowing what I know now.
When I was that age I had about $40K in super. I was retrenched so I rolled over my $40K with a large bank who were boasting 40% returns for the previous 12 months. Like a fool I put it all in into their “growth” fund. It very rapidly delivered a “negative return” (superannuation industry code for “loss”).
I then transferred the remaining $25K to their “cash” option only to find out a year later that I copped another “negative return” and when I said how come you have lost money in a cash situation they replied that “cash” in the investment industry meant hedging, futures and other weird things – anything but cash management funds and term deposits (no front end commissions in that stuff).
I then decided to change some priorities in my life with money for retirement (not necessarily superannuation) becoming number one priority as I did not want to be cold and hungry in retirement.
At the same time I gathered as much knowledge as possible about the subject and as soon as could I started a SMSF because retail and other funds do not offer enough choice in investment plans and there is the everpresent risk of “stock market crashes” as you alluded to. It’s all about “trust” and control.
As soon as my home mortgage was paid off I invested all I could into superannuation being careful to stick to term deposits and high interest online savings accounts with preservation of capital until pension time being foremost.
There is a common misconception among retirees that there must be sufficient capital in their fund to generate at least $50k a year in retirement and the capital cannot be touched. In a SMSF in pension mode this would be tax free. At current term deposit/savings rates of about 4.5% one would have to have $1m in their fund to generate this amount and very few people are in this league.
The possibility of interest rates going to 10% is remote and it is likely they will go lower.
There are two choices; namely start drawing down capital (also tax free) to supplement yield (no one lives for ever and you can’t take it with you) and afterall, superannuation is about sustaining a dignified lifestyle in retirement.
The other choice is to wind up your SMSF and invest personally as the tax-free threshold for seniors is about $32K and their is no advantage in having a “tax free” super fund if eanings are below this level. Also, it costs about $3K a year to run a SMSF so this is a significant saving as well.
To supplement income, draw down capital. There is no need to bother Centrelink for an “entitlement”.

I don’t believe SMSFs are appropriate, as the ATO points out on the subject “To establish a viable SMSF that can be competitive with large funds, it is considered that you may need around $200,000 in super savings”. My less than $100k, with a few thousand in fees per annum would quickly dwindle to nothing with my luck on the races. Super funds invest where everybody else does, so I don’t see doing it yourself being a better option than a big business whose main modality is to make money. If they lose it, no doubt all the rest of the investors in the world are going to lose money too.
I won’t have my mortgage paid off until I am past retirement age, by then it is too late to invest everything into super for a quick fix. Yes, I would be able to use what is in super to pay off the remainder of my mortgage, but how to survive after that, with what little I may have acquired from dwindling wages? Even with a SMSF, my remaining say $70k, if invested at an unlikely return of say 10%, taking out $3000 per annum in costs and insurance would return $280,000 by the time I retire in 20 odd years. At that stage, I would still owe $110,000 on the mortgage assuming the current interest rates don’t climb [unlikely] so after paying that off I have $170k left to live on. I have no idea what the cost of living will be like in 20 years, but it sure won’t be as cheap as now and I somehow think less than $200k is not going to last long. A pension is going to be the only way I will survive those last years of my life, with any kind of dignity, unless the home is sold off.
Rough calculations, but I think ballpark it looks like the golden years are going to be a little blemished with some copper and iron.

dungfungus 2:46 pm 22 Apr 14

chewy14 said :

dungfungus said :

chewy14 said :

dungfungus said :

jasmine said :

dungfungus
You are making a few assumptions. I am not being politically tribal on this issue. I was also against the previous government raising the retirement age and against their watered down version of the mining tax. This came after pressure from the mining industry but the Labor Government should have stuck to their guns.

Your analogy of going out and finding a gold nugget is comparing apples and oranges; and is incorrect. I have to pay tax on the value of my nugget and did not ask any assistance from the government to help me find it. I paid for my own pick and shovel and my own petrol (without subsidy). I am also happy to pay tax on the value of my nugget as it pays for hospitals and other essential services.

Contrast with big mining companies who routinely use offshore tax havens and lobby governments for all manner of tax minimisation ‘incentives’ , fuel subsidies and grants. I also don’t have access to government intelligence services to bug foreign cabinet rooms to gain an advantage in my ventures as is the case with some oil and gas negotiations (Timor). I also won’t get a job on a mining company board when I retire as some politicians from both sides of the ideological spectrum.

Yes, the resources may be there for all to extract but a fair taxation regime ensures that all Australians benefit in some way from their country’s resources. Currently most of the mining companies are foreign owned which also means the low-taxed profits are moved offshore.

I specifically said how would you like to share a portion of your NET profit (meaning after you had already paid the mining costs and income tax). That is what the Mining Super Tax is all about – a residual tax levied after normal taxes and royalties are paid.
In claiming you would not get a “petrol subsidy”, I think you are confusing this with the Diesel Fuel Rebate which is waived where agricultural and mining vehicles are exclusively used off road.
A petrol powered hybrid doesn’t fall within this category.
I think you are a little bit paranoid about some of the the other stuff but your heart is in the right place.

Dungfungus,
The difference being that the minerals mined are owned by the states which is different to any other industry.
If you owned a product that you sold to a retailer for $50 which the retailer on sold for $100 do you think you might ask for a higher sale price if that retailer could suddenly sell your product for $200?

There are different methods and taxation systems to ensure that we get maximum value for assets that are owned by us and you can’t compare resource rents with arbitrarily raising taxes on an industry because they’re extremely profitable. You can argue that royalties are a better system if you want but there is a lot economic theory suggesting that they aren’t.

What “difference” are you talking about?
The mining industry does not sell to retailers who on-sell the same product so that argument you are trying to apply is invalid. As far as I am aware, coal and iron ore are sold direct to the end users who use the minerals to produce electricity and steel which then may be sold to retailers.
I wasn’t suggesting that royalties are a better system than “other economic theory” (whatever that may be) but it seems to work OK at present. I think it is levied on volume and not price.

The mining industry are the retailers selling a product owned by the states (us). And yes I know its not really as simple as that because there are massive risks taken by some of these companies in exploration and infrastructure but it is true that we own the product that they are digging up and selling.
I’m not going to argue here about the best forms of taxation for the mining industry (because its beyond my knowledge) but there is a vast amount of research out there comparing various systems of taxation and their distortions of the market and investment decisions made by companies (a google search will find you plenty). It’s not nearly as simple as miners paying royalties and income tax therefore they shouldn’t pay more or pay different amounts under a different system.

I’m totally happy with that.
While we have been sidetracked, Richard Denniss from the leftie-Marxist Australia Insitute has again put the boot into concessions given to retirees (mainly self-funded ones who have “all the wealth” according to Denniss).
What he fails to concede is that contributions tax and fund earning tax has already been paid on the retirement nest eggs that some retirees have but he wants to have them taxed again. Denniss also fails to aknowledge that self-funded retirees save the Commonwealth about $400K in the last 20 years of their life by not claiming the age pension.
I wonder what type of superannuation scheme Denniss has? Whatever it is I’ll bet he doesn’t contribute a cent of his own wages to it.

chewy14 10:40 am 22 Apr 14

dungfungus said :

chewy14 said :

dungfungus said :

jasmine said :

dungfungus
You are making a few assumptions. I am not being politically tribal on this issue. I was also against the previous government raising the retirement age and against their watered down version of the mining tax. This came after pressure from the mining industry but the Labor Government should have stuck to their guns.

Your analogy of going out and finding a gold nugget is comparing apples and oranges; and is incorrect. I have to pay tax on the value of my nugget and did not ask any assistance from the government to help me find it. I paid for my own pick and shovel and my own petrol (without subsidy). I am also happy to pay tax on the value of my nugget as it pays for hospitals and other essential services.

Contrast with big mining companies who routinely use offshore tax havens and lobby governments for all manner of tax minimisation ‘incentives’ , fuel subsidies and grants. I also don’t have access to government intelligence services to bug foreign cabinet rooms to gain an advantage in my ventures as is the case with some oil and gas negotiations (Timor). I also won’t get a job on a mining company board when I retire as some politicians from both sides of the ideological spectrum.

Yes, the resources may be there for all to extract but a fair taxation regime ensures that all Australians benefit in some way from their country’s resources. Currently most of the mining companies are foreign owned which also means the low-taxed profits are moved offshore.

I specifically said how would you like to share a portion of your NET profit (meaning after you had already paid the mining costs and income tax). That is what the Mining Super Tax is all about – a residual tax levied after normal taxes and royalties are paid.
In claiming you would not get a “petrol subsidy”, I think you are confusing this with the Diesel Fuel Rebate which is waived where agricultural and mining vehicles are exclusively used off road.
A petrol powered hybrid doesn’t fall within this category.
I think you are a little bit paranoid about some of the the other stuff but your heart is in the right place.

Dungfungus,
The difference being that the minerals mined are owned by the states which is different to any other industry.
If you owned a product that you sold to a retailer for $50 which the retailer on sold for $100 do you think you might ask for a higher sale price if that retailer could suddenly sell your product for $200?

There are different methods and taxation systems to ensure that we get maximum value for assets that are owned by us and you can’t compare resource rents with arbitrarily raising taxes on an industry because they’re extremely profitable. You can argue that royalties are a better system if you want but there is a lot economic theory suggesting that they aren’t.

What “difference” are you talking about?
The mining industry does not sell to retailers who on-sell the same product so that argument you are trying to apply is invalid. As far as I am aware, coal and iron ore are sold direct to the end users who use the minerals to produce electricity and steel which then may be sold to retailers.
I wasn’t suggesting that royalties are a better system than “other economic theory” (whatever that may be) but it seems to work OK at present. I think it is levied on volume and not price.

The mining industry are the retailers selling a product owned by the states (us). And yes I know its not really as simple as that because there are massive risks taken by some of these companies in exploration and infrastructure but it is true that we own the product that they are digging up and selling.
I’m not going to argue here about the best forms of taxation for the mining industry (because its beyond my knowledge) but there is a vast amount of research out there comparing various systems of taxation and their distortions of the market and investment decisions made by companies (a google search will find you plenty). It’s not nearly as simple as miners paying royalties and income tax therefore they shouldn’t pay more or pay different amounts under a different system.

dungfungus 9:19 pm 21 Apr 14

chewy14 said :

dungfungus said :

jasmine said :

dungfungus
You are making a few assumptions. I am not being politically tribal on this issue. I was also against the previous government raising the retirement age and against their watered down version of the mining tax. This came after pressure from the mining industry but the Labor Government should have stuck to their guns.

Your analogy of going out and finding a gold nugget is comparing apples and oranges; and is incorrect. I have to pay tax on the value of my nugget and did not ask any assistance from the government to help me find it. I paid for my own pick and shovel and my own petrol (without subsidy). I am also happy to pay tax on the value of my nugget as it pays for hospitals and other essential services.

Contrast with big mining companies who routinely use offshore tax havens and lobby governments for all manner of tax minimisation ‘incentives’ , fuel subsidies and grants. I also don’t have access to government intelligence services to bug foreign cabinet rooms to gain an advantage in my ventures as is the case with some oil and gas negotiations (Timor). I also won’t get a job on a mining company board when I retire as some politicians from both sides of the ideological spectrum.

Yes, the resources may be there for all to extract but a fair taxation regime ensures that all Australians benefit in some way from their country’s resources. Currently most of the mining companies are foreign owned which also means the low-taxed profits are moved offshore.

I specifically said how would you like to share a portion of your NET profit (meaning after you had already paid the mining costs and income tax). That is what the Mining Super Tax is all about – a residual tax levied after normal taxes and royalties are paid.
In claiming you would not get a “petrol subsidy”, I think you are confusing this with the Diesel Fuel Rebate which is waived where agricultural and mining vehicles are exclusively used off road.
A petrol powered hybrid doesn’t fall within this category.
I think you are a little bit paranoid about some of the the other stuff but your heart is in the right place.

Dungfungus,
The difference being that the minerals mined are owned by the states which is different to any other industry.
If you owned a product that you sold to a retailer for $50 which the retailer on sold for $100 do you think you might ask for a higher sale price if that retailer could suddenly sell your product for $200?

There are different methods and taxation systems to ensure that we get maximum value for assets that are owned by us and you can’t compare resource rents with arbitrarily raising taxes on an industry because they’re extremely profitable. You can argue that royalties are a better system if you want but there is a lot economic theory suggesting that they aren’t.

What “difference” are you talking about?
The mining industry does not sell to retailers who on-sell the same product so that argument you are trying to apply is invalid. As far as I am aware, coal and iron ore are sold direct to the end users who use the minerals to produce electricity and steel which then may be sold to retailers.
I wasn’t suggesting that royalties are a better system than “other economic theory” (whatever that may be) but it seems to work OK at present. I think it is levied on volume and not price.

chewy14 8:34 pm 21 Apr 14

dungfungus said :

jasmine said :

dungfungus
You are making a few assumptions. I am not being politically tribal on this issue. I was also against the previous government raising the retirement age and against their watered down version of the mining tax. This came after pressure from the mining industry but the Labor Government should have stuck to their guns.

Your analogy of going out and finding a gold nugget is comparing apples and oranges; and is incorrect. I have to pay tax on the value of my nugget and did not ask any assistance from the government to help me find it. I paid for my own pick and shovel and my own petrol (without subsidy). I am also happy to pay tax on the value of my nugget as it pays for hospitals and other essential services.

Contrast with big mining companies who routinely use offshore tax havens and lobby governments for all manner of tax minimisation ‘incentives’ , fuel subsidies and grants. I also don’t have access to government intelligence services to bug foreign cabinet rooms to gain an advantage in my ventures as is the case with some oil and gas negotiations (Timor). I also won’t get a job on a mining company board when I retire as some politicians from both sides of the ideological spectrum.

Yes, the resources may be there for all to extract but a fair taxation regime ensures that all Australians benefit in some way from their country’s resources. Currently most of the mining companies are foreign owned which also means the low-taxed profits are moved offshore.

I specifically said how would you like to share a portion of your NET profit (meaning after you had already paid the mining costs and income tax). That is what the Mining Super Tax is all about – a residual tax levied after normal taxes and royalties are paid.
In claiming you would not get a “petrol subsidy”, I think you are confusing this with the Diesel Fuel Rebate which is waived where agricultural and mining vehicles are exclusively used off road.
A petrol powered hybrid doesn’t fall within this category.
I think you are a little bit paranoid about some of the the other stuff but your heart is in the right place.

Dungfungus,
The difference being that the minerals mined are owned by the states which is different to any other industry.
If you owned a product that you sold to a retailer for $50 which the retailer on sold for $100 do you think you might ask for a higher sale price if that retailer could suddenly sell your product for $200?

There are different methods and taxation systems to ensure that we get maximum value for assets that are owned by us and you can’t compare resource rents with arbitrarily raising taxes on an industry because they’re extremely profitable. You can argue that royalties are a better system if you want but there is a lot economic theory suggesting that they aren’t.

VYBerlinaV8_is_back 8:00 pm 21 Apr 14

milkman said :

NoImRight said :

VYBerlinaV8_is_back said :

NoImRight said :

dungfungus said :

chewy14 said :

Dungfungus,
Your maths was clearly dodgy. You said accumulated $1M in Super not contributed $1M.
And don’t try and bring the capital gains tax for selling within 12 months into this, its obvious you just plucked those two figures out of your posterior to try and back up your point.

Now, with regards to the tax rate of young vs old you still haven’t given a reason why they should be treated differently. Assets are assets and earnings are earnings no matter when they occur. Just because someone is in pension mode is not a reason.

And please outline you logic in regards to how younger people are not paying for well off people giving their children an inheritance with regards to the pension?

Pensioner owns house (large asset). Pensioner receives welfare from the taxes of younger people. Pensioner dies, gives house as inheritance.

I’ll say it again, the pension is welfare. Welfare is a safety net for those who cannot provide for themselves. Why do you support socialist policies redistributing wealth to already well off people who have the means to look after themselves?

I concede a lot of my deliberations are dodgy and I would like to think that people are not abusing the pension system. You are correct in describing it as a safety net but it is not only the “wealthy retired” people that have the opportunity to abuse the system – it happens at all socio-economic levels.
Just remember to that that stereotyped pensioner you constantly refer to has a big house because he raised a big family in it. Is it fair to socially engineer his departure from a place that holds so many memories? It’s a personal heritage to a lot of people and just because you see it as incongruent does not mean your solution is going to suit everyone.
What we have been debating is clearly of no interest to other Rioters (not local enough) so how about we debate the merits (or otherwise) of negative gearing as this is a very Canberra issue.
I believe it is immoral and I challenge those of you who do it to convice me otherwise.

A post I actually agree with mostly. 🙂
Not sure why negative gearing is “immoral”. An investment property is just a business investment. Business owners can claim the same deductions. Do you say its immoral for a plumber to claim the payments on his car lease? How is it any different?

Or is this the ethics of envy?

Changing negative gearing wouldn’t change house prices much, because any loss would be carried forward until the asset was positively geared anyway.

Im not sure we are talking about the same thing? I think you are referring to a property that has a bigger debt than its value. Is that correct? negative gearing is more about claiming expenses to offset some costs in ownership.

There’s been chatter about this issue on the property investment forums recently, and the thinking is that if the laws were changed to prevent negative gearing, the unclaimed losses would be carried forward into future years when the property was making a profit and deducted then (much like capital losses are now). As such, there’d be no meaningful change. This has nothing to do with the value of the property itself.

Is this what you were referring to VYBerlinaV8_Is_back?

Yes.

bigred 6:02 pm 21 Apr 14

dungfungus said :

bigred said :

A lot of incorrect information being spruked here. I wish a few people would learn some facts before engaging keyboard.

I will focus on so called negative gearing. As a wealth building exercise it can be very beneficial if you have spare financial resources, a long term strategy and willingness to actively manage your assets. It also has benefits to government, through providing rental accomodation that it may have to provide otherwise, and carry on its balance sheet. Then there is the issue of property owners who also vote.

What also tends to happen is that as the property owners head towards retirement they liquidate some properties to extinguish ongoing liabilities. I have noticed the 50 something cardigan wearers selling up in preparation for the imminent Hockey Budget and job slashing. Some of these folk are seriously cashed up waiting for the VR tap on shoulder.

Without commenting on the validity or otherewise of your claim that “a lot of incorrect information being spruked (sic) here”, you have at least confirmed my claim that negative gearing (involving residential investment properties) is immoral by citing the “50 something cardigan wearers selling up in preparation for the imminent Hockey Budget and job slashing. Some of these folk are seriously cashed up waiting for the VR tap on shoulder”.
You are obviously referring to the high paid public servant property barons who have not only been paid wages by the ordinary taxpayer but they have had a lot of the tax deducted from their wages returned to them by the ordinary taxpayer thanks to their negatively geared investments.
You are suggesting that now they are cashing in some of their property investments (and will benefit from generous capital gains concessions) while they await equally generous ordinary taxpayer funded voluntary redundancy packages prior to receiving their ordinary taxpayer funded defined benefit pensions.
And people on this thread ignore this situation choosing instead to put the boot into self funded retirees and Gina Reinhart.

Actually, it is the EL1 Cohort who seem to have made serious $$
$

dungfungus 5:06 pm 21 Apr 14

jasmine said :

dungfungus
You are making a few assumptions. I am not being politically tribal on this issue. I was also against the previous government raising the retirement age and against their watered down version of the mining tax. This came after pressure from the mining industry but the Labor Government should have stuck to their guns.

Your analogy of going out and finding a gold nugget is comparing apples and oranges; and is incorrect. I have to pay tax on the value of my nugget and did not ask any assistance from the government to help me find it. I paid for my own pick and shovel and my own petrol (without subsidy). I am also happy to pay tax on the value of my nugget as it pays for hospitals and other essential services.

Contrast with big mining companies who routinely use offshore tax havens and lobby governments for all manner of tax minimisation ‘incentives’ , fuel subsidies and grants. I also don’t have access to government intelligence services to bug foreign cabinet rooms to gain an advantage in my ventures as is the case with some oil and gas negotiations (Timor). I also won’t get a job on a mining company board when I retire as some politicians from both sides of the ideological spectrum.

Yes, the resources may be there for all to extract but a fair taxation regime ensures that all Australians benefit in some way from their country’s resources. Currently most of the mining companies are foreign owned which also means the low-taxed profits are moved offshore.

I specifically said how would you like to share a portion of your NET profit (meaning after you had already paid the mining costs and income tax). That is what the Mining Super Tax is all about – a residual tax levied after normal taxes and royalties are paid.
In claiming you would not get a “petrol subsidy”, I think you are confusing this with the Diesel Fuel Rebate which is waived where agricultural and mining vehicles are exclusively used off road.
A petrol powered hybrid doesn’t fall within this category.
I think you are a little bit paranoid about some of the the other stuff but your heart is in the right place.

jasmine 3:23 pm 21 Apr 14

dungfungus
You are making a few assumptions. I am not being politically tribal on this issue. I was also against the previous government raising the retirement age and against their watered down version of the mining tax. This came after pressure from the mining industry but the Labor Government should have stuck to their guns.

Your analogy of going out and finding a gold nugget is comparing apples and oranges; and is incorrect. I have to pay tax on the value of my nugget and did not ask any assistance from the government to help me find it. I paid for my own pick and shovel and my own petrol (without subsidy). I am also happy to pay tax on the value of my nugget as it pays for hospitals and other essential services.

Contrast with big mining companies who routinely use offshore tax havens and lobby governments for all manner of tax minimisation ‘incentives’ , fuel subsidies and grants. I also don’t have access to government intelligence services to bug foreign cabinet rooms to gain an advantage in my ventures as is the case with some oil and gas negotiations (Timor). I also won’t get a job on a mining company board when I retire as some politicians from both sides of the ideological spectrum.

Yes, the resources may be there for all to extract but a fair taxation regime ensures that all Australians benefit in some way from their country’s resources. Currently most of the mining companies are foreign owned which also means the low-taxed profits are moved offshore.

dungfungus 12:47 pm 21 Apr 14

jasmine said :

It’s a terrible idea and one that has been introduced to replace the Age Pension with Newstart with full knowledge of the risk employers won’t generally hire older people. Unless the government creates incentives for employers or creates age-specific jobs I can forsee a rise in approaches to charity groups. Both the ALP and Coalition sprout job creation. I can’t see how raising the pension age will assist with that aim. People who are able and who want to work longer already can.

In the near future there will be many women who left the workforce for a time to raise children reaching retirement age. There are also people who started working when superannuation was not compulsory and it was only executives and public servants who enjoyed the benefits. I remember in the 80s people got paid out their Super when they left the APS.

Designing a Budget should not only be about savings but about doing what’s fair especially when one contrasts the level of middle class welfare and corporate welfare that is often handed out. While the Coalition is cutting corporate welfare (when it suits) it is increasing middle class welfare. What are governments for? Shouldn’t governments also work for the greater benefits to the community ensuring safety nets which ultimately benefit the whole community. One only has to visit the USA to see the effects of wage disparity and an unregulated labour market. It seems an odd choice of this government to think about raising pension eligibility while working hard against new taxes such as the Super Profits Mining Tax which would also distribute the benefits of Australian resources more fully to its citizens.

I was thinking “this post makes a lot of sense”.
Well, up to a point it does. For example, it is meaningless to use comparisons of what happens in other countries without examining other factors.
You refer to the word “choice” when you disagree with the government’s policy to raise pension age and at the same time abandon the Super Profits Mining Tax. You forget that the previous government raised the pension age as a matter of policy and they also introduced the Mining Tax which is costing more to administer that it collects. Are you happy to have part of your taxes continue to subsidising a loss making policy? I’m not.
Regarding “Australian resources”, they are there for all to extract. You can go out with a pick and shovel and look for wealth the same as the big mining companies do but I’ll bet you wouldn’t thnk it was fair if you found a huge gold nugget only to be told by the government that you had to share a portion of the net profits with all other Australians who gave you no support in your mining venture.

dungfungus 11:35 am 21 Apr 14

wildturkeycanoe said :

Cripey! You people are talking about superannuation in terms of massive investment opportunities. At the age of forty-odd, I have less than $100k in super, having paid the regulated amounts and lost plenty in the crashes we’ve seen. At retirement, depending on the global economics and my relevant employer’s super scheme, it may be enough to survive maybe five years of retirement. Where do people come up with these millions of dollars of superannuation when a person’s lifetime of total money earned could be less than that let alone their “nest egg”? Stock crashes can cost you your superannuation pension, so where is the government guarantee that all these “investments” will keep them alive till they pass naturally? I have herad first hand how super would have been better off in a bank savings account at 5% interest than in the hands of foreign ownership as is forced upon us, so tell me why shouldn’t there be a safety net for us when we physically can’t use power tools or shovels? I am myself in the situation where I’ll be paying the last pennies off my mortgage at 60, yet I can’t work in a physical trade anymore. Who can afford a mortgage on an unskilled job that doesn’t involve manual labour? If anyone can tell me, please do so now because there won’t be any jobs for 60 to 70 year olds let alone those in their forties right now, unless the government plans ahead for them. You will have school leavers battling for the same job vacancies as their grandparents and guess who will win? This country has gone down the gurgler….

I wish I was forty-odd again with $100K in my super knowing what I know now.
When I was that age I had about $40K in super. I was retrenched so I rolled over my $40K with a large bank who were boasting 40% returns for the previous 12 months. Like a fool I put it all in into their “growth” fund. It very rapidly delivered a “negative return” (superannuation industry code for “loss”).
I then transferred the remaining $25K to their “cash” option only to find out a year later that I copped another “negative return” and when I said how come you have lost money in a cash situation they replied that “cash” in the investment industry meant hedging, futures and other weird things – anything but cash management funds and term deposits (no front end commissions in that stuff).
I then decided to change some priorities in my life with money for retirement (not necessarily superannuation) becoming number one priority as I did not want to be cold and hungry in retirement.
At the same time I gathered as much knowledge as possible about the subject and as soon as could I started a SMSF because retail and other funds do not offer enough choice in investment plans and there is the everpresent risk of “stock market crashes” as you alluded to. It’s all about “trust” and control.
As soon as my home mortgage was paid off I invested all I could into superannuation being careful to stick to term deposits and high interest online savings accounts with preservation of capital until pension time being foremost.
There is a common misconception among retirees that there must be sufficient capital in their fund to generate at least $50k a year in retirement and the capital cannot be touched. In a SMSF in pension mode this would be tax free. At current term deposit/savings rates of about 4.5% one would have to have $1m in their fund to generate this amount and very few people are in this league.
The possibility of interest rates going to 10% is remote and it is likely they will go lower.
There are two choices; namely start drawing down capital (also tax free) to supplement yield (no one lives for ever and you can’t take it with you) and afterall, superannuation is about sustaining a dignified lifestyle in retirement.
The other choice is to wind up your SMSF and invest personally as the tax-free threshold for seniors is about $32K and their is no advantage in having a “tax free” super fund if eanings are below this level. Also, it costs about $3K a year to run a SMSF so this is a significant saving as well.
To supplement income, draw down capital. There is no need to bother Centrelink for an “entitlement”.

jasmine 10:02 am 21 Apr 14

It’s a terrible idea and one that has been introduced to replace the Age Pension with Newstart with full knowledge of the risk employers won’t generally hire older people. Unless the government creates incentives for employers or creates age-specific jobs I can forsee a rise in approaches to charity groups. Both the ALP and Coalition sprout job creation. I can’t see how raising the pension age will assist with that aim. People who are able and who want to work longer already can.

In the near future there will be many women who left the workforce for a time to raise children reaching retirement age. There are also people who started working when superannuation was not compulsory and it was only executives and public servants who enjoyed the benefits. I remember in the 80s people got paid out their Super when they left the APS.

Designing a Budget should not only be about savings but about doing what’s fair especially when one contrasts the level of middle class welfare and corporate welfare that is often handed out. While the Coalition is cutting corporate welfare (when it suits) it is increasing middle class welfare. What are governments for? Shouldn’t governments also work for the greater benefits to the community ensuring safety nets which ultimately benefit the whole community. One only has to visit the USA to see the effects of wage disparity and an unregulated labour market. It seems an odd choice of this government to think about raising pension eligibility while working hard against new taxes such as the Super Profits Mining Tax which would also distribute the benefits of Australian resources more fully to its citizens.

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