Super Tax – Possible Changes

By Jason Fittler

When it comes to super, people’s biggest fear is that the government will change the rules. A justified fear given current rumors.

In 2007 the Howard Government passed new rules in regards super. Rules we all currently enjoy and which has seen many people seriously consider super as a long-term investment vehicle.

John Howard's plan was simple, encourage people to save more in super. Reward them in retirement for doing so and at the same time relieve the strain on the public purse as demand for the Age Pension reduced.

This is now being undone. This week rumors have started, that the government is looking to change the rules and move the goal posts for those who they consider to be wealthy; loosely defined as people who have super balances close to a million dollars.

The indication is that that they are looking to attack your super on two fronts:

Let’s put this into perspective:

A couple with a combined super of $1 million could expect $65,000 per annum in income. If they retired at age 60 this would last to, around age 90. 

In the 2011 Census the median average household income was $64,200. When you compare the two and allow for the fact that once retired the couple will no longer be generating any further income, you quickly come to the realization that having $1 million in super does not make you wealthy.

If one of the couple were to die the other person would normally inherit their super bringing their balance up to the $1 million mark. They would now be subject to the new taxes on super, which the government is proposing.

We need to keep in mind that these retirees were not given this money. Super is earned and saved for many decades to achieve a goal of a comfortable retirement and not to be a burden on the government or family.

Instead of thanking these people the government looks to tax them.

If you are getting close to retirement age you should lobby your local member to ensure that these changes do not come in. Remember your super is your money you earned it, you have worked hard all your life and to be asked to continue to pay tax after retirement seem unfairly harsh.

If you are still working and below 50 years old, keep in mind if they change the laws in regards to when you can access your super you will be working longer.

You will have less time in retirement.

Super for most people is their largest investment after their home, if you cannot access it you cannot stop work.

How long do you want to be trapped at work?

Again, speak to your local member.