Is a person who has $1 million in superannuation really ‘extravagantly wealthy’? And is a person who earns $240,000 a year in the same bracket? Both are being declared fabulously wealthy by long-serving politicians and pubic servants who first carefully feathered their own personal superannuation nests so they would not be affected by their planned raids on the so called ‘wealthy’ outside the public service and political class.
Let’s look at the ”millionaires” first. In terms of spending power, $1 million will buy you a lot of holidays, a good car and pay off mortgages. It represents a very large amount of immediate spending power not available to the vast majority of people.
But what $1 million in a super fund will NOT do is provide you a lifetime pension that is worthwhile, assuming you live well into your 80s and 90s.
In simple terms a 5 per cent return on $1 million provides you with an income of $50,000 a year. Sure, you can punt the stock market and that may lift your returns but it might also reduce them. You can live on $50,000 a year but you are certainly not extravagantly wealthy.
Moreover that $50,000 income will decline with inflation so in time you will have to dip into your savings just to maintain the purchasing value.
Unless you have other forms of income the person or couple currently aged around 60 with $1 million dollars will be forced onto the aged pension in their 80s or 90s. And that is exactly what is set to happen to the majority of people who have lesser superannuation sums, which is why many plan to work well into there 70s.
Yet it is people with $1 million in super, who are trying to not rely on the public pension, that some government politicians reckon should be targeted because of their ‘extreme wealth’. If the politicians and public servants set the tax attack trigger at $2 million in a superannuation fund they would be on much stronger grounds.
Senior long-serving public servants and politicians have lifetime indexed pension schemes that make most worth at least $5 million and often $10 million plus. Moreover as soon as there was a whiff of a planned raid on private superannuation the government politicians declared their own and public servant pensions would remain tax-free.
In my view if $50,000 (5 per cent of $1 million) is to be declared fabulously wealthy by the current crop of government politicians and public servants then all public servant and politician pensions above $50,00 a year should be taxed at 46 per cent. And given they saved only token amounts to create these fabulous pensions (which are nothing better than a crude tax rort) maybe there should be a penalty placed on them.
Currently Australian federal and state public servants and politicians have an unfunded liability above $200 billion making this the biggest tax minimisation scheme in the country.
A high tax on the public service pensions above $50,000 should cut the shortfall.
There are some signs that the politicians and public servants are starting to realise that their planned vicious attack on those who are actually trying to get off the pubic purse will back fire on the free loaders in the political and public servant ranks.
So now the government is thinking about attacking those who are on salaries of $240,000 or more. The politicians are obviously oblivious to Australian mortgage costs, but they don’t have to worry because they have looked after themselves.