Super for some, unfair for others

It is a truism of public life that baby boomers won't stand for the frugal retirement lifestyle of their parents' generation.

Not for the MasterChef crowd the buffet at Sizzlers or the $9 dinner at the Catholic Club nor could the world-travelled, bungie-jumping boomers be expected to suffer the boredom of the central coast holiday that gratified their mums and dads.

The Minister for Financial Services and Superannuation, Bill Shorten, has summed up this attitudinal change in a speech to the superannuation industry: "Like Oliver, they want more and we are here to supply it." If only every Australian demanding more from the government were so lucky.

An international survey by the financial services company Mercer this week rated Australia's retirement income system as second only to the Netherlands. But Mercer overlooks the inequities and unfairness of the superannuation system.

Australian taxpayers contribute $27 billion a year in superannuation tax concessions that enable some retirees, whose homes are paid off and children gone, to enjoy a tax-free income higher than that earned by many people with young children, and mortgages and tax to pay.

At a time when acrimony and bitter division are the hallmarks of Australian politics, superannuation is the great unifier. All the major players - Labor, the Coalition, the unions, the big end of town - defend the merits of our superannuation system.

Few question why the right to a ''comfortable'' retirement, which the superannuation industry defines to include regular restaurant meals, private health insurance and an overseas holiday every five years, has become a moral imperative. Few ask why the government subsidies underpinning the superannuation system go disproportionately to the better-off.

The demands of baby boomers to continue to live the good life in retirement have trumped the demands of millions of others in the community who lead impoverished lives. Low-wage workers, including many baby boomers who could have done with more money when they were younger people with disabilities, single mothers, carers of the elderly and disabled, have learnt, as Shorten said of the baby boomer retirees, to "expect more" than their parents' generation did.

But the government has felt no compunction to lift government payments and concessions to the point where Australia's poor and low-wage earners can enjoy an occasional overseas holiday and regular restaurant meals. Perhaps they are not seen as being greedy enough.

People on the disability support pension are expected to live on $19,000 a year those on sickness benefits survive on $12,000 while a hairdresser budgets on $37,000 and a childcare worker on $42,000. Someone on the age pension gets by on about $19,000.

The Association of Superannuation Funds of Australia says a "comfortable" retirement requires a tax-free income of about $40,000 for a single and $55,000 for a couple a premise the government appears to have accepted without question. It is hardly a fortune but governments have privileged the retirees above others more needy and equally deserving of a "comfortable" lifestyle.

Few understand how our superannuation system works. Who grasps what the Treasury itself has noted - that 37 per cent of the tax concessions that underpin the system go to the richest 5 per cent of Australians?

Because ordinary workers get a meagre benefit from the system, it has blinded them to the fact that the "tax effectiveness'' of super is most stark for those on incomes of $180,000 and more those who earn up to $37,000 get nothing, although in a token gesture, a small tax rebate is planned for 2013-14.

A submission to the recent tax summit that deserves more exposure was from UnitingCare Australia. Written by Richard Denniss and David Baker, of The Australia Institute, and titled What Price Dignity? it explains the system this way: "If taxpayer support for superannuation was provided in the form of annual cheques rather than less transparent tax concessions a person earning $30,000 per year would receive a cheque for $0.00 while someone making the compulsory 9 per cent contribution on an income of $200,000 per year would receive a cheque for $5,400 each year."

This is because all income put into superannuation is taxed at a flat rate of 15 per cent. Lower income earners on a marginal tax rate of 15 per cent gain no concessions when compelled to put 9 per cent of their salary into super, while high-income earners on a marginal rate of 45 per cent make a major saving.

As well, retirees aged 60 and over pay no tax on their super income and payouts which means very rich people live tax-free because of their age and because they have no taxable income they can qualify for concessions meant for poorer people such as the $800 a year seniors supplement to cover utilities, and the seniors health care card.

Australia needs a fairer retirement income system over-generous tax concessions to the relatively well off are unnecessary when contributions are compulsory anyway.

And because John Howard made age pension income and assets tests so generous, the super system has failed to take pressure off the aged pension.