Government advised to tax ‘rich old men’ to pay for young people

It’s one of the quirks of our superannuation and taxation systems that means those who have amassed a great deal of wealth

It’s one of the quirks of our superannuation and taxation systems that means those who have amassed a great deal of wealth while working make the most substantial tax savings in retirement.

And today respected thinktank, the Grattan Institute, has proposed that this unfair weighting of tax be evened out, proposing that the government reduce tax breaks for “rich old men”.

The institute’s report, Superannuation Tax Targeting, says doing so will add $7 billion to the budget, which would mean young people and low-earners could pay less tax.

Grattan Institute chief executive John Daley said the report’s suggestions were bound to be politically sensitive.

“This is an area where there’s enormous vested interests,” Mr Daley told Fairfax. “Reform is going to be extremely difficult given those vested interests … but the policy arguments are extremely strong.”

The main proposal is to restrict “concessional contributions” made from pre-tax income to $11,000 per year rather than around $30,000 now, News Limited reports.

Secondly, earnings in retirement should be taxed at 15 per cent instead of not being taxed at all.

“For the top 10 per cent of over 60s drawing on super, the tax benefits are extremely generous – they pay no tax on their average super earnings of $85,000 a year,” says the report.

A third proposal is to limit post-tax super contributions to $250,000 over a lifetime rather than $180,000 a year.

As the report says: “We would all like to be rich. But the benefit of higher retirement incomes must be balanced against the costs of achieving them.”

It also found evidence that the top 20 per cent of earners would still be more than comfortable without these tax concessions and caps, and that these people (who are, yes, overwhelmingly men) would still not qualify for the pension.

“People on higher incomes, and those close to retirement, tend to use tax-advantaged savings programs to reduce the tax paid on money they would save anyway,” the authors write.

“For a small proportion of women with higher incomes later in life, the changes would reduce their catch-up contributions.”

But the changes would “reduce far more the tax breaks for a lot of rich old men”.

According to the report, the top 20 per cent of older Australians have assets of $2 million and the wealthiest 20 per cent of households headed by someone over the age of 65 have typically saved enough to generate a substantial retirement income.

Do you think it makes sense for Australia’s wealthiest retirees to pay tax on their retirement earnings? Would you like to see these measures adopted? 

  1. Never been rich, never owned a property so I really can’t comment except …………if I was rick it would be a definite NOoooooo

  2. So does that mean that the rich old lady’s get to keep theirs😉

  3. Pollies first. Get rid of all their stupid perks, and cut their super in half at least and watch how much we will save, and then go after the other weathly ones

  4. What are they going to do after the baby boomers have all gone, the goose that lays the golden eggs?

  5. I think that this will have the exact opposite effect to the one they hope for. People will be discouraged from putting money into super and more encouraged to spend their money now. Therefore they will have less to retire on and maybe more likely to be at some stage dependent on social security. And I am sure that the Politicians super will be exempt. Maybe we should start with their very generous super funds.

  6. LOL I love how the old are going to pay for the young, don’t they know we did that for years while we were working with our taxes, seems we will be doing it till death us do part 🙂

  7. Oh please,how stupid so these rich old guys never paid taxes. If you have worked. And paid taxes wether you ended up at retirement age rich or poor you should be treated the same. Sick of people saying the rich do not need it. they probably don’t, but they have paid a lot more taxes. Time will tell how things play out, requarding paying into a super fund.i will be peeved if they make us use it first

    • But of course they will make you use it first do you know if you are made redundant and you use you redundancy to pay out debt or mortgage centrelink is most displeased they take you reduncy payout figure abd divide it by a sun per week deemed a livable figure regardless of financial obligation abd the result of that mathmatical excercise is the conclusion that you could have kived of it fo X amount of weeks so therefore you are not eligible for centrelink assistance until that time is expired. You do realise that the same thing is going ti haoppen with your super there will ne no luxery iverseas trips or round Australia trips or anything else for the coming generations you will have to put your super into a pension scheme and will be lucky to get a centrelink too up.

  8. I think if thought out properly it would be a great idea and long over due, it would also have to include our RICH OLD POLITICIANS as well including PAST POLITICIANS. Our current TAX SYSTEM obviously doesn’t work because there are so many WEALTHY PEOPLE NOT PAYING THEIR FAIR SHARE OF TAX AND NEVER HAVE!

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