Cross one leg over the other, gently tap just below the elevated kneecap and the lower leg should kick up. It’s a reflex action – as automatic and unthinking as the Opposition Leader immediately impersonating Chicken Little at the merest hint of a tax lurk possibly facing attempted reform at some unspecified time in the future.
Cue Peter Dutton’s reaction this week to the government releasing a consultation paper on possible wording to define the purpose of superannuation.
“The sky is falling!” Mr Dutton squawked. “Labor will steal your kidney fat! More tax! More tax! More tax!”
OK, maybe not the sky or the kidney fat bit, but certainly the knee-jerk it’s “all code for more tax”.
Thus the predictable ground is marked out for all attempts at improving Australia by changing bad revenue-related policies.
No matter how harmful it might be for the Commonwealth, any individual or sector rolling in an iniquitous tax break will have the privilege defended under the lie that anything that might result in increased revenue is “more tax” and therefore evil.
And note that the example provided by Mr Dutton this week is his reaction to only the first step towards a motherhood definition of superannuation’s purpose, something that has been on the agenda since the Murray review recommended it nine years ago.
Our exploited super system
If the Coalition hadn’t been so conflicted, it would have done the job when it had the chance.
The telling thing about the Dutton reaction, though, is that it effectively acknowledges our superannuation system has been ruthlessly exploited. No surprise.
Just the idea of defining the healthy purpose of super is enough to cause Coalition panic, because everyone knows it will create an invidious comparison with the unhealthy purpose it has been put to by those with the means to do so.
Disclosure: I’m rolling in over-generous superannuation. The Pascoe family super fund unfortunately is not one of 32 accounts holding more than $100 million, but it is more than merely comfortable. Sensible reform would see me a little less well off, but sensible reform would end up benefitting society overall, of which I am a member.
An iniquitous tax system that overwhelmingly entrenches wealth increases inequality and, if it continues on the path of the neoliberal ‘trickle down’ lie, ends up damaging society by failing to sufficiently provide for it.
The bigger problem exemplified by Mr Dutton’s “more tax!” reflex is that if something as reasonable as superannuation reform can’t be supported, what chance is there for broader and more difficult reform?
Quick example before I get to the bigger point: The dogs are barking that there will be a push to limit individuals’ super to $5 million – any more than that would need to be withdrawn from the world’s best tax haven and take its chances in the wild.
Does that sound like hardship for the 11,000 or so super funds that would be affected?
In pension phase, i.e. when the fund is being used for what it should be used for, a 70-year-old with $5 million in super is required to withdraw 5 per cent – $250,000.
The $250,000 is tax free. To take home that much, ordinary folk would need a pre-tax income of $417,000 – which is getting close to the median taxable income of the top 1 per cent of taxpayers.
And super funds tend to earn 5 per cent without sweating, so paying out that much in tax-free pension isn’t eating away at capital either – the golden goose keeps laying.
So any poor diddum with, say, $6 million in super who is forced to deploy $1 million of it in a way that might be taxed at the going rate will still be creaming it with ‘only’ $5 million in the tax haven.
There is, of course, much more detail in any superannuation example, but you get the drift.
The bottom line is that those with the ability to save millions in superannuation are being looked after extremely well, while ordinary wage slaves without that ability should know their place.
The right place to start
The promised bigger point is that our taxation system has other lurks that unfairly benefit wealth.
Morningstar Australia’s editorial director Graham Hand has penned a column in defence of the $5 million-plus super club.
In my opinion, his main beef is that there are other lurks that are at least as generous, specifically including the tax-free profit made on investing in one’s primary residence.
And, in my opinion, Mr Hand doesn’t demonstrate that reforming the superannuation tax haven is unfair, only that we need more tax reform, including taxing all capital gains.
“Thing A is crook. Thing B also is crook, therefore Thing A is OK.” Nah, doesn’t wash.
The principle being suggested for superannuation – defining what it is for – needs to be extended to the rest of our tax system.
Our present mountain of tax law and regulation is a piecemeal hodge-podge full of contradictions and inequities. Setting out guiding principles, now that we’re over the great neoliberal lie, would form the basis of genuine reform.
As someone else has written, every attempt at tax reform starts with the vintage line about the Irish farmer’s reply to the English motorist asking about the best way to get to Dublin: “Oh, I wouldn’t start from here.”
Establishing clear, legislated principles would provide the starting point.
Meanwhile, the ATO has been picking away around the edges of the damage done by various governments, but especially the Howard/Costello regime, some of which was so incredibly stupid as to spark conspiracy theories as an alternative to incompetence.
Unsurprisingly, it was Howard/Costello who right-royally rorted superannuation. I’ve sometimes wondered if the duo just wanted to ensure they would be popular at the golf club in their retirement.
There is no alternative starting point than here. Defining purpose, establishing principles, is the start.
