Latest news with #Breunig
The Age
17 hours ago
- Business
- The Age
The act of bastardry that's hurting young generations
So post-tax income and pension payments have gone up relative to the overall population, but not all parts of the population. Older Australians have a post-tax income one-third higher than someone aged between 18 and 30. They used to be around the same. The change has been caused by more tax on the younger cohort and less tax (and larger income streams) for the older bunch. Before the turn of the century, retirees received relatively little in the way of income, relying largely on the age pension to get by. Superannuation was created to ensure older people did not have to rely on government support. It was all aimed at giving retirees dignity in their later years. But along the way, it's gone way beyond dignity. In too many cases, it's become estate planning, tax management or wealth transference. The average 60-ish retiree drawing tax-free income from their super plus a bit of the age pension is getting the same income as an average working 40-year-old. But the spending pressures on a retiree and someone in their early 40s are very different. The retiree doesn't face the 'pressures of saving for the future or supporting a growing family'. They've probably paid off their mortgage while they spend far less than someone of working age. One of those saving pressures is finding a deposit for a home. In 1990, to buy a median-priced house in Sydney required almost seven times the median income. It's now more than 13 times the median income. That's a big factor in the collapse in home ownership among under-35s. That fall in ownership is one of the factors contributing to the drop-off in fertility rates among younger couples. We're asking younger Australians to pay huge amounts for their higher education, leaving many in debt for longer (another issue making it more difficult for this group of people to save for a deposit). Breunig and his team point out that we have a tax and welfare system which rewards people who move their wealth into income-generating low- or no-tax asset classes. About two-thirds of income is captured by the tax system. That's great if you have assets not attracting tax. But for those who don't, like most people under the age of 40, that translates into paying more tax. And that tax is probably going towards services (the health system, aged care) used by older Australians. This is why Breunig and his team believe the intergenerational contract is broken. 'The current tax and transfer system, with its growing obligations to the growing cohort of older Australians and shrinking resources from which to meet those obligations, is spiralling down and unsustainable,' they found. To resolve this problem, you could slash spending. The second-largest expense for the federal budget is the age pension, at $66 billion a year. That's followed by the NDIS ($51 billion), aged care services ($41 billion), medical benefits ($35 billion) and assistance to the states to run their hospitals ($34 billion). Loading The largest expense in the budget world is actually the GST at $101 billion, which goes straight out the door, mostly to fund state hospitals. Combined, that's about 40 per cent of the budget, much of which flows to the old, the sick, the disabled and the young. Another option is to increase taxes on older Australians. That would be the bunch of politically important voters who have managed to move the tax system in their favour over the past 30 years. The economic roundtable was all about finding ways to lift our nation's collective living standards while also fixing the budget bottom line. When it came to tax, the usual ideas such as company tax or the GST dominated discussion.
Sydney Morning Herald
17 hours ago
- Business
- Sydney Morning Herald
The act of bastardry that's hurting young generations
So post-tax income and pension payments have gone up relative to the overall population, but not all parts of the population. Older Australians have a post-tax income one-third higher than someone aged between 18 and 30. They used to be around the same. The change has been caused by more tax on the younger cohort and less tax (and larger income streams) for the older bunch. Before the turn of the century, retirees received relatively little in the way of income, relying largely on the age pension to get by. Superannuation was created to ensure older people did not have to rely on government support. It was all aimed at giving retirees dignity in their later years. But along the way, it's gone way beyond dignity. In too many cases, it's become estate planning, tax management or wealth transference. The average 60-ish retiree drawing tax-free income from their super plus a bit of the age pension is getting the same income as an average working 40-year-old. But the spending pressures on a retiree and someone in their early 40s are very different. The retiree doesn't face the 'pressures of saving for the future or supporting a growing family'. They've probably paid off their mortgage while they spend far less than someone of working age. One of those saving pressures is finding a deposit for a home. In 1990, to buy a median-priced house in Sydney required almost seven times the median income. It's now more than 13 times the median income. That's a big factor in the collapse in home ownership among under-35s. That fall in ownership is one of the factors contributing to the drop-off in fertility rates among younger couples. We're asking younger Australians to pay huge amounts for their higher education, leaving many in debt for longer (another issue making it more difficult for this group of people to save for a deposit). Breunig and his team point out that we have a tax and welfare system which rewards people who move their wealth into income-generating low- or no-tax asset classes. About two-thirds of income is captured by the tax system. That's great if you have assets not attracting tax. But for those who don't, like most people under the age of 40, that translates into paying more tax. And that tax is probably going towards services (the health system, aged care) used by older Australians. This is why Breunig and his team believe the intergenerational contract is broken. 'The current tax and transfer system, with its growing obligations to the growing cohort of older Australians and shrinking resources from which to meet those obligations, is spiralling down and unsustainable,' they found. To resolve this problem, you could slash spending. The second-largest expense for the federal budget is the age pension, at $66 billion a year. That's followed by the NDIS ($51 billion), aged care services ($41 billion), medical benefits ($35 billion) and assistance to the states to run their hospitals ($34 billion). Loading The largest expense in the budget world is actually the GST at $101 billion, which goes straight out the door, mostly to fund state hospitals. Combined, that's about 40 per cent of the budget, much of which flows to the old, the sick, the disabled and the young. Another option is to increase taxes on older Australians. That would be the bunch of politically important voters who have managed to move the tax system in their favour over the past 30 years. The economic roundtable was all about finding ways to lift our nation's collective living standards while also fixing the budget bottom line. When it came to tax, the usual ideas such as company tax or the GST dominated discussion.
The Age
22-05-2025
- Business
- The Age
‘Hundreds of thousands' could be caught in Chalmers' super tax
Jim Chalmers' plan to raise extra tax out of superannuation funds with more than $3 million will hit hundreds of thousands of young people while enticing them to sink more cash into trusts, one of the country's leading tax experts has warned. As industry data undermines claims by some investors the changes will debilitate the venture capital sector, ANU tax expert Bob Breunig urged Chalmers to look at simpler ways to target the self-managed superannuation sector and also to index the $3 million threshold. The government is planning to double the concessional tax rate from 15 per cent to 30 per cent on earnings in superannuation accounts holding more than $3 million from July 1 in a move expected to raise $2.7 billion in its first full year of operation. It has been strongly condemned by many investors and public policy experts concerned that unrealised gains will be taxed. The government maintains that only 80,000 accounts, some of which hold hundreds of millions of dollars, will be affected. But Breunig, whose work has exposed how many high-income Australians exploit the tax system to reduce their overall tax payments, said the failure to index the $3 million threshold was a substantial problem that needed to be addressed. Loading 'I'm not happy about the lack of indexation, even to inflation. It's going to mean that hundreds of thousands of people are going to get caught up in this relatively quickly. It should be dealt with now,' he said. Breunig's research on the Division 293 retirement income contributions tax, under which people earning more than $250,000 pay an extra 15 per cent tax on concessional super contributions, revealed how people use financial instruments to avoid tax. He said the government's planned $3 million threshold would probably have a similar effect with people moving money into trusts, even though holding cash in super had substantial tax benefits.
Sydney Morning Herald
22-05-2025
- Business
- Sydney Morning Herald
‘Hundreds of thousands' could be caught in Chalmers' super tax
Jim Chalmers' plan to raise extra tax out of superannuation funds with more than $3 million will hit hundreds of thousands of young people while enticing them to sink more cash into trusts, one of the country's leading tax experts has warned. As industry data undermines claims by some investors the changes will debilitate the venture capital sector, ANU tax expert Bob Breunig urged Chalmers to look at simpler ways to target the self-managed superannuation sector and also to index the $3 million threshold. The government is planning to double the concessional tax rate from 15 per cent to 30 per cent on earnings in superannuation accounts holding more than $3 million from July 1 in a move expected to raise $2.7 billion in its first full year of operation. It has been strongly condemned by many investors and public policy experts concerned that unrealised gains will be taxed. The government maintains that only 80,000 accounts, some of which hold hundreds of millions of dollars, will be affected. But Breunig, whose work has exposed how many high-income Australians exploit the tax system to reduce their overall tax payments, said the failure to index the $3 million threshold was a substantial problem that needed to be addressed. Loading 'I'm not happy about the lack of indexation, even to inflation. It's going to mean that hundreds of thousands of people are going to get caught up in this relatively quickly. It should be dealt with now,' he said. Breunig's research on the Division 293 retirement income contributions tax, under which people earning more than $250,000 pay an extra 15 per cent tax on concessional super contributions, revealed how people use financial instruments to avoid tax. He said the government's planned $3 million threshold would probably have a similar effect with people moving money into trusts, even though holding cash in super had substantial tax benefits.
