By far & away the greatest concern for the ageing population to whom Superannuation is clearly in focus, is that of Government intervention. The pollies just can't keep their fingers out of tinkering with it & changing the rules & regulations on an all too frequent timeframe. For most of the pollies, it is of little concern as they are protected by the largesse of their own parliamentary pension scheme, the likes of which the average punter does not have access to. Yet mums & dads are faced with the constant questions of what are the governement going to change that will impact of our future financial welfare. I'm mad as hell & I'm not going to take it anymore.

This problem has been created by both sides of the political divide, who both myth the point, and the tongue in cheek pun was intended.
With every reform since the very foundation of the Westminster system, comes another layer of deliberately imposed complexity.
Simply put, this very complexity allows huge tax avoidance, which in a vastly much simpler, more transparent system, would become unavoidable!
A simple stand alone, UNAVOIDABLE expenditure tax, set at a painless 4.8%, would collect 25% more NET revenue, than that collected by the current complexity.
A simple stand alone expenditure tax would negate the need for compliance and its often onerous costs; thereby adding some 7% to the averaged Australian based bottom line.
The repeal of all other tax measures, including fuel excise and the ubiquitous GST, as part of long overdue reform, would enhance the Australian based bottom line by a further 30%, averaged.
And improve household disposables, by around 25%, averaged.
This would allow the immediate imposition of a non-contributory 15% super!
The only tax that would then apply, would be the universal expenditure tax, as the money is spent in retirement, collected as a pension?
The tax rate could be microscopically adjusted, region by region to alone,and more immediately, control all inflation or stagnation!
Meaning the interest rate setting could be progressively adjusted downward, until the AUD, hit its true value, enabled the resuscitation of manufacturing/exports etc.
There's a lot that could and should be done!
Just don't hold your breath, waiting for any of the current crop of patently, self serving, over rewarded pollies, to do any of it for real!
Rhrosty.

This is an excellent post. The effective tax rates on super are about 30%. Essentially the government is taxing you now for a benefit you may receive in 40 years. The investment income that could be earned on the tax paid now is lost to the system and explains why the effective tax rate is so much higher than the actual tax rate.

The EET system you describe is a much fairer system, particularly for low income earners, because their pensions generally won't be large enough to cause much tax and the accumulation phase is tax free. High income earners will be discouraged from putting too much in because the pensions are still taxable.

The

My only advice to anyone, given all three levels of government's need to generate continued additional revenue in an economic system that is declining per-capita-world-wide each year is; forget about getting the pension and relying on your compulsory superannuation scheme.

You will never get a financial planner telling you to grow assets (gold, cash, property, stocks etc) beyond what your tax threshold for tax purposes in terms of the pension or super are!

Instead I recommend you work as hard as possible and wrest control of your financial security away from government taxes and charges wherever possible.

Wealth should be accumulated based on a balanced portfolio that takes account of the ever changing tax system, there is no hope governments will ever take less, only more and more over time.

You can, if young enough, build a portfolio of income generation that is flexible and robust enough to provide a great retirement, unfortunately if you are middle aged or beyond, you now sit in the gun-sights of the government and unless you have significant wealth outside of the super scheme or intend to rely on the pension, then I would suggest you are financially stuffed.

Geoff

Excellent article.

The purpose of superannuation, and other savings, is ultimately to provide for retirement, and thereby to minimize future demand on Govt funded welfare, health, and/or concessional programs. As such, the EET arrangement sounds about perfect. I additionally think there should be no taxation on any savings - and Henry seems to agree on this. Taxing of savings interest is a massive disincentive to save!

As compulsory super contributions are paid by the employer, from employer funds and not as a deduction from an individual's salary, such contributions should not be taxed, but should be a straight tax deduction to the employer. Discretionary, extra contributions, now subject to a 'cap', and now taxed at 15%, would be better to be untaxed (as per EET) - as a further inducement to adequate saving for retirement. Ok, such extra contributions are a deduction from taxable income, but one has to look to the 'purpose', to the future, and not as a money-hungry pig with a live-for-today and 'hang tomorrow' mentality (as our current Govt seems addicted to).

Superannuation provides a massive capacity for investment in productive industry, housing and construction, and even lending to Govts - directly benefiting the nation and creating employment. It is therefore in everyone's interest for any profit earned by these Super Funds to be credited to the benefit of contributor accounts, untaxed, in recognition of the national benefit derived, and as incentive for further investment by the Funds in development programs. Far better that, than leaving the funds in the Funds sitting idle in bonds or low interest investments.

This Govt wants to fiddle with capital gains tax, negative gearing, and taxing of superannuation earnings only to bolster its ailing management of Govt expenditure. They have raided the Future Fund, and are simply looking for the next 'easy target'. We are not amused, and come September the full weight of our dissatisfaction will be aimed with surgical precision. And, you can take that to the bank!