Housing Crisis... your fault, old people

We had a thread once but the wheel fell off

 

I thought it would have been fairly obvious from the discussion that we are talking about companies that make large profits and individuals that have high personal incomes. I was responding specifially to an article demonstrating that very profitable companies paid little or not tax. Read the article, you'll figure it out Which companies are not paying tax

Where did I say they should?

 

Well, here are the comments I was responding to:

My understanding is that these comments refer to private individuals, not companies. Feel free to correct me if my understanding is not correct!

 

I've got the steering wheel, and I'm sitting in the back

 

Maybe the 'housing crisis' is over and we have moved on to other topics. lol

 

I've pulled the thread. Now there's a big hole. Has anyone got a needle?

 

I think the original posters have disappeared, That means we did it!, We've solved the housing crisis. Congrats gentlemen.

 

This thread has turned into some form of study in economics...

It's touched on just about everything at this point. Taxation, interest rates, time value of money, history, housing standards, life expectations, travel, parenthood and a whole bunch more!

 

True, but it has been circular and had it's own internal logic in a way. It started off as a rant about how the 'horrid' rich have made housing unaffordable and on page 35, about how the 'horrid' rich pay no tax. It is almost certain that the 'horrid' rich are responsible for all of societies ills.

 

Just going back a couple of pages, according to the SMH 55 millionaires didn't pay any tax at all last year. Of course, some of them managed to spend $1 million plus on advisers, which itself was a deduction, so it's not as though they're suffering penury.

 

Interesting article @Graeme. There's something sus about that I reckon. All earning at least $1 million ... each paid an average of $1 million to an adviser ...
Sounds dodgy. It's interesting in the article that:

Two thirds of the tax was paid by Australians earning $80,000 or more. More than one quarter was paid by Australians earning $180,000 or more.​

To address a point raised earlier, do you reckon that 55 equates to the nebulous "many"?

I don't

 

Yeah but I said, then they said, and I said...
Don't care, it's Friday

 

Hi, everyone...(echo). Seems the place is vacant and it's time to review...

I cite the article below, lifting extracts, most of which I am in agreement.

Why retirees aren't spending their savings by Simon Cowell in The Australian

Why retirees aren’t spending their savings

The article pulls together the findings of three reports to support the title statement:

• CSIRO, show that retiree households are not drawing down their wealth to support themselves in retirement
• ARC Centre of Excellence in Population Ageing Research paper found that, while households draw down their resources early in retirement, older retiree households maintain or increase their wealth
• Productivity Commission research on Superannuation Policy for Post-Retirement which found that while super balances were run down between the ages of 55 and 70, net worth declined only slowly over retirement. The PC showed that 75 to 79 year olds had a higher net worth on average than people aged 50 to 54

The reasons:

• State sponsored perverse incentives lead to clear over-investment by retirees in illiquid and untapped housing assets, such that around 70 per cent of retirees have 75 per cent or more of their wealth locked up in their home.
• Second, as noted in the 2009 Harmer Pension Review Report, is a strong but erroneous belief in those who have ‘worked hard and paid taxes all their lives’ having the ‘right’ to a state-funded pension. Those of this view argue that because they have saved they deserve support, and shouldn’t have to use those savings to support themselves.

Some outcomes:

• Dysfunctional tax and welfare system. This supposedly moral case for welfare (not using assets to support own retirement - instead relying on the Aged Pension) is just a recipe for churn, higher taxes and ultimately big government. If payments are made to everyone who can’t afford to live without them and everyone who thinks they deserve them, who will be left to pay for all this largesse?
• Around 7 in 10 retirees already receive an age pension, and for most the pension constitutes the bulk of their income. "And therein lies the core of the behavioural dilemma over retirees’ savings. The primary reason retirees don’t draw down their home equity, or take more than the minimum from superannuation, is that the state-funded pension means they don’t have to." Hence, directly restricts supply of housing and damages affordability and indirectly by restricting state budgetary resources to address housing affordability.

Suggested remedies:

• "First, the exemption of the family home from the pension means test is the primary reason why net worth may increase over retirement. A government-backed scheme for reverse mortgages combined with including the family home in the pension assets and income tests could save taxpayers $14.5 billion a year and boost incomes for 98 per cent of pensioners by an average of $6,000 a year."
  
• Refocus superannuation policies. ".. the government needs to look at superannuation not as a source of additional tax revenue but as a source of expenditure savings. Boosting superannuation balances, combined with other reforms to better align superannuation with the purpose of enabling more self-funded retirement, should produce offsetting pension savings."

Moral imperatives:

• The Aged Pension is for "supporting only those who cannot support themselves."
• "The problem is taxpayers being asked to pay welfare to people who can support themselves."
• It is not about "people dying with ‘unused’ assets, or even retirees accumulating additional savings across retirement. ...As long as retirees are not taking some of the $44bn a year currently being paid out in pension payments, it is no business of the government what they do with their savings."

I like the last statement as much as a basic tenet of a free capitalist democracy. (Off with the head of anyone who thinks otherwise! )

 

$14.5 billion a year might sound like a lot but "forgone revenue from two superannuation tax concessions will cost the federal government $36 billion this coming financial year, jumping to $50 billion in 2018-19." Where to after that? $14.5 billion a year vs $50 billion a year and growing.

While it is true that the government should work towards boosting superannuation balances, at what cost? How much should the government spend (in forgone revenue) to boost superannuation balances?

Within three years, Australians will face a $100 billion-plus bill, just to cover the age pension and super tax breaks. Without action, that bill will be much higher as more baby boomers head to retirement.​

This is simply unaffordable and something has to give. The solution is to address both the concessions side and and pension side of the equation. However, both are politically unpalatable.

It is unfair and innacurate to single out pensioners as damaging affordability and indirectly by restricting state budgetary resources to address housing affordability. Wage earners are almost equally responsible for this and will soon be equally responsible for this.

http://theconversation.com/the-100-...-retirement-bill-as-the-grey-vote-booms-41492

 

The obvious answer here is why not both... The majority of those super concessions are the very wealthy who will not even require superannuation in retirement, a huge chunk of that could be reclaimed.

The fact that super is just as broken doesn't mean you shouldn't fix the pension irregardless of what you do there. 14.5 billion a year so that we can have a moral win is just ridiculous.

The problem with the system is who is receiving the concessions right now not that concessions are there.

What we need is more of the lower and middle income earners to be significantly boosting their superannuation balances and right now they're the people receiving little to none of the concessions. For starters they have to be earning at least 20k before they receive any benefit from super, realistically it's above 38k before you're seeing any tangible benefit. Given that 50% of the population have a taxable income under 48k, you can safely say that roughly 50% of the population aren't getting any benefit from using super. These people earning at that level are all the people most likely to be on the pension in the future.

Right now the biggest benefactors are those in the highest income brackets and it's not even close, the super concessions should work in the complete opposite way, we want the poorest to be putting more money into it and the wealthiest to be keeping as much money in their own name and paying at the highest marginal rates, it's the very foundation of the tax system that the highest earners should be paying the highest rate, not shifting all their income into a super fund and paying the lowest rate of tax available.

Of course targeting the educated and wealthy (who will generally have an adviser even if they aren't educated themselves) is political suicide, they're the ones who will whip the masses around them and cease funding political campaigns. On the other hand the ignorant and poorer masses don't care about Super because they know just enough to know it doesn't help them now and they get no benefit from it other than money they can't touch. It takes a lot to get them even caring that the wealthy are using it to avoid taxes (the only way to really trigger a response).

I've said it before, the super system is currently a broken mess, it's the right idea it's just very poorly executed with the concessions for some absurd reason ended at the wealthy instead of the poor, the idea that it should replace pensions is completely broken by how it is designed because the only people actively using it are the very people not eligible for the pension anyway. Basically you're going to have the next generation be tangibly poorer throughout their lives because ~10% of their income has been taken from them and put in super instead throughout their working lives who then need the pension anyway because they still don't have nearly enough to actually retire, meanwhile the wealthy have dodged billions in tax by reaping the concessions that are absurdly targeted at them.

And again, just because the Super system is broken isn't a reason to accept a broken pension system as well, yes they're both linked but they're also separate enough to not need to be fixed at the same time. Including the main residence in asset tests for pensions and having a decent reverse mortgage system set up are very easy fixes that would save 14.5 billion a year. Fix that tomorrow and then start working on the bigger mess that is superannuation.

 

Omg, I agree with this. Either I've mellowed in the months since this thread opened, or you guys are stating your ideas in a way I can actually understand.

 

Agree with you @Angel. OMG... lightbulb moment. Thanks for sharing @wogitalia.

 

Good luck though

Fixing super is a time consuming and administrative nightmare that will get the wealthy benefactors of the current system (aka everyone in Canberra for starters) completely offside. On the flipside fixing the pension is technically very easy... the public relations side though is going to be political suicide. Just look at the reaction to the idea that people should pay $5 to see the GP and imagine trying to sell that granny has to reverse mortgage the family home and pay her way!

 

Considering Australia can't afford the projected $100 million to keep both schemes going in their current form, it is a shame that there are no serious proposals to address both sides. In the past, politicians were prepared to do things that were politically unpopular. It appears this is no longer the case.

Back in the day when it was Abbott vs Shorten:

Opposition Leader Bill Shorten has already made clear that a Labor government under his leadership would reform tax concessions applying to superannuation, but would do little to address the burgeoning cost of current pension arrangements.

That means the Abbott-led Coalition government only wants to tackle pensions, while Shorten’s Labor opposition only wants to tackle superannuation concessions.
So far, neither has signalled they are prepared to reform both the age pension and super tax breaks – the politically difficult but economically necessary task ahead.​

http://theconversation.com/the-100-...-retirement-bill-as-the-grey-vote-booms-41492

Although Abbott has now been replaced, I don't see any positive signs from the new government that these issues will be tackled.

It's a bit of a grim situation really. I wonder what will actually happen?