Ordinarily, I would expect that a Government decision to introduce taxes on the proceeds of a superannuation fund payment to the dependants of a recently deceased person, would be considered a type of death duty. The imposition of that tax would then be considered the imposition of death duties. Call me old-fashioned.
Our current Government, in its budget night announced proposals, introduced death duties. Continue reading
In 1949, the monumental economic treatise ‘Human Action’ was published, written by Ludwig von Mises. The book remains of immense significance. It is undoubtedly a tough read. Murray Rothbard produced his own magnum opus ‘Man, Economy and State’ a few years later that similarly was an economic treatise built from the ground up. Rothbard and von Mises had similar understandings. Rothbard’s work was a little more accessible for the reader. But von Mises was the grand master. If you question the relevance of a book written over 60 years ago, consider this quotation*:
“The rigid dogmatism peculiar to religious groups and to Marxism results only in irreconciliable conflict. It condemns beforehand all dissenters as evildoers, it calls into question their good faith, it asks them to surrender unconditionally. No social cooperation is possible where such an attitude prevails.”
That quotation is as true, relevant and topical today as it ever was. Today’s Marxists, greens and the totalitarian left are just as vicious as their predecessors.
* Human Action, Ludwig von Mises, Scholar’s edition 1998, p185
The Federal Government’s proposed budget for 2016/17 contained a significant number of changes to be made to superannuation laws. Overall, superannuation has been made less flexible and tax incentives have been reduced. That, in conjunction with a proposed legislated ‘purpose of superannuation’ that is insipid, suggests that the Government has downgraded the importance of superannuation in retirement incomes policy in Australia.
The reduction in flexibility is casued by a tightening of the annual limits on contributions. Contributions from year to year have varying levels of disutility for a saver. When incomes struggle to meet living expenses, housing costs, education costs, savings are minimal or non-existent. When the pressure of expenses eases, people are more able to save, typically when they are aged 45 and above during their peak earning years prior to retirement. Savings are adjusted in accordance with the disutility associated with them. The new limits will inhibit savings because they fail to recognise this point.
The proposed limit to savings of $1.6m is causing a lot of anger among today’s retirees and near-retirees. At current interest rates, $1.6m will not generate a particularly lavish lifestyle. But for future retirees that have been constrained by the new lower annual caps on contributions, I suspect the $1.6m limit is beyond reach anyway.
The Government has messed around with the rules, upset a lot of people with the retrospectivity of the changes and made administration more complex. The best next step would be to admit the total failing of Government regulated savings. Abolish the compulsory Superannuation Guarantee, make all investment earnings tax free (within super), remove super contributions as a deductible expense and tax all benefits as income.
Australian Actuary 