5 things Labor won’t tell you about low income super contributions

Superannuation has been a very touchy subject for the past few weeks, but it is a topic that is not going to go away for a long time.

Labor has been roundly condemned from nearly every quarter, including from within it’s very own ranks, for their very transparent efforts to link super to yet another round of attempted class warfare by attacking the so called “fabulously wealthy” and supposedly sticking up for the lowly paid.

Labor has tried to place considerable spin on the Liberals plans to end funding for the Low Income Super Contribution (LISC).

For those of you that are not familiar with the LISC, it is a government super payment to help low income earners save for their retirement.  The LISC is 15% of the concessional (before tax) contributions you or your employer makes from 1 July 2012.

The maximum payment you can receive for a financial year is $500 and the minimum is $20.

The LISC is meant to be funded by the receipts of the almost useless Mineral Resources Rent Tax, more commonly known as the Mining Tax , or as I like to call it the little tax that wasn’t.

I call it this because the Mining Tax that Julia Gillard negotiated herself after Wayne Swan stuffed up the first version prior to the 2010 election has not delivered the rivers of gold that Labor promised and it actually costs more to implement than it brings in.

The backdown from Swan’s original version was one of the main catalysts for Labor deciding to knife deposed Prime Minister Kevin Rudd, but that is another story for another day so let’s get stuck into the 5 things that Labor don’t want you to know about the Low Income Super Contribution (LISC) scheme.

1) Funding drives welfare programs

The Liberals position is pretty simple given Australia’s substantial debt position.  If the tax that was meant to pay for the LISC doesnt generate any money, then the programs it was meant to support need to be removed.

It’s simple case of balancing a budget, just like most households do every month or year in order to get by.

Or if you don’t have a budget of your own to balance, it’s just like the game of Monopoly – NO MONEY IN, NO MONEY OUT.

If you promise something to someone on the provisio that it is dependent on something else, which doesnt materialise because of poor management, then it might be impossible to deliver wouldn’t it? it’s common sense, but that isn’t what Labor focuses on is it?

No, they run with the class warfare angle that Liberals want to take from the poor.

Well, that’s not entirely true either and that brings me to…

2) Liberals introduced the LISC

Since 1 July 2003, the Australian Government has provided the incentives of a government funded co-contribution for lower income employees who make personal contributions to their own superannuation fund.

And guess who was in power in 2003.  The LIBERALS.

It was John Howard and Peter Costello that initiated the Low Income Super Contribution, not Labor.

So it was the Liberals who actually initiated contributions to the superannuation of those working in low paying jobs.

3) Labor have already reduced the LISC – part 1

Another thing that Julia Gillard, Wayne Swan and Bill Shorten don’t want you to know about the LISC is after Labor got into office in 2007, THEY LOWERED the LISC from the level that John Howard’s Liberals established it at in 2003.

The amount was lowered by $500 so that the maximum low income earners could obtain was $1,000 (up to and including FY 2012).

4) Labor have already reduced the LISC – part 2

Don’t worry, it gets better as most Labor spin stories do when you start to scratch the surface to examine where the the all-to-present fetid stench of ineptitude emanates from.

The kicker is that Labor will once again lower the LISC for the 2014/15 financial year.  This is the second such reduction of the LISC by Labor.

Not only will the maximum entitlement now be reduced to just $500 (down from the $1,000 offered in 2007), there will also be a reduction in contribution matching rate from 100% to 50%.  So this means to get the $500 in 2014/15 financial year, low income earners will need to contribute $1000 as opposed to the dollar for dollar contribution of the Costello / Howard years.

5) Low income earners will not use their superannuation as the primary basis of their retirement income stream

People who earn the low incomes that qualify for the LISC (no more than $37,000 p.a), will NOT have any meaningful superannuation when they retire.  Almost certainly, all of these people will be wholly dependent on the Aged Pension, which the government provides them courtesy of the Australian taxpayers.

So in summary….

Next time you hear Gillard, Swan and Shorten, or any of the pack of lying miscreants that represent the Australian Labor Party start talking about how Tony Abbott is going to take money away from the lowly paid just think back to this post. Labor have removed 2/3’s of the contribution that the Liberals initiated when they were in office.

When you are ever confronted with a post on Facebook by one of their economically challenged supporters telling you just how bad AbbottAbbottAbbott is, just tell them these simple facts.

1. Howard and Costello created the LISC and set the amount at $1500
2. Howard and Costello funded the LISC by way of running consecutive surpluses as a result of prudent economic management
3. Gillard and Swan subsequently decreased the LISC to $1000 and tied the funding to the mining tax that Labor designed,
4. As the MRRT subsequently didn’t generate any tax revenue, Gillard and Swan have again been forced to decreased the LISC to $500
5. The amount that Labor bangs on about is only a third of the amount originally provided to low income earners by the Liberals in 2003 under John Howard.

These are the facts about the Low Income Super Contribution scheme, not some factually incorrect, piss poor photoshop slide posted on Julia Gillard’s Facebook page.

Labor – We are us – Moving forward in politics by misrepresentation since 2007.

Crean draws a line in the sand on our Super

Simon Crean has completely washed away any lingering notion that he was merely a Gillard stooge in the recent failed leadership spill by openly criticising Labor’s looming changes to superannuation legislation.

The feeling that we are in for yet another policy brawl within the ALP was only exacerbated by a seemingly combative appearance by Dr Emerson on Sky New last night.

The Australian reports Crean’s principled objection to any changes to super today in an article entitled Simon Crean to fight plan for superannuation tax changes as internal rift deepens.

As this article is once again behind Evil Rupert’s Evil Paywall™, I will summarise it for those of you who chose not to pay for your news.

Simon Crean has deepened the rift within Labor over looming budget changes to the superannuation regime, declaring he would oppose any move by the government to tax earnings on super accounts.

Launching an attack on Labor’s inability to frame serious policy debate, the senior party figure would not comment on whether he would cross the floor to vote against any changes.

But he called on the government to explicitly rule out changes that retrospectively taxed earnings generated by super accounts, saying it was “tantamount to taxing people’s retirement surpluses to fund our surplus“.

Mr Crean delivered his ultimatum shortly after Trade Minister Craig Emerson called for a discussion on lifting taxes on the superannuation accounts of the “fabulously wealthy”, highlighting the rift in Labor ranks over values and policy substance after last month’s leadership crisis.

Crean is not the only Labor stalwart who has openly criticised the Gillard Government’s approach to superannuation policy following the recent failed leadership coup, with both Martin Ferguson and Bill Kelty voicing concerns about retrospectively taxing superannuation in order to balance the Government’s faltering bottom line.

Even Bernie Fraser, former Reserve Bank governor, Treasury secretary in the 1980s under the Hawke government and a former voice of the industry super movement, said yesterday

…the government’s rhetoric on class warfare and on foreign workers was divisive and desperate but argued that a “good case” could be made for re-examining super concessions for high-income earners.

“It’s very true,” Mr Fraser said of the criticism. “I share the same concern and frustration as to how Labor has lost its way over recent years compared to the Hawke-Keating years, which were devoted to making the whole country and the whole community better off.”

As many other commentators who are far more qualified than I have pointed out,  no “good case” has been made by the Gillard government to tax superannuation, regardless of the respective balances of people’s funds.

Crean continued to not only walk the walk, but talk the talk….

“I will oppose anything that seeks retrospectively to tax people’s accumulated earnings in superannuation,” Mr Crean said.

“..But if the question is the need to ensure the sustainability of the system in the future, then frame the debate properly about what is sought to be achieved and let’s have that debate.

One of the big criticisms I have of this government is that it has failed to frame the debate in its terms. And you are always behind if you fail to frame the debate in your terms.”

Mr Crean would not be drawn directly on whether he would cross the floor but said any attempts to retrospectively target super earnings should be explicitly “ruled out”.

While the article discusses potential changes to the super for what Dr Emerson described as the “fabulously wealthy“, it does note the negatives of any such move..

An alternative strategy would be to increase the tax on contributions to super by high-income earners from 15 per cent to 30 per cent. However, this would not raise as much money.

So it seems it is all about how much money can be potentially raised by increasing taxes on peoples super, as opposed to some noble socialist cause.  It was Margaret Thatcher who famously said in 1976 that

…Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people’s money. It’s quite a characteristic of them.

Perhaps we should first start to look for “savings“, as Wayne Swan egregiously describes any proposed changes to taxation, in the extremely generous superannuation entitlements of our top public servants and politicians before they look to raid everyone else’s retirement savings.

As the article suggests

One of the problems with raising the tax on earnings is applying it to defined benefit schemes, such as the generous schemes for politicians and public servants that have been closed to new entrants.

If Wayne Swan is defeated at this year’s election, he is eligible for a parliamentary pension of $168,106 a year.

Julia Gillard, if defeated in September, would be eligible for a pension of $177,520 a year.

A worker not on a defined benefit scheme would need to build up a superannuation lump sum of up to $5.6 million to secure the same amount.

I wonder if Dr Emerson would regard Swan and Gillard as falling into this new class of the “fabulously wealthy“, or is that definition only reserved for those of us that actually work for a living?

Working hard to make a livin’

A great article about taxing those dirty rich bastards who will retire with one million dollar payouts, which amounts to just over $50K pa.

Conservative estimates show that a couple will need more than $53K to live comfortably for the 20 or so years until they pass. Don’t forget these rich bastards don’t get the pension either or the associated benefits that go with it.

As the article outlines, just think about that next time you get up at 6am to go to work while others remain tucked up in bed.. for the day.

Remember in your deepest heart how much others deserve what you’ve earned. Yes, you might have sweated to get that education and training, and worked each day for forty years dragging yourself out of bed at 6 am and getting home at 7 pm. But you know full well that you didn’t earn that money. Admit it! It was all the community’s and the government’s doing. You should be grateful that you’re left with anything at all.