Don’t be fooled, only the very richest will ever have more than $3m in super

by Greg Jericho

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The debate over the superannuation changes are dominated by lies and exaggerations, so let’s set the record straight.

The hyperbolic scare campaign against the government’s changes to the tax concessions of superannuation continues with almost little care of reality or context.

So let’s give you some.

  1. Almost no one will be affected by these changes. 99.5% of Australians currently don’t have more than $3m in super
  2. Using figures reported in the Australian Financial Review 97% of all people currently in the labour force will never have more than $3m in super.

So some questions:

  1. Do you have more than $3m in super? No? Then nothing changes.
  2. Are you ever going to have more than $3m in super? No? Then nothing will change.

At this point, you might be wondering why the big fuss? And you would be right.

To get to $3m worth of super you have to earn an extremely large amount of money your entire working life.

How much money? We’ll let’s create an 18yo  who has just left school and see how they go.

OK, you don’t have any qualifications, but lucky you, you got a job that pays the average full-time wage of $106,277. Feeling good? You should! You are now earning more than 75% of all Australians! Not bad for someone with only a Year 12 certificate!

Now let’s give you even more luck – let’s make sure every year for your entire working life you get a 3.7% pay rise. Don’t worry that for the past 15 years the average rise has been 2.7%, I want you to be happy, so you get 3.7%.

And now, guess what? You never have to take time off to raise kids. You never stop working. You never lose your job. You never have an accident which means you have to take time off without pay. You never decide to take time off to study. You keep your full-time job every year until you are 67.

And all that while you have been getting money taken out every fortnight going into your super.

At this point if you think the situation is a tad absurd, you are right. Half of Australians currently make less than $73,000 a year. So suggesting someone earns over $100,000 right from the get go is pretty dumb.

But surely even with these absurd assumptions, that person will retire with more than $3m in super?

Nope.

They will end up, according to the government SmartMoney super calculator, with a super balance of $2.1m.

The supertax changes right now affect almost no one. The fear about not indexing the $3m threshold is just a scare campaign designed to make people think they will be hit, even though they are only 30 years old now, because maybe they might one day have that much super.

Bugger all Australians will ever be affected by this tax change.

But they will be helped by the revenue raised by it.

We are a low-tax nation. We need more revenue if we are going to pay for the schools and hospitals and infrastructure we need.

Asking the 80,000 people with the biggest superannuation funds to get less of a tax break than they currently do seems pretty fair way to start.

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