As the tax burden grows ever heavier on working Australians, have tax breaks for older Australians become unfair and should they be rolled back?
That’s the question The Australian economics editor and Trading Day host Adam Creighton raised in his column on Tuesday and which has unsurprisingly ignited a fiery discussion.
“It’s actually the most commented piece I’ve written in a number of years,” Creighton admitted.
At the same time that the franking credit debate rages on, Creighton criticised some of the tax policies implemented during the Howard-Costello era.
“ was a really good year for seniors. There was full refundability of franking credits that year and there was also this $32,000 tax-free threshold for the over 65s,” he told Your Money Live.
That tax-free threshold is almost twice the $18,400 level that other Australians face.
“Some say that’s fair because these people have paid tax all their lives but I was actually saying that given the current environment and given the fact that workers have had bracket creep now for over 10 years that maybe we need to start thinking about winding back some of these concessions at the high end and lowering marginal tax rates for other people,” Creighton explained.
And the tax breaks didn’t stop in 2000.
“2006 was even more generous. What happened in that year was the taxation on earnings in superannuation funds once you retire fell down to 0 [per cent],” Creighton said.
At the moment, Australians pay a flat tax of 15 per cent on those earnings as long as the money is in a superannuation account until they retire and pay nothing.
“This is a huge pool of money, it’s about $830 billion in those super funds and it’s going to grow over time,” Creighton said.
“I just think it wasn’t a very wise decision to reduce it to zero. Sure, it’s got to be concessional because we have to encourage people to save but I think zero just goes too far,” he added.
To highlight his argument, Creighton points to the fact that a couple with $7.3 million can be currently classified as “low-income earners” according to the Australian taxation system.
For example, with all the current concessions in place, it’s possible for a couple to own a $3 million home, have $3.2 million in superannuation, a further $1.1 million outside of super and yet pay zero income tax and a marginal income tax rate of 15 per cent.
“The [tax] burden is increasing on most workers but for certain people, there’s no tax at all.”
Watch the full segment above.