tag:blogger.com,1999:blog-22517597.post4451939403427088986..comments2024-03-03T11:13:39.377+11:00Comments on Moomin Valley: Changes to Health Insurance and SuperannuationmOOmhttp://www.blogger.com/profile/03440274434662150925noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-22517597.post-69823295692980075352009-05-19T10:07:00.000+10:002009-05-19T10:07:00.000+10:00Being as mystified about the intricacies of super ...Being as mystified about the intricacies of super as the next economist, I left that aspect of the Budget for last. I hadn't got around to considering personal implications at all, so thanks for alerting me that there are some. JQJohn Quigginhttps://www.blogger.com/profile/10830215234726229924noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-82663037975260727902009-05-19T09:01:00.000+10:002009-05-19T09:01:00.000+10:00You are probably right on the lack of means testin...You are probably right on the lack of means testing that seems to be the case. I apparently misunderstood how the scheme worked based on how the thing was originally "pitched". An interesting idea on a lifetime cap for concessional contributions. Even without the concession there is a tax advantage to super especially for higher income taxpayers due to the lower rates on fund earnings and zero tax once a pension payout is established. The risk is that they are going to end up raising the preservation age to 67 or who knows what else. So right now we are putting a bit extra into super than absolutely required by our jobs but not a huge amount more. <br /><br />Well I've never taken out private insurance in Australia and I'm 44. The rate that the online quote gave me seemed pretty reasonable. Insuring my father in law (who is 76) while he was in Australia cost about $A1,300 per annum, which is about the same as for us as a couple at our current ages. Though probably the two aren't directly comparable.mOOmhttps://www.blogger.com/profile/03440274434662150925noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-62973688608370101992009-05-18T20:55:00.000+10:002009-05-18T20:55:00.000+10:00As far as I can recall, the 30% private health ins...As far as I can recall, the 30% private health insurance rebate was always available to everyone ie. not means tested. One thing to bear in mind about taking out private health cover is that if you take it out before a certain age (31?) you pay the base rate, and it doesn't increase with age. If you exit private health insurance, you are allowed a certain number of years 'grace' before your age rating starts to go up. Effectively, if you mostly had private insurance in place from age 30 until 70 you would always pay the standard rate. But if you never took out health insurance until age 65, you'd pay a much higher premium based on your age when you take out the insurance.<br /><br />We took out basic hospital cover to avoid the 1% medicare surcharge, and then dropped it last year when the thresholds were raised (and DW is working part time). If we don't take out private insurance again until age 65 (to avoid the public hospital waiting lists for 'elective surgery' such as hip replacements in our old age!) then our rate would be that of a 50 year old who never had previously had health insurance. Currently our 'age rating' is set to 31, and it will start increasing once our 'grace' period has been used up.<br /><br />It's awfully complicated, and makes it very hard to work out whether or not it's worth paying for health insurance or not. Having a variable medicare surcharge that is income based makes it even more difficult to decide if private insurance is worthwhile.<br /><br />The reduced caps on concessionally taxed superannuation contributions have quite an impact even at relatively modest income levels. At around $90K gross salary, a large part of my salary would be taxed at 30% or 40% if I didn't have any tax deductions. Putting the maximum $50K into super ( approx $10K SGL and $40K salary sacrifice) saved around $10K in income tax last year (which will help fund my retirement sans government pension). With the new $25K cap I can only salary sacrifice around $15K. Rather than contribute what's left of the other $25K income after paying 30%+ tax, I'm tempted to just use it for current consumption and hope there's still some chance of getting a means-tested part-pension when I hit 67!<br /><br />It seems strange that the cost to tax revenue of someone using salary sacrifice (taxed 15% into super) to reduce taxable income (taxed at say, 40%) is treated as a straight out 25% hit to tax revenue. I've even seen this tax deduction described as 'paying' the high income workers to save for their retirement! In reality, it seems no different to the huge 'tax revenue hit' notionally arising from professionals using family companies to limit their tax rate to 30% company tax rather than the top personal tax rate.<br /><br />To me it seemed quite fair that retirement savings (up to $50Kpa) were being treated to a flat 15% tax rate, rather than using progressive taxation. No-one can know exactly how current income levels will compare to retirement income levels for any particular worker, so using progressive tax rates on retirement (by sjifting $25K of retirement savings from pre-tax to after-tax contributions) that are simply based on gross current income can be just as inequitable over the life cycle. Consider the situation of a male worker on $100,000 who works without interruption until 67, compared to a woman who has several years of nil salary while having children, and therefore ends up having fewer years in the workforce at a higher income level, but her total lifetime wages are the same as the male.<br /><br />One way to avoid this problem would have been to have a lifetime cap on concessional contributions (similar to the old RBL limits). Say, a lifetime of total concessionally taxed contributions of $1,000,000, with an annual limit of $100,000. That would have made the system fairer for woman spending time outside the workforce, and also helped address the issue of the 9% SGL being insufficient for baby boomers who spent a large part of their working lives "pre-super".<br /><br />Of course, that wouldn't have produced an immediate boost to government tax revenue at a time of record deficits!enoughwealth@yahoo.comhttps://www.blogger.com/profile/09371028394685288035noreply@blogger.com