ETA: Below I mention that interest is paid. To clarify, the ATO pays the account holder interest when an unclaimed amount is claimed.
This week I received an email from a family member asking me to sign a petition about superannuation. It isn’t a subject matter that I would normally be asked to look at but I thought that if they were convinced there was an issues that I should look into it. I’m not one to go and randomly sign petitions so I thought I should at least go and look into this a bit further.
The petition I was asked to sign is on a website called “Hands off my super!” I haven’t linked the site because I don’t want them to get any sort of ‘Google-fu’ from me linking to them.
One issue raised is regarding superannuation amounts held by temporary foreign workers who have worked in Australia. From their website:
Two years ago the federal government made a small change to the superannuation rules. It ordered the Australian Taxation Office to seize the balances of all funds from temporary foreign workers who had left Australia.
The Australian Financial Review reported it this way at the time:
‘Budget to grab $800m from super funds…After the initial payment in June, super funds will be required to hand over their obligations from temporary residents twice a year, in April and October.’
This gave the government an $800 million free money windfall — with more coming twice a year, every year.
Of course what the AFR didn’t mention is that this superannuation can be claimed AT ANY TIME by the worker by contacting the Australian Tax Office and putting in a request to receive their unpaid super. You can read it for yourself at the ATO website.They are taxed on this money, but it certainly isn’t gobbled up by the government to be kept forever.
The website then tries to link the first issue with the government taking away unclaimed superannuation amounts and claiming it for themselves. Because if it happens to foreign workers, then of course “ordinary hard-working Australians” are going to suffer at the hands of the government too. Again from the website:
You might think this doesn’t have much to do with you, but it does.
You see in the latest mid-year financial review on October 22nd 2012, Australian Federal Treasurer Wayne Swan revealed another change to the rules governing ‘lost super’.
The old rule was that super was only considered ‘lost’ if the super fund hadn’t been able to contact the member for five years and if the balance was less than $200.
But the new definition of ‘lost super’ is if the fund can’t contact the member for one year, and it now covers balances up to $2,000.
According to the proposed rule change, if an account balance falls under this new definition, the super fund will take possession of this money, and forward it to the government.
So as you can see, the government are just trying to rake in money left, right and center. Or are they? Well the facts are actually a little different to what is presented on the website.
It is true that the government has changed the rules for forwarding of unclaimed superannuation amounts to them. Unclaimed superannuation will be forwarded to them sooner and for smaller amounts. But what the website doesn’t tell you is that anyone with lost super can claim it AT ANY TIME. Don’t believe me? Read it for yourself. It also doesn’t mention that from 1 July 2013 interest will be paid on the amounts held by the government. It also doesn’t mention that by having the amounts transferred to the ATO, the superannuation fund can no longer charge fees on that super.
So the outcome is that the super is retained by the government, managed by the ATO, interest is paid when it is claimed by the taxpayer and no fees or charges are payable. What exactly is the issue with this?
The email then went on to talk about the changes to the concessional cap for super contributions and taxing superannuation returns for those on incomes above $300,000 a year. I looked at the website for “Hands off my Super” and there is nothing there about this. But I’ll look at this too, but just in brief.
In 2008/2009 the concessional cap for super contributions was lowered from $50,000 to $25,000. It normally goes up with indexation but it was frozen until 2014/2015. If you or your employer contribute to your super, you are taxed on that. For all amounts under $25,000 you are taxed a concessional tax rate of 15%. Put more than $25,000 into your super and that part gets taxed at a higher rate, currently 31.5%. This is still far less than the marginal tax rate of 45%, and therefore to me (the untrained person off the street) superannuation still seems like a good investment.
The idea of taxing super returns for those on incomes above $300,000 a year is also based on the same principle as the current taxation system for earnings. If you earn more, you pay more tax. It isn’t even a solid policy yet, but the article mentioned in the email mentions a possibility of taxing them 30% instead of 15%. Still way below the marginal tax rate.
So no, I won’t be signing the petition. Firstly, the facts surrounding the petition are wrong. The other issues raised are a) not part of the petition and b) seem like a fair and reasonable way of deciding who pays for what in the 21st Century. I don’t like paying taxes and I will pay as little as I have to. On the other hand, taxes allow the government (no matter which party they are from) to run the country and provide services to people. Governments will never be profit making enterprises; this is why governments perform those services and not corporations.