Aside from the bad policy of encouraging retirees to take a lump sum, blow it, and then go on the pension, the big problem with the Costello superannuation change is that it relies on punters trusting future governments.
Axing the tax on funds going into super, or while they’re in there, would be a concrete benefit workers could judge. The benefit starts accruing straight away. For most people, collecting their super is still a long way off and, therefore, so is the tax break Cossie is introducing.
But do you trust all the governments between now and your retirement not to change the system again? The one sure thing we have come to rely on is that governments will fiddle with the super scheme, sometimes raiding the piggy bank when they need to and sometimes being generous in their treatment of it. Just as Costello has conferred tax-free status on super payouts, another treasurer somewhere down the track might decide he needs the money for other things.
It’s a big gamble, trusting governments. It’s all very well while the resources boom pours windfall profits into the ATO, but it won’t be so pretty when the good times aren’t rolling.
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