This week Fairfax breathlessly reported an ‘exclusive’ from The Australia Institute that purported to show the current tax treatment of investment properties and superannuation delivers almost no benefits to the under-30s.
It’s not difficult to see why. When the biggest benefits of both tax policies apply to those paying the highest marginal tax rate (those earning above $180,000 p.a.) it makes sense that most people in the first few years of their career are not earning anywhere near that much.
What this simplistic analysis fails to account for is the bleedin’ obvious: young people don’t stay young forever. They start to earn more and build their wealth, often through investing in property — just as previous generations have done.
If we truly want to have a conversation about intergenerational equity, let’s talk about how Labor’s policy, which would enable existing property investors to keep their portfolios through grandfathering but bar new investors from buying established properties, would create two classes of investors — where young people are on the losing side.
Consider that the government, instead of letting spending cuts do the heavy lifting on budget repair, is allowing bracket creep on income taxes to do the work instead. Younger people of working age are paying higher taxes because of political unwillingness to tackle the real culprit: spending. The largest chunk of federal spending is the Age Pension, and today’s pensioners are not expected to unlock the wealth in their home to support their lifestyle in retirement.
By the time the young people of today reach retirement age (no doubt pushed to 70 or 75 by then), the Age Pension will be a curious quirk of history: as irrelevant as 1 and 2 cent pieces. Superannuation and the family home will be the principal form of supporting oneself in retirement.
Since we’re talking about superannuation, let’s talk about how any ‘reform’ of the tax arrangements surrounding superannuation (almost certainly just a tax grab) would in all likelihood preserve the current generous system of concessions for those who are closer to retirement. It’ll be today’s young people who are slugged with higher tax on that same pot of money which is then meant to support them fully in retirement.
Higher taxes and more spending means younger taxpayers and future generations are footing the bill for others’ profligacy. This absurd yet ubiquitous narrative that big government is good for ‘the young’ is nothing but a con.
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