Superannuation savings could be in danger of being wiped out by the federal government. The Australian Financial Review (AFR) reported recently that the federal government was about to seize the superannuation balances of foreign temporary workers. This is a big deal and I’ll come to why it affects you shortly… Here’s what the AFR said:
“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.”
The super balances in question belong to people that have come to Australia, worked for a period of time, paid taxes, received superannuation contributions from their employer, and then left the country to return home.
But stealing private property doesn’t seem to worry the government or Kevin Rudd, at least not yet. Besides, as the AFR reports, if these foreign workers want their property back: “Members will be able to claim their savings from the ATO, but from this month former temporary residents will have to pay withholding tax of up to 45 per cent, up from 40 per cent previously.”
You see, the process of expropriating this private property is that it will be treated as tax revenue. The Australian Taxation Office (ATO) will tax these super balances at 100%. The funds will then be added to the government’s consolidated revenue – in other words, straight into the government wallet for it to spend.
It all sounds very Venezuelan doesn’t it? Kevin Rudd and superannuation. Hugo Chavez and oil.
Needless to say, not only is the Rudd government grabbing $800 million from superannuation, but because it will spend the money to ’save’ the economy, it will add another liability to Australia’s balance sheet as each year more money is snaffled from savers and spent.
And the scary thing is, I saw this coming. I wrote in Money Morning recently that now would be the perfect time for the government to sink its paws even further into your wallet and your savings. But even this has happened quicker than I thought possible.
Is Kevin Rudd coming for YOUR retirement cash?
The next logical step is for the government to grab the superannuation balances of all working Australians. Don’t forget, the government is about to embark on a massive $200 billion spending spree and it’s got to pay for it somehow.
Australian taxes are already high. What are the other options? It can increase the GST for starters, but that’s only going to drip feed through to government coffers. If it wants a big one-off hit what better way than to get hold of the $1 trillion held in superannuation.
It would wipe out government debt in an instant and still leave it with plenty of your money to spend on wasteful infrastructure projects.
What this means is that yet again savers are being punished. The dream of paying for your retirement with your super could be about to end. To read more about how developments in the market affect your super, make sure to sign up for my free daily e-letter Money Morning. Click here to sign up to Money Morning.
Kris Sayce
Editor, Money Morning