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Higher Taxes for Superannuitants

old lady cash coins money counting poor poverty purse

It was only ever a matter of time. The government has been looking at ways to solve the so-called ‘ageing population’ issue and has proposed that, if superannuitants have earnings other than their pension, they should pay a higher rate of tax on those earnings.

Welcome back to the 1980s. In those days, it was called the Superannuation Surcharge.

Treating the pension as a basic income, and taxing pensioners’ other earnings at a higher rate, could be a better option to lower the cost of superannuation than raising the age of eligibility or cutting the amount paid, researchers say.

Associate Professor Susan St John, of the University of Auckland Retirement Policy and Research Centre, released a briefing last week which updated work done in 2019, in the context of Treasury’s fiscal projections for the superannuation scheme.

Susan St John… who else? The ageing professor is determined to put all the rest of the aged into poverty at all costs.

Between 2021 and 2060, the number of pensioners is expected to roughly double. Treasury expects the cost of the scheme to grow at a rate 1.5 times faster than the economy over that period.

Perhaps if we had a government that focused on growing the economy and helping businesses to thrive, those figures would not look quite so dire. I question the numbers anyway. New Zealand is a country that continues to import talent and new immigrants have to be below a certain age. Many arrive here with young families. This will continue to dilute the average age of Kiwis, which is currently 37.

St John said the growing number of younger working age people struggling to get into the property market, with large student loans, were questioning a pension for “well-off, well-housed superannuitants”.

Young people are struggling to get into the property market because of a hopeless government that has no clue how to get houses built. People would not be paying ridiculous prices for property, were it not for the useless government that promises the earth and delivers… nothing.

“Of those turning 65 today, fewer have their own homes mortgage-free and many are struggling in the private rental market.

“Nearly 20 per cent of the 24,000 applicants on the housing register, which indicates extreme housing need, are over 55. Evidence of pressures in the housing market are reflected in high rates of increase in additional accommodation and hardship support.”

Hang on. So fewer of those qualifying as superannuitants today own houses… so what is their excuse? Why aren’t they ‘well-off, well-housed superannuitants’? The housing crisis has not been going on for the last 40 years. It seems there are not quite as many ‘well-off, well-housed superannuitants’ as we thought.

“Wealthy recipients of NZS may still be in well-paid work and/or have other large private incomes and assets, and sometimes annuities or private pensions. Wealthy recipients of NZS are likely to have accumulated their wealth with tax-free capital gains, especially in housing, and may have gained substantially from the 2010 income tax cuts, lower portfolio investment entity (PIE) rates of tax.”

Typical response from a mealy-mouthed elitist. The idea of introducing special tax rates on PIE funds was to encourage saving and investment. So, people did what they were encouraged to do… and now, they are to be penalised for it?

Good grief… these people…

She said the pension could be moved outside the tax system and treated as a basic income, which she referred to as the New Zealand Superannuation Grant (NZSG).

Those receiving it could then be taxed at a higher rate on their other income.

That would mean, once their other earnings reached a certain point, they were better off not to claim the pension.

Isn’t this TOP party policy? The Universal Basic Income but, in this case, only for pensioners?

Her modelling showed, with a rate of $17,448 per year, with a flat tax of 39 per cent on all other income, the breakeven would happen when someone’s other income was $139,000 a year.

Whaaat? A flat rate of 39%? You have got to be joking. A little old lady who makes $5,000 in interest each year would end up losing just under 40% of it in tax? How is that in any way ‘fair’?

With a rate of 17.5 per cent for the first $15,000 of other income, and 43 per cent on each dollar over that, the breakeven point would be $122,000 a year.

Stuff.

43%? A special rate just for pensioners? Because someone earning $500,000 a year through normal earnings would not pay tax at a higher rate than 39%. This is usury.

St John has acknowledged that the basic pension is insufficient, but intends to tax any superannuitant who dares to earn other income anyway. Any other income. In some circumstances, this could be considered fair, if there were thresholds above which the taxation applied, and if the applicable tax rates weren’t the highest rates in the land. But last time the Superannuation Surcharge caused serious hardship for many pensioners and St John’s proposals are much more draconian than the rules in the 1990s.

Always, always, there is a reference to older people living in houses which are valued very highly because of capital gains. But just stop and think for a minute. Those capital gains are of no use to anyone until the property is sold. A house, whether worth $200,000 or $2 million, is still just a house. If a superannuitant sells their house, they still need to live somewhere, as they buy and sell on the same market. And don’t forget that once the superannuitant passes on, it is their children who get the benefit of the capital gains… or of the house. That’s right. Those ‘struggling to get into the property market’ may well manage to do it without any effort at all. Just wait for the olds to pop off.

It is time that all these proposals were calculated, not on the basis of envy, but on the basis of equity. Perhaps then we might get some common sense into these arguments and proposals for the future, but the politics need to be taken out of this discussion. That won’t happen when left-wing elitists are driving the narrative on the subject. Is there anything that is free from politics these days?

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