The reason why we don’t havefree dental in Medicareis because we subsidise the inheritance of the wealthiest people in Australia.
I know it might shock you to see it written plainly, it might even annoy you. But it is the truth.
The way superannuation is mostly covered by the media in this country is about how to avoid paying tax and how to use it to fund inheritance.
Takethe headlinethis week in Nine newspapers “money column”: “We have $8m in an SMSF. How can we avoid the new super tax?”
You could hardly find a more pointed example of everything wrong with Australia’s media and economic system.
I look forward to the SMH and others providing advice on how people on jobseeker can work for cash to avoid losing any benefits and paying extra tax.
Similarly, it doesn’t take long for any story about the proposed changes to the tax breaks on superannuation balances over $3m to mention inheritance. That’s because $3m is so far beyond what anyone needs to retire comfortably that only the most self-delusional think they need more than that to survive. Heck, the main way Peter Dutton criticised the changeswas to label thema “quasi inheritance tax”.
The best one of the genre is anAFR headline: “New $3m super tax is ‘stealing my children’s inheritance’”. You might expect that from the AFR but you would hope for better from the ABC.
On Tuesday night,ABC’s 7.30 reportedon a pair of farmers who were worried about the changes to the superannuation tax breaks because the combined balances of the couple was $5.5m and so might soon have a combined $6m (ie more than $3m each).
The 7.30 story had no mention of inheritance but the written versionnotedthat “the money isn’t only being used to fund their retirement. The plan is for it to help fund the inheritances of their other children without necessitating selling off the family farm.”
Let’s stop right there.
We don’t give tax breaks on superannuation so that you can fund the inheritance of your children.
Tattoo that on your eyeballs.
Superannuation tax breaks are designed to encourage you to save so you do not need to rely on the age pension. It is not so your kids can get a head start in life. That might be a nice thing for you to do but there is zero public benefit in giving you a tax break to do it.
The story also contained the claim by the couple’s son that “Mum and Dad will be up for an extra $120,000 a year”.
According to the report, the extra tax was due to the anticipated unrealised capital gain of the farming assets (the wind turbines and the agricultural chemical businesses) once the couple’s super balance passed $6m (ie $3m each).
Well now. If your Spidey senses are tingling, you should be a journalist. Because that seems a rather bold claim.
Consider that to pay $120,000 in tax on just plain old income you need to earn $342,000 a year.
If the graph does not display click here
Given the average tax on that is 35.1%, we know that cannot be the case for super, because super earnings are only taxed at 15% until the balance goes above $3m and then the earnings attributable to the amount above $3m are taxed at 30% – both below 35%.
So, for that claim to be true, the earnings on their superannuation (including unrealised capital gains) would need to be well over $342,000.
How much? Well, the Treasury has given us a handyfact sheetthat lets us work it out.
For one person with a $3m super balance, their fund would need to increase by $2m for them to have to pay an extra $120,000 (yes, just a 6% tax rate).
But what if the $120,000 is combined?
In that case, both their funds would need to grow in a year from $3m to $4.3m. Each would pay$60,035 on that $1.3m unrealised gains. Yep, a tax rate of just 4.6% each.
If the graph does not display click here
Consider as well that an ordinary income earner pays an average tax rate of 4.6% when they earn just $25,500.
Those with super balances of over $3m arestillgetting a tax break because if it was taxed like normal income they would pay 45% tax not 30%. These tax breaks cost money. Money that the government has decided it is better to spend than, for example, to include dental in Medicare.
Let’s do some maths.
The cost of putting dental in Medicare, which would include “preventative and therapeutic dental services, including regular check-ups and teeth cleans, crowns, orthodontic treatment, oral surgeries, periodontics and prosthodontics” is estimated bythe Parliamentary Budget Officeto be $13.63bn in the first year.
That is a lot of money.
But not compared to how much each year the government gives in tax breaks to the richest 10% on their superannuation – most of whom will not be eligible of the age pension, and thus are getting a tax break for no public good, and much of which will go towards inheritance.
In 2025-26, the Treasury estimates these breaks will cost the budget $22bn.
If the graph does not display click here
When the treasurer, Jim Chalmers, was asked about dental in Medicare during the election campaignhe told reportersthat “we’ve got to make sure that we can afford it and make sure there’s room for it in the budget”.
OK, then. Let’s not cut all the super tax concessions for the richest 10%. Let’s still give them $8bn a year in tax breaks to help ensure they have stonks more money than they need for retirement.
Great, we have now found room in the budget to pay for dental in Medicare.
Dental in Medicare or tax breaks to the richest so they can give money tax-free to their kids?
Budget and governing are about choices, and so too is how the media covers it.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work