For nation’s sake, boomer self-interest must end

‘How could anyone defend people using superannuation accounts to accumulate massive wealth while being taxed at concessional rates?’

When Anthony Albanese and Jim Chalmers announced a doubling of the concessional tax rate from 15 per cent to 30 per cent on earnings from superannuation balances above $3m, the loudest and shrillest cries of opposition came from the luckiest, most selfish and entitled generation of all: baby boomers.

There has never been a generation that has received so much government support, whether it be free education and healthcare or lucrative tax perks alongside superannuation, such as negative gearing and franking credits, while living most their lives in eras of full employment with cheap housing, and using their assisted wealth creation to live comfortably in retirement at the expense of other generations.

Yet this tax change to superannuation is eminently defensible. It will impact an estimated 80,000 people, or just 0.5 per cent of Australians. It will apply from 2025, after the next election. And it will provide a much-needed $2bn in revenue for a budget deep in the red and a heavily indebted nation.

How could anyone defend people using superannuation accounts to accumulate massive wealth while being taxed at concessional rates? Too many wealthy boomers are using superannuation as a tax minimisation, wealth inheritance and transfer scheme. Superannuation is supposed to be about saving for a comfortable retirement. Nobody needs $3m for that.

The cost of superannuation tax concessions, which mostly benefit high-income earners, is estimated to be about $52bn in forgone revenue each year. This is forecast to exceed the cost of the Age Pension, now about $55bn, by 2050. Yet the top 20 per cent of income earners who receive two-thirds of the value of these super tax benefits would not be eligible for the pension.

Opposition to this modest tax change has exposed the entitlement mentality of the greediest generation. It should lead to a sober examination of the allocation of other payments and benefits that are skewed towards boomers. The truth is that we cannot, as a nation, continue to provide so many benefits to so few at a time of increasing budget pressures, from rising health costs and the NDIS to defence.

The Greatest Generation (born 1901-24) and Silent Generation (1925-45) lived through depression and war, and worked hard so their children, the boomers, could live better lives than they did. But many boomers (1946-64) seemingly have little regard for intergenerational equity and expect the rest of us to pay for their comfortable lives.

The burden of paying for the ageing boomer cohort has fallen on their children and grandchildren: Generation X (1965-80), millennials (1981-96) and Gen Z (1997-2012). Because any special tax treatment for retirees – many ironically classified as “self-funded” – is mostly funded by younger workers paying higher tax rates on their earnings.

These generations – I proudly claim my Gen X status – can only dream of free or low-cost education, easily finding a job when leaving school, purchasing an average home that didn’t require an equivalent entire annual salary as a deposit, and then benefiting from a range of tax lurks and perks to see us contentedly into retirement. Census data shows homeownership in decline. In 1991, 65.8 per cent of baby boomers owned or were paying off a home. By 2006, 62 per cent of Generation Xers had paid off or were paying off a home loan. By 2021, just 54.6 per cent of millennials were doing the same.

‘Too many wealthy boomers are using superannuation as a tax minimisation.’

It should come as no surprise that even though many boomers, as they often tell us, were paying 17 per cent interest rates, Generation X and millennials have been paying much higher mortgage repayments or rent with much lower interest rates because house prices have increased so much. Generation X paid 28.5 per cent of their median income on mortgage repayments in 2006 compared to 20.3 per cent for boomers in 1991.

These comparisons could go on and on. Generation X and millennials leave university with massive debts compared to their parents and grandparents, most of whom had generous scholarships or fee-free tuition. We work longer hours at a time when employment has been less secure and have endured multiple recessions compared to the prosperous 1950s and ’60s. All the while paying for boomer benefits and tax breaks.

The changes to superannuation could have been handled better by Chalmers. There were days of speculation about what might be changed, having called for debate and discussion, and then a sudden announcement of what is nevertheless a rather small change to the tax rate on earnings with balances above $3m.

It is true Albanese all but ruled out any changes to superannuation before the last election by saying Labor had no plans to do so. That was likely the case at the time but it gave the impression there would be no alteration to superannuation arrangements at all. This has led to the “broken promise” charge being made by critics, many of them boomers.

With the change in tax rates on superannuation earnings not due to commence until after the next election it is no different to John Howard and Peter Costello taking their proposal to introduce a GST, and other tax changes, to the 1998 election after saying it would “never ever” again be part of Coalition policy ahead of the 1996 election.

Those who attacked the government for broken promises and raiding superannuation accounts may have been surprised when Newspoll on Monday showed very strong support for the government’s changes, with 64 per cent in favour and just 29 per cent against. Even most baby boomers approved. It is a sign perhaps even the boomers now realise they have had it too good for too long.