Firstly, they were hated as homeowners because they could afford a house in the 1980s, which caused resentment among the younger generations.
And as Australian baby boomers retire, their finances are coming under greater scrutiny, simply for having retirement savings that allow them to earn money to finance their later years.
During the super accumulation phase, workers pay a 15 per cent tax on their earnings. But after someone turns 60 and stops working, their super earnings are tax-free for retirement savings of up to $1.9 million.
The reason is simple: older Australians have more money left to pay their living expenses after their working lives end and are therefore less reliant on the Age Pension.
But the Institute of Actuaries, the peak body for mathematicians who calculate risk, wants to change that with a new 10 per cent tax on the retirement phase of super.
Under this proposed retirement tax, Workers would also pay a 10 per cent tax during the super accumulation phase instead of the current rate of 15 per cent. So the idea is a flat 10 percent tax applied to both Retirement life stages.
The biggest losers from such a proposal would be boomers with greater retirement savings, who live off their super and do not receive the old-age pension.
Professor Robert Breunig, director of the Tax and Transfer Policy Institute at the Australian National University, tells me: ‘It would be a blow for those people compared to the current system.
Australian baby boomers who have worked hard all their lives now face a proposed new retirement tax (photo is a file image)
“Those people are going to have a little less money to spend, but 10 percent is still pretty small.”
Professor Breunig argues that the current system is in fact too generous for those who retire with a lot of extra money.
‘The question is: is the current system too generous? For people who have a lot of money in groceries, there is a great benefit; I’m not sure there’s much benefit to Australian society,” he says.
Australia’s youngest boomers turned 60 this year and the Institute of Actuaries admits its proposal to tax super earnings in retirement would hit this group hardest, especially if they have more super.
“A current couple in their 60s who are closer to the retirement phase, and therefore have less compensation for the lower tax in the accumulation phase, would be more affected than younger households,” he says.
‘The biggest impacts would be felt by members who are currently in the retirement phase because the change will simply be an additional tax on earnings as they are no longer in the accumulation phase.
“Households with higher wealth would be proportionally more affected, compared to households with lower wealth.”
The discussion paper Superannuation tax reform: sensible changes for a fairer system argues that a flat tax super scheme would see younger Australians have more retirement savings at age 60, the age at which someone can access their superplan.
The Institute of Actuaries wants to introduce a 10 per cent tax on the retirement phase of supers
“Retirees would pay higher taxes, but those who have not yet retired would retire with higher balances to fund this additional tax,” he says.
The paper also argues that a tax rate for supers, during the accumulation and retirement phases, would mean Australians would only need to hold one retirement account without having to switch at retirement, which would benefit both individuals and the super funds.
“Implementing a uniform tax rate for accumulation and retirement would also mean that all members could have a single account,” he says.
‘Retirees would not need to juggle two accounts with different rules and the significant complexities (and costs) of transfer balance limits would be eliminated.
‘It would no longer be necessary to separate contributions into different types within fund accounts and track them over time. This would improve the simplicity of the system and finance operational processes.’
The Institute of Actuaries is arguing for a flat tax on super 15 years after the former Treasury secretary recommended the idea in a wide-ranging tax review.
Professor Robert Breunig, director of the Tax and Transfer Policy Institute at the Australian National University, tells me the proposal will affect those with the largest retirement savings.
Under his plan, new retirees would pay taxes on their Social Security for the first time, but government revenues would not improve for 17 years.
“Initially, fewer taxes would be generated, but from 2042 there would be more taxes than the current regime,” the report says.
The mandatory super debuted in 1992, when the oldest baby boomers were in their forties.
Back then, mandatory employer contributions were only three percent.
This meant that many boomers didn’t have generous retirement savings if they only started building their super 14 years before turning 60.
Those who worked in unstable jobs in the private sector often had little retirement savings.
Many had to continue working until they could receive the age pension of 65 years. It has since been raised to 67 years for those born after 1957.
Younger workers, by contrast, have benefited from mandatory double-digit super contributions.
It has been at 11.5 percent since July 1 and will increase to 12 percent in July 2025.
But Professor Breunig says the mandatory 9.5 percent pension guarantee, which applied until June 2021, was a more appropriate level.
He argues that would allow young workers to keep more of their income that they could use to buy a home.
“There are deeper problems with the supersystem,” he says.
‘Is the retirement guarantee too big? Are we making people save too much money, especially considering that people in their 30s would like to use that money to buy houses?’
Australians have on average just $164,126 in superannuation, according to tax office data.
By the time they are in their early sixties, men typically have $205,385 in excess compared to $153,685 for women in the same age group.
This is well below the $595,000 target the Australian Superannuation Funds Association recommends for a comfortable retirement, provided someone has paid off a mortgage.
The Institute of Actuaries’ proposal could well help younger Australians save for their retirement and close this savings gap.
Poorer Australian retirees with fewer savings, as a result of the new supertax, would end up relying more on the age pension.
Then there are those who accumulate too many pensions and die with large retirement savings balances.
“We are seeing a lot of people dying with a lot of retirement and a lot of people not spending anything on their retirement,” says Professor Breunig.
“So, there is a group of people who at 85 have as much super as they do at 65.”
Professor Breunig says that a 15 percent tax in both the accumulation and retirement phases therefore makes more sense.
“There are advantages to that idea; I’m not sure 10 percent is enough,” he tells me.
“I think 15 percent is not unreasonable.”