# Superannuation, the ultimate government cash cow?



## drsmith (20 April 2012)

Soon after coming to office in 1996, the Howard Government introduced a superannuation surcharge for contributions from higher income earners. It's reintroduction is currently off the agenda (according to The Australian), but Labor is currently considering the following measures (below, again from The Australian).

Linking the contributions tax to a worker's marginal income tax rate would, in effect, be the same as the Coalition's surcharge, but Labor may go further, hitting income from super as well.


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## StumpyPhantom (20 April 2012)

drsmith said:


> Soon after coming to office in 1996, the Howard Government introduced a superannuation surcharge for contributions from higher income earners. It's reintroduction is currently off the agenda (according to The Australian), but Labor is currently considering the following measures (below, again from The Australian).
> 
> Linking the contributions tax to a worker's marginal income tax rate would, in effect, be the same as the Coalition's surcharge, but Labor may go further, hitting income from super as well.




It's too easy.  So you scrape the nation's future self-funded retirees, but it won't happen to the extent that we have to rely on the pension.  Money for nothing.  

But this says everything about Gillard's motivation.  She keeps repeating it - share the wealth and prosperity around - somehow making it a sin for those who have earned it.

Just keep your powder dry.  Put it in a piggy bank if you have to, and the political pendulum will swing away from Labor and then (hopefully) allow you to re-submit that money to your super.


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## banco (20 April 2012)

Given the number of baby boomers there are going to be on the aged pension it seems reasonable that the better off baby boomers help pay for them rather then leaving it for the younger generations.


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## StumpyPhantom (20 April 2012)

banco said:


> Given the number of baby boomers there are going to be on the aged pension it seems reasonable that the better off baby boomers help pay for them rather then leaving it for the younger generations.




No problem with paying my fair share Banco.  My problem is that this money being HOOVERED up by the Gillard government is going anywhere BUT!

It's going into general revenue to pay for everything else this Government has squandered money on.

Anyway, I don't get the logic of this baby boomer statement.  Isn't the fact of being a self-funded retiree, on its own, what it means to be paying your way?  The words alone suggest it.


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## Julia (20 April 2012)

StumpyPhantom said:


> No problem with paying my fair share Banco.  My problem is that this money being HOOVERED up by the Gillard government is going anywhere BUT!
> 
> It's going into general revenue to pay for everything else this Government has squandered money on.
> 
> Anyway, I don't get the logic of this baby boomer statement.  Isn't the fact of being a self-funded retiree, on its own, what it means to be paying your way?  The words alone suggest it.



Exactly.

  Banco:  why should those who have saved and made provision for funding their own retirement be obliged to subsidise those who couldn't be bothered and/or spent up large instead?

If the government go ahead with this they will be more than ever sealing their fate of electoral oblivion for decades.  Just so Swanny can claim a surplus, something which most economists correctly label as a purely political aim.


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## Intrinsic Value (20 April 2012)

The whole things stinks but it was always on the cards with a government addicted to spending and with a philosophy of taking away incentives for those that want to take control over their own financial destiny.

The 15percent contributions tax on super is an especially good idea for older australians who have not had super long enough to be able to depend on it for retirement purposes. For people in their late forties and fifties it gives them an opportunity to super charge their super so that they dont have to depend on the old aged pension. It is eminently sensible. 

In the long run they would save money by retaining this tax incentive.

But no it is back to lowest common denominator politics.

How about looking at out of control government spending and the vast array of government handouts that cost billions of dollars a year and the people that have become instituitionalised into a welfare mentality.

The whole things is a sad pathetic indictment on our current government and their policies.


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## banco (20 April 2012)

Julia said:


> Exactly.
> 
> Banco:  why should those who have saved and made provision for funding their own retirement be obliged to subsidise those who couldn't be bothered and/or spent up large instead?




The people who couldn't be "bothered and/or spent up large" are going to receive age pensions (not to mention medicare) whatever happens.  The only question is how to pay for it.  There's not going to be enough young workers to pay for it all so it's only logical that the Government would try and recover some of the costs from the wealthier retirees/retirees to be.


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## Intrinsic Value (21 April 2012)

banco said:


> The people who couldn't be "bothered and/or spent up large" are going to receive age pensions (not to mention medicare) whatever happens.  The only question is how to pay for it.  There's not going to be enough young workers to pay for it all so it's only logical that the Government would try and recover some of the costs from the wealthier retirees/retirees to be.




False economy. These are not wealthy retirees yet. They are trying to save for their retirement so that they are not depedent on the old age pension but the government is removing the incentive that is currently in place for those that are not benefitting from compulsory super for the majority of their working lives.

Less people on the pension means greater savings in the long run for the government instead of looking at a short term fix for the  current budget deficit.


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## So_Cynical (21 April 2012)

How about the thousands of struggling older Australians who were putting millions into super a couple of years ago before the new (anti rorting) limits came into force...now penalised for just wanting to put a few million away to look after themselves in retirement....shame Labor Shame.


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## banco (21 April 2012)

Intrinsic Value said:


> False economy. These are not wealthy retirees yet. They are trying to save for their retirement so that they are not depedent on the old age pension but the government is removing the incentive that is currently in place for those that are not benefitting from compulsory super for the majority of their working lives.
> 
> Less people on the pension means greater savings in the long run for the government instead of looking at a short term fix for the  current budget deficit.




Well it depends on the details of the actual policies but if its aimed at wealthier people it's unlikely to prove to be a false economy as they are likely to end up being self-funded retirees in any case.  

But my broader point is that the tax concessions with regards to super are unsustainable in the medium run in their current form given Australia's demographics.  In particular the policy of super income for over 60s being tax free isn't going to last.  I've little doubt that in a few years retirees will be paying income tax on their super income.


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## StumpyPhantom (21 April 2012)

banco said:


> Well it depends on the details of the actual policies but if its aimed at wealthier people it's unlikely to prove to be a false economy as they are likely to end up being self-funded retirees in any case.
> 
> But my broader point is that the tax concessions with regards to super are unsustainable in the medium run in their current form given Australia's demographics.  In particular the policy of super income for over 60s being tax free isn't going to last.  I've little doubt that in a few years retirees will be paying income tax on their super income.




Banco - your arguments have been shredded by the preceding.  And your class warfare statement about robbing Peter to pay Paul shouldn't be dignified with a response.

As per your broader point, I'm afraid the media sensationalism about baby boomers has got inside your head.  How is it that you can rationalise, in an exponentially growing global population, that the bulge of the population is STILL the baby boomers?

Have a read of this http://www.servicecentral.com.au/resources/articles/Gen-y-is-now-australia-s-largest-demographic/137 or do Statistics 101 at uni.


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## Intrinsic Value (21 April 2012)

banco said:


> Well it depends on the details of the actual policies but if its aimed at wealthier people it's unlikely to prove to be a false economy as they are likely to end up being self-funded retirees in any case.
> 
> But my broader point is that the tax concessions with regards to super are unsustainable in the medium run in their current form given Australia's demographics.  In particular the policy of super income for over 60s being tax free isn't going to last.  I've little doubt that in a few years retirees will be paying income tax on their super income.




Well you have bought up another point here about the tax free income for over 60s which we were not discussing but I do agree that this policy is unsustainable and should never have been bought in. This was a Howard initiative i think to capture the grey vote.

The wealthy as you call it will do alright anyway without any caps or not but there is a vast number of people who are not wealthy and do not have adequate super but who can at the late stage of their working life put money into super and take advantage of the existing incentives so that they are not dependent on the old aged pension.

Cuts to govt spending could come in many areas particularly the vast array of middle class welfare like family allowances which are completely unsustainable.


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## Julia (21 April 2012)

Intrinsic Value said:


> The whole things stinks but it was always on the cards with a government addicted to spending and with a philosophy of taking away incentives for those that want to take control over their own financial destiny.
> 
> The 15percent contributions tax on super is an especially good idea for older australians who have not had super long enough to be able to depend on it for retirement purposes. For people in their late forties and fifties it gives them an opportunity to super charge their super so that they dont have to depend on the old aged pension. It is eminently sensible.
> 
> In the long run they would save money by retaining this tax incentive.



Yes.  Stupid to remove incentives for people to provide for their own retirement.



> But no it is back to lowest common denominator politics.
> 
> How about looking at out of control government spending and the vast array of government handouts that cost billions of dollars a year and the people that have become instituitionalised into a welfare mentality.
> 
> The whole things is a sad pathetic indictment on our current government and their policies.



I couldn't agree more.  



banco said:


> The people who couldn't be "bothered and/or spent up large" are going to receive age pensions (not to mention medicare) whatever happens.  The only question is how to pay for it.  There's not going to be enough young workers to pay for it all so it's only logical that the Government would try and recover some of the costs from the wealthier retirees/retirees to be.



You are missing the point of my earlier comment.

I wonder if this is just something the government has dropped out just to see what the reaction is, and will elect not to go ahead if the backlash is loud enough?
Remember some months ago they did a similar thing with medical research funding and the various research groups made so much noise it was dropped.
Quite possibly the same will happen here.  They cannot, after all, afford to reduce their electoral chances any more than they already have.


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## StumpyPhantom (21 April 2012)

Julia said:


> I wonder if this is just something the government has dropped out just to see what the reaction is, and will elect not to go ahead if the backlash is loud enough?
> Remember some months ago they did a similar thing with medical research funding and the various research groups made so much noise it was dropped.
> Quite possibly the same will happen here.  They cannot, after all, afford to reduce their electoral chances any more than they already have.




Fingers crossed, Julia that that's their strategy.  This government is deluded and silly enough to think that it's still got a chance at the next election.

I suppose that's better than a 'crash and burn' government where they know they're going down and want to take as much down with them as they can.


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## drsmith (21 April 2012)

This was leaked on the same day as the aged care policy was released with the hope it would slip under the radar. It's just part of the usual budget softening up process.

Labor may not have decided on all the detail, but their intention to hit super is clear.



> ''There are a number of options on the table and none of them will bother the people whose votes we need,'' one source said.




http://www.smh.com.au/opinion/polit...rise-in-contributions-tax-20120420-1xcfa.html



StumpyPhantom said:


> I suppose that's better than a 'crash and burn' government where they know they're going down and want to take as much down with them as they can.



By intention or not, they became a crash and burn government the day they announced a carbon tax.


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## Glen48 (21 April 2012)

Don't know why you are worried about super, the feds will take over super one day claiming they can manage it better and give you more money in the long run of course most will fall for the Feds don't lie trick and think it s a good thing when in fact you will be handed back your super like a kid getting pocket money if there is any money there after all how will the super scheme's get the money from  a failing economy.

USA has 11 M house's close to going under water and soon will have 700K citizens with out any income once their benefits are cut off can you imaging what turmoil that will cause.
 Of course its USA  and can'thappen here


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## Starcraftmazter (21 April 2012)

Pretty unacceptable considering how much else there is to cut which doesn't contribute to the productive economy.

How much can be saved by getting rid of baby bonus? Family tax benefits A&B? Negative gearing? How about the capital gains concessions for property?

This government is mad, and needs to be put down.....after the NBN is built


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## Tyler Durden (21 April 2012)

Julia said:


> Banco:  why should those who have saved and made provision for funding their own retirement be obliged to subsidise those who couldn't be bothered and/or spent up large instead?




I see your point, and in a perfect world, they wouldn't.

But we live in an imperfect world. A similar analogy can be seen in the office - people who are efficient and prioritise their work will get all their work done within time and maybe even have a bit to spare. Those who are inefficient become unable to handle any other work, which then gets shifted to the efficient workers because they have 'spare' time.


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## Starcraftmazter (21 April 2012)

Tyler Durden said:


> A similar analogy can be seen in the office - people who are efficient and prioritise their work will get all their work done within time and maybe even have a bit to spare. Those who are inefficient become unable to handle any other work, which then gets shifted to the efficient workers because they have 'spare' time.




Yeh, but the more productive of us get paid more :


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## drsmith (21 April 2012)

My guess at what the government will do.

Introduce an additional 1% tax for every pre-tax dollar contributed and earnings from super for every $10000 above $110000 (defined as some form of adjusted income to include pre-tax contributions). This would equate to an effective tax rate of 22% on pre-tax contributions and earnings at $180000 or 15% below the marginal rate of 37%, in line with Greens policy. 

For incomes above $180000, this would continue to $260000, at which point the effective pre-tax rate on contributions and earnings would be 30% which is 15% below the marginal tax rate of 45%, again in line with Greens policy. 

Thresholds and rate of increase may vary, but this is the way I suspect they will go.

Both the above could operate like the superannuation surcharge. The former Coalition government has shown the way here.

Members of unfunded-defined benefit schemes may not escape either. Again, the former Coalition government has shown the way.



> Unfunded defined benefit funds and members of constitutionally protected funds, are not required to pay the surcharge liability until the member has left the fund, or begin to receive their benefits.




http://www.ato.gov.au/superfunds/content.aspx?doc=/content/77953.htm

Any such liability accumulates interest at the 10-year bond rate.


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## Julia (21 April 2012)

Tyler Durden said:


> I see your point, and in a perfect world, they wouldn't.
> 
> But we live in an imperfect world. A similar analogy can be seen in the office - people who are efficient and prioritise their work will get all their work done within time and maybe even have a bit to spare. Those who are inefficient become unable to handle any other work, which then gets shifted to the efficient workers because they have 'spare' time.



There are plenty of other sources from which to obtain the shortfall, Tyler.  See SCM's post above.
Do away with the damn baby bonus for a start!

Some of us have all our working lives invested carefully and saved in order to have a self funded retirement.  Meantime, we've watched friends spending on luxury extensive travel, new cars, designer clothes etc blithely saying stuff like "oh the future will look after itself' etc.

I'm just so sick of the prudent having to subsidise the wasters.


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## banco (21 April 2012)

Julia said:


> There are plenty of other sources from which to obtain the shortfall, Tyler.  See SCM's post above.
> Do away with the damn baby bonus for a start!
> 
> Some of us have all our working lives invested carefully and saved in order to have a self funded retirement.  Meantime, we've watched friends spending on luxury extensive travel, new cars, designer clothes etc blithely saying stuff like "oh the future will look after itself' etc.
> ...




In other words keep the benefits for older Australians and pay for them by getting rid of benefits directed at the younger generations?


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## Starcraftmazter (21 April 2012)

banco said:


> In other words keep the benefits for older Australians and pay for them by getting rid of benefits directed at the younger generations?




Why is allowing people to save money for retirement without having it taxed harshly considered a benefit?

As a younger person, I am more than happy to have every benefit for "younger" people removed. I didn't ask for any damn welfare to have children or speculate on property, and I sure as hell don't need it.


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## StumpyPhantom (21 April 2012)

banco said:


> In other words keep the benefits for older Australians and pay for them by getting rid of benefits directed at the younger generations?




Hay Starcraftmazter - I'm with you on the Banco comment.  It's quite ironic - what he's saying about all this - and yet he's the one who most needs to listen to Joe Hockey's recent speech in London about getting rid of this 'entitlement culture'.

Here it is Banco - http://www.abc.net.au/lateline/content/2012/s3480665.htm - knock yourself out!


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## drsmith (21 April 2012)

Starcraftmazter said:


> Why is allowing people to save money for retirement without having it taxed harshly considered a benefit.



The Greens would like to tax super more harshly than it is now.


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## Starcraftmazter (21 April 2012)

drsmith said:


> The Greens would like to tax super more harshly than it is now.




For everyone or the rich? Citations would be good.


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## drsmith (21 April 2012)

Starcraftmazter said:


> For everyone or the rich? Citations would be good.



Given that you have described the Greens as a good minor party and that you feel we would only get real governance when the two major parties are marginalised, I would have thought you would know.

What income level do you consider to be rich ?


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## Starcraftmazter (21 April 2012)

drsmith said:


> Given that you have described the Greens as a good minor party and that you feel we would only get real governance when the two major parties are marginalised, I would have thought you would know.




I really can't be familiar with every single policy of every single party. Mostly, I am familiar with the ones I consider most important (this would not be one of them).



drsmith said:


> What income level do you consider to be rich ?




Rich enough to salary sacrifice purely for tax reasons.


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## drsmith (21 April 2012)

Starcraftmazter said:


> I really can't be familiar with every single policy of every single party. Mostly, I am familiar with the ones I consider most important (this would not be one of them).



You're against it then ?

It's harsher than what Labor will likely dish out.



Starcraftmazter said:


> Rich enough to salary sacrifice purely for tax reasons.



What income level is that ?


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## Starcraftmazter (21 April 2012)

drsmith said:


> You're against it then ?
> 
> It's harsher than what Labor will likely dish out.




I don't know - I have not seen the policy details yet. Either way, it is inconsequential compared to the bigger evils perpetrated by major parties.



drsmith said:


> What income level is that ?




I doubt it depends on income as much as the amount of super that is contributed annually. I am unsure of what that level is as I have not given it much thought.


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## drsmith (21 April 2012)

Starcraftmazter said:


> I don't know - I have not seen the policy details yet. Either way, it is inconsequential compared to the bigger evils perpetrated by major parties.




That's not the impression I got from your earlier comment,



Starcraftmazter said:


> Why is allowing people to save money for retirement without having it taxed harshly considered a benefit?
> 
> As a younger person, I am more than happy to have every benefit for "younger" people removed. I didn't ask for any damn welfare to have children or speculate on property, and I sure as hell don't need it.




--------------------------------------------------------------------------



Starcraftmazter said:


> I doubt it depends on income as much as the amount of super that is contributed annually. I am unsure of what that level is as I have not given it much thought.




That's what I thought.


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## Starcraftmazter (21 April 2012)

drsmith said:


> That's not the impression I got from your earlier comment,




I really don't see how the two relate.

It's bad if the government chooses to tax super contributions more harshly. But it's nothing compared to giving people money to speculate on property or creating a welfare state - which are my two biggest criticisms of the major parties.

I have not seen the Greens legislation you mentioned, and you have failed to link to it anywhere so I can't really comment on whether I think it is designed indeed to increase tax for people contributing to their super, or deal with the tax loophole whereby the rich avoid paying tax through super. As such, I can't really make any comprehensive comment on it.


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## drsmith (21 April 2012)

The Green tail wags the Labor dog again.

http://www.news.com.au/business/bre...ation-tax-change/story-e6frfkur-1226263630449

If the super tax rate is changed, it will also be another Julia Gillard lie.



> Prime Minister Julia Gillard on Tuesday stressed that the superannuation rates were not up for review.




http://afr.com/p/home/greens_call_for_review_into_super_XS1g98qc3yPZk5pg0GyA7O


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## So_Cynical (21 April 2012)

drsmith said:


> The Green tail wags the Labor dog again.
> 
> http://www.news.com.au/business/bre...ation-tax-change/story-e6frfkur-1226263630449
> 
> ...






			
				SMH story said:
			
		

> Greens leader Bob Brown said he had spoken to Treasurer Wayne Swan about raising the tax rate on superannuation *for high-income earners and cutting it for those on low incomes.*
> Senator Brown said that at present about $30 billion in revenue was foregone because of the tax break on superannuation - and will rise to $40 billion in four years.
> "*Half of those tax breaks go to the 12 per cent of top income earners* and there's no real advantage for lower income earners in that set-up,"




Taxing the rich would seem to make perfect sense to me....beats the hell out of taxing the poor.


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## drsmith (21 April 2012)

So_Cynical said:


> Taxing the rich would seem to make perfect sense to me....beats the hell out of taxing the poor.



Labor has allready been reducing super concessions for both. See items 1 and 2 from the image attached to the first post of this thread.

Labor is only interested in Green dogma to the extent that it raises revenue. They don't give a rats about low income earners.


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## Bill M (21 April 2012)

I personally think that Super is taxed currently just about right. Any tinkering on the present could drive away further investment, particularly by the younger people. I don't think the government will interfere with it too much at this point in time.


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## Starcraftmazter (21 April 2012)

drsmith said:


> The Green tail wags the Labor dog again.
> 
> http://www.news.com.au/business/bre...ation-tax-change/story-e6frfkur-1226263630449




Hmmm



> Greens leader Bob Brown said he had spoken to Treasurer Wayne Swan about *raising the tax rate on superannuation for high-income earners and cutting it for those on low incomes.*
> 
> Senator Brown said that at present about $30 billion in revenue was foregone because of the tax break on superannuation - and will rise to $40 billion in four years.
> 
> ...





Just like almost all policy proposals by the Greens, that seems extremely sensible to me.


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## So_Cynical (21 April 2012)

Bill M said:


> I personally think that Super is taxed currently just about right. Any tinkering on the present could drive away further investment, particularly by the younger people. I don't think the government will interfere with it too much at this point in time.




I agree..just about right, though perhaps some sort of additional tax on accounts above say 2 million (per person for SMSF's) would be appropriate IMO.


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## drsmith (21 April 2012)

Starcraftmazter said:


> Just like almost all policy proposals by the Greens, that seems extremely sensible to me.



Low income earners allready get government assistance for super in the form of a government co-contribution.

In a broader context, tax on super should be reformed, but not necessarily as a wealth redistribution exercise as the Greens would like. Any reductions in super tax concessions higher up the income scale should be reflected in lower marginal tax rates.


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## drsmith (21 April 2012)

So_Cynical said:


> I agree..just about right, though perhaps some sort of additional tax on accounts above say 2 million (per person for SMSF's) would be appropriate IMO.



Labor will dig deeper than that in its attempt to balance the budget.


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## So_Cynical (21 April 2012)

drsmith said:


> Low income earners allready get government assistance for super in the form of a government co-contribution.




$31,920 is not a low income...its subsistence living, assuming you don't own you own home and are working part time for fun etc...$61,920 is the cut off point as it should be because people pulling over 62K a year don't need any special Govt help IMO.

Anyone further up the income chain (6 figure incomes, net worth above 2 mill - ex PPR) should be taxed more.


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## Starcraftmazter (21 April 2012)

drsmith said:


> Low income earners allready get government assistance for super in the form of a government co-contribution.
> 
> In a broader context, tax on super should be reformed, but not necessarily as a wealth redistribution exercise as the Greens would like. Any reductions in super tax concessions higher up the income scale should be reflected in lower marginal tax rates.




Given they would still be better off, I am not sure why this is necessary.


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## drsmith (21 April 2012)

So_Cynical said:


> $31,920 is not a low income...its subsistence living, assuming you don't own you own home and are working part time for fun etc...$61,920 is the cut off point as it should be because people pulling over 62K a year don't need any special Govt help IMO.
> 
> Anyone further up the income chain (6 figure incomes, net worth above 2 mill - ex PPR) should be taxed more.



We should not be aiming to tax any group more as an end in itself. 

We need to strengthen the tax base so marginal rates can be reduced. What's the point of greater tax on a person with a 6-figure income if they can then minimise that tax by, for example, negative gearing into property.



Starcraftmazter said:


> Given they would still be better off, I am not sure why this is necessary.



It's called tax reform and is a better approach than just increasing taxes.


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## Starcraftmazter (21 April 2012)

drsmith said:


> We need to strengthen the tax base so marginal rates can be reduced. What's the point of greater tax on a person with a 6-figure income if they can then minimise that tax by, for example, negative gearing into property.




Very simple solution: Get rid of negative gearing.



drsmith said:


> It's called tax reform and is a better approach than just increasing taxes.




I'm all for tax reform. But my idea of tax reform does not include any federal taxes for anyone. Or maybe just a little.

Realistically, we will never get tax reform in Australia because our politicians are far too incompetent.


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## Pager (21 April 2012)

It does make you think, ive more or less secured my future by salary sacrificing and running a SMSF and by learning how to trade and taking an interest in were my money is invested, im a tradesman with an average income, I don’t waste money, don’t spend a fortune going out or on clothes, gambling, new car every other year etc, I take responsibility for my own future and don’t want or expect government handouts, sadly I know plenty of people my age (late 40,s) who don’t take any interest or really care about there Super or there financial future, they live for today and EXPECT a pension when they hit 65, each and every week they will spend all there wages.

Now there is going to be a lot of these people hitting retirement in a few years time and does anyone really think these VOTERS can be ignored, like it or not In my opinion those who have done the right thing and provided for there older years will be subsidising those who have not.

Sometimes I think what the hell maybe I should go and get that new BMW or go on cruises 2 or 3 times a year, buy designer brands, eat at nice restaurants as the alternative is somehow im going to be stripped of much of this wealth ive worked hard for so as the government can get re-elected on the promises it makes to the masses many of whom never gave it a second thought and had the BMW, went on the cruises, spent all of what ever they earned and never bothered with there future.

IMO, its going to take many more years and need a higher % of compulsary contributions to super before it becomes self funding as it were, in the mean time those currently in there 40,s and 50,s and maybe even 30,s who are doing the right thing will more than likely be shouldering the burden for those that didnt.


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## StumpyPhantom (21 April 2012)

Pager said:


> It does make you think, ive more or less secured my future by salary sacrificing and running a SMSF and by learning how to trade and taking an interest in were my money is invested, im a tradesman with an average income, I don’t waste money, don’t spend a fortune going out or on clothes, gambling, new car every other year etc, I take responsibility for my own future and don’t want or expect government handouts, sadly I know plenty of people my age (late 40,s) who don’t take any interest or really care about there Super or there financial future, they live for today and EXPECT a pension when they hit 65, each and every week they will spend all there wages.
> 
> Now there is going to be a lot of these people hitting retirement in a few years time and does anyone really think these VOTERS can be ignored, like it or not In my opinion those who have done the right thing and provided for there older years will be subsidising those who have not.
> 
> ...




With you all the way Pager.  I'm 49 and doing the same as you - determined not to live on government handouts.

All the stories I hear about this dividing line between those on the pension and those self funded retirees is "what so-and-so did to hide or give away money so that he/she could get the pension".  I've never heard a story going the other way.

So good for you - hang in there and do the right thing.


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## banco (21 April 2012)

Starcraftmazter said:


> Why is allowing people to save money for retirement without having it taxed harshly considered a benefit?
> 
> As a younger person, I am more than happy to have every benefit for "younger" people removed. I didn't ask for any damn welfare to have children or speculate on property, and I sure as hell don't need it.




Well call it a benefit or a tax break but the effect is the same.  You could deliver family benefit and the baby bonus through the tax system in the form of tax credits.  It's still money foregone by the treasury.  

Fact is in the real world Federal Government spending as a % of GDP is going to stay roughly at current levels (and probably increase).  That level of spending has to be funded through some combination of taxes and if you tax one area less you are inevitably going to have to tax another area more ie there's a respectable argument that capital gains should be taxed less but then you have to make the revenue lost somewhere else.  

What I'm afraid we are going to end up with due to demographics and politics is relatively high rates of taxation with regards to the taxes that young employed people pay (ie income tax, medicare levy etc.) while at the same time fewer services etc. for young people because all the money will be going to fund the oldies pensions and healthcare.  So if you're a young person you'd have the worst of all worlds relatively high rates of taxation and see very little of it back.


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## StumpyPhantom (21 April 2012)

banco said:


> What I'm afraid we are going to end up with due to demographics and politics is relatively high rates of taxation with regards to the taxes that young employed people pay (ie income tax, medicare levy etc.) while at the same time fewer services etc. for young people because all the money will be going to fund the oldies pensions and healthcare.  So if you're a young person you'd have the worst of all worlds relatively high rates of taxation and see very little of it back.




That's the logic I don't get.  If you're really afraid of that then the solution is to let as many of those 'oldies' save for (and then support) themselves so that they're not eating into your precious taxes?

Given that it appears so easy to slip into a pension, it is surely counter-productive for you to support taxing these super contributions out of existence?


----------



## drsmith (21 April 2012)

Starcraftmazter said:


> Very simple solution: Get rid of negative gearing.



With regard to salary income, I agree, but state based property taxes should also be abolished as well. That would reduce investment decisions to investment merit ann not on tax. Any balance could go into reduced marginal tax rates. 

If the top marginal rate could be reduced to 30% by strengthening the tax base and overall simplification, the Greens super policy objective would be satisfied with the current super tax rate of 15%.



Starcraftmazter said:


> I'm all for tax reform. But my idea of tax reform does not include any federal taxes for anyone. Or maybe just a little.
> 
> Realistically, we will never get tax reform in Australia because our politicians are far too incompetent.



The feds have to function off of something and provide some support to those less well off.

We won't get meaningful tax reform as it would take many steps to implement and political parties are much more concerned about what will attract the swinging voter within a single electoral cycle.


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## banco (21 April 2012)

StumpyPhantom said:


> That's the logic I don't get.  If you're really afraid of that then the solution is to let as many of those 'oldies' save for (and then support) themselves so that they're not eating into your precious taxes?
> 
> Given that it appears so easy to slip into a pension, it is surely counter-productive for you to support taxing these super contributions out of existence?




Well it depends what actual policy changes to superannuation you are talking about but most of the proposed changes I've seen (and certainly the ones that are likely to actually become law) are not going to make the difference between people being self-funded retirees and on the pension.


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## Starcraftmazter (21 April 2012)

banco said:


> What I'm afraid we are going to end up with due to demographics and politics is relatively high rates of taxation with regards to the taxes that young employed people pay (ie income tax, medicare levy etc.) while at the same time fewer services etc. for young people because all the money will be going to fund the oldies pensions and healthcare.  So if you're a young person you'd have the worst of all worlds relatively high rates of taxation and see very little of it back.




Yep, couldn't agree more.



drsmith said:


> If the top marginal rate could be reduced to 30% by strengthening the tax base and overall simplification, the Greens super policy objective would be satisfied with the current super tax rate of 15%.




Could you please elaborate on your reasoning here, I am not sure I understand how this would be achieved.


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## drsmith (21 April 2012)

Starcraftmazter said:


> Could you please elaborate on your reasoning here, I am not sure I understand how this would be achieved.



It's a very simple principal.

Strengthen the tax base by removing exemptions such as deductions and use the proceeds and consequent reduction in compliance/administration costs to reduce marginal tax rates. The result would be a leaner, more efficient government and investment decisions based more on economic merit, not on tax minimisation. 

How far one could go with reducing marginal rates would depend on how broadly the tax base was strengthened and simplified.


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## Eager (21 April 2012)

drsmith said:


> It's a very simple principal.
> 
> Strengthen the tax base by removing exemptions such as deductions and use the proceeds and consequent reduction in compliance/administration costs to reduce marginal tax rates. The result would be a leaner, more efficient government and investment decisions based more on economic merit, not on tax minimisation.
> 
> How far one could go with reducing marginal rates would depend on how broadly the tax base was strengthened and simplified.



I am all for true reform.

I have kept the following article, published several years ago, for just such an occasion. The salient point is regarding what happened in NZ:

_LOWER TAXES MUST BE ON THE MENU    by Kevin Bailey (Herald Sun, 5/9/05)



The debate in relation to the unfairness of tax cuts that seem to only help the rich and not low income earners reminds me of an article I read in the Chicago Tribune a number of years ago.
I wrote about this in an investment journal last year and I believe it is relevant still in light of the current debate. The story was about a group of friends who went out to dinner together once a month and the story has lots of lessons for us in the current tax debate.
Sometimes, we lose sight of where wealth comes from and that we need to encourage enterprise as well as care for the less well off. There is no question that the country should be structuring taxation mire simply.
The article in the Tribune talked about putting tax cuts in terms everyone could understand. It was a story of how once a month for many years, 10 men went out to dinner together and the bill for all 10 came to $300. If they paid their bill the way we pay our taxes it would be paid as follows.
The first four men, the poorest, would pay nothing, the fifth would pay $3, the sixth would pay $9, the seventh would pay $21, the eighth would pay $36, the ninth would pay $54 and the tenth man, the richest, would pay $177. Which is what they decided to do.
The 10 men ate dinner in the restaurant every month and seemed quite happy with the arrangement until one day the owner gave them an unexpected benefit. In tax language he gave them a tax cut.
“Since you are all such good customers, I am going to reduce the combined cost of your meal by $60,” he said.
So now the dinner for the 10 men only cost $240. The group still wanted to pay the bill the way we pay our taxes so the first four men continued to eat for free. What about the other six?
These were the paying customers and they had to work out how to divide the bill so that everyone would get his “fair share” of the windfall.
The six men realised that the $60 divided by the six was $10 but if they subtracted that from everyone’s share then the fifth and sixth men would end up being paid to eat their meal. Therefore the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount.
He proceeded to work out what each man should pay. The result was that the fifth man now paid nothing, the sixth put in $6, the seventh put in $15, the eighth put in $27 and the ninth put in $36. This left the tenth man to put in $156 instead of his earlier $177.

Each of the six men was better off than they were before and the first four continued to eat for free. Once outside the restaurant however, they began to compare their savings.
“I only got $3 out of the $60,” declared the sixth man, pointing to the tenth, “But he got $21.”
“That’s right,” said the fifth man, “I only saved $3 too. It’s unfair that he got seven times more than us.”
“That’s true,” said the seventh man. “Why should he get back $21 when I only got back $6? The wealthy get all the benefits.”
“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. The system exploits the poor.”
So the nine men surrounded the tenth man and beat him up. The next month he didn’t show up for dinner (or in the real world he took his business out of the country).
So the nine sat down for dinner and ate without him. When it came time to pay the bill, they discovered too late what was very important. They were $156 short of paying the bill.
The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they might just not show up at the table any more and where will that leave the rest of us? It is a shame this rather straightforward logic doesn’t always get through to the electorate.
When New Zealand lowered its highest income tax rate from 66 per cent to 33 per cent and the low end tax rate from 38 per cent to 19 per cent and introduced a 10 per cent consumption tax but eliminated Capital Gains Tax, Property taxes and all other indirect taxes it was designed to be revenue neutral. In fact, what actually happened was it received 20 per cent more tax because of an increase in voluntary compliance.
Every country of the world that has dramatically simplified and lowered its tax rates has ended up with more revenue not less. We could all learn this lesson.




_


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## Julia (21 April 2012)

banco said:


> In other words keep the benefits for older Australians and pay for them by getting rid of benefits directed at the younger generations?



On the contrary.  I think most older Australians, including those who have had no problem paying tax all their working lives, are happy for these taxes to be funding the education and healthcare of younger people.

The baby bonus is a whole different matter.   The people who will produce worthwhile citizens who will make a contribution to Australian society, both socially and financially, will not at all be influenced in their decision to breed by a $5000 payout.

The people who are influenced by this are the unemployed and those on minimal incomes who see it as funding that new supa dupa plasma, and various other toys.
I spent over 12 years in the welfare sector and saw hundreds of these people.
You would ask them "what are you planning to do with the baby bonus" (hoping they'd tell you it was going in a bank account for the child's future, or at the very least buying the necessities for a new baby).

Not on your life.  They didn't mention providing for the coming child, and just listed all the ubeaut stuff they'd be able to buy, having never in their entire lives having had a whole $5000 to spend.

So if you really think this sort of government spending is worth taxing retirees who have saved as Pager describes above, then I would absolutely question your values.

Btw, banco, would you care to share with us what plans you yourself are making for looking after yourself in retirement so that the younger generation is not burdened with looking after you?


----------



## drsmith (21 April 2012)

Eager said:


> I am all for true reform.
> 
> I have kept the following article, published several years ago, for just such an occasion. The salient point is regarding what happened in NZ:
> 
> ...



_
That's a good find. It puts Labor's class warfare into sharp focus.

The Coalition does not get off scott free either as some of the tax cuts and welfare handouts from Howard's latter years was focused more on votes and less on true tax reform._


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## Starcraftmazter (21 April 2012)

Eager said:


> _LOWER TAXES MUST BE ON THE MENU    by Kevin Bailey (Herald Sun, 5/9/05)_



_

Great story, 10/10 - would read again.



Julia said:



			On the contrary.  I think most older Australians, including those who have had no problem paying tax all their working lives, are happy for these taxes to be funding the education and healthcare of younger people.
		
Click to expand...



Healthcare of younger people? Young people probably use some small and insignificant portion of the healthcare budget. Every clinic in Sydney is stuffed with old people (and immigrants I might add!).

Education also benefits the old tremendously. Some of us have to be earning real money and paying real taxes so that the rest of them have welfare dollars to draw on.

What benefit the young get from supporting boomers who own 2/3 of all property in the country is a much more questionable concept. Sounds like slavery to me._


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## StumpyPhantom (22 April 2012)

banco said:


> Well it depends what actual policy changes to superannuation you are talking about but most of the proposed changes I've seen (and certainly the ones that are likely to actually become law) are not going to make the difference between people being self-funded retirees and on the pension.




Wrong Banco.  It's the human beahviour that you're not taking account of here.  If there is no incentive to be a self-funded retiree, it gets blown on fast cars, holidays, you name it.  It goes very easily.

Then, come retirement day, exactly the outcome you're fearing comes to pass when the baby boomer you're afraid of supporting with your taxes walks into Centrelink.

You think that's not gonna happen?  How many stories have you already heard of a 60-something selling up and giving it away to their grandkids, anyone, or stuffing it somewhere so it doesn't show up when they apply for a pension.

Those stories are going to multiply if these future 60-somethings could have put money away but haven't because the Government made it just as easy for them to spend it when they earned it.

So be careful what you wish for.  Most of us would enjoy spending that money now rather than saving it for our retirement when we're not sure how many years we have post-65 anyway.


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## drsmith (22 April 2012)

Starcraftmazter said:


> Great story, 10/10 - would read again.



It's something the Greens should read as well.


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## breaker (22 April 2012)

What about taking payments from able bodied dole recipients,and helping the older generation who have paid taxes all there lives.

Todays dole bluger will be old one day .


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## Julia (22 April 2012)

breaker said:


> What about taking payments from able bodied dole recipients,and helping the older generation who have paid taxes all there lives.
> 
> Todays dole bluger will be old one day .



There are plenty of decent Australians, who have paid their share of taxes, struggling to survive on the dole which is pathetically inadequate.
Companies, fail, downsize, all the time.  If you're retrenched, especially if you're over 40, it's difficult for people to get another job.  Doesn't make those people bludgers.


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## jet328 (22 April 2012)

The current pension system is way too generous as is, and discourages people from saving themselves.

Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.

In how many countries can you own a $US2 million dollar house, have $US0.5-1 million in other assests, yet still receive a part pension plus a healthcare card? Not to mention that a cleaner on $600 a week is expected to pay tax to fund this persons pension/healthcare.

Take someone on an average wage of 50k/year and calculate how much tax they pay. Even the healthiest are using some government services eg. might send kids school. You take out just a few little services and they are paying jack all in actual net tax. Yet this entitles them to years of pensions, costly healthcare, concessions? Its just completely unrealistic.

What about "they've paid taxes all their life" line? Firstly the average worker doesn't pay a great deal of net taxes. Secondly when the current pensioners were "paying taxes"
-were they funding people for 20,30,40 years of retirement?
-were they funding this many operations, devices, aids, scans, nursing homes, hospitals, doctors visits, medications, pathology tests, medical specialists?

Its just a completely unrealistic expectation to put in a bit, but then expect all this.

Sure you can do it now without a problem because the percentage of elderly people is so small, but once the boomers reach this age, there is no chance it goes on.

Hopefully we'll learn from what's about to happen in Europe/Japan/US.

Pensions should be reserved for those that have used up their own savings and then reversed mortgaged their house to centrelink.

What does anyone need a house for when they've both passed on?


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## breaker (22 April 2012)

Julia said:


> There are plenty of decent Australians, who have paid their share of taxes, struggling to survive on the dole which is pathetically inadequate.
> Companies, fail, downsize, all the time.  If you're retrenched, especially if you're over 40, it's difficult for people to get another job.  Doesn't make those people bludgers.




I meant the 18-19 year olds I see laying about all smoking


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## StumpyPhantom (22 April 2012)

jet328 said:


> The current pension system is way too generous as is, and discourages people from saving themselves.
> 
> Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.




I agree with your view jet328, as someone who is aiming not to rely on government handouts whatsoever.

There must be every encouragement for people to save, even if it means their house will be means tested before the get the pension.

Now you have to try and persuade Banco over to your view (I've given up) and argue that the incentives to saving for super now shouldn't be removed.


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## craft (22 April 2012)

jet328 said:


> The current pension system is way too generous as is, and discourages people from saving themselves.
> 
> Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.
> 
> ...




Jett Some good big picture thoughts there.

I ask myself

Do you want the country you live in to have a transfer system to address wealth inequality?

If so what should be the size of that transfer?

Wealth inequality occurs both due to effort and economic rent. (ie proximity towards factors that are not your causation -  Somebody buying a house in the 50-70 has received economic rent because of demographics , our miners receive economic rent because of our proximity to markets and quality of natural reserves etc etc)

Personally I do want to live in a country that has a wealth transfer system.

I would prefer to see that transfer system based on taxing gains from economic rents to subsidise those that are on the wrong end of economic conditions.

I don’t like to see effort taxed to subside those that make no effort.

I think we have a long way to go and the level of education and debate offers no hope of making quick progress. We seem to be bogged down by non-visionary politics for as far as the eye can see.

Taxation of the super system shouldn't be left out of the mix because in some cases it is sheltering some large amounts of economic rent derived wealth and as for housing and pension eligibility rules.....


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## Knobby22 (22 April 2012)

Well put, craft.


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## Julia (22 April 2012)

jet328 said:


> The current pension system is way too generous as is, and discourages people from saving themselves.
> 
> Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.
> 
> ...



Really good points.



Knobby22 said:


> Well put, craft.



+1.
Especially this:


> I don’t like to see effort taxed to subside those that make no effort.


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## banco (22 April 2012)

StumpyPhantom said:


> Now you have to try and persuade Banco over to your view (I've given up) and argue that the incentives to saving for super now shouldn't be removed.




You've set up a straw man.  I never said that all incentives should be removed I said I don't see much of problem with the incentives that tend to be mostly used by high income earners being made slightly less generous.  Let's not forget the incentives are for extra payments into super people are obliged to pay in their 9% regardless.


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## jet328 (22 April 2012)

craft said:


> Personally I do want to live in a country that has a wealth transfer system.



Completely agree, every time I go to US, I think 'they call this a developed country'. There are plenty of people who through absolutely no fault of their own have no chance in the dog eat dog world we live in with out assistance. In a civilised society the more fortunate should help the less fortunate.

Everyone will draw the line somewhere different, but I believe in a wealthy country like Australia everyone should have accommodation, food & basic necessities, moderate healthcare and education.

The problem is, election after election, politician after politician, more and more has been promised without considering the long run implications. The problem with promises is that they are much harder to take back. Just look at the first home buyers bonus to tie us over the introduction of the GST. 12 years later...

Not to mention that virtually no politician wants to be the one to address the ageing population issue. They all like to pretend they've done something or other to solve the issue, but its really just been skirting around the issue. If I put myself in a politicians shoes, I'd probably do the same. Choice between 'getting head chopped off' and 'leaving to the next guy' isn't a difficult one. Just look at what happened in France when they changed the retirement age from 60 to 62 a year ago. Can't see any French politician having another go at that one...

Back on topic and drawing the line. Have we gone too far when families on six figures are the less fortunate? Is there something wrong when retirees with significant assets outside their home deal with centrelink?

I say its too far, but I'm sure the people receiving don't nor the politicians. 




craft said:


> I don’t like to see effort taxed to subside those that make no effort.



Agree, how crazy is it that Person A can work their butt off all year doing something productive for the country in their job. Person B can flip some existing property or shares, doing nothing productive. Please spare us the price discovery or providing cheap rentals for the needy flipping existing properties arguments. Aliens would think we were nuts if Person B paid half the tax of Person A.



craft said:


> I think we have a long way to go and the level of education and debate offers no hope of making quick progress. We seem to be bogged down by non-visionary politics for as far as the eye can see.




Lately I've seen quite a few political commentators mention that if Obama wins the next election, it will give him the platform to make some real changes as he doesn't have to worry about getting re-elected in his second term. It makes you wonder, does our current political system hinder difficult/unpopular decisions. Can you really implement a bit of 'vision' in under 3 years?
Maybe a single 8 year term would work better?
Maybe we need some sort of system like the RBA for decisions on a long term time frame?

Lots of people would say my view is heartless, but I think its pretending that the current system is sustainable is heartless. Just look overseas, I'm sure most would prefer something less that's sustainable, than what will finally result eg. greek pensioners


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## Julia (22 April 2012)

jet328 said:


> It makes you wonder, does our current political system hinder difficult/unpopular decisions. Can you really implement a bit of 'vision' in under 3 years?
> Maybe a single 8 year term would work better?



The idea of the present government there for EIGHT YEARS is totally intolerable, so no.  If they're doing a reasonable job they will be re-elected for the next three years, and even thereafter if the electorate is satisfied.



> Lots of people would say my view is heartless, but I think its pretending that the current system is sustainable is heartless. Just look overseas, I'm sure most would prefer something less that's sustainable, than what will finally result eg. greek pensioners



I don't think your view is heartless.  It's realistic and well expressed.


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## Starcraftmazter (23 April 2012)

jet328 said:


> Lately I've seen quite a few political commentators mention that if Obama wins the next election, it will give him the platform to make some real changes as he doesn't have to worry about getting re-elected in his second term.




That's a load of crap for many reasons. First of all, he had a very big platform for change when he was first elected, AND democrats had majority of both houses.

If he does uncontroversial things in his second term, the in the mid-term elections democrats will lose majority of either or both houses - just as last time.

My point is, the only time a president gets to do anything these days is when his party holds both houses. Now the only thing Obama did during his time in the spotlight is give ridiculous amounts of money to banks and waste more taxpayer dollars on unaffordable healthcare which is now even more unaffordable.

The point is, Obama is a sham. The democrats promised change, and instead Obama has signed a law stating that any US citizen, on US soil can be treated as a terrorist without any judicial oversight. And that's just the beginning.



jet328 said:


> It makes you wonder, does our current political system hinder difficult/unpopular decisions. Can you really implement a bit of 'vision' in under 3 years?
> Maybe a single 8 year term would work better?
> Maybe we need some sort of system like the RBA for decisions on a long term time frame?




Welcome to politics....

8 year terms would be horrific. In reality there is no sweet spot and no solution to the problem you allude to. This is why federal government always fails at doing anything productive, and wastes massive amounts of taxpayer dollars.

This is why we must have a very very small federal government, and local governments which governed according to the will of their people. It is far easier to connect with and hold accountable your local government.



Julia said:


> If they're doing a reasonable job they will be re-elected for the next three years, and even thereafter if the electorate is satisfied.




Not if the electorate is el stupido. Prime example, years back the labour laws which have made Germany into the best economy in Europe were deeply unpopular and the government which enacted them was voted out. I choose this because this is an extreme of a federal government doing something very very good for the long term, and the electorate not being able to understand that.

Now if such an extreme case can happen in one of the smartest countries in the world, then countries like Australia, the US and UK have no hope in hell.


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## drsmith (4 October 2012)

If governments want to reform super, then perhaps the obvious starting point is how that money can be used in retirement.

http://www.smh.com.au/money/super-a...on-super-lump-sum-payouts-20121003-26zif.html


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## sptrawler (4 October 2012)

drsmith said:


> If governments want to reform super, then perhaps the obvious starting point is how that money can be used in retirement.
> 
> http://www.smh.com.au/money/super-a...on-super-lump-sum-payouts-20121003-26zif.html




I love Ken Henry's comment.

The former treasury secretary Ken Henry said in the 2010 Australia's Future Tax System Review that the current tax system made annuity products unattractive to many retirees and raised the possibility of the government providing annuities

Read more: http://www.smh.com.au/money/super-a...sum-payouts-20121003-26zif.html#ixzz28OQUBog8

So lets get that right if what I heard was right. Our pension system was originally funded by the tax payers same as the British and New Zealand system. Then the government in the 1950's or so said, no we will streamline it and incorporate the pension into consolidated revenue and pay it from there.
Then came the means test and people were told, you don't need it youv got money, so fund your own.
Now he is suggesting the government take that off you and pay you a pension. What a classic.


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## Julia (4 October 2012)

I don't think it would be unreasonable to limit how much can be taken in a lump sum.  People taking it all and spending it, then accessing the full age pension seems to be quite contrary to the whole philosophy of the compulsory super which was surely to provide a living in retirement.


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## sptrawler (4 October 2012)

Julia said:


> I don't think it would be unreasonable to limit how much can be taken in a lump sum.  People taking it all and spending it, then accessing the full age pension seems to be quite contrary to the whole philosophy of the compulsory super which was surely to provide a living in retirement.




Isn't there allready rules in place whereby if you have got rid of money in the 5 years prior to applying for a pension. You don't qualify for the pension, I think the family home is excluded. But if someone is changing houses to spend money to qualify for the pension,I think they would have  screw lose.

My guess is, all this screaming and shouting by the super funds, is a smoke screen because some could be insolvent. That's just my guess, at the moment more people are putting money in the bucket than are taking out.
However that is changing rapidly, that would be why people are starting their own super funds, at least they know they have the money.


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## prawn_86 (1 February 2013)

Just another reason why young people shouldn't be contributing to Super:

http://www.theaustralian.com.au/nat...ee-super-payouts/story-fn59nsif-1226566283613



> THE federal government is understood to be looking at reintroducing a limit on tax-free superannuation payouts, imposing an exit tax on funds carrying balances close to $1 million




1m is not much in todays standards, especially if one plans to retire for 20+ years....


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## McLovin (1 February 2013)

Bam!

This is inevitable IMHO. I was with my accountant the other day and we were chatting about super, even he said that the current rules are far too generous.

Here's what I said last week...Didn't expect the change to already be being discussed by the government.



> The problem is that tax policy is not set in stone it adjust to maintain the revenue base. Go back thirty years and there was no FBT, GST, CGT and lots of companies getting lost at the bottom of the Harbour. With super I am making a deal with the government that I agree to put my money into a regulated account and in return receive a concessionary tax rate. This scenario works well while the majority are in accumulation phase and still paying income tax, but what happens when all those baby boomers hit retirement and go into pension phase super or the government pension? Someone still needs to pay the bills and it would not surprise me in the least when/if the government announced that SMSF's with assets over $x will have their income taxed at ordinary rates. It also wouldn't surprise me if they put drawdown restrictions in place.


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## Garpal Gumnut (1 February 2013)

As I said on this thread or another.

Take as much money out of your super as you can between now and May 2013.

Because Wayne Swan will tax it mightily if you take it out after that date.

I plan to be on the pension some day.

Why shouldn't I get all the benefits that pensioners do?

gg


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## CanOz (1 February 2013)

Well done McLovin...Called that one spot on.

In Argentina I believe the Prime Minister confiscated the national pension scheme, the whole thing...

Maybe Julia will eventually do the same


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## tinhat (1 February 2013)

McLovin said:


> It also wouldn't surprise me if they put drawdown restrictions in place.




That's the irony. At the moment there are minimum draw down rules that you have to pull so much out of the fund every year. After all it is suppose to be an income stream not a place to hoard money tax free once you have retired.

It use to be the case (back when Keating use to fiddle with the rules every bloody year) that when the rules changed everyone would be grandfathered; ie, the new rules would apply to contributions made after the rule change.

Everyone acknowledges they have to do something to stem the erosion of the tax base due to super concessions. They shouldn't tax on the way in. Whatever is under the concessionary limit should not be taxed on the way in. The government is only diminishing the future income streams of both the individual and the government itself (via the income on the super) by doing so. Zero in, 15% while accumulating and 15% on the way out at the other end would generate a lot more tax in the long run. But sacrifices tax revenue now to generate a much larger tax stream in the future and, while that makes sense economically (and fits the demographic dilemma) it probably doesn't fit into the political needs of the government.


----------



## sptrawler (1 February 2013)

McLovin said:


> Bam!
> 
> This is inevitable IMHO. I was with my accountant the other day and we were chatting about super, even he said that the current rules are far too generous.
> 
> Here's what I said last week...Didn't expect the change to already be being discussed by the government.




Prior to 2007 there was min and max withdrawls, this was known as an allocated pension. Post 2007 with the introduction of market linked pensions, maximum withdrawls were removed and it was made more difficult to put before tax money into super.
It will be difficult for the government to restrict peoples access to their after tax contributions. They may restrict access to concessionaly treated contributions.
If they go down that track, why would people put money into super, currently a married couple can recieve $36k before paying income tax.
I can see they may remove the tax free pension after 60 and replace that with a standard 19% offset.
This would bring it more in line with standard income tax brackets.


----------



## Bill M (1 February 2013)

Garpal Gumnut said:


> Take as much money out of your super as you can between now and May 2013.
> 
> *Because Wayne Swan will tax it mightily if you take it out after that date.*




Nah I don't think they would be that silly to do it during an election year. It would only be more amo for Abbott to use against labor and would alienate some of their supporters. I reckon they will leave it alone for this year.



sptrawler said:


> If they go down that track, *why would people put money into super*, currently a married couple can recieve $36k before paying income tax.
> I can see they may remove the tax free pension after 60 and replace that with a standard 19% offset.
> This would bring it more in line with standard income tax brackets.




Exactly, the more they slug the less likely people will contribute. I am sweating it as it's near collection time for my wife and I and the last thing we need is a big change at this time.


----------



## sptrawler (1 February 2013)

Bill M said:


> Nah I don't think they would be that silly to do it during an election year. It would only be more amo for Abbott to use against labor and would alienate some of their supporters. I reckon they will leave it alone for this year.
> 
> 
> 
> Exactly, the more they slug the less likely people will contribute. I am sweating it as it's near collection time for my wife and I and the last thing we need is a big change at this time.




Snap, you're not Robinson Crusoe, if they keep messing with super people will get out.
Prior to super being introduced, everyone spent what they earned and hoped to pay off their house, by the time they retired.
Now people have placed faith in the super system and saved money to fund their retirement. The government is seeing those savings, which previously wouldn't have been there as a loss of tax base.
Typical dumb ideology, well tax the crap out of it, I for one will pull my contributions out and as GG says, enjoy myself spending. For the first time in my life.

The other thing that gets up my nose is, I have worked continuosly since I was 15 and paid tax.
Yet because I have saved and done without, I'm told I am likely to spend my money in order to access some welfare. These people adopting this attitude must be judging me by their own principles and don't seem to give any credit to the retiree.
What about people who haven't paid any tax in their life and recieve a full pension?
What about people who come here in their 40's or 50's and recieve a full pension?
No much easier to tell the ones who have done without and saved, to spend all their savings. Yes that sounds fair and reasonably and promotes a society of workers and savers. What a joke

Maybe adopt the German model, where the maximum amount of pension you qualify for is proportional to the number of years in the workforce. Obviously someone has to be fit and able to work.


----------



## prawn_86 (1 February 2013)

sptrawler said:


> promotes a society of workers and savers. What a joke




When has any government every encouraged savers? The whole Western capitalist ethos is based around consumption and spending. In fact you are better living outside your means, or at least treated equally, especially if you are a too big to fail institution...


----------



## sptrawler (1 February 2013)

prawn_86 said:


> When has any government every encouraged savers? The whole Western capitalist ethos is based around consumption and spending. In fact you are better living outside your means, or at least treated equally, especially if you are a too big to fail institution...




Well maybe the focus is too much on the retiree. 
How about, the earnings in accumulation phase is taxed at the marginal tax rate of the individual. They are getting a tax break putting it in. As the capital increases so the tax increases. The rich who put more in, pay more tax.
Then make access to the pension, as I've said, proportional to years in the work force, while still making it means tested. Then people sitting on their ar$e on welfare, will think twice. No different really than making single parents go on job search, when the kids are 8 years old.


----------



## sptrawler (1 February 2013)

Actually I wonder what Sydboy thinks of the concept?
It would make super much more of a level playing field. Low income earners pay no contribution tax, higher income earners pay 15% with a cap of say $50k.
Then the earnings are taxed at the tax payers gross income rate, that would stop tax effective loans to reduce taxable income.
Cuts out middle class welfare, gives low income earners an incentive to save and stops high income earners dumping after tax money into super.
To keep focusing on diminishing the end benefit, is counter productive, to build equality in the amassing of the benefit is intelligent.
But I haven't seen anything yet to convince me someone really cares, as long as they have someone to blame.
At the end when you draw a pension, all the earnings are tax free and the income is treated as taxable.


----------



## IFocus (2 February 2013)

Bill M said:


> Nah I don't think they would be that silly to do it during an election year. It would only be more amo for Abbott to use against labor and would alienate some of their supporters. I reckon they will leave it alone for this year.
> 
> Exactly, the more they slug the less likely people will contribute. I am sweating it as it's near collection time for my wife and I and the last thing we need is a big change at this time.




It was Labor (Keating) that drove super and had plans to raise it higher under Howard he refused to raise the level instead bought votes from the middle class (Howard battlers) instead we all know how thats going.

I wouldn't expect Labor to hurt super (but who knows) but the coalition will win government this year and have promised surpluses, Sydboy has pointed out the $30 bil pot of gold who knows where it will go but I don't expect any enhancement for super.  

If any thing expect tax and rules for mandatory contributions.


----------



## sptrawler (2 February 2013)

IFocus said:


> It was Labor (Keating) that drove super and had plans to raise it higher under Howard he refused to raise the level instead bought votes from the middle class (Howard battlers) instead we all know how thats going.




Well If you think about it there is a problem already with the contributions at 9%.
One would assume that problem is going to become bigger as contributions rise to 12%. 
It is obviously another case of this government going off half cocked as usual.


----------



## banco (3 February 2013)

sptrawler said:


> Snap, you're not Robinson Crusoe, if they keep messing with super people will get out.
> Prior to super being introduced, everyone spent what they earned and hoped to pay off their house, by the time they retired.
> Now people have placed faith in the super system and saved money to fund their retirement. The government is seeing those savings, which previously wouldn't have been there as a loss of tax base.
> Typical dumb ideology, well tax the crap out of it, I for one will pull my contributions out and as GG says, enjoy myself spending. For the first time in my life.




I would be surprised if, within the next 5 years, there weren't limits imposed on how much you can withdraw and spend from super.


----------



## sptrawler (3 February 2013)

banco said:


> I would be surprised if, within the next 5 years, there weren't limits imposed on how much you can withdraw and spend from super.




Well then why would you put* extra* money in? 
Why wouldn't you just enjoy the money now? and allow the government to pick up the slack.

I think there won't be a limit of withdrawls when in the pension phase, because as everyone says, it's costing a fortune(better they take it out).
Therefore there is more chance of an increase of taxing on the accumulation phase.
Even if they place an exit tax on withdrawls it can only be on taxable contributions, after tax contributions have to be tax free otherwise it's double taxing


----------



## banco (4 February 2013)

sptrawler said:


> Well then why would you put* extra* money in?
> Why wouldn't you just enjoy the money now? and allow the government to pick up the slack.
> 
> I think there won't be a limit of withdrawls when in the pension phase, because as everyone says, it's costing a fortune(better they take it out).
> ...




Admittedly I haven't seen figures that confirm this but I suspect the ones that have the cash to put much extra in aren't the ones that are likely to end up on the age pension because they run out of cash relatively early in their retirement.  In other words if the net effect of generous treatment of extra payments into super is that well off retirees have a more comfortable self-funded retirement then they otherwise would have it's not clear that it's a good trade for the taxpayer.

I'm not sure a cash strapped Government will share your philosophical opposition to double taxation.


----------



## sptrawler (4 February 2013)

banco said:


> Admittedly I haven't seen figures that confirm this but I suspect the ones that have the cash to put much extra in aren't the ones that are likely to end up on the age pension because they run out of cash relatively early in their retirement.  In other words if the net effect of generous treatment of extra payments into super is that well off retirees have a more comfortable self-funded retirement then they otherwise would have it's not clear that it's a good trade for the taxpayer.




This is what I was alluding to, the younger ones are going to be enticed to cut off their nose to spite their face.

At the moment the numbers being thrown around are garbage IMO. They are saying the money in super(if it was taxed as savings) are costing them a fortune, just more smoke and mirrors.

Before super the exposure to overseas borrowings was massive, we were the same as Greece, Spain ,Italy.

Now that there is compulsory saving (which was taken out of wage rises) the government sees it as a loss of revenue.
Well why don't they ask the workers, would you like your super raised to 12% or a 12% pay rise?

The ones that put extra money in will obviously have a better retirement, that is how it is meant to work. Why else would you put extra money in?


----------



## sptrawler (4 February 2013)

banco said:


> I'm not sure a cash strapped Government will share your philosophical opposition to double taxation.




On that basis, if you put your after tax contribution into super, its earnings are taxed at 15%, no tax free threshold.
If they decide to tax your withdrawl of that money, why would you put it in super?
They would have a mass exudus of after tax withdrawls, super funds would collapse overnight.lol

Its a bit like having money in the bank, if they taxed you on the interest and then tax you when you take it out. Why would you put it in the bank?


----------



## banco (4 February 2013)

sptrawler said:


> On that basis, if you put your after tax contribution into super, its earnings are taxed at 15%, no tax free threshold.
> If they decide to tax your withdrawl of that money, why would you put it in super?
> They would have a mass exudus of after tax withdrawls, super funds would collapse overnight.lol
> 
> Its a bit like having money in the bank, if they taxed you on the interest and then tax you when you take it out. Why would you put it in the bank?




I don't think the supersystem as a whole is nearly as dependent on additional payments as you think.  Withdrawals could still be taxed at a concessional rate (rather than as ordinary income).


----------



## gav (4 February 2013)

sptrawler said:


> Its a bit like having money in the bank, if they taxed you on the interest and then tax you when you take it out. Why would you put it in the bank?




My income gets taxed. I then use part of that taxed income to buy some shares. I sell 6 months later at a profit. I get taxed again. I then put that money in a savings account, which gets taxed again.


----------



## sptrawler (4 February 2013)

banco said:


> I don't think the supersystem as a whole is nearly as dependent on additional payments as you think.  Withdrawals could still be taxed at a concessional rate (rather than as ordinary income).




I agree, what I'm saying is that your *after tax* contribution can't be taxed when you withdraw it.
Of course, *the taxable*, component can be taxed any way they see fit.

Of course the proportioning rule complicates it somewhat, but that is another issue.


----------



## sptrawler (4 February 2013)

gav said:


> My income gets taxed. I then use part of that taxed income to buy some shares. I sell 6 months later at a profit. I get taxed again. I then put that money in a savings account, which gets taxed again.




Obviously I phrased something wrong.
The banking example, was saying, if you put $1000 in an account and it earns 10%. Then the $100 is taxed at your marginal rate, if then you decide to withdraw that $1000 they can't tax you on it.
The same goes for super, if your account has $1m of that $500,000 is after tax contributions and $500,000 has had a concessional treatment. Therefore 50/50 ratio of funds are taxed and taxable
When you withdraw the funds, the original after tax contribution 50% has to be returned tax free.
If when you withdraw it you buy shares or make an investment with it. Of course then any *earnings* are taxable, the original investment isn't.

Obviously we are drifting off track.


----------



## sptrawler (5 February 2013)

Now this is the super everyone wants.

http://www.heraldsun.com.au/news/retiring-mps-have-income-for-life/story-e6frf7jo-1226570330900

$120,000 tax free and indexed for life, starting from when she leaves parliament. All that after just 15 years, not bad if you can get it.
The same people say our SMSF are unsustainable. What the


----------



## sptrawler (6 February 2013)

At last someone has started to think about the issue, I can see a backlash coming. 

http://www.abc.net.au/news/2013-02-06/kohler-super-budget-dilemma/4503262


----------



## Julia (6 February 2013)

"The Australian" is reporting that the government is considering the threshold for this as only $800K!!


----------



## sptrawler (6 February 2013)

Julia said:


> "The Australian" is reporting that the government is considering the threshold for this as only $800K!!




This would be the first stage of the Government taking over super.IMO
$800K would only give a return similar to the pension, therefore it would indicate, anyone earning more than the pension should be taxed.
I don't think workers will like this one. It will be as bad as work choices was for the Libs


----------



## craft (6 February 2013)

Superannuation is a tax advantaged structure for retirement savings.

I think there should be a limit on the amount that can be accumulated at a tax advantaged rate. The flip side should be any amount above the tax advantaged amount should be accessible immediately.

I would be affected by this change – but think it fair.

The contribution caps as the limiting mechanism are ridiculous and very punitive compared to the regime not that long ago.  Those with already high balances are not affected by the contribution caps at all as they have no need to add further. A cap on total balance is much cleaner and fairer 

Where should the max balance cap be set?


----------



## McLovin (6 February 2013)

Julia said:


> "The Australian" is reporting that the government is considering the threshold for this as only $800K!!




This doesn't surprise me in the least. How much should you be allowed in super before it's being taxed? Social security transfers already eat up most income tax revenue and this is only going to deteriorate over the coming decades. It's impossible to have such a large cohort of people retiring _and_ expect those still working to pay not only for government paid pensioners but also to subsidise the fare for self-funded retirees. I'm not making a social/moral statement, just an economic one.

I'm pretty certain that within ten years there will be a cap on lump sum withdrawals and a cap on the tax benefits flowing to super balances over a certain amount.

I continue to keep my super balance low.


----------



## craft (6 February 2013)

craft said:


> Where should the max balance cap be set?




The current income cut out for a single age pension is $44,248.43 pa.

At the current deeming rates a capital amount of $953,000 would be required to generate that income.

Around 1 Million seems intuitively low to me but it equates to the upper limit where tax payers currently subsidise pensioners to some degree – Should self funded retires receive tax subsidy for higher incomes? Somebody has to pay for the subsidy.


----------



## sptrawler (6 February 2013)

craft said:


> Superannuation is a tax advantaged structure for retirement savings.
> 
> I think there should be a limit on the amount that can be accumulated at a tax advantaged rate. The flip side should be any amount above the tax advantaged amount should be accessible immediately.
> 
> ...




Well the average wage is approx $70K so it should be linked somehow to that, cpi and government bond rate.
In the current climate at bond rate of say 3%, it would require, ball park $2.5m to achieve that return.
It will take some spin to make people believe they are a fat cat, if they have $800K in super.
The next step would be for the government to take over super balances upto $800K and pay the individual a pension.
Also even if it is $1m is that per couple or individual? Lots of super is in the male partners account.


----------



## banco (6 February 2013)

sptrawler said:


> This would be the first stage of the Government taking over super.IMO
> $800K would only give a return similar to the pension, therefore it would indicate, anyone earning more than the pension should be taxed.
> I don't think workers will like this one. It will be as bad as work choices was for the Libs




The people who GAS about this are probably most liberal voters anyway (which is why Howard lavished superannuation goodies on them when he was in Government).


----------



## craft (6 February 2013)

sptrawler said:


> Well the average wage is approx $70K so it should be linked somehow to that, cpi and government bond rate.
> In the current climate at bond rate of say 3%, it would require, ball park $2.5m to achieve that return.
> It will take some spin to make people believe they are a fat cat, if they have $800K in super.
> The next step would be for the government to take over super balances upto $800K and pay the individual a pension.
> Also even if it is $1m is that per couple or individual? Lots of super is in the male partners account.




Why should the whole average wage be subsidised? The person who has to pay that subsidy is you in your working life. Are you suggesting **** loads of tax when you are working and none when retired is the way to go?

Based on the above post I’m saying there is a basis for 1 Million per person. I’m sure balances or caps could be transferred between partners it the legislation is so written.

I don’t for a second buy any crap about the Gov’t taking over/confiscating etc super..... The worst I see is tax advantages being reduced and perhaps limits on capital withdrawals  to ensure the funds that have been tax advantaged are used for the reason they received those advantages.


----------



## banco (6 February 2013)

For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs.  I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.


----------



## drsmith (6 February 2013)

craft said:


> The current income cut out for a single age pension is $44,248.43 pa.
> 
> At the current deeming rates a capital amount of $953,000 would be required to generate that income.



Another dilemma for the government ?

The RBA has cut the cash rate twice since the current deeming rates were announced.

http://www.rba.gov.au/statistics/cash-rate/
http://www.humanservices.gov.au/customer/enablers/deeming


----------



## drsmith (6 February 2013)

banco said:


> For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs.  I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.



The issue to me is that as per the title of the thread, the government is not interested in reforming super, only milking it.

The Howard government was no different in its early years with its superannuation surcharge.


----------



## prawn_86 (6 February 2013)

banco said:


> For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs.  I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.




While i agree. 800k - 1m is not a large figure to have accumulated over a lifetime for those who were diligent so it once again appears that those who save hard are being penalised.

Moral of the story is dont save, or if you do, try and make sure the government doesnt know about at least a portion of it. Offshore acounts, physical metals etc


----------



## McLovin (6 February 2013)

prawn_86 said:


> While i agree. 800k - 1m is not a large figure to have accumulated over a lifetime for those who were diligent so it once again appears that those who save hard are being penalised.




Except we all subsidised their saving.


----------



## medicowallet (6 February 2013)

McLovin said:


> Except we all subsidised their saving.




People who have substantial super probably pay more tax per year than the people who believe that they subsidise what these "wealthy" people earn.


MW


----------



## medicowallet (6 February 2013)

banco said:


> For me the bottomline is that a very large % of Government revenue is going to go towards paying the baby boomers pension and health costs.  I don't see why the wealthier baby boomers should be expecting the younger generations to pay disproportionately for those costs.




Bingo!


You should see the wasted dollars in the hospital system!

MW


----------



## sptrawler (6 February 2013)

McLovin said:


> Except we all subsidised their saving.




What if it is 80% after tax contributions?


----------



## sptrawler (6 February 2013)

craft said:


> Why should the whole average wage be subsidised? The person who has to pay that subsidy is you in your working life. Are you suggesting **** loads of tax when you are working and none when retired is the way to go?
> 
> Based on the above post I’m saying there is a basis for 1 Million per person. I’m sure balances or caps could be transferred between partners it the legislation is so written.
> 
> I don’t for a second buy any crap about the Gov’t taking over/confiscating etc super..... The worst I see is tax advantages being reduced and perhaps limits on capital withdrawals  to ensure the funds that have been tax advantaged are used for the reason they received those advantages.




Why wouldn't the government just apply the 15% rebate to all withdrawls same as under 60's pay now?


----------



## RandR (6 February 2013)

prawn_86 said:


> While i agree. 800k - 1m is not a large figure to have accumulated over a lifetime for those who were diligent so it once again appears that those who save hard are being penalised.
> 
> Moral of the story is dont save, or if you do, try and make sure the government doesnt know about at least a portion of it. Offshore acounts, physical metals etc




The fund I work for has the highest 'per member' balances in the country in the baby boomer .. 45/50+ generation. the vast majority are nowhere near touching 800k let alone 1m+

Probably less then 1 in a 100 of our members in the baby boomer age have super balances of 800k plus.

I cannot honestly see how the government could raise any meaningful level of taxation from such a levy like that. the reality is any money lifted from such a strategy wont really comethrough in any real and meaningful sum until Gen X matures as naturally their balances will be quite larger then the baby boomers as a generation in dollar amount and a higher proportion will be affected.

Out of the miniscule number of people that would be affected by such a cap/tax. Most of them arnt even wealthy despite having giant super balances, most of the giant balances in that age range have come from state/federal defined benefit plans inherited by 70 something widowed housewives who dont want to spend or draw down a cent


----------



## drsmith (6 February 2013)

The lowest hanging fruit will be the tax rate on contributions and/or earnings.


----------



## sptrawler (6 February 2013)

RandR said:


> The fund I work for has the highest 'per member' balances in the country in the baby boomer .. 45/50+ generation. the vast majority are nowhere near touching 800k let alone 1m+
> 
> Probably less then 1 in a 100 of our members in the baby boomer age have super balances of 800k plus.
> 
> ...




Good post, so what is the motivation, behind all the hype. 
As I've said on numerous occassions, if someone has a large super balance a majority of it would have to be from after tax contributions. 
If the government wants to tax it more, it can only be on earnings or taxable components, the rest is the individuals money.
As McLovin said he is placing minimum in super, if the uncertainty continues, many more will follow.
Then we go back to everyone on a pension.

It is just another vote grabbing "bash the rich" prank, by Labor.
How about taxing pollies pensions as income with the 15% rebate, Know that would save some money.


----------



## Julia (6 February 2013)

From "Business Spectator" today:


> Prime Minister Julia Gillard has ruled out taxing withdrawals on superannuation for people aged over 60 while challenging the opposition to show how it would have achieved budget surpluses during the global financial crisis.
> 
> According to media reports, Ms Gillard made the commitment during in parliament, as she came under increasing pressure over proposed changes to the government's superannuation program.
> 
> The Australian reported that Ms Gillard repeated her 2010 vow that tax-free benefits would "never" be removed for over 60s.




Yeah, right.  Just as she said "there will be no carbon tax under a government I lead".

That's the trouble, Ms Gillard, with your promises:  you have no credibility any more.


----------



## sptrawler (6 February 2013)

Julia said:


> From "Business Spectator" today:
> 
> 
> Yeah, right.  Just as she said "there will be no carbon tax under a government I lead".
> ...




If there is an issue with the impact of future loss of revenue, they have the tools to reduce the problem.
They have reduced the concessional cap to $25K, they can reduce the personal cap from $150K to $0, for funds with a balance above a certain $ value.
Workers will be in a complete spin, trying to work out where the government is coming from.

I think this kind of speculation and feeling the water by the government, will encourage people to do what GG suggests.
Must go down and check out that Road King tommorrow and thankfully I've bought the van.LOL


----------



## sptrawler (7 February 2013)

Actually when you think about the super system, it isn't the funds that are already in there that are the problem.

It is more about the funds going in, what is happening is bracket creep. 

In the early days 15% entry tax, was fine a lot of workers in 2000-2008 were on less than $35k.

Now nobody who works full time is on less than $35k, so everyone is getting a tax break on super.
IMO that is where the problem is manifesting, it is becoming a perk for the plebs, the engine room.
You can't have that.
Just my thoughts.

It will be interesting to see how they manage the increase in wages and maintain 15% contribution tax.


----------



## Julia (8 February 2013)

Business is making fairly clear to the government how they feel about suggested tampering with Super.
http://www.theaustralian.com.au/nat...cil-of-australia/story-fn59nsif-1226573057536


----------



## pixel (8 February 2013)

Julia said:


> Business is making fairly clear to the government how they feel about suggested tampering with Super.
> http://www.theaustralian.com.au/nat...cil-of-australia/story-fn59nsif-1226573057536



... but when has our current Gov'mint started to listen to Business? 
Maybe the next one might - but only where it suits them. They always have "The Greater Good" in mind.


----------



## banco (8 February 2013)

Julia said:


> Business is making fairly clear to the government how they feel about suggested tampering with Super.
> http://www.theaustralian.com.au/nat...cil-of-australia/story-fn59nsif-1226573057536




They might not have to if Howard hadn't given away the farm in 2006.


----------



## prawn_86 (8 February 2013)

banco said:


> They might not have to if Howard hadn't given away the farm in 2006.




Lets please keep this thread on topic with regards to superannuation and any future changes that are upcoming as opposed to political arguments as to who did what as we all know all politicians are as useless as each other


----------



## sptrawler (8 February 2013)

prawn_86 said:


> Lets please keep this thread on topic with regards to superannuation and any future changes that are upcoming as opposed to political arguments as to who did what as we all know all politicians are as useless as each other




Quite right prawn, I haven't heard either side say "hang on a minute, how can we discuss the general super system and its taxing? When we don't apply the same litmus test on the system we enjoy"


----------



## sydboy007 (9 February 2013)

The way superannuation is currently working it's not really a cost effective way to reduce the financial burden of providing the aged pension.

Depending on the person's income you can be getting up to 75% of the current age pension as a tax discount, though this has been reduced a bit for those earning over 300K.

How making super tax free in the pension phase is supposed to help I still haven't read anything that makes financial sense to me.  Allowing someone over age 60 to do a TRB along with salary sacrificing up to 25K is a GIANT tax loophole based on age based discrimination.

I'd suggest setting up super so that once you have a balance that would provide you with say 125% of the aged pension that you can only add fully taxed money into you account.  Once a person isn't going to be a burden on tax payers, why should the government "care" any more?  What is the point of keep income taxes higher to fund super tax breaks?

I'd argue that by cutting back on the amount of lost super tax it would easily allow the Government to provide biannual tax cuts, along with funding some infrastructure.  Better yet, help devlop a retail corporate bond market in this country and let the SMSF sector help fund the productive investment of local companies


----------



## sptrawler (9 February 2013)

sydboy007 said:


> The way superannuation is currently working it's not really a cost effective way to reduce the financial burden of providing the aged pension.
> 
> Depending on the person's income you can be getting up to 75% of the current age pension as a tax discount, though this has been reduced a bit for those earning over 300K.
> 
> ...




I think you've lost the plot, salary sacrificing $25k is not going to give you a reasonable pension.
I've said before, if you want a steady, I'm not saying lavish, retirement in the current climate you need $2m.
The labor party are saying $800k are fat cats, just shows how they are out of touch with reality.
I think both parties would be much more realistic, if their pensions were taxed the same as everyone elses.

It is o.k backing one, but do either live by the rules they apply to others.
That is why I've said Allan Carpenter was the only politician that had morals. Guess what he was labor.lol

Guess how long he lasted. lol Not long


----------



## banco (9 February 2013)

sydboy007 said:


> I'd suggest setting up super so that once you have a balance that would provide you with say 125% of the aged pension that you can only add fully taxed money into you account.  Once a person isn't going to be a burden on tax payers, why should the government "care" any more?  What is the point of keep income taxes higher to fund super tax breaks?




Because the baby boomers are a large and very active voting bloc who want to be kept in the style they've become accustomed to?


----------



## McLovin (9 February 2013)

sptrawler said:


> I've said before, if you want a steady, I'm not saying lavish, retirement in the current climate you need $2m.




$2m, are you joking? Have you actually worked out what the annuity on that would be, even at 3%? Over say 25 years it would be around $110k/annum. With no kids, house paid off, minimal living expenses, and no tax, you'd be living on $110k/annum disposable income. What do you consider lavish?


----------



## sptrawler (9 February 2013)

banco said:


> Because the baby boomers are a large and very active voting bloc who want to be kept in the style they've become accustomed to?




Most baby boomers have very little in super due to the fact it was only introduced in 1992, even then it was 3%.
If baby boomers have money in super, it is mainly from after tax contributions, e.g downsizing.
The Labor party ethos of demonising people is a double sided sword.
They don't put themselves forward as saying we will adopt the same taxing regime as everyone else.
Secondly most baby boomers I know are trying to downsize and fund their own pension, while still supporting adult children.
They are the most demonised section of society.IMO
Cheap shot banco, just remember you have to live with the outcomes.


----------



## sptrawler (9 February 2013)

McLovin said:


> $2m, are you joking? Have you actually worked out what the annuity on that would be, even at 3%? Over say 25 years it would be around $110k/annum. With no kids, house paid off, minimal living expenses, and no tax, you'd be living on $110k/annum disposable income. What do you consider lavish?




Talking glib is fine if you are an accountant, however some look beyond the crap.

http://www.superguide.com.au/boost-your-superannuation/crunching-the-numbers-a-2-million-retirement

What I consider lavish is M.P's getting $100k - 200k indexed for life tax free, gauranteed.lol

The examles given are for 5-7% returns and I'm talking about retiring at 55.
Currently term deposits are 4-4.5%


----------



## McLovin (9 February 2013)

sptrawler said:


> Talking glib is fine if you are an accountant, however some look beyond the crap.
> 
> http://www.superguide.com.au/boost-your-superannuation/crunching-the-numbers-a-2-million-retirement
> 
> ...




So, living to 100 at 5% (the most conservative calculation) gives an inflation indexed amount of $82k/annum in today's dollars. Same scenario, tax free, mortgage free, child free. Almost $1,600/week in disposable income for life.


----------



## sptrawler (10 February 2013)

McLovin said:


> So, living to 100 at 5% (the most conservative calculation) gives an inflation indexed amount of $82k/annum in today's dollars. Same scenario, tax free, mortgage free, child free. Almost $1,600/week in disposable income for life.




Yes that's at 5%, currently term deposits are 4-4.5%. The talk is returns going to 3%, so it isn't as glossy as you make out. In U.K, U.S and Europe it's about 1%.
You could take risks and buy dividend paying shares, I realse that, but I'm using solid data, not speculation.

But trust me, as a pleb to save $2m in todays terms, takes a lot of sacrifice.
To do the same in 10 - 20years time would require saving $4m-$6m.

Also it shows how good a $100k -$200k pollies pension is, in real terms.

So to cut to the chase, McLovin what do you think is a reasonable retirement sum?


----------



## sptrawler (10 February 2013)

McLovin said:


> So, living to 100 at 5% (the most conservative calculation) gives an inflation indexed amount of $82k/annum in today's dollars. Same scenario, tax free, mortgage free, child free. Almost $1,600/week in disposable income for life.




Sorry forgot to mention, they would be taxing that, as it would be above $800k supporting the pension. what a hoot.


----------



## sptrawler (10 February 2013)

O.K McLovin, now we have established 15years in parliament, gives you the same retirement benefit as having $3 - 5m in super.
Lets get back to reality, Here is the same link if you have $1m in super.

http://www.superguide.com.au/boost-your-superannuation/retirement-why-can’t-1-million-last-forever

Just because you are fed rubbish doesn't mean you have to eat it. $1m in super and a person will probably end up on the pension.

This is why the pollies gave themselves a 40% payrise recently, inflation will knock the crap out of a $1m nest egg.


----------



## Tyler Durden (10 February 2013)

Just thought it relevant to share this here:



> The four most disproportionately influential industries in Australia, they say, are superannuation, banking, mining and gambling.
> 
> Employers in Australia are required by law to remove 9 per cent of employees' pre-tax wages and deposit it in a superannuation account the employees can't touch until they retire. The industry has now persuaded the Labor government to gradually increase this to 12 per cent.
> 
> ...




http://www.smh.com.au/opinion/politics/the-four-industries-that-rule-australia-20130205-2dwew.html


----------



## sydboy007 (10 February 2013)

sptrawler said:


> I think you've lost the plot, salary sacrificing $25k is not going to give you a reasonable pension.
> I've said before, if you want a steady, I'm not saying lavish, retirement in the current climate you need $2m.
> The labor party are saying $800k are fat cats, just shows how they are out of touch with reality.
> I think both parties would be much more realistic, if their pensions were taxed the same as everyone elses.
> ...




You're missing the point.

What is the Government's prime reasoning for super?  I'd argue it's to minimise the cost of the aged pension on tax payers, and as has been showing the dependancy ratio is going to sky rocket over the next 15 years, so the remaining tax payers are going to be in a real bind if the aged pension costs blow out.

So to argue that you need $2 million to fund a comfy retirement isn't really an issue for the Govt.  Super should pretty much be about getting the largest number of people on an income that's a bit more than the current aged pension.  Anything above that is up to the individual.

To me, the current argument smacks of the nanny state.  The Govt has a slight role to push us all to have a basic minimum saved for retirement, but after that, it's a personal choice how much you want to slow your current spending now to have more to spend later in life.

As for that $2 million for a comfy retirement, lets say you have 30 years to live after retirement.  You should be  able to draw down around 65K a year over that 30 years, with CPI increases each year.  Your super balance isn't some untouchable sum of money, you DON'T have to just survive on earnings alone.  It is meant to fund your retirement.  5% of $1M is 50K a year, and I'd argue it is still relatively easy to find shares and some bonds that pay at least this much.  Just look at AKY or AYK - listed interest securities funds that are paying at least 8% yield.

I'd argue a major issue for Australians is the lack of access to corporate debt.  When I signed up with FIIG last year I was amazed at how many higher yielding bonds are out there.  It seemed like you could easily earn 2 to 3% extra if you were able to move in the wholesale debt space.  While that kind of debt was a bit riskier than what was available for retail investors, we certainly weren't talking about junk bonds or financially vulnerable companies.

We need to have a listed corporate debt market that is as liquid and cheap to buy sell as currently for shares.  It would make the country a lot less vulnerable to the ebb and flow of the money markets, and it would benefit us all by allowing our super funds to increase their investments into what is generally a more stable form of income, especially for those in the pension phase.


----------



## sydboy007 (10 February 2013)

Tyler Durden said:


> Just thought it relevant to share this here:
> 
> 
> 
> http://www.smh.com.au/opinion/politics/the-four-industries-that-rule-australia-20130205-2dwew.html




I'd argue that is one of the major reasons that the number SMSFs has skyrocketed in recent years.  For a single person with 100K it's worthwhile, for a couple with more it's a no brainer, especially if you have adult children.  With esuperfund I'd say you can have a fixed annual fee of $1000, so spread between 2 to 4 people it's a very cheap way to manage your money.  Having complete visibility of the fund is another major draw card or me.


----------



## sptrawler (10 February 2013)

What you say has a lot of merit Sydboy. 
The one thing that annoys me, with the tax debate is, the tax cost is a percieved loss, not a actual loss.
If there was no super, there wouldn't be tax collected as there would be no savings( disregarding tax collections on the spending)
What they are saying is if those savings were taxed normally there would be more tax collected.
The only 'real'  loss of tax is when it is contributed at a concessional rate.
Once in the system it is locked away and all earnings are taxed, no tax free threshold. 
The individual has no access to the money and it props up our monetary system, which was exposed in the 87 crash. From memory two of our banks nearly went under, due to overseas borrowing exposure.
To say it is costing our younger generation is probably a complete fuphy, as they are enjoying the tax concession on the contribution. 
With bracket creep and with the lowest marginal bracket at 19% everyone who works is getting a tax concession. Now that is an actual cost to the government, even the lowest paid are getting a 4% tax break.

As for $2m ,If you want a comfortable lifestyle it will cost about $80k.
That is an overseas trip of say 6 - 8 weeks, going to the movies once a week, changing your car every 7-8 years. 
I'm going off a friend who has been retired for 20 years and is fairly diligent with his money. Neither of them smoke.
We are talking about having enough money to never need any government support.
Having $1m you just about qualify for part pension and you will be on full pension within 20 years.


----------



## sptrawler (10 February 2013)

Rather than speculate on what is a great amount of money, use this calculator, to work out your own circumstances.

https://www.moneysmart.gov.au/tools...rs-and-tools/account-based-pension-calculator

You can download the excel spreadsheet and play with till your hearts content.


----------



## sydboy007 (10 February 2013)

sptrawler said:


> As for $2m ,If you want a comfortable lifestyle it will cost about $80k.
> That is an overseas trip of say 6 - 8 weeks, going to the movies once a week, changing your car every 7-8 years.
> I'm going off a friend who has been retired for 20 years and is fairly diligent with his money. Neither of them smoke.
> We are talking about having enough money to never need any government support.
> Having $1m you just about qualify for part pension and you will be on full pension within 20 years.




I've obviously got a totally different concept of a comfortable life.

Being mortgage free with no addictions (except maybe books but the bookdespository saves me there) and I find I'm able to have 2 to 3 overseas holidays a year (6 to 8 weeks away) on about 45K after tax.

The rest of my income is going into building a share portfolio.

I suppose I'm lucky in that I don't have a car, but I'd really have trouble blowing 80K a year.  

With so many boomers heading for retirement I just don't see how the remaining tax payers are going to be able to afford to support the system when around 25% of the population will have largely tax free income.  GST increase is about the only way to resolve that insanity.


----------



## sptrawler (10 February 2013)

sydboy007 said:


> With so many boomers heading for retirement I just don't see how the remaining tax payers are going to be able to afford to support the system when around 25% of the population will have largely tax free income.  GST increase is about the only way to resolve that insanity.




Again you say you don't know how the tax payers are going to pay for people who have a tax free income.
They are not costing anything as it is being paid from their own earnings from saved funds.
If they were pulling government assistance the tax payer is paying for it.

The only cost is loss of percieved tax that could be levied on that money. 
If there was no super there would be no money to tax and a huge pension bill. Now that would be insane.

As I said earlier the only net loss currently is contributions being taxed at 15%, this is a loss of personal income tax reciepts. 
Also as the lowest tax bracket is now 19%, all workers contributions are now costing the government money. This is the unsustainable part currently. 
Same as taxing earnings at 15% instead of at marginal rate, in accumulation phase, that's costing also.

It is interesting that if someone is living off their investments and not recieving any government welfare, they are demonised.
Yet if they spend it, they recieve sympathy and taxpayer support.


----------



## banco (10 February 2013)

sptrawler said:


> Again you say you don't know how the tax payers are going to pay for people who have a tax free income.
> They are not costing anything as it is being paid from their own earnings from saved funds.
> If they were pulling government assistance the tax payer is paying for it.




I think he's referring to who is going to pay for the very large chunk of the boomer population that don't have sufficient retirement resources and don't have private health insurance.   The superannuation industry and the wealthier boomers seem to be pushing a model where the well off baby boomers will have comfortable, relatively low taxed retirements while the working age population will be paying tax out their ass to support the poorer boomers with age pensions and healthcare.


----------



## sptrawler (10 February 2013)

banco said:


> I think he's referring to who is going to pay for the very large chunk of the boomer population that don't have sufficient retirement resources and don't have private health insurance.   The superannuation industry and the wealthier boomers seem to be pushing a model where the well off baby boomers will have comfortable, relatively low taxed retirements while the working age population will be paying tax out their ass to support the poorer boomers with age pensions and healthcare.




What you are saying is absolutely correct.
What Sydboy and Labor are saying is that the boomers who have saved, should be taxed (over $1m)
What I'm trying to show is how stupid that is, if you tax their earnings, they will also be on the pension in no time.
Suggest you read back through this and and other related threads,to get a background.

Also at the moment everyone is getting their a$$es taxed off to subsidise the 15% contribution concessions and 15% earnings concessions at the moment.
I don't hear the young high income earners complaining about that.


----------



## sydboy007 (10 February 2013)

sptrawler said:


> It is interesting that if someone is living off their investments and not recieving any government welfare, they are demonised.
> Yet if they spend it, they recieve sympathy and taxpayer support.




Maybe if I put some $ figures to what my argument i about it might be clearer.

My position is that superannuation should only be about minimising the aged pension cost.  It seems most people agree to do nothing would leave us either destitute in old age, or a minimal working population paying ludicrous taxation.

The current single aged pension is $18512 a year

I'd argue allowing someone to build up savings within super to to provide 125% of the current age pension is reasonable.  There's nothing to stop a person from saving more for their retirement outside of super.

Using your spreadsheet it would seem a balance of $470K would provide a 23.5K annual income indexed to CPI till age 82 (assuming 5% a year with 0.55% management fee).  Personally I think you could buy some IABs and get a much better net return, but that's a whole other topic.  If you haven't fallen off ya perch by 82, and there's a reasonable chance you wont, then it might be time to take a reverse mortgage or downsize your house.  A million $ balance with the same earning rate would provide a 50K income till age 88.  50K after tax puts you in the top 20-25% of income earners in the country.

People seem to be treating super as tax minimisation shelter, when it should be viewed as providing a basic level of income for retirement.  The majority of the tax benefits go to the wealthiest and to me it seems to be an expensive way to solve the retirement income problem.  It would be much better to limit how much can be accumulated at the lower tax rate.  I'd much rather see lower income taxes than the current super rort continuing.

The tax forgone on contributions is small when compared to the income earned of say 30K on a decent sized super balance compared to what someone would pay at their marginal rate for that.  The tax free pension phase is another huge cut to Govt revenue.  I don't know why Howard had to cut the RBL system.  No idea why people are allowed to take lump sums and blow them as they like then expect to get the age pension when it runs out.  People argue it's their money, but quite a bit of it is tax payer subsidy.  Don't I have the right to expect your tax payer subsidised super to last you as long as possible and minimise the aged pension you'll receive?

I know in this tiny microcosm of aussiestockforums everyone here is practically a fully self funded retiree who will never ask for money from the Govt, but the reality is that the fully self funded retiree is only just slightly less rarer than hens teeth.


----------



## sptrawler (10 February 2013)

sydboy007 said:


> The tax forgone on contributions is small when compared to the income earned of say 30K on a decent sized super balance compared to what someone would pay at their marginal rate for that.  The tax free pension phase is another huge cut to Govt revenue.  I don't know why Howard had to cut the RBL system.  No idea why people are allowed to take lump sums and blow them as they like then expect to get the age pension when it runs out.  People argue it's their money, but quite a bit of it is tax payer subsidy.  Don't I have the right to expect your tax payer subsidised super to last you as long as possible and minimise the aged pension you'll receive?
> 
> I know in this tiny microcosm of aussiestockforums everyone here is practically a fully self funded retiree who will never ask for money from the Govt, but the reality is that the fully self funded retiree is only just slightly less rarer than hens teeth.




There are already laws in place to stop people 'blowing' money in order to obtain a pension!

I agree min - max will be brought back. But that won't stop people withdrawing their own money.

As concessional limits are so low ($25k) the only people who have large amounts in super, have done so with their own money.

So therefore a married couple with $1m in super, currently get no pension.
They introduce a 15% withdrawl tax on them. Minimum withdrawl is 4% i.e $40,000 minimum withdrawl.
So on their $1m it earns 5% = $50k - 40k minimum withdrawl - 15% ($6k) = $44k available after tax.

Or they withdraw the money put it in term deposit, $1m at say 5% = $50k or 25k each
The first $$18k tax free the remaining $7k is taxed at 19% = approx$1,300 tax each.
So on the $50k interst they keep $47,400 no strings attached.
Like that works out.

As the concessional component is so low in super, what is the difference between someone 'blowing' money they hold outside of super or inside super.
If the result is the person obtains a pension, I really think that the 'blowing' of money in super to obtain a pension isn't as big an issue as you think. There is more likelyhood of it happening outside the super structure.


----------



## drsmith (10 February 2013)

sydboy007 said:


> I know in this tiny microcosm of aussiestockforums everyone here is practically a fully self funded retiree who will never ask for money from the Govt, but the reality is that the fully self funded retiree is only just slightly less rarer than hens teeth.



If you think it's such a tiny microcosm, isn't all you said before that statement and will say after a waste of time ?

This sort of categorisation of those who have views that differ from your own only detracts from the substance of your argument.

Is the current government interested in changes to taxing super from the context of raising revenue or broader tax reform ? 

That's the fundamental question of this thread.  

The tiny microcosm to which you refer is much broader than you would like to acknowledge.


----------



## sptrawler (10 February 2013)

drsmith said:


> If you think it's such a tiny microcosm, isn't all you said before that statement and will say after a waste of time ?
> 
> This sort of categorisation of those who have views that differ from your own only detracts from the substance of your argument.
> 
> ...




I was enjoying the debate, but exactly drsmith.


----------



## Julia (10 February 2013)

sptrawler said:


> There are already laws in place to stop people 'blowing' money in order to obtain a pension!



Are there?  I wasn't aware of that.  Can you be specific about this?
As I understand it, as long as any withdrawals from Super are clearly nominated as being "Pension Payments", you can pull out as much as you like, spend it on what you like, and then have access to a government pension, if that were to be what you wanted.


----------



## sptrawler (10 February 2013)

sydboy007 said:


> Maybe if I put some $ figures to what my argument i about it might be clearer.
> 
> My position is that superannuation should only be about minimising the aged pension cost.  It seems most people agree to do nothing would leave us either destitute in old age, or a minimal working population paying ludicrous taxation.
> 
> ...




Even using this example is flawed, up untill about 4 years ago the single age pension was approx $14,000 now it is $18,500.

Using your reasoning if someone was allowed to build up their super, to provide for 125% the pension of 4 years ago, they would be getting less than the pension now.
Also as they are retired there is no way of recovering the situation.

If they want to sort it out, just tell everyone to withdraw there super and apply an exit tax of 15% on the taxable component.
Let's see if that happens.lol


----------



## sptrawler (10 February 2013)

Julia said:


> Are there?  I wasn't aware of that.  Can you be specific about this?
> As I understand it, as long as any withdrawals from Super are clearly nominated as being "Pension Payments", you can pull out as much as you like, spend it on what you like, and then have access to a government pension, if that were to be what you wanted.




I'm pretty sure when you apply for a pension, they look at your expenditure over the last five years.
Therefore if you withdrew say $100k last year, they would want to know what it was spent on. 
You can't actively dispose of money in order to obtain government assistance.
I will stand corrected if I'm wrong, but I'm pretty sure that's the way it is.


----------



## sydboy007 (11 February 2013)

sptrawler said:


> I'm pretty sure when you apply for a pension, they look at your expenditure over the last five years.
> Therefore if you withdrew say $100k last year, they would want to know what it was spent on.
> You can't actively dispose of money in order to obtain government assistance.
> I will stand corrected if I'm wrong, but I'm pretty sure that's the way it is.




from the industry funds services website

_Can I spend my entire super and then get the pension?

If you are over 60 and have permanently retired from the workforce, you will be able to withdraw 100% of your super, spend it, and then apply for the age pension if you have reached the qualifying age.

You do not need to spend all your money to receive the pension and in many cases you may be better off maximising the income from your super/investments than solely relying on the age pension.

If you intend to give funds away please note Centrelink has gifting limits (see above)._


----------



## sydboy007 (11 February 2013)

drsmith said:


> If you think it's such a tiny microcosm, isn't all you said before that statement and will say after a waste of time ?
> 
> This sort of categorisation of those who have views that differ from your own only detracts from the substance of your argument.
> 
> ...




IIRC fully self funded retirees make up something like 5-7% of retirees, so if that isn't a small microcosm then I stand corrected.

Neither the ALP of the LNP are interested in broad tax reform.  They're only interested in the getting their flabby butts onto the treasury benches.


----------



## sydboy007 (11 February 2013)

sptrawler said:


> Even using this example is flawed, up untill about 4 years ago the single age pension was approx $14,000 now it is $18,500.
> 
> Using your reasoning if someone was allowed to build up their super, to provide for 125% the pension of 4 years ago, they would be getting less than the pension now.
> Also as they are retired there is no way of recovering the situation.
> ...




I suppose I should have clarified that the amount would move in line with the pension.

I'd prefer forcing people to have to take a pension with their super.  The Govt has already forced us to save the money, so they might as well force us to use it for what it was intended for ie provide an income for as long as possible in retirement.


----------



## drsmith (11 February 2013)

sydboy007 said:


> IIRC fully self funded retirees make up something like 5-7% of retirees, so if that isn't a small microcosm then I stand corrected.




Aussiestockforums is even a smaller proportion of the population, so the question stands.

Why are you wasting your time for what you regard as such a tiny microcosm ?



sydboy007 said:


> I know in this tiny microcosm of aussiestockforums......


----------



## sptrawler (11 February 2013)

sydboy007 said:


> I suppose I should have clarified that the amount would move in line with the pension.
> 
> I'd prefer forcing people to have to take a pension with their super.  The Govt has already forced us to save the money, so they might as well force us to use it for what it was intended for ie provide an income for as long as possible in retirement.




Your point is? 
As I said in the example of allowing people to save enough to provide 125% of the pension.
Four years later they will be drawing pension from consolidated revenue. That's dumb.
If the person had enough in super, so that he can support himself from his own earnings, without taking anything from consolidated revenue.
That has to be a better outcome rfor the tax payer.


----------



## sptrawler (11 February 2013)

sydboy007 said:


> from the industry funds services website
> 
> _Can I spend my entire super and then get the pension?
> 
> ...




The last line is very important.


----------



## sptrawler (11 February 2013)

sydboy007 said:


> IIRC fully self funded retirees make up something like 5-7% of retirees, so if that isn't a small microcosm then I stand corrected.
> 
> Neither the ALP of the LNP are interested in broad tax reform.  They're only interested in the getting their flabby butts onto the treasury benches.




No, they are interested in a tax free pension from the moment they leave parliament, indexed to cpi for the rest of their lives.
So they can leave at 47 years old and work, plus recieve the pension tax free on top. 
You say someone retired getting $25k is taking the pizz, I don't think so, at least they've paid some tax on it.


----------



## sptrawler (11 February 2013)

sydboy007 said:


> I suppose I should have clarified that the amount would move in line with the pension.




It doesn't matter, the person who retired four years earlier is now in the pension phase and can't add to his total.
So he is still screwed.


----------



## Julia (11 February 2013)

> Can I spend my entire super and then get the pension?
> 
> If you are over 60 and have permanently retired from the workforce, you will be able to withdraw 100% of your super, spend it, and then apply for the age pension if you have reached the qualifying age.



Thanks for that confirmation syd boy.



> You do not need to spend all your money to receive the pension and in many cases you may be better off maximising the income from your super/investments than solely relying on the age pension.



That's a good point.  Apparently some people actually do simply spend money in order to get the age pension.
Hard to see the point of working to be self funded and then just ending up on the very miniscule age pension anyway.  



> If you intend to give funds away please note Centrelink has gifting limits (see above)



And reasonably so.  If this were not the case, it would leave the way open for family members to, on paper, take ownership of the retiree's funds allowing the pension to be accessed while leaving considerable earning capacity in place.


----------



## awg (11 February 2013)

Havent read past posts...but afaic..the problem is tax free over 60!

I want to know how it can be justified that you dont pay tax due to an arbitrary age if you are wealthy?

(Please dont crack out that hoary old chestnut, paid tax all their life...or I will throw-up)


imo, there should be a threshold...ie over $2M in super, pay some tax etc etc.

With the population aging, the maths are going all the wrong way.

I find almost no one agrees with me...my very wealthy 70 yr old accountant does though...vehemently!

The weird thing is that the vast majority of retirees would not have $2M in super.

Taxing the end user is the only thing makes sense to me


----------



## Julia (11 February 2013)

awg said:


> Havent read past posts...but afaic..the problem is tax free over 60!
> 
> I want to know how it can be justified that you dont pay tax due to an arbitrary age if you are wealthy?



Presumably it's part of the overall incentive to save for one's own retirement in the first place, taking some of the burden off the age pension.  The suggestion has been made that this saving does not balance out the loss of tax revenue.  If anyone has bothered to find government figures on this, it would be interesting.

Coming from NZ where I'm pretty sure the age pension is not means tested but is taxed along with all other income, I was  surprised about not even any tax on earnings here.



> imo, there should be a threshold...ie over $2M in super, pay some tax etc etc.



That sounds reasonable enough, certainly on earnings:  I don't think withdrawals should be taxed though if they've been taxed going in.



> The weird thing is that the vast majority of retirees would not have $2M in super.



So why is it an issue?


----------



## sptrawler (11 February 2013)

awg said:


> imo, there should be a threshold...ie over $2M in super, pay some tax etc etc.
> .
> 
> Taxing the end user is the only thing makes sense to me




Agree $2m for a couple in todays dollars earns a reasonable income. As for taxing, the regime that is in place for those between 55 - 60 years of age, could be employed.


As for taxing the end user being the only thing that makes sense is debatable.

15% tax on contributions, now that the lowest tax scale is 19%, is unsustainable. 
One would think it will have to move to at least 19%, otherwise there is a real fall in tax revenue.

Possibly making the tax concession proportional to the individuals income bracket, would balance the inequity in the benefit.
Both in contributions as well as earnings.


----------



## McLovin (11 February 2013)

Julia said:


> Presumably it's part of the overall incentive to save for one's own retirement in the first place, taking some of the burden off the age pension.  The suggestion has been made that this saving does not balance out the loss of tax revenue.  If anyone has bothered to find government figures on this, it would be interesting.




Where do you draw the line then? By some of the logic I've seen in here (not by you) it seems that the prevailing mindset is "I saved it, so I shouldn't have to pay tax because I'm not a burden". There are plenty of people who have saved or who have been successful enough to live off their investments well before 60 or whose investments are outside of the superannuation system, yet they still have to pay tax. 

The original purpose of the super system was to provide a pension that the government didn't have to pay for. Along the way all these perks have been added. Was the intention to create a tax sheltered environment for savings that would provide beyond the basic pension?


----------



## Julia (11 February 2013)

McLovin said:


> Where do you draw the line then? By some of the logic I've seen in here (not by you) it seems that the prevailing mindset is "I saved it, so I shouldn't have to pay tax because I'm not a burden". There are plenty of people who have saved or who have been successful enough to live off their investments well before 60 or whose investments are outside of the superannuation system, yet they still have to pay tax.
> 
> The original purpose of the super system was to provide a pension that the government didn't have to pay for. Along the way all these perks have been added. Was the intention to create a tax sheltered environment for savings that would provide beyond the basic pension?



I guess, McLovin, the whole idea was designed not for people like yourself who will obviously not be depending on a government pension, but for those who - without significant incentives - would not take the initiative to even think about their future.


----------



## sptrawler (11 February 2013)

McLovin said:


> Where do you draw the line then? By some of the logic I've seen in here (not by you) it seems that the prevailing mindset is "I saved it, so I shouldn't have to pay tax because I'm not a burden". There are plenty of people who have saved or who have been successful enough to live off their investments well before 60 or whose investments are outside of the superannuation system, yet they still have to pay tax.




I asuume I'm getting a mention there.lol

As for the people who invested outside of super and had to pay tax.
Firstly they had access to that money to use as they wished, the superannuant didn't
Secondly they could employ tax minimisation strategies to accumulate the wealth.

Also I personaly don't agree that it shouldn't be taxed. What I argue is it should be addressed in an holistic way.
Not just saying a person with $x in retirement phase should pay, when there are discrepancies through all phases of the process.
Just to make it clear I'm not on any sort of pension, so it isn't from my personal perspective or experience.


----------



## McLovin (11 February 2013)

Julia said:


> I guess, McLovin, the whole idea was designed not for people like yourself who will obviously not be depending on a government pension, but for those who - without significant incentives - would not take the initiative to even think about their future.




Point taken Julia. But for those people who don't think about their own retirement they have little choice but to invest in superannuation. That, to me, was the main point of super; employer makes the contribution which is then ringfenced until retirement. Like all pension systems, it cuts the beneficiary out of the equation until they retire. In many other countries you make a "social security contribution" on each payslip that goes straight to the government and in return the government pays you a pension at retirement. Our privatised system has created a whole industry around pensions, maybe the explains why there are so many more perks (especially as your super balance grows) than in other countries.



			
				sptrawler said:
			
		

> I asuume I'm getting a mention there.lol




You did cross my mind. 



			
				sptrawler said:
			
		

> Also I personaly don't agree that it shouldn't be taxed. What I argue is it should be addressed in an holistic way.
> Not just saying a person with $x in retirement phase should pay, when there are discrepancies through all phases of the process.
> Just to make it clear I'm not on any sort of pension, so it isn't from my personal perspective.




Fair enough. FWIW, I don't know who should or shouldn't be taxed. I'm just thinking aloud.


----------



## sptrawler (11 February 2013)

McLovin said:


> Point taken Julia. But for those people who don't think about their own retirement they have little choice but to invest in superannuation. That, to me, was the main point of super; employer makes the contribution which is then ringfenced until retirement. Like all pension systems, it cuts the beneficiary out of the equation until they retire. In many other countries you make a "social security contribution" on each payslip that goes straight to the government and in return the government pays you a pension at retirement. Our privatised system has created a whole industry around pensions, maybe the explains why there are so many more perks (especially as your super balance grows) than in other countries.
> 
> 
> 
> ...




I really find super interesting McLovin and as you say the reasons it was first introduced have been lost.
Now there is so much money involved, both sides of government want to get into it.lol
Not to mention the fund administrators.

As with you I'm just thinking out loud, debating it causes me to think of the issues I haven't thought of.
That is why I enjoy Sydboys input, they are from angles I've never thought of.

I think personaly if the system is becoming a huge tax burden, then the whole thing needs to be put on a sustainable footing.
Not just politically expedient jabs at it. Both parties are as guilty as each other.

I hope the debate can continue in the nature it has been, I've thoroughly enjoyed it and I have no background in economics or accounting, as you have probably recognised already.


----------



## DocK (11 February 2013)

I've been enjoying reading this thread, so when I saw this article this afternoon I though it might be of interest to the participants.  Maybe we'd be better off if there were no contributions tax on the compulsory employer contributions, no contributions tax on voluntary contributions up to a higher cap than the present $25,000, no tax on earnings within super, but a tax at normal marginal rates on all payments made out of the super fund regardless of the age of the recipient.  This would encourage people to put extra in, thereby lessening the taxpayer provided pension load, and would also provide ongoing tax revenue when they were old enough to take it out.  I'd also have no problem with being told I had to take the compulsory employer provided portion as a fixed pension/annuity.   







> * Aust super concessions stack up poorly*





> Tax concessions within Australia's superannuation system are not as generous as those in other countries.
> 
> A new study shows the net retirement benefits of an average British worker is 16.4 per cent - or $43,534 - higher than their Australian counterpart.





> It compares Australia to eight other countries considered to have the best pension systems in the world: Canada, Chile, Denmark, Netherlands, Sweden, Switzerland, the United Kingdom and United States.





> Australia is the only country of all nine that charges a tax rate on employer contributions, at 15 per cent, and the only one not to offer employee tax deductible contributions.
> 
> It's also one of three to have a tax rate on investment income, alongside Denmark and Sweden.
> 
> ...



http://www.businessspectator.com.au/bs.nsf/Article/Super-concessions-not-so-generous-report-4T4XJ?OpenDocument&src=pm&utm_source=exact&utm_medium=email&utm_content=178730&utm_campaign=pm&modapt=news


----------



## qldfrog (11 February 2013)

In my opinion, every income should be taxed the same irrespective of the origin, so capital gain or share income, PPOR or investment unit, wages it should be the same and a single tax rate ideally: 
Has no one been amazed that no one challenges the fact that the more income you get the higher your taxation rate is ?
It is similar to adding weight on a sprinter who win too many competition.
Handicap the winners....
a single rate would still mean most of the taxes will be paid by the wealthy, whereas currently, really rich people probably pay less tax than me as they use complex instruments to  "not avoid" yet still pay less tax...

But it seems our western society does not even challenge that concept...

In the case of super, no tax on contribution at all but standard tax when receiving the benefits.
This would provide the incentive to go into super yet tax retiree as everyone based on actual income, why would a retiree be taxed less than a 20y old working full time?

Pension should be treated as other welfare payment should, a survival amount, not an entitlement.
This should be enough to motivate people to be responsible, and if not-> well bad luck 
Instead of the current system where 20y old at mc donald are doing a de facto gift to union or finance managed so called super funds while people in wealth accumulation phase are actually restricted..crazy...

anyway, thinking loud and scaring the left as this would be really egalitarian and freedom based. 
Just thinking aloud...


----------



## sptrawler (11 February 2013)

DocK said:


> I've been enjoying reading this thread, so when I saw this article this afternoon I though it might be of interest to the participants.  Maybe we'd be better off if there were no contributions tax on the compulsory employer contributions, no contributions tax on voluntary contributions up to a higher cap than the present $25,000, no tax on earnings within super, but a tax at normal marginal rates on all payments made out of the super fund regardless of the age of the recipient.  This would encourage people to put extra in, thereby lessening the taxpayer provided pension load, and would also provide ongoing tax revenue when they were old enough to take it out.  I'd also have no problem with being told I had to take the compulsory employer provided portion as a fixed pension/annuity.




My guess is that the government would lose too much revenue. Remembering we are talking about 9% of Australia's wage bill
Currently contribution tax is 15%, therefore untill the recent tax scale changes, the only loss of revenue were on contributions made on behalf of workers on the 30-45% tax rates. That is workers on more than $37k 

Now in 2013 there is a loss of revenue from contributions on the salary of a worker on more than $18,200
I think that will cost a lot to government income tax reciepts. 
To lose the tax completely it would be a massive lot of revenue.

No tax on the earnings, currently they are taxed at 15%, again that is a huge amount of revenue.

Taxing pensions at marginal rates, would mean that the first $36,400 is tax free(married couple). 
Then if they were drawing a pension of $40,000 each their combined tax would be approx $9,000.
Assuming they have a combined sum of $2m i.e $40k pensions, they would only be paying 1% tax.  

It would cause a massive hole. IMO


----------



## sptrawler (11 February 2013)

I think a lot of the issues arise from the fact the average baby boomer only has $150k in super. Mainly due to the fact the scheme has only been in operation for 20 years.
Therefore currently, the only way they can get into a position of reducing their dependence on a government pension, is with after tax contributions. To do this they will probably have to sell assetts e.g rental properties, shares, downsize the house etc. They won't do that if there is no upside.

I feel as the average super balance(younger generation) come through the amount of after tax contributions you can put in will reduce. This will happen as the concessional contribution increases to 12 then probably 15%.

Therfore I think, the contribution tax will go to the lowest tax rate and a discount of 19% for contributers on higher tax brackets.

After tax contribution allowance will be scaled back to a much lower level as balances increase.

In the accumulation phase earnings taxed at 19%.

Pension phase, earnings untaxed, the pension taxed as income with the 19% offset.

Well that's my thought, Sydboy will probably jump all over me


----------



## Julia (11 February 2013)

qldfrog said:


> In my opinion, every income should be taxed the same irrespective of the origin, so capital gain or share income, PPOR or investment unit, wages it should be the same and a single tax rate ideally:



Let's remember that everyone needs X amount of income to just survive with paying for basic living needs.
So it doesn't seem fair to me to tax someone who is a very low earner equally on, say, the first $20Kpa
as a higher earner.
We need to make allowances that not everyone has the same capacity to earn and provide for their future, and this is one of the problems successive governments have had to contend with in designing the Super system.



> most of the taxes will be paid by the wealthy, whereas currently, really rich people probably pay less tax than me as they use complex instruments to  "not avoid" yet still pay less tax...



I guess they would still be able to find additional ways to maximise their position.



> Pension should be treated as other welfare payment should, a survival amount, not an entitlement.
> This should be enough to motivate people to be responsible, and if not-> well bad luck



As above, not everyone has the capacity to save at the same rate.  And what you suggest is pretty much what happens at present, i.e. the age pension is only a basic survival amount and is means tested.

Your point about the need to encourage responsibility, however, is well made.  A couple I know, in retirement, have no source of income other than the age pension.  This is despite both working full time all their adult lives in well paid jobs, having no children to raise and educate.  They simply spent as they went giving essentially no thought to needing anything other than the age pension in retirement.  I don't think their situation is unusual, and that's what the compulsory scheme is attempting to counteract.


----------



## sptrawler (11 February 2013)

Julia, how do you slice up the quotes so you can answer each one individualy .
It reads a lot better than answering all the questions in one continuous answer.


----------



## Julia (11 February 2013)

sptrawler said:


> Julia, how do you slice up the quotes so you can answer each one individualy .
> It reads a lot better than answering all the questions in one continuous answer.




Here's Joe's thread on how to use the Quote tags, sp.  
Essentially, you just have to wrap each comment you want to respond to with the correct Quote tags, having first ticked the Multiquote tag at the base of each post you want to comment on.
https://www.aussiestockforums.com/forums/showthread.php?t=2737&highlight=tags


----------



## sptrawler (11 February 2013)

Julia said:


> Here's Joe's thread on how to use the Quote tags, sp.
> Essentially, you just have to wrap each comment you want to respond to with the correct Quote tags, having first ticked the Multiquote tag at the base of each post you want to comment on.
> https://www.aussiestockforums.com/forums/showthread.php?t=2737&highlight=tags




Right, I know where the multi quote tag is, it is the wrapping each comment with the correct quote tag, that I'm struggling with.
Do I copy and paste the quote tags at the beginning and ends of each quote, or is there a key that inserts the quote tags in the desired locations?


----------



## Julia (11 February 2013)

sptrawler said:


> Right, I know where the multi quote tag is, it is the wrapping each comment with the correct quote tag, that I'm struggling with.
> Do I copy and paste the quote tags at the beginning and ends of each quote, or is there a key that inserts the quote tags in the desired locations?



I don't think so.  I always just type the Quote tags in manually.  What you do have to remember is to insert the / after the initial bracket when typing the tag at the end of what you want to quote.

Do a bit of trial and error and see if it looks right in the Preview Post option.


----------



## sptrawler (11 February 2013)

Julia said:


> I don't think so.  I always just type the Quote tags in manually.  What you do have to remember is to insert the / after the initial bracket when typing the tag at the end of what you want to quote.
> 
> Do a bit of trial and error and see if it looks right in the Preview Post option.




Thanks, back on topic.


----------



## sptrawler (11 February 2013)

Julia said:


> Presumably it's part of the overall incentive to save for one's own retirement in the first place, taking some of the burden off the age pension.  The suggestion has been made that this saving does not balance out the loss of tax revenue.  If anyone has bothered to find government figures on this, it would be interesting.




McLovin that was a good question from Julia, you didn't answer it.

Also, a while back, I asked what you thought was a reasonable amount in todays fiscal climate to support a sustainable pension.
I posted Asics calculator to support my theory that $2m wasn't obscene, so what do you think?

Not putting you under the pump, but it keeps the thread going and obviously from the visits, it's popular.
Your comments are measured and well founded, also appreciated.


----------



## McLovin (12 February 2013)

sptrawler said:


> McLovin that was a good question from Julia, you didn't answer it.




I don't have any figures, unfortunately.

Probably be good to measure the total cost to the government that someone 65+ incurs, rather than just whether they draw a pension. Health care would be a huge cost, even with private health insurance most of the cost is still borne by the government.



			
				sptrawler said:
			
		

> Also, a while back, I asked what you thought was a reasonable amount in todays fiscal climate to support a sustainable pension.
> I posted Asics calculator to support my theory that $2m wasn't obscene, so what do you think?




Like I said up thread, if the point of superannuation was to provide someone with a basic pension so that the government didn't have to, then anything above that level should be fair game for tax. I realise that won't be popular with many/any. 

Here's the problem (that I see): Let's say there's two people, one is employed and the other runs a small business. At retirement person A has $2m in superannuation and person B sells his business for $2m at retirement. Under the current rules person B who has worked just as hard for his money will have to pay tax when he sells and then will continue paying tax on his earnings until the day he dies (or at least for 12+ years until he's moved it all into super). Person A will live tax free for life. Does that seem fair?



			
				sptrawler said:
			
		

> Not putting you under the pump, but it keeps the thread going and obviously from the visits, it's popular.
> Your comments are measured and well founded, also appreciated.




It's certainly an interesting discussion.


----------



## craft (12 February 2013)

Defiantly an interesting discussion.

I can bring just one firsthand account.

I’m a bit of a sucker for a tax shelter and so super has appealed. 

We now have more in our SMSF then the amounts mentioned here. The majority has accumulated via earnings on early deductible contributions; only around 2% is after tax contributions.

The situation now is that for every 100K of grossed up dividend earnings received in super we pay $31,500 less in tax then if those earnings were in our own name.

With 18 years until access and then a tax free rate after that,  the projected amount of tax avoided under current regime is ridiculous even a little bit scary. Not having a reasonable benefits cap is ridiculous. 

Given the prior inducements to get money in I think a fair way to handle a reasonableness cap is to release any money above the cap rather than penalty rates or locking it up and still applying marginal rates. Excess money kicked out of super is by default then treated as any other asset/income.

With a reasonableness cap in place you could soften the contribution caps to make them more suitable for people with an uneven savings capacity over their lifetimes (kids/periodic work etc)

The old RBL used to be about 12 times ordinary earnings for lump sum or 24 times for pension and that sort of number sounds about right to me – super tax advantages should only be in place to offset pension replacement not to shelter large wealth.


----------



## Julia (12 February 2013)

McLovin said:


> Here's the problem (that I see): Let's say there's two people, one is employed and the other runs a small business. At retirement person A has $2m in superannuation and person B sells his business for $2m at retirement. Under the current rules person B who has worked just as hard for his money will have to pay tax when he sells and then will continue paying tax on his earnings until the day he dies (or at least for 12+ years until he's moved it all into super). Person A will live tax free for life. Does that seem fair?



Couldn't person B own his business via a SMSF, thus receiving the same tax advantages as person A?

I understand your irritation at being prepared to provide for your own eventual retirement and still pay tax at your usual rate, but that's just one of life's choices, I guess.  You (rightly imo) are wary of governments having their sticky fingers all over your money so prefer to keep savings outside of Super.  Result of that choice is you don't get the incentive available to those who are hoping like hell it will still be their money when they get to retirement.


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## sydboy007 (12 February 2013)

craft said:


> The old RBL used to be about 12 times ordinary earnings for lump sum or 24 times for pension and that sort of number sounds about right to me – super tax advantages should only be in place to offset pension replacement not to shelter large wealth.




Seems like a fair compromise.  Maybe need to look at the actuarial tables and determine the life expectancy of the individual and add on a few years to give a reasonable chance of the money out living you, and set the limit that way?

Super has been hijacked by the finance industry and been morphed from minimising the aged pension costs on tax payers to being a tax shelter for those able to take advantage of it - currently that is not much of the tax paying population since the tax breaks are so biased towards a small section of the community.

The other thing that is rarely discussed is that the more tax is forgone on super, the higher current general taxation needs to be.  I'd argue that lower income taxes now means a larger economy in 20 years time, which makes it easier to afford any pension payments required at that time.

With people still wary of taking on more debt, the growth rates of the early 2000s isn't going to return, so GST and corporate taxes are going to be growing at trend, along with retail spending chugging along at around income growth rates.  All this makes balancing budgets much harder as revenue is lucky to rise much more than CPI.

I do think something needs to be done to allow people to sock away more in their later years of life.  I certainly wont have any interest in voluntarily contributing to super until 55+ and prob more like 60+.  The RBL system allowed this in a much fairer way than the current 25K annual limit now imposed.  I'd say it would be hard to go back to a version of the old system.  The howls from the finance industry would make the miners seem like whisperers.


----------



## Vixs (12 February 2013)

McLovin said:


> I don't have any figures, unfortunately.
> 
> Probably be good to measure the total cost to the government that someone 65+ incurs, rather than just whether they draw a pension. Health care would be a huge cost, even with private health insurance most of the cost is still borne by the government.
> 
> ...





Your super vs business example is excluding the Small Business CGT Concession and Retirement Exemption, which is designed for just such a scenario and works quite well (besides being a bit of a mindf%#k of complexity like much of the tax legislation). It would allow a large portion of that $2m to be plonked straight into super CGT free, with further funds being able to be contributed depending on age.

There is also an argument to be made that if they can't get that all into super at retirement age, maybe they should have been paying themselves a better wage and super contribution all along.

It's not something the government has ignored, it's something that Australian's with the attitude that all advisers are bad advisers have ignored.


----------



## sydboy007 (12 February 2013)

sptrawler said:


> McLovin that was a good question from Julia, you didn't answer it.
> 
> Also, a while back, I asked what you thought was a reasonable amount in todays fiscal climate to support a sustainable pension.
> I posted Asics calculator to support my theory that $2m wasn't obscene, so what do you think?
> ...




I couldn't find Julia's original quote

Here's some graphs I had used in another thread.

i think they highlight some of the issues with the current super system.

Admittedly they don't all apply now as tax rates and the lower end have changed and limits on people earning above 300K now apply, but it does show how unbalanced the tax benefits are.

It just seems ludicrous to give someone from 1/3 to 3/4 of the aged pension as an incentive to not receive the aged pension, especially when it's very likely they would have assets at a level that would stop them receiving it.  Can I put my hand up for that?  I'll gladly sign my rights away to any Govt assistance when I retire if they gave me 1/3 of the aged pension every year until I retire 

So in the 2009-10 financial year we had

The bottom 36.9% of tax payers with just 9.8% of the super tax concession

The top 20.4% of tax payers raking in 53.7% of the super tax concessions

If we can't change the super system, then I'd argue this should mean any future income tax cuts should be targeted at those earning under 80K.

Before I hear howls of protests that 80K isn't a high income, it does beat around 80% of income earners.  You might not be in 1% territory, but you are up there.


----------



## Ves (12 February 2013)

Vixs said:


> Your super vs business example is excluding the Small Business CGT Concession and Retirement Exemption, which is designed for just such a scenario and works quite well (besides being a bit of a mindf%#k of complexity like much of the tax legislation). It would allow a large portion of that $2m to be plonked straight into super CGT free, with further funds being able to be contributed depending on age.



Isn't it just tax-free upon retirement (above 55) if it is an active business asset and has been used for 15 years?


http://www.ato.gov.au/businesses/content.aspx?doc=/content/00106318.htm



> Small business 15-year exemption
> 
> If your business has owned an asset for 15 years and you are aged 55 years or over and are retiring, or if you are permanently incapacitated, you won't have an assessable capital gain when you sell the asset.




The only difference in the two scenarios, as McLovin rightly alludes to, is the fact that the $2 million will then need to be invested somewhere, and the earnings will be subjected to normal earnings rates outside of super.

I believe you could only get $500,000 of this money into super with the exemptions, and additionally you could contribute more as non-concessional contributions, and be maxed out at $450,000 over the first 3 years.  Once you're over 65, you're dead stuck if you are retired and cannot contribute.


----------



## prawn_86 (12 February 2013)

sydboy007 said:


> Before I hear howls of protests that 80K isn't a high income, it does beat around 80% of income earners.  You might not be in 1% territory, but you are up there.




Is that table saying you are in the top 3% of wage earners if you earn over 180k??


----------



## sydboy007 (12 February 2013)

prawn_86 said:


> Is that table saying you are in the top 3% of wage earners if you earn over 180k??




Pretty much.

I wish the media and Govt would talk about median rather than average wages.  When I was studying high school economics the avg wage put you in the top 30% of income earners.  I dare say that ratio hasn't changed for the better over the last couple of decades.


----------



## Vixs (12 February 2013)

Ves said:


> Isn't it just tax-free upon retirement (above 55) if it is an active business asset and has been used for 15 years?
> 
> 
> http://www.ato.gov.au/businesses/content.aspx?doc=/content/00106318.htm
> ...




It doesn't need to be 15 years, the 15 year rule is one way of qualifying, but there are others. The $500,000 is the capital gain amount, and can be discounted using various discounts.

As I said, it's complex and the best option is to seek competent professional advice, but the option is there.

Retiring small business owners are not left high and dry.


----------



## drsmith (12 February 2013)

sydboy007 said:


> The bottom 36.9% of tax payers with just 9.8% of the super tax concession
> 
> The top 20.4% of tax payers raking in 53.7% of the super tax concessions
> 
> If we can't change the super system, then I'd argue this should mean any future income tax cuts should be targeted at those earning under 80K.



To some extent, I don't disagree with the problem, but I do with that solution.

Biasing tax cuts to the lower end increases marginal rates for middle income earners. The Carbon tax compensation is a perfect example of this.


----------



## craft (12 February 2013)

sydboy007 said:


> So in the 2009-10 financial year we had
> 
> The bottom 36.9% of tax payers with just 9.8% of the super tax concession
> 
> The top 20.4% of tax payers raking in 53.7% of the super tax concessions




In addition to your very good points

Even with very moderate returns more concession will come from the flat earnings rate tax of  15% over the entire accumulation phase than from total contribution concessions – the advantage to high balances is also totally skewed.


----------



## Ves (12 February 2013)

Vixs said:


> It doesn't need to be 15 years, the 15 year rule is one way of qualifying, but there are others. The $500,000 is the capital gain amount, and can be discounted using various discounts.
> 
> As I said, it's complex and the best option is to seek competent professional advice, but the option is there.
> 
> Retiring small business owners are not left high and dry.



Of course - sorry I should have qualified it by saying "the best case scenario is..."

I'm glad I don't do business tax any more.  The CGT concessions are, as you said, complex.  A nightmare, really.


----------



## McLovin (12 February 2013)

Julia said:


> Couldn't person B own his business via a SMSF, thus receiving the same tax advantages as person A?




Not if my understanding of SMSF's is correct. 



> Unless an exception applies, trustees generally can't:
> 
> ...
> 
> lend to, invest in or lease to a related party of the fund (including related trusts) more than 5% of the fund's total assets (these are called 'in-house assets').




http://www.ato.gov.au/superfunds/content.aspx?menuid=0&doc=/content/00251857.htm&page=23&H23

I assume that would cover owning a small business through an SMSF.




Julia said:


> I understand your irritation at being prepared to provide for your own eventual retirement and still pay tax at your usual rate, but that's just one of life's choices, I guess.  You (rightly imo) are wary of governments having their sticky fingers all over your money so prefer to keep savings outside of Super.  Result of that choice is you don't get the incentive available to those who are hoping like hell it will still be their money when they get to retirement.




My irritation isn't that I'm paying tax it's that others aren't. I have no problem with paying tax, at all. I think it's what FDR called enlightened self-interest. But I think on a point of principle the tax system should be equal. If you remember the discussion we had a few weeks ago about family tax benefits, my sentiments were very similar; two people earning the same amount from the same source should pay the same amount of tax. 

I'm not trying to have a go at people, like yourself and sptrawler, who have diligently saved and contributed toward their retirement under the current system. If I was 20 years older I'd probably be in the same boat.



			
				Ves said:
			
		

> I believe you could only get $500,000 of this money into super with the exemptions, and additionally you could contribute more as non-concessional contributions, and be maxed out at $450,000 over the first 3 years. Once you're over 65, you're dead stuck if you are retired and cannot contribute.




Yeah, this is my understanding too, which is why I said over 12+ years they may be able move the cash into shares. 

Sydboy, those are some very interesting graphs! It really shows who is receiving the benefits!


----------



## medicowallet (12 February 2013)

sydboy007 said:


> Here's some graphs I had used in another thread.
> 
> i think they highlight some of the issues with the current super system.
> 
> ...




These are the kinds of arguments left wingers tend to make.

How about providing the figures of how much net tax the bottom 36.9% of taxpayers paid and the what the top 20.4% paid.

It should NOT be everyone's right to freeload off high income earners all their life.

Heaven forbid a leader actually offering incentives for people to improve their income, as opposed to offering bribes to gain votes.

Your kind of logic, and unfortunately I guess this entitlement attitude is representative of the majority of low-medium income earners, is flawed and pathetic.

I wish people would make the kinds of sacrifices that high income earners make, as opposed to rewarding governments who flog the highest earners the most.

Sigh

MW


----------



## qldfrog (12 February 2013)

In France for the last 30 years, this has been the way:
 "flog the bastards" (ie everyone richer than 'us') with taxes-> you see the results very quickly economically

this is easy for left politicians  as you will always find a majority (>50%) to vote for you and agree to parasite a higher 40% minority, the trouble is that after a few decades of this regime, the 40% richest class is actually quite poor and so is the whole country...


----------



## sydboy007 (12 February 2013)

medicowallet said:


> These are the kinds of arguments left wingers tend to make.
> 
> How about providing the figures of how much net tax the bottom 36.9% of taxpayers paid and the what the top 20.4% paid.
> 
> ...




Not sure if you're saying I'm a left winger - i'm very much a centrist that sees some good center right and left policies out there.

As for being a low medium incomer, if you'd read some of my other posts you'd know I'm in the roughly top 15% of income earners, so I'm not basing my opinion out of envy, rather out of a sense of efficiency.

How much income in retirement should someone be entitled to build up in a system that has minimal tax?  At what point does a system like that start to cost more than the problem it's solving?

Quite often those who lean towards the right want to see the top tax rates lowered.  My argument is if you add a lot of the benefits that top income earners can take part in, super being one and the halving of the CGT, then I think you'll see most are not paying anywhere near the top tax rate on their income.

As for an entitlement attitude, not sure how you came to that conclusion.  I grew up poor, scrounged my way through uni, and worked quite hard to get to where I am.  So how about you post some factual information rather than biased claims that really add little to the discussion?

ps.  I seem to remember it was the Honorable Howard who perfected the entitlement mentality of the middle classes.


----------



## Miss Hale (12 February 2013)

qldfrog said:


> In France for the last 30 years, this has been the way:
> "flog the bastards" (ie everyone richer than 'us') with taxes-> you see the results very quickly economically
> 
> this is easy for left politicians  as you will always find a majority (>50%) to vote for you and agree to parasite a higher 40% minority, the trouble is that after a few decades of this regime, the 40% richest class is actually quite poor and so is the whole country...




As Maggie Thatcher said, ""The problem with socialism is that eventually you run out of other people's money".


----------



## medicowallet (12 February 2013)

sydboy007 said:


> Not sure if you're saying I'm a left winger - i'm very much a centrist that sees some good center right and left policies out there.
> 
> As for being a low medium incomer, if you'd read some of my other posts you'd know I'm in the roughly top 15% of income earners, so I'm not basing my opinion out of envy, rather out of a sense of efficiency.
> 
> ...




1. Yes Howard and Costello gave too large tax breaks, which has contributed to the housing bubble etc.

2. I NEVER said that you possess an entitlement attitude, however I did infer it is what I suspect the majority of lower to medium income earners possess.

3. Get on the bandwagon, that way your low income could become higher.

4. Isn't it easy to come up with policies that don't really affect you, but affect higher income earners.
     How about we get rid of the tax free threshold and fund extra super contributions for all?

5. My argument and the reality is that these high income earners, even with their taxation strategies still pay truckloads more than the other taxpayers, so why flog them more?

MW


----------



## sptrawler (12 February 2013)

McLovin said:


> Here's the problem (that I see): Let's say there's two people, one is employed and the other runs a small business. At retirement person A has $2m in superannuation and person B sells his business for $2m at retirement. Under the current rules person B who has worked just as hard for his money will have to pay tax when he sells and then will continue paying tax on his earnings until the day he dies (or at least for 12+ years until he's moved it all into super). Person A will live tax free for life. Does that seem fair?
> 
> 
> 
> It's certainly an interesting discussion.




Small business has a special provission whereby they can reduce cgt and put $1m into super.

These concessions are complex but the recent changes have made them somewhat simpler and accessible to a wider range of business owners.

It's possible to sell your business and pay no tax under the new rules around super and business capital gains tax concessions.

For example if you sold your business for $2 million, you could avoid any tax by putting $500,000 into super.

Under the new super rules, most people are limited to annual non-concessional (after-tax) contributions of $150,000 a year, or $450,000 over three years if you're under 65. But there are small business concessions that allow an extra contribution cap up to $1 million (indexed) - which means you could sell your small business and contribute up to $1.45 million in one year. To qualify for any of the small business CGT concessions, you must first satisfy several basic conditions. These conditions and further information are detailed on the ATO web site at www.ato.gov.au 

Whilst the concessions can be very useful, careful consideration should to be given to how you structure your business, and the timing of its sale, to make the most of them. It's essential to obtain advice when both planning and selling your business.

It seems there are tax breaks everywhere. No wonder it is costing so much.


Getting back  to tax on the pension. If it is taxed as income it basically puts a brake on withdrawls, the more you pull out the more exit tax you pay.

You've got to love this forum don't you? There is no way I can talk to the missus about this stuff, she'd just tell me to go away and let her read her book.lol


----------



## drsmith (12 February 2013)

For a quickie reform, cap all contributions (tax deductable or otherwise) at a fixed fund balance limit. Once your fund balance is X, that's it. The earnings would still be taxed at 15% and the fund would continue to grow, but you can't stick anymore in.

20 x AWOTE for X ?


----------



## sptrawler (12 February 2013)

McLovin said:


> My irritation isn't that I'm paying tax it's that others aren't. I have no problem with paying tax, at all. I think it's what FDR called enlightened self-interest. But I think on a point of principle the tax system should be equal. If you remember the discussion we had a few weeks ago about family tax benefits, my sentiments were very similar; two people earning the same amount from the same source should pay the same amount of tax.
> 
> I'm not trying to have a go at people, like yourself and sptrawler, who have diligently saved and contributed toward their retirement under the current system. If I was 20 years older I'd probably be in the same boat.




I agree 100%, the tax system should be fair.
They can't set the goal posts and system in place for people to attain to, which I think is a comfortable retirement(I think $80k at the moment for a couple).
Then due to mismanagement, come out with a suggestion that people with, in real terms minimal amounts in super, need to pay more.
In a word it is outrageous, especially when they accept a tax free indexed pension for life, this as a reward for screwing us. It beggers belief.
Most of the politicians, State and Federal, will recieve an indexed pension for life equivalent to a super balance of $3m or more. I don't even mind that, there is no way I would want to fight in that pit.

What annoys me is when I read they are saying someone with $800k in super is taking the pizz, thats not fair.

I do agree a max cap in super sounds reasonable, then amounts above that are transferred out.
That cap could be moved up with inflation, the trick is setting the cap for low earnings periods.
What I disagree with, is politicians deciding that cap, as they are immune to it.


----------



## banco (12 February 2013)

sptrawler said:


> I agree 100%, the tax system should be fair.
> They can't set the goal posts and system in place for people to attain to, which I think is a comfortable retirement(I think $80k at the moment for a couple).
> Then due to mismanagement, come out with a suggestion that people with, in real terms minimal amounts in super, need to pay more.




This "moving the goalposts" analogy is silly.  Taxes go up and taxes go down according to revenue needs and community wants.


----------



## sydboy007 (12 February 2013)

drsmith said:


> For a quickie reform, cap all contributions (tax deductable or otherwise) at a fixed fund balance limit. Once your fund balance is X, that's it. The earnings would still be taxed at 15% and the fund would continue to grow, but you can't stick anymore in.
> 
> 20 x AWOTE for X ?




Something like this would bring a bit of balance to super.

I was thinking along the lines of a balance that would provide you with a pension to last you the avg life expectancy + 5 years for when you pension starts, indexed to 5% pa.  23K tax free income for a person isn't too bad, 46K for a couple. 

After that point you could add say 10K a year in undeducted contributions, still benefiting form the 15% tax on earnings.

There's nothing stopping people from saving for their retirement outside of super.


----------



## sptrawler (12 February 2013)

banco said:


> This "moving the goalposts" analogy is silly.  Taxes go up and taxes go down according to revenue needs and community wants.




Yes and outside of super you can adjust your position, inside super the money is not accessible.?

If for example they say "we are scapping negative gearing" you can say"ok I'll sell the investment property and buy a boat. Rather than house the poor.

In super, if they say all money in super will be taxed at 40%, what do you do? Especially if half your balance has been put in after tax?
Please don't come back with they can't do that, look at the penalties for over contributing.lol

What makes you think that moving the goal posts is silly?

I think your statement is a bit silly. Only my thoughts.


----------



## Bill M (12 February 2013)

sptrawler said:


> What I disagree with, is politicians deciding that cap, as they are immune to it.




That is exactly right, why should they be any different? It will never ever be a fair system until the politicians are treated exactly the same as everyone else. It is joke and it is the reason why I hate both the major parties. If only we could have one leader that would bring this issue into line I would say they would get the majority of the votes. Such a disgusting unfair system.


----------



## sptrawler (12 February 2013)

sydboy007 said:


> Something like this would bring a bit of balance to super.
> 
> I was thinking along the lines of a balance that would provide you with a pension to last you the avg life expectancy + 5 years for when you pension starts, indexed to 5% pa.  23K tax free income for a person isn't too bad, 46K for a couple.
> 
> ...




Great idea, the only problems I see with that is, if the person retires in a low inflation low return point of the cycle, eg now. 
Then there is a return to norm of 3-5% inflation and interest rates of 6-8% there needs to be a buffer.
Where in retirement, do you get the 10k from to make the undeducted contributions? From the 23k pension single or the 46k pension couple.


----------



## Julia (12 February 2013)

McLovin said:


> Not if my understanding of SMSF's is correct.
> http://www.ato.gov.au/superfunds/content.aspx?menuid=0&doc=/content/00251857.htm&page=23&H23
> 
> I assume that would cover owning a small business through an SMSF.



You're probably right.  I was vaguely thinking back to something DocK said on another thread and probably inappropriately extrapolating it.
Have run it down as follows:


> So far as rent is concerned, we're fortunate in that our SMSF purchased the factory from which we operate several years ago - so our business pays rent to our SMSF.



DocK, you may care to elaborate on this?  It seems in your case your SMSF has bought property which is distinct from buying the actual business.



> My irritation isn't that I'm paying tax it's that others aren't. I have no problem with paying tax, at all. I think it's what FDR called enlightened self-interest. But I think on a point of principle the tax system should be equal. If you remember the discussion we had a few weeks ago about family tax benefits, my sentiments were very similar; two people earning the same amount from the same source should pay the same amount of tax.



I understand your point.  Just think it's pretty difficult to design a scheme which will provide a good incentive to people who would otherwise not save for their retirement which will not at the same time penalise those who choose not to participate in that scheme.



> I'm not trying to have a go at people, like yourself and sptrawler, who have diligently saved and contributed toward their retirement under the current system. If I was 20 years older I'd probably be in the same boat.



Completely understood.  Likewise I'm not criticising your choices.





> Yeah, this is my understanding too, which is why I said over 12+ years they may be able move the cash into shares.
> 
> Sydboy, those are some very interesting graphs! It really shows who is receiving the benefits!



I've only briefly glanced at the graphs but the current tax free threshold is not represented there from what I can see.
It's becoming more relevant if the government looks like tinkering yet again with Super rules.  Plenty of people who have all their assets in Super will pretty smartly move the appropriate amount out to take advantage of what I think is around $18,000 as tax free threshold outside of super.




medicowallet said:


> These are the kinds of arguments left wingers tend to make.
> 
> How about providing the figures of how much net tax the bottom 36.9% of taxpayers paid and the what the top 20.4% paid.
> 
> ...






banco said:


> This "moving the goalposts" analogy is silly.  Taxes go up and taxes go down according to revenue needs and community wants.



I don't think that sort of laissez faire attitude is appropriate when it comes to a long term planning proposition like super.
Imo Medicowallet makes valid points.




Bill M said:


> That is exactly right, why should they be any different? It will never ever be a fair system until the politicians are treated exactly the same as everyone else. It is joke and it is the reason why I hate both the major parties. If only we could have one leader that would bring this issue into line I would say they would get the majority of the votes. Such a disgusting unfair system.



Exactly.  And just why politicians are held in such contempt with their breathtaking hypocrisy.


----------



## sptrawler (12 February 2013)

Bill M said:


> That is exactly right, why should they be any different? It will never ever be a fair system until the politicians are treated exactly the same as everyone else. It is joke and it is the reason why I hate both the major parties. If only we could have one leader that would bring this issue into line I would say they would get the majority of the votes. Such a disgusting unfair system.




Allan Carpenter, saw the immoral side of it and chose not to take the politicians pension perks, obviously he didn't last long.
However somewhere down the track he will be remembered for being honourable. That will be quite novel because he was Labor and an ex reporter.


----------



## banco (12 February 2013)

sptrawler said:


> Yes and outside of super you can adjust your position, inside super the money is not accessible.?
> 
> If for example they say "we are scapping negative gearing" you can say"ok I'll sell the investment property and buy a boat. Rather than house the poor.
> 
> ...




I don't think it's as different as you think it is in terms of the ability to adjust your position.  If negative gearing was removed tomorrow and you decide to sell your investment property presumably a discount would apply as it would no longer be as tax efficient an investment as it was prior to the announcement. 

I think it's silly because you're saying a large proportion (and growing) of income flows and assets will be off limits to increases in taxation and for no compelling policy reason.  It might not be as big a problem in practice if Howard hadn't introduced unsustainable changes to super in 2006 that the superannuation industry likes to pretend are written in blood and can't be changed.

Your aged couple on $80,000 will likely have to make do on slightly less money after tax so they can help pay for their fellow baby boomers' retirement and health care costs.


----------



## drsmith (12 February 2013)

sydboy007 said:


> Something like this would bring a bit of balance to super.
> 
> I was thinking along the lines of a balance that would provide you with a pension to last you the avg life expectancy + 5 years for when you pension starts, indexed to 5% pa.  23K tax free income for a person isn't too bad, 46K for a couple.



That's essentially a question of where X is set as a multiplier of AWOTE.



sydboy007 said:


> After that point you could add say 10K a year in undeducted contributions, still benefiting form the 15% tax on earnings.




Dabate would revolve around the annual limit. It would add a limited complexity but would avoid the complexity of varying marginal tax rates on earnings from super. Worth consideration.



sydboy007 said:


> There's nothing stopping people from saving for their retirement outside of super.




Marginal tax rates. Reduce them with the savings.


----------



## sptrawler (12 February 2013)

banco said:


> I don't think it's as different as you think it is in terms of the ability to adjust your position.  If negative gearing was removed tomorrow and you decide to sell your investment property presumably a discount would apply as it would no longer be as tax efficient an investment as it was prior to the announcement.
> 
> I think it's silly because you're saying a large proportion (and growing) of income flows and assets will be off limits to increases in taxation and for no compelling policy reason.  It might not be as big a problem in practice if Howard hadn't introduced unsustainable changes to super in 2006 that the superannuation industry likes to pretend are written in blood and can't be changed.
> 
> Your aged couple on $80,000 will likely have to make do on slightly less money after tax so they can help pay for their fellow baby boomers' retirement and health care costs.




I can follow your first paragraph, can you re post the second paragraph.
With regards your third paragraph, I did say pension payments should be taxed as income?

So look forward to your response, it is great people are interested in the thread, I find it stimulating(in a non sexual way) lol


----------



## sptrawler (12 February 2013)

drsmith said:


> For a quickie reform, cap all contributions (tax deductable or otherwise) at a fixed fund balance limit. Once your fund balance is X, that's it. The earnings would still be taxed at 15% and the fund would continue to grow, but you can't stick anymore in.
> 
> 20 x AWOTE for X ?




The problem with that doc, is it exposes us to overseas borrowing, if super is capped, money underpinning our system is capped 
The reason Keating brought in super, was because of the massive hit the 87 crash caused on our banking system.
We had no savings, the banks were geared up with overseas borrowings, when the crash happened all debts were called in.
Westpac and ANZ were caught with there pants down. NAB was a bit immune because it was the minor bank and Commonwealth was still government owned.
The fall out investigations showed we needed an internally funded slush fund.
The superannuation scheme was born.

Since then, they have being trying to convince us, it's for our benifit.

We now seem to ebb and flow between, yes they can have the money, we're doing o.k.
To, Christ how much money is sitting there that we aren't taxing.
Like, why not make it sustainable, rather than a money lenders contract that the terms can be changed at a whim.

The government and Australia need the superannuation system, without it our booms and busts would be huge.
Combine with this, the problem of wealth being passed down from one generation to the next. Add to that a falling birth rate. then on top of that add the tall poppy syndrome.
Where can I buy a copy of "how to be a boat person" lol


----------



## DocK (13 February 2013)

Julia said:


> You're probably right.  I was vaguely thinking back to something DocK said on another thread and probably inappropriately extrapolating it.
> Have run it down as follows:
> 
> 
> ...




Correct.  The following sets it out better than I could:



> All SMSF holders know that it is strictly against the rules to use your super balance in any way that benefits you or your business prior to retirement, and this is especially true when it comes to property transactions.
> 
> There is one area however where business owners can use their retirement funds to benefit their business prior to retirement, and this is through the ability to purchase your own business premises via your SMSF.
> 
> ...



http://www.moneybuddy.com.au/financial-planning/Buying-Your-Business-Premises-Within-Your-SMSF
One of the major advantages is that rent paid into the smsf is not counted as a contribution, so the full $25000 limit remains available, it gives the business stability of premises, it gives the smsf a reliable (hopefully) tenant.  Disadvantage is that it can tie up a good deal of capital from the smsf and depending upon the balance of the fund and the value of the business premises it can result in the assets of the smsf being skewed too much towards the one asset.  

For the purposes of this discussion, the first sentence quoted is the most pertinent:  "it is strictly against the rules to use your super balance in any way that benefits you or your business prior to retirement".  Upon sale of the business and its assets, I'm very glad that there is apparently provision made for self-employed to contribute capital gain and sale proceeds into super if desired.  It is certainly fair to say that a lot of self-employed people reinvest capital into their businesses with an eye to their future retirement, where an employed person may contribute extra into super.  To reward one with tax breaks but penalise the other would be inequitable in my view - but then I'm self-employed so I'm hardly unbiased on the subject


----------



## DocK (13 February 2013)

> It compares Australia to eight other countries considered to have the best pension systems in the world: Canada, Chile, Denmark, Netherlands, Sweden, Switzerland, the United Kingdom and United States.




That sentence is from an article in Bus Spectator that I linked to yesterday - putting forward the view that Australians were actually receiving lower tax breaks on superannuation than the countries listed.

I'm quite ignorant of the super/pension arrangements of those nations, but would be interested in learning what the major differences are between theirs and our own.  I've a vague notion that the Scandinavian countries have excellent social security and pension benefits - but also have high taxation?  I'd appreciate any discussion on this aspect from those that know, as I'm feeling too tired and lazy to go searching the 'net myself.


----------



## sptrawler (13 February 2013)

DocK said:


> Correct.  The following sets it out better than I could:
> 
> 
> http://www.moneybuddy.com.au/financial-planning/Buying-Your-Business-Premises-Within-Your-SMSF
> ...




Great post Dock, what I have found since "living on my wits" is the ATO have ALL angles covered.
I have actually found that comforting, because prior to this period in my life, I thought they didn't have a clue.

What I take exception to is the government of the day trying to bend things to cover their stupidity, with my money.


----------



## sptrawler (13 February 2013)

DocK said:


> That sentence is from an article in Bus Spectator that I linked to yesterday - putting forward the view that Australians were actually receiving lower tax breaks on superannuation than the countries listed.
> 
> I'm quite ignorant of the super/pension arrangements of those nations, but would be interested in learning what the major differences are between theirs and our own.  I've a vague notion that the Scandinavian countries have excellent social security and pension benefits - but also have high taxation?  I'd appreciate any discussion on this aspect from those that know, as I'm feeling too tired and lazy to go searching the 'net myself.




Well Dock, I was talking to a German couple, they said the maximum pension was 900 euros a month but you had to have worked for 45 years to get it.
However they did say the cost of living here is stupid, that was a month ago.

I didn't ask about their super system, it was only a brief encounter.


----------



## sydboy007 (13 February 2013)

sptrawler said:


> Great idea, the only problems I see with that is, if the person retires in a low inflation low return point of the cycle, eg now.
> Then there is a return to norm of 3-5% inflation and interest rates of 6-8% there needs to be a buffer.
> Where in retirement, do you get the 10k from to make the undeducted contributions? From the 23k pension single or the 46k pension couple.




Adding the 10K was pre retirement.  Allows the building of a bigger balance if someone wants to take advantage of the tax effectiveness of super but minimises the cost to general revenue.

i think what I've suggested removes a lot of the vagaries out of setting the end maximum balance.  It shouldn't be too hard to determine what kind of balance would provide 23K pa for say 25 years with the ability to increase the payout by 5% each year.

Even with the current low interest rate environment you could easily purchase a number of inflation linked bonds and inflation indexed annuities and achieve a 6% return.  The ILBs will store some capital away for the longer term, the IIBs will return capital and interest on a regular basis and allow you to redeploy the capital over time.

Seems the perfect way to have a reasonable income stream over an extended period of time without worrying about the vagaries of the share market.


----------



## Vixs (13 February 2013)

I am still disturbed by the amount of people here that want to see more tax on super, more restrictions, lower limits, even capped balances?

Super is the road to eliminating permanently and completely the government pension, or at least any further increases. This is an investment in the wealth of the country to allow the government to put a lid on one of its biggest expenses.

True to form, the politicians can't resist taxing those savings now, but will still have to have the hard talk with the nation later when the balances aren't as stellar as required to fully fund retirement. It's short sighted.

Some of the ideas focused on raiding the honeypot downright remove the incentive to save for your own retirement, and that is a huge issue for generations still 30 odd years from retirement that will need to make their super count and will not be able to depend on a pension that will keep them from poverty.

I'm probably too tired to be posting anything, but my point is this: Why are you so readily promoting more tax, more restrictions, more limitations and less freedom, based on individual perceptions and guesstimates about what is enough (which is entirely individual - I've got friends who have managed to support spouses completely and only earn $50k p.a., and I've got other friends who can't make ends meet with $150k)? 

Where is the incentive to succeed?


----------



## sydboy007 (13 February 2013)

Vixs said:


> I am still disturbed by the amount of people here that want to see more tax on super, more restrictions, lower limits, even capped balances?
> 
> Super is the road to eliminating permanently and completely the government pension, or at least any further increases. This is an investment in the wealth of the country to allow the government to put a lid on one of its biggest expenses.
> 
> ...




I think the issue is focusing on super as begin the ONLY way to save for retirement.

The cost of the tax forgone on super is large.  There is a cost with lower services / infrastructure spending or higher taxes.

By your argument once someone's super balance can pay them the equivalent of the aged pension for say 25 years then the system has done it's job??  Is it efficient to provide 20% of those contributing to super over 50% of the tax benefits?


----------



## Vixs (13 February 2013)

sydboy007 said:


> I think the issue is focusing on super as begin the ONLY way to save for retirement.
> 
> The cost of the tax forgone on super is large.  There is a cost with lower services / infrastructure spending or higher taxes.
> 
> By your argument once someone's super balance can pay them the equivalent of the aged pension for say 25 years then the system has done it's job??  Is it efficient to provide 20% of those contributing to super over 50% of the tax benefits?




You can save for retirement either in or out of super. If you aren't employing any gearing through investment loans, margin loans and geared property investment, you'd be better off for retirement savings purposes putting the money into super and having earnings taxed less. 

I understand the cost of the tax foregone on the super is large, but the savings in future pension expenditure will also be large.

I don't know what the 'equivalent of the aged pension for 25 years' stuff is all about - the aged pension is not a comfortable retirement where one can enjoy themselves and help family with things like private tuition fees, or doting on grandchildren at Christmas. If that's all you want out of a self-funded pension that's fine, but I don't personally want to be eating sausages and mash and watching the 6 o'clock news for entertainment every night between leaving the workforce and dying. Money to live, not exist, would be nice.

As far as over 50% of the benefit going to 20% of the people? I don't think much about the tax system is fair at all - I think the rich already pay far too much to support the poor thanks to excessive middle class welfare that has done nothing but keep us one of the most expensive places in the world to live. I'm not that disappointed that the wealthy are getting a bigger percentage advantage, because it would still seem to me that these people pay more in taxes than a dozen people at the opposite end of the spectrum. What they earn is irrelevant, it's what they pay in taxes as a dollar amount that shouldn't be ignored.


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## sydboy007 (13 February 2013)

Vixs said:


> I understand the cost of the tax foregone on the super is large, but the savings in future pension expenditure will also be large.
> 
> I don't know what the 'equivalent of the aged pension for 25 years' stuff is all about - the aged pension is not a comfortable retirement where one can enjoy themselves and help family with things like private tuition fees, or doting on grandchildren at Christmas. If that's all you want out of a self-funded pension that's fine, but I don't personally want to be eating sausages and mash and watching the 6 o'clock news for entertainment every night between leaving the workforce and dying. Money to live, not exist, would be nice.
> 
> As far as over 50% of the benefit going to 20% of the people? I don't think much about the tax system is fair at all - I think the rich already pay far too much to support the poor thanks to excessive middle class welfare that has done nothing but keep us one of the most expensive places in the world to live. I'm not that disappointed that the wealthy are getting a bigger percentage advantage, because it would still seem to me that these people pay more in taxes than a dozen people at the opposite end of the spectrum. What they earn is irrelevant, it's what they pay in taxes as a dollar amount that shouldn't be ignored.




So if someone has enough in super and other assets to not qualify for the pension, what purpose does it server to continue to provide a tax incentive to save more within super?  Doesn't that just loose tax with little community wide benefit?

Seems you're arguing against a progressive tax system and would prefer a flat tax rate?

Totally agree with you that middle class welfare has been out of control for years.  Don't see that changing much because neither side of politics sees any votes in cutting back the waste.


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## craft (13 February 2013)

medicowallet said:


> These are the kinds of arguments left wingers tend to make.
> 
> How about providing the figures of how much net tax the bottom 36.9% of taxpayers paid and the what the top 20.4% paid.
> 
> ...




Seems like I must be a left wing capitalist – if there is such a thing.

Capitalism without intervention tends towards winner takes all outcomes. There may be problems with a progressive tax system and motivation at some levels but surely capitalist societies need a progressive tax scales for some sort of semblance of fairness and equity.   

The excess money I make isn’t really a result of my efforts just an ability to read and play the system. I’m collecting economic rent that should be distributed to the community that creates it.  I don’t want to take responsibility for the distribution of wealth beyond my needs and wants – I would far rather it be done through the taxation and transfer system.

No matter how low and flat the tax rate I could never make enough money to compensate for living in a massively unequitable community – the thought of having to live in a compound with bodyguards to avoid kidnap etc as they do in some countries is a very unpleasant thought.

So here either ends a call for balance or my left wing whinge, depending on your perspective.


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## McLovin (13 February 2013)

craft said:


> No matter how low and flat the tax rate I could never make enough money to compensate for living in a massively unequitable community – the thought of having to live in a compound with bodyguards to avoid kidnap etc as they do in some countries is a very unpleasant thought.




That, my friend, is enlightened self-interest.


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## Julia (13 February 2013)

sydboy007 said:


> i think what I've suggested removes a lot of the vagaries out of setting the end maximum balance.  It shouldn't be too hard to determine what kind of balance would provide 23K pa for say 25 years with the ability to increase the payout by 5% each year.



I can't see just $23K p.a. being an acceptable level of income for most people in retirement.



Vixs said:


> Super is the road to eliminating permanently and completely the government pension, or at least any further increases. This is an investment in the wealth of the country to allow the government to put a lid on one of its biggest expenses.



+1.



> Some of the ideas focused on raiding the honeypot downright remove the incentive to save for your own retirement, and that is a huge issue for generations still 30 odd years from retirement



I agree about the need for considerable incentive as payoff for locking up contributions for so many years.
People are just not going to do it over the compulsory level.  So we can have all the discussion we like about what might make sense in terms of government budgets, but if that discussion omits the human factor, it's a bit pointless.

So far, most discussion is just about providing an acceptable level of income in retirement, with a view to paying for daily cost of living, travel, entertainment, etc.   I know none of us want to think about really old age where the odds are that we'll experience diminished physical or cognitive capacity and need help.  
But, given the rising numbers of people who will be in that group, and governments' apparent lack of willingness to make adequate provision for care for such dependent folk, don't we also need to give some thought to having the capacity to pay for our own aged care?

I've volunteered in a few nursing homes over the years and they are very depressing places.  There's an assumption that if a family member has to accept admission to such a facility, they will be properly cared for.
The reality is that such an expectation is optimistic.

So wouldn't most people much prefer to be able to afford to pay for someone to help them in their own home, perhaps receiving reduced payment in exchange for free accommodation?

Then there's the requirement for capital sums for maintenance, for gap payments where private insurance doesn't cover what can be hundreds of thousands in specialised medical care.

So all up, I suspect many have a less than realistic view of what level of capital and how much income it can generate will be needed if a person is going to have a sense of security in later years.

Or perhaps I'm just an obsessive pessimist.


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## DocK (13 February 2013)

> Originally Posted by sydboy007
> 
> i think what I've suggested removes a lot of the vagaries out of setting the end maximum balance. It shouldn't be too hard to determine what kind of balance would provide 23K pa for say 25 years with the ability to increase the payout by 5% each year.






Julia said:


> I can't see just $23K p.a. being an acceptable level of income for most people in retirement.
> 
> I agree about the need for considerable incentive as payoff for locking up contributions for so many years.
> People are just not going to do it over the compulsory level.  So we can have all the discussion we like about what might make sense in terms of government budgets, but if that discussion omits the human factor, it's a bit pointless.
> ...




I'm reading Sydboy's comments a little differently.  My intepretation of his comment is that the tax breaks given to super should apply only to the portion that would replace a pension that the taxpayer would otherwise need to pay - hence his suggestion of $23K pa.  There'd be nothing to prevent those who wish to contribute more doing so, but presumably Sydboy would prefer that they not receive preferential tax treatment for doing so.  Likewise, nothing to stop people from saving for retirement outside of super.  I don't think he's saying that $23k pa would make for a comfortable retirement, or even necessarily be adequate, but it would be equal to the amount that would otherwise be received via govt provided pension.  I can follow his logic - most people would be sufficiently incentivised to put enough into super, or would accumulate enough via compulsory employer contributions,  to provide a basic pension in retirement - therefore relieving the taxpayer of the burden of funding age pensions.  Those that wish to ensure a higher level of security and comfort, and are able to put aside more, would be free to do so, but wouldn't receive any special tax treatment for doing so.  

I can follow the logic - and part of me thinks it may indeed be a good thing for society as a whole if it went one step further and contributions and earnings within super were tax-free up to the level he's mentioned, so that most "working families" would find themselves self-funded to a very basic level.  The problem of course is that the incentive to put away extra would be largely removed, so we could find ourselves with a nation of miserable retirees subsisting on a pittance and failing to contribute to the economy by spending the kid's inheritance, putting too much pressure on the public health system etc.  I wonder how many would still save extra $$$s for their golden years if the tax advantages for doing so were removed??


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## DocK (13 February 2013)

Let's not forget also that the $23K pa that Sydboy is working with is the amount of pension that someone with absolutely no other income would receive - and is presumably what our gummint reckons is enough to live on.  In reality I presume most retirees would have at least some interest or dividend income on top of that.  I'm unsure how much one can earn before the pension cuts out entirely, but there'd be a good % of over 65's on a part-pension, rather than a full one wouldn't there?

I'd be interested in Sydboy's comments on how his vision for super would work in that scenario.


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## craft (13 February 2013)

One thought on these superannuation musings.

Previously system was intergenerational transfer – Now the system dictated by demographics is moving towards self funded. 

People caught in this transformation period (ie current working generation) are effectively trying to fund two lots of pension systems – that’s a big ask especially if you want to do it without a fiscal imbalance for a while.  In-between bashing the govt’s, some consideration of the magnitude of the task is probably appropriate.


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## sydboy007 (13 February 2013)

DocK said:


> I'm reading Sydboy's comments a little differently.  My intepretation of his comment is that the tax breaks given to super should apply only to the portion that would replace a pension that the taxpayer would otherwise need to pay - hence his suggestion of $23K pa.




Sums it up nicely.  I will note that the 23K figure is around 8K more than the current pension.

Possible a fairer target would be an income equal to the minimum pay - $606 a week so 31500 pa.



DocK said:


> Let's not forget also that the $23K pa that Sydboy is working with is the amount of pension that someone with absolutely no other income would receive - and is presumably what our gummint reckons is enough to live on.  In reality I presume most retirees would have at least some interest or dividend income on top of that.  I'm unsure how much one can earn before the pension cuts out entirely, but there'd be a good % of over 65's on a part-pension, rather than a full one wouldn't there?
> 
> I'd be interested in Sydboy's comments on how his vision for super would work in that scenario.




The current pension provides a tad over 17K a year.  That's what YOU say is a reasonable amount for someone to live on in retirement.  The Govt does what the people want, as so far I don't hear too many people asking for a large rise in pension payments.

My main argument is that the mor tax breaks to super, the higher income and corporate taxes have to be, or the lower the level of services we accept from the Govt.  It's all a trade off.



craft said:


> One thought on these superannuation musings.
> 
> Previously system was intergenerational transfer – Now the system dictated by demographics is moving towards self funded.
> 
> People caught in this transformation period (ie current working generation) are effectively trying to fund two lots of pension systems – that’s a big ask especially if you want to do it without a fiscal imbalance for a while.  In-between bashing the govt’s, some consideration of the magnitude of the task is probably appropriate.




That's the other complex issue.  I would argue Gen X and early Gen Y are in the difficult position of supporting the old system, while fully funding the new system.  The problem wouldn't be so bad if super had been introduced a couple of decades earlier.


Another major flaw with super is that there's nothing to stop a person blowing their money then getting a pension.  Shouldn't there be a limit to how much can taken as a lump sum?  Shouldn't the over 60 be forced to set aside a particular amount that will limit their burden to tax payers?


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## sydboy007 (13 February 2013)

Julia said:


> So far, most discussion is just about providing an acceptable level of income in retirement, with a view to paying for daily cost of living, travel, entertainment, etc.   I know none of us want to think about really old age where the odds are that we'll experience diminished physical or cognitive capacity and need help.
> But, given the rising numbers of people who will be in that group, and governments' apparent lack of willingness to make adequate provision for care for such dependent folk, don't we also need to give some thought to having the capacity to pay for our own aged care?




Good point.  A lot of boomers have a primary residence.  Should they have to use that to help with their bonds?  What if a person has no other assets - quite a few elderly women are in that situation.

They are tricky questions that the politicians wont touch because it's too easy for the other side to scream about the elderly being kicked out of their homes by a cruel and callous Govt.

The sad fact is a lot of nursing homes are depressing places.  My aunt used to work in one of the better ones for a good few years.  She liked it, but found it emotionally draining as she would become attached to quite a few of the residents and was always mourning the passing away of someone.

At what point do we have to stop looking to the Govt for help and start to use the assets we build up over our lives to provide for a comfortable retirement?  If you have a million dollar property is it unreasonable for taxpayers to expect you to use some of that value for a bond to get into an aged care facility?

Maybe as a society we need to agree on a minimum income that cuts out a level of luxuries - overseas travel is one - but still provides enough money to eat out and buy some gifts for the grandchildren without being overly generous.  Once you get to that level then to have an income higher than this you need to operate in the non super world and pay normal tax rates.

I think this debate would be easier if the Govt would provide a summary each year of how much tax benefit we get from super.  It wouldn't be hard with the ATO knowing the TFN assigned to each super account.  If a person could see on their last statement they had received $8000 in tax breaks on their super it's easier to understand the huge $$$ the super system is requiring.


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## sptrawler (13 February 2013)

The only problem with this nice group hug, scenario where everyone gets to save enough to support their own pension.
But it should only provide for an income similar to the aged pension (I have noted Sydboy has softened up a bit on that) is that it doesn't take inflation into consideration.
When I started thinking about how much I would need to squirrel away, I was about 23years old, then I thought $600k would be magic, now I think it is nearer $2m. 
When $600k was enough, a house and land package cost $30,000 in Rockingham about  30k's out of Perth.  Now 36 years later a similar house and land package costs $400k.

Bringing this back on topic, it is a nice idea to think you can retire, with say $800k and be self funded.

However it wouldn't be many years before all those people are on a pension, even if you limit their access.

This will happen because the age pension will be raised, as inflation makes it less adequate. 
Then the access to the $800k has to be increased to maintain the relativity.

Unless the government takes over superannuation completely, it will be an abysmal failure, most people will be on a government pension in no time.lol


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## Vixs (13 February 2013)

sydboy007 said:


> Sums it up nicely.  I will note that the 23K figure is around 8K more than the current pension.
> 
> Possible a fairer target would be an income equal to the minimum pay - $606 a week so 31500 pa.




Think about what you're suggesting - that all retirees should get the same amount as people working for minimum wage, just for being old. That is insane! There is no way that is equitable, necessary or even affordable.



sydboy007 said:


> Another major flaw with super is that there's nothing to stop a person blowing their money then getting a pension.  Shouldn't there be a limit to how much can taken as a lump sum?  Shouldn't the over 60 be forced to set aside a particular amount that will limit their burden to tax payers?




That's a change that many are expecting to happen in the near future. I personally don't like it, and I don't feel the tax breaks are a big enough trade off to having that little control of my own funds, especially as they continue to shave away the tax benefits.

The current generation retiring without sufficient super to self fund will no doubt continue to take a lump sum and pay off debt - after all, it might be the best return they get on their money!

I think that this will resolve itself in the future once retiree average super balances are higher than outstanding liabilities. It also stands to reason for me that the pension will get progressively less generous as expected average balances increase. The people that blow their money because they have too much debt left on their bmw's and mcmansions will need to live off a pension that is lower than even today's. That should be disincentive enough, as long as they get some advice and can comprehend what that means.


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## sptrawler (13 February 2013)

sydboy007 said:


> At what point do we have to stop looking to the Govt for help and start to use the assets we build up over our lives to provide for a comfortable retirement?  If you have a million dollar property is it unreasonable for taxpayers to expect you to use some of that value for a bond to get into an aged care facility?
> .




So how do you safeguard against that person, with the $1m property from selling it and spending it on cruises, for example.

Possibly one way would to be take a leger of a persons assetts at retirement age? 
I mean if they have sold their house to enjoy the fruits of their labour are you saying they should be penalised in some way?


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## FxTrader (13 February 2013)

sptrawler said:


> So how do you safeguard against that person, with the $1m property from selling it and spending it on cruises, for example.
> 
> Possibly one way would to be take a leger of a persons assetts at retirement age?
> I mean if they have sold their house to enjoy the fruits of their labour are you saying they should be penalised in some way?




Probably more to the point is why sell the million dollar+ property at all since it doesn't count in the assets test for pension eligibility.  I suspect that many boomers will weigh this all up with a financial adviser and decide to keep that expensive primary residence, collect a pension and use a reverse mortgage if necessary to tap into the equity.  That makes more sense to me than a world cruise, blow the cash and then live in a rented flat on a pension check.


----------



## sptrawler (13 February 2013)

FxTrader said:


> Probably more to the point is why sell the million dollar+ property at all since it doesn't count in the assets test for pension eligibility.  I suspect that many boomers will weigh this all up with a financial adviser and decide to keep that expensive primary residence, collect a pension and use a reverse mortgage if necessary to tap into the equity.  That makes more sense to me than a world cruise, blow the cash and then live in a rented flat on a pension check.




The point is Sydboy would have it count in an assett test, that's what I was responding to.

I personaly think, keeping the expensive primary residence is a recipe for disaster. Only my opinion, but I don't see the family home being exempt from assett valuation for much longer.
It will be difficult to sit on the side of Sydney harbour, sipping chardonay and say "I'm struggling to make ends meet".IMO


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## FxTrader (13 February 2013)

sptrawler said:


> The point is Sydboy would have it count in an asset test, that's what I was responding to.




Brave indeed would be any political party that tries to add the primary residence to the pension assets test.  It's political suicide and will be only more so as the population ages. 



> I personaly think, keeping the expensive primary residence is a recipe for disaster. Only my opinion, but I don't see the family home being exempt from assett valuation for much longer.
> It will be difficult to sit on the side of Sydney harbour, sipping chardonay and say "I'm struggling to make ends meet".IMO




No one will say this, they will simply expect the check to show up in the mail indexed for inflation and vote for the party that adovocates this policy.  I seriously doubt the current generation of retirees have anything to fear in relation to the primary residence exemption.


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## Julia (13 February 2013)

Vixs said:


> Why are you so readily promoting more tax, more restrictions, more limitations and less freedom, based on individual perceptions and guesstimates about what is enough (which is entirely individual - I've got friends who have managed to support spouses completely and only earn $50k p.a., and I've got other friends who can't make ends meet with $150k)?



The eternal question.  Some people manage money well and others don't.
My neighbours are a couple in their mid 30's, one child.  She took a year off to have the child and now works half a week as a teacher.  He is an electrician with Ergon Energy.  So neither in any sort of massively high income bracket.

Next month they will move into their newly built house, completely debt free, value around $900K.
They will rent out the present house, also debt free, adding to the income from an IP, also debt free, purchased about 7 years ago.  And they have just bought another IP, completely negatively geared.

They received no help from either set of parents.

How is that they have achieved so much on moderate incomes, while others are unable to even get up a deposit for the first PPOR?


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## Julia (13 February 2013)

DocK said:


> I'm reading Sydboy's comments a little differently.  My intepretation of his comment is that the tax breaks given to super should apply only to the portion that would replace a pension that the taxpayer would otherwise need to pay - hence his suggestion of $23K pa.  There'd be nothing to prevent those who wish to contribute more doing so, but presumably Sydboy would prefer that they not receive preferential tax treatment for doing so.  Likewise, nothing to stop people from saving for retirement outside of super.  I don't think he's saying that $23k pa would make for a comfortable retirement, or even necessarily be adequate, but it would be equal to the amount that would otherwise be received via govt provided pension.  I can follow his logic - most people would be sufficiently incentivised to put enough into super, or would accumulate enough via compulsory employer contributions,  to provide a basic pension in retirement - therefore relieving the taxpayer of the burden of funding age pensions.  Those that wish to ensure a higher level of security and comfort, and are able to put aside more, would be free to do so, but wouldn't receive any special tax treatment for doing so.



Yes, understood.  I'm simply trying to broaden the discussion somewhat.



> I can follow the logic - and part of me thinks it may indeed be a good thing for society as a whole if it went one step further and contributions and earnings within super were tax-free up to the level he's mentioned, so that most "working families" would find themselves self-funded to a very basic level.  The problem of course is that the incentive to put away extra would be largely removed, so we could find ourselves with a nation of miserable retirees subsisting on a pittance and failing to contribute to the economy by spending the kid's inheritance, putting too much pressure on the public health system etc.



That is the point I was trying to make, in addition of course, to providing for the personal security and comfort of the retiree.



> I wonder how many would still save extra $$$s for their golden years if the tax advantages for doing so were removed??



Given the minimal thought provided to these "golden years" by most people, along with simple lack of financial capacity to put away additional savings, probably very few.

There still seems to be a wide spread sense that "I've paid taxes all my life so as a result I expect a government funded age pension which will keep me in complete comfort".   Along with, of course, first class medical treatment as and when required.  There is imo going to have to be a considerable adjustment of expectation of entitlements as the proportion of retirees increases, and it will come down to the need to provide for yourself if you want a reasonable standard of living and an equally reasonable standard of health care.


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## sptrawler (13 February 2013)

FxTrader said:


> No one will say this, they will simply expect the check to show up in the mail indexed for inflation and vote for the party that adovocates this policy.  I seriously doubt the current generation of retirees have anything to fear in relation to the primary residence exemption.




The current generation don't have a problem, they either have nothing, or most of their super has been put in after tax.
The next generation are the ones who have all their contributions subsidised, they are the ones with the real problem.
I think a lot of what Sydboy wishes for will happen, just when he moves into retirement. 
By that time the system will have been in place long enough for the outcomes to start reflecting the  the inputs.


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## FxTrader (13 February 2013)

Julia said:


> The eternal question.  Some people manage money well and others don't.
> My neighbours are a couple in their mid 30's, one child.  She took a year off to have the child and now works half a week as a teacher.  He is an electrician with Ergon Energy.  So neither in any sort of massively high income bracket.
> 
> Next month they will move into their newly built house, completely debt free, value around $900K.
> ...




An interesting example.  Yes the unsustainable property price boom has made many property investors wealthy in Aus.  The question is though is this wealth formula still applicable today, is it sustainable and how many could apply it successfully.  Not nearly enough I suspect.  Your neighbors have invested wisely and rode the boom, however I have friends in the US who went broke trying to follow the real estate to riches path.

For every success story there is another story of someone who followed a similar path and did not hit the mother load.  In most cases, fortuitous market timing does not make one a wise investor just a fortunate one who chose to invest in the right asset class at the right time.  The real skill is discerning trends and investing in them.  Property price growth on the back of easy credit and ever higher household debt levels was one such trend that has arguably run its course.


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## sptrawler (13 February 2013)

Julia said:


> The eternal question.  Some people manage money well and others don't.
> My neighbours are a couple in their mid 30's, one child.  She took a year off to have the child and now works half a week as a teacher.  He is an electrician with Ergon Energy.  So neither in any sort of massively high income bracket.
> 
> Next month they will move into their newly built house, completely debt free, value around $900K.
> ...




They achieve this by gearing, but because it is the me generation, you can't say anything. 
You are the selfish one because your not paying tax on your term deposit, that is paying your wage.lol
The only amusing part of the situation, is the old adage of ' be carefull what you wish for' .
Syd's generation will no doubt get the changes he wishes for and then there will be an uproar, however all their contributions will be concessional.


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## Julia (13 February 2013)

sptrawler said:


> They achieve this by gearing, but because it is the me generation, you can't say anything.
> You are the selfish one because your not paying tax on your term deposit, that is paying your wage.lol
> The only amusing part of the situation, is the old adage of ' be carefull what you wish for'



I think you've misunderstood my post.  I'm full of admiration for what these people have achieved.
Likewise, they have no attitude of criticism toward anyone else who has also made an honest effort.

I don't care how they've achieved it.  They started with nothing and have got further ahead at a relatively young age than many have after a lifetime of working.  Good for them.


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## sptrawler (13 February 2013)

Julia said:


> I think you've misunderstood my post.  I'm full of admiration for what these people have achieved.
> Likewise, they have no attitude of criticism toward anyone else who has also made an honest effort.
> 
> I don't care how they've achieved it.  They started with nothing and have got further ahead at a relatively young age than many have after a lifetime of working.  Good for them.




I agree, I've done the same, I started with nothing had 3 kids by the time I was 25, also I'm an electrician(always worked for wages). 
I take exception to people saying because we did without to save a nest egg, we have to be taxed to take back what we saved earlier.
We are obviously on a different page. I can understand that.


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## doctorj (14 February 2013)

Interesting report from Deutsche Bank a couple of days ago on world financial markets that touched on global pension assets.  In terms of private pension assets per head of total population, they estimate Australia has around USD 57k.  Doesn't sound great, but it's behind only Switzerland (USD 88k) and Netherlands (USD 63k) and well ahead of Canada (USD 38k). Total assets at the end of 2011 were estimated at USD 1,301 billion.

The other interesting take away was that of the countries studied, Australia held more equity investments than any other country, amounting to 50% of total private pension assets.  For comparison, the world average was 41%, but Germany only had 4%!


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## sptrawler (14 February 2013)

doctorj said:


> The other interesting take away was that of the countries studied, Australia held more equity investments than any other country, amounting to 50% of total private pension assets.  For comparison, the world average was 41%, but Germany only had 4%!




Well that would be because your super funds are underpinning the mining companies at the moment.
The government would prefer it was underpinning connect east, bris connect and that other non performing tunnel, that cost everyone heaps, clem someone. Then there is Telstra, stellar performer, back to $4.60 after an issue price of $7.40.lol
That's why SMSF are booming, everyone is saying OMG
Also others are saying you should have caps on what you can put in, well maybe that has merrit, like Wilkies caps on the pokies.
At least with a cap they can only lose a certain amount of your money, can you imagine how many would end up on a pension.


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## sydboy007 (14 February 2013)

sptrawler said:


> So how do you safeguard against that person, with the $1m property from selling it and spending it on cruises, for example.
> 
> Possibly one way would to be take a leger of a persons assetts at retirement age?
> I mean if they have sold their house to enjoy the fruits of their labour are you saying they should be penalised in some way?




In a way yes.  At what point does a person have to take responsibility?

I'd say we all know that as we get older we'll quite likely need some sort of assistance in our later years.

The current aged care system isn't working because it's underfunded.  How in the heck will it cope in 15 years when the over 85 group has quadrupled?  The over 65s will have doubled.

Unless we have a boom in Govt revenue there is no way the tax payer can afford to increase funding tot he levels required.


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## sptrawler (14 February 2013)

sydboy007 said:


> In a way yes.  At what point does a person have to take responsibility?
> 
> I'd say we all know that as we get older we'll quite likely need some sort of assistance in our later years.
> 
> ...




I agree, also the tax base will change over the next 10 years, the idea of the family home being a tax haven, can't last.
It won't be long in my opinion before the family home becomes an assessable assett.
Actualy, I think it already is when going into a nursing home, not sure how that works though.


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## Superb Parrot (14 February 2013)

This article by Alan Kohler is interesting. http://www.abc.net.au/news/2012-10-31/kohler-australia-super-disgrace/4343108

He did a similar take recently in the Fin, of how the risk, now that defined benefit schemes are out of favour,  is thrown onto the consumer instead of the provider, to the delight of the Super industry.


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## DocK (14 February 2013)

sptrawler said:


> I agree, also the tax base will change over the next 10 years, the idea of the family home being a tax haven, can't last.
> *It won't be long in my opinion before the family home becomes an assessable assett.*
> Actualy, I think it already is when going into a nursing home, not sure how that works though.




I guess if this comes to pass there will have to be some allowances made for the location of the home - diff in median house prices in Syd/Melb/Bris etc.  I guess this could be a way of reviving a lot of small country towns if it became financially attractive to let go of the high value city home once retired......


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## Julia (14 February 2013)

FxTrader said:


> An interesting example.  Yes the unsustainable property price boom has made many property investors wealthy in Aus.  The question is though is this wealth formula still applicable today, is it sustainable and how many could apply it successfully.  Not nearly enough I suspect.  Your neighbors have invested wisely and rode the boom, however I have friends in the US who went broke trying to follow the real estate to riches path.
> 
> For every success story there is another story of someone who followed a similar path and did not hit the mother load.  In most cases, fortuitous market timing does not make one a wise investor just a fortunate one who chose to invest in the right asset class at the right time.  The real skill is discerning trends and investing in them.  Property price growth on the back of easy credit and ever higher household debt levels was one such trend that has arguably run its course.



Good point.  I've occasionally suggested some diversification into shares might be useful but they've been resistant to this.  There is, I think, the idea that property just can't lose.


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## McLovin (14 February 2013)

sptrawler said:


> It won't be long in my opinion before the family home becomes an assessable assett.




This is already happening in the ACT.

I've enjoyed this thread, it's actually managed to remain remarkably civil. Sp, I get the feeling we will probably never agree on the issue of taxation of super, so maybe we should agree to disagree.


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## WilkensOne (14 February 2013)

McLovin said:


> This is already happening in the ACT.
> 
> I've enjoyed this thread, it's actually managed to remain remarkably civil. Sp, I get the feeling we will probably never agree on the issue of taxation of super, so maybe we should agree to disagree.




+1 This thread has been a really interesting read. Being in my early 20's I still don't have much to do with my super and the very small balance it holds : it brings up the question of how much of my income in the future I move into super if 40 years from now.. the rules of super could be completely different and I have all this money tied up getting taxed out at (for all I know) my marginal rate!

Wilkens


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## sptrawler (14 February 2013)

McLovin said:


> This is already happening in the ACT.
> 
> I've enjoyed this thread, it's actually managed to remain remarkably civil. Sp, I get the feeling we will probably never agree on the issue of taxation of super, so maybe we should agree to disagree.




I too have enjoyed it, yourself and Sydboy have certainly given me food for thought and the basis of your arguements are well founded.
I think to a degree we have all compromised our stance.
I tend to agree there should by some form of taxing in retirement. Whether that is best carried out on an earnings or withdrawl basis, is beyond my abilities to work out.

I noticed Sydboy has softened his stance on how much money he sees as reasonable for pension.

Generally I think the thread has stimulated a lot of discussion and thoughtfull debate. I'm sure people have learnt from it, I know I have.


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## sydboy007 (14 February 2013)

sptrawler said:


> I agree, also the tax base will change over the next 10 years, the idea of the family home being a tax haven, can't last.
> It won't be long in my opinion before the family home becomes an assessable assett.
> Actualy, I think it already is when going into a nursing home, not sure how that works though.




Part of me thinks we should move towards a US styled system where all interest costs under a certain level are tax deductible, but everyone pays CGT on the sale of the property.

Would help to balance the system as FHB would be on an equal footing to investors.

Personally i think a progressive land tax would be the most efficient option, with say a 10 year grand fathering clause for those who have recently purchased their property so they don't end up paying stamp duty and doubling up on the land tax too quickly.  At least then the states would have a stable predictable income.

Another option is for the Govt to bring out reverse mortgages with low interest rates.  If the Govt can borrow at 3.5% for 10 years, then lending at 5.5% up to 60% of the value of the property shouldn't be too big a task.  Helps the asset rich / cash poor to tap into their wealth, the tax payer is less burdened, there's still something left to bequeath to the children.

I'd say at least a decade away before anything this radical is looked at by the pollies though.  We'll have to have a very bad recession before any tough decisions are examined, even then I don't see much chance of bipartisan between the major parties.  Maybe the MSM needs to stop being their dog whistles and start pushing them for some productive economic policy.


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## DocK (14 February 2013)

WilkensOne said:


> +1 This thread has been a really interesting read. Being in my early 20's I still don't have much to do with my super and the very small balance it holds : it brings up the question of how much of my income in the future I move into super if 40 years from now.. the rules of super could be completely different and I have all this money tied up getting taxed out at (for all I know) my marginal rate!
> 
> Wilkens




Questions like yours will become increasingly common the more governments tinker with the system.  Even at my age I'm reluctant to commit more than I have to into super because of the uncertainty about the ability to take a lump sum in the future etc.  My focus when I was your age was on repaying non-deductible debt first, followed by investing for the future.  I don't know whether you intend to borrow for your own home some time in the future - but if you are, I'd suggest your main focus might best be on reducing any debt with interest that is not tax-deductible - if only because it's near to impossible to predict how many legislative changes may be made to the superannuation system by the time you're looking at retirement!  Your generation is fortunate that compulsory employer contributions to super were introduced, as most of Gen Y will have at least a modest super balance if they remain in the workforce for 30 years or so, especially as the present 9%  of gross wages gradually increases to 12%.  Just don't forget about it - you still have the option of choosing which asset class/classes it gets invested in, and can switch between shares/property/fixed int options within your employer fund as you see fit over the years.


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## sydboy007 (15 February 2013)

DocK said:


> Questions like yours will become increasingly common the more governments tinker with the system.  Even at my age I'm reluctant to commit more than I have to into super because of the uncertainty about the ability to take a lump sum in the future etc.  My focus when I was your age was on repaying non-deductible debt first, followed by investing for the future.  I don't know whether you intend to borrow for your own home some time in the future - but if you are, I'd suggest your main focus might best be on reducing any debt with interest that is not tax-deductible - if only because it's near to impossible to predict how many legislative changes may be made to the superannuation system by the time you're looking at retirement!  Your generation is fortunate that compulsory employer contributions to super were introduced, as most of Gen Y will have at least a modest super balance if they remain in the workforce for 30 years or so, especially as the present 9%  of gross wages gradually increases to 12%.  Just don't forget about it - you still have the option of choosing which asset class/classes it gets invested in, and can switch between shares/property/fixed int options within your employer fund as you see fit over the years.




+1

Also consider using a First Home Buyers Savings account - works like salary sacrificing into super but you can use the money for a deposit on a house.


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## craft (15 February 2013)

WilkensOne said:


> +1 This thread has been a really interesting read. Being in my early 20's I still don't have much to do with my super and the very small balance it holds : it brings up the question of how much of my income in the future I move into super if 40 years from now.. the rules of super could be completely different and I have all this money tied up getting taxed out at (for all I know) my marginal rate!
> 
> Wilkens




Don't forget to weigh the following against the legislative risk of negative change when making your choice.


*The more you put in early the less your total contributions need to be to meet X target *

Potential for favourable grandfathering arrangements.  

Actual tax benefit achievable in current year

Legislative goal is to provide incentive through tax reduction. 

One way or another you are probably going to need to provide for your own retirement.


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## WilkensOne (15 February 2013)

craft said:


> Don't forget to weigh the following against the legislative risk of negative change when making your choice.
> 
> 
> *The more you put in early the less your total contributions need to be to meet X target *
> ...




Yeah I definetly agree I'm already getting the vibe that it seems to be a BYO retirement for my generation. I just wonder that if I am going to be depositing soon 12% of my income into super I would rather invest my money elsewhere and control it how I please but with the goal of it being part of my retirement fund.


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## sptrawler (15 February 2013)

WilkensOne said:


> Yeah I definetly agree I'm already getting the vibe that it seems to be a BYO retirement for my generation. I just wonder that if I am going to be depositing soon 12% of my income into super I would rather invest my money elsewhere and control it how I please but with the goal of it being part of my retirement fund.




That is a sound strategy, as you know there are tax effective ways to accumulate wealth outside of super.
It may be worth considering salary sacrificing a further 3% to take the contribution up to 15%. Not a major impost but with compounding effect would be significant . This in every likelyhood, would be enough over a 30 year period, go a long way to underpinning a reasonable pension.IMO


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## Garpal Gumnut (15 February 2013)

One million people are ready to fight the ALP Government on this attack on battlers who save and pay taxes.

If you have a SMSF read this.

From the BRW.

http://www.brw.com.au/p/smsfs_changes_political_muscle_with_aEm6qgRmuqfIuLN45sllzH

gg


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## Ves (15 February 2013)

Interestingly I had a client call me this week (after they spoke to their financial planner) asking what paperwork was necessary for them to pull their $800k out of their SMSF.  They are 60, retired and do not want the leglislative risk of further taxation, when they can get the money now tax-free.  

Just goes to show, as soon as you start talking about $800k - $1 mil limits to super taxation concessions, people start assuming it is certain to come into play.  This client wanted the money out before the May budget. The government should be providing more clarity as soon as this kind of thing leaks to the media.  It is then the responsibility of the media to report in correctly IMO.


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## Bill M (15 February 2013)

What did you advise them Ves? I reckon they might be jumping the gun a bit, really I don't think anything will come out the May budget and it won't be immediate even if it did.

There is nothing worse than continual rule changes and it is this reason my wife will be taking a transition to retirement pension this year, we just don't trust the Guvnuts, none of them.


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## sydboy007 (15 February 2013)

WilkensOne said:


> Yeah I definetly agree I'm already getting the vibe that it seems to be a BYO retirement for my generation. I just wonder that if I am going to be depositing soon 12% of my income into super I would rather invest my money elsewhere and control it how I please but with the goal of it being part of my retirement fund.




A lot of people seem to think super is the only way to fund their retirement.  At least you've realised that isn't the case.

Partly because it's going to be so long before I can tap into super I'm not too keen to add to much more at present.  Depending on what tax bracket you're in, buying shares that pay 5-6% fully franked dividends means you may not have much tax to pay on the income.  My goal is to buy 3 * 10K parcel of shares each year and slowly build up a portfolio that will give me a reliable passive income that should also increase at least as fast as inflation over time.  Just have to look at quite a few of the dividend increase this reporting season.


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## Ves (15 February 2013)

Bill M said:


> What did you advise them Ves? I reckon they might be jumping the gun a bit, really I don't think anything will come out the May budget and it won't be immediate even if it did.
> 
> There is nothing worse than continual rule changes and it is this reason my wife will be taking a transition to retirement pension this year, we just don't trust the Guvnuts, none of them.



We don't give advice, _per se_, I'm a Fund accountant specialising in SMSF, I can answer compliance issues, and tell the client that the changes are not set in stone, but at the end of the day, if the client wants to pull it out it is their choice. I'm not sure what the financial planner said, mind you.  But I don't think a planner could do much if the client has already made up their mind.

I think they're jumping the gun too.  But some people just get scared when a little bit of uncertainty comes their way and rightfully want to protect what they have.


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## WilkensOne (15 February 2013)

sydboy007 said:


> A lot of people seem to think super is the only way to fund their retirement.  At least you've realised that isn't the case.
> 
> Partly because it's going to be so long before I can tap into super I'm not too keen to add to much more at present.  Depending on what tax bracket you're in, buying shares that pay 5-6% fully franked dividends means you may not have much tax to pay on the income.  My goal is to buy 3 * 10K parcel of shares each year and slowly build up a portfolio that will give me a reliable passive income that should also increase at least as fast as inflation over time.  Just have to look at quite a few of the dividend increase this reporting season.




That is definitely something that I really need to look into. I love the idea of having an income generated from shares especially with the benefit of franking credits when you are at retirement age. I am unfortunately not in a position to spend that much each year of investments as I am still studying at university. In my head the current goal is to purchase a house and pay it off fully, meanwhile buying dividend generating shares and also trading my small capital base. 

So many options, so much time!

.. guess I could have worse problems :


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## sptrawler (15 February 2013)

Ves said:


> Interestingly I had a client call me this week (after they spoke to their financial planner) asking what paperwork was necessary for them to pull their $800k out of their SMSF.  They are 60, retired and do not want the leglislative risk of further taxation, when they can get the money now tax-free.
> 
> Just goes to show, as soon as you start talking about $800k - $1 mil limits to super taxation concessions, people start assuming it is certain to come into play.  This client wanted the money out before the May budget. The government should be providing more clarity as soon as this kind of thing leaks to the media.  It is then the responsibility of the media to report in correctly IMO.




As we said on the earlier, $800k invested in both names i.e $400k each, will give them a tax free income now the lowest rate starts at $18,200.
No point in keeping that amount in super, IMO
As was also said earlier, if the government brought in that sort of cap, the only money left in super would be the taxable component.
Which by percentage wouldn't be a lot.


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## Ves (15 February 2013)

sptrawler said:


> As we said on the earlier, $800k invested in both names i.e $400k each, will give them a tax free income now the lowest rate starts at $18,200.
> No point in keeping that amount in super, IMO



I should have specified.  Client was single.


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## sptrawler (15 February 2013)

Ves said:


> I should have specified.  Client was single.




Even then, if the person bought $600k of bank shares returning say 5% + franking and put the remaining $200k in term deposit.
The franking would probably cover the tax owing. 

Again as has been pointed out earlier, the major loss at the moment is contributions tax and accumulation earning tax.IMO

At the moment the 15% contribution and earnings tax needs to be taken up to 19%, in line with the lowest tax rate.IMO


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## Julia (15 February 2013)

sptrawler said:


> As we said on the earlier, $800k invested in both names i.e $400k each, will give them a tax free income now the lowest rate starts at $18,200.
> No point in keeping that amount in super, IMO
> As was also said earlier, if the government brought in that sort of cap, the only money left in super would be the taxable component.
> Which by percentage wouldn't be a lot.



Ves has now clarified that the $800K belongs to one person, so by removing the funds from Super he/she is going to end up paying some tax.

$800K earning just 5% = $40K:  Deduct the $18K = $22K taxable.

Even had it been a couple, assessed as having $400K each, at just 6% they're each more than $5000 over the tax free threshold, so it doesn't seem a very well thought out move to me.

If the government does alter the tax it's surely likely to be on* amounts over $800K* (I'll be surprised if they were to even take that as a lower limit, think it's more likely to be $1M) tax will not be applied to the whole amount.

Ves, is it possible for you to find out from the client what the financial adviser's opinion was?  That would be interesting.


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## sptrawler (15 February 2013)

Julia said:


> Ves has now clarified that the $800K belongs to one person, so by removing the funds from Super he/she is going to end up paying some tax.
> 
> $800K earning just 5% = $40K:  Deduct the $18K = $22K taxable.
> 
> ...




As I said earlier, if a tax was too onerous, people would remove their taxed component out of the super system.
This would leave the taxable component in super, and yes they can tax that any way they like.
However it would leave a big dent in the super system,  as the concessional component in percentage terms I would think is relatively low. 
I may be wrong, however with concessional caps at $25k and non concessional at $150k, I would think it's a fair assumption. Especially when the system has only been running for 20years and lets not forget average balances are around $150k.


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## tinhat (15 February 2013)

Ves said:


> I should have specified.  Client was single.




Good looking? 

Seriously though - perhaps that person shouldn't be managing their money if they are going to take fright at every twist and turn.

Which makes me think - what is going to happen when a lot of the SMSF trustees start to go a bit senile. Seriously. People often develop a heubris when the early stages of dementia set in. A classic example is Philip Fisher, author of "Common Stocks and Uncommon Profits". His son writes in the foreword of the edition I have of how his father made dreadful decisions at a senior age after having been a stock market genius for most of his life.


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## Bill M (15 February 2013)

sptrawler said:


> As I said earlier, if a tax was too onerous, *people would remove their taxed component out of the super system.*
> This would leave the taxable component in super, and yes they can tax that any way they like.
> However it would leave a big dent in the super system,  as the concessional component in percentage terms I would think is relatively low.




Hello sptrawler, can you clarify something for me? I think you have mentioned this about removing the taxed component before, are you sure this is allowed?

Reason I ask is that with my wife's super I am pretty sure you can not do selective allocation of your super.

Lets use a 200K balance. 100K was put in as after tax contributions, the other 100K was concessional contributions. 

From what I understand is that if the person wanted to start a 100K transition to retirement pension then you can't cherry pick the after tax contribution and use that for the pension. It says something like, "if the contribution is 50/50 (after tax/concessional) you can not pick the non concessional contribution", it has to be taken as the balance of the contribution, in this case 50/50.

That would mean you would be taxed on the 50% of the payment. You can not just use the non concessional amount on it's own. (This is only for those who want to start a transition to retirement pension, ages 55 to 60). I will see what I can dig up and report back, cheers.


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## sydboy007 (15 February 2013)

WilkensOne said:


> That is definitely something that I really need to look into. I love the idea of having an income generated from shares especially with the benefit of franking credits when you are at retirement age. I am unfortunately not in a position to spend that much each year of investments as I am still studying at university. In my head the current goal is to purchase a house and pay it off fully, meanwhile buying dividend generating shares and also trading my small capital base.
> 
> So many options, so much time!
> 
> .. guess I could have worse problems :




Check out the thread looking at future house prices.

I'm rather negative against property - it has been a great investment for those who rode the debt fuel boom from the early 90s through to the GFC, but now that mortgage debt in Australia is around 80% of GDP, and household debt is at historical highs, it's very unlikely house prices can do much more than income growth.  Why buy when you can rent for half the cost and invest the difference in assets that provide double the yield and I'd argue a better long term capital appreciation.

Nice to see you've started to focus on the future at such a young age


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## Ves (15 February 2013)

sptrawler said:


> Even then, if the person bought $600k of bank shares returning say 5% + franking and put the remaining $200k in term deposit.
> The franking would probably cover the tax owing.
> 
> Again as has been pointed out earlier, the major loss at the moment is contributions tax and accumulation earning tax.IMO
> ...



This client also has substantial income producing assets outside of super.  It often pays not to assume that super and the income it produces is the only source an individual may have.   Marginal tax rate is at least 30% in some of these cases.   You also need to consider any asset protection and estate planning benefits that super may have in the long run.  Cheers. 



			
				Julia said:
			
		

> Ves, is it possible for you to find out from the client what the financial adviser's opinion was? That would be interesting.



I agree - but unfortunately I cannot in this case.  But my assumption would be that they would have said keep it in super to see if the changes actually get announced.  This way they would keep getting those juicey fees  (sorry couldn't help but add this bit!!)


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## sptrawler (15 February 2013)

sydboy007 said:


> Check out the thread looking at future house prices.
> 
> I'm rather negative against property - it has been a great investment for those who rode the debt fuel boom from the early 90s through to the GFC, but now that mortgage debt in Australia is around 80% of GDP, and household debt is at historical highs, it's very unlikely house prices can do much more than income growth.  Why buy when you can rent for half the cost and invest the difference in assets that provide double the yield and I'd argue a better long term capital appreciation.
> 
> Nice to see you've started to focus on the future at such a young age




+1, At such a young age, you don't have to speculate widly to make excellent gains in the share market. Post GFC capital raisings have far outstripped the property market e.g Wesfarmers, the banks.

Like Sydboy says there has been a lot of debt taken onboard to push house prices in the last 10 years. The current boom, at least where I live, seems to be driven by Asian investment.

If you start buying good quality shares now and just keep adding to them, you will do just as well, if not better than jumping into a mortgage early in life.


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## Bill M (15 February 2013)

Bill M said:


> Hello sptrawler, can you clarify something for me? I think you have mentioned this about removing the taxed component before, are you sure this is allowed?
> 
> Reason I ask is that with my wife's super I am pretty sure you can not do selective allocation of your super.
> 
> ...




I found this, any comments?


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## sptrawler (15 February 2013)

Bill M said:


> Hello sptrawler, can you clarify something for me? I think you have mentioned this about removing the taxed component before, are you sure this is allowed?
> 
> Reason I ask is that with my wife's super I am pretty sure you can not do selective allocation of your super.
> 
> ...




You are spot on, since 2007, my understanding is when the funds are accessed they are crystalised i.e. they are seperated into taxed and taxable components (expressed as a ratio).

From that time forward funds removed have to be taken as per that ratio, even after 60. By doing so at any given point through the life of the pension the component that was put in after tax and the component the was given a tax concession can be identified.

At the moment the main reason for this is, the concessionally treated component attracts tax, when the funds are distributed out of the fund e.g when drawing a pension under 60 or after passing away.

What I allude to is, if a major change is made to the tax treatment of the funds in the pension phase.

The government would have to include in that tax change, the option for retirees to withdraw that taxed component, which is the funds that they have contributed after tax. 
Therefore as per a lot of the thread this is just my speculation as to what would have to be included in the changes if they were ever to be implemented

This is all just my thoughts, as I've said I have no formal accounting experience, just interested in the subject.


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## Garpal Gumnut (15 February 2013)

May I ask a grounded question.

If one had more than $1m in super atm, how could one withdraw the maximum before the budget in May 2013?

gg


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## sptrawler (15 February 2013)

Just a further post to clarify where I'm coming from.
If the government said we are going to tax bank deposits at a 50% tax reduction on earnings.eg half your marginal rate.
Then a lot of people start putting money in deposits.
Then the government turns around and says, it's costing too much we are losing too much revenue, from next year we will tax at your marginal rate.

Also, by the way, you can't take your money out of the bank!!! I don't think so.

What you have to remember is, a lot of this thread is about different peoples thoughts on the taxing regime of super.

Therefore a lot of posts are speculation, guestimates and opinions, not current taxing practice. 
Do your own research and definately get proffessional advice if you are not sure.


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## sptrawler (15 February 2013)

Garpal Gumnut said:


> May I ask a grounded question.
> 
> If one had more than $1m in super atm, how could one withdraw the maximum before the budget in May 2013?
> 
> gg




Depends on your age GG

If your over 60, no problems, unless you have untaxed component

If your between 55 and 60, tax will be payable depending on your components i.e taxed, taxable, untaxed.

If your under 55, unless you are permanently dissabled, it won't happen. 
However GG if you fall in this age group, refer to the Chinese chainsaw thread.lol you can chose disability if pain isn't an issue.


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## Bill M (15 February 2013)

sptrawler said:


> What I allude to is, if a major change is made to the tax treatment of the funds in the pension phase.
> 
> The government would have to include in that tax change, the option for retirees to withdraw that taxed component, which is the funds that they have contributed after tax.
> Therefore as per a lot of the thread this is just my speculation as to what would have to be included in the changes if they were ever to be implemented
> ...




Me neither mate, thanks for your thoughts and to drsmith for the thread, very interesting. There is one free site I have found very valuable to the Superannuation situation in Australia. A lot of questions are answered there and they keep up to date with the latest changes. If anyone is interested it is here:  http://www.superguide.com.au/


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## Ves (15 February 2013)

You guys are right about the crystalisation of components when a pension starts. Cheers.


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## sptrawler (15 February 2013)

Ves said:


> You guys are right about the crystalisation of components when a pension starts. Cheers.




From a pleb to someone who knows the facts, thanks for you input, it's much appreciated.

I can't get over the amount of views this thread gets, it's obviously a popular subject. Also I think topical subjects, as this one broaden the appeal, therefore the audience of the forum.


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## Garpal Gumnut (15 February 2013)

This site seems to have many of the answers sought on this thread.


http://www.smh.com.au/money/tools-and-guides/superannuation-guide--withdrawing-your-superannuation-20100531-wp51.html


gg


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## sptrawler (15 February 2013)

Garpal Gumnut said:


> This site seems to have many of the answers sought on this thread.
> 
> 
> http://www.smh.com.au/money/tools-and-guides/superannuation-guide--withdrawing-your-superannuation-20100531-wp51.html
> ...




Good link GG, I hadn't seen that one.

So does this mean I can't sell you a chainsaw?


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## Garpal Gumnut (15 February 2013)

sptrawler said:


> Good link GG, I hadn't seen that one.
> 
> So does this mean I can't sell you a chainsaw?




Only Eddie.

gg


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## Julia (15 February 2013)

tinhat said:


> perhaps that person shouldn't be managing their money if they are going to take fright at every twist and turn.
> 
> Which makes me think - what is going to happen when a lot of the SMSF trustees start to go a bit senile. Seriously. People often develop a heubris when the early stages of dementia set in. A classic example is Philip Fisher, author of "Common Stocks and Uncommon Profits". His son writes in the foreword of the edition I have of how his father made dreadful decisions at a senior age after having been a stock market genius for most of his life.



This is another area no one likes to consider.  It's perhaps a tick for government regulation that part of Super should be required, at retirement, to be set up as an annuity.

If there are more than one trustee, then presumably the non-senile members should be able to sort it out.
Much more of a problem, though, for those who are sole director /corporate trustee.

It's a good point to raise.  I wonder if any research or provision for this exists?


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## sptrawler (15 February 2013)

Julia said:


> This is another area no one likes to consider.  It's perhaps a tick for government regulation that part of Super should be required, at retirement, to be set up as an annuity.
> 
> If there are more than one trustee, then presumably the non-senile members should be able to sort it out.
> Much more of a problem, though, for those who are sole director /corporate trustee.
> ...




That is an interesting proposition, especially if the fund has a single member and is using his/her accountant as the other trustee.


----------



## DocK (16 February 2013)

Garpal Gumnut said:


> This site seems to have many of the answers sought on this thread.
> 
> 
> http://www.smh.com.au/money/tools-and-guides/superannuation-guide--withdrawing-your-superannuation-20100531-wp51.html
> ...




Thanks to Bill M & GG for those links.  I note this, from the smh article: 


> So, for tax purposes:
> •super benefits paid to dependants are tax-free;
> •benefits paid to “non-dependents” are taxed.
> 
> Yes, this is confusing, but the crucial issue is this – although the superannuation laws allow you to make a binding nomination to any dependent, if that recipient is not also a dependent for tax purposes, their payout may well be taxed. Still confused? Remember this - if you have adult children who are no longer financially dependent on you, make sure you discuss with your accountant the tax implications of a binding nomination in their favour. Some in the superannuation industry describe this tax as a de facto death duty – this is a fair description given that a significant percentage of superannuation beneficiaries will be financially independent adult children of the deceased member



Read more: http://www.smh.com.au/money/tools-a...perannuation-20100531-wp51.html#ixzz2L0ozg6y6

Does this in effect mean that if my spouse and I were both to die at some point in the future when our sons are adults, that if the bulk of our wealth is held within our SMSF that they'll pay tax on their inheritance, but if it were money in a bank account they would not?  How is property held within a SMSF dealt with upon the death of the retiree - does CGT become payable only upon sale of the asset, or is it payable upon transfer out of the super fund?  These are matters that my generation are going to have to give a good amount of thought to (professional advice also) in order to walk the fine line between giving ourselves the best retirement years possible, whilst also being cognizant of the most advantageous method of passing on whatever's left to our adult children.


----------



## DocK (16 February 2013)

> Originally Posted by tinhat
> 
> perhaps that person shouldn't be managing their money if they are going to take fright at every twist and turn.
> 
> Which makes me think - what is going to happen when a lot of the SMSF trustees start to go a bit senile. Seriously. People often develop a heubris when the early stages of dementia set in. A classic example is Philip Fisher, author of "Common Stocks and Uncommon Profits". His son writes in the foreword of the edition I have of how his father made dreadful decisions at a senior age after having been a stock market genius for most of his life.





Julia said:


> This is another area no one likes to consider.  It's perhaps a tick for government regulation that part of Super should be required, at retirement, to be set up as an annuity.
> 
> If there are more than one trustee, then presumably the non-senile members should be able to sort it out.
> Much more of a problem, though, for those who are sole director /corporate trustee.
> ...



This problem isn't unique to those running their own smsf, unfortunatley.  I have an elderly relative, who is single and childless, who is starting to become a little muddled and confused.  She has been fiercely independant all of her life, made an excellent career for herself from modest beginnings, and retired with a modest nest-egg as well as her own home etc.  She was never the type to discuss her private affairs, and any questions regarding how well she was set up for the future were met with a degree of cynicism as to whether we (her neice and nephew) were concerned for her welfare or our future possible inheritance.  We do know that she purchased an annuity which was not a life-time benefit, and has had the same financial planner looking after her affairs for the past 30 years or so.  She seemed quite worried during the GFC and has made the odd comment since that indicates she may have suffered substantial losses.  It's becoming evident that her mental capacity may be deteriorating, but it's not an easy matter to simply step in and tell a loved and respected relative that you think they're "losing the plot" without coming across as a self-serving money-grabbing opportunist.


----------



## Julia (16 February 2013)

DocK said:


> It's becoming evident that her mental capacity may be deteriorating, but it's not an easy matter to simply step in and tell a loved and respected relative that you think they're "losing the plot" without coming across as a self-serving money-grabbing opportunist.



That's a touchy and difficult situation.  Does she have an accountant?  Would it be interference if you were to discuss your concerns with her financial planner?  Do you know if she has arranged POA for anyone in the event she were to lose capacity?

Does anyone know if a charity has to pay tax on a bequest from a SMSF?


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## DocK (16 February 2013)

Julia said:


> That's a touchy and difficult situation.  Does she have an accountant?  Would it be interference if you were to discuss your concerns with her financial planner?  Do you know if she has arranged POA for anyone in the event she were to lose capacity?
> 
> Does anyone know if a charity has to pay tax on a bequest from a SMSF?




Unfortunately nobody else in the family has a clue who her financial planner is or whether she even has an accountant, or just used a tax agent.  She has mentioned that her solicitor is the executor of her will, and hopefully also holds a POA for her.  My brother and I find it both amusing and insulting at once, that she's often made a point of mentioning at family occasions that she'd never give a relative control of her health or finances in case they should be tempted to shunt her off to an old age home in order to get their hands on her money.  Unfortunately, if her mental faculties continue to deteriorate we're going to be put in a position where we may have to do just that.  At present, we're in the almost ridiculous situation where my 83 year-old mother (who fortunately is as sharp as a pin) is gently trying to convince her younger sister to mention her periods of confusion to her GP - without much success as my aunt is adamant that she's fine.  If it becomes necessary we'll perhaps have to contact her GP ourselves and express our concerns - at least then her GP can do whatever tests she feels are appropriate without necessarily letting my aunt know we've asked her to.  I assume she'd need to be assessed in some way for entry into a retirement village or the like.  She has recently also developed respiratory problems and sounds depressed - I think she's finding life just too difficult and is inclined to "stick her head in the sand" rather than think of how she's going to cope in the future.  

I'm extrememly thankful that my mother, although 5 years older than my aunt, is in better health mentally and physically and is doing her best to monitor the situation.  Unfortunately, her sister has never taken kindly to any offers of assistance in the past and the entire situation is stressful for Mum - which frustrates me.  Although my aunt has friends, they're not close enough friends to have the type of conversation that might be needed, and she has no children of her own.  She started working as a nurse's aide at the age of 14, worked her way up to registered nurse, then midwife, then studied while working in order to get the uni degree necessary to be the head midwife at the hospital she worked at.  I've admired and respected her enormously since I was a child, but the same independant streak that has worked for her in her career is now making life very difficult for her family.  Aging in today's society can be a real b!tch.

Anway, that's all off topic so enough rambling from me.  Apologies for getting off track.


----------



## McLovin (16 February 2013)

Sounds like a tough spot to be in DocK. Can't offer any insight or experience but I hope it works out for you and your family.


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## sptrawler (16 February 2013)

A friend of mine is in a similar situation.
He is in his late 50's, he has his mother of 95 living with him, now his wife has left for greener pastures.
his Aunt (mothers sister) is 97 lives alone, but he is the only relative that looks after her, does her shopping, goes to her place 60k's each way twice a week.
By the way he is an only child and his aunt has no children.

What he did was get power of attorny along with his cousin. It seems to be working, I think he`said she was much happier to agree when there were two involved.

I'm just gratefull I'm not in the same position.

Best of luck.


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## Julia (16 February 2013)

DocK said:


> Anway, that's all off topic so enough rambling from me.  Apologies for getting off track.



Not rambling at all and more relevant to the topic than we might wish.

Approaching your aunt's vagueness etc via her GP sounds sensible.  I don't know what the situation is if the GP were to do tests and find her cognitive function diminished.  Presume he'd then ask for an ACAT assessment.
At best that's going to see her persuaded into some form of assisted living which she might resent.  The fine line your family seems to be treading is one of maintaining her limited confidence whilst having her understand that you are primarily concerned for her welfare.  To put that to a very independent, strong minded person is not easy.
I wish you all the best and hope you might let us know how it goes, as many people will be in a similar situation.

At the risk of derailing the thread, I'd like to sound a note of caution to family members accepting the role of Enduring POA for an elderly parent or other relative.  After a sudden illness, surgery, and subsequent loss of capacity with my father, the EPOA I had for him came into effect on medical direction that he could not look after his own affairs.

 Going through his financial records, I discovered significant assets which had not been reported to Centrelink (he was receiving a government pension at the time and these assets would have definitely resulted in much less pension had he divulged them).

I didn't feel I could act in continuing the deception so wrote to Centrelink advising that my father must have overlooked these assets, set them out clearly, and asked them to understand that it was an oversight due to ill health etc.  They took no action against him and simply adjusted his pension accordingly.

A month or two later he recovered somewhat and said he wanted to take back charge of his own affairs.  Fine.  I handed over all the records including my letter to Centrelink and their response.  He went nuts about this and accused me of gross disloyalty etc etc.

When he died, I found a copy of a letter he had written to Centrelink, saying that he had been temporarily unwell, that his daughter had unnecessarily taken over his affairs during this time, and to his absolute shock and horror he had discovered that I had failed to report essential assets while having POA and then subsequently tried to blame it on him.  He asserted that he had always been absolutely truthful and careful to report all assets and was devastated that his deceitful daughter had marred his record.
There was no record of any response from Centrelink.

So while we might think we're doing our best for someone, it can well and truly backfire into a very stressful experience.


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## qldfrog (17 February 2013)

wow Julia,
that must be hard, and sadly I see some trouble coming in that way with my dad.
Add the complexity of a different country, stubbornness and two different tax systems and you have a nasty cooking pot....
All this is a bit off subject but we should all remember that our sharpness of mind may fade one day and we always leave the mess behind while gliding into senility.And SMSF will not ease the problem


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## FlyingFox (17 February 2013)

Sorry to derail this discussion but hopefully some find this useful. 

Some of the issues raised lately in this thread will cause some big legal problems as the population ages. I used to do research into dementia, mainly Alzheimer's disease. Currently the established criteria for impairment etc are based on clinical evaluation. Unfortunately by the time someone is clinically diagnosed with dementia, they are generally in no state to look after themselves or their financial affairs. 

This in itself is a problem because they could have been in decline for quite some time and had they not made the right provisions earlier on, it is easy for them to be coerced into changes they did not intend to make or not agreeable to changes that need to be made.

The other problem will be the emergence of new techniques of predicting dementia. You can now fairly accurately predict the onset of AD at least 18-24 months prior to clinical diagnosis. Now the subject may already have some impairment but does not have dementia. What happens in this case? Legally I don't think you can get a POA. Moreover subsequently, any changes to wills etc during this period maybe challenged due to the fact that they may have had impairment. 

A lot of these issues have been black and white in the past. However with a large ageing population and their large asset pools there could be a lot of legal wrangling going on that did not happen in the past. I am sure some of the policy around this will need to be looked at.


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## FlyingFox (17 February 2013)

qldfrog said:


> wow Julia,
> that must be hard, and sadly I see some trouble coming in that way with my dad.
> Add the complexity of a different country, stubbornness and two different tax systems and you have a nasty cooking pot....




While I hope this is a long way away for me, my brother and I are unfortunately in the same boat as you.....


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## Julia (17 February 2013)

FlyingFox said:


> While I hope this is a long way away for me, my brother and I are unfortunately in the same boat as you.....



Good luck.  It's not a responsibility we can in all conscience refuse to take on.  You're right in suggesting the problems will be compounded in the future.

What I did learn from that upsetting experience was the importance of documenting everything, not just the records if you have to take over a relative's affairs, but also noting unusual or irrational behaviour as it occurs.
eg  my father at one stage accused me of stealing a plastic bowl from him.  (the ones available in a set of three from the $2 shops for about $3.)  It had gone missing, he said, and he therefore concluded I must have stolen it.
This went on for months, with him demanding a confession from me.
Eventually he wrote me out of his Will because he didn't get the confession.

Apologies to those who consider this sort of discussion outside the scope of the thread.  As Flying Fox has suggested, it's likely to become more and more relevant.


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## sptrawler (18 February 2013)

We will see what happens now that it is out in the open. I don't think I've ever heard them say 'the baby boomers can't retire' before.
They usually, skirt around the issue and talk about defering and encourage more participation, the tone is changing.

http://www.heraldsun.com.au/news/na...ster-mark-butler/story-fndo471r-1226579826498


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## DocK (18 February 2013)

McLovin said:


> Sounds like a tough spot to be in DocK. Can't offer any insight or experience but I hope it works out for you and your family.




Thanks McLovin.


sptrawler said:


> A friend of mine is in a similar situation.
> He is in his late 50's, he has his mother of 95 living with him, now his wife has left for greener pastures.
> his Aunt (mothers sister) is 97 lives alone, but he is the only relative that looks after her, does her shopping, goes to her place 60k's each way twice a week.
> By the way he is an only child and his aunt has no children.
> ...



Thanks Sptrawler - unfortunately my mother, brother and myself are her only living relatives, so providing balance from cousins etc is not possible.  Hard enough for the three of us to agree on a course of action sometimes


Julia said:


> Not rambling at all and more relevant to the topic than we might wish.
> 
> Approaching your aunt's vagueness etc via her GP sounds sensible.  I don't know what the situation is if the GP were to do tests and find her cognitive function diminished.  Presume he'd then ask for an ACAT assessment.
> At best that's going to see her persuaded into some form of assisted living which she might resent.  The fine line your family seems to be treading is one of maintaining her limited confidence whilst having her understand that you are primarily concerned for her welfare.  To put that to a very independent, strong minded person is not easy.
> I wish you all the best and hope you might let us know how it goes, as many people will be in a similar situation.



Thanks Julia.  The single thing I dread most about the aging process is the possibility of diminishing mental facility.  It's sad to see people who've been very sharp all of their lives slowly deteriorate - I can only imagine how frustrating it must be for them.  On that note, although it sounds rather callous, my aunt's general health seems to be declining rapidly and I sorta hope she fades away physically faster than mentally.  I'm quite sure she'd prefer to pass away from illness with her mental faculties mostly intact, rather than linger for years in a state of dementia.  However - what will be will be, and we'll just have to take things as they come.  


qldfrog said:


> wow Julia,
> that must be hard, and sadly I see some trouble coming in that way with my dad.
> Add the complexity of a different country, stubbornness and two different tax systems and you have a nasty cooking pot....
> All this is a bit off subject but we should all remember that our sharpness of mind may fade one day and we always leave the mess behind while gliding into senility.And SMSF will not ease the problem



Exactly right - this issue is one that will become an increasing concern as modern medicine ensures that people live longer - with the result that their physical health may outstrip their mental health.  I guess when the average life expectancy was "three score years and ten" most would fall off the perch before they started to lose their mental grip.  I try to remember this when dealing with my teenagers - they may very well be the ones I need to wipe the drool off my chin one day


FlyingFox said:


> Sorry to derail this discussion but hopefully some find this useful.
> 
> Some of the issues raised lately in this thread will cause some big legal problems as the population ages. (snip)
> A lot of these issues have been black and white in the past. However with a large ageing population and their large asset pools there could be a lot of legal wrangling going on that did not happen in the past. I am sure some of the policy around this will need to be looked at.




Indeed.  One of the problems is agreement on a course of action by the children/relatives of the diminished person.  My brother and I disagreed vehemently on the treatment my father should receive (or not) at the end of his life, which could probably have been avoided had he made a health directive or at least set out in writing his wishes.  It's a difficult thing for some to confront the matter of their eventual passing, or decline in mental ability, but it does make things so much easier for those that are left to care for them if they have a directive to follow.

Anyway, enough of this morbidity - let's get back to discussing whether the loss of tax revenue that _could_ have been levied on super contributions should really be considered as a cost.  It occurs to me that a tax not charged is not really a cost, but an aged pension paid definately is.  I can't get away from the idea that if the present _cost_ of providing the incentive to self-fund retirement eventually results in saving the real cost of taxpayer funded aged pensions, then surely that's a good thing?  Much as I don't like the idea of gummint telling me what I can and can't do with my voluntary contributions - maybe severely limiting the amount/% of lump sum taken from super is a better one.  If you were 30 and told that all concessionally taxed super contributions, whether by employer, salary sacrificed or voluntary had to be taken upon retirement as a lifetime annuity style pension - would you still contribute in order to gain the present tax advantage and the future retirement security?  I guess you could consider it a quid pro quo of sorts - tax break now but no lump sum later.......


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## DocK (18 February 2013)

sptrawler said:


> We will see what happens now that it is out in the open. I don't think I've ever heard them say 'the baby boomers can't retire' before.
> They usually, skirt around the issue and talk about defering and encourage more participation, the tone is changing.
> 
> http://www.heraldsun.com.au/news/na...ster-mark-butler/story-fndo471r-1226579826498




That article was a good read - makes a fair bit of sense to me.  I think the key issues are society's attitude toward older people, and the flexibility of career/job opportunities for the over-60's.  I know quite a few people who have retired and then decided to seek part-time work a few years later as they've become bored or decided they need a little extra income, or both.  In a lot of careers there is only the choice of working full-time or retiring.  Most over 60's have reached the stage where their expenditure is much less than those years they were supporting and educating dependant children, paying off the home loan etc.  I'd be surprised if there weren't quite a lot that would relish the opportunity to continue in a satisfying career on a part-time or jobshare basis.  It's something that the spouse and I have considered for the future - rather than sell our business outright down the track, we may be better to simply employ a manager and admin staff and scale back our own involvement whilst still keeping a hand in and an eye on things.


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## FlyingFox (18 February 2013)

sptrawler said:


> We will see what happens now that it is out in the open. I don't think I've ever heard them say 'the baby boomers can't retire' before.
> They usually, skirt around the issue and talk about defering and encourage more participation, the tone is changing.
> 
> http://www.heraldsun.com.au/news/na...ster-mark-butler/story-fndo471r-1226579826498




+100. Amazing how governments skirt around difficult issues until they are just about to explode. This is about to hit everyone very hard! Perhaps not the best thread to discuss this but I wonder how this will impact wage inflation.

They must have put something in the water in Canberra cause the PM was talking about the strength of the Aussie dollar and how it may not fall any time soon and therefore we need alternatives to traditional manufacturing etc.


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## sptrawler (18 February 2013)

DocK said:


> That article was a good read - makes a fair bit of sense to me.  I think the key issues are society's attitude toward older people, and the flexibility of career/job opportunities for the over-60's.  I know quite a few people who have retired and then decided to seek part-time work a few years later as they've become bored or decided they need a little extra income, or both.  In a lot of careers there is only the choice of working full-time or retiring.  Most over 60's have reached the stage where their expenditure is much less than those years they were supporting and educating dependant children, paying off the home loan etc.  I'd be surprised if there weren't quite a lot that would relish the opportunity to continue in a satisfying career on a part-time or jobshare basis.  It's something that the spouse and I have considered for the future - rather than sell our business outright down the track, we may be better to simply employ a manager and admin staff and scale back our own involvement whilst still keeping a hand in and an eye on things.




Sounds like a great idea to me Dock.
I retired nearly two years ago and I'm thinking of picking up a bit of work, something to get me out of the house a couple of days a week.


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## prawn_86 (18 February 2013)

DocK said:


> rather than sell our business outright down the track, we may be better to simply employ a manager and admin staff and scale back our own involvement whilst still keeping a hand in and an eye on things.




A few of my clients as an exit plan tend to sell the business and in the sale contract have a defined period where they act as a part-time consultant to the new owners


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## Julia (18 February 2013)

sptrawler said:


> We will see what happens now that it is out in the open. I don't think I've ever heard them say 'the baby boomers can't retire' before.
> They usually, skirt around the issue and talk about defering and encourage more participation, the tone is changing.



Mr Butler's comments are imo sensible and realistic.  It's probably going to be difficult, though, to apply any general rule about retirement age/access to government pension across the population.  If someone has worked all their lives as a labourer, then sheer physical wear is likely to mean they can't go on bricklaying or whatever until into their 70's.  A completely different story for, say, an academic.

I don't think it would be unreasonable - if bipartisan support could be achieved - for as much as half accumulated Super to have to be taken as an annuity.  But they have to stop fiddling with the rules and allow people to properly plan for their retirement.  It's unfair to let people think they will have full access to their Super at retirement age if that's not going to be the case.

Re part time work, I think that's a great idea and I see more and more people doing this.  I was relieved to be able to retire quite some years before retirement age, but the downside is the lack of challenge and intellectual stimulation.  Both are healthy imo.


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## sptrawler (18 February 2013)

Julia said:


> Mr Butler's comments are imo sensible and realistic.  It's probably going to be difficult, though, to apply any general rule about retirement age/access to government pension across the population.  If someone has worked all their lives as a labourer, then sheer physical wear is likely to mean they can't go on bricklaying or whatever until into their 70's.  A completely different story for, say, an academic.
> 
> I don't think it would be unreasonable - if bipartisan support could be achieved - for as much as half accumulated Super to have to be taken as an annuity.  But they have to stop fiddling with the rules and allow people to properly plan for their retirement.  It's unfair to let people think they will have full access to their Super at retirement age if that's not going to be the case.
> 
> Re part time work, I think that's a great idea and I see more and more people doing this.  I was relieved to be able to retire quite some years before retirement age, but the downside is the lack of challenge and intellectual stimulation.  Both are healthy imo.




The problem with the annuity idea is who runs it? 
Currently, most annuities I have read about, seem to be very lucrative to the provider, not to the recipient.
Much fairer, I feel to tax withrawls with an offset, as is done currently with those between 55 and 60.


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## sydboy007 (18 February 2013)

After reading a bit about the debt markets and what's available I would urge anyone looking at an annuity to consider purchasing:

Inflation Link Bonds
Indexed Annuity Bonds
Floating rate securities

Purchasing a combination of these will provide a stable, relatively secure income stream that is hedged against inflation.

Throw in a 15% weighting to high yield shares and you shouldn't have too much trouble, especially if you have a 12-24 month cash buffer


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## sptrawler (18 February 2013)

sydboy007 said:


> After reading a bit about the debt markets and what's available I would urge anyone looking at an annuity to consider purchasing:
> 
> Inflation Link Bonds
> Indexed Annuity Bonds
> ...




Where would you start looking for those style of products Sydboy?


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## Julia (18 February 2013)

sptrawler said:


> Where would you start looking for those style of products Sydboy?




If you just google them you will get lots of links.


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## sptrawler (18 February 2013)

Julia said:


> If you just google them you will get lots of links.




Thanks Julia, I really should have thought of that.

I'm going to have to employ you as my I.T manager, did you notice how I sliced and diced a post the other day.


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## McLovin (20 March 2013)

> Superannuation tax concessions are unsustainable and will need to be scaled back, the chief executive of the country’s largest industry superannuation funds has warned.
> 
> Ian Silk, boss of the $60 billion AustralianSuper scheme, urged all sides of politics to come together to decide on retirement savings policies because watering down the tax breaks on a piecemeal basis was short term and damaging consumer confidence.
> 
> ...




http://www.afr.com/p/home/super_tax_concessions_unsustainable_7mqSYeSVU0xJzbn870L08K


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## Ijustnewit (27 March 2013)

Tax Breaks Scrapped ? He we go more Gillard Class Warfare. :1zhelp:

http://www.abc.net.au/news/2013-03-27/wong-signals-sustainable-budget-super-changes/4597050


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## Boggo (27 March 2013)

Take it from Super and spend it on welfare so her supporters can sleep in comfortably while the rest of us work ! FFS

Seriously, I had 5 and 5 super before the super guarantee was mandatory...
"Superanuation is only in this country because Labor brought it here - otherwise ordinary working people wouldn't have super, only some high income earners would.

"So I can assure people super is a Labor creature, we will always nurture it well, and any decisions we make will be about the long-term interests of the superannuation system."


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## FlyingFox (27 March 2013)

Don't see how something that is widely believed to unsustainable should be considered class warfare. If the head of a large super fund says it's unsustainable, then they must be some truth in the matter??

Also if the current government doesn't do it, the next one will have to or the one after that .... Better to have a sustainable and consistent policy that isn't fiddled with every few years to get votes. 

The alternative might be that they just take a 10-20% haircut from super balances in the future


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## drsmith (27 March 2013)

> A new analysis of superannuation payments commissioned by the activist group GetUp! shows that the wealthiest 10 per cent of Australians pocket a third of the tax breaks.




When one considers who gets what out of retirement funding, the pension and other benefits also need to be considered.

http://au.finance.yahoo.com/news/super-industry-nervous-over-budget-094645023.html



FlyingFox said:


> Don't see how something that is widely believed to unsustainable should be considered class warfare. If the head of a large super fund says it's unsustainable, then they must be some truth in the matter??



Labor just wants to tax it more to fund its waste and fantasies.

Reform of retirement income support needs to be considered in a much broader context than that.


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## FlyingFox (27 March 2013)

drsmith said:


> Labor just wants to tax it more to fund its waste and fantasies.
> 
> Reform of retirement income support needs to be considered in a much broader context than that.





See my previous comment about this government or the next. When push comes to shove, the coalition will do the same. They just need to come up with a sustainable set of policies that will not get touched for the next 10-20 years at least.

Agree with your second point.


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## drsmith (27 March 2013)

FlyingFox said:


> See my previous comment about this government or the next. When push comes to shove, the coalition will do the same.



They have past form on that (superannuation surcharge), but it will be for the repayment of debt (hopefully) which is more fiscally responsible than Labor's priorities.


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## Garpal Gumnut (27 March 2013)

Ijustnewit said:


> Tax Breaks Scrapped ? He we go more Gillard Class Warfare. :1zhelp:
> 
> http://www.abc.net.au/news/2013-03-27/wong-signals-sustainable-budget-super-changes/4597050




Anyone with super, in a SMSF or an Industry Fund has rocks in their head if they vote this Labor government back in.

Penny Wong has said super will be hit, and hit hard.

Any other also rans in the ALP who argue otherwise have no say.

If you haven't already I would, to those with super who can, suggest starting a pension, examine stocks held for possible capital gains realisation before the budget and sticking your head between your legs.

gg


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## drsmith (28 March 2013)

drsmith said:


> They have past form on that (superannuation surcharge), but it will be for the repayment of debt (hopefully) which is more fiscally responsible than Labor's priorities.



At least this time they're being honest,



> His opposition counterpart Mathias Cormann said the superannuation industry and parliament's independents should rally against such changes now, before it was too late.
> 
> “We don't want to see any increase in taxes targeting superannuation,” he said.
> 
> “But if the government increases taxes on superannuation in the budget and spends all the money as they usually do, we cannot give a guarantee that we will fix up all the damage on day one.”




https://www.aussiestockforums.com/forums/newreply.php?do=newreply&p=762956


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## sptrawler (28 March 2013)

Garpal Gumnut said:


> Anyone with super, in a SMSF or an Industry Fund has rocks in their head if they vote this Labor government back in.
> 
> Penny Wong has said super will be hit, and hit hard.
> 
> ...




I tend to agree with you GG, most super changes aren't retrospective.


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## Garpal Gumnut (28 March 2013)

sptrawler said:


> I tend to agree with you GG, most super changes aren't retrospective.




I've sold many of my "winners" last week.

By the time the ole Wong gets to me there will be nothing to tax.

And she won't be able to make it retrospective.

gg


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## drsmith (29 March 2013)

What the government is considering, according to the SMH.



> The government has been considering boosting the tax on the super-fund earnings of wealthy people from 15 to 30 per cent or increasing the earnings tax on all super accounts from 15 per cent to 20 in the May budget.




http://www.smh.com.au/opinion/politics/super-losses-likely-as-libs-reject-repeal-20130328-2gxae.html


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## sptrawler (29 March 2013)

Both suggested policies only affect super in the accumulation phase. 
As GG says, it would be very difficult to impose extra costs to funds in the pension phase.
It would be totally counter productive, eroding pensioners balances and forcing them onto the age pension sooner.IMO


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## drsmith (29 March 2013)

sptrawler said:


> Both suggested policies only affect super in the accumulation phase.



I can't see them increasing the fund earnings tax across the board as that would essentially be a tax increase for most income earners. The only circumstances under which this would be considered I would have thought would be if increasing the contributions tax on higher income earners wasn't going to raise sufficient revenue for their purposes.

I would have thought the simplest thing to do would be to reduce the concessional contributions caps, again.

http://www.ato.gov.au/super/content.aspx?doc=/content/60489.htm&page=3&H3


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## sptrawler (30 March 2013)

drsmith said:


> I can't see them increasing the fund earnings tax across the board as that would essentially be a tax increase for most income earners. The only circumstances under which this would be considered I would have thought would be if increasing the contributions tax on higher income earners wasn't going to raise sufficient revenue for their purposes.
> 
> I would have thought the simplest thing to do would be to reduce the concessional contributions caps, again.
> 
> http://www.ato.gov.au/super/content.aspx?doc=/content/60489.htm&page=3&H3




The funds earnings tax is the one that has to be lifted by the smallest margin for maximum gain.

Bashing the high income earners, when they can only get relief on $25k, is nonsense and will save nothing.

4% increase on contributions tax to bring it in line with the lowest tax rate, covers all tax earners. That's $b's

To increase the contribution tax on the top 10% of wage earners from 15% to 30% on $25k contribution is 2/5ths of 5/8ths of nothing.

It would just be another case of class bashing, that hasn't worked so far and is actually counter productive for Labor.lol

The other thing it is easy to justify, as the 15% contribution tax was the same as the lowest tax rate, now it is 19%.


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## drsmith (30 March 2013)

sptrawler said:


> The funds earnings tax is the one that has to be lifted by the smallest margin for maximum gain.



You have a point there, in more than one sense. By hitting a broad section of the community, it would also reduce the rubble that is currently what remains the house of Labor to even smaller pieces.   

Labor won't do that in my view. They'll try at least to retain some pieces of rubble big enough to shelter under and go for an option consistent with their class war rhetoric.

In the context of what Labor wants to do with the money, they're all nonsense. Super should be reformed, but in the context of broader tax reform, not spending.


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## drsmith (31 March 2013)

It will be interesting to see what Labor's definition of 'fabulously wealthy' is.



> The government is understood to be considering lifting the 15 per cent tax rate on superannuation earnings for those with high balances, but has yet to settle on a level at which it will kick in.




http://www.theaustralian.com.au/nat...nnuation-changes/story-fn59niix-1226609774940


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## drsmith (31 March 2013)

Will earnings and contributions both be hit ?



> Changes to the tax treatment of superannuation contributions could boost the budget bottom line by hundreds of millions of dollars.




http://www.abc.net.au/news/2013-03-31/emerson-backs-debate-on-taxing-super-of-wealthy/4602606


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## sptrawler (31 March 2013)

drsmith said:


> It will be interesting to see what Labor's definition of 'fabulously wealthy' is.
> 
> 
> 
> http://www.theaustralian.com.au/nat...nnuation-changes/story-fn59niix-1226609774940




So they are talking up the wealthy bashing, best of luck with that, it hasn't worked so far.

They are just proving how dumb they are.IMO

It is more about their jobs than sensible changes to super, that would save a lot of money.

How they can maintain 15% contribution tax with a lowest tax rate of 19% is just dumb, that gives all tax payers a 4% tax break.
Yet in the same breath they say super is unsustainable, how dumb is that, the worlds greatest loser.


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## Sir Burr (31 March 2013)

drsmith said:


> Will earnings and contributions both be hit ?
> 
> 
> 
> http://www.abc.net.au/news/2013-03-31/emerson-backs-debate-on-taxing-super-of-wealthy/4602606




How can a max. of $25K @ 15% be wealthy?
Wow

Edit: ...maybe talking about non-concessional contributions


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## sptrawler (31 March 2013)

Sir Burr said:


> How can a max. of $25K @ 15% be wealthy?
> Wow
> 
> Edit: ...maybe talking about non-concessional contributions




Non concessional contributions are after tax from your pocket contributions, they tax that and the system goes down the drain.
Which believe it not may happen, what if workers in their enterprise agreements, decide to take the pay rise rather than an increase in super contributions?

Maybe they decide an extra 3% payrise towards their house payment is better value.

Actualy if they decide super is a dud and say we will forego it for a 12% payrise, well that would throw a real cat among the pigeons. LOL
It won't happen but it shows how easy it is for people to be disenchanted with something that was meant to be for their benefit.
Before this government came in workers could see putting money away for retirement was a winner.

Now in a short period of time, they have seen how a government can send you a cheque in the mail, put insulation in your roof, throw money at your school .
Now the same government is scambling round to pay for it. Absolute losers


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## Intrinsic Value (31 March 2013)

The govt is out of touch with reality. Their idea of the rich and the reality is two different things. They think that people earning more than 100 -150k are rich! That is bare survival money for a family with a mortgage in a capital city in Australia. What are they thinking?

It seems they don't really want people to retire and be self funded as they are doing everything in their power to dissuade people from using super as a primary vehicle to fund retirement.

What this govt should be doing is cutting costs not trying to raid our super to fund their deficit. They could start by reining in middle class welfare which according to a report this week is running at 316 billion a year and which has compliance costs equal to 50 percent of this figure. What a joke? Will the Liberals man up and reverse some of this madness? I have little confidence they will but in the mean time Labor has to go they have done their dash.


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## Garpal Gumnut (1 April 2013)

My contacts tell me that Gillard and Emerson may be in for more than they bargained for in raiding retiree's Superannuation.

Simon Crean and Martin Ferguson are planning to , if not cross the floor, perhaps challenge the leadership of the ALP on their Superannuation hoist.

From the Australian 



> SIMON Crean has deepened the rift within Labor over looming budget changes to the superannuation regime, declaring he would oppose any move by the government to tax earnings on super accounts.
> 
> Launching an attack on Labor's inability to frame serious policy debate, the senior party figure would not comment on whether he would cross the floor to vote against any changes. But he called on the government to explicitly rule out changes that retrospectively taxed earnings generated by super accounts, saying it was "tantamount to taxing people's retirement surpluses to fund our surplus".
> 
> Mr Crean delivered his ultimatum shortly after Trade Minister Craig Emerson called for a discussion on lifting taxes on the superannuation accounts of the "fabulously wealthy", highlighting the rift in Labor ranks over values and policy substance after last month's leadership crisis.






> Dr Emerson also rejected claims from Mr Crean and former resources minister Martin Ferguson that the government had failed on reform and was not "governing for all Australians".
> 
> But former Reserve Bank governor Bernie Fraser yesterday backed the criticism that Labor had lost the "governing for everybody" mentality adopted during the Hawke and Keating years.
> 
> ...




Bernie Fraser is weighing in as well.

It looks not good for Gillard and Emerson.

gg


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## FlyingFox (1 April 2013)

Intrinsic Value said:


> The govt is out of touch with reality. Their idea of the rich and the reality is two different things. They think that people earning more than 100 -150k are rich! That is bare survival money for a family with a mortgage in a capital city in Australia. What are they thinking?




Agreed. However the stats say otherwise. 150K puts you in the top 20% almost everywhere in Oz. The imbalance in my opinion is due to house prices going haywire in the last decade. Equate that out for people who bought prior and people on 150K are doing quite well.



Intrinsic Value said:


> It seems they don't really want people to retire and be self funded as they are doing everything in their power to dissuade people from using super as a primary vehicle to fund retirement.
> 
> What this govt should be doing is cutting costs not trying to raid our super to fund their deficit. They could start by reining in middle class welfare which according to a report this week is running at 316 billion a year and which has compliance costs equal to 50 percent of this figure. What a joke? Will the Liberals man up and reverse some of this madness? I have little confidence they will but in the mean time Labor has to go they have done their dash.




Agreed. However super concessions also costs the government a lot of money. It is not only middle but moreso upper class welfare depending on how you look at it. I think there were some numbers in a another thread by Sydboy007.


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## So_Cynical (1 April 2013)

Intrinsic Value said:


> The govt is out of touch with reality. Their idea of the rich and the reality is two different things. They think that people earning more than 100 -150k are rich! That is bare survival money for a family with a mortgage in a capital city in Australia. What are they thinking?




Bollocks

Survival with an Audi in a beach side suburb.


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## Intrinsic Value (1 April 2013)

So_Cynical said:


> Bollocks
> 
> Survival with an Audi in a beach side suburb.




Given the average mortgage is around 350 k you would probably need an income of at least 100k or more to qualify for a loan. Then of course you would need probably 200k saved as well just to buy an average house in the suburbs of most of Australia's capital cities.


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## Intrinsic Value (1 April 2013)

FlyingFox said:


> Agreed. However the stats say otherwise. 150K puts you in the top 20% almost everywhere in Oz. The imbalance in my opinion is due to house prices going haywire in the last decade. Equate that out for people who bought prior and people on 150K are doing quite well.
> 
> 
> 
> Agreed. However super concessions also costs the government a lot of money. It is not only middle but moreso upper class welfare depending on how you look at it. I think there were some numbers in a another thread by Sydboy007.




Super concessions don't cost as much money as the govt thinks. It is a bit of false economy if those people who benefit from tax breaks then go on to be self funded retirees rather than pension collectors. Remember a lot of these so called high income earners don't start making money til later in life and after paying of their mortgages and schooling their kids. They might have a 10 year window to stash it away otherwise they are going to be welfare dependent in old age and a burden on the govt so a tax incentive here is not such a bad thing.  

Further If people cant use super to reduce their marginal rate they will find other ways like buy investment properties or borrow and leverage on the stock market to help reduce their taxable income so the govts savings may be more illusionary than it looks.


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## medicowallet (1 April 2013)

Intrinsic Value said:


> Further If people cant use super to reduce their marginal rate they will find other ways like buy investment properties or borrow and leverage on the stock market to help reduce their taxable income so the govts savings may be more illusionary than it looks.




As has been mentioned before, if they decide to negatively gear, it may cost the government more to fund the tax deductions per year of an interest only loan over say, 10 years, than to give super concessions with a rolling taxation benefit.    

This would also likely contribute to a mini-housing boom (something we do not need)

Seems like the only solution if they change super is to tinker with negative gearing as well.

MW


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## drsmith (1 April 2013)

Having already increased the contributions tax for those on incomes above $300k, the government has already partially tapped that well. Interestingly, the same politicians making these decisions have been tardy in passing that legislation that would apply this change to their own defined benefit superannuation. 

John Howard applied his superannuation surcharge to defined benefit schemes at least for the public service although I'm not sure if that went as far as politicians. It was a mess and illustrated the problems with constant change to the system.  



> In last year's budget, the tax on contributions was doubled from 15 per cent to 30 per cent for people earning more than $300,000; however, this has not been legislated yet.
> 
> Critics of the move said it was effectively retrospective taxation because people locked away their savings in superannuation funds on the understanding that the earnings tax rate was 15 per cent.
> 
> ...




http://www.theaustralian.com.au/nat...nal-rift-deepens/story-fn59nsif-1226610030006


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## Judd (1 April 2013)

I'm always fascinated by the alleged claim that a couple with $1m in superannuation are considered wealthy.  Maybe or maybe not.  Simple sums indicate that $1 at 5% is $50k pa.  Tax free where the couple are 60+.

However, no one seem to be prepared to equate the $1m to the sum of the age pension plus supplement.  A married couple of full age pension receive $1,106.20 pf and, if eligible, $49.40 pf supplement.  A total of $1,155.60 pf.  This is $30,045.60 pa .  To earn that amount you would need capital of $600,912 earning 5% (30,045.60/.05), so in my view in that context $1m is not a massive amount in comparison.

Suppose it depends on how much you wish to contort reality and Governments seem to be good at doing that.


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## FlyingFox (1 April 2013)

Judd said:


> I'm always fascinated by the alleged claim that a couple with $1m in superannuation are considered wealthy.  Maybe or maybe not.  Simple sums indicate that $1 at 5% is $50k pa.  Tax free where the couple are 60+.
> 
> However, no one seem to be prepared to equate the $1m to the sum of the age pension plus supplement.  A married couple of full age pension receive $1,106.20 pf and, if eligible, $49.40 pf supplement.  A total of $1,155.60 pf.  This is $30,045.60 pa .  To earn that amount you would need capital of $600,912 earning 5% (30,045.60/.05), so in my view in that context $1m is not a massive amount in comparison.
> 
> Suppose it depends on how much you wish to contort reality and Governments seem to be good at doing that.




You should be doing the sums with principal plus interest and not interest only to have a fair comparison.


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## Judd (1 April 2013)

FlyingFox said:


> You should be doing the sums with principal plus interest and not interest only to have a fair comparison.




Fair point but I was working from the aspect that a couple on the age pension does not consume the notional capital value.


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## drsmith (1 April 2013)

In terms of increased taxes based on assets in the fund, I would imagine the assets test for a part pension would provide a lower limit.



> Family situation,
> 
> Homeowners: Single $731 500, Couple (combined) $1 086 000.
> Non-homeowners: Single $871 000, Couple (combined) $1 225 500.



http://www.humanservices.gov.au/customer/enablers/assets

This though is hardly super rich.


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## FlyingFox (1 April 2013)

Judd said:


> Fair point but I was working from the aspect that a couple on the age pension does not consume the notional capital value.




How the accounting for that is done maybe quite complicated (I'm not an accountant or an economist so someone else please chime in) but frankly quite irrelevant. No nest egg is passed on for anyone on a pension.

The point of saving for retirement is pay for retirement and not to pass on a nest egg. If you can afford to leave a $1 million dollar nest egg, and I believe the stats will prove me correct, you should be considered wealthy.

Edit: I am assuming the person has their own paid off home.


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## So_Cynical (1 April 2013)

Intrinsic Value said:


> Given the average mortgage is around 350 k you would probably need an income of at least 100k or more to qualify for a loan. Then of course you would need probably 200k saved as well just to buy an average house in the suburbs of most of Australia's capital cities.




Correct, i live in Sydney and while i have enough for a 30% deposit on the average mortgage, i don't earn enough to actually pay off the loan.... what's that got to do with the 150K struggling statement :dunno: put simply if your household income is 150K+ and your struggling, your a tool or some sort of Muppet.


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## Intrinsic Value (2 April 2013)

So_Cynical said:


> Correct, i live in Sydney and while i have enough for a 30% deposit on the average mortgage, i don't earn enough to actually pay off the loan.... what's that got to do with the 150K struggling statement :dunno: put simply if your household income is 150K+ and your struggling, your a tool or some sort of Muppet.




The point my dear friend is that you are not rich on that income and indeed if you are paying off a mortgage on that income then you wouldn't have much left over at the end of the month.


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## FlyingFox (2 April 2013)

Intrinsic Value said:


> The point my dear friend is that you are not rich on that income and indeed if you are paying off a mortgage on that income then you wouldn't have much left over at the end of the month.




I think the differentiating point is that property and houses are overly expensive. If you bought before the boom and are even slightly financially oriented, then you have or are close to having a paid of property. At this point a $150K is a fair amount of money. Remember ~70% of Australians own their own home and edit: ~ half of these own them outright. 

On the other hand, if you are young and want to buy your first property, then even at a $150K you may be struggling as your mortgage will chew in to a substantial portion of your income. However this group are still in the minority.

Also if you have a look at income distributions, $150 K puts you into the top 20% of incomes in Oz and it goes up very quickly, $185 K is close to 10% and $250 K is somewhere near the top 2-3% or less. Housing aside, if you are not considered wealthy on $250K then there is something very wrong.


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## FxTrader (2 April 2013)

FlyingFox said:


> Also if you have a look at income distributions, $150 K puts you into the top 20% of incomes in Oz and it goes up very quickly, $185 K is close to 10% and $250 K is somewhere near the top 2-3% or less. Housing aside, if you are not considered wealthy on $250K then there is something very wrong.




Terms like wealthy and rich are assigned arbitrary meanings and values usually based around some current income level.  Wealth should really be measured in terms of assets, the passive income generated by these assets and any offsetting liabilities.  If I owned 10 million dollars worth of real estate (debt free) but declared little or no income am I wealthy?  I suspect most would say yes.  Yet if I owned a 10 million house I could still collect the full aged pension in such a low income scenario.

The government has a problem, modelling the growth of the aged pension over time shows it to be unsustainable.  Unfortunately, the superannuation system can be gamed by drawing it all out as a tax free lump sum on retirement and then structuring one's finances to draw a pension.  So the intention of super being used as a retirement income stream is thwarted by a flaw in it's structure.  Tinkering with tax thresholds does not solve the problem.


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## McLovin (2 April 2013)

So_Cynical said:


> Correct, i live in Sydney and while i have enough for a 30% deposit on the average mortgage, i don't earn enough to actually pay off the loan.... what's that got to do with the 150K struggling statement :dunno: put simply if your household income is 150K+ and your struggling, your a tool or some sort of Muppet.




Why does your inability to pay off a standard size mortgage in Sydney mean that someone earning $150k in Sydney wouldn't be struggling?

With a couple of kids and a mortgage even $250k is still very much middle class in Sydney.



			
				Flying Fox said:
			
		

> Also if you have a look at income distributions, $150 K puts you into the top 20% of incomes in Oz and it goes up very quickly, $185 K is close to 10% and $250 K is somewhere near the top 2-3% or less. Housing aside, if you are not considered wealthy on $250K then there is something very wrong.




Most international cities have the same issues. In places like New York, London, Singapore, Hong Kong $250k won't buy you the same lifestyle as it would elsewhere. Sydney can't be compared to the rest of Australia, IMO.


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## FlyingFox (2 April 2013)

FxTrader said:


> Terms like wealthy and rich are assigned arbitrary meanings and values usually based around some current income level.




Agree they are arbitrary but relative incomes are just one of the unbiased ways of making these comparisons for incomes. Since taxes are mainly on income, they tend to be used as a measure of wealth. Also this is the more applicable measure for the majority of the population as people with large sets of paid off assets are in the minority. At the last census if you had over $1 million of unencumbered assets as investments *apart from your family home* you were in the top 2% of the wealthy.



FxTrader said:


> Wealth should really be measured in terms of assets, the passive income generated by these assets and any offsetting liabilities.  If I owned 10 million dollars worth of real estate (debt free) but declared little or no income am I wealthy?  I suspect most would say yes.  Yet if I owned a 10 million house I could still collect the full aged pension in such a low income scenario.




I agree but the two tend to be interrelated. BTW you wouldn't pass the asset test for your pension and would not get one.



FxTrader said:


> The government has a problem, modelling the growth of the aged pension over time shows it to be unsustainable.  Unfortunately, the superannuation system can be gamed by drawing it all out as a tax free lump sum on retirement and then structuring one's finances to draw a pension.  So the intention of super being used as a retirement income stream is thwarted by a flaw in it's structure.  Tinkering with tax thresholds does not solve the problem.




Agreed. While tinkering the tax thresholds does not solve this, they will not change the structure as it will piss off more people and would be considered a retrospective change and possibly challenged in the courts etc. Also they can't apply this change to only those that have high super balances and not everyone. Personally the full lump sum option should not be available to anyone as long as super is subsidized.

If executed properly it may stop people from accumulating large tax free super holdings (more than needed for retirement) that they will get out tax free and pass on to their kids.


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## FxTrader (2 April 2013)

FlyingFox said:


> BTW you wouldn't pass the asset test for your pension and would not get one.




Your primary residence (family home) is exempt from the assets test assessment.  I know a few people personally who own primary residences worth well over a million dollars and collect at least a part pension.  They could easily sell and move into a more modest residence but they would lose their pension .  This is what I mean by gaming the super system.  I doubt the super architects considered the full impact of the now well known and deployed strategy of plowing as much lump sum cash into one's primary residence as will allow at least the collection of  a part pension if not the full pension.


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## FlyingFox (2 April 2013)

FxTrader said:


> Your primary residence (family home) is exempt from the assets test assessment.  I know a few people personally who own primary residences worth well over a million dollars and collect at least a part pension.




That comment was made under the assumption that if you have 10 million worth of paid of property it would be more than one but point taken 



FxTrader said:


> They could easily sell and move into a more modest residence but they would lose their pension .  This is what I mean by gaming the super system.  I doubt the super architects considered the full impact of the now well known and deployed strategy of plowing as much lump sum cash into one's primary residence as will allow at least the collection of  a part pension if not the full pension.




No they didn't. And more largesse was added to win votes over the years. The worst abuse was/is of concessional caps. Just an anecdotal situation, a know someone who was contributing all their salary up to $100 K into super (and upto 50k once this was lowered) because they were going to retire in a few years. This year they retired (from Oz at least), took the lump sump payment and moved to nz. Rough back of the envelope figure, this cost the tax payers 50-60 in lost revenue.

It's not just super but the whole taxation and welfare system in general. And it will not change because it is political suicide to do so. Look at the irritation the taxation of super has raised in the media and this forum in just the last week.


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## Julia (2 April 2013)

FxTrader said:


> Your primary residence (family home) is exempt from the assets test assessment.  I know a few people personally who own primary residences worth well over a million dollars and collect at least a part pension.  They could easily sell and move into a more modest residence but they would lose their pension .



Might be time to only exempt the family home up to a certain value?
Then I suppose there would be much whining from those with property in eg Sydney compared to a family home in WopWop.


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## drsmith (2 April 2013)

If the government was genuine about long-term sustainability, it could look at reintroducing reasonable benefit limits and review access to further super tax benefits for any new contributions made by those who have formally retired (accessed their existing super benefit/government pension as part of a formal retirement).


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## FlyingFox (2 April 2013)

drsmith said:


> If the government was genuine about long-term sustainability, it could look at reintroducing reasonable benefit limits and review access to further super tax benefits for any new contributions made by those who have formally retired (accessed their existing super benefit/government pension as part of a formal retirement).




+10. Not that they will. Perhaps the simplest way of doing this is to make super inaccessible except via a pension scheme with the difference in retirement age and mean lifespan used as the lifetime of the pension. At least in this way the concessions can be justified.


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## mylorman (2 April 2013)

i know this may sound ignorant and the like but I have always maintained that superannuation is not the best option. I decided in my twenties to put money into starting my own business and prefer to think that my business will support me in my latter years .. after all who really wants to retire, be bored and have a heart attack anyway ? I dont see that I will stop working for myself just that my role will change and hopefully it will lead to a cushier job that pays excellent money. I will say that the current GFC hasnt helped with growth so sometimes it makes me wonder whats the point of it all anyway ... before i sunk money into super i would look at buying good property ... just my opinion for whatever it's worth
Cheers
PS how could the government resist keeping their hands off the huge super holdings that have accumulated ?


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## drsmith (2 April 2013)

mylorman said:


> PS how could the government resist keeping their hands off the huge super holdings that have accumulated ?



Depending on how desperate they get, it's what they hit before going after marginal income tax rates.

On ABC radio news late this afternoon I heard a segment with Bill Shorten defending current arrangements for up to 4-times average salary. DecQ AWOTE was $1396 or ~$73k pa. 4x is ~$292k. That's very close to a figure we've seen before and won't raise much for the government.

Perhaps they've found the water a little too cold for one's delicate pre-election budget toe.


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## So_Cynical (2 April 2013)

McLovin said:


> With a couple of kids and a mortgage even $250k is still very much middle class in Sydney.




Not in Penrith, in fact not anywhere west of Parra...anyone struggling on 150K is struggling because they have made financial commitments that were/are the cause of their struggle, Mc Mansion first home, 2 cars, etc.


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## Julia (2 April 2013)

drsmith said:


> Perhaps they've found the water a little too cold for one's delicate pre-election budget toe.



They have been doing what they always do - testing the electorate for reactions to various levels of change of legislation.  They have been diligently leaking various options in order to generate discussion and gauge responses without making a single statement about what they are actually considering.

It has been a pretty successful strategy in that heaps of reaction has been garnered which will then allow them to pick a level of Super gouging that will only alienate those whose votes they were never going to get anyway.


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## drsmith (2 April 2013)

Julia said:


> They have been doing what they always do - testing the electorate for reactions to various levels of change of legislation.  They have been diligently leaking various options in order to generate discussion and gauge responses without making a single statement about what they are actually considering.
> 
> It has been a pretty successful strategy in that heaps of reaction has been garnered which will then allow them to pick a level of Super gouging that will only alienate those whose votes they were never going to get anyway.



You'd think they'd do that behind the scenes.

It looks very messy in the public domain and a free kick for the Opposition.


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## sydboy007 (3 April 2013)

drsmith said:


> If the government was genuine about long-term sustainability, it could look at reintroducing reasonable benefit limits and review access to further super tax benefits for any new contributions made by those who have formally retired (accessed their existing super benefit/government pension as part of a formal retirement).




One has to ask why Howard and Costello removed the RBL?  Possibly due to the fact that it benefited LNP supporters far more than the ALP?  The RBL limit was just a tad over $1 million when they changed things to the current system, as long as you took at least half as a pension.  That seemed a reasonable amount to aquire with Government subsidy.  IF you want more then do it outside of super and pay the taxes the country needs to operate all the services you'll need to support your twilight years.

Still don't understand why you can take all you super balance and spend it as fast as you like then put your hand out for the aged pension.


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## sydboy007 (3 April 2013)

Julia said:


> Might be time to only exempt the family home up to a certain value?
> Then I suppose there would be much whining from those with property in eg Sydney compared to a family home in WopWop.




Maybe set it at twice the median for the City or Suburb???

then again you'd get people moving or being affected as values changed.

Something needs to be done though as the wealth stored in housing and locked away is causing taxation to be much higher than required.  There's only so much longer the shrinking tax payer base can pay for everything before the system breaks under the pressure.  With nominal GDP growly so weakly I think we may be starting to see the first stress cracks already.

The number of 65+ is going to double over the next 15 years.  It's the kind of scenario that makes me scratch my head and wonder why anyone would want to be in politics.  You are basically faced with shafting the young or trying to fight the aged - ACA and Today Tonight just LOVE dog food eating pensioner style stories.


----------



## Garpal Gumnut (3 April 2013)

drsmith said:


> You'd think they'd do that behind the scenes.
> 
> It looks very messy in the public domain and a free kick for the Opposition.




It is a free kick for the coalition, and should be.

The ALP through their Union and Faction Heavies run many "Industry Superfunds".

They will manipulate any changes in Super, in the budget, to destroy SMSF's.

This will force self funded retirees to fund Union heavies, Unions, Faction ALP heavies and ultimately the ALP.

The ALP have less than 30% of the vote, but will control more than 70% of Superannuation funds.

They will then employ more University graduates, and doctors' wives to keep their moribund party going.

The Workers need to unite against the ALP, and will via the Coalition.

gg


----------



## DB008 (3 April 2013)

Can't remember if I posted in this thread, but my 'mentor' spoke to me about the ALP raiding super over a year ago.
Mentor was spot on.


----------



## drsmith (3 April 2013)

sydboy007 said:


> One has to ask why Howard and Costello removed the RBL?  Possibly due to the fact that it benefited LNP supporters far more than the ALP?  The RBL limit was just a tad over $1 million when they changed things to the current system, as long as you took at least half as a pension.  That seemed a reasonable amount to aquire with Government subsidy.  IF you want more then do it outside of super and pay the taxes the country needs to operate all the services you'll need to support your twilight years.
> 
> Still don't understand why you can take all you super balance and spend it as fast as you like then put your hand out for the aged pension.



What's interesting now is that Labor's not talking about reintroducing RBL's. I have not heard any commentary on this. Perhaps it just won't raise much.

Higher super contributions/earnings tax on the top 1 or 2% of income earners won't raise much either. Perhaps Labor is now looking for the most graceful way it can escape the discussion it started.


----------



## Judd (4 April 2013)

If my memory serves me correctly, the Government of the day removed the RBL because the maintenance costs to monitor every superannuation account cost more than the amount raised in excess RBL.  I understand over the period RBLs applied less than 1,000 superannuation accounts for individuals were subject to this provision.  Whether it would apply now and the potential amount raised versus system maintenance costs is probably a matter of debate.


----------



## sptrawler (4 April 2013)

Judd said:


> If my memory serves me correctly, the Government of the day removed the RBL because the maintenance costs to monitor every superannuation account cost more than the amount raised in excess RBL.  I understand over the period RBLs applied less than 1,000 superannuation accounts for individuals were subject to this provision.  Whether it would apply now and the potential amount raised versus system maintenance costs is probably a matter of debate.




Another reason the RBL was removed. 
The thinking of the government changed, to one of controlling how much can be put in tax effectively.
There is real problems getting the money back into super once it is removed.


----------



## drsmith (4 April 2013)

Judd said:


> If my memory serves me correctly, the Government of the day removed the RBL because the maintenance costs to monitor every superannuation account cost more than the amount raised in excess RBL.  I understand over the period RBLs applied less than 1,000 superannuation accounts for individuals were subject to this provision.  Whether it would apply now and the potential amount raised versus system maintenance costs is probably a matter of debate.



That might explain why the current government isn't looking there.


----------



## drsmith (4 April 2013)

What the government could raise by increasing the contributions tax from 15 to 30 per cent for those earning over $240k,



> Mr Swan would not confirm the likely targets ... in the wake of reports that changes would affect only the top 1-2 per cent of workers, earning about $240,000 or more…
> 
> The National Centre for Social and Economic Modelling estimates there are about 190,000 people in the top 2 per cent earning incomes of more than $240,000 a year…
> 
> ...



http://www.theaustralian.com.au/nat...e-gain-for-labor/story-fn59nsif-1226612076606

http://blogs.news.com.au/heraldsun/...comments/blowing_billions_dying_for_millions/


----------



## sptrawler (4 April 2013)

Maybe it's just a diversion, give everyone a common focus, stops them focusing on the actual policies that have failed and are continueing to fail.

You are not seeing much in the press about all the other failures.
So it would appear to be working, let's not forget even the reporters have skin in the superannuation game.

Gillard is playing a time wasting diversion tactic.IMO
The budget won't have any real nastys in it and they have survived another couple of months.

Slimy lot.


----------



## craft (4 April 2013)

What chances that Labor are planning some Henry Recommendations implementation on Super?  

Out of Labor's mouth I have heard long term sustainability, equity and Hawk/Keating type reform. That pretty much sounds to me like Henry is a possibility.




> Recommendation 18:
> 
> The tax on superannuation contributions in the fund should be abolished. Employer superannuation contributions should be treated as income in the hands of the individual, taxed at marginal personal income tax rates and receive a flat-rate refundable tax offset.







> Recommendation 19
> 
> The rate of tax on superannuation fund earnings should be halved to 7.5 per cent. Superannuation funds should retain their access to imputation credits. The 7.5 per cent tax should also apply to capital gains (without a discount) and the earnings from assets supporting superannuation income streams.





http://www.taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/Papers/Final_Report_Part_2/chapter_a2-2.htm



If they go for it or something else structurally substantial  – lets hope we don’t have a repeat of the Resource Rent Tax implementation fiasco.

Undoubtable we will once again (already started) have the minority who stand to lose running a mis-information campaign to hoodwink the majority who stand to benefit.


----------



## drsmith (4 April 2013)

Ken Henry ?

Who's he ??

I think even Labor have forgotten.


----------



## medicowallet (4 April 2013)

craft said:


> Undoubtable we will once again (already started) have the minority who stand to lose running a mis-information campaign to hoodwink the majority who stand to benefit.




Would the ones likely to benefit be middle class welfare dependent Australians?

Would the ones likely to lose be the Australians with a disproportionately high tax burden?


It always seems nicer when you are the recipient of government welfare than a contributor.

I wonder if offering incentives to work harder would increase productivity?  No test wrt theory since Ruddy got in eh?

MW


----------



## sptrawler (4 April 2013)

With returns on capital gauranteed investments at or about 4 to 5%, taxing earnings is dumb.

But this government falls into that catergory, only joking, Like I've said I think it's all crap to take the heat off.


----------



## sptrawler (5 April 2013)

The other laugh is the Independents and Peter Slipper, have probably been pushing the SMSF for their family members, it would make sense.

Well that was untill Gillard and the union run industry funds get involved.LOL

http://www.theage.com.au/opinion/po...per-changes-revealed-20130403-2h759.html#poll

Now it probably may reflect on them and their families, they call for an explanation.LOL

The Australian public has been calling for an explanation for 5 years?
It obviously clouds your vision when you have your nose in the trough.

Adam Brandt, worried why?
Bob Katter, worried why?

No comment from the three amigos, why?
because they are in the loop, it's a game.IMO

Let's see if there isn't a great announcement, that gives everyone a feel good hit and the three amigos get airplay for supporting it.lol
I'm probably being cynical.


----------



## prawn_86 (5 April 2013)

Press conference happening now:

"Changes not retrospective"

"Concessions cant be open ended"


----------



## bigdog (5 April 2013)

http://www.centralwesterndaily.com.au/story/1411392/super-changes-how-you-will-be-affected/?cs=2452

*SUPER CHANGES: How you will be affected *

By  Daniel Hurst and Jonathan Swan 
April 5, 2013, 9:39 a.m.

Source: The Sydney Morning Herald

Australians with about $2 million in superannuation will lose tax concessions under changes to the system announced on Friday by Treasurer Wayne Swan.

Treasury estimates that about 16,000 people will be affected by this measure in 2014-15, which represents about 0.4 per cent of Australia's projected 4.1 million retirees in that year.

For superannuation assets earning a rate of return of 5 per cent, this reform will only affect individuals with more than $2 million in superannuation assets supporting income streams.

This reform will save about $350 million over the forward estimates period.

Under current arrangements, all earnings on assets supporting income streams (superannuation pensions and annuities) are tax-free, in contrast to earnings in the accumulation phase of superannuation, which are taxed at 15 per cent.

However, Mr Swan announced that from July 1, 2014, future earnings (such as dividends and interest) on assets supporting income streams will be tax free only up to $100,000 a year. Earnings above $100,000 will be taxed at the same concessional rate of 15 per cent that applies to earnings in the accumulation phase


----------



## sptrawler (5 April 2013)

bigdog said:


> http://www.centralwesterndaily.com.au/story/1411392/super-changes-how-you-will-be-affected/?cs=2452
> 
> *SUPER CHANGES: How you will be affected *
> 
> ...




Yes another sly move, why not tax the pension above $100,000 at 15%. 
Well the reason would be, that it would mean the politicians would have to pay tax on their pensions.LOL
But wouldn't that be fairer.


----------



## craft (5 April 2013)

[SUP][/SUP]







sptrawler said:


> Yes another sly move, why not tax the pension above $100,000 at 15%.
> Well the reason would be, that it would mean the politicians would have to pay tax on their pensions.LOL
> But wouldn't that be fairer.



...


> Applying the same treatment to defined benefit funds
> 
> The Government will ensure that members of defined benefit funds, including federal politicians, are impacted by this new reform in the same way as members of defined contribution funds (i.e. that there will be a corresponding decrease in concessions in the retirement phase).
> 
> ...


----------



## craft (5 April 2013)

That was all pretty underwhelming – What a bunch of Wusses.

Calling that Keating/Hawk like reform tops Domino’s calling a pizza a game changer.


----------



## craft (5 April 2013)

You have got to love Grandfathering.



> Special arrangements will apply for capital gains on assets purchased before 1 July 2014:
> 
> For assets that were purchased before 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024;


----------



## FlyingFox (5 April 2013)

craft said:


> That was all pretty underwhelming – What a bunch of Wusses.
> 
> Calling that Keating/Hawk like reform tops Domino’s calling a pizza a game changer.




+1 . However a tiny tiny step in the right direction.


----------



## McLovin (5 April 2013)

This is a first step in the right direction. I doubt it will be the last. Depite the rhetoric from Abbott, I think the more sensible heads in the opposition realise the current arrangement isn't sustainable.


----------



## drsmith (5 April 2013)

> Applying the same treatment to defined benefit funds
> 
> The Government will ensure that members of defined benefit funds, including federal politicians, are impacted by this new reform in the same way as members of defined contribution funds (i.e. that there will be a corresponding decrease in concessions in the retirement phase).
> 
> ...



Actuaries calculating notional earnings again. 

The split obviously varies with age, but if it's 50/50 at age 60, the politician in question would need to be getting an annual pension of over $200k before being affected by this change. It looks to me like the politicians on defined benefit schemes have largely managed to avoid this tax change.

Overall, it's been reduced to no more than an election commitment with a small sweetener in the accumulation phase. I can't see anyone being too trusting of Labor when it comes to concessional contributions caps.

Labor has gone in to damage control. None of these changes are likely to see light of day unless the Opposition adopts them as part of their policy platform.


----------



## Ves (5 April 2013)

McLovin said:


> This is a first step in the right direction.



Looking at the press releases I get the feeling that this $100k earnings will be calculated on a Fund level.

Rich people and their advisers are not dumb.  There is a glaring loophole if the threshold is restricted to the Fund and not "linked" to the individual member that will allow people to circumvent this threshold entirely.


----------



## drsmith (5 April 2013)

Ves said:


> There is a glaring loophole if the threshold is restricted to the Fund and not "linked" to the individual member that will allow people to circumvent this threshold entirely.



I would have thought that if a retired Mr X for example had $2m in a fund and fund earnings were, say, 15% (lets say it was a good year for shares), the earnings from the fund would be $300k, regardless of what he draws down as a pension and thus his fund earnings would be subject to 15% tax on $200k.

If the following year was a poor one for investments and his fund earns 0%, he's obviously a bit stiff as he can't take advantage of the tax free nature of earnings up to $100k.

Variable returns from year to year will be a big problem with this and could capture many more than the government anticipate in a good year. One solution will be for wealthier retirees to choose more conservative investment options to minimise variation fund earnings from year to year.

Fortunately, this ill considered change has been announced as an election policy and therefore will be unlikely to see the light of day.


----------



## Ves (5 April 2013)

That's not what I'm thinking of - and I'm not saying it here - but have a think of the difference between earnings being linked to the FUND (ie. $100k as a tax exemption for a pension member claimed in the Fund's tax return) as opposed to the INDIVIDUAL - get creative.  There's a solution for those canny enough to see it.

I'm assuming that the government may close the potential creativity in the actual legislation - but then again governments are notoriously bad when it actually comes to collecting tax as opposed to giving the impression that they are collecting tax.


----------



## Ves (5 April 2013)

drsmith said:


> I would have thought that if a retired Mr X for example had $2m in a fund and fund earnings were, say, 15% (lets say it was a good year for shares), the earnings from the fund would be $300k, regardless of what he draws down as a pension and thus his fund earnings would be subject to 15% tax on $200k.
> 
> If the following year was a poor one for investments and his fund earns 0%, he's obviously a bit stiff as he can't take advantage of the tax free nature of earnings up to $100k.
> 
> ...



By the way, I didn't mean to sound dismissive.  This is an excellent post and well worth considering.


----------



## craft (5 April 2013)

Ves said:


> That's not what I'm thinking of - and I'm not saying it here - but have a think of the difference between earnings being linked to the FUND (ie. $100k as a tax exemption for a pension member claimed in the Fund's tax return) as opposed to the INDIVIDUAL - get creative.  There's a solution for those canny enough to see it.
> 
> I'm assuming that the government may close the potential creativity in the actual legislation - but then again governments are notoriously bad when it actually comes to collecting tax as opposed to giving the impression that they are collecting tax.




Yep I can just picture you accountant's sitting around thinking mmmm  multiple funds – multiple fees.

Surely the legislation would cover it, but you never know – undoubtedly something will be porous.  Taxing the top end is like herding cats.


----------



## craft (5 April 2013)

drsmith said:


> I would have thought that if a retired Mr X for example had $2m in a fund and fund earnings were, say, 15% (lets say it was a good year for shares), the earnings from the fund would be $300k, regardless of what he draws down as a pension and thus his fund earnings would be subject to 15% tax on $200k.
> 
> If the following year was a poor one for investments and his fund earns 0%, he's obviously a bit stiff as he can't take advantage of the tax free nature of earnings up to $100k.
> 
> ...




Variable returns and lumpiness of realising capital gains will both capture more people than the headline numbers suggest.


----------



## ROE (5 April 2013)

Notice the rise and rise of CUP (I have some sometimes ago, dont think we even have a thread for it on here) with all these crazy stuff going on generating more and more work for accountants


----------



## chops_a_must (5 April 2013)

drsmith said:


> Variable returns from year to year will be a big problem with this and could capture many more than the government anticipate in a good year. One solution will be for wealthier retirees to choose more conservative investment options to minimise variation fund earnings from year to year.




I dare say that is a part of the policy subtext.

i.e. the lack of conservative retirement options.

Would be nice to have a more accessible and liquid corporate bond market, for instance.


----------



## tinhat (5 April 2013)

Guys and Gals, my understanding of what I heard briefly on the radio while Shorten was giving his press conference is that the tax payable on income over $100k will be taxed on the individual. You've got to remember that an account in accumulation phase pays 15% tax. It is only money that is in a pension phase account that is currently tax free. But keep in mind that there are minimum drawdown rules that apply to pension phase accounts. An individual with a pension phase account is forced to draw down a certain percent each year as income. I would have thought that the income tax will be payable by the individual.The only thing I can see happening is people rejigging the balances between accumulation phase and pension phase accounts to minimise their tax exposure and try and keep as much income at or below the 15% tax rate. People will be more inclined to draw down lump sums from their accumulation account rather than pay out a pension that might exceed $100,000 due to the drawdown rules on pension accounts.

There will be more and more fiddles with the rules I am sure. The Costello reforms were so generous I never believed they would be sustainable. Something else that will get reformed will be how much a person of retirement age must commit to pension account and also the fact that under Costello's reforms a person of pension age can just dip in and grab lump sums tax free as much as they want. That's not going to last long-term either. Basically the Costello reforms are going to have to be unwound eventually because everyone knows they are not sustainable for the income tax base.

As I said in my last post, it is better to see that no tax is paid on the way in and then tax on the way out. This is more equitable for low income earners and this is a better economic outcome for the country as it will have a substantial compounding effect on national savings and will actually grow the income tax base from super savings in the long term.

No one's got the balls to fix the income tax system to make it truly simple and equitable and an inducement to low income earners receiving family benefits to work full time.


----------



## ROE (5 April 2013)

All up on AFR with details
http://www.afr.com/p/national/labor_caps_tax_free_super_earnings_GQcUMka42N7LHKj6C6K8VO



The federal government is proposing a $100,000 cap on the tax-free earnings that can be generated from superannuation assets after retirement, as the central plank of measures it says will save $900 million over four years but $10 billion over 10 years.

Contrary to earlier indications that the government might try to target the benefits high-income earners could get from superannuation in the accumulation phase, and/or target the capital gains arrangements of self-managed super funds, the Government has homed in on the value of tax concessions after retirement, but not reimposed a tax on actual superannuation withdrawals.

Treasurer Wayne Swan and Superannuation Minister Bill Shorten could not say on Friday whether the proposed changes would actually be introduced into parliament before the federal election.

But the changes are prospective – beginning on July 1 next year – so in effect become a mandate issue for the election.

The government says the changes are not retrospective, setting out a grandfathering arrangement for assets held in super funds before today that will exempt them from the new arrangements for 10 years.

The government says the changes will affect only about 16,000 people in 2014-15 because the $100,000 cap, which will be indexed to inflation, means that only individuals with superannuation funds worth $2 million or more – on a conservatively estimated 5 per cent annual earnings rate – would breach the cap.


----------



## tinhat (5 April 2013)

I'm just reading an article in the SMH and it seems I am mistaken. Tax will be on the income earned in the fund not the pension income. I assume that the $100,000 income will be the total for all super accounts - both pension and accumulation.

edit - thanks ROE.


----------



## ROE (5 April 2013)

tinhat said:


> I'm just reading an article in the SMH and it seems I am mistaken. Tax will be on the income earned in the fund not the pension income. I assume that the $100,000 income will be the total for all super accounts - both pension and accumulation.
> 
> edit - thanks ROE.




very details long article on AFR if you dont have access I can PM you...

Personally I think it is not too bad ..someone on 100K tax free earning is enough to live a good life style
anything after 15% tax sound ok... there is a little bit of capitalist left in labor 

someone with 3m plus account will do with a little less and I am sure they wont be happy


----------



## prawn_86 (5 April 2013)

ROE said:


> someone with 3m plus account will do with a little less and I am sure they wont be happy




Or they will just invest it a bit more conservatively which is probably a good thing as they wont be taking risks which may eventually cause them to draw a pension


----------



## Julia (5 April 2013)

Maybe think about the fact that this change is only mooted presumably to quell all the damaging speculation that Labor so unwisely allowed to start.

The proposed reforms will not be legislated before the election, after which the Coalition will be running the show.  Given his frothing at the mouth today about this 'reform', Mr Abbott can hardly legislate it or anything similar.

So people might stop running around frantically rearranging their financial affairs and further contributing via fees to the retirement plans of the financial planners.


----------



## skc (5 April 2013)

prawn_86 said:


> Or they will just invest it a bit more conservatively which is probably a good thing as they wont be taking risks which may eventually cause them to draw a pension




If I earn $100k there's $0 tax so my after tax income is $100k.

If I earn $150k there's 15% tax on that extra $50k, so I pay $7.5k tax and left with after tax income of $142.5k.

So in order to avoid paying $7.5k tax I should invest conservatively and forgo $42.5k of after tax income 

That's putting the tax cart in front of the income horse...


----------



## prawn_86 (5 April 2013)

skc said:


> If I earn $100k there's $0 tax so my after tax income is $100k.
> 
> If I earn $150k there's 15% tax on that extra $50k, so I pay $7.5k tax and left with after tax income of $142.5k.
> 
> ...




No i'm saying that if someone has 2m in an account they might decide to put it in a TD at 5% rather than risking the volatility of stocks that have div yields of 7 - 8% (although franking credits also need to be considered). Obviously it would be different for everyone on a risk:return basis


----------



## sptrawler (5 April 2013)

It will get a lot more than 16,000 people, if interest rates go back to long term average of 7 _ 8% . Nothing like a dose of bracket creep, to enhance long term returns.

Also I still think it would have been easier to administer if it was a tax on the pension recieved.


----------



## craft (5 April 2013)

You don’t even have to envisage high interest rates to get bracket creep.

The 100K represents approx 1 and a third times average wage and is indexed to CPI.

Go forward 30 years where wages have grown by 4.5% and inflation stays at mid band RBA target at 2.5%  and tax free threshold will only be three quarters of the average wage.

Any productivity gains that flow to wage earners are not recognised by the indexing.

Its worth also noting that If earnings are running at 4.5% the guy/girl with 2 Million bucks has to earn and re-invest 90K just to stay still in real terms. The 100K exemption is just about blown before they draw a cent to spend.

Earning 5% on 2 Million and spending 100K is a sizable draw down in real terms.


----------



## sptrawler (5 April 2013)

craft said:


> You don’t even have to envisage high interest rates to get bracket creep.
> 
> The 100K represents approx 1 and a third times average wage and is indexed to CPI.
> 
> ...




It certainly is, also in the pension phase one assumes the person will not be in a position to add to it. I think there will be a lot of re_balancing of fund weightings between members.


----------



## nulla nulla (5 April 2013)

sptrawler said:


> It certainly is, also in the pension phase one assumes the person will not be in a position to add to it. I think there will be a lot of re_balancing of fund weightings between members.




yeah right. Like this forum is full of members with more than $2,000,000.00 in their super funds. The reality is:

1. The proposed changes would affect less than 1% of suparannuants; 
2. Legislation changes are not going to be voted on until after the election; and
3. It will never get voted on as labor will be gone after the election.

All the kerfuffle is a storm in a tea cup. Stupid comments from both parties blathering on about something that will never happen. And it gets so much air time it is a joke.


----------



## banco (5 April 2013)

Julia said:


> Maybe think about the fact that this change is only mooted presumably to quell all the damaging speculation that Labor so unwisely allowed to start.
> 
> The proposed reforms will not be legislated before the election, after which the Coalition will be running the show.  Given his frothing at the mouth today about this 'reform', Mr Abbott can hardly legislate it or anything similar.
> 
> So people might stop running around frantically rearranging their financial affairs and further contributing via fees to the retirement plans of the financial planners.




Have they announced they won't be legislated before the election?


----------



## tinhat (5 April 2013)

ROE said:


> very details long article on AFR if you dont have access I can PM you...
> 
> Personally I think it is not too bad ..someone on 100K tax free earning is enough to live a good life style
> anything after 15% tax sound ok... there is a little bit of capitalist left in labor
> ...




Thanks mate. As long as can grab the headline then google it, then click on the google cached copy you can access the articles behind the news ltd firewall.



> Superannuation Minister Bill Shorten and Treasurer Wayne Swan this morning revealed Labor would cap the exemption for earnings on superannuation assets supporting income streams at $100,000 with a concessional tax rate of 15 per cent to apply after that.
> 
> Read more: http://www.news.com.au/money/supera...0k/story-e6frfmdi-1226612971840#ixzz2PZRPN5Q6




So the $100k threshold only applies to pension phase accounts. As others have said I can only dream of having to worry about this when I get to retirement (if ever). Of course, there will be more changes along the way. And people, surely you can't believe everything Uncle Tony and Uncle Joe are saying right now? They will get in on such a landslide that they will be able to afford to renege on every empty platitude and hollow promise they are espousing right now. Just as John Howard did. Just as Bob Carr did in NSW. If only they could shut up Andrew Robb (those anti-depressants must act like a truth serum).

Thank goodness life is not all about money!


----------



## drsmith (5 April 2013)

craft said:


> Yep I can just picture you accountant's sitting around thinking mmmm  multiple funds – multiple fees.
> 
> Surely the legislation would cover it, but you never know – undoubtedly something will be porous.  Taxing the top end is like herding cats.



That might need to be more opaque than multiple funds under the same name (TFN), but after the MRRT debacle, you never know.

This I suspect will be an issue left for the bureaucrats to resolve in the detail should Labor be re-elected.


----------



## drsmith (5 April 2013)

craft said:


> You don’t even have to envisage high interest rates to get bracket creep.
> 
> The 100K represents approx 1 and a third times average wage and is indexed to CPI.
> 
> ...



Another perhaps greater risk is that like with any new tax, the threshold and rate can be changed to suit the government of the day.

This I reckon will be Labor's thinking more than anything else.


----------



## sptrawler (5 April 2013)

drsmith said:


> Another perhaps greater risk is that like with any new tax, the threshold and rate can be changed to suit the government of the day.
> 
> This I reckon will be Labor's thinking more than anything else.




It's certainly the thin edge of the wedge if it gets through. Can't see Slipper, Wilkie and Oakeshott voting for it myself.


----------



## drsmith (5 April 2013)

sptrawler said:


> It's certainly the thin edge of the wedge if it gets through. Can't see Slipper, Wilkie and Oakeshott voting for it myself.



They won't matter. Labor have no intention to legislate before the election. 

In the absence of the Coalition adopting the same type of policy or (god forbid) Labor win, the discussion is largely academic.


----------



## nulla nulla (5 April 2013)

drsmith said:


> This I suspect will be an issue left for the bureaucrats to resolve in the detail should Labor be re-elected.




Sleep easy Dr Smith, you have more chance of winning lotto than labor has being re-elected. The swing against them in the marginal seats alone will be enough to consign them to the opposition benches.


----------



## RandR (5 April 2013)

drsmith said:


> That might need to be more opaque than multiple funds under the same name (TFN), but after the MRRT debacle, you never know.
> 
> This I suspect will be an issue left for the bureaucrats to resolve in the detail should Labor be re-elected.




One does not have to have all their superannuation in pension or accumulation and one is free to move from pension back into accumulation. You will find people will thus probably only put in the max amount required into pension to make use of tax free and keep the rest in accumulation (where its taxed at 15% anyway) where there is no requirement to drawdown


----------



## FlyingFox (5 April 2013)

McLovin said:


> This is a first step in the right direction. I doubt it will be the last. Depite the rhetoric from Abbott, I think the more sensible heads in the opposition realise the current arrangement isn't sustainable.




Hopefully ... assuming they can think past their next term in office...


----------



## Julia (5 April 2013)

nulla nulla said:


> yeah right. Like this forum is full of members with more than $2,000,000.00 in their super funds. The reality is:
> 
> 1. The proposed changes would affect less than 1% of suparannuants;
> 2. Legislation changes are not going to be voted on until after the election; and
> ...



Exactly.  As I have pointed out earlier in the thread.
I just cannot believe all the talking heads taking up time in current affairs programs discussing this when it simply won't happen.  So utterly silly.  



banco said:


> Have they announced they won't be legislated before the election?



Yes.



drsmith said:


> They won't matter. Labor have no intention to legislate before the election.
> 
> In the absence of the Coalition adopting the same type of policy or (god forbid) Labor win, the discussion is largely academic.



And therefore pointless.  Doesn't seem to have deterred several posters here getting into the purely academic discussion.


----------



## sptrawler (5 April 2013)

sptrawler said:


> Maybe it's just a diversion, give everyone a common focus, stops them focusing on the actual policies that have failed and are continueing to fail.
> 
> You are not seeing much in the press about all the other failures.
> So it would appear to be working, let's not forget even the reporters have skin in the superannuation game.
> ...




Which goes back to this post.
But it has been a great chat.


----------



## drsmith (5 April 2013)

Julia said:


> Doesn't seem to have deterred several posters here getting into the purely academic discussion.



A chat and a cuppa can be good for the soul. The views of others can also help broaden one's knowledge and perspective. 

For me, it's not specifically about the policy itself.


----------



## sptrawler (6 April 2013)

craft said:


> You don’t even have to envisage high interest rates to get bracket creep.
> 
> The 100K represents approx 1 and a third times average wage and is indexed to CPI.
> 
> ...




Hey Craft, you seem to have a good handle on the accounting side.
If they are going to tax earnings above $100k in the pension phase, will that mean that loses will be able to be applied?
At present as it's untaxed, losses can't be applied?
What do you reckon?


----------



## drsmith (6 April 2013)

> Under current arrangements, all new earnings (such as dividends and interest) on assets supporting income streams (superannuation pensions and annuities) are tax-free. This is in contrast to earnings in the accumulation phase of superannuation, which are taxed at 15 per cent.
> 
> From 1 July 2014, earnings on assets supporting income streams will be tax free up to $100,000 a year for each individual. Earnings above $100,000 will be taxed at the same concessional rate of 15 per cent that applies to earnings in the accumulation phase.




Upon reading that statement, I'm unsure as to whether unrealised variation in the capital assets will be considered as part of the income stream for the above tax threshold. I would say no on the above, but that's only because of omission rather than a definitive answer.

We may need to wait for the fine print to get the definitive answer, if it gets that far.

http://resources.news.com.au/files/2013/04/05/1226613/049704-aus-na-file-superannuation.pdf


----------



## Judd (6 April 2013)

drsmith said:


> Upon reading that statement, I'm unsure as to whether unrealised variation in the capital assets will be considered as part of the income stream for the above tax threshold. I would say no on the above, but that's only because of omission rather than a definitive answer.
> 
> We may need to wait for the fine print to get the definitive answer, if it gets that far.
> 
> http://resources.news.com.au/files/2013/04/05/1226613/049704-aus-na-file-superannuation.pdf




A number of aspects were unclear but it seems that that 'earnings' includes movement in unrealised gains for the purposes of reporting through the SMSF profit and loss account.  The $100,000 threshold could catch large/lumpy gains eg when a SMSF sells a residential or commercial property in pension phase.

You would think the tax should only apply to actual gains upon realisation but it is still early days before any legislation is passed.

And it certainly has not been clarified whether the $100k is at fund, per member or individual account level.  What about multiple fund situations?

All nice and wonderful at the announcement and concept level but as appears to be usual with this Government lately, no fine details appear to have been thrashed out beforehand.  Another "shoot from the hip moment" because we feel pressures to say something to the populace which wont make us look too bad?


----------



## bigdog (6 April 2013)

What is the impact of the new taxes on our federal pollies high pensions on retirement?


----------



## sptrawler (6 April 2013)

bigdog said:


> What is the impact of the new taxes on our federal pollies high pensions on retirement?




Sounds as though it will be minimal. Apparently some dude runs some numbers through the calculator to work out what fictitous sum the polly would have needed to support the pension payment.
Then it is divided by another number to give a number the politician is happy with. lol That's only my understanding of it.


Much simpler and fairer to just tax the pension recieved once it passes $100k. The down side is the pollies would have to pay the same tax as everyone else, we can't have that.


----------



## Knobby22 (6 April 2013)

The government wimped out. Very weak attempt at fixing the problems.
They are not going to pass the legislation but instead take it to the election which means it won't happen. Hockey was non committal but Abbott couldn't help himself and opposed it. I worry what he will be like as Prime Minister.

It will now be up to the coalition to make reforms and they will have to.
I am quoting Tim Colebatch following:

"It will be Tony Abbott's problem and a big one. Treasury estimates that in 2009-2010, tax breaks on superannuation funds cost revenue (that is other taxpayers) 9.5 billion. This year it will be 11.7 billion. In three years time it will be 25.1 billion. Super tax breaks will grow from 26 billion to 47 billion in that time.  You can blame the Howard government which removed the reasonable benefit limits and made payouts tax free."

And at the end of the article:

"Is it really Liberal policy to give away $47 billion a year in superannuation tax breaks , of which just 23% goes to the 60 percent of Australians in the bottom and middle incomes while 26% goes to the richest 5%?" 

I am not in the richest 20% and I know I am being screwed. The Libs will have no choice except to fix this unless they raise other taxes which will be on me, I will do my best to protest if they do that. Just fix it.


----------



## sptrawler (6 April 2013)

At last the penny has dropped with the press, shonky Swann using historicaly low interest rates, to help his spin.

http://www.couriermail.com.au/money...hit-more-aussies/story-e6freqp6-1226613624250

Jeez it took the press long enough to work that one out, it stood out like dogs you know whats.
Also that is why the forecasts are saying the measure will be worth billions in 10 years, good old bracket creep.
Most workers will be paying the tax in 10 - 15 years. Lol So much for the fabulously wealthy.


----------



## drsmith (6 April 2013)

Knobby22 said:


> The government wimped out. Very weak attempt at fixing the problems.




That's the current government. Having completely wrecked border control, they haven't got the inclination to fix that either.

I think to a large extent it's political. There is a small sweetener or two in there which I think are designed to wedge the Libs into more commitments in the lead up to the election and defuse the discussion.

To me, the biggest worry is that whoever's in office next, we'll see harsher measures to raid super to help balance the budget. The Coalition have form here with their superannuation surcharge from the late 90's.

As for tax distribution between the wealthy and the less well off, it needs to be seen in a much broader context than just superannuation. The broader problem was well summed up in the following point yesterday,



tinhat said:


> No one's got the balls to fix the income tax system to make it truly simple and equitable and an inducement to low income earners receiving family benefits to work full time.




Debate would obviously remain about what's equitable, but that in itself isn't a bad thing.


----------



## sails (6 April 2013)

sptrawler said:


> At last the penny has dropped with the press, shonky Swann using historicaly low interest rates, to help his spin.
> 
> http://www.couriermail.com.au/money...hit-more-aussies/story-e6freqp6-1226613624250
> 
> ...





From that link - should be under "caption a photo"...lol.  Look at Swan's despondent face and Shorten could be indicating "I give up".  Interesting body language going on here:


----------



## DocK (6 April 2013)

IF the proposed changes are ever passed I can see small family-owned business being negatively affected, again.  Nothing new for this segment of our economy to be completely overlooked by our present Govt.  

A good number of family owned SMEs own their business premises via their SMSFs.  Quite often these same people haven't been able to make extra contributions to their super and the property forms the bulk of the value of the fund - well below the 2M mark.  Upon retirement and the probable sale of the premises there would hopefully be a reasonable capital gain - which would then be subject to the 15% tax on cap gain/earnings over 100K.  I know the grandfathering clause exempts property already owned for up to 10 years - but this is no comfort to those family businesses who don't envisage retirement or relocation within that timeframe.  I guess not only accountants and planners will benefit from yet more tinkering with super, but also real estate agents, who will  benefit from the inevitable push to sell lumpy assets within the 10 years.  It would certainly make sense for those whose SMSF's main asset is a factory or similar to sell and rent back for a few years.

I can see the sense in some minimisation of the current super tax breaks - but I think an across the board increase to the tax applied to earnings whilst in the accumulation phase from 15% to say 18% would raise more revenue and be fairer.  Yes, it would apply to "working families" as well as the more wealthy, but super would still be taxed at such a low rate as to retain its attractiveness as an investment vehicle, and the incentives to contribute to one's own retirement rather than speculate outside of super would remain.  Gen Y will complain that the baby boomers already in pension phase will receive a get out of jail free card, but I bet they'd scream blue murder if the very wealthy decide that switching to negative gearing investments in property is a better bet than risk paying tax on their super earnings down the track.


----------



## Judd (6 April 2013)

As an observation, I assume that this is an "attack" on SMSFs.  I say that as I wonder how many "fabulously wealthy" individuals would use industry or retail superannuation funds?

Edit:  A thought just came into my head.  It would not surprise me if some trustees probably use DRPs even in the pension phase, so they could be caught with the asset purchase arrangements to apply from 5 April 2013.  All very interesting.


----------



## sydboy007 (6 April 2013)

What i find really annoying with this debate is the $20+ billion a year in fees the financial industry rips out of super is pretty much ignored.

Certainly a bigger grab than any Government would be proposing.

It's time all funds have to declare gross returns then deduct any expenses and high light them on the member statements.

Hopefully this will make the uninterested take a second look and start to question why they are paying so much.

I'd even go so far as to say the Govt should impose maximum fee levels, and they should also impose standard criteria to what a mixed fund means - is a fund "balanced" if it can have 50% in shares, 30% in property and just 20% in fixed interest / cash??

Then there's the issue that I'm going to save to 45+ years, but I have no idea what I will have at the end.  Just changing a forecast by 1/2 a % can make huge differences in what balance I'll have at age 65.

We'd all be better off if we just focused on super to provide something a bit better than the pension, and then put the effort into growing wealth outside of super to provide for the lifestyle we'd like to have when retired.  The way the debate on super goes you'd think people can't save for their retirement in any other way.


----------



## drsmith (6 April 2013)

drsmith said:


> As for tax distribution between the wealthy and the less well off, it needs to be seen in a much broader context than just superannuation. The broader problem was well summed up in the following point yesterday,
> 
> Debate would obviously remain about what's equitable, but that in itself isn't a bad thing.



Taking this point further,



> SO-CALLED super tax breaks might flow overwhelmingly to higher income earners - but so does the nation's tax bill.
> 
> The latest tax office data show the top 1 per cent of income earners pay about 17 per cent of all income tax, while the top 10 per cent pay almost half of the commonwealth government's annual income tax haul.
> 
> Australia's tax system is highly progressive, with a top marginal tax rate of 45 per cent - above New Zealand's at 33 per cent and the US at 35 per cent.




http://www.theaustralian.com.au/bus...ady-pay-the-bill/story-fnc2jivw-1226612818237

The simplification that is needed is a broadening of the income tax base by removal of deductions in exchange for lower marginal rates.


----------



## Judd (6 April 2013)

sydboy007 said:


> ...The way the debate on super goes you'd think people can't save for their retirement in any other way.




Yep, agree and it's the way my late wife and I approached the matter.  That, and a few other issues, resulted in the winding up of our SMSF and I have pulled as much I can out of the superannuation arrangements.


----------



## drsmith (6 April 2013)

It looks like the Opposition will support some of the measures.

Joe Hockey,



> The Coalition would support the increase in concessional contribution caps and an improvement in the tax treatment of excess contributions, he said.




This too might be interesting,



> ''The almost $1 billion of tax hikes are the beginning and not the end of Labor's assault on superannuation,'' Mr Hockey said. ''In his press conference Wayne Swan was asked twice to explicitly rule out further changes to superannuation in the May budget in six weeks' time. He refused.''




Wayne Swan would be politically insane if he did.

http://www.smh.com.au/opinion/polit...-consensus-greets-changes-20130405-2hcd0.html


----------



## drsmith (6 April 2013)

The AFR has a graphic the outlines the measures,

http://www.afr.com/p/national/super_hit_on_wealthy_investors_GQcUMka42N7LHKj6C6K8VO

With regard to the increase in the concessional cap (measure 2), I'm at a loss to understand how this is a saving to the budget over the 4-year estimate period.


----------



## Judd (6 April 2013)

drsmith said:


> ...With regard to the increase in the concessional cap (measure 2), I'm at a loss to understand how this is a saving to the budget over the 4-year estimate period.




Probably in the same way the ATO got hold of unclaimed superannuation, ie money owed to other people, and the Government claimed it as revenue.  There is accounting and there is Government accounting, which appears to be close to fiction or even the devil's work.


----------



## Knobby22 (6 April 2013)

drsmith said:


> Taking this point further,
> 
> 
> 
> ...




If broadening the tax base means hitting the middle class harder to appease the very wealthy then I won't be happy.


----------



## DocK (6 April 2013)

drsmith said:


> The AFR has a graphic the outlines the measures,
> 
> http://www.afr.com/p/national/super_hit_on_wealthy_investors_GQcUMka42N7LHKj6C6K8VO
> 
> With regard to the increase in the concessional cap (measure 2), I'm at a loss to understand how this is a saving to the budget over the 4-year estimate period.




Possibly because they had promised to reinstate the $50,000 cap for over 50's from July 2014, and now propose raising it to only $35,000 - unindexed.

From Superguide's website:


> 9. What is the concessional cap for the 2014/2015 year?
> 
> The answer to this question is somewhat speculative since it is based on Government promises, but set out below is what we have been promised:
> •The concessional cap for under-50s for the 2014/2015 year (1 July 2014 to 30 June 2015) will increase to $30,000 for under 50s.
> •From July 2014, those with account balances of less than $500,000 will be able to make up to $50,000 in concessional contributions each year. Although if the under-50s cap is being indexed presumably the over-50s cap will increase to $55,.000 as well. Stay tuned because we could be dealing with a different government by the time July 2014 comes around.



http://www.superguide.com.au/how-super-works/concessional-contributions-caps-10-facts-you-should-know


----------



## sydboy007 (6 April 2013)

drsmith said:


> The simplification that is needed is a broadening of the income tax base by removal of deductions in exchange for lower marginal rates.





Wont happen.  Seems the only reason we have politicians is so the special interest groups can trawl their ways through the corridors of power so they can get special tax breaks or other rent as applicable.

It should be relatively simple to simplify the tax system and broaden the base somewhat, but the politics are anything but simple.

Nothing of much will change in Australia until voters punish both sides of politics and force them to do things in the interests of the country, not of their butts on the treasury benches.


----------



## drsmith (6 April 2013)

Judd said:


> Probably in the same way the ATO got hold of unclaimed superannuation, ie money owed to other people, and the Government claimed it as revenue.



That's budgeted separately as a $123m saving.

This is from the joint press release by Wayne Swan and Bill Shorten yesterday,



> *Simplifying the design and administration of the higher concessional contributions cap*
> 
> The Government will simplify the design and administration of the proposed higher concessional contributions cap, by providing an unindexed $35,000 *concessional cap *to anyone who meets certain age requirements.
> 
> ...




Perhaps it's relative to an earlier planned $500k asset capped increase in concessional cap also mentioned. The detail in that must have been too devilish even for the class warfare hawks in Labor.  

If the numbers stack up, it's not bad for the Opposition. They can claim a net saving from the two measures Joe Hockey proposes to support.


----------



## drsmith (6 April 2013)

sydboy007 said:


> Wont happen.  Seems the only reason we have politicians is so the special interest groups can trawl their ways through the corridors of power so they can get special tax breaks or other rent as applicable.
> 
> It should be relatively simple to simplify the tax system and broaden the base somewhat, but the politics are anything but simple.
> 
> Nothing of much will change in Australia until voters punish both sides of politics and force them to do things in the interests of the country, not of their butts on the treasury benches.




I tend to think more broadly there would be winners and losers across the middle class, so the time to do it was when there was excess revenue to minimise the losers. There's also the standard of general public political debate which in my view is very poor (this forum excepted of course ).

If we punish both sides of politics, what do you suggest we elect as an alternative ?


----------



## Ves (6 April 2013)

drsmith said:


> If we punish both sides of politics, what do you suggest we elect as an alternative ?



I don't think it is so much about punishing both sides and looking for an alternative, but more forcing them out of the current modus operandi of self-preservation and looking after special interest groups.  Easier said than done, of course.


----------



## ASICK (6 April 2013)

Ves said:


> I don't think it is so much about punishing both sides and looking for an alternative, but more forcing them out of the current modus operandi of self-preservation and looking after special interest groups.  Easier said than done, of course.




http://www.afr.com/p/national/super_hit_on_wealthy_investors_GQcUMka42N7LHKj6C6K8VO

"However, the changes – which are estimated to save $2 billion a year – will be added to an estimated $8 billion of savings from super tax changes announced in last year’s budget to pay for the national disability insurance scheme and education spending." (emphasis added)

"save"? How about "rip"?  it's all to be expected from these socialists - anyway, the liberals are no better - they're all socialists now.  There's no real distinction any more.

Don't fret for senators and representatives, I'll bet their super will be indexed in some way to overcome the tax.

I'll use a common term of endearment used by "what's his name?", scumbags.


----------



## drsmith (6 April 2013)

DocK said:


> Possibly because they had promised to reinstate the $50,000 cap for over 50's from July 2014, and now propose raising it to only $35,000 - unindexed.
> 
> From Superguide's website:
> http://www.superguide.com.au/how-super-works/concessional-contributions-caps-10-facts-you-should-know



I didn't see your post. Too busy posting myself. 

The implication was in the detail of the media release yesterday, but that confirms it.


----------



## sptrawler (7 April 2013)

Noel Whittaker wrote a great article in the 'Sunday Times' today, the article is called 'Ad Fab for some'

It gives a great summary of the superannuation system and who are really the winners.

Here is another article in a similar line, just shows what a bunch of hypocrits the pollies are.

http://www.perthnow.com.au/news/pol...-says-opposition/story-fnhnv0wb-1226613617102

* POLITICIANS on generous taxpayer-funded defined benefits would be thousands of dollars better off than ordinary workers whose superannuation earnings will be slugged, the Opposition said last night. *


I hope Bolt or someone gets stuck into them.lol


----------



## Julia (7 April 2013)

Surely it's time for Tony Abbott to stop making irresponsible comments?


> The government plans to raid your superannuation to fund its spending spree.  The government is going to take your money, your superannuation money.




There will be thousands of ordinary, ill-informed Australians who will take this extravagant statement at face value.
Perhaps he will gain some votes from such people as a result, but isn't he in the process losing respect from people whose goodwill he needs?


----------



## drsmith (7 April 2013)

Julia said:


> Surely it's time for Tony Abbott to stop making irresponsible comments?



He's absolutely right in the sense that Labor wants to fund its spending spree. As to whether reducing super tax concessions is _taking your money, your superannuation money_, that's more debatable, but the broad impression he wants give is that Labor wants to raid super to fund its spending and on that, he's right.

Comparisons with Cyprus though were definitely over the top in my view. I think now though that the politicians get advised on this short of stuff. Perhaps it's designed to appeal to a demographic less interested in politics. From my perspective however, it's just plain silly.

There was some interesting discussion on Insiders amongst the panel this morning regarding our fiscal position. Whoever wins government nest term will likely be faced with difficult fiscal choices, and for that, super is an easy target. Once the election is over, super tax concessions will be hit far harder than they are now, regardless of who is in power and what they say now. The advantage the Coalition will hopefully offer in office is that they will focus more on debt reduction than Labor.


----------



## Garpal Gumnut (7 April 2013)

Julia said:


> Surely it's time for Tony Abbott to stop making irresponsible comments?
> 
> 
> 
> ...




I disagree Julia, Tony Abbott was quite correct to make that statement.

Nobody knows what they, the ALP, originally intended until there was a hue and cry from the Super fund Industry and from SMSF's.

And if they win the election in September, they will raid Super funds, they will have to raid them, to pay for their unfunded promises.

gg


----------



## ASICK (7 April 2013)

http://www.breitbart.com/Big-Govern...s-by-Capping-Retirement-Accounts-at-3-Million

ah... ya gotta love these socialists.

It's all for the common good.

Yes gg, labor will raid those who are successful to pay for those who are hopeless (or unfortunate).


----------



## sails (7 April 2013)

Julia said:


> Surely it's time for Tony Abbott to stop making irresponsible comments?
> 
> 
> There will be thousands of ordinary, ill-informed Australians who will take this extravagant statement at face value.
> Perhaps he will gain some votes from such people as a result, but isn't he in the process losing respect from people whose goodwill he needs?





Maybe Abbott wasn't so wrong after all:



> The federal government's superannuation plan is more far reaching than that forecast by Treasurer Wayne Swan  and the Minister for Financial Services and Superannuation, Bill Shorten.
> 
> Retirees with far less than $2 million in superannuation face extra tax bills after the superannuation changes announced on Friday.
> 
> An examination of the federal government's announcement shows the impact will be far broader than the forecast that only 16,000 people with $2 million or more in super will be hit by the tax on retirement earnings.




Read more from SMH: Super plan contains a booby trap


----------



## Intrinsic Value (7 April 2013)

sails said:


> Maybe Abbott wasn't so wrong after all:
> 
> 
> 
> Read more from SMH: Super plan contains a booby trap




Well I still think that it was only a matter of time before the tax free income for those in the pension phase was changed.

You really cant have retirees generating income of 100k and more a year tax free whilst the rest of working population is being slugged so heavily. These same older people will also be using the hospital and medical system heavily which will also be subsidised by the younger generation. And of course there is a whole lot of baby boomers ready to join the ranks of pensioners over the next 10 years or so it was never going to be a sustainable policy over the long haul.

I can see that this will be further tightened in the years to come with the tax free component being whittled back to align perhaps with the average wage.

And for all those bashing Labor remember it was  Howard who brought in all these unsustainable policies and Abbott was also a member of his cabinet at the time if I am not mistaken. The next axe will have to fall on some other of these expensive middle class welfare handouts bought in by Howard to buy votes.


----------



## ASICK (7 April 2013)

Intrinsic Value said:


> ... You really cant have retirees generating income of 100k and more a year tax free whilst the rest of working population is being slugged so heavily. These same older people will also be using the hospital and medical system heavily which will also be subsidised by the younger generation. And of course there is a whole lot of baby boomers ready to join the ranks of pensioners over the next 10 years or so it was never going to be a sustainable policy over the long haul. ...




Why not? Those "same older people" will most probably not be using the hospital system because they'll most probably be privately insured.   First superannuation was all about providing a future outside the public purse, now it's about superannuation supporting the public purse: socialism.


----------



## nulla nulla (7 April 2013)

Intrinsic Value said:


> You really cant have retirees generating income of 100k and more a year tax free....




I find it amazing that the "retiree generating $100k per anum" is being targeted for tax penalties. The assumption being a retiree with $2,000,000.00 of investments is generating 5% per annum income. 

What about the retiree taking it up to the market and working his/her $400,000.00 generating returns of 25% or better? Why should they be penalised?

 It is not as if they are salary sacrificing $25,000.00+ from a big executive pay packet to boost their smsf. They are at the market face every day trying to maximise their smsf pool so that they will not have to rely on a pension. Don't they deserve the tax breaks that Keating and Costello set up?


----------



## Intrinsic Value (7 April 2013)

I am one of those people badly hit by limiting the salary sacrifice to 25k for over fifties which I think is a bad policy because many like me had low super balances because we came late to the super game and also never had the large incomes til later in the working life. 

However the tax free element for the pension phase is another issue and I will certainly take advantage of it if it is still around which I doubt by making some lump sum payments into super just before I retire.

But you cant say it is either fair or equitable. People have had the benefit of a low tax environment going in and in the accumulation phase as well and then making the whole lot tax free on retirement well it just wont wash because we wont be able to afford it no matter what govt is in office.


----------



## FlyingFox (7 April 2013)

ASICK said:


> [
> ...
> Yes gg, labor will raid those who are successful to pay for those who are hopeless (or unfortunate).




As apposed to raiding those that were born later to fund those that were born earlier and therefore having the largest voting block?

The Coalition will do the same in due time as this a question of sustainability not policy. Maybe they'll use the money for something else but they will do it.  



Intrinsic Value said:


> And for all those bashing Labor remember it was  Howard who brought in all these unsustainable policies and Abbott was also a member of his cabinet at the time if I am not mistaken. The next axe will have to fall on some other of these expensive middle class welfare handouts bought in by Howard to buy votes.




+1. And we are discovering how hard it is to wind any handouts/entitlements back. 



ASICK said:


> Why not? Those "same older people" will most probably not be using the hospital system because they'll most probably be privately insured.   First superannuation was all about providing a future outside the public purse, now it's about superannuation supporting the public purse: socialism.




Privately insured is only above medicare. I think you stated it exactly. Super is meant to provide a future; it is not meant to be used as a tax avoidance system for the wealthy.

For all those who argue that this will stop the high income earners from saving etc, here is some evidence to the contrary:

http://obs.rc.fas.harvard.edu/chetty/ret_savings.html


----------



## sptrawler (7 April 2013)

IMO It is just Labor Party garbage as per usual.
They say they are in there for the 'little guy' they say the fat cats have $2m in super.

What they fail to say is, as Noel Whittaker pointed out, Nicola Roxon retires at 45 next year on a penssion equivelent to a super fund of $4million.

Then when you read other reports, she won't lose any pension untill it's above approx $180,000. Also she can access it at 45 years old, it's government gauranteed and indexed for life.:1zhelp:

Apparently our super is unsustainable.lol,lol,lol

Give me a break, nothing better than dividing and ruling. Cheers

Why not just put $4million in her super and say right you sort it, rather than us having to? At least then she has to wear her legacy.

I'm not bashing pollies, just think if they are going to demonise 'fabulously wealthy' they should be measured by the same definition.


----------



## Judd (7 April 2013)

ASICK said:


> ...First superannuation was all about providing a future outside the public purse, now it's about superannuation supporting the public purse....




Really?  Where has that ever been officially stated apart from the urban myth?  The SGC was introduced in 1992 with a view that when it reached a "mature" level, it, together with the Age Pension, would provide the opportunity for people on low to average wages with an average working life of 35 years to have a substantial replacement of their income.  At least that is what is contained in the Explanatory Papers to the Bill.

As for additional superannuation, it was not as far as I am aware, intended to be used as a tax haven but as the tax-assisted voluntary part of the superannuation system. Generous tax concessions encourage and assist those with saving capacity to provide for their retirement.

The crux of the issue is that the tax concessions are being used/abused by some who do not need it to have an reasonable retirement income.  The balance between encouraging people to save for retirement via superannuation and superannuation being used as a tax haven is what is at issue.

I don't necessarily agree with the way this Government has gone about it which I think smacks of being ham-fisted and playing politics rather than reasoned policy but I do understand the concern.

Disclaimer:  I have pulled everything I can out of the superannuation system as I don't need it in order to provide for my needs.


----------



## sptrawler (7 April 2013)

Judd said:


> Disclaimer:  I have pulled everything I can out of the superannuation system as I don't need it in order to provide for my needs.




I am sure many others will be following your lead.


----------



## Julia (7 April 2013)

sails said:


> Maybe Abbott wasn't so wrong after all:
> Super plan contains a booby trap[/URL]



No booby trap.  I have no interest in defending the government, but the cgt issue mentioned in that article was not disguised.

Question for you sails, gg, and anyone else who is saying the recent announcement is unfair:
do you really think it's fair for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered?

I know when I first learned about that, I couldn't believe it.
Perhaps it's the 'thin edge of the wedge' in which case we have reason to be concerned, but on face value of what has been announced it seems to me to be simply addressing a tax dodge of the reasonably wealthy who would otherwise have still accumulated sufficient funds to fund their own retirement anyway.
Further, they will not be people who would have even considered voting Labor.



Intrinsic Value said:


> Well I still think that it was only a matter of time before the tax free income for those in the pension phase was changed.



Agree.



> You really cant have retirees generating income of 100k and more a year tax free whilst the rest of working population is being slugged so heavily. These same older people will also be using the hospital and medical system heavily which will also be subsidised by the younger generation.



Yes.  To suggest that private health cover will entirely remove any dependence on the public health system is fallacious.  Certainly private cover is well worth while for elective surgery like knee replacements etc., but to imagine it will be the first recourse in, say, cardiovascular emergencies, acute illnesses etc, is not reasonable.



> And of course there is a whole lot of baby boomers ready to join the ranks of pensioners over the next 10 years or so it was never going to be a sustainable policy over the long haul.



And according to most published stats, most of these new retirees are not going to be self funded so will be drawing on at least a part government pension.



sptrawler said:


> IMO It is just Labor Party garbage as per usual.
> They say they are in there for the 'little guy' they say the fat cats have $2m in super.
> 
> What they fail to say is, as Noel Whittaker pointed out, Nicola Roxon retires at 45 next year on a penssion equivelent to a super fund of $4million.
> ...



Of course that's true.  But you can't base a whole of system policy on what a few politicians get.
Is their situation fair and reasonable?  No, of course not.  But you cannot conclude, ipso facto, that therefore such inequities continue to prevail across the wider population.
The obvious answer is to address the over-generous situation for politicians.  I think some steps have been taken toward this, but I'm not sure what.




> Apparently our super is unsustainable.lol,lol,lol



Do you believe the present system, especially considering the demands on the age pension and public health systems by the incoming baby boomers, is genuinely sustainable into the future?


----------



## sptrawler (7 April 2013)

Julia said:


> Do you believe the present system, especially considering the demands on the age pension and public health systems by the incoming baby boomers, is genuinely sustainable into the future?




Firstly, let's not forget, the loss of tax is on savings that prior to compulsory super, wasn't there and wouldn't be there now. It is a percieved loss of tax.

As has been pointed out if like this year, where there has been a 30% rise in the equity market, it will affect people with $500 _ $1m in super. 
What Obama is suggesting is probably more sensible, where there is a cap placed on super balances.

To tax a fund in the pension phase will cause a more rapid errosion of the capital, when people are not in a position to replace it.
Therefore if another once in a lifetime happens (which seem to happen every 5 or so years) it will just push a larger number of self funded onto welfare. It is dumb IMO

They would be far better taxing pensions above $100k at 15%, that wouldn't erode the capital as quickly.IMO
Also it would capture the pollies with the same rules and save a lot of paperwork with smoke and mirrors.

Let's be honest what they are suggesting isn't about sustainability, it's about maximising returns of tax while minimising effect on them.


----------



## banco (7 April 2013)

sptrawler said:


> Firstly, let's not forget, the loss of tax is on savings that prior to compulsory super, wasn't there and wouldn't be there now. It is a percieved loss of tax.
> 
> As has been pointed out if like this year, where there has been a 30% rise in the equity market, it will affect people with $500 _ $1m in super.
> What Obama is suggesting is probably more sensible, where there is a cap placed on super balances.
> ...




I think with all that you still managed to avoid saying whether the current policy settings are sustainable.


----------



## Garpal Gumnut (7 April 2013)

I take all your points Julia but will still fight against an ALP Government retrospectively changing the rules on my Super.

I have had very few sick days in a work life of nearly 40 years, and when I was sick for longer than a month, had sickness insurance, which I paid for, to tide me over.

I resent an ALP Government strapped for cash taking MY MONEY, for mine it is, to get themselves out of a political hole.

Second rates like Wong, Swan and Roxon retiring on $200,000 a year from the age of 45 indexed for life is obscene, and it is not good enough to say it will be addressed. It is obscene.

*And I do think it is fair* for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered.

Because that is what we were promised.

And what the muppet ALP don't realise is that retirees will spend that money when they retire, on goods and services that younger people provide.

However if it becomes an ageist war, as the ALP Government are trying to make it, they won't. 

I can live on $20,000 as well as $100,000

Like many of my generation I was poor, and living poor doesn't faze me, it is not a problem.

However for the muppet retirees with their funeral insurance, grey nomad caravans, Landcruisers, accident, glass, roof maintenance, falling over and all the other crap accoutrements of retirement it will.

And the economy will suffer.

gg


----------



## banco (7 April 2013)

Garpal Gumnut said:


> I take all your points Julia but will still fight against an ALP Government retrospectively changing the rules on my Super.
> 
> I have had very few sick days in a work life of nearly 40 years, and when I was sick for longer than a month, had sickness insurance, which I paid for, to tide me over.
> 
> ...




I'm not sure why people think aspects of the tax system are immutable.  Tax rates change all the time based on Government revenues, priorities etc.


----------



## sptrawler (7 April 2013)

banco said:


> I'm not sure why people think aspects of the tax system are immutable.  Tax rates change all the time based on Government revenues, priorities etc.




Agree completely and while you are working you can adjust to changes, someone who is 65+ can't. 

They are captive and fairly well helpless to adapt.

Don't think for a moment that I think fabulously rich people need welfare. 

However I do think changes should be done in a sensible transparent and logical manner, without inequity.

That's why I think, the tax should be all encompasing of everyone, at a pension amount, not on earnings.

It should also cover polliticians pensions, which would be very easy to apply if it was triggered at a certain pension amount.


----------



## banco (7 April 2013)

sptrawler said:


> Agree completely and while you are working you can adjust to changes, someone who is 65+ can't.
> 
> They are captive and fairly well helpless to adapt.
> 
> .




You may have a point in theoretical point but we can't go back in time and increase taxes on super during the accumulation phase. 

It also strikes me as a self-serving argument for the older generation.  "Well we're over 65 now so it would be unfair to make any changes to how super is taxed in the pension phase but we recommend you tax super more heavily at the point of entry"


----------



## sptrawler (7 April 2013)

banco said:


> I think with all that you still managed to avoid saying whether the current policy settings are sustainable.




Sorry in a word no.

Are the new suggestions an improvement, in a word no.

Will the suggestions improve the situation,no.

Will the suggested changes reduce workers benefits,yes

Will they be thrown out in the next gfc event, yes.

Will they increase the dependence on welfare.yes 

All my opinions.


----------



## sptrawler (7 April 2013)

banco said:


> You may have a point in theoretical point but we can't go back in time and increase taxes on super during the accumulation phase.
> 
> It also strikes me as a self-serving argument for the older generation.  "Well we're over 65 now so it would be unfair to make any changes to how super is taxed in the pension phase but we recommend you tax super more heavily at the point of entry"




Now you are twisting my arguement, with spin.

I did say Obama's idea of a cap on super amounts is a good one.

My only arguement with Labors idea is the tax should be applied to the pension not the earnings.

If there was a cap on super balances, once the earnings  adding to the principle reached that, they would have to be taken out of the super system.

I don't see your point, or maybe i'm on the wrong track, you sound knowledgable.


----------



## FlyingFox (7 April 2013)

Julia said:


> Question for you sails, gg, and anyone else who is saying the recent announcement is unfair:
> do you really think it's fair for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered?
> 
> I know when I first learned about that, I couldn't believe it.
> ...




Personally I wouldn't mind it as much expect for the fact that we had very high concessional caps and no opportunity cost past retirement. Very little preventing you from taking out the money in lump sum and then getting a pension. Moreover the concessional caps are actually biased against the lower income earners. Many will not have enough liquid saving to actually make full use of them. 





sptrawler said:


> Firstly, let's not forget, the loss of tax is on savings that prior to compulsory super, wasn't there and wouldn't be there now. It is a percieved loss of tax.




No it's not a perceived loss of tax. If we did not have complusory super, we would get the extra income which would be taxed at marginal rates. It is an actual loss of tax. Compulsory super contribs is not magic money, you still earn it.



Garpal Gumnut said:


> I take all your points Julia but will still fight against an ALP Government retrospectively changing the rules on my Super.
> 
> I resent an ALP Government strapped for cash taking MY MONEY, for mine it is, to get themselves out of a political hole.




They are not taking your money (well not yet anyway). They are just taxing your income above a rather high limit.




Garpal Gumnut said:


> Second rates like Wong, Swan and Roxon retiring on $200,000 a year from the age of 45 indexed for life is obscene, and it is not good enough to say it will be addressed. It is obscene.




That's all the politicians mate....Start a partition.....Start your own political party.



Garpal Gumnut said:


> *And I do think it is fair* for people to be taxed at only 15% on the way in to Super, 15% in the whole of the accumulation phase, and then nothing at all thereafter once pension phase is entered.
> 
> Because that is what we were promised.




Ahuh, now we come to the crux of the issue ... there were a lot of things promised and done for votes without foresight. However even in the face of hindsight, these "promises" are impossible to wind back due to the fact we all feel entitled to them. Even if they have very little impact on most people.


----------



## FlyingFox (7 April 2013)

sptrawler said:


> Will the suggested changes reduce workers benefits,yes
> 
> Will they be thrown out in the next gfc event, yes.
> 
> ...




How?

Read this if you think this will stop high come earners from saving and increase dependence on welfare 

http://obs.rc.fas.harvard.edu/chetty/ret_savings.html


----------



## sptrawler (7 April 2013)

FlyingFox said:


> How?
> 
> Read this if you think this will stop high come earners from saving and increase dependence on welfare
> 
> http://obs.rc.fas.harvard.edu/chetty/ret_savings.html




So you think taxing the income and reducing compounding, is better than placing a cap and returning excess to the normal taxation system?

This IMO isn't about taxing high income earners, it's just another middle class tax.
If you think the ultra rich are going to be caught out by this crap, your dreaming.
Same as you won't catch the pollies paying it.


----------



## tinhat (7 April 2013)

sails said:


> Maybe Abbott wasn't so wrong after all:
> 
> 
> 
> Read more from SMH: Super plan contains a booby trap




Well, that's just going to push people towards fully franked dividends even more.


----------



## Garpal Gumnut (7 April 2013)

sptrawler said:


> So you think taxing the income and reducing compounding, is better than placing a cap and returning excess to the normal taxation system?
> 
> This IMO isn't about taxing high income earners, it's just another middle class tax.
> If you think the ultra rich are going to be caught out by this crap, your dreaming.
> Same as you won't catch the pollies paying it.




Agree, mate, I thought I might have been in the 16,000, incredible to me as it may have seemed.

But on looking at it more closely I'm nearer to the 250,000th.

Many of my winners are growth not income assets, and I now plan to take the max from retirement super pension in case these silly bastards of the ALP ever get re-elected in my lifetime to implement this complete balls up of a policy, so that I end up below the 2mil.

And anyone who ends up in the 16,000 is a mug imo.

gg


----------



## FlyingFox (7 April 2013)

sptrawler said:


> So you think taxing the income and reducing compounding, is better than placing a cap and returning excess to the normal taxation system?




Firstly the changes are only on the pension phase. The compounding thing does not matter much in this case. I don't mind them doing it either way. I think most will prefer the tax on income to going to the normal taxation system which will either have a much larger impact for them or have no increase in tax for the government. 



sptrawler said:


> This IMO isn't about taxing high income earners, it's just another middle class tax.
> If you think the ultra rich are going to be caught out by this crap, your dreaming.
> Same as you won't catch the pollies paying it.




Do you know many who would classify themselves as middle class that have > 2 million in super?

The rich will not be affected, hence the link. Just prevents them from exploiting a tax loophole.


----------



## sptrawler (7 April 2013)

tinhat said:


> Well, that's just going to push people towards fully franked dividends even more.




Abso bloody lutelly, you would be a goon not to.


----------



## FlyingFox (7 April 2013)

Garpal Gumnut said:


> Agree, mate, I thought I might have been in the 16,000, incredible to me as it may have seemed.
> 
> But on looking at it more closely I'm nearer to the 250,000th.
> 
> ...





And what proportion of the population do you think are in the same boat as you and sptrawler?

What is the typical super return? I suspect it more in the vicinity of 10% than 30%.


----------



## sptrawler (8 April 2013)

FlyingFox said:


> And what proportion of the population do you think are in the same boat as you and sptrawler?
> 
> What is the typical super return? I suspect it more in the vicinity of 10% than 30%.




Well as the ASX has gone from 4000 to 5000 in the last 6 months, blind freddy would expect an index linked fund to do better than 10%.


----------



## FlyingFox (8 April 2013)

sptrawler said:


> Well as the ASX has gone from 4000 to 5000 in the last 6 months, blind freddy would expect an index linked fund to do better than 10%.




I will avoid the cheap shot and not mention where the ASX has been prior 

And that is where all your assumptions fall. The majority of people with super in the pension phase will not have a growth strategy as they are scared to loose it. 

My semi-retired parents have all their savings in property and term deposits. They get ~ 6%. They couldn't care less about the market.


----------



## sptrawler (8 April 2013)

FlyingFox said:


> Firstly the changes are only on the pension phase. The compounding thing does not matter much in this case. I don't mind them doing it either way. I think most will prefer the tax on income to going to the normal taxation system which will either have a much larger impact for them or have no increase in tax for the government.
> .




Well I thought you were knowledgeable, isn't the debate about sustainability, compounding in the pension phase is crucial. 
The pension phase maybe 30 years with nothing going in, it is more important than the accumulation years where members are adding to the sum
Isn't it all about keeping the baby boomers off welfare? am I missing something, or are you?

One minute your saying it's unsustainable, next your saying, people would prefer to stay in the system.

I'm saying once the have enough in the system, any excess should be taxed normally.

Sorry can't follow your reasoning. 
Just think the suggestions by Labor are crap and do nothing for sustainability


----------



## Julia (8 April 2013)

FlyingFox said:


> Very little preventing you from taking out the money in lump sum and then getting a pension.



This is an aspect that probably deserves more focus than the presently discussed policy.  I wonder, though, how many retirees actually do this?  If someone makes the effort to be self funded, it seems unlikely they'd want to spend  up to $1M just to then eke out an existence on the meagre age pension.

Requiring people to take a percentage of their retirement funds in an annuity doesn't seem too unreasonable, but I suppose it would fail the "it's my money and I'll decide what I do with it" test.

So far, despite the intense interest in what is simply Labor's election policy, rather than something that will definitely happen, there has been relatively little focus on the Coalition's proposal to remove the small assistance in Super presently offered to low income earners.  That seems a retrograde step to me, but I might be missing something here?


----------



## sptrawler (8 April 2013)

Julia said:


> So far, despite the intense interest in what is simply Labor's election policy, rather than something that will definitely happen, there has been relatively little focus on the Coalition's proposal to remove the small assistance in Super presently offered to low income earners.  That seems a retrograde step to me, but I might be missing something here?




+1 I too, can't follow the coalitions reasoning.


----------



## sptrawler (8 April 2013)

FlyingFox said:


> My semi-retired parents have all their savings in property and term deposits. They get ~ 6%. They couldn't care less about the market.




I know it is all speculation and I've probably done it to death. However if unrealised capital gains is thrown into the earnings mix, it will effect your parents.
Anyway probaly enough been said, I'll give the subject a break.


----------



## craft (8 April 2013)

Julia said:


> So far, despite the intense interest in what is simply Labor's election policy, rather than something that will definitely happen, there has been relatively little focus on the Coalition's proposal to remove the small assistance in Super presently offered to low income earners.  That seems a retrograde step to me, but I might be missing something here?




The retirement funding system should be thought about in a holistic way – Ie the cost of tax concessions + Pension payments.

The low income super rebate probably doesn’t do much to the overall funding cost of the demographic it touches – but it is a big measure in transferring the costs from the pension payment component to the tax concession component.

The tax concession cost occur earlier – removing this measure takes pressure of the budget now but pushes the cart down the road to when low wage /intermittent earners retire underfunded and will need to rely on the pension more heavily. 

This really should be getting some scrutiny because introducing it was good policy – removing it is bad policy. However critiquing a Libral policy on ASF is akin to self torture – Best avoided I think.


----------



## craft (8 April 2013)

tinhat said:


> Well, that's just going to push people towards fully franked dividends even more.




??? Imputation credits are included as part of assessable income - can you explain to me what you see as a benifit for moving more towards franked dividends?


----------



## craft (8 April 2013)

sptrawler said:


> That's why I think, the tax should be all encompasing of everyone, at a pension amount, not on earnings.
> 
> It should also cover polliticians pensions, which would be very easy to apply if it was triggered at a certain pension amount.





How are you going to tax pension income without removing the ability for people to take lump sums?


----------



## craft (8 April 2013)

Julia said:


> Surely it's time for Tony Abbott to stop making irresponsible comments?
> 
> 
> There will be thousands of ordinary, ill-informed Australians who will take this extravagant statement at face value.
> Perhaps he will gain some votes from such people as a result, but isn't he in the process losing respect from people whose goodwill he needs?




As you would say Julia +1

We are only ever talking a reduction of some very favourable tax concessions when it comes to changes made to the super system.  Regardless of which party is making the changes.

However the political debate iis leading most people to conclude super is not safe when it is and will remain the most tax advantaged way to save for retirement. 

I can’t believe people that may be affected by the 15% on earnings are talking about pulling out their funds into a 46.5% marginal tax environment.  Its rhetoric /fear not logic.


----------



## sptrawler (8 April 2013)

craft said:


> How are you going to tax pension income without removing the ability for people to take lump sums?




Good point craft, that would have to come into the mix. In U.K apparently you are only allowed to remove 40% as a lump.


----------



## tinhat (8 April 2013)

craft said:


> ??? Imputation credits are included as part of assessable income - can you explain to me what you see as a benifit for moving more towards franked dividends?




The newspaper article being discussed earlier was asking whether capital gains are to be included as income. Given that it is the performance of the pension phase account that is being assessed (not the actual pension drawn) then the answer would appear on face value to be "yes" - CGT events are treated as income. CGT events create "lumpy" income that could easily push someone on a middle of the road SMSF pension over the $100,000 threshold creating more incentive to seek yield over capital gains.


----------



## craft (8 April 2013)

drsmith said:


> Upon reading that statement, I'm unsure as to whether unrealised variation in the capital assets will be considered as part of the income stream for the above tax threshold. I would say no on the above, but that's only because of omission rather than a definitive answer.
> 
> We may need to wait for the fine print to get the definitive answer, if it gets that far.
> 
> http://resources.news.com.au/files/2013/04/05/1226613/049704-aus-na-file-superannuation.pdf




It’s all academic because a realistic evaluation of circumstances suggest we will never see legislation.

However I can’t imagine unrealised gains/losses would be captured – There is already legislation in place that specifies everything with-in super is on a Capital Acoount. A CGT event would have to happen for a gain to be included.

Even so realising capital gains is the smoking gun in the legislation – It has the potential to catch many funds in years when gains are realised.

The grandfathering measures are generous.


----------



## craft (8 April 2013)

sptrawler said:


> Hey Craft, you seem to have a good handle on the accounting side.
> If they are going to tax earnings above $100k in the pension phase, will that mean that loses will be able to be applied?
> At present as it's untaxed, losses can't be applied?
> What do you reckon?




Capital Gains losses would be of benefit.

A far as I understand it they are actually still included in the CGT calculation now – Its just that in pension phase whatever the assessable income comes out to be – you are allowed a full exemption. 

The only change is the exemption will now be capped at 100K for all earnings.


----------



## craft (8 April 2013)

drsmith said:


> That might need to be more opaque than multiple funds under the same name (TFN), but after the MRRT debacle, you never know.
> 
> This I suspect will be an issue left for the bureaucrats to resolve in the detail should Labor be re-elected.




They are talking fund level at the moment as V indicated. If they don’t have something in the legislation to limit the exemptions at the individual level then multiple funds will be with-in the law. It's this type of thing that is not foreseen that makes legislation porous.


----------



## craft (8 April 2013)

DocK said:


> IF the proposed changes are ever passed I can see small family-owned business being negatively affected, again.  Nothing new for this segment of our economy to be completely overlooked by our present Govt.
> 
> A good number of family owned SMEs own their business premises via their SMSFs.  Quite often these same people haven't been able to make extra contributions to their super and the property forms the bulk of the value of the fund - well below the 2M mark.  Upon retirement and the probable sale of the premises there would hopefully be a reasonable capital gain - which would then be subject to the 15% tax on cap gain/earnings over 100K.  I know the grandfathering clause exempts property already owned for up to 10 years - but this is no comfort to those family businesses who don't envisage retirement or relocation within that timeframe.  I guess not only accountants and planners will benefit from yet more tinkering with super, but also real estate agents, who will  benefit from the inevitable push to sell lumpy assets within the 10 years.  It would certainly make sense for those whose SMSF's main asset is a factory or similar to sell and rent back for a few years.




Capital gains will still be assessable at 10% if held for more than 12 Months - the discount is not affected.

The grandfathering on assets already held means that capital gains will only start to accrue after 2024. Ie if you own an asset now and you still own it in July 2024 you will record its valuation as of that date and only gains above that valuation will be included when the asset is finally disposed of.


----------



## craft (8 April 2013)

sptrawler said:


> Noel Whittaker wrote a great article in the 'Sunday Times' today, the article is called 'Ad Fab for some'
> 
> It gives a great summary of the superannuation system and who are really the winners.
> 
> ...




In your rage at the Pollies pension – don’t lose sight that this policy at least is to be is to be applied evenly. There will be an element of capital draw down in a defined benefit pension, that may superficially make the pension payment taxation look different but the underlying earnings both cop the tax rate at 100K.


----------



## craft (8 April 2013)

tinhat said:


> The newspaper article being discussed earlier was asking whether capital gains are to be included as income. Given that it is the performance of the pension phase account that is being assessed (not the actual pension drawn) then the answer would appear on face value to be "yes" - CGT events are treated as income. CGT events create "lumpy" income that could easily push someone on a middle of the road SMSF pension over the $100,000 threshold creating more incentive to seek yield over capital gains.





Ok – moving towards yield rather than growth because of the CGT lumpiness problems with the proposed legislation – I understand.   I wasn’t sure why you were singling out franked income.

This discrimination against growth assets is probably the poorest policy implication in my view.


----------



## drsmith (8 April 2013)

craft said:


> The retirement funding system should be thought about in a holistic way – Ie the cost of tax concessions + Pension payments.
> 
> The low income super rebate probably doesn’t do much to the overall funding cost of the demographic it touches – but it is a big measure in transferring the costs from the pension payment component to the tax concession component.
> 
> ...



Introducing it from an alternative revenue source was the bad policy. It should have been looked at in the context of weighing up the low income super contribution against the super-co contribution and the former reduced to fund the latter if the latter was regarded as a better incentive for low income earners. 

I doubt Labor had the long term in mind when they introduced it. It was a handout to promote the MRRT in the public eye. There was nothing holistic in this and as a policy was made worse by virtue of the MMRT failing to raise the revenue expected and thus the program being unfunded. This type of fiscal failure goes to the heart of Labor's economic incompetence. They spend money they haven't raised and then start looking elsewhere to make up the shortfall.

With regard to the Coalition, they don't actually need to respond to the individual components of Labor's plan because without legislation this term, it's nothing more than en election commitment. The Coalition can therefore determine their own policy platform from the standpoint of where we are now for the public to compare with Labor and that in my view is what they should do.

I hope the Coalition lean more towards looking at the retirement funding system more in a holistic way in the lead up to the election. That will be the test for them.


----------



## sptrawler (8 April 2013)

Thanks craft, for all the posts, it's really great to have posters such as yourself, who have a proffessional understanding of the implications.
We are driven by spin and missinformation, self generated and press generated.
It's great you can supply some clarity to the actual issues, you certainly have answered a lot of my questions. Cheers


----------



## craft (8 April 2013)

sptrawler said:


> Thanks craft, for all the posts, it's really great to have posters such as yourself, who have a proffessional understanding of the implications.
> We are driven by spin and missinformation, self generated and press generated.
> It's great you can supply some clarity to the actual issues, you certainly have answered a lot of my questions. Cheers




You must have me confused with somebody else.  I’m just a bum with an interest in super that read the press releases. I don’t bother with the media, everything gets lost in the translation and biases.


----------



## drsmith (8 April 2013)

craft said:


> They are talking fund level at the moment as V indicated. If they don’t have something in the legislation to limit the exemptions at the individual level then multiple funds will be with-in the law. It's this type of thing that is not foreseen that makes legislation porous.






craft said:


> It’s all academic because a realistic evaluation of circumstances suggest we will never see legislation.
> 
> However I can’t imagine unrealised gains/losses would be captured – There is already legislation in place that specifies everything with-in super is on a Capital Acoount. A CGT event would have to happen for a gain to be included.
> 
> ...




I can only comment in the accumulation phase as I'm not yet retired. The annual statement I get describes fund earnings in any given financial year as a single figure which is inclusive of asset price variation (unrealised capital gains/losses). 

In the pay down (retirement) phase, do funds break this down into the separate components such as unrealised capital movement and income from investments ?

They would need to do this for unrealised gains/losses not to be captured.


----------



## sptrawler (8 April 2013)

craft said:


> You must have me confused with somebody else.  I’m just a bum with an interest in super that read the press releases. I don’t bother with the media, everything gets lost in the translation and biases.




My mistake.lol


----------



## tinhat (8 April 2013)

craft said:


> I wasn’t sure why you were singling out franked income.




It's just my observation that fully franked dividends tend to provide a greater after tax yield for people who don't pay income tax (such as pension phase super accounts). A property or infrastructure trust that has no franking credits tends to yield a lower after tax return for a superannuant pensioner than an income tax payer and visa-versa. So, when I am looking for income stocks for my Mum's pension phase super account I always calculate the grossed-up yield which almost exclusively puts fully franked dividend payers ahead of unfranked dividend payers. The only unit trust style stock I have considered buying for the SMSF was AAD when it was around $1 (yielding around 10%). Instead I piled into TLS which at that time was yielding 12% grossed up and banks which were yielding 10% grossed up.


----------



## craft (8 April 2013)

drsmith said:


> I can only comment in the accumulation phase as I'm not yet retired. The annual statement I get describes fund earnings in any given financial year as a single figure which is inclusive of asset price variation (unrealised capital gains/losses).
> 
> In the pay down (retirement) phase, do funds break this down into the separate components such as unrealised capital movement and income from investments ?
> 
> They would need to do this for unrealised gains/losses not to be captured.





The earnings you see on your statement are not the same as the earnings for tax purposes to the fund. The difference is recorded in the balance sheet as Deferred tax Liabilities/Assets.

The above probably sounds like gobledy gook  - maybe a better way to try and explain it is that your annual statement earnings fluctuate with the market after an allowance for potential tax obligation - your actual taxable earnings for which actual tax is paid are different by the magnitude of the changes to the balance sheet tax accruals . The exemption is based on actual taxable earnings. 

In a non SMSF fund all this is pretty complicated, non transparent and potentialyl averaged over many members. ( I really don't understand big fund accounting at all)  Somebody like Ves or R&R might be able to explain it better.


----------



## drsmith (8 April 2013)

I've gone back to Wayne Swan's and Bill Shorten's media release from Friday,



> The Government will better target the tax exemption for earnings on superannuation
> assets supporting income streams, by capping it to the first $100,000 of future
> earnings for each individual.
> 
> ...






> For superannuation assets earning a rate of return of 5 per cent, this reform will only affect individuals with more than $2 million in assets supporting an income stream.




http://resources.news.com.au/files/2013/04/05/1226613/049704-aus-na-file-superannuation.pdf

I'm in the PSS which shows earnings and tax as follows,

Change in market value of investments: $228.7m
Other income: $2.1m

Income tax Expense: $34.2m

$34.2m is 15% of $228m.

http://pss.gov.au/storage/1-PSS 2011-2012 Annual Report to Members.pdf

My bolds.


----------



## sptrawler (8 April 2013)

drsmith said:


> I've gone back to Wayne Swan's and Bill Shorten's media release from Friday,
> 
> 
> 
> ...




If your assumptions are correct doc, it could quite concievably hit a lot of people in a year of surging assett prices. One would hope all this would be thrashed out during the formulation process.

Another interesting statement by Shorten, when asked why limits weren't placed on withdrawls, he responded by saying he didn't want to spook the horses. Or something to that effect, can't locate the article.


----------



## craft (8 April 2013)

drsmith said:


> I've gone back to Wayne Swan's and Bill Shorten's media release from Friday,
> 
> 
> 
> ...




Your situation is a* government defined benefit *superannuation fund.

I don’t understand the accounting for it– it’s different from everything else I am familiar with. 

Everything relating to deferred tax obligations seems to be handled through the revenue line  ‘Appropriation from Consolidated Revenue Fund’  which seems like a netting of deferred  tax assets and liabilities for the Government.


----------



## drsmith (8 April 2013)

craft said:


> Your situation is a* government defined benefit *superannuation fund.
> 
> I don’t understand the accounting for it– it’s different from everything else I am familiar with.
> 
> Everything relating to deferred tax obligations seems to be handled through the revenue line  ‘Appropriation from Consolidated Revenue Fund’  which seems like a netting of deferred  tax assets and liabilities for the Government.



Beyond the detail outlined in the operating statement, I don't know either, but the income tax is 15% of the change in market value of the investments.

Regardless of it being a defined benefit fund supported by government appropriations, there's an implication that the 15% tax on earnings includes unrealised capital gains. It's either that or if more complicated, simply a coincidence between the income tax and the change in market value of investments.


----------



## drsmith (8 April 2013)

sptrawler said:


> If your assumptions are correct doc, it could quite concievably hit a lot of people in a year of surging assett prices. One would hope all this would be thrashed out during the formulation process.



The public released of this policy was rushed. 

It wouldn't surprise me if at a government level it hasn't yet been considered. they're not exactly rushing to legislate. The revenue saving projections may be based on 5% earnings each and every year. Who knows.


----------



## craft (8 April 2013)

drsmith said:


> Beyond the detail outlined in the operating statement, I don't know either, but the income tax is 15% of the change in market value of the investments.
> 
> Regardless of it being a defined benefit fund supported by government appropriations, there's an implication that the 15% tax on earnings includes unrealised capital gains. It's either that or if more complicated, simply a coincidence between the income tax and the change in market value of investments.




Like I say I don’t know much about government or defined benefit schemes. – It seems a pretty unlikely co-incidence though. 

What I do know is that Non Government defined contribution funds which cover most people don’t pay tax on unrealised gains – although a provision is made for them.

 My  speculation is that it’s very unlikely that it will be applied on un-realised gains – If it is that makes it a huge change and a major departure from current for most people. Until we get the legislation which is not likely to occur there’s only enough info for futile speculation - so I'm not going to argue the toss.


----------



## sptrawler (8 April 2013)

craft said:


> Like I say I don’t know much about government or defined benefit schemes. – It seems a pretty unlikely co-incidence though.
> 
> What I do know is that Non Government defined contribution funds which cover most people don’t pay tax on unrealised gains – although a provision is made for them.
> 
> My  speculation is that it’s very unlikely that it will be applied on un-realised gains – If it is that makes it a huge change and a major departure from current for most people. Until we get the legislation which is not likely to occur there’s only enough info for futile speculation - so I'm not going to argue the toss.




I'm happy with that, but if it goes pear shaped, me and doc will be kicking your @rse. lol


----------



## prawn_86 (10 April 2013)

National Press CLub address on now about the recent changes if anyone is interested


----------



## ASICK (11 April 2013)

http://poorrichardsnews.com/post/47244056666/obama-seeks-to-cap-retirement-accounts-so-that-no

What is "too much"?  Still, it's nice to see that we're not alone.


----------



## drsmith (13 April 2013)

prawn_86 said:


> National Press CLub address on now about the recent changes if anyone is interested



I saw a couple of questions at the end, but missed most of it. Is the video made publically available after the event ?

Laura Tingle did a piece on it,



> Brogden opened by arguing that the proof of the success of the super system “is in the Budget”.
> 
> “Superannuation is already saving taxpayers billions in age pension payments,” he claimed, arguing the pension bill would increase by “$7 billion in the absence of superannuation”.
> 
> Well that makes tax concessions worth $32 billion (according to Treasury’s tax expenditure statement) good value for money, don’t they?




The difference of course is $25bn.

http://www.afr.com/p/opinion/on_slippery_slope_there_is_only_HI98SSvDxPJeQKOsN4IanL

In 2011, the number of people aged over 65 was approximately 3.1 million.

http://www.abs.gov.au/ausstats/abs@.nsf/0/AE3CAF747F4751CDCA2579CF000F9ABC?OpenDocument

If we assume this is currently 3.25 million, the $25bn difference between pension savings from super and super concessions would fund a non-means test annual payment of $7692 for every person aged 65 and over. 

It would be interesting to know what the total government outlay is for the age pension and add it to the above figures and then take into account the distribution between singles and couples relative to current pension rates.

The superannuation investment industry that clips its $20bn in fees every year I think would prefer not to know.


----------



## drsmith (13 April 2013)

Does anyone know how much we pay out annually for the age pension or where I could find it ?

Digging into the budget papers, the closest I could get to was _Income For Seniors_, but at $36.76bn for 2012/13, that must include more than the age pension. On 3.25 million people being 65 or over, that equates to $11310 per person.

http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst6-03.htm


----------



## McLovin (13 April 2013)

drsmith said:


> Does anyone know how much we pay out annually for the age pension or where I could find it ?
> 
> Digging into the budget papers, the closest I could get to was _Income For Seniors_, but at $36.76bn for 2012/13, that must include more than the age pension. On 3.25 million people being 65 or over, that equates to $11310 per person.
> 
> http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst6-03.htm




There's a pretty good breakdown here...

http://www.google.com.au/url?sa=t&r...=Dzj8ZJovuMXW6JnMOIy-qg&bvm=bv.45175338,d.cGE


----------



## sydboy007 (14 April 2013)

McLovin said:


> There's a pretty good breakdown here...
> 
> http://www.google.com.au/url?sa=t&r...=Dzj8ZJovuMXW6JnMOIy-qg&bvm=bv.45175338,d.cGE




Well worth a read.

A few things I was surprised by

_A partial Age Pension is payable for home owning couples with earnings up to close to $2,500 per fortnight and
with over $1,000,000 in non-housing assets.

For example, a couple who are homeowners with non-housing assessable assets of $750,000 and assessable
income of $45,000, are eligible for a considerable part Age Pension payment of over $10,000 per annum, and
those with even higher income and $1 million in non-housing assets are still eligible for a partial pension.

We estimate that the cost of administering the Age Pension by Centrelink could be as high as $1 billion a year

Second, although the eligibility for the Age Pension is 65 and increasing to 67, retirees can access their
superannuation at age 60. This allows early retirees to spend some or all of their superannuation and fall back on
the Age Pension at a relatively young age.

It appears incongruous that people cannot claim a Newstart allowance until they have used up their own money
first, while there is a generous asset test for the Age Pension. Further, Newstart has no partial payment – you
either qualify or you don’t._

I like the proposals they have to simplify access to the aged pension.  Would in many ways stop the double dipping that can occur now.


----------



## Julia (14 April 2013)

> It appears incongruous that people cannot claim a Newstart allowance until they have used up their own money
> first, while there is a generous asset test for the Age Pension. Further, Newstart has no partial payment – you
> either qualify or you don’t.



Requiring all savings to be used before Newstart is accessible has always seemed unreasonably harsh to me.
People can, of course, quarantine saved funds into Super, but we all know the restrictions that then involves.

Surely unemployed people should be able to receive assistance for, say, a few months while they look for a job, then if still unemployed, then have to access their savings before receiving any more government benefit.
It's reasonable enough that a high earner with a decent asset base doesn't receive taxpayer funded assistance, but someone on the average wage with only a few thousand saved as an 'emergency backstop' should be allowed to keep that imo.  Can't see why it couldn't be worked on a graduated scale.


----------



## craft (14 April 2013)

drsmith said:


> I saw a couple of questions at the end, but missed most of it. Is the video made publically available after the event ?





Was worth a watch - pretty civil both extremes argued.

http://www.abc.net.au/news/programs/national-press-club/


----------



## craft (14 April 2013)

Julia said:


> Requiring all savings to be used before Newstart is accessible has always seemed unreasonably harsh to me.
> People can, of course, quarantine saved funds into Super, but we all know the restrictions that then involves.
> 
> Surely unemployed people should be able to receive assistance for, say, a few months while they look for a job, then if still unemployed, then have to access their savings before receiving any more government benefit.
> It's reasonable enough that a high earner with a decent asset base doesn't receive taxpayer funded assistance, but someone on the average wage with only a few thousand saved as an 'emergency backstop' should be allowed to keep that imo.  Can't see why it couldn't be worked on a graduated scale.




Pretty sure there is a liquidity waiting period of upto thirteen weeks after that is served the assets test to cut out (no phase out) the payment is the same as when the pension starts to reduce. ie around 200K for a single non-home owner and up from there depending on your circumstamces - so not that mean really.


----------



## drsmith (14 April 2013)

McLovin said:


> There's a pretty good breakdown here...
> 
> http://www.google.com.au/url?sa=t&r...=Dzj8ZJovuMXW6JnMOIy-qg&bvm=bv.45175338,d.cGE



Thanks.

With some simple assumptions, I calculated that in 2011 that the net cost of super concessions and the age pension was about $7bn more than a non-means tested age pension for everybody 65 and over. This was after taking into account the $7bn saving to pension funding from super concessions as outlined in Laura Tingle's article above. 

I was going to show the calculations but lost the post. 



craft said:


> Was worth a watch - pretty civil both extremes argued.
> 
> http://www.abc.net.au/news/programs/national-press-club/



Thanks. I'll watch it over the next couple of days.


----------



## Julia (14 April 2013)

craft said:


> Pretty sure there is a liquidity waiting period of upto thirteen weeks after that is served the assets test to cut out (no phase out) the payment is the same as when the pension starts to reduce. ie around 200K for a single non-home owner and up from there depending on your circumstamces - so not that mean really.



Thank you, craft.  I've had a look at the Centrelink website and it looks as though the assets test is similar to that for pensions and all other allowances, unless I'm misinterpreting the info on the website (entirely possible).
So that's a huge improvement and something the government hasn't publicised at all, given the still widely held understanding that all assets need to be used up before accessing Newstart.
Full credit to the government for this change, if it's actually how it works.


----------



## Intrinsic Value (15 April 2013)

sydboy007 said:


> Well worth a read.
> 
> A few things I was surprised by
> 
> ...




Too generous by half and unsustainable in the long run. There needs to be a lot of rework on super and the OAP before it becomes equitable and sustainable.


----------



## sydboy007 (17 April 2013)

Intrinsic Value said:


> Too generous by half and unsustainable in the long run. There needs to be a lot of rework on super and the OAP before it becomes equitable and sustainable.




Very true

Howard certainly set the budget up for a slow death with all the increased access he gave to a partial OAP which then provides a lot of other perks.


----------



## sptrawler (17 April 2013)

Intrinsic Value said:


> Too generous by half and unsustainable in the long run. There needs to be a lot of rework on super and the OAP before it becomes equitable and sustainable.




Too true, just vote Labor, to get it fixed.


----------



## Intrinsic Value (17 April 2013)

sptrawler said:


> Too true, just vote Labor, to get it fixed.




You seem to be forgetting that is was the Howard govt that created this mess in the first place buying the grey vote with unsustainable election bribes. 

Sooner or later whoever is in govt will have to wind back some of these policies.


----------



## sydboy007 (17 April 2013)

Intrinsic Value said:


> You seem to be forgetting that is was the Howard govt that created this mess in the first place buying the grey vote with unsustainable election bribes.
> 
> Sooner or later whoever is in govt will have to wind back some of these policies.




Too true

Whether it was pensioners and making it easier to get a partial OAP and access to pensioner discounts, boby bonus, child care Howard pretty much said whinge to me and I shall shower you with $$$.  I have a once in a century resource boom and I will treat this as a permanent shift in revenue.

The number of people hitting pension ages is going to double over the next 15 or so years.  Something needs to be done to share the increased costs of this before the adjustment becomes rather painful for everyone.

We need to get back to seeing welfare as for those at the bottom 25-30% and the rest of us make do with what we have.

Politicians that stop providing simple answers to complex problems would be a great start, but I can't see anything happening till we are in crisis because you will never get bipartisan support.  Far easier for an opposition to say no to everything but blame the Govt for not achieving anything.  The republicans have done this for years in the USA and look at how paralysed the country is from it.


----------



## banco (17 April 2013)

Intrinsic Value said:


> You seem to be forgetting that is was the Howard govt that created this mess in the first place buying the grey vote with unsustainable election bribes.
> 
> Sooner or later whoever is in govt will have to wind back some of these policies.




Yes but the oldies must have certainty, promises have been made.....


----------



## sptrawler (17 April 2013)

Intrinsic Value said:


> You seem to be forgetting that is was the Howard govt that created this mess in the first place buying the grey vote with unsustainable election bribes.
> 
> Sooner or later whoever is in govt will have to wind back some of these policies.




No not at all, I think Australia needs another two terms of Labor, it will take that amount of time for the results to resonate through to the very young.
As far as I'm concerned, nothing will change much, I've always saved and enjoy tinkering, so my running costs aren't high.
We ride bikes for our everyday running, 2,200k's in the last three months, love it.
So I've finally decided, stop worrying, let you young blokes pick up the slack.
Have fun, vote the goon show in, you will learn a lot.IMO


----------



## sptrawler (17 April 2013)

sydboy007 said:


> Too true
> 
> Whether it was pensioners and making it easier to get a partial OAP and access to pensioner discounts, boby bonus, child care Howard pretty much said whinge to me and I shall shower you with $$$.  I have a once in a century resource boom and I will treat this as a permanent shift in revenue.
> 
> ...




Yep you are spot on, you shouldn't have to pay for the baby boomers and you won't have to pay for me.

We and most of our friends had four children, who we brought up. They are helping pay for my generation.

How many children are the "we want it now" generation having? How many children are you going to have?

Who is going to support them/you?

Nothing better than Karma.


----------



## FlyingFox (17 April 2013)

sptrawler said:


> How many children are the "we want it now" generation having? How many children are you going to have?
> 
> Who is going to support them/you?




Have you actually thought about why that maybe? Could it be for some other reason other than the younger generations are selfish and stuck up?



sptrawler said:


> Nothing better than Karma.




Hold that thought....


----------



## sydboy007 (18 April 2013)

sptrawler said:


> Yep you are spot on, you shouldn't have to pay for the baby boomers and you won't have to pay for me.
> 
> We and most of our friends had four children, who we brought up. They are helping pay for my generation.
> 
> ...




It seems difficult enough to pay for all the services we expect from Govt when there's around 4 tax payers per dependent.

How does it work in 2040ish when there's just 2.5 per dependent?  Something like 25% of the population will be over 67 and receiving tax free income from super.  How does that work?


----------



## drsmith (18 April 2013)

We have a class war, a sex war, I suppose, why not an age war.

When I calculated that super tax concessions + the pension > the same pension for all >= 65 (2011), my initial thought was to scrap all super tax concessions and just pay a non means tested pension. This though overlooks the fact that much of those super savings wouldn't be there to tax if there were no tax concessions.


----------



## craft (18 April 2013)

drsmith said:


> This though overlooks the fact that much of those super savings wouldn't be there to tax if there were no tax concessions.




Thats the rubber in the numbers - until this number is quantified its hard to really have a factual based discussions on appropriate levels of concessions.


----------



## sptrawler (18 April 2013)

sydboy007 said:


> It seems difficult enough to pay for all the services we expect from Govt when there's around 4 tax payers per dependent.
> 
> How does it work in 2040ish when there's just 2.5 per dependent?  Something like 25% of the population will be over 67 and receiving tax free income from super.  How does that work?




As craft says, it's all rubber numbers.

Take for example a couple retiring on full pension of say $30,000 and $300k in the bank at 5% = $15,000 total $45,000 + perks

Then look at a retired couple with $1.1m in in super earning 5% = $55,000 no pension at all and no perks.

So who is costing the most, just general approximate figures?

What is confusing the issue is, the couple aren't paying tax on the $55k.
But what is being forgotten is they aren't costing $30k + in Government handouts. That needs to be put into the equation.


----------



## banco (18 April 2013)

sptrawler said:


> As craft says, it's all rubber numbers.
> 
> Take for example a couple retiring on full pension of say $30,000 and $300k in the bank at 5% = $15,000 total $45,000 + perks
> 
> ...




Speaking of rubber numbers seems like the taxpayer will have to take a chunk out of the $55,000 been earned.


----------



## sptrawler (18 April 2013)

banco said:


> Speaking of rubber numbers seems like the taxpayer will have to take a chunk out of the $55,000 been earned.




Why do you think the couple who has saved $1.1m should pay tax on his $55k earnings? When they may have downsized and put $450k into their super. 

While the couple on full pension + perks + $15k may live in a $15m house on Sydney harbour? With a family trust.

You have a different take on it, but hey it is in line with Labors.


----------



## banco (18 April 2013)

sptrawler said:


> Why do you think the couple who has saved $1.1m should pay tax on his $55k earnings? When they may have downsized and put $450k into their super.
> 
> While the couple on full pension + perks + $15k may live in a $15m house on Sydney harbour? With a family trust.
> 
> You have a different take on it, but hey it is in line with Labors.




Because we are going to need the money to pay for their fellow boomers retirement.  You think the younger generations should pay?

Plus if the goal is to keep them off the pension even if $5k was taken in tax from the $55k they still wouldn't qualify for a pension in your example.


----------



## sptrawler (18 April 2013)

banco said:


> Because we are going to need the money to pay for their fellow boomers retirement.  You think the younger generations should pay?
> 
> Plus if the goal is to keep them off the pension even if $5k was taken in tax from the $55k they still wouldn't qualify for a pension in your example.




Who is paying for the person in the Mac Mansion, on full pension + $15k ?


----------



## ROE (18 April 2013)

Every generation has its rewards and challenges

class/age war fare is a dangerous game, it leads to resentment.

Focus more energy in creating opportunities for yourself...


----------



## sptrawler (18 April 2013)

ROE said:


> Every generation has its rewards and challenges
> 
> class/age war fare is a dangerous game, it leads to resentment.
> 
> Focus more energy in creating opportunities for yourself...




Absolutely Roe, there seems to be a huge amount of effort, being spent by the younger generation in making a rod for their own backs.


----------



## banco (18 April 2013)

ROE said:


> Every generation has its rewards and challenges
> 
> class/age war fare is a dangerous game, it leads to resentment.
> 
> Focus more energy in creating opportunities for yourself...




Bit late for that.  First shots were fired when their patron awarded the oldies tax free pensions.


----------



## sptrawler (18 April 2013)

banco said:


> Bit late for that.  First shots were fired when their patron awarded the oldies tax free pensions.




Who are you talking about now?

The ones on a tax free pension who spent their money?

Or the ones on a tax free pension who saved their money?

Or the multitude, who are arriving daily, that will end up on a tax free pension?


----------



## sptrawler (18 April 2013)

Jeez Banco I see you are still on line, was the question too hard.lol


----------



## sydboy007 (19 April 2013)

interesting video made by the ATO

https://www.youtube.com/watch?v=3Q0opp0YA_Q


----------



## drsmith (19 April 2013)

sydboy007 said:


> interesting video made by the ATO
> 
> https://www.youtube.com/watch?v=3Q0opp0YA_Q



That's how you'd explain the concept of percentage to a child.

Not exactly a glowing endorsement of our education system.


----------



## banco (19 April 2013)

sptrawler said:


> Who are you talking about now?
> 
> The ones on a tax free pension who spent their money?
> 
> ...




I'm referring to the big wet kiss Howard gave the boomers in the form of a tax free superannuation pension.


----------



## sptrawler (19 April 2013)

banco said:


> I'm referring to the big wet kiss Howard gave the boomers in the form of a tax free superannuation pension.




Oh so you are talking about the ones who paid 15% contributions tax and 15% on its earnings.

Not the ones who get $30k tax free + upto $300k in the bank + perks.lol

As GG said everyone should blow their super and the younger generation shouldn't put any extra in.

We may as well all sink together.


----------



## ROE (19 April 2013)

banco said:


> I'm referring to the big wet kiss Howard gave the boomers in the form of a tax free superannuation pension.




I'm not baby boomer and I don't have an issue with it...how many times do you want to tax the guys who want to fund their own retirement? you got to give them some sort of incentive 

you already get tax 15% in, 15% on earning so your out should be tax free, that is how it operate around the globe you get tax twice not three times....

or the labor way tax everyone out of their business (job creations), tax all the savers (Capital to fund business and projects) you end up....with a nation where no one want to do anything, spent every cent the got and wait for hand out...

All communist countries tried the socialist model and they all failed...spread the wealth good for everyone they said....even China now embrace the capitalist model.....


----------



## FlyingFox (19 April 2013)

ROE said:


> I'm not baby boomer and I don't have an issue with it...how many times do you want to tax the guys who want to fund their own retirement? you got to give them some sort of incentive
> 
> you already get tax 15% in, 15% on earning so your out should be tax free, that is how it operate around the globe you get tax twice not three times....
> 
> ...




There is nothing wrong with having tax concessions on super as long as they can't be abused. The problem is that for a few years we had concessional super caps of up to $100K (still $50K) and very weak restrictions on keeping the money in super post retirement.

Not much use you saving for retirement if you then blow it or spread it via creative accounting and go on the pension. Or that you use super to do estate planning.


----------



## sptrawler (19 April 2013)

I think a young person would be dumb to put extra money into super. 
The government has let the 'cat out of the bag', it will be taxed, it will be seen as an assett not as savings that offset government handouts.
Don't bother with the small tax saving on extra contributions, invest tax effectively outside super.IMO


----------



## ROE (20 April 2013)

FlyingFox said:


> There is nothing wrong with having tax concessions on super as long as they can't be abused. The problem is that for a few years we had concessional super caps of up to $100K (still $50K) and very weak restrictions on keeping the money in super post retirement.
> 
> Not much use you saving for retirement if you then blow it or spread it via creative accounting and go on the pension. Or that you use super to do estate planning.




and you think without super they cant do it other ways 
try Hybrid Discretionary Trusts


----------



## FlyingFox (20 April 2013)

ROE said:


> and you think without super they cant do it other ways
> try Hybrid Discretionary Trusts




There are many other ways of getting around this, I know. However not many offer you significant tax discounts in the process...


----------



## sydboy007 (21 April 2013)

ROE said:


> I'm not baby boomer and I don't have an issue with it...how many times do you want to tax the guys who want to fund their own retirement? you got to give them some sort of incentive
> 
> you already get tax 15% in, 15% on earning so your out should be tax free, that is how it operate around the globe you get tax twice not three times....
> 
> ...




Just to remind you that it was Labor that brought in Dividend Imputation to reduce the double taxation of this source of income.

The major issue I have with super now is:

- TRiP being abused to increase minimally taxed super payments.  Surely this would be a relatively easy loop hole to shut.  Estimates are for a $300M p.a saving

- People able to build up personal debt then use a lump sum from their super to pay it off then gain access to a full or partial pension.

If we have to leave the minimal taxation of super in place then people should have to use it to take a pension.  Maybe some adjustment at the very low end of things so that someone getting say 5K pension would retain most of their OAP, but in general terms I don't se that super is being cost effective in minimising the OAP cost to the budget.

The dependency ratio starts to take off from around this year.  Demands on the Govt are going to increase as the number of 65+ really starts to take off.  Where does the revenue come from to support this?  What expenditure gets cut?

I'm starting to think we should just outsource all super management to the Norwegian SWF, save around $20B in fees to the financial industry, and have the Govt come up with some simple formula to say you put this much in, you get this much pension for life. Limit the amount of pension to say $25K a person, indexed to AWE.  Simple and so much cheaper to run.


----------



## sptrawler (21 April 2013)

sydboy007 said:


> Just to remind you that it was Labor that brought in Dividend Imputation to reduce the double taxation of this source of income.
> 
> The major issue I have with super now is:
> 
> ...




I'm beginning to think, just disband super, let people get back to spending the money they earn.
Let Australian banks go back to borrowing from overseas, why put away money you could use now. If the government can blackmail you with it later?
Much better to get extra in the pay packet and pay off the home, or invest in a negative geared property or shares.IMO


----------



## FlyingFox (21 April 2013)

sptrawler said:


> I'm beginning to think, just disband super, let people get back to spending the money they earn.
> Let Australian banks go back to borrowing from overseas, why put away money you could use now. If the government can blackmail you with it later?
> Much better to get extra in the pay packet and pay off the home, or invest in a negative geared property or shares.IMO




Except that the government may not be able to afford the pension in the future....


----------



## sptrawler (22 April 2013)

FlyingFox said:


> Except that the government may not be able to afford the pension in the future....




But according to Syd and the boys, they can't afford you to save and not take a pension?
It beats the hell out of me.lol
Pizz it up to the wall and sod it, I reckon. 
If you save your money your a goose, if you spend it you are the poorly hard done by.lol


----------



## sptrawler (22 April 2013)

sydboy007 said:


> Just to remind you that it was Labor that brought in Dividend Imputation to reduce the double taxation of this source of income.
> 
> The major issue I have with super now is:
> 
> ...




By the way SydBoy, I think old people and there super is the least of your problems.
The obesety and diabetes related health cost of your generation, is going to be far more of a cost issue.


----------



## sydboy007 (23 April 2013)

sptrawler said:


> By the way SydBoy, I think old people and there super is the least of your problems.
> The obesety and diabetes related health cost of your generation, is going to be far more of a cost issue.




That issue is across all age ranges


----------



## sydboy007 (25 April 2013)

I keep thinking about how to achieve the goals of super at the lowest cost.

To me the flat tax nature of the scheme is probaly why it costs so much.

I think the main issue though is that everyone has different ideas about what super is really about.

My POV is that it is mainly to minimise the impact of the OAP on the budget in 20+ years time.

Secondary issues are providing a reasonable base income for retires, and to provide support to the domestic economy by having the retired population with enough income to support the service economy.

So I suppose it all boils down to what is a reasonable base income.

A lot of people on ASF argue that $1 million in savings is the minimum required, since 5% provides $50K each year.  That seems quite a high income, especially when it is tax free ie it is equivalent to $63K paying the usual tax.  That is higher than AWE, so people are arguing that a comfortable retirement requires an income greater than ~60% of the population receives during their working lives.  If that figure was for a couple, then I could accept that as being reasonable.

So I think it's better to first get a broad acceptance as to what is the maximum level of income that the Govt should subsidise us to achieve in retirement?  I often think it would be better if people saw their marginal tax rate taken out of their super, then a Govt payment into the super as a credit less the 15% tax.  This should also be done for any tax on earnings as well.  It would allow people a better grasp as to what super is costing the budget. We also need to determine what is the minimum level to be achieved - most likely this will be a combination of OAP and pension funded by super.

Until we can have broad acceptance on minimum - maximum Govt supported retirement income, I don't see how super policy can really move from an argument over tax.


----------



## sydboy007 (26 April 2013)

Just as a little exercise I thought I'd see what the Govt subsidy would be for 4 different people over a 40 year working life.

Starting income of 35K, 50K, 80K, 100K
Assume 3% income growth p.a
Assume tax rates stay the same

I've taken the increase in super from 9 to 12% into account.

I've not taken inflation into account - my excel skills aint that good

So after 40 years how much Govt subsidy does each person get on their contributions?

35K:   67,200
50K:   103,400
80K:   200,808
100K:   266,425

Now I do accept that it's quite unlikely for someone to start earning at 100K from the get go, but it does help to illustrate just how fast the subsidy grows with increasing income.

If I get the motivation I might try to determine how much subsidy goes into the fund earnings as well.


----------



## Vixs (26 April 2013)

sydboy007 said:


> Just as a little exercise I thought I'd see what the Govt subsidy would be for 4 different people over a 40 year working life.
> 
> Starting income of 35K, 50K, 80K, 100K
> Assume 3% income growth p.a
> ...




I don't understand one sided rationale like this. A complex tax system cannot be evaluated by individual component.

Why don't you have a look at overall tax paid? 
Who is subsidizing who in the big picture?
Do you think that higher income earners with private health cover and privately educated children (who receive less of a subsidy per head than publicly educated children) cost the government more or less than the lower earners that have lower rates of both of the above?
How much extra GST revenue is generated by the higher levels of discretionary consumption that comes with having more disposable income?

Just how badly does everyone want to live in a country that provides no incentive to excel?

The rationale that they should be paying more because they can afford to is fine by me, it is a reasonable way of providing quality services for all without overly punishing those at the top end of the spectrum. What I do have a problem with is that there seems to be an ever expanding creep in how far people think it should go.

As an example, if we assessed household income (just spouses, not children) as one tax return and didn't punish families with one income earner's income being substantially greater than the other, we could do away with a lot of the rationale behind family trusts and other tax strategies that people utilise to distribute income.

There are plenty of ways you can remove the protective shell around the abusers without unnecessarily punishing the successful. Why that isn't the focus of legislators of all persuasions, sheeple around Australia and commentators on forums like this is beyond me. Success isn't a sin, maybe you all just aren't aiming high enough?

The threshold at which you are now considered worthy of being targeted to help pay for bogans to smoke bongs on couches all day is not out of reach for anyone with any interest in improving their financial position - and I don't think it's unreasonable to say that that would be every single person on this forum.

We don't need to be in a race to the bottom, our wealth relative to the rest of the world is only going to decrease in the future. 

Anyone outraged at how well off other people in Australia are relative to them is a fool. Open your eyes, you're already at the top of the food chain of the 7,000,000,000 human beings on this planet.


----------



## sydboy007 (26 April 2013)

Vixs said:


> I don't understand one sided rationale like this. A complex tax system cannot be evaluated by individual component.




I suppose what I'm trying to show is the other flip side to the high income earners are being taxed like crazy, super is providing them a significant tax shelter.

I don't think people realise just how costly super is, and I'm starting to question whether it's the most economic way to provide a decent income in retirement for the majority.

I do agree with you we need a root and branch total redesign of the tax system in this country, and I also believe there is 0% chance of this happening till we are in an economic crisis and the human costs of the required change at that point are far more expensive than if we do them soon.

Too many vested interests that have seen what the mining companies and clubs have achieved by crying poor to the MSM.  No Govt will have the cajones to make any changes, and the ability to have costless changes is behind us.

As for giving more breaks to families, well they already get a far bigger slice of Govt spending than single or childless couples.  In general terms that's fair, but as a single tax payer seeing around $28-30K a year of tax siphoned away I am starting to feel a bit of resentment toward the whole system.  It's deigned to reward speculation and punish slow and steady investments with savings rather than loading up with debt.  Maybe I should play to the system, but after paying my house off I have an aversion to debt.

If anyone would like to have a play with a spreadsheet I've made up, I've added some extra capabilities to show the level of govt subsidies on

Super levy payments
Income earned within super

You can change 3 variables to see how different scenarios play out.  Hopefully my math and excel skills haven't been faulty.


----------



## FlyingFox (26 April 2013)

Vixs said:


> I don't understand one sided rationale like this. A complex tax system cannot be evaluated by individual component.
> 
> Why don't you have a look at overall tax paid?
> Who is subsidizing who in the big picture?
> ...





Great post Vix. As you have highlighted, there are more things wrong with the overall system then just super. And I agree with you that the system can be (easily?) altered to prevent abuse. 

I think the some of the previous posts have been trying to highlight the cost of super concessions and are not necessarily an attack on the wealthy or wealth. However some of the allowances have been very generous and are not sustainable and will mean more tax down the road....guess who will bear the brunt of that?

In light of all the imbalances that do exist in our system and tax system, it is only prudent that we look at all of them.

As for the super case, there was a paper about a Scandinavian country where they changed or reduced subsidies a while back. Basically they found very little change in the savings habits. People who were earning more were saving outside the system and that the best way to increase super savings was to have mandated rates (like 9% here). I will try and find this on the weekend.

As to your question "Just how badly does everyone want to live in a country that provides no incentive to excel?" ? We are almost there, no?


----------



## Vixs (26 April 2013)

sydboy007 said:


> I suppose what I'm trying to show is the other flip side to the high income earners are being taxed like crazy, super is providing them a significant tax shelter.
> 
> I don't think people realise just how costly super is, and I'm starting to question whether it's the most economic way to provide a decent income in retirement for the majority.




I think the point is that if you look at the overall tax paid by that person on their income and investment income, the 'significant shelter' being provided is not such a huge injustice and slap in the face of the everyman.

In return for tax relief they are locking away money that will be used to ensure they are not a significant burden on the government in retirement via the pension system. I can tell you right now that I won't be putting a dollar more into super than I have to. I don't care if all it does is fund my insurance premiums so my family can be protected. I don't want tax incentives that come with string attached, because over a short period of time we've seen the strings pulled tighter and there is no recourse for the puppets with the locked up money.



sydboy007 said:


> I do agree with you we need a root and branch total redesign of the tax system in this country, and I also believe there is 0% chance of this happening till we are in an economic crisis and the human costs of the required change at that point are far more expensive than if we do them soon.
> 
> Too many vested interests that have seen what the mining companies and clubs have achieved by crying poor to the MSM.  No Govt will have the cajones to make any changes, and the ability to have costless changes is behind us.




Superannuation needs to be addressed but tax law even disregarding superannuation is disgustingly complex. The amount of legislation that affects a tiny fraction of the population is phenomenal.



sydboy007 said:


> As for giving more breaks to families, well they already get a far bigger slice of Govt spending than single or childless couples.  In general terms that's fair, but as a single tax payer seeing around $28-30K a year of tax siphoned away I am starting to feel a bit of resentment toward the whole system.  It's deigned to reward speculation and punish slow and steady investments with savings rather than loading up with debt.  Maybe I should play to the system, but after paying my house off I have an aversion to debt.




The proposed example wasn't about giving families more perks, it was just an example of a whole sector (Family Trusts) that don't add value to the economy. They are just inter-generational wealth vehicles. The benefits and subsidies received by families that singles and partners don't receive is a huge difference, I agree. I used to feel like you about that, but funnily enough as I get closer to the stage of life where I want to start my own family I'm becoming a little more forgiving.

As for your aversion to debt - nothing wrong with that at all. It's a decision that you can't really fault as long as you understand that you aren't likely to save your way to greater wealth, and the fact is that it's not in the government's interest to reduce the amount of leverage going around. 

Borrowed money for investment adds multiple sources of revenue to the government, and there's nothing wrong with speculating on the future success of businesses or value of land - every single business is in the game of speculation. 

A $100,000 loan generates interest revenue for the lender (profits taxable). 
The borrower looking to invest is presumably going to be aiming for a return greater than the price they borrowed at (capital gains and dividends/rental income taxable).
Then there are the transaction costs (brokerage revenue for the broker being taxable, stamp duty for real estate, selling commission for real estate agents - taxable, goods and materials bought to renovate - GST payable to the govt, work done by the tradesman, GST payable, income tax payable.....you get the point. )

All that revenue from someone saying "I can earn more with this money than you can."

Utopia for the government coffers is a country where we have jobs, believe they are there to stay, are making a profit as a household and can afford to invest in our own futures independent of government involvement. Under those conditions people are more comfortable using leverage. If we have a government that believes that we will be better off as a country.


----------



## Vixs (26 April 2013)

FlyingFox said:


> Great post Vix. As you have highlighted, there are more things wrong with the overall system then just super. And I agree with you that the system can be (easily?) altered to prevent abuse.
> 
> I think the some of the previous posts have been trying to highlight the cost of super concessions and are not necessarily an attack on the wealthy or wealth. However some of the allowances have been very generous and are not sustainable and will mean more tax down the road....guess who will bear the brunt of that?
> 
> In light of all the imbalances that do exist in our system and tax system, it is only prudent that we look at all of them.




I'd rather they hit super with the massive force that they want to and then leave it alone for 20 years so that people can adjust. This incremental sliding has been going on too long to be acceptable to people as a temporary phase and has become the new normal.



FlyingFox said:


> As for the super case, there was a paper about a Scandinavian country where they changed or reduced subsidies a while back. Basically they found very little change in the savings habits. People who were earning more were saving outside the system and that the best way to increase super savings was to have mandated rates (like 9% here). I will try and find this on the weekend.




People receiving good advice would have been the only people using it. Everyone else would pretend it isn't there.



FlyingFox said:


> As to your question "Just how badly does everyone want to live in a country that provides no incentive to excel?" ? We are almost there, no?




Not yet mate. There is still plenty of scope to excel in this country. Quite frankly though, unless the calibre of politican improves then we'll be left with dickheads on both sides of the fence.


----------



## FlyingFox (26 April 2013)

Vixs said:


> I think the point is that if you look at the overall tax paid by that person on their income and investment income, the 'significant shelter' being provided is not such a huge injustice and slap in the face of the everyman.
> 
> In return for tax relief they are locking away money that will be used to ensure they are not a significant burden on the government in retirement via the pension system. I can tell you right now that I won't be putting a dollar more into super than I have to. I don't care if all it does is fund my insurance premiums so my family can be protected. I don't want tax incentives that come with string attached, because over a short period of time we've seen the strings pulled tighter and there is no recourse for the puppets with the locked up money.




I agree and I am not an will not be putting any extra money in super . The issue is, as it stands and in the last few years, there are no strings attached for anyone just retiring with money in super. You can spend it all and then go onto the pension. This is subsidised money.

I am certain this will not be the case when I retire....but in the mean time my taxes are contributing to the subsidies. 



Vixs said:


> Superannuation needs to be addressed but tax law even disregarding superannuation is disgustingly complex. The amount of legislation that affects a tiny fraction of the population is phenomenal.




I agree. And quite bloated and broken. We had an inquiry into the tax system. Time we voted for those changes to be implemented....



Vixs said:


> ...
> All that revenue from someone saying "I can earn more with this money than you can."
> ...




Not sure about this but I see where you coming from. Speculation can be good....but too much of a good thing is bad....


----------



## FlyingFox (26 April 2013)

Vixs said:


> I'd rather they hit super with the massive force that they want to and then leave it alone for 20 years so that people can adjust. This incremental sliding has been going on too long to be acceptable to people as a temporary phase and has become the new normal.




Agreed. Fix it and leave it alone.



Vixs said:


> Not yet mate. There is still plenty of scope to excel in this country. Quite frankly though, unless the calibre of politican improves then we'll be left with dickheads on both sides of the fence.




I wouldn't say plenty but ok. Lol....sorry but that's the only thing I see any of the fence. Only the decisions that are popular today will get made....


----------



## Vixs (26 April 2013)

Sorry I should have been clearer, we currently *have *dickheads on both sides, but soon we'll have *nothing but.*


----------



## sptrawler (30 April 2013)

sydboy007 said:


> I keep thinking about how to achieve the goals of super at the lowest cost.
> 
> To me the flat tax nature of the scheme is probaly why it costs so much.
> 
> ...




What if returns are 1% or less like they are in the U.S, U.K and Europe? Then $1m lasts about 13 years so how do you reconcile that?

Also, by the way, how do you save that?
With house prices and rents rising?

Term deposits were 8% 5 years ago.
Term deposits 12 months ago were 5.8%
Term deposits now are 4.3%.
LOL
Put a tax on that and you will have all the baby boomers on the pension in no time.lol


----------



## sydboy007 (1 May 2013)

sptrawler said:


> What if returns are 1% or less like they are in the U.S, U.K and Europe? Then $1m lasts about 13 years so how do you reconcile that?
> 
> Also, by the way, how do you save that?
> With house prices and rents rising?
> ...




have a ply with the spreadsheet i attached to this thread

Here's the kind of subsidies being offered

		         Sup Sub	        Inc Sub	Total Sub	Sup Grow	5.0%
18201-37000	0.205	31,421.25	24,914.73	56,335.98	Sup Earn	3.0%
37001-80000	0.34	55,518.75	44,022.26	99,541.01	In Grow	3.0%
80001-180000	0.385	88,830.00	70,435.62	159,265.62		
>180001	        148,837.50         118,017.13	266,854.63		

Quite a lot of money provided by Govt

I'm not sure if it's value for money, especially since you can spend it all in a year of retirement AND still get a full pension


----------



## Vixs (1 May 2013)

sydboy007 said:


> have a ply with the spreadsheet i attached to this thread
> 
> Here's the kind of subsidies being offered
> 
> ...




It's been a discussion had before, perhaps even earlier in this same thread - blowing all your super in the first year/5 years of retirement is going to naturally be less of a problem as super balances upon retirement are higher.

It's also not money 'provided' by the government, it is simply a lower level of taxation on the wealth accumulated and earned through investment. THE GOVERNMENT PRODUCES NOTHING IN THE EQUATION. Taxation is an expense, and a lower rate is not a 'rebate', it is simply a lower expense. They might make the balance sheet look the same but they are fundamentally very different things. They're not government tax dollars to rebate unless they were earned by the government - the problem with this is that government's don't EARN tax, they TAKE it.


----------



## sptrawler (1 May 2013)

sydboy007 said:


> have a ply with the spreadsheet i attached to this thread
> 
> Here's the kind of subsidies being offered
> 
> ...




How much subsidy is being offered if you don't put any extra into super and end up with the ' normal ' $200k in super?
Also add the full pension to it.


----------



## sydboy007 (2 May 2013)

sptrawler said:


> How much subsidy is being offered if you don't put any extra into super and end up with the ' normal ' $200k in super?
> Also add the full pension to it.




those figures are based on super guarantee payments only

i'm not quibbling over cost savings against the pension, only the fact that once a person has a balance that would stop them receiving a pension, why do they still receive thousands of dollars a year in reduced tax?  Few people are likely to even get to a million $ balance over a working life, so why pour billions of dollars into such a small section of the community>

Currently i feel a goal of super is *NOT *to have the largest possible number of people off the pension. 

Surely if you wont get access to a pension there's not really any need to provide further financial incentives to save WITHIN super.  Anyone who's able to hit $1 million in super is probably going to continue to save outside super to maintain the kind of lifestyle they've become accustomed to.

As for larger super balances not being blown quickly, what is "quickly" when someone hitting 65 has a good chance of 25 years of life expectancy.

The Govt needs to clamp down on lump sum withdrawals and super needs to be take as a pension, otherwise it's just an expensive tax avoidance scheme that allows people to rack up private debt and use lightly taxed savings to pay it off.


----------



## sptrawler (2 May 2013)

sydboy007 said:


> those figures are based on super guarantee payments only
> 
> i'm not quibbling over cost savings against the pension, only the fact that once a person has a balance that would stop them receiving a pension, why do they still receive thousands of dollars a year in reduced tax?  Few people are likely to even get to a million $ balance over a working life, so why pour billions of dollars into such a small section of the community>
> 
> ...




All the people I know who have reasonable amounts in super are trying to self fund.
The last thing they are thinking of is taking out lump sums.
Theyare concerned about inflation and ensuring the money sees them out. Also none want a government pension, they all see that as an admission of failure.
What you seem to be forgetting is most of the 'baby boomers' who have secured a reasonable sum in super, have done so by doing without, diligence and personal sacrifice. I'm not talking about CEO's etc I'm talking about people from blue collar working class backgrounds.
It just cracks me up as I ride around with the wife on our pushbikes, seeing all these poor young people sitting at the coffee shops and take aways, not many look hungry to me.lol


----------



## sydboy007 (3 May 2013)

sptrawler said:


> All the people I know who have reasonable amounts in super are trying to self fund.
> The last thing they are thinking of is taking out lump sums.
> Theyare concerned about inflation and ensuring the money sees them out. Also none want a government pension, they all see that as an admission of failure.
> What you seem to be forgetting is most of the 'baby boomers' who have secured a reasonable sum in super, have done so by doing without, diligence and personal sacrifice. I'm not talking about CEO's etc I'm talking about people from blue collar working class backgrounds.
> It just cracks me up as I ride around with the wife on our pushbikes, seeing all these poor young people sitting at the coffee shops and take aways, not many look hungry to me.lol




Then by your argument removing the ability of taking super in a lump sum wont affect anyone since they don't intend to?

So why do you have to take a poke at young people?

There's plenty of older Gen X and boomers who've frittered away most of their savings.

Being sensible rarely has an age factor to it.  Older people just tend to be a bit more discreet when they're silly.


----------



## Ves (3 May 2013)

I intend to be fully self-funded well before I reach my preservation age... so my wealth is kept outside of superannuation (other than 9% SGC).  I am at the full mercy of the tax regime because of it.

Why is it that people who become quite wealthy and keep it in the super system receive more tax concessions than someone who is doing the same thing outside of it?   They both have the same goal, but are taxed differently.


----------



## FlyingFox (3 May 2013)

Ves said:


> Why is it that people who become quite wealthy and keep it in the super system receive more tax concessions than someone who is doing the same thing outside of it?   They both have the same goal, but are taxed differently.




Because they are "entitled" to.....


----------



## sptrawler (3 May 2013)

Ves said:


> I intend to be fully self-funded well before I reach my preservation age... so my wealth is kept outside of superannuation (other than 9% SGC).  I am at the full mercy of the tax regime because of it.
> 
> Why is it that people who become quite wealthy and keep it in the super system receive more tax concessions than someone who is doing the same thing outside of it?   They both have the same goal, but are taxed differently.




Simply because, the government can control how it is withdrawn and taxed in super. Therefore it makes sense from their perspective to have the majority locked into it.
If everyone kept their money out of super, the government has no control, so it gives tax breaks to encourage participation.
If there wasn't tax breaks people wouldn't put any in. I suppose it is just another tool to engineer the outcome they want.


----------



## Ves (3 May 2013)

sptrawler said:


> Simply because, the government can control how it is withdrawn and taxed in super. Therefore it makes sense from their perspective to have the majority locked into it.
> If everyone kept their money out of super, the government has no control, so it gives tax breaks to encourage participation.
> If there wasn't tax breaks people wouldn't put any in. I suppose it is just another tool to engineer the outcome they want.



Yep... that's what I was gently implying.   Never made sense to me.  Super is one of those things that the government can easily use to make it look like they are doing something in my opinion.  I notice a lot of tinkering with it from my standpoint in the industry.... a lot of it seems very minor, but is billed up as the next big thing (on both sides of politics).


----------



## Bill M (3 May 2013)

Ves said:


> I intend to be fully self-funded well before I reach my preservation age... so my wealth is kept outside of superannuation (other than 9% SGC).  I am at the full mercy of the tax regime because of it.
> 
> Why is it that people who become quite wealthy and keep it in the super system receive more tax concessions than someone who is doing the same thing outside of it?   They both have the same goal, but are taxed differently.




20 years ago I was a bit like you. I worked hard, saved hard and invested hard outside of super. I put nothing at all extra into it. I had the same ambition of being self funded well before collection age. I achieved this goal and accepted the tax liabilities that I had to pay. It worked for me and it can work for anyone, nothing wrong with investing outside of super under those circumstances.

Fast forward 20 years and now it's collection age for my wife and I. We think differently now, we are moving our assets aggressively into super (I mean I'd rather pay 15% tax than 30%). If you were my age I'm sure you would rather pay less tax than the marginal rates.

People who can be self funded before preservation age are few and far between. The Government doesn't really worry about us, we are doing ok, we are not a burden on society. On the other hand the tax incentives are there for those that can't save. You have lower taxes, government co-contributions and that new low income payment going in boosting your balance. Without any of those incentives people just wouldn't save with super and we would end up where we were 25 years ago with very little money going into super. 

Before compulsory super nearly everybody on the factory floor relied on the Government pension at retirement. It is better now, I support super as it is, anything less and it just wouldn't be worthwhile putting in and a lot of people will end up on the miserable government pension. (Yes there are a few good savers and disciplined investors out there but we are talking about the greater majority.) They are talking about black holes and deficits now, can you imagine if we didn't have a super system what kind of black holes we would have then?

Just a note, even now only a few Months out we are reluctant to put a lump sum into our super "just in case they change the rules". We will wait until the last few weeks before we know for sure we will be able to access our money. Make no mistake, wind back super or tax it heavily and people won't put in, me included.


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## Ves (3 May 2013)

Bill M said:


> Fast forward 20 years and now it's collection age for my wife and I. We think differently now, we are moving our assets aggressively into super (I mean I'd rather pay 15% tax than 30%). If you were my age I'm sure you would rather pay less tax than the marginal rates.



Bill, great post.  Thank you for sharing your experience.

I just typed a really long reply and forgot to create a new tab when visiting a link someone visited me.  Away she goes. 

Basically I just wanted to say that aggressively moving your assets into super is a fantastic idea, something that a lot of people forget to do when they have the chance!    The government has made it really hard to achieve this with the cap restrictions, but unless you are super wealthy you can still get most, if not all, of your assets inside.  I would think of doing the same thing at your age, because by then, you have visibility of your retirement and the potential legislation.... which you do not have with 40 years to go.


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## sptrawler (3 May 2013)

Bill M said:


> 20 years ago I was a bit like you. I worked hard, saved hard and invested hard outside of super. I put nothing at all extra into it. I had the same ambition of being self funded well before collection age. I achieved this goal and accepted the tax liabilities that I had to pay. It worked for me and it can work for anyone, nothing wrong with investing outside of super under those circumstances.
> 
> Fast forward 20 years and now it's collection age for my wife and I. We think differently now, we are moving our assets aggressively into super (I mean I'd rather pay 15% tax than 30%). If you were my age I'm sure you would rather pay less tax than the marginal rates.
> 
> ...




You've summed it up well Bill, people believing in super and its benefits, is the key to reducing the burden on the pension. It is a bit like a contract with the government, people put extra money in so they can enjoy the benefit in retirement.


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## Ves (3 May 2013)

sptrawler said:


> You've summed it up well Bill, people believing in super and its benefits, is the key to reducing the burden on the pension. It is a bit like a contract with the government, people put extra money in so they can enjoy the benefit in retirement.



It is probably that I hate being told what to do.... if only you didn't have to work until you were 60, or probably 65, by the time I get there.


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## craft (3 May 2013)

Ves said:


> It is probably that I hate being told what to do.... if only you didn't have to work until you were 60, or probably 65, by the time I get there.




I think I should start a super is great thread.  But I might just be talking to myself.

Why not have it both ways.  Super is extremely tax effective, the reality is that all the tinkering only ever reduces the tax benefits slightly and gets nowhere near eliminating them and nearly every change is grandfathered anyway.   You are going to need money after preservation age for living or intergenerational transfer so you may as well accumulate that in the tax advantaged environment.  Save outside of super to fund early retirement to preservation age.


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## Vixs (3 May 2013)

Ves said:


> I intend to be fully self-funded well before I reach my preservation age... so my wealth is kept outside of superannuation (other than 9% SGC).  I am at the full mercy of the tax regime because of it.
> 
> Why is it that people who become quite wealthy and keep it in the super system receive more tax concessions than someone who is doing the same thing outside of it?   They both have the same goal, but are taxed differently.




The tax thresholds don't care what your goals are or what your favourite colour is - they're numbers. They are based on data today.

Superannuation is a simple, simple trade off that is only complicated by the fact that it is compulsory. The trade off is: 

MORE RESTRICTIONS + MORE LIMITATIONS + LESS GOVERNMENT RISK = LOWER TAX

The alternative is the inverse:

LESS RESTRICTION + LESS LIMITATIONS + MORE GOVERNMENT RISK = MORE TAX

The balancing act of the government is to make sure that the tax discounts are attractive enough to counteract the restrictions and limitations. As much through actual legislative changes as the total lack of confidence in our politicians, this balance is currently screwed.

EDIT: Re-read my original post and I sounded like a prick. Didn't mean to so I dropped it.


----------



## Julia (3 May 2013)

Ves said:


> Why is it that people who become quite wealthy and keep it in the super system receive more tax concessions than someone who is doing the same thing outside of it?   They both have the same goal, but are taxed differently.



You know the answer to this already.  Obviously, because there has to be some incentive to the individual to lock away their savings in an environment which - to offset its tax advantage - is vulnerable to the sticky fingers of governments.  No one would do it if there were not the tax advantage.



Bill M said:


> 20 years ago I was a bit like you. I worked hard, saved hard and invested hard outside of super. I put nothing at all extra into it. I had the same ambition of being self funded well before collection age. I achieved this goal and accepted the tax liabilities that I had to pay. It worked for me and it can work for anyone, nothing wrong with investing outside of super under those circumstances.
> 
> Fast forward 20 years and now it's collection age for my wife and I. We think differently now, we are moving our assets aggressively into super (I mean I'd rather pay 15% tax than 30%). If you were my age I'm sure you would rather pay less tax than the marginal rates.
> 
> People who can be self funded before preservation age are few and far between. The Government doesn't really worry about us, we are doing ok, we are not a burden on society. On the other hand the tax incentives are there for those that can't save. You have lower taxes, government co-contributions and that new low income payment going in boosting your balance. Without any of those incentives people just wouldn't save with super and we would end up where we were 25 years ago with very little money going into super.



Exactly.  Your account above, Bill, pretty much mirrors my own.



> Before compulsory super nearly everybody on the factory floor relied on the Government pension at retirement. It is better now, I support super as it is, anything less and it just wouldn't be worthwhile putting in and a lot of people will end up on the miserable government pension.



+1/



> Just a note, even now only a few Months out we are reluctant to put a lump sum into our super "just in case they change the rules". We will wait until the last few weeks before we know for sure we will be able to access our money. Make no mistake, wind back super or tax it heavily and people won't put in, me included.



Bill, once you move into pension phase, I doubt there's too much likelihood of the government risking the political repercussions of altering the existing tax free conditions.




Ves said:


> It is probably that I hate being told what to do.... if only you didn't have to work until you were 60, or probably 65, by the time I get there.



You don't.  You can save whatever you like.  No one is stopping you retiring as soon as you can afford it.
The rules have to accommodate a population of very different people and imo strike a pretty fair balance at present.
Get on with saving and retire at 45 like some of us have.


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## Ves (3 May 2013)

I meant within super.   I can and do save outside of super.

Can't you access it in the US if you retire early?  Singapore too perhaps?


----------



## sptrawler (3 May 2013)

Ves said:


> It is probably that I hate being told what to do.... if only you didn't have to work until you were 60, or probably 65, by the time I get there.




That's true, I hated conforming, however as Bill says a point is reached where you have to make a decission.

Due to age, ill health, redundancy or disillusionment, you eventually have to give up work. Then you have to decide what to do with the assetts you've built up.
You can leave them outside super or sell them and put the proceeds in super.
As Julia and Bill have said, if you put it in super, it gives the government a lot of security over your assett base.
The upside is they cut you some slack on tax, but the pay off for them is a reduced welfare budget.


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## Ves (3 May 2013)

I think as craft says, there is an inflexion point where keeping any more assets outside super isn't as necessary  (ie.  you already have built an asset base that allows you to live with the freedom that you desire).  Then you can start building the super up.  

It's a good point - and food for thought.  Thank you all. You all seem to be coming to that conclusion in your own ways.


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## sptrawler (3 May 2013)

Ves said:


> I meant within super.   I can and do save outside of super.
> 
> Can't you access it in the US if you retire early?  Singapore too perhaps?




There used to be a loop hole where you could leave Australia, sign a stat dec and get your super, then come back. 
I think they closed that up about 10years ago.


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## craft (4 May 2013)

A person currently earning 100K pa will receive 9K per year in compulsory super leaving 16K [21% of ordinary wages] of concessional cap to utilise through salary sacrifice if they wish.

Back of the envelope and using the following assumptions:
40 Years of contributions; 3% Inflation; 6%pa Gross dividend; 6%pa Capital Gain.

 Directing that 21% of an ordinary wage to super would accumulate 35 times ordinary wages in today’s dollars after 40 years.  By changing nothing other than the taxation to marginal PAYE rates the figure drops to 16 times for outside super.

The magnitude of the tax concessions means government tinkering is a risk but the rewards are pretty substantial also. Don’t just look at the risks.  The *earlier* you contribute the *less in total *you need to contribute to achieve a given outcome.  Missing the early generous incentives and the grandfathering arrangements to protect them has been a risk to late accumulators.

My  for the case in favour of utilising super structure early.


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## Bill M (4 May 2013)

sptrawler said:


> There used to be a loop hole where you could leave Australia, sign a stat dec and get your super, then come back.
> I think they closed that up about 10years ago.




Yeah you are right, the rules were changed in 1998, now no one can access their super until their preservation age. For more info follow this link: http://www.superguide.com.au/accessing-superannuation/accessing-super-early/permanent-departure-from-australia


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## sptrawler (4 May 2013)

craft said:


> A person currently earning 100K pa will receive 9K per year in compulsory super leaving 16K [21% of ordinary wages] of concessional cap to utilise through salary sacrifice if they wish.
> 
> Back of the envelope and using the following assumptions:
> 40 Years of contributions; 3% Inflation; 6%pa Gross dividend; 6%pa Capital Gain.
> ...




Agree 90%, your assumptions of 3% inflation, 6% gross dividend and 6% capital growth. 
Could be challenged, especially if you lived anywhere else in the world other than Australia.

But I forgot to add in the, it can't happen here factor.


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## sydboy007 (5 May 2013)

With the $20B in costs to run the current super system I wonder if it would be easier to just have:

OAP as minimum retirement income

Super directed to a future fund style governance structure that is legislated to have the interests of members front and centre of all decisions.  Make it so hard to fiddle with the fund so as to stop the Government looking at the savings in there as a honey pot to be tapped into.

On retirement you will receive OAP + 5-8% of the balance you had accumulated in super till you die.  Actual % will need to be determined by actuarial analysis of what is affordable over the long term.

All longevity risk is worn by the taxpayer, but any balance left on your death remains within the fund.  Have a system in place so a couple's balance is combined.  On the death of one the balance provides the same income to the one still alive.

This system could also help the asset rich cash poor in society by allowing them to use their property as collateral to supplement their income, with the loan repaid when they die or sell the house.

Suppose it goes back to a defined benefit fund in some ways, but it I'd say the Govt could save the system over 90% of it's operation costs as the Norwegians are able to run their SWF with < 0.1% management costs since they do most of it in house.  From memory the guy heading up the fund was on the equivalent of a couple of hundred thousand a year.  A pittance in the finance world.

I see a major advantage of this system is that the fund can make decisions based on 5-10 year horizons, similar to the big pension funds in the USA and Canada, rather than the constant worry about the last quarter performance.

The way super is at present, no one in able to plan anything in their retirement because you have money go in, then a random number to multiply your savings to give a final figure.  Even 1 year from retirment no one can really tell you what that rand multiplier will be.

The Singaporeans have had a similar system in place for over 4 decades with the various Govt run funds.  Admittedly the Singaporeans run it in a far more political way than what I want our version.  Far prefer we model ourselves along the way of the Norwegians.


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## sptrawler (6 May 2013)

This article probably highlights, how stupid it is to get out of shape about pensioners with $1m in super, as being fat cats that require extra taxing.

http://www.theage.com.au/business/millionaires-snub-taxman-20130506-2j3pr.html


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## FlyingFox (6 May 2013)

sptrawler said:


> This article probably highlights, how stupid it is to get out of shape about pensioners with $1m in super, as being fat cats that require extra taxing.
> 
> http://www.theage.com.au/business/millionaires-snub-taxman-20130506-2j3pr.html




I wonder how many of them used the very generous super caps (especially from previous years) to reduce their taxable income....


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## sptrawler (7 May 2013)

FlyingFox said:


> I wonder how many of them used the very generous super caps (especially from previous years) to reduce their taxable income....




My guess would be non, why bother paying 15% contributions tax,on a measly $25k, when you can keep it out of super and pay nothing. Or in the case of negative gearing get a tax advantage and access to the assett.

This is the problem when people are fed crap by the government, they swallow it.


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## sptrawler (12 May 2013)

Obviously this thread has lost its shine.
Now the self funded pensioners, are earning less than their minimum drawdown requirement, they probably won't be hit by the goons.lol
Just shows how timing is everything, six months ago, self funded retirees were the unbelievably rich.
Next year the government will be screaming about how much extra they have to pay in pensions. Due to self funded retirees qualifying for more pension.

Funny how for the last few years when interest rates were 5% plus, the government relaxed the drawdown limits by 50% then 25%.

Now interest rates are down to 4% or less the minimum drawdown will probably be increased.


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## sydboy007 (12 September 2013)

Got to love it when people still plan to get the pension with this kind of asset base.  At what point should you expect to stand on your own?

My husband is 61 and retired. I plan to retire when I reach 60 this year. We live in an apartment worth $1.7million with an outstanding loan of $350,000. Our combined super is $1.2million. Do we have to draw on our super to pay off the loan so we qualify for the aged pension when we turn 65

Read more: http://www.smh.com.au/money/ask-an-...o-apply-cgt-20130910-2th9m.html#ixzz2egFXirIl

The writer advised the couple they're in the top 1% and they still want to get a part pension 

The sad fact is they CAN get one.

So what's the point of providing $30B+ in tax concessions to super when even the top 1% will still get access to a part pension?


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## Judd (13 September 2013)

One does have to wonder why a couple at that stage of their lives still have an outstanding debt of $350,000.  

Still, even with $850k left in super, at the age they are, they could still draw down a combined tax-free pension of $34,000.

That is probably more than the married rate age pension for a couple who have stuff all in comparison.  So yeah, it does appear to be on the generous side of things.

As for me, I am the opposite of a number of posters.  I wish to have as little to do with superannuation as possible.  More than happy to pay the tax I owe and live very, very comfortably off the rest.  I suppose I can lay claim to be more of a self-funded retiree than others as I am not seeking tax concessions.


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## jmoz (13 September 2013)

The pension system in Aus needs a serious shake up.  The assets test cutoffs should be at least halved and only those on a full aged pension should be eligible for the Health Care Card (can add up to $4-5,000 in benefits over the course of a year). PPOR should also be included for the assets test above the median or average house price.

I see at least 1 couple a week who are whinging that they are only going to get $80 a fortnight in pension and ‘how am I supposed to live off that??’ meanwhile they are living in a 5x3 on 1200sqm within 1km from Cottesloe beach in Perth (looking at a cool $2m+ there) and $650,000 in a Term Deposit. The most common one is ‘I paid taxes all my life I deserve it’. Yep so I guess the years of education for you and your kids, the visits to the hospital, the roads you drive on everyday etc etc don’t count?

It makes me happy when I see folks on Today Tonight banging on about how sh*t the pension is. It should be. It should be enough to keep you alive, healthy and nothing else. Where is the incentive for people to take a long term view and take responsibility for their own retirement? At the moment we are just seeing 60 year olds hock themselves to the eyeballs for a palace of a PPOR because ‘we will just pay it off with our super and then go on the pension’.

Sorry for the rant but it sh*ts me to tears that I am going to have to subsidise this crap through my own tax dollars for another 40 years.


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## Julia (13 September 2013)

So, jmoz, what is your own plan for retirement?   Presumably to be entirely self funded?

When you reach that stage, having made considerable sacrifices in the process, it might just irritate you slightly that some of the people who have had an equal earning capacity have frittered it away and are, in retirement,  completely dependent on the age pension.

It might also irritate you that you've made that effort yet can't even access a concession on council rates, electricity, prescriptions etc.

I doubt I'd be the only one occasionally considering that being self funded is not that smart after all.


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## Judd (13 September 2013)

I thought it was a good rant.  And your views have merit - a strange statement coming from a Baby Boomer.

It does surprise me the extent to which people deprive themselves of income simply to obtain a pension.  I honestly don't understand it.  My income last year (share investments; mostly franked dividends) placed me in the 37c in the $ tax bracket, yet I received a refund of close to a $1,000.  Cannot see the point of rushing around like a headless chook attempting to minimise income and/or assets so I could receive what would be the equivalent of a tank of petrol each fortnight.

As for shifting assets into super to obtain more when I don't need it, well, that's got whiskers on it as far as I am concerned.  No need for trust deeds, accountants, auditors, actuary statements or, shudder, financial advisers.

As an aside, whenever I learn or hear about surveys from ASIC or Financial pararsites that x% haven't sought financial advice, I ask myself if one of the questions posed was "Do you want financial advice?"  Bet it weren't.


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## tech/a (13 September 2013)

jmoz said:


> The pension system in Aus needs a serious shake up.  The assets test cutoffs should be at least halved and only those on a full aged pension should be eligible for the Health Care Card (can add up to $4-5,000 in benefits over the course of a year). PPOR should also be included for the assets test above the median or average house price.
> 
> I see at least 1 couple a week who are whinging that they are only going to get $80 a fortnight in pension and ‘how am I supposed to live off that??’ meanwhile they are living in a 5x3 on 1200sqm within 1km from Cottesloe beach in Perth (looking at a cool $2m+ there) and $650,000 in a Term Deposit. The most common one is ‘I paid taxes all my life I deserve it’. Yep so I guess the years of education for you and your kids, the visits to the hospital, the roads you drive on everyday etc etc don’t count?
> 
> ...




Typical un informed kid stereo typing.
Those 60 yr. olds like most of us either have lived in the home since it was built 40 yrs ago and $100K (Not the 2 mill its worth).
OR
Have traded their way up to their Mc Mansion over many years.
Few if any would have a 750K Mortgage.

I'm with Julia.
I Pay GST
COMPANY TAX
PAYE TAX
FRINGE BENEFITS TAX
CAPITAL GAINS TAX
PAYROLL TAX.

My taxes over a year would finance a few families.
Over a lifetime a country town.

Your Sh*tted off!

I will have to pay all my medical bills I wont have subsidised pharmaceuticals
Wont get a concession on anything--will never claim a cent from a pension.
I've kept  many people employed paying taxes to a government (Any damned Govt) who waste my and your hard earned---and when they are insolvent just print money that you and I would be jailed for if we did it.
Not only that I've paid Work Cover and super from my companies earnings to my employees for 30 yrs
If I wasn't good at what I do and others like me----you and people like you--- wouldn't have 40 yrs to whinge about how tough you have it.

Give me a break!


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## skc (13 September 2013)

Judd said:


> One does have to wonder why a couple at that stage of their lives still have an outstanding debt of $350,000.




Because it is cheaper to use debt outside super compared to the return within super.

Borrowing $100k @ 5.2% you pay $5.2k interest, and for investment purpose and highest tax bracket, the after tax cost is $2730 p.a. or there abouts.

Having $100k in super earning just 4% interest in a term deposit gives you $4k income, tax free.

So it can actually be more financially beneficial to pile assets in super and use debt outside of it, depending on the relative after tax cost/return.


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## jmoz (13 September 2013)

Julia said:


> So, jmoz, what is your own plan for retirement?   Presumably to be entirely self funded?
> 
> When you reach that stage, having made considerable sacrifices in the process, it might just irritate you slightly that some of the people who have had an equal earning capacity have frittered it away and are, in retirement,  completely dependent on the age pension.




maybe it's the naivety of youth but yes i do plan to be entirely self funded. I operate under the principle that by the time i retire super will no longer exist in its current form (or if it does my preservation age will be 85).

on your second point we are in agreement, which is why my original post made mention of these types your takinng about who fritter away their funds and then expect the age pension to pick up the slack.




tech/a said:


> Typical un informed kid stereo typing.
> Those 60 yr. olds like most of us either have lived in the home since it was built 40 yrs ago and $100K (Not the 2 mill its worth).
> OR
> Have traded their way up to their Mc Mansion over many years.
> ...




i'm not saying i'm worse off than you in the 'who the government can gouge the most game' and i completely agree that it's wrong the amount of tax you have paid over the years has subsided X number of families of which you get nothing back. Where my opinion differs is that i feel the side of the ledger that needs to be balanced is the amount that gets taken from you and paid to the 'battlers', rather than taking more from you and then giving you a little bit back after paying the batters.

Fixing the system shouldn't mean making sure everyone can claim a bit to feel like the government is helping them out, it should be to stop taking so much in the first place!!


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## jmoz (13 September 2013)

or maybe i'm just too far right and should move to andorra!


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## tech/a (13 September 2013)

Two Points.

(1) Over 30+ yrs. of retirement the value of your fund will halve purely due to inflation.
So the money required to have a long and financially free retirement even in mediocrity is far more than you think.
Today Under a million will hardly cut it over 30 yrs.

(2) If the govt was serious about self funding retirement they would have

Tax deductable payments for PPOR----- without a freehold home your stuffed!
No Tax on Super fund payments to 1.5 x the level estimated for retirement at any one time.
Stops at 65 so start NOW!
Will take a generation to implement.

Then
No Tax on super fund earnings to 1.5 X ---blahh.
No other taxes upon retirement other than GST.

NO INTRODUCTION OF DEATH TAXES!
Way ahead of these Prikks

So you have a heap of well funded retirees---what's the problem??
So we have kids kick started by family who pass on prematurely---what's the problem.


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## Judd (13 September 2013)

skc said:


> Because it is cheaper to use debt outside super compared to the return within super.
> 
> Borrowing $100k @ 5.2% you pay $5.2k interest, and for investment purpose and highest tax bracket, the after tax cost is $2730 p.a. or there abouts.
> 
> ...




True.  Thanks, skc.  That aspect had escaped me probably because I haven't had any debt of any type for a long time.  It's odd.  Once you don't have to deal with the numbers it takes a bit to remember and when the issue is pointed out you kinda go "Oh yeah, that's right."


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## sydboy007 (13 September 2013)

tech/a said:


> Two Points.
> 
> (1) Over 30+ yrs. of retirement the value of your fund will halve purely due to inflation.
> So the money required to have a long and financially free retirement even in mediocrity is far more than you think.
> ...




Without supply side constraints removed tax deductibility for the PPOR would just lead to even more insane levels of inflation for housing.

Not sure how we afford all the services we expect while giving away so many tax break on super.

If the tax breaks cost more than the pension, what's the point?


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## sydboy007 (18 September 2013)

Yet they still want more

$1M in assets with a 2K+ passive income, but they still want access to the pension.  It seems the pension is now a right rather than a safety net for those who have nothing else to put food on the table.

Interesting they don't mention anything about super

We are a married couple aged 70 and 63, both working, with a combined income of $80,000 gross, and plan to retire in two years. We own our home worth $450,000, have $120,000 in shares, and $120,000 in term deposit earning 4 per cent. We also own an industrial shed valued at $400,000, returning $2000 a month with a mortgage of $80,000. Do you think we should buy another investment property such as a house, and borrow another $350,000, or buy more shares? We are hoping to arrange our affairs so we can get all or some pension.

Read more: http://www.smh.com.au/money/ask-an-...-bank-on-it-20130917-2tvlu.html#ixzz2fCKz79yX


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## tech/a (18 September 2013)

sydboy007 said:


> Without supply side constraints removed tax deductibility for the PPOR would just lead to even more insane levels of inflation for housing.
> 
> Not sure how we afford all the services we expect while giving away so many tax break on super.
> 
> If the tax breaks cost more than the pension, what's the point?




Making the interest tax deductable will make housing more attractive and give people more opportunity to own something.
Sure they maybe in a better position to buy further property---invest excess funds in Shares.
Buy a business.
*The trade off could be as simple *as not allowing the PPOR as collateral for funding.
Then you have a choice.
Tax deductibility or use of equity.

*Money Makes Money.*

If people are making more money then the Govt will also make more money.
The massive future burden of social security/health costs could be alleviated in a generation. 

Simple Duck enomixs.

- - - Updated - - -



sydboy007 said:


> Yet they still want more
> 
> $1M in assets with a 2K+ passive income, but they still want access to the pension.  It seems the pension is now a right rather than a safety net for those who have nothing else to put food on the table.
> 
> ...




You'll need it.
While it looks fine on paper your outgoings erode your $500 a week income.
In 10 yrs youll be struggling even more as interest rates rise and inflation eats into your capital base and capital return.
You have some hedging in rent return but Id be buying more shares not property.(If you can better 4% return + Dividends).


----------



## sydboy007 (18 September 2013)

tech/a said:


> Making the interest tax deductable will make housing more attractive and give people more opportunity to own something.
> Sure they maybe in a better position to buy further property---invest excess funds in Shares.
> Buy a business.
> *The trade off could be as simple *as not allowing the PPOR as collateral for funding.
> ...




We have an artificial scarcity of land combined with NIMBYism that protects the current rent seekers benefiting form the scarcity but it's leaving the next generations without the ability to own their home.  A right of use / development would go a long way to overcoming this issue.  Just look to Texas to see what a very laissez faire land use policy can achieve.  Some of the highest population and income growth in the USA and some of the lowest property prices rises.  I prefer that over the Californian boom and bust cycle.

Combine a land tax with the removal of stamp duties and local council rates, remove the CGT exemption for the PPOR, let the primary residence interest be tax deductible against current income - though some form of cap would be required otherwise it's going to encourage further over investment in housing - change negative gearing so that any loss above the income of the asset is capitalised to reduce the CGT on sale, remove the halving of the CGT as income is income and it just encourages people to speculate.

As for the couple, they own their own home, have minimal debt, and the passive income they're earning is probably closer to $3000 a month - 120K of shares should get you a grossed up income of 6% fairly easily and 4% interest on $120K adds an extra 12K to the 24K in rent.  I'm sure with a bit of tax advise they can convert most of that income into tax free super.


----------



## Julia (18 September 2013)

sydboy007 said:


> Yet they still want more
> 
> $1M in assets with a 2K+ passive income, but they still want access to the pension.



They have investable asset base of only $560,000.  Do you really think that's adequate for two people to generate a decent income from for the next twenty or so years?

If that amount generated a return of 7% (achievable with grossed up yield in shares) it's less than $40K p.a.
That's not enough with rising cost of living, especially electricity etc.

They will certainly be entitled to a part pension.

Obviously they were asking a question of some adviser.  Is the answer supplied? 

Agree with Tech's additional comments.


----------



## sydboy007 (18 September 2013)

Julia said:


> They have investable asset base of only $560,000.  Do you really think that's adequate for two people to generate a decent income from for the next twenty or so years?
> 
> If that amount generated a return of 7% (achievable with grossed up yield in shares) it's less than $40K p.a.
> That's not enough with rising cost of living, especially electricity etc.
> ...




i would have thought their investment base is 450 + 120 + 120 = $690K?

Then what's the point of Superannuation if pretty much everyone will be able to get a part pension?

It's already costing more in lost tax revenue than the pension costs.

We have a budget deficit that the current Govt says might be around for another 10 years - current goal of surplus in a decade.

So where does the money come from?  I know I'm likely to be a target, but I'm already paying an average tax rate of 28%


----------



## Vixs (18 September 2013)

sydboy007 said:


> i would have thought their investment base is 450 + 120 + 120 = $690K?
> 
> Then what's the point of Superannuation if pretty much everyone will be able to get a part pension?
> 
> ...




That's their house mate. The 450 isn't assessable as an asset nor is it really investable wealth.

They have equity in the property assuming it's valid security for a lender to a decent LVR, and they have their really quite meagre other investment assets.

They won't have any trouble qualifying for a pension.

The thing that worries me is the thought of more gearing at age 70 and 63...


----------



## Julia (18 September 2013)

sydboy007 said:


> i would have thought their investment base is 450 + 120 + 120 = $690K?



No.  As Vixs has pointed out, the value of the PPOR is irrelevant, except perhaps as security against borrowing.
Here is what you quoted:


> We own our home worth $450,000, have $120,000 in shares, and $120,000 in term deposit earning 4 per cent. We also own an industrial shed valued at $400,000, returning $2000 a month with a mortgage of $80,000



So $240K across shares and cash, the shed, with mortgage deducted, is $320K   ergo   $560,000.

and I was being generous in allowing for a 7% yield across that whole amount, given at least the term deposit is only earning 4%.



> Then what's the point of Superannuation if pretty much everyone will be able to get a part pension?



That's a bit of an overstatement, syd.  It's not the case at all that 'pretty much everyone will be able to get a part pension".  
Although I'm pointing out that this couple are not by any means as well off as you seemed to be suggesting, when you consider what their investable capital can actually generate, they're still better off than the majority of the population going into retirement.



Vixs said:


> That's their house mate. The 450 isn't assessable as an asset nor is it really investable wealth.
> 
> They have equity in the property assuming it's valid security for a lender to a decent LVR, and they have their really quite meagre other investment assets.
> 
> ...



+1.


----------



## Ves (18 September 2013)

My calcs as follows:

$400,000 shed,  income at $2,000 per month,   $24,000 annual
_  (less loan $80,000  @ 6% interest = $4,800 annual)_

$120,000 shares,  market gross yield 6.6 or 6.7%,   say  $8,000 total

$120,000   term deposit  at  $4,800


total net income of  $31,920.

Whilst,  that isn't super comfortable by any means.   If you could protect that income stream from inflation there is no reason you could not live on it for the rest of your life assuming that you owned your own PPOR.   

Believe me or not, but myself and my partner,  excluding mortgage payments (which you shouldn't be paying in retirement if you plan properly)  get by on around $30,000 to $35,000 living expenses.  

There's not really much that I'm not doing at the moment that would enrich my life massively that money could buy.

All I will say is that the shed makes up a massive part of their income and they probably need to de-risk it somehow.   But I'm not here to judge their investments,  just comparing the income to my own situation.


----------



## sydboy007 (18 September 2013)

Julia said:


> No.  As Vixs has pointed out, the value of the PPOR is irrelevant, except perhaps as security against borrowing.
> Here is what you quoted:
> 
> So $240K across shares and cash, the shed, with mortgage deducted, is $320K   ergo   $560,000.
> ...




Below is the asset and income test for a part pension.

I don't think I'm too far wrong when you can have over $1M in assets (excluding the family home) as a couple with an income just over $2700 / fortnight and still receive a part pension and all the associated goodies that entitles you to.

So you can be in the 9th income decile, and probaby in the 8th or 9th decile for overall wealth, and still receive a few $ in pension and cut price pharmceuticuls.  I dare say if you have no mortgage that you probaby have a disposable income that's equivalent to an income decile or 2 higher as well.


----------



## Julia (18 September 2013)

It might upset you further, syd, to know that your chart is already out of date and the new asset limits are even more generous.


----------



## Ves (18 September 2013)

Julia said:


> It might upset you further, syd, to know that your chart is already out of date and the new asset limits are even more generous.




A link would have been nice.

For everyone else:

http://www.yourlifechoices.com.au/news/asset-test-tables


----------



## sydboy007 (18 September 2013)

Julia said:


> It might upset you further, syd, to know that your chart is already out of date and the new asset limits are even more generous.




The I suppose the younger generations deserve the overly generous PPL and maybe everyone does have a right to government money.

Welfare is a right not provided based on need.


----------



## Vixs (19 September 2013)

I don't have a problem with the asset and income levels because I know that it's going to take that amount to fund a couple in retirement without leaving much change except the house when they pass on.

The real issue (and it's been discussed at length way back in the property price thread and maybe this one too) is housing values for the elderly.

On the one hand it's not right to ask the elderly to leave the community they've been part of for much of their life to unlock the equity in their home.

On the other hand, it's not right to treat paper millionaires like paupers just because they don't want to sell their house.

The solution could be nicer aged care housing developed within existing suburbs - the elderly can keep their communities intact, be close to family and friends and the things they are familiar with, but their homes can be sold on to the next generation - be it their own kids or someone else.

That's probably too off topic for this post but it is directly related to the assets text exemption on the home.


----------



## banco (19 September 2013)

Vixs said:


> I don't have a problem with the asset and income levels because I know that it's going to take that amount to fund a couple in retirement without leaving much change except the house when they pass on.
> 
> The real issue (and it's been discussed at length way back in the property price thread and maybe this one too) is housing values for the elderly.
> 
> ...




An easier way would be to let them live in their million dollar houses and receive their age pension but upon their death some of the proceeds of the sale go to the taxpayer.


----------



## sydboy007 (19 September 2013)

Vixs said:


> I don't have a problem with the asset and income levels because I know that it's going to take that amount to fund a couple in retirement without leaving much change except the house when they pass on.
> 
> On the other hand, it's not right to treat paper millionaires like paupers just because they don't want to sell their house.




We're already providing the super system with more funding than just about any other area of Government spending - except maybe health - and yet not seeing much reduction in the pension payments.  Throw in the $20B a year it takes to run the super system (plus the other performance and management fees the various players add on) and I often wonder if it's worth it.  If there's compulsion within the system do we need to make the tax breaks so big?

What kind of income level should those left paying tax have to provide to those who've retired?

Is it fair to allow someone who's retired to have a tax free income in the top half of Australians and still be able to receive a part pension?

Easiest solution for those wanting to keep their house is for the Govt to provide a 50% exemption along with cpi interest rate loans to help cover any short fall in income.

Why should my taxes be higher so someone can inherit their parents home?


----------



## craft (19 September 2013)

Vixs said:


> On the one hand it's not right to ask the elderly to leave the community they've been part of for much of their life to unlock the equity in their home.
> 
> On the other hand





sydboy007 said:


> Why should my taxes be higher so someone can inherit their parents home?




One of the issues Australia needs to have a grown up debate about. (god help us)



banco said:


> An easier way would be to let them live in their million dollar houses and receive their age pension but upon their death some of the proceeds of the sale go to the taxpayer.



 probably too sensible to see the light of day.


----------



## Julia (19 September 2013)

Ves said:


> total net income of  $31,920.
> 
> Whilst,  that isn't super comfortable by any means.   If you could protect that income stream from inflation there is no reason you could not live on it for the rest of your life assuming that you owned your own PPOR.



That's pretty presumptuous of you.  You have no idea what expenses they might have.
Neither is it your business to decide how much anyone needs to live on. 



> Believe me or not, but myself and my partner,  excluding mortgage payments (which you shouldn't be paying in retirement if you plan properly)  get by on around $30,000 to $35,000 living expenses.



Well, that's your business and your decision.   


> But I'm not here to judge their investments,  just comparing the income to my own situation.



Something that's completely irrelevant.

- - - Updated - - -



Ves said:


> A link would have been nice.




I'm sure the few people who would want to know actual limits are just as capable as you are of accessing the Centrelink website.


----------



## Ves (19 September 2013)

Julia said:


> That's pretty presumptuous of you.  You have no idea what expenses they might have.
> Neither is it your business to decide how much anyone needs to live on.
> 
> 
> ...



Why so aggressive and intent on destabilising the discussion with your willingness to antagonise me?


----------



## sydboy007 (19 September 2013)

The below graph shows the economic headwinds we're facing

4800 hitting pension age every week and reasonable growth in that as the years go by.

So when tax free super came about we had around 4.6 workers per retiree (2007).

We're down to about 4 now, and projected to be about 3.5 by 2020 - and it keeps on getting worse.

We may need to move towards a system that spain has decided to use from 2019

_The Spanish government will end the link between pensions and inflation. Instead, the level of pensions will depend on the development of the Spanish economy and Spain’s life expectancy. In the future, pensions will not increase more than 0.25 per cent above inflation. Their total level will also be linked to the amount of contributions paid into the social security system, and from 2019 pensions payments will also be coupled to longevity. In other words, as Spain gets older (which it will), its pensions will fall (as they must)._

Why is a couple who earns more than 50% of households entitle to welfare?  What are people who can have millions of dollars in assets (when you factor in the primary residence) entitled to welfare?

Because they are one of the most powerful voting blocks.


----------



## tech/a (19 September 2013)

> Why is a couple who earns more than 50% of households entitle to welfare? What are people who can have millions of dollars in assets (when you factor in the primary residence) entitled to welfare?




Why should a couple who have lived off the dole and used public housing all their life --- MORE entitled to welfare than the couple above?


----------



## tech/a (19 September 2013)

In my working career my businesses have paid millions in Taxes.

Without the company turning a profit I would not have payed.

All my employees PAYE Tax
GST
Fringe benefit tax
Payroll Tax.
Company Tax.

Capital gains tax.

I have contributed more in taxes to my country than 30 average families.

And YOU think I should be denied $30K a year?????

*WHY?*

- - - Updated - - -

How about linking welfare to the contribution made to tax revenue.
No contribution no welfare.

Might get a few off their butts.


----------



## CanOz (19 September 2013)

Tech, c'mon now, the only reason you pay taxes is to support others....its not for you silly!


----------



## Julia (19 September 2013)

tech/a said:


> Why should a couple who have lived off the dole and used public housing all their life --- MORE entitled to welfare than the couple above?



Yes, especially considering they are not high income earners, they've done OK to have got to where they have imo.


> We are a married couple aged 70 and 63, both working, with a combined income of $80,000 gross, and plan to retire in two years.



Two people only receiving $80K.  

I'm a bit puzzled about all the indignation on this thread apparently being directed toward the tax breaks for those who have provided for their own retirement, rather than the great majority who have an expectation of being cared for by their fellow citizens throughout their lives.

Plenty of people have worked all their lives, no dependants, yet failed to save to fund their own retirement. 

Vixs makes good points above.   Maybe a compromise on the family home could be that it's exempt from Centrelink assessment up to a certain value, say around $500,000, but anything over that is counted in assessable assets.  The obvious difficulty with that, however, is the huge discrepancy between housing costs in capital cities and small towns.


----------



## McLovin (19 September 2013)

tech/a said:


> In my working career my businesses have paid millions in Taxes.
> 
> Without the company turning a profit I would not have payed.
> 
> ...




Yes, I do. Do you need $30k/year courtesy of the taxpayer?



			
				Julia said:
			
		

> I'm a bit puzzled about all the indignation on this thread apparently being directed toward the tax breaks for those who have provided for their own retirement, rather than the great majority who have an expectation of being cared for by their fellow citizens throughout their lives.




As I've said previously in this thread, I think it's great people provide for their own retirement. But I think the amount of income that can be taken tax-free needs to be capped. The idea that someone should not pay tax merely because they're a saver doesn't compute with me. I'm 31, I live off my own savings, should I be allowed to live tax free?


----------



## VSntchr (19 September 2013)

McLovin said:


> Yes, I do. Do you need $30k/year courtesy of the taxpayer?
> 
> 
> 
> As I've said previously in this thread, I think it's great people provide for their own retirement. But I think the amount of income that can be taken tax-free needs to be capped. The idea that someone should not pay tax merely because they're a saver doesn't compute with me. *I'm 31, I live off my own savings*, should I be allowed to live tax free?




Im 23, teach me


----------



## McLovin (19 September 2013)

VSntchr said:


> Im 23, teach me




Those halcyon pre-GFC days gave me a _massive_ leg up. Banking just don't pay like it used to pay, unfortunately.


----------



## Judd (19 September 2013)

McLovin said:


> Yes, I do. Do you need $30k/year courtesy of the taxpayer?
> 
> 
> 
> As I've said previously in this thread, I think it's great people provide for their own retirement. But I think the amount of income that can be taken tax-free needs to be capped. The idea that someone should not pay tax merely because they're a saver doesn't compute with me. I'm 31, I live off my own savings, should I be allowed to live tax free?




I'm more than 20 years older than you so could be classed as in the "You owe me" brigade.  However, I'm more inclined towards your concepts.

Interesting how people can turn the principle of a need based on welfare into an entitlement.


----------



## craft (19 September 2013)

tech/a said:


> In my working career my businesses have paid millions in Taxes.
> 
> Without the company turning a profit I would not have payed.
> 
> ...




Interesting that you see tax on your employees labour as tax that has been levied on you. Reckon your employees probably see it as tax they have paid.

As to why for you –  Makes no sense to tax somebody just to hand it back again – inefficient and distorting.



tech/a said:


> How about linking welfare to the contribution made to tax revenue.
> No contribution no welfare.
> 
> Might get a few off their butts.




I guess there is an argument as to whether there should nothing, a quasi insurance scheme or a welfare safety net in place. From my perspective I’m glad to live in a country where we have a welfare safety net.  – I think Mclovin described it to me one day as enlightened self interest.

The real issues for me is how we ensure that the safety net is set at the right level, not abused and does not create disincentives for recipients to get off it. Get those aspects right/fair and you will have the lowest distortion to the economy from the transfer system intervening whist still being humane.


----------



## tech/a (19 September 2013)

McLovin said:


> Yes, I do. Do you need $30k/year courtesy of the taxpayer?




Hell yeh!


Every time one of my guys hits me up for a wage rise---do they *NEED* IT?
If interest rates go to 10% and inflation hits hard.
I get Ill or My passive income streams dry up.
When My father retired and he is still alive---he had enough invested for 10 houses. (400K)
Back in 1975
He was considered wealthy.

Today He and mum are on struggle street!


----------



## McLovin (19 September 2013)

tech/a said:


> Every time one of my guys hits me up for a wage rise---do they *NEED* IT?




I don't know. It's fairly non-sequitur to the discussion. I'm not quite sure how one can equate a welfare payment with wages and salaries paid by a, presumably, profitable company. Some of your posts make it sound as though you're running some benevolent organisation and your employees are an incredible burden.



			
				tech/a said:
			
		

> If interest rates go to 10% and inflation hits hard.
> I get Ill or My passive income streams dry up.




And that's the point of having a safety net, rather than a US style carte-blanche system where Gates and Buffet are entitled to the pension. It's there _if_ you need it.


----------



## jmoz (19 September 2013)

tech/a said:


> How about linking welfare to the contribution made to tax revenue.
> No contribution no welfare.
> 
> Might get a few off their butts.




um yeh that would work great. I'm sure there would be no increase in crime at all


----------



## sydboy007 (19 September 2013)

tech/a said:


> How about linking welfare to the contribution made to tax revenue.
> No contribution no welfare.
> 
> Might get a few off their butts.




I grew up in a family that bounced around the poverty line.  We survived because of welfare and a lot of HARD WORK that never earned us the kind of income your effort was rewarded with.  My dad is dyslexic.  He left school in year 8 because his father had passed away and being one of the older children he had to work the farm.  As the economy changed through the 80s he had trouble getting enough work.  Throw in getting 3rd degree burns to a third of his body due to employer negligence (they admitted such during the coronial inquest) in the early 90s and I'm surprised he's still a pretty happy person who goes off to do his odd jobs each morning for a little extra money to supplement the pension, same as my mum.

We were definitely NOT A LAZY FAMILY!  We mowed lawns in 30+ degree summer days, put up fences on farms, roof bats in 30 degree summer days (still remember that birthday).  I count myself very lucky to have had the luck and motivation to get a good education and move into the income elite of this country.  I doubt I would have if I'd grown up in the USA.

By your definition my parents should be starving right now with no pension support.

The majority of people on welfare wished they weren't.  Most people on welfare hate it, especially when they have to put up with attitudes like yours.  You'd fit in better with your attitude in the USA.  There it's sink or swim.


----------



## Julia (19 September 2013)

McLovin said:


> As I've said previously in this thread, I think it's great people provide for their own retirement. But I think the amount of income that can be taken tax-free needs to be capped.



That sounds reasonable enough.  What would you suggest as the capped level?


> The idea that someone should not pay tax merely because they're a saver doesn't compute with me. I'm 31, I live off my own savings, should I be allowed to live tax free?



Whilst I congratulate you on achieving such a successful position at such a young age (it took me until my late 40's), I don't think you can reasonably compare the two situations, in that the couple in the example above would presumably have paid into the tax system all their working lives, viz up to about fifty years.  Not so for you.  I'm sure you'll have considered the option of using the tax free threshold and then placing the remainder into Super in order to only be taxed at 15% in accumulation phase.



craft said:


> The real issues for me is how we ensure that the safety net is set at the right level, not abused and does not create disincentives for recipients to get off it. Get those aspects right/fair and you will have the lowest distortion to the economy from the transfer system intervening whist still being humane.



Certainly this is the point which concerns all of us.  At present we have ridiculously high levels of unwarranted middle class welfare whilst failing to properly support those in genuine need.
I don't envy any government trying to get this right.  Obviously a case by case determination of welfare requirements would be ultimately desirable, but less than practical from a cost point of view.


----------



## McLovin (19 September 2013)

Julia said:


> That sounds reasonable enough.  What would you suggest as the capped level?




Taking a very "macro" approach, I'd say the level should be set as a % above the basic pension. Whether it's 25%, 50%, 100% I don't know. 



> Whilst I congratulate you on achieving such a successful position at such a young age (it took me until my late 40's), I don't think you can reasonably compare the two situations, in that the couple in the example above would presumably have paid into the tax system all their working lives, viz up to about fifty years.  Not so for you.  I'm sure you'll have considered the option of using the tax free threshold and then placing the remainder into Super in order to only be taxed at 15% in accumulation phase.




Valid points and I don't disagree. To clarify what I was saying (and related to my comments above), the superannuation system shouldn't become a tax-shelter for those who should otherwise pay tax and by that I don't mean the person with $500k in super. I'm in a generation that will have to carry a very high tax burden if the tax system isn't reformed soon. 

In many ways I think Australia has become a victim of its own success. People my age, by-and-large, don't know what a recession is and are used to the idea of ever increasing wages, the ability to find a job at the drop of a hat, and a government that "hands back" plenty of money. Sometimes I think we have become fat and lazy. It's weird to think that the last time we had a recession (and unlike most I remember it acutely because my parents almost lost their business) I was in year 3.


----------



## sydboy007 (20 September 2013)

McLovin said:


> Valid points and I don't disagree. To clarify what I was saying (and related to my comments above), the superannuation system shouldn't become a tax-shelter for those who should otherwise pay tax and by that I don't mean the person with $500k in super. I'm in a generation that will have to carry a very high tax burden if the tax system isn't reformed soon.




I do wonder if we'd not be better off with just giving everyone the pension and taxing super at a 15% discount to your marginal rate with a 0% tax on the first 10K of earnings each year and the rest at 15% discount rate.

The tax from super will be quarantined for funding the pension.

This way everyone gets relatively the same level of support and hopefully the cost to the budget of the super and pension sytem will be a lot lower.

The present system benefits those most able to save for retirement, while others have the mentality that it's my money and entering retirement with large amounts of debt and expect their super to pay it off.  Maybe we need to have full taxation on super with a rebate as I've proposed above which cannot be taken as a lump sum in retirement.  That isn't your money - it's taxpayer funds and should be used to provide some form of annuity during retirement.


----------



## stewiejp (20 September 2013)

I think the average Australian who is approaching retirement age, especially ones who have worked all their lives seem to think they are "entitled" to the OAP since they have put so much into our tax system over the years. That is demonstrated well by this thread.
I'm certainly no expert but isn't the definition of welfare this : "Financial or other aid provided, especially by the government, *to people in need*" 

So by definition people who don't need it (ie earn over a certain amount, or have assets over a certain amount) don't get it. 

People like Tech/a (nothing personal mate) who have done a fantastic job making this country what it is today, but claim they are entitled because they have paid taxes.... just makes me shake my head. As far as I know it's there for people who need it, not everyone. The main reason I got into investments, shares etc is to plan for when there is no pension, or at least no pension I am entitled to because hopefully I'll be a self funded retiree.


----------



## DocK (20 September 2013)

stewiejp said:


> I think the average Australian who is approaching retirement age, especially ones who have worked all their lives seem to think they are "entitled" to the OAP since they have put so much into our tax system over the years. That is demonstrated well by this thread.
> I'm certainly no expert but isn't the definition of welfare this : "Financial or other aid provided, especially by the government, *to people in need*"
> 
> So by definition people who don't need it (ie earn over a certain amount, or have assets over a certain amount) don't get it.
> ...




Agree with the above, but I can also see why this is such an emotive subject for some.  It all comes down to basic human nature imo.  Most people would never begrudge a handout or welfare assistance to those that *need* it - such as Syd's example of his family years ago.  If you are disabled in some way, lack the ability to earn above minimum wage, are raising a houseful of future taxpayers, or in any other way are doing your best but just can't put enough aside to provide for yourself - I don't think many would begrudge welfare support.   That's what makes us a civilised society - the fortunate should consider themselves lucky to have been able to help the less so.  It really irks most people though to see those who should have been able to provide for themselves receive some of their hard-earned taxes.   It's basic human nature really - nobody want to see others get a free ride.  Those that did without luxuries all their lives in order to save for their "golden years" begrudge the pension payments to those that spent every dollar they ever earned with no thought of tomorrow - and why wouldn't they?  

How to differentiate between those that_ need _help and those that _should_ have been able to provide for themselves - that's the real question isn't it?  Compulsory super contributions deducted from wages has gone some way towards forcing those in work to at least partially provide for their retirements - I know none of my employees would have voluntarily put any of their wages aside for retirement so the introduction of (and planned increases to) SGC was a massive step in the right direction for our country.


----------



## VSntchr (20 September 2013)

A good discussion with some very interesting points.

The difference of opinion even between just the small sub-section of the population that ASF represents really goes to show why government policies on topics such as this are so hard to get right and keep everyone happy.

I see the point that some are making where they say that because they have paid alot of tax and created wealth in the economy and for their workers that they are entitled to something back. BUT... the flip side of this is that they may have actually already recieved more than others via the platform that they have leveraged their success from - our economic prosperity, (relative) political stableness, (relatively) good infrastructure...etc

If the government becomes overly concerned with giving out pensions to higher earners who think they are entitled - at what cost is it to the above factors? and how will it effect the chances for future generations to do the same?

Not saying that these things aren't something that everyone has the opportunity to use to create wealth, but just something that crossed my mind..


----------



## sydboy007 (20 September 2013)

DocK said:


> How to differentiate between those that_ need _help and those that _should_ have been able to provide for themselves - that's the real question isn't it?  Compulsory super contributions deducted from wages has gone some way towards forcing those in work to at least partially provide for their retirements - I know none of my employees would have voluntarily put any of their wages aside for retirement so the introduction of (and planned increases to) SGC was a massive step in the right direction for our country.




Even if we can distinguish, I doubt we'd able able to let poor retirees starve.

I do think we need to be educated about the fact that life on the pension, on any welfare, is more existence than life because you generally can't afford the luxuries of life on welfare.  That's why both my parents are still doing some work each day, so they can afford to do a cheap renovation of the kitchen and bathroom, or have a trip to driving around Tasmania.

A list of the top 20 sources of revenues and Govt spending programs would go a long way to letting the voters see where the money comes from and goes to.  Might be a rude shock that super and the pension are near the top of the outgoings list.


----------



## sydboy007 (20 September 2013)

This might help people understand where the money is going in the budget

http://www.abc.net.au/news/2012-05-08/interactive-budget-2012-how-its-spent/3971410

Assistance to the Aged is already the number 1 budget spending and we've yet to really see the boomer generation hit retirement.

It's unclear if that accounts for the taxation breaks to super, but my understanding is the pension is already around the $40B a year mark and steadily rising.


----------



## qldfrog (21 September 2013)

indeed an interesting set of figures: more money gioven to private than public school for example, an amazing amount already for the disablility funding
etc should be more publicised


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## tech/a (21 September 2013)

qldfrog said:


> indeed an interesting set of figures: more money gioven to private than public school for example, an amazing amount already for the disablility funding
> etc should be more publicised




Private schools pay maintenance/wages/insurances/running costs/land/rates/most improvements.
Etc
Public schools pay for?


----------



## tech/a (21 September 2013)

Just a couple of comments on comments made now I have a little more time.

PAYE Tax.
Of course my employees "Pay the tax"
But my company has to profit enough to cover wages AND taxes AND work cover AND Super Payments.
Its my company check which goes to the tax department!
If it doesn't then I don't employ.If I employ MORE I cop bigger taxes (Payroll tax!)


I take *ALL* the RISK. If a larger Client goes through the hoop and owes me $100s of $1000s I cop the lot.
My employees walk away and find a new job. I lose the lot but whoopy Ill be able to claim welfare!

Im not denying those who find life harder--welfare--the genuine ones!
But I do get bent out of shape when I see guys applying for jobs who have no intention of being employed---who have it easy and BLUDGE off welfare.

I had 2 last week
Thongs
Chewies
Hadn't washed for a week
Couldn't string a sentence together and couldn't get out of the interview fast enough.
Sure I'm in the building industry and pussies don't last---but!!

To deny those who stick their neck out (for a better long term lifestyle and in turn create jobs and incentives
for others in the process) Cheap medical,pharmaceutical,pension discounts and even a small passive income (Pension) ---when they have been taxed the bejeezus out of all their lives---in my view stinks.

Sure this is the Lucky country.
I like many* didn't* finish Secondary school.

My first job was pumping gas!!
I had the same choices everyone else had.
So don't tell me how hard struggle street has it and they should EXPECT a safety net.

*Unless* your born incapacitated/fall to a disease or accident/Invalid Child or Parent--during your life time---you have exactly the same opportunities as EVERYONE. Where else is there --NEED???
Yeh there is one---the retired Grand parents left with a Child or children from kids who cant cope--killed
or suicided!-- self funded--who cares!

Contribute to society and make your own safety net.
Find and vote for politicians who understand that equality is for all not *JUST THE POOR* end of town.

----End of rant----


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## qldfrog (21 September 2013)

tech/a said:


> Private schools pay maintenance/wages/insurances/running costs/land/rates/most improvements.
> Etc
> Public schools pay for?



I would assume the same: all depends on what is defined in the bucket;
anyway, the budget is clearly a welfare state one and I am not impressed...


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## qldfrog (21 September 2013)

pS tech/a I am in the top rate as well, and owe my own business, but I would have no issue not acessing access to any welfare/pension etc AS LONG AS it is restricted to the one in need.
The focus should be not on keeping  global access to pensions etc but on retsricting drastically the total amount AND reduce taxes:
I will never trust government in being efficient in taxing me then paying me back part of the initial amount.
And yes, I believe taxes are a disincentive in this country
I absolutely refuse to pay more than half what I can earn in tax, and this is quickly reached when top rate + GST....so I favor more free time vs more money as I am not into tax dodging (legal or not) so that my average goes below 50%.
every one makes his own choice


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## sydboy007 (21 September 2013)

qldfrog said:


> indeed an interesting set of figures: more money gioven to private than public school for example, an amazing amount already for the disablility funding
> etc should be more publicised




I was amazed with the $34.2B in tax churn for families with Children.

I'd love if someone could calculate what rate a land tax in conjunction with a very small financial transaction tax (eg 0.001%) and broadly based GST at say 10% on the essentials and 20% on the rest would be required to remove most other taxes including income taxes.  best to tax what you can't move or hide easily.  Might put a lot of accountants out of business if the tax system was made a lot simpler.

Technically the states provide the majority of the funding for public schools, but yes I do find it strange that we've had over a decade of excess funding to private schools yet little outcry.  Imagine if some "dole bludgers" were receiving 50% or 100%+ in extra entitlements and the Govt said it's OK no one should be worse off with the new rules?

I do wish it had been broken down a bit more into the specific programs that the total accounts for, but something easily understood like this should be mandatory for the Government to release with the budget.


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## McLovin (1 October 2013)

Although the writer is discussing America, I thought some of his points could equally apply to the current situation in Australia...


> There are two ways to become richer. One is to provide more goods and services; that’s economic growth. The other is to snatch someone else’s wealth or income; that’s the spoils society. In a spoils society, economic success increasingly depends on who wins countless distributional contests: not who creates wealth but who controls it. But this can be contentious. Winners celebrate; losers fume.
> 
> Of course, the two systems have long co-existed – and always will. All modern societies chase growth; all redistribute income and wealth. Some shuffling is visible and popular. Until now, that’s been the case with America’s largest transfer, which is from workers to retirees through Social Security and Medicare. In 2012, this exceeded $US1 trillion. Still, for the nation, the relevant question is whether productive behaviour (generating economic growth) is losing ground to predatory behaviour (grabbing existing wealth and income). There are good reasons to think it is.
> 
> ...




http://www.afr.com/p/opinion/affluent_society_subverted_by_its_SdoYoBv6R6SKk0NPBy0bUM

That last paragraph certainly rings true to me of Australia. So much of our political discourse is devoted to transfer payments, subsidies for under-performing industries and tax breaks. The focus seems to be on how we cut the pie, rather than how to expand the pie. At the last election the LNP's big campaign promise was a new transfer payment. Before that, the ALP had promised a new tax to create the NDIS. It certainly fits into the discussion on this thread.


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## sydboy007 (1 October 2013)

McLovin said:


> Although the writer is discussing America, I thought some of his points could equally apply to the current situation in Australia...
> 
> 
> http://www.afr.com/p/opinion/affluent_society_subverted_by_its_SdoYoBv6R6SKk0NPBy0bUM
> ...




I think that sums up things in Australia quite nicely.  Too many vested interests liking their cut of the cake with minimal effort.

With the poisoned politics and little to no bipartisan support for any changes to the way things are, I doubt we will see any changes of consequence till the ToT has turned against us and unemployment has a 7 or maybe 8 in front of it.

Seems as a society we only like to make the changes during a crisis, rather than making the much smaller and easily coped with changes over time.


----------



## doctorj (1 October 2013)

sydboy007 said:


> This might help people understand where the money is going in the budget
> 
> http://www.abc.net.au/news/2012-05-08/interactive-budget-2012-how-its-spent/3971410
> 
> ...




This is why I personally think people should be smart about how they manage their superannuation.  I think you have to be aware of the fact that the superannuation system we enjoy today is only a product of legislation.  There is a risk that the legislation that underpins superannuation may not always be there.

A number of countries have recently killed off their pillar 2 pension systems (superannuation).  People’s contributions now go directly to the state and exist in unallocated accounts for payment of retirement benefits.  They earn some sort of notional return, but typically not as good as the former privately run system.  What this means is you will have reduced transparency over your savings, less control and less certainty over your ability to withdraw them at retirement. 

With an ageing population the stress on the budget will only get worse.  The government will have to find solutions.  The fact is, the current pension system was designed when the ratio of tax payers to retirees was quite a lot different to what it is today.  The ratio is only deteriorating, so the risk that the government may be tempted to capture the superannuation cashflows is for me, non-trivial.


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## FxTrader (1 October 2013)

McLovin said:


> That last paragraph certainly rings true to me of Australia...



No doubt this little gem of an opinion piece was written by a republican devotee of trickle-down economic rationalism.  The language of far right economic propaganda is infused throughout.  In the good old USA, amoral corporate greed and political influence has devastated the middle class and created enormous wealth disparity and concentration in society.  Wealth transfer is occurring, not from the middle class to the elderly, but from the 99% to the 1%.

I especially like this bit of biased insight...



> Growing income inequality has intensified pressures to raise taxes on the rich and near-rich, however defined, to support the middle class and poor. The massive transfers from workers to retirees are starting to sow a backlash among the young, who wonder whether all the elderly’s benefits are justified.



So pressure is intensifying on the rich to support the dwindling middle class and poor through higher taxation (and so it should) but young workers backlash is properly directed at the elderly pensioners drawing social security! 

The author is right about one thing but not for the reason he/she puts forward...



> What’s emerging today is more self-interested and self-destructive.



That is the very essence of corporate America where greed and self-interest are virtues, to hell with others.  Life is just a zero sum game after all.

At least in Australia there is an attempt, through the superannuation system, to address the issue of self-funded retirement through compulsion to save instead of spend.  The idea that the poor and socially disadvantaged are somehow collectively trying to snatch wealth from the rich is a truly repulsive argument.


----------



## sydboy007 (1 October 2013)

doctorj said:


> This is why I personally think people should be smart about how they manage their superannuation.  I think you have to be aware of the fact that the superannuation system we enjoy today is only a product of legislation.  There is a risk that the legislation that underpins superannuation may not always be there.




it was one of the reasons I started a SMSF.  I also didn't like being in the equivalent of a managed fund which is what most retail and industry funds are.  Getting access to my money for a pension or lump sum is at their discretion.

I just wish the super system wasn't so dam expensive.  It costs a lot in the fees gouged by the finance system, and it costs a lot in higher taxation.


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## Bill M (8 October 2013)

We have the third best superannuation/pension system in the world according to this article. Not a bad effort for us as a country, better than UK, Germany and USA too.

---
Australian retirees have got it pretty good, according to a report ranking the lucky country as having the third-best pension system in the world.

Compulsory superannuation combined with a generous Age Pension helped Australia maintain third place in this year's Melbourne Mercer Global Pension Index.

Link to full story: http://www.thebull.com.au/articles/a/41200-aust-retirement-system-among-world's-best.html
---


----------



## sydboy007 (8 October 2013)

Bill M said:


> We have the third best superannuation/pension system in the world according to this article. Not a bad effort for us as a country, better than UK, Germany and USA too.
> 
> ---
> Australian retirees have got it pretty good, according to a report ranking the lucky country as having the third-best pension system in the world.
> ...




I question how long the generous aged pension is affordable.  We're looking at a doubling of the over 65 population by about 2030, which aint a long time away.  We might not have a budget surplus till 2020 the way things are going.

Considering the aged pension is already around the $38B mark, a doubling of the aged pension combined with over 1 less worker per dependent how the eroded tax base supports all the services we need I don't know.


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## 13ugs13unny (8 October 2013)

sydboy007 said:


> I question how long the generous aged pension is affordable.  We're looking at a doubling of the over 65 population by about 2030, which aint a long time away.  We might not have a budget surplus till 2020 the way things are going.
> 
> Considering the aged pension is already around the $38B mark, a doubling of the aged pension combined with over 1 less worker per dependent how the eroded tax base supports all the services we need I don't know.




Its relative, pensioners are a massive contributors to the economy. Even if the pension bill doubles on a linear scale over time, the economy will also benefit.

Pensioners tend to spend the lot to make ends meet for groceries, taxis, transport, utilities, aged care supplies, pharmaceuticals etc etc, they are an important part of the economy, those that own their homes outright and decide to downsize into a unit contribute to a transaction where stamp duties paid by the purchaser swell state government coffers, where the debt created is carried by a person who can service the debt given tight lending conditions.

It all part of the economy mix and I don't believe pensioners should be underestimated. I think a small deficit on occasion is a healthy thing to keep the economy cogs greased as long as the overall outlook is to balance the books and build a surplus for a rainy day.


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## sydboy007 (8 October 2013)

http://www.macrobusiness.com.au/2013/10/making-superannuation-sustainable/

pretty good read on super


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## FxTrader (8 October 2013)

sydboy007 said:


> http://www.macrobusiness.com.au/2013/10/making-superannuation-sustainable/ pretty good read on super



Interesting indeed...


> "the widespread push by the wealth management industry for Australians to turn their retirement nest eggs into income streams so that they don’t run out of superannuation too early – either by burning through their retirement savings or living longer than expected."



Just a little to self-serving a push I think.  Annuities equal ongoing fees for the parasitic "wealth management" industry.



> "The push follows criticism in August from CPA Australia, which argued that a significant number of baby boomers are running-up debts as they head towards retirement, and then withdrawing their super as a lump sum to pay off debts and, rather than invest for income, spending most of the remainder on consumer goods or a holiday before falling back on the aged pension."



True, and why would you not choose this option?  Most boomers don't have enough money saved in super to do anything else and plan to draw the aged pension.  Pay off debts, no mortgage and adjust assets accordingly.  Not a plentiful retirement perhaps but a perfectly adequate one and many see it this way.



> "Allowing someone to retire at 60, withdraw their super tax free as a lump sum, use the money to pay down personal debts or consumption, and then go on the aged pension from 65 years of age is crazy. In such instances, the taxpayer is left wearing the cost of superannuation concessions throughout the individual’s working life, and then again once that same individual goes on the aged pension."



A crazy system perhaps, but not for those who plan to exploit it.  The Howard/Costello government created this perk and Abbott (Howard's disciple) is unlikely to substantially change it.

Just like the unlimited tax concessions for property investors, trying to roll back the generosity of this policy would cetainly be met with a backlash and severe retribution at the ballot box.


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## Vixs (12 October 2013)

Anyone that is happy to send themselves broke at 65 and rely on the government for hand outs that don't keep up with the true cost of living is an idiot, and time will tell them that. If they speak to me, I'll tell them that today.

All of my clients entering the wealth distribution phase of life have 1 major source of peace of mind: they aren't reliant on politicians for their jam money.

The people I have seen do this are people that had their asset base destroyed by divorce, and needed to take out a new mortgage at say age 50.

The other thing worth noting is that in a low interest rate environment a lot of people are better off contributing to super up until retirement age INSTEAD of paying off their mortgage ASAP. They aren't intentionally 'loading up' debt, but the breakeven point for where concessionally taxed earnings and growth in superannuation is going to outperform the guaranteed, tax free 'return' of paying extra of the mortgage is lower. Some people will be better off 'loading up on debt' and taking a lump sum to repay it.

The most sensible decision for someone living off an income stream and with no future earnings expected is almost certainly going to be to repay all debt and live off what's left, not use your income stream to service debt. That's the scenario being proposed by the forced income stream champions. No 72 year old wants to have a mortgage anymore while they have assets that exceed their liabilities.

The people maxing out credit cards, buying flash cars outside their means and using their line of credit as an ATM circa-2007 are the tiny minority, and are probably making equally stupid decisions in other areas.


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## sydboy007 (12 October 2013)

Vixs said:


> The other thing worth noting is that in a low interest rate environment a lot of people are better off contributing to super up until retirement age INSTEAD of paying off their mortgage ASAP. They aren't intentionally 'loading up' debt, but the breakeven point for where concessionally taxed earnings and growth in superannuation is going to outperform the guaranteed, tax free 'return' of paying extra of the mortgage is lower. Some people will be better off 'loading up on debt' and taking a lump sum to repay it.




Just brilliant.  Let them NG with debt to their eyeballs with an I/O loan, then maximise their concessionally taxed super contributions so doubling down on reducing their tax, then take that minimally taxed lump sum, get very creative with the spending and investing of it, and walk out with a part pension and all the associated goodies.

Not sure how much longer this system can work before there's just not enough money to do the basics anymore.


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## medicowallet (13 October 2013)

sydboy007 said:


> Not sure how much longer this system can work before there's just not enough money to do the basics anymore.




Oh I can tell you... until the "high income earners" decide it is not worth their time going to work anymore 

Until then, there are a lot of Levies or taxes that can be placed on them because sure as heck the greedy bastards don't pay enough tax or make enough sacrifices for their fellow man now do they..


MW

PS I was going to ask some high income friends tonight, but a couple are at work, a couple on call, and the rest asleep.  I will get back to the ASF community wrt their answers within the month.


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## sydboy007 (13 October 2013)

medicowallet said:


> Oh I can tell you... until the "high income earners" decide it is not worth their time going to work anymore
> 
> Until then, there are a lot of Levies or taxes that can be placed on them because sure as heck the greedy bastards don't pay enough tax or make enough sacrifices for their fellow man now do they..
> 
> ...




Right.  I suppose it depends what you classify as a high income earner?  

At 50K you beat 50% and at around 75% you're in the top 25%.

I thought super was mean to provide an income in retirement?  Obviously I'm wrong as it's now viewed as tax minimisation scheme where financial advisers are telling their clients to renovate the house and get more govt funded pension.

In 8-10 years there'll be 1 worker less per retiree than today.  The pension alone will be somewhere around $55B a year (overall assistance to the aged is already $51B out of a ~$370B budget)

Where does the money come from?  A worsening dependency ratio, higher levels of assistance to the aged, and none of the major political parties have thought it's something they need to start preparing for.  So far all their decisions seem to be making the situation worse by reducing taxes based on how old you are, just as the boomers really start to hit 60+.


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## Vixs (13 October 2013)

sydboy007 said:


> Just brilliant.  Let them NG with debt to their eyeballs with an I/O loan, then maximise their concessionally taxed super contributions so doubling down on reducing their tax, then take that minimally taxed lump sum, get very creative with the spending and investing of it, and walk out with a part pension and all the associated goodies.
> 
> Not sure how much longer this system can work before there's just not enough money to do the basics anymore.




I wasn't using that as an example of investment debt and property, though that was obviously not clear so I can see where you went with that.

I was talking about not making any more P&I repayments on the family home than required until concessional contributions to super has been utilised to their most effective point.

That was the idea for a rather conservative investor who should be on track to reach their goals.

Your example would be something I could see people doing, but with contribution caps so low the people that would be 'milking' the system like that just can't get enough money into super to do it.

There are a lot of inputs to consider in the 15-20 years before retirement.


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## Garpal Gumnut (13 October 2013)

I've looked at property in my SMSF and decided against it.

I would advise others to hasten slowly on property, it may be cheaper, much cheaper, in 18 months.

ASX is the place to be atm.

And a good way with divis to avoid government taking a cut.

gg


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## nulla nulla (14 October 2013)

Garpal Gumnut said:


> I've looked at property in my SMSF and decided against it.
> 
> I would advise others to hasten slowly on property, it may be cheaper, much cheaper, in 18 months.
> 
> ...




I agree with you GG. I think there will another financial fallout from the U.S house of cards in the next year or two and property prices will stumble. Property is a very illiquid form of investment. Can be great long term if you are young and have plenty of time but if demand slows, cashing out in a hurry without losing out can be a real problem.


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## 13ugs13unny (14 October 2013)

Garpal Gumnut said:


> I've looked at property in my SMSF and decided against it.
> 
> ASX is the place to be atm.
> 
> ...




Someone has seen the light. Agree 100% SMSF is mainly for retirement purposes, and needs to be as liquid as possible. If its held in bricks and mortar, you may not want to wait around for 5-10years for next property boom.


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## Hodgie (14 October 2013)

13ugs13unny said:


> Someone has seen the light. Agree 100% SMSF is mainly for retirement purposes, and needs to be as liquid as possible. If its held in bricks and mortar, you may not want to wait around for 5-10years for next property boom.




In SMSF like any super fund should be ONLY for retirement purposes.

I think it really depends how much is available within the SMSF, it may be appropriate to diversify into property as part of a larger portfolio.

I have an uncle that had the majority of his super funds on the market a few years back and lost a very significant portion of it during the GFC right before reaching retirement age. There are alot of things to consider with your retirement funds I think saying that having all your funds tied up in the asx as a blanket approach for everyone doesnt really work out.

Also alot of people will be waiting 5-10 years before they acess their super funds anyway.

I have other relatives nearing retirement which are looking at purchasing a property within their SMSF so that once they reach retirement they can sell off the family home and downsize into this other property for retirement.

It needs to be taken into account the fact that when you reach retirement age you may live for 20+ years so your investment timeframe may not nessisarily be a short one. A mix of liquid and illiquid assets may be appropriate depending on how much is in there.


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## FxTrader (14 October 2013)

Hodgie said:


> I have other relatives nearing retirement which are looking at purchasing a property within their SMSF so that once they reach retirement they can sell off the family home and downsize into this other property for retirement.



This may not be an option.  My understanding of property acquistion in an SMSF is as follows...

_*You can only buy property through your SMSF if you comply with the rules. The property...

    Must meet the 'sole purpose test' of solely providing retirement benefits to fund members
    Must not be acquired from a related party of a member
    Must not be lived in by a fund member or any fund members' related parties
    Must not be rented by a fund member or any fund members' related parties*_

When your relatives retire they can sell the property with no capital gains tax attached but moving into their SMSF owned home is a compliance issue.

Other disadvantages include...

- If you borrow to buy property through your super and you’re negatively geared, the tax offset only applies to    other income earned within the fund – not your regular income.
- You can’t renovate a property purchased through a SMSF while it is still under a loan.
- There are thousands of dollars in set-up costs and there are sometimes higher fees involved in getting a loan through your SMSF.
-  Buying property through a SMSF is generally only suitable for funds with $200,000 in combined funds.

Even so, current evidence suggests SMSF trustees are piling into property at a faster pace than ever.


----------



## Hodgie (14 October 2013)

FxTrader said:


> This may not be an option.  My understanding of property acquistion in an SMSF is as follows...
> 
> _*You can only buy property through your SMSF if you comply with the rules. The property...
> 
> ...




As to the moving into the house, they can convert to pension phase and sell the property (to themselves) and pay no tax at all. There are also other options which have minimal tax implications being inside super and owning over 12 months. but yes they would need to remove the property from the SMSF once they reach retirement age. Although they are so close to retirement i dont think its likely that capital gains will be much of an issue anyway.

Im not sure exactly what the LVR of the purchase will be but I know that they do have quite a large nest egg as they both are full time employed (for 40+ years) and 1 of them is on the top marginal tax rate from the income they earn. The recommended 200k will not be an issue. There are tax benefits associated with concessional contributions. Also i beleive they are looking at a smaller place as it will be just for the 2 of them so i dont think the borrowings will be massive. but yes the loss of full tax benefits on interest needs to be taken into account as well as large fees.

I do beleive that the availability of purchasing property through the SMSF may be causing a price bubble if thats what your getting at with the last comment. I think thats another whole debate though. With the possibility of raising compulsary contributions up to 12%, placing more funds into this space it may continue with years to come.

The  point i was raising with my provious post is the fact that there is not a 1 suit fits all approach when it comes to retirement. For some people the risk reward trade off isnt there by having a 100% allocation to shares, if another GFC occured alot of people invested heavily into shares have to go back to work. someone may only need to earn 5% p.a. on their retirement funds to live comfortably so why do they need to risk it all? Im not saying this is my situation or im anywhere near retirement im just pointing out the fact that other asset classes apart from aussie shares can be very appropriate inside an SMSF as part of an overall portfolio construction. That is the one and only point i am raising. Property is more then just an investment it has other characteristics especially in retirement, if you plan to live in it for the rest of your life do you care about market price fluctuations as these will never be realised? (other then for what you leave behind)

I myself hold 100% allocation to shares both in and outside super.


----------



## 13ugs13unny (14 October 2013)

Hodgie said:


> In SMSF like any super fund should be ONLY for retirement purposes.
> 
> It needs to be taken into account the fact that when you reach retirement age you may live for 20+ years so your investment time frame may not necessarily be a short one. A mix of liquid and illiquid assets may be appropriate depending on how much is in there.




Depends if you can imagine yourself dealing with tenants, real-estate agents, building repairs/issues etc well into your retirement, I think your right if your SMSF is large, but at the end of the day it boils down to generate clean income without any hassle, such as portfolios with outright dividend payments with blue chips and proven stayers.

e.g in 2010 the dividend interim for anz was 52cents 3 years later its 73. about same margins for wbc,nab, - cba interim for the same time period increased by 80 cents.  with all this cheap money being lent out ..once tapering starts these bank shares will increase as banks make larger profits from these loans as well and then house prices will taper & cool with higher rates- happens all the time, saw it in the eighties before the 1987 crash, nineties before the dot com crash, then 2007-8 gfc. Now the borrowing cycle has started again because the RBA has finally coerced the spooked 2007-8 post GFC herd to come to the money trough for a drink. Good news for retirees not so good for the herd when it will get sheered once its grown some wool.

IMHO. its an obvious crystal ball. I'm more inclined to think retirees would prefer the cash without the hassle.


----------



## Julia (14 October 2013)

13ugs13unny said:


> Depends if you can imagine yourself dealing with tenants, real-estate agents, building repairs/issues etc well into your retirement, I think your right if your SMSF is large, but at the end of the day it boils down to generate clean income without any hassle, such as portfolios with outright dividend payments with blue chips and proven stayers.
> 
> e.g in 2010 the dividend interim for anz was 52cents 3 years later its 73. about same margins for wbc,nab, - cba interim for the same time period increased by 80 cents.  with all this cheap money being lent out ..once tapering starts these bank shares will increase as banks make larger profits from these loans as well and then house prices will taper & cool with higher rates- happens all the time, saw it in the eighties before the 1987 crash, nineties before the dot com crash, then 2007-8 gfc. Now the borrowing cycle has started again because the RBA has finally coerced the spooked 2007-8 post GFC herd to come to the money trough for a drink. Good news for retirees not so good for the herd when it will get sheered once its grown some wool.
> 
> IMHO. its an obvious crystal ball. I'm more inclined to think retirees would prefer the cash without the hassle.



+100.  I considered an IP in my SMSF - for about a minute and a half, for all the reasons you list above.  Yields are pathetic and no guarantee of capital gain.  And just the thought of some tenant ringing at 2am with a plumbing problem would be the last thing I'd want. 

 I think too many people are getting sucked into buying property at present just because of the low interest rates, often not even stopping to consider the basic arithmetic.  There is an astonishing level of the belief "property always goes up and is always a good, solid investment."


----------



## Hodgie (14 October 2013)

13ugs13unny said:


> Depends if you can imagine yourself dealing with tenants, real-estate agents, building repairs/issues etc well into your retirement, I think your right if your SMSF is large, but at the end of the day it boils down to generate clean income without any hassle, such as portfolios with outright dividend payments with blue chips and proven stayers.
> 
> e.g in 2010 the dividend interim for anz was 52cents 3 years later its 73. about same margins for wbc,nab, - cba interim for the same time period increased by 80 cents.  with all this cheap money being lent out ..once tapering starts these bank shares will increase as banks make larger profits from these loans as well and then house prices will taper & cool with higher rates- happens all the time, saw it in the eighties before the 1987 crash, nineties before the dot com crash, then 2007-8 gfc. Now the borrowing cycle has started again because the RBA has finally coerced the spooked 2007-8 post GFC herd to come to the money trough for a drink. Good news for retirees not so good for the herd when it will get sheered once its grown some wool.
> 
> IMHO. its an obvious crystal ball. I'm more inclined to think retirees would prefer the cash without the hassle.




Yeah I agree, I would not even consider a property purchase inside SMSF if the balance was not substantial. I wouldnt even bother with starting up an SMSF with a low balance for similar reasons (high fixed costs and the hastle). I guess one advantage of the SMSF is the fact that you can combine your retirement funds to reduce duplicate fees and an overall higher balance.

The Tennant and maintanance issue would only be short term for someone who intends to move into the house once they are able and eligible to take it out of the SMSF.

Im not going to agree or disagree with you on those bank shares discussed above as I was talking about the asset class itself rather than individual stock selection which is another whole debate but the type of stocks you invest in within your SMSF may be more conservate then what you would do otherwise I think thats common. In financial planning a planner would have to do a separate risk profile for someone acting as the trustee of an SMSF as well as them acting on behalf of themselves as an individual for this exact reason.


----------



## FxTrader (14 October 2013)

Hodgie said:


> As to the moving into the house, they can convert to pension phase and sell the property (to themselves) and pay no tax at all.



I would argue that stamp duty is a tax.  If the assessed value of their investment property (potential retirement home) is say $700k, that's ~$40k including fees in VIC - hardly a trivial sum for most retirees.  Though there is a one-off concession for pensioners who hold a qualifing concession card.  If they don't they would have paid stamp duty twice on the same property if they chose to acquire it from their SMSF.



> I do beleive that the availability of purchasing property through the SMSF may be causing a price bubble if thats what your getting at with the last comment. I think thats another whole debate though.



Certainly a debate within the context of this thread.  With investors now comprising over 40% of home loan origination, SMSF trustees are playing their part in proping up the market.


----------



## Hodgie (14 October 2013)

FxTrader said:


> I would argue that stamp duty is a tax.  If the assessed value of their investment property (potential retirement home) is say $700k, that's ~$40k including fees in VIC - hardly a trivial sum for most retirees.  Though there is a one-off concession for pensioners who hold a qualifing concession card.  If they don't they would have paid stamp duty twice on the same property if they chose to acquire it from their SMSF.
> 
> 
> Certainly a debate within the context of this thread.  With investors now comprising over 40% of home loan origination, SMSF trustees are playing their part in proping up the market.




Yeah I agree stamp duty certainly should be factored in to any property investment decision. Something that cannot be ignored.

Well if the price bubble topic falls within the context of this thread fair enough. Although I do not disagree with you on this one so someone else will have to debate for the other side of that argument.  

Also as I said earlier with the possibility of compulsary super contributions moving up to 12% could lead to even more funding inside this space so is there a chance this bubble will expand?

I have no intention of being a property owner in the current market so it doesnt bother me either way. Just something other people may be considering.


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## sydboy007 (14 October 2013)

Hodgie said:


> Yeah I agree, I would not even consider a property purchase inside SMSF if the balance was not substantial. I wouldnt even bother with starting up an SMSF with a low balance for similar reasons (high fixed costs and the hastle). I guess one advantage of the SMSF is the fact that you can combine your retirement funds to reduce duplicate fees and an overall higher balance.




I used to believe that the costs of running an SMSF were high, but they don't have to be.

the budge SMSF administrators like esuperfund have a fixed annual that covers them doing your audit and associated admin work.

I had about $146K when I set up my SMSF with esuperfund.  The first year audit is free, so all i was up for is to set up a company since I'm a single trustee which was $465.

From the following years I pay a $44 fee to ASIC, $699 to esuperfund, and an ATO fee of $2XX.  Basically I should have a relatively fixed cost of approx $1000 pa.  No more fees based on the size of my asset base.

I like the control, and have always had a financial interest so being involved with my super is not a chore.


----------



## Hodgie (14 October 2013)

sydboy007 said:


> I used to believe that the costs of running an SMSF were high, but they don't have to be.
> 
> the budge SMSF administrators like esuperfund have a fixed annual that covers them doing your audit and associated admin work.
> 
> ...




Fair point, that is quite cheap indeed. Cheaper then I would have thought. That brings to question why the recommended amount is $200,000+ for an SMSF. I would pay higher then that with my fund as a percentage of my balance and my investment options are much more limited.


----------



## 13ugs13unny (14 October 2013)

Hodgie said:


> Yeah I agree stamp duty certainly should be factored in to any property investment decision. Something that cannot be ignored.
> 
> Well if the price bubble topic falls within the context of this thread fair enough. Although I do not disagree with you on this one so someone else will have to debate for the other side of that argument.
> 
> ...




Same here. I just don't get moving SMSF's into property. As per ato rules you can't directly benefit from super fund real-estate prior retirement, ultimately the capital gains would be far more tax if your intentions were to sell it - than tax free super after 60 years of age? Unless you passionately love that much that its bricks & mortar purchase to become your end of days coffin where mobility starts to decline, prior real coffin another 10-20k which in that case doesn't matter - or does it? Maybe the final conveyor belt ride to the furnace to save a few bucks is your cup of tea, but hey what are super-funds for? Tongue in cheek, to hell with it buy that 99 year lease at your local cemetery and take property purchasing to the grave!!

I think those investing their super into property just might be shooting themselves in the foot. IMHO your better off private borrowing outside your super if you want to go risk into property & leaving SMSF alone so that if you 'fall over', your super wont fall over with you, and if your property risk purchase is funded outside your super and is a success by the time you retire and want to cash in you can have your cake as well - if not rents will likely cover it for you anyway.

therefore unlikely bubble to be had here and its just those that think emotionally and have a passion for real estate, nothing wrong with that either.

its just an opinion, best seek professional advice.


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## Julia (14 October 2013)

Hodgie said:


> Fair point, that is quite cheap indeed. Cheaper then I would have thought. That brings to question why the recommended amount is $200,000+ for an SMSF. I would pay higher then that with my fund as a percentage of my balance and my investment options are much more limited.



I'm just curious as to why you're prepared to pay a% of your balance as a fee?  Don't you think it would be more reasonable to pay for the amount of work involved?
eg if you have $3M in the fund, yet it's all in a few term deposits, how can anyone justify charging for tax return and audit on a percentage of assets basis?
Likewise if you only have around $500,000, yet do hundreds of trades p.a. that's obviously a lot more work, yet you're still being charged  a percentage of assets?

I've been with my current accountant for many years but still send him the outline of the year's activities and ask for a quote before the work goes ahead.  It's always reasonable and always on the basis of number of hours of work involved.  eg this current year it works out at around 0.25% of asset base.


----------



## Hodgie (15 October 2013)

Julia said:


> I'm just curious as to why you're prepared to pay a% of your balance as a fee?  Don't you think it would be more reasonable to pay for the amount of work involved?
> eg if you have $3M in the fund, yet it's all in a few term deposits, how can anyone justify charging for tax return and audit on a percentage of assets basis?
> Likewise if you only have around $500,000, yet do hundreds of trades p.a. that's obviously a lot more work, yet you're still being charged  a percentage of assets?
> 
> I've been with my current accountant for many years but still send him the outline of the year's activities and ask for a quote before the work goes ahead.  It's always reasonable and always on the basis of number of hours of work involved.  eg this current year it works out at around 0.25% of asset base.




I do agree that you should pay for the services you receive. I was merely comparing the fees paid in a percentage term for a comparison point.

Its funny the example which you used. I have witnessed a very similar situation which you have described there. A super balance in the millions of dollars range (an AXA super fund from memory) which had 80% allocated to fixed interest securities and 20% in cash. Their financial planner over a 3 year period took over 200k in fees from the super fund for managing the portfolio (not much work involved).

I completely understand where your coming from.


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## Vixs (15 October 2013)

SMSFs are not the best option for a lot of people (including many of the people that are currently trustees).

It's a lot of responsibility being a trustee - there's no APRA to fall back on and people to sue.


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## sydboy007 (16 October 2013)

I think this thread should be titled Superannuation, the ultimate cash cow for the Financial Services industry.

There are so many ticket clippers that add negative value charging a fee for doing sweet FA.

I saw a few investments I was interested in, then as you read through the prospectus you realise that those providing the investment can't loose.

Once bond based investment was looking to take around 1.7% at the start, then a management fee of around 1% each year, with a 17.X% performance fee for any excess return above the 10 Govt Bond rate.

So for basically doing their job they want extra money.  I see this time and time again in the financial industry where these organisations get paid for losing investors money, then expect extra money from us if by chance they make a decent profit.

If the stats are right and there's a 1.6T pool of super savings then the financial industry is probably milking 2% of that every year.  $32B which is close to the current funds required for the aged pension.  That amount is going to rise faster than pension outlays over the next 10 years, baring another GFC or other black swan event.


----------



## FxTrader (16 October 2013)

sydboy007 said:


> Once bond based investment was looking to take around 1.7% at the start, then a management fee of around 1% each year, with a 17.X% performance fee for any excess return above the 10 Govt Bond rate.



Such fees are common practice for all fund managers and not exclusive to the super industry.



> So for basically doing their job they want extra money.  I see this time and time again in the financial industry where these organisations get paid for losing investors money, then expect extra money from us if by chance they make a decent profit.



The financial services industry extracts performance bonuses as a ransom for performing better than some benchmark.  They cleverly exploit the unwillingness people to manage their own investments or improve their financial literacy.  The rising tide of SMSF is a bit uncomfortable for them since outperforming them is not that difficult as more and more people are discovering.



> If the stats are right and there's a 1.6T pool of super savings then the financial industry is probably milking 2% of that every year.  $32B which is close to the current funds required for the aged pension.  That amount is going to rise faster than pension outlays over the next 10 years, baring another GFC or other black swan event.



Being a fund manager is a great gig if you can land it.  I once did some IT contracting work for Telstra Super and it was quite revealing.  They actually outsourced funds management while the executives sat in plush offices earning big money for essentially just performing an administrative role.  Should have gone for a Finance degree instead of IT.  Fund managers and the finance industry generally are supreme financial parasites.


----------



## 13ugs13unny (16 October 2013)

sydboy007 said:


> I think this thread should be titled Superannuation, the ultimate cash cow for the Financial Services industry.




Don't hold back, its a scam to 'fee' the be-jess-us out of super, to govern control of super or SMSF in anyway which you want to put it. Government, CA's, CPA's, fund managers, fraudsters, ...you name it.

The audit brigade for SMSF is now marching in to swoop in for their fees.

And savings of more than 250k will be taxed in the near future.

Its getting to the point the best thing to do if you have a lot in super is to just leave the country permanently cash in your property as well and take it with you.

Its the only way to escape.


----------



## Judd (16 October 2013)

sydboy007 said:


> Snip....
> 
> If the stats are right and there's a 1.6T pool of super savings then the financial industry is probably milking 2% of that every year.  $32B which is close to the current funds required for the aged pension.  That amount is going to rise faster than pension outlays over the next 10 years, baring another GFC or other black swan event.




The latest figures I saw, based on 2012, was $18.6B which went to fund managers, etc.  And the real fun part is that when you get down to the nitty gritty, their buying/selling is more than likely to each other.

It is why the finance industry hate SMSFs.  As at the end of June 2012, the ATO estimated that SMSFs held 31% ($0.434T) of the $1.4T in super assets.  You bet the finance industry is salivating about getting that under its control.


----------



## Julia (16 October 2013)

sydboy007 said:


> I think this thread should be titled Superannuation, the ultimate cash cow for the Financial Services industry.
> 
> There are so many ticket clippers that add negative value charging a fee for doing sweet FA.



Hence the rise in SMSFs.



13ugs13unny said:


> The audit brigade for SMSF is now marching in to swoop in for their fees.



What fees?  My audit fee has hardly changed in ten years.



> And savings of more than 250k will be taxed in the near future.



More information on this?  What exactly are you saying will happen?



> Its getting to the point the best thing to do if you have a lot in super is to just leave the country permanently cash in your property as well and take it with you.



Seems somewhat extreme.  I'm still pretty happy with my SMSF situation.



Judd said:


> It is why the finance industry hate SMSFs.  As at the end of June 2012, the ATO estimated that SMSFs held 31% ($0.434T) of the $1.4T in super assets.  You bet the finance industry is salivating about getting that under its control.



Why do you think they have any reason to so salivate, Judd?  I don't see too many SMSF trustees relinquishing their original reason for DIY, i.e. to have control, and falling into the ever welcoming arms of a bunch of self serving 'advisers'.


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## Hodgie (16 October 2013)

Judd said:


> It is why the finance industry hate SMSFs.  As at the end of June 2012, the ATO estimated that SMSFs held 31% ($0.434T) of the $1.4T in super assets.  You bet the finance industry is salivating about getting that under its control.




It's actually quite common for financial advisors to recommend to their clients to start up an SMSF, with recent changes to legislation (FoFA) and the move to a fee for service based remuneration model instead of charging a commission on a super balance it is easier for an advisor to attempt to justify the fees they charge if they recommend to setup an SMSF as well as how to invest all the funds within the SMSF. It also opens them up to a much larger range of products to recommend. 

Many advisors work as an accountant as well as a financial planner. They take a fee based on the investment recommendations as well as the audit and compliance side of a SMSF.

They would already have a large portion that $0.434T under control.


----------



## 13ugs13unny (16 October 2013)

Hodgie said:


> It's actually quite common for financial advisors to recommend to their clients to start up an SMSF, with recent changes to legislation (FoFA) and the move to a fee for service based remuneration model instead of charging a commission on a super balance it is easier for an advisor to attempt to justify the fees they charge if they recommend to setup an SMSF as well as how to invest all the funds within the SMSF. It also opens them up to a much larger range of products to recommend.
> 
> Many advisors work as an accountant as well as a financial planner. They take a fee based on the investment recommendations as well as the audit and compliance side of a SMSF.
> 
> They would already have a large portion that $0.434T under control.




Its already happening. Usually accountant has an auditor for compliance and charges separately.

The accountant charges to establish the SMSF, then charges to administer the ACN company which is usually yourself as trustee of a trust. Now you also need to have your SMSF audited for compliance another charge for that.

Your accountant ensures the company operates within ASIC rules, and manages the ATO side of things as well as the compliance auditing.

The upside is if you don't like your accountant you can leave, and you don't have superfund managers taking a fee of your entire super amount. If you have half a brain you have more freedom to invest your super as you see fit, usually do better than fund mangers.

The downside is more regulation is costing more to have a SMSF. But its a lucrative business if your a CA firm. The other down side is as SMSF become a bigger "pie" the government is likely to want to eat more of it in the next 10-20 years.

Overall if you have more than 400k and have a half a brain its worth doing IMHO.


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## Vixs (16 October 2013)

sydboy007 said:


> I think this thread should be titled Superannuation, the ultimate cash cow for the Financial Services industry.
> 
> There are so many ticket clippers that add negative value charging a fee for doing sweet FA.
> 
> ...




Sounds like a pretty **** fund.

Domestic bond funds usually range from 0.25%-0.6% p.a. ICR. 1.7% is an embarassment to the joker that recommended it.

You don't need to pay a contribution fee. They're a joke, and rightly so aren't used by any adviser worth talking to anymore. What is common is a one off implementation fee for setting up accounts, arranging rollovers and getting the funds invested.

Performance fees are usually subject to a high water mark, meaning if your investment is underwater due to drawdown then they're not making anything. Other funds use the cash rate as a benchmark, which doesn't seem right in a strong market as they're taking performance fees on anything over the cash rate, however they take nothing at all when you don't get returns in excess of cash.

Not all fund managers and funds are the same, but if you look at what you can get when you talk to your local CBA branch planner or OnePath 'adviser' you won't find the cream of the crop. You get **** products with no ongoing advice.

As far as getting paid to do your job - yeah - I suppose fund managers do want that. How much work do you do for free? Hell in most businesses if you add value that contributes to a strong performance, you get a bonus!

The people that should have their money in quality funds are not people that should be running their own portfolios inside an SMSF. This forum is not a representation of the Australian population, it's a representation of the sub-set of us that care enough to learn how to do it ourselves.

As far as the financial services industry getting to much of the pie? When you take 0.5 - 1% in advice fees off a 7.5 - 9% return net of performance and management fees, the cumulative fees paid look pretty scary over 30 years. You know what looks worse? The money sitting in the bank for 30 years simply so the financially illiterate didn't pay any fees out of principle. Again, this forum is not a representation of the general population.


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## Vixs (16 October 2013)

We've shut down more SMSFs for new clients than recommended new ones this year.

Some blew up most of their retirement nest egg over 12 months before they realised they were in over their heads. They don't have the means to recover the money they lost at their age. We've even had 2 that set up SMSFs through their accountant, who provided no advice on how to invest, and the funds sat in cash for 3 years. The accountant collected the audit and tax return fees each year, but they never suggested maybe the client should do something with their money.


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## Julia (16 October 2013)

13ugs13unny said:


> Its already happening. Usually accountant has an auditor for compliance and charges separately.
> 
> The accountant charges to establish the SMSF, then charges to administer the ACN company which is usually yourself as trustee of a trust. Now you also need to have your SMSF audited for compliance another charge for that.
> 
> ...



None of the above seems to address my earlier questions to you, viz


> Originally Posted by 13ugs13unny
> The audit brigade for SMSF is now marching in to swoop in for their fees.



*What fees? My audit fee has hardly changed in ten years.
*


> ( 13ugs13unny])]And savings of more than 250k will be taxed in the near future.



*More information on this? What exactly are you saying will happen?
*



> ( 13ugs13unny)Its getting to the point the best thing to do if you have a lot in super is to just leave the country permanently cash in your property as well and take it with you.




and rather seems to contradict your statement here:


> Overall if you have more than 400k and have a half a brain its worth doing IMHO.






Vixs said:


> We've shut down more SMSFs for new clients than recommended new ones this year.
> 
> Some blew up most of their retirement nest egg over 12 months before they realised they were in over their heads. They don't have the means to recover the money they lost at their age. We've even had 2 that set up SMSFs through their accountant, who provided no advice on how to invest, and the funds sat in cash for 3 years. The accountant collected the audit and tax return fees each year, but they never suggested maybe the client should do something with their money.



Interesting, Vixs, though I'm not too surprised.   Not sure I'd be blaming the accountant entirely, however, unless he was also employed to act as a financial adviser.  I have the highest regard for my accountant, but wouldn't be asking him for actual investment advice.


----------



## 13ugs13unny (16 October 2013)

Julia said:


> None of the above seems to address my earlier questions to you, viz
> 
> *What fees? My audit fee has hardly changed in ten years.
> *
> ...




I thought new levy on savings was a done deal 1 jan 2016, see link below even if SMSF your not exempt if you have cash savings, let me know if this isn't the case anymore.

http://www.heraldsun.com.au/busines...t-of-savings-tax/story-fni0dcne-1226689773598


*What fees? My audit fee has hardly changed in ten years.
*

oh well your lucky to have a lenient accountant? Perhaps you have a simple SMSF everyone is in a different situation, I have diversified my SMSF and I suppose it costs more for a compliance audit and has gone up to about 800 p/a to audit. Seems the ATO compliance has tightened somewhat last year or two.

Still think SMSF is worth it, but I can see the SMSF pie being plundered by the government indirectly over the next 10 years or so because they have run out of assets to sell.


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## Julia (16 October 2013)

13ugs13unny said:


> I thought new levy on savings was a done deal 1 jan 2016, see link below even if SMSF your not exempt if you have cash savings, let me know if this isn't the case anymore.
> 
> http://www.heraldsun.com.au/busines...t-of-savings-tax/story-fni0dcne-1226689773598



Do you have a link which shows this is actually happening?   AFAIK it was another of Labor's thought bubbles, released to the media in a 'testing the waters' exercise.  It was prior to the election, and I'd be surprised if it's been confirmed by the new government.   It was certainly slammed by the Bankers Assn and others.
 Since you've raised it as fact, perhaps you'd be good enough to look into it and tell us if it's reality or not.

*What fees? My audit fee has hardly changed in ten years.
*



> oh well your lucky to have a lenient accountant?



No, I'm not lucky.  I did considerable shopping around and had two dud accountants before I found someone with integrity.  He outsources the audit, and my earlier comment stands.  I wouldn't be paying $800 just for the audit.  Maybe shop around a bit.



> Perhaps you have a simple SMSF everyone is in a different situation, I have diversified my SMSF and I suppose it costs more for a compliance audit and has gone up to about 800 p/a to audit. Seems the ATO compliance has tightened somewhat last year or two.



The ASIC annual levy has gone up a little, but hardly enough to get hysterical about.



> Still think SMSF is worth it, but I can see the SMSF pie being plundered by the government indirectly over the next 10 years or so because they have run out of assets to sell.



So just an opinion on your part.  Fair enough.  Somewhat less impassioned than your earlier comment that the only way to survive was to cash in everything and leave the country!!


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## sydboy007 (12 December 2013)

http://www.actu.org.au/Images/Dynamic/attachments/8092/ACTU Economic Bulletin - December 2013.pdf

*Can I just say WOW that the top 10% of income earners get more super tax breaks than the bottom 60%*

_The present system for taxing superannuation contributions is blatantly inequitable. An individual with an income of $60 000 faces a marginal tax rate of 32.5% (not including the Medicare Levy), and pays 15% on super contributions. This is a concession of 17.5 percentage points. A high-income earner on $180 000 or more receives a concession of 30 points.

The system will be rendered more inequitable as a result of the Government’s abolition of the Low Income Superannuation Contribution and rejection of the plan to reduce the super tax concession for individuals with annual incomes greater than $300 000. The LISC effectively refunds the tax paid on super contributions by individuals with incomes below $37 000. The abolition of this measure will mean that an estimated 3.6 million low income earners will pay 15% tax on their super contributions, while facing a marginal tax rate on ordinary income of 0% or 19%.

Treasury analysis shows that high income earners benefit far more than low-income earners from superannuation tax concessions (including those associated with contributions, earnings, and withdrawals).9 It shows that the top 10% of income earners received 38.2% of superannuation tax concessions in 2009-10. This is more than the share of the bottom 60%, combined. The bottom 10% received a negative share of the total, as they paid more on their super than on other income. The analysis also shows that the support given to high income earners in the form of superannuation tax concessions exceeds that enjoyed by lower income earners in the form of the age pension. The Treasury found that “the top 1 per cent of income earners received the most combined support,” taking both the age pension and super concessions into account.

Tax expenditures associated with super are estimated to be worth $31.8 billion in 2012-13, rising to $44.8 billion by 2015-16.10 Unions support the concessional taxation of superannuation, but these concessions must be sustainable and equitably distributed. This is not currently the case. The Commission must recommend reform to the size and distribution of these tax expenditures if it is to seriously grapple with the medium to long-term budget pressures facing the Commonwealth._


----------



## Bill M (12 December 2013)

sydboy007 said:


> http://www.actu.org.au/Images/Dynamic/attachments/8092/ACTU Economic Bulletin - December 2013.pdf
> 
> *Can I just say WOW that the top 10% of income earners get more super tax breaks than the bottom 60%*
> 
> ...




I got to say sydboy I just can not believe any government would axe the LISC. This is just ridiculous, the poorest of the poor gets nothing. Shame shame shame.............. shakes me head...:headshake


----------



## sydboy007 (12 December 2013)

Bill M said:


> I got to say sydboy I just can not believe any government would axe the LISC. This is just ridiculous, the poorest of the poor gets nothing. Shame shame shame.............. shakes me head...:headshake




Yes.  A policy that provides the greatest assistance to those who least need it, on top of making the pot of money at the end tax free with minimal consequences for gaining access to a publicly funded pension and the ability to spend it as fast as you like with minimal consequences.

How the current Govt can say axing the LISC is in any way good policy I don't know.  We have a super system that costs an exorbitant amount and does little to reduce the cost of aged pension.  How many more budget deficits before they're forced to review their policy stance???


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## sydboy007 (23 December 2013)

Looks like there might be some interesting developments in super land next year, but I'd expect the Government to neuter any positive outcomes.

http://www.smh.com.au/national/supe...t-deals-with-parent-banks-20131222-2zt1c.html

_One of the cash funds is producing a return of 1.38 per cent, well below the Reserve Bank cash rate of 2.5 per cent and the inflation rate of 2.2 per cent.

Australian Prudential Regulatory Authority research into fees, related parties and concentrated markets in the superannuation industry found several concerns.

The study, which examined more than 100 funds, highlighted the conflicts of interest inherent in the board composition and ownership structure of many for-profit superannuation funds, particularly when parent companies are aligned to the funds' material service providers.

For example, APRA found some *trustees of for-profit funds* using related-party administrators were paying significantly higher administration fees, *''effectively doubling the median member's cost load''* - that is, paying twice as much.

APRA noted ''reconciling this finding with the superannuation trustee's fiduciary duty to fund members will bear further investigation''. *It found fees paid by trustees of not-for-profit funds to related parties were ''not significantly different than those to independent service providers''.*
_

Seems for all the angst against Industry funds they are not ripping off the fund members in the ways the retail funds are.

Considering how the Govt is considering to pretty much remove any benefits from the new FOFA legislation, I don't think much will come to pass, though hopefully APRA might force some change through.


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## k.smith (15 May 2014)

sydboy007 said:


> http://www.actu.org.au/Images/Dynamic/attachments/8092/ACTU Economic Bulletin - December 2013.pdf
> 
> *Can I just say WOW that the top 10% of income earners get more super tax breaks than the bottom 60%*
> 
> ...




http://www.crikey.com.au/2014/05/14...d-on-low-income-earners/?wpmp_switcher=mobile

''.....And last night’s budget also revealed the latest Treasury projections for the cost of superannuation tax concessions, which in total will exceed $50 billion in 2017-18. That’s not the amount of revenue that could be obtained from removing those concessions, but Treasury estimates in its annual Tax Expenditures Statement suggest 90-95% of that foregone revenue could be obtained through their removal.

The bulk of that $50 billion in 2017-18 will flow to high income earners ”” and the higher your income, the more you will get. The Australia Institute showed in 2009 that the top 5% of income earners obtain 37% of all superannuation tax concessions. The multibillion-dollar rise in superannuation tax concessions ”” which cost “just” $30 billion this financial year ”” is thus primarily a multibillion-dollar handout to high-income earners, primarily those above $180,000 a year. In fact, the cost of the deficit levy to people on those incomes and above ”” just over $3 billion ”” will be entirely swamped by the increase in tax concessions on superannuation from this year ($30 billion) to next alone ($36 billion).

None of those concessions were touched last night by the government; Treasurer Joe Hockey’s only move on superannuation has been to abandon a Labor plan to tax super earnings over $100,000 per annum.....''

Superannuation, the ultimate cash cow?


----------



## medicowallet (15 May 2014)

sydboy007 said:


> Yes.  A policy that provides the greatest assistance to those who least need it, on top of making the pot of money at the end tax free with minimal consequences for gaining access to a publicly funded pension and the ability to spend it as fast as you like with minimal consequences.
> 
> How the current Govt can say axing the LISC is in any way good policy I don't know.  We have a super system that costs an exorbitant amount and does little to reduce the cost of aged pension.  How many more budget deficits before they're forced to review their policy stance???




Yes, shame on the people who earn $180000 trying to minimise their own taxation by sacrificing to super WHICH IS TAXED EVERY YEAR AT A COMPOUNDING RATE, also funding their retirement so as to not be a burden on the following generations, whilst paying for an awful lot of things along the way, and often sacrificing their time and ability to experience life events to achieve their financial goals.

And what they can sacrifice (as it is taxed) is STILL taxed much higher than the effective marginal tax rate of lower income earners after government assistance.

shame shame shame.


I have no problems paying tax to support those who are in need, but to be insulted as they make an assumption that I get an unfair tax benefit by sacrificing to super (which as before is capped) is plain annoying.  It shows a poor understanding of where net income tax revenue (after govt assistance) comes from

MW


----------



## Julia (15 May 2014)

What seems to have gone without observation is the change to eligibility of the Commonwealth Seniors Health Card, which has provided cheaper PBS medicines etc to self funded retirees.

 Previously income from super was not included in the income test for this card.  From 1 January 2015 it will be included.  This will cut many people out of any acknowledgment of their efforts in becoming self funded in retirement.

Once again, if you don't make the effort to provide for yourself in retirement, then you're entitled to full taxpayer support.  But if you've exchanged holidays, designer clothes etc for savings and investment, then forget about any notion of this being rewarded.

Meantime, someone living in a $2 million house with less actual dollars invested is magically entitled to full taxpayer support.


----------



## sptrawler (15 May 2014)

The super system is a bit scary for people who have placed a lot of their own money into it. One hopes that common decency prevails and the tax free component stays that way.

I posted this link on another thread, it is probably more appropriate here. It's interesting reading.

http://www.voiceofthepeoplelobbygroup.com/2010/august/truth_about_pensions.htm

The more things change, the more they stay the same.


----------



## sptrawler (16 May 2014)

Here is an example of what seems to be misleading information, I always thought Pacoe knew his stuff.

http://www.smh.com.au/business/comm...-age-of-super-entitlement-20140516-38ece.html

This seems a bit eroneous.


While various bits of middle and lower class entitlement have had their indexing fiddled with, the good times keep rolling for those with the spare cash to whack in a tax haven.

*From July 1, those over 49 will be able to contribute $35,000 at a concessional tax rate and $180,000 of after-tax money.

Using the pull-forward option, that means a couple with some spare cash could plonk more than $1 million in their super tax haven and never have to pay tax on what the money earns or what the super fund pays subsequently pays out to them*

Well I would have thought if the couple in question were 50years old, the earnings on the funds would be taxed at 15% as it is still in the accumulation phase.
When the fund is converted to pension phase, if it is done at 55 years old the earning component is taxable and the initial deposit i.e the original $1million is tax free.
If it is accessed after 60 years old it is tax free.

Now let's look at the pension side, if the couple want an absolutely secure investment and chose a term deposit.

They get around 3.8%, which is $38,000/annum on $1million. 
They could have spent the $1million, rather put it in super, and recieved $32,000 government pension plus all the perks.

Maybe Michael thinks it is unfair to get a tax free pension on money you've saved, but it's ok to get a tax free government pension if you spend it. Or maybe I'm missing something.

Craft, Junior or McLovin will be able to put me right.


----------



## medicowallet (17 May 2014)

Exactly

Still get taxed more than average joe on the $35k ish that you put in each year.

Govnuts still gets 15% on the income for however many years you have it going.


But people without enterprise see it as a 2/3 reduction in tax payable, because they need this extra tax to fund the lifestyle that high income earner tax has allowed them to think they can achieve by themselves (and by this I mostly mean middle class welfare, where most have newish cars, iphones, large TVs, large 4 bedroom houses for themselves and their 2 children etc etc)

I aint got the time to do a calculation to post, but the alternative is for me to NOT salary sacrifice into super, and then instead, go out and massively negatively gear property, which the government subsidises far more than the super, increases house prices for others etc.

Don't hear much about that though, because a lot of people have their money in this unproductive pie, and think that it drives prosperity, unfortunately the "middle class getting rich as the poor get poorer" is totally acceptable, and desirable in our society.

MW


----------



## Judd (17 May 2014)

Julia said:


> What seems to have gone without observation is the change to eligibility of the Commonwealth Seniors Health Card, which has provided cheaper PBS medicines etc to self funded retirees.
> 
> Previously income from super was not included in the income test for this card.  From 1 January 2015 it will be included.  This will cut many people out of any acknowledgment of their efforts in becoming self funded in retirement.
> 
> ...




I have read elsewhere that it will also apply to the Seniors Card which I understand provides various discounts for those 60 yo and over.

I assume the argument used in all of this is that the tax-free status of account-based pensions for those over 60 is sufficient recognition in itself.

We shall see.  Still has to be passed into legislation.


----------



## sptrawler (17 May 2014)

Yes Medic, it makes me laugh when they say high income earners get a bigger tax break on their super contributions.

A taxpayer on $180,000 pays $54,000 tax

A taxpayer on $50,000 effectively pays no tax.

How can you give the taxpayer on $50k more of a tax break? weird economics.

The taxpayer on $180,000 up untill this year could put $25,000 in his super, thereby paying how much less tax?

Ball park $7 - 8k wow, for locking away $35k of their money that will no doubt stop them getting the pension.
Which the low income earner will get.
Yes let's take all the high income earners, all the fifo's out the back and give them a good flogging. How dare they aspire to earn high incomes, it should be stopped, tax them till they bleed.lol


----------



## Judd (17 May 2014)

Simply a link to a viewpoint on viewpoints on relative incomes.

http://mattcowgill.wordpress.com/2013/05/13/what-is-the-typical-australians-income-in-2013/


----------



## sptrawler (17 May 2014)

Judd said:


> Simply a link to a viewpoint on viewpoints on relative incomes.
> 
> http://mattcowgill.wordpress.com/2013/05/13/what-is-the-typical-australians-income-in-2013/




That's an interesting read Judd, bit outdated but a good write up.

I guess what it shows is the majority of taxpayers are on less than approx $100,000, and a very small amount of taxpayers are on more than $180,000.
That is what makes it difficult for governments, it is easier to take $1 of 10million people, than $10million of 100 people.
When you add the welfare recipients to the low to middle income earners, it becomes a lopsided equation.
I certainly wouldn't like the job of balancing it out, while keeping the economy and consumer confidence stable.


----------



## Julia (17 May 2014)

Judd said:


> I have read elsewhere that it will also apply to the Seniors Card which I understand provides various discounts for those 60 yo and over.



I've looked into it fairly thoroughly, Judd, and found no suggestion anywhere that the Seniors Card is affected.
It has never been means tested and is purely age related.  It's also State based and the benefits offered vary State to State.  What is possible, I suppose, is if the States and the Feds don't sort out their grievances over schools and hospitals funding and the States are required to find more money themselves for this, such privileges as the Seniors Card might then have to go.  There would be a massive outcry, however, because everyone I know over, I think, 55 has one.



> We shall see.  Still has to be passed into legislation.



I wouldn't foresee any problems with all other parties agreeing to tighten up the criteria for what they suggest are wealthy/privileged/etc retirees.


----------



## craft (17 May 2014)

sptrawler said:


> Here is an example of what seems to be misleading information, I always thought Pacoe knew his stuff.
> 
> http://www.smh.com.au/business/comm...-age-of-super-entitlement-20140516-38ece.html
> 
> This seems a bit eroneous.





I would assume he’s talking about dropping the funds in the day before your 60th birthday. 

A couple could each utilise the pull forward of 3 x $180K non-concessional cap resulting in $1,080,000 instantly becoming tax free for future earnings on those funds.  Do a bit of planning and you can drop in another $180k each on 30th June prior to turning 60.

Additionally there is also the 35K Concessional cap if you have a business or working.  If circumstances are right then a couple can get in over $1.5M utilising the financial year just prior to the 60th birthday.

Given the tax differential and the fact you are not tying your money up for long you would be crazy to not utilise super planning around your 60th birthday if you have the cash available – *even if your super fund is already huge*. It’s a free kick in front of the goal.

My only comment on the right or wrong of it is that Super is a tax favoured structure for retirement. I think the Balance that can be held in there should be limited to a reasonable (whatever reasonable is) amount to fund retirement and not be an unlimited wealth shelter.  If you had a max balance in place then you could forget about the stupid caps because they are not very efficient and are always being messed around with.

edit

But there is no use in closing down just super as a wealth shelter if you don't close down all the others as well. Negative gearing, primary residence exemption, corporate structures/family trusts and on and on. To fix a leaky bucket you have to plug *all* the holes.


----------



## sptrawler (17 May 2014)

craft said:


> I would assume he’s talking about dropping the funds in the day before your 60th birthday.
> 
> A couple could each utilise the pull forward of 3 x $180K non-concessional cap resulting in $1,080,000 instantly becoming tax free for future earnings on those funds.  Do a bit of planning and you can drop in another $180k each on 30th June prior to turning 60.
> 
> ...




Thanks Craft, I thought by his statement he was talking about a couple turning 50 not 60.
I think your idea of a max is probably right.
Cheers.


----------



## medicowallet (17 May 2014)

craft said:


> But there is no use in closing down just super as a wealth shelter if you don't close down all the others as well. Negative gearing, primary residence exemption, corporate structures/family trusts and on and on. To fix a leaky bucket you have to plug *all* the holes.




And this is the part that the uneducated dont understand.  The "lucky rich" can just stop putting the cash into super which is guaranteed 15 percent tax ongoing and neg gear into property which costs the government money.

But that doesnt make sense to people because they dont understand that the "tax concessions" given to the greedy "rich" just result in the $30k being taxed less than it sould otherwise have been but still more than they pay... talk about a handout society

Mw


----------



## sptrawler (17 May 2014)

medicowallet said:


> And this is the part that the uneducated dont understand.  The "lucky rich" can just stop putting the cash into super which is guaranteed 15 percent tax ongoing and neg gear into property which costs the government money.
> 
> But that doesnt make sense to people because they dont understand that the "tax concessions" given to the greedy "rich" just result in the $30k being taxed less than it sould otherwise have been but still more than they pay... talk about a handout society
> 
> Mw




That goes hand in hand with what I said on the budget thread, changing taxing has a bigger and more random outcome, than reducing spending. 
It also requires handling in a much more comprehensive and hollistic manner, which the up comming white paper should give.


----------



## sptrawler (17 May 2014)

craft said:


> I would assume he’s talking about dropping the funds in the day before your 60th birthday.
> 
> .




On re reading the article Craft, I would rather have you as my financial adviser, than him.
I don't think a senior financial reporter for Fairfax, should write something that is financialy so misleading.
He is probably licenced to give financial advice, to put that in print is probably illegal.


----------



## k.smith (18 May 2014)

sptrawler said:


> Yes Medic, it makes me laugh when they say high income earners get a bigger tax break on their super contributions.
> 
> A taxpayer on $180,000 pays $54,000 tax
> 
> ...




A taxpayer on $50k pays around $7,797 

According to these rates....
https://www.ato.gov.au/Rates/Individual-income-tax-rates/


and the proposed new $35k
http://www.firststatesuper.com.au/FederalBudget2014 

Taxpayer A on $180k who places $35k into super could reduce his taxable income from $180k to $145k, and his tax from around $54.5k to around $41.5k. Add another $5,250 for the 15% contributions tax in his superfund, he  saves around $7,700.

Taxpayer B on $50k who places $35k into super could reduce his taxable income from $50k to $15k, and his tax from $7,797 to zero. Add $5,250 for the 15% contributions tax in his superfund, and he saves around $2772.


The national objective of Superannuation was designed to provide security for the population in their retirement years, and this objective is supported by all taxpayers collectively.

Should A gain a greater financial advantage to B when they have both placed the same amount into a national program which we all support  to improve security in retirement ?
How great an advantage?


----------



## sptrawler (18 May 2014)

k.smith said:


> A taxpayer on $50k pays around $7,797
> 
> According to these rates....
> https://www.ato.gov.au/Rates/Individual-income-tax-rates/?




What about low income tax breaks that those on $50k qualify for and those on $180k don't. What about medicare levy ect. I'm only going of something I read that stated there is no effective tax paid untill approx $50k, I would have to locate the article.




k.smith said:


> and the proposed new $35k
> http://www.firststatesuper.com.au/FederalBudget2014
> 
> Taxpayer A on $180k who places $35k into super could reduce his taxable income from $180k to $145k, and his tax from around $54.5k to around $41.5k. Add another $5,250 for the 15% contributions tax in his superfund, he  saves around $7,700.
> ...




Should those that chose to put no money in super gain a greater financial advantage by getting a tax free pension?

 The $35k is above and beyond the compulsory 9%, therefore it is out of the individuals own pocket, why should it be taxed at different rates? Because they can?

What if the contribution is from an individual on $180k, as opposed to married couple on $90k each?
The couple on $90k each pay combined tax of $42,494, the individual pays $54,000 tax that's $12,000 more than the couple why should they get a tax gain.

Why does A only pay  6.4c/$1 net in tax when B pays 33c/$1 net, why not have a flat tax rate?
It's very easy to pick something in isolation, however it should be looked upon as a contribution out of the individuals pocket.
By the way I'm not on $180k lol, just to put the record straight.


----------



## medicowallet (18 May 2014)

k.smith said:


> Taxpayer A on $180k who places $35k into super could reduce his taxable income from $180k to $145k, and his tax from around $54.5k to around $41.5k. Add another $5,250 for the 15% contributions tax in his superfund, he  saves around $7,700.
> 
> Taxpayer B on $50k who places $35k into super could reduce his taxable income from $50k to $15k, and his tax from $7,797 to zero. Add $5,250 for the 15% contributions tax in his superfund, and he saves around $2772.
> 
> ...




Let us say they both have 2 kids.

Taxpayer B gets full FT A. FT B, rent assistance, low income offset, healthcare care etc etc etc


A more realistic appraisal is that a $50000 person pays $0 net tax.

The $180k person who sacrifices the amount into super pays total of $47000 tax ( yes FORTY SEVEN THOUSAND per year)

PLUS the trailing 15% guaranteed on the sacrificed component's earnings until retirement...... NOT a bad income stream for the government.

So much for a fair taxation system where the people who work smarter and harder pay obscene amounts more tax than those who whine the most about the system.

MW


----------



## Judd (18 May 2014)

I am *devastated* completely *devastated * I tell you for those who have to pay the deficit tax:

http://www.brisbanetimes.com.au/fed...ring-an-age-of-inequality-20140516-38fc9.html



> 'What's so striking about how the budget affects people is that so much of the impact is felt by low and middle-income people, particularly families with kids,'' says Ben Phillips from the National Centre for Social and Economic Modelling (NATSEM). ''The heavy lifting to claw back the surplus is being done by the people in the most precarious position.''
> 
> While those families in the bottom quintile (or 20 per cent) of income earners see an average 5 per cent reduction in disposable incomes, those in the top quintile barely register a decline, down just 0.3 per cent.
> 
> Phillips, one of the country's leading modellers, did the analysis at the request of Labor but says his conclusions were reached independently. He says single-income families with two kids and earning between $50,000 and $100,000 could lose more than $6000 a year, once all the changes - and the abolition of the schoolkids bonus - are factored in. Sole parents working part-time or on benefits, stand to lose more than $3000 per year. For a young unemployed person who loses the Newstart allowance for six months, the forgone benefits are more than $7000. During that time, they will have no income and will have to rely on the charity of others.


----------



## sptrawler (18 May 2014)

Judd said:


> I am *devastated* completely *devastated * I tell you for those who have to pay the deficit tax:
> 
> http://www.brisbanetimes.com.au/fed...ring-an-age-of-inequality-20140516-38fc9.html




I haven't heard anyone complain about the increased tax levy and medicare levy on those earning $180k.

This thread is about superannuation.


----------



## medicowallet (18 May 2014)

​


Judd said:


> I am *devastated* completely *devastated * I tell you for those who have to pay the deficit tax:
> 
> http://www.brisbanetimes.com.au/fed...ring-an-age-of-inequality-20140516-38fc9.html




We have an excellent system that allows people to retrain / and have excellent opportunities in the system regarding employment that allows many to work overtime or get a second job.

Then again, incentivising people to forge their own path is more difficult than handing them other people's hard earned.

MW

I know this can sound callous, but so is the taxation treatment of people's income past 40 or 50 or 60 hours per week.


----------



## Judd (18 May 2014)

sptrawler said:


> I haven't heard anyone complain about the increased tax levy and medicare levy on those earning $180k.
> 
> This thread is about superannuation.




Damn.  Ever had one of those days when you wished you didn't cancel the appointment with the ophthalmologist?


----------



## Judd (18 May 2014)

medicowallet said:


> ​
> We have an excellent system that allows people to retrain / and have excellent opportunities in the system regarding employment that allows many to work overtime or get a second job.
> 
> Then again, incentivising people to forge their own path is more difficult than handing them other people's hard earned.
> ...




And are those hours worked by choice or by requirement.  As one of many I assume, I have in the past worked weekends and after hours without additional pay or time off in lieu.  Seems my tax stayed the same as did my pay.


----------



## sptrawler (18 May 2014)

medicowallet said:


> ​
> We have an excellent system that allows people to retrain / and have excellent opportunities in the system regarding employment that allows many to work overtime or get a second job.
> 
> Then again, incentivising people to forge their own path is more difficult than handing them other people's hard earned.
> ...




Yes medic, like the fifo's, 84hrs/week.lol    3weeks on 1 week off, 12hour shifts.


----------



## sydboy007 (18 May 2014)

medicowallet said:


> Yes, shame on the people who earn $180000 trying to minimise their own taxation by sacrificing to super WHICH IS TAXED EVERY YEAR AT A COMPOUNDING RATE, also funding their retirement so as to not be a burden on the following generations, whilst paying for an awful lot of things along the way, and often sacrificing their time and ability to experience life events to achieve their financial goals.
> 
> And what they can sacrifice (as it is taxed) is STILL taxed much higher than the effective marginal tax rate of lower income earners after government assistance.
> 
> ...




With super "costing" around the $30B mark, that cost growing 3 times faster than the aged pension, is the current "plan" we have to help ameliorate the aging population actually the cheapest way?

Factor in the roughly $20B a year in fees to run it and the current plan costs more than the aged pension,  and as things are currently going it will NEVER be cheaper than the aged pension.  I just think it's not sensible to have a policy to save future spending that will  always cost more than the savings.

So unless we can somehow get the Government to go the hard yards in explaining why we need to move  away from taxing hard work and savings and towards taxing land, consumption and use of finite resources, not much is going to change.

I personally think it's silly to "pay" people lots of money to save when they would generally do the savings themselves.

Conversely I find it repugnant to charge poor people to save within super.  Do you think it's fair to provide a bigger income in retirement to the already well off via tax expenditures?  Sadly that's what the current super system is doing?  

I'm not sure how we counteract the spend now rather than save for later mentality most people have, but maybe we have to slowly move towards the Singapore way where employers and people put in significantly more into their version of super - IIRC a combined 38%.  We'd also have to cut back on the tax breaks otherwise income and other taxes will have to remain ridiculously high.  The $30B cost of super is something like 20% of income tax receipts, so it's not an insignificant amount.  Personally I think we'd be better off with lower income taxes and super contributions fully taxed with a tax discount on earnings.  Tax free super pensions are also going to become less and less affordable unless you get the tax via a broadened GST.  I don't think a taxation cum welfare policy based on age rather than need is also particularly generationally fair.


----------



## sptrawler (18 May 2014)

sydboy007 said:


> With super "costing" around the $30B mark, that cost growing 3 times faster than the aged pension, is the current "plan" we have to help ameliorate the aging population actually the cheapest way?
> 
> Factor in the roughly $20B a year in fees to run it and the current plan costs more than the aged pension,  and as things are currently going it will NEVER be cheaper than the aged pension.  I just think it's not sensible to have a policy to save future spending that will  always cost more than the savings.
> 
> ...




One hopes the 'white paper' comes up with a fair and equitable system.

I heard in the budget, the income from super will be deemed and the pension reduced by 50c for every dollar above approx $7500. Can't see that encouraging people to put extra in, but should save some money,maybe.


----------



## sydboy007 (18 May 2014)

sptrawler said:


> One hopes the 'white paper' comes up with a fair and equitable system.
> 
> I heard in the budget, the income from super will be deemed and the pension reduced by 50c for every dollar above approx $7500. Can't see that encouraging people to put extra in, but should save some money,maybe.




Super is a tax effective way to save for retirement.

We have to stop talking like it's the ONLY WAY to save for retirement.

I somehow doubt the rentier class will be as likely to want cuts to the tax expenditures they receive as they are with cuts to welfare and other forms of Govt spending.  The problem is this Government is being too ideologically based in most of it's decisions.  They need to be far more inclusive on the reports they've commissioned.  They might actually get a better buy in from the public if they did.

I'm fully supportive of the direction Abbott wants to go, but so far I'm mostly against how he wants to get their.


----------



## sptrawler (18 May 2014)

sydboy007 said:


> Super is a tax effective way to save for retirement.
> 
> We have to stop talking like it's the ONLY WAY to save for retirement.
> 
> ...




The problem for the rentier class is, welfare is by far the biggest Government cost and it is growing the fastest , therefore it is obvious it will be reigned in first. Sad but not unexpected.


----------



## Julia (18 May 2014)

> I personally think it's silly to "pay" people lots of money to save when they would generally do the savings themselves.




If they did generally do the saving themselves, of course everyone would agree with you.
The problem is that most people don't.  Even with the compulsory super, most people don't even take a few minutes to work out whether that will, over their working lives, provide a sufficient income in retirement.

As is all too evident from current stats on super balances at retirement, it's on the whole massively inadequate.


----------



## sptrawler (18 May 2014)

Julia said:


> If they did generally do the saving themselves, of course everyone would agree with you.
> The problem is that most people don't.  Even with the compulsory super, most people don't even take a few minutes to work out whether that will, over their working lives, provide a sufficient income in retirement.
> 
> As is all too evident from current stats on super balances at retirement, it's on the whole massively inadequate.




Very true Julia, the super system was introduced because Australia had poor savings and exposed us to a huge fiscal shock in the 1987 stock market collapse.
Westpac, ANZ and NAB nearly collapsed, because all their funding was from overseas and they had huge exposure to highly geared Australian companies, eg Bond, Skase, Adelaide Steamships.
When the dust settled Hawke/Keating introduced the super gaurantee sytem to build an Australian savings fund, that the banks could access.

Even Keating, the other night on lateline, said it was a furphy that the super system was costing money. 
It is a smoke and mirrors B.S story that is beat up. 
If we didn't have super, there wouldn't be the money there to tax, it would have been spent.


----------



## sydboy007 (18 May 2014)

Julia said:


> If they did generally do the saving themselves, of course everyone would agree with you.
> The problem is that most people don't.  Even with the compulsory super, most people don't even take a few minutes to work out whether that will, over their working lives, provide a sufficient income in retirement.
> 
> As is all too evident from current stats on super balances at retirement, it's on the whole massively inadequate.




Then rather small tinkering around a system that doesn't achieve the aim of reducing the aged pension costs on the budget, that only benefits the top 10-15% of income earners and the minority below that who have the ability and sense to take advantage of the tax benefits.

So we have a very well known problem that the current 9.25% of super will not benefit the majority of people.  We've known this for over a decade.  Why haven't we done anything about it?  Why is it still not on the agenda?


----------



## sydboy007 (18 May 2014)

sptrawler said:


> If we didn't have super, there wouldn't be the money there to tax, it would have been spent.




Um, I somehow don't theink the 1.8T of money would have magically disappeared.  It would have just been standard income taxed at standard income rates.

I'm not saying don't have super, I am saying we should be moving towards a much higher level of saving, along with a a cheaper and simpler system.  We could look to Singapore and Norway and take some of the better parts of their systems and introduce them.  We don't have to reinvent the wheel.


----------



## sptrawler (18 May 2014)

sydboy007 said:


> Um, I somehow don't theink the 1.8T of money would have magically disappeared.  It would have just been standard income taxed at standard income rates..




We didn't have national savings pre super, we wouldn't have had national savings post super.
One just has to look at the debt binge since the 80's, if you think people would have put away money for their retirement, you're away with the fairy's.



sydboy007 said:


> I'm not saying don't have super, I am saying we should be moving towards a much higher level of saving, along with a a cheaper and simpler system.  We could look to Singapore and Norway and take some of the better parts of their systems and introduce them.  We don't have to reinvent the wheel.




And no doubt we will, at present the system is in its infancy, the problem is everyone wants a piece of it. Most people nearing retirement, that I know have $100 - 200k in super. 
Using Singapore is silly, it is a one party democracy, that owns most of the residential property. You pay for your pension, you buy your flat off the government.


----------



## sptrawler (18 May 2014)

sydboy007 said:


> Then rather small tinkering around a system that doesn't achieve the aim of reducing the aged pension costs on the budget, that only benefits the top 10-15% of income earners and the minority below that who have the ability and sense to take advantage of the tax benefits.
> 
> So we have a very well known problem that the current 9.25% of super will not benefit the majority of people.  We've known this for over a decade.  Why haven't we done anything about it?  Why is it still not on the agenda?




Another thing that could be done Syd, why not have all Lotto wins above say $250k have to be put in super, why should people be allowed to spend their wins and pick up a pension. They picked it up tax free

Also if you inherit money or property to a value greater than $250k it must be put into super, why should they be able to spend it and obtain a pension. They picked it up tax free.

Why are you only worried about people who put their own money in super spending it? They paid tax on it.

Just wondering


----------



## medicowallet (19 May 2014)

Sure sydboy. 

Instead of the costs of the 30k per year into super then hiw about the people just negatively gear a new inv property every few years or so it costs the gov and society even more


Gee next thing you will be calling for no tax deductions for people on gigh incomes because they benefit more from them as opposed to people who pay no net tax


When you eventually start earning a high income and are paying more tax then most earn, i am sure that each hour of overtime or each weekenf you dont spend with your children will be offset by the warm fuzzy feeling you get knowing that your middle income neighbour had a barbecue with their kids in their mcmansion subsidised by fta ftb etc.        It is mcw that is draining the tax take, not the tax take of high income earners

Mw


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## FxTrader (19 May 2014)

sydboy007 said:


> *Can I just say WOW that the top 10% of income earners get more super tax breaks than the bottom 60%*
> 
> _The present system for taxing superannuation contributions is blatantly inequitable. An individual with an income of $60 000 faces a marginal tax rate of 32.5% (not including the Medicare Levy), and pays 15% on super contributions. This is a concession of 17.5 percentage points. A high-income earner on $180 000 or more receives a concession of 30 points_



_
Quantifying this tax concession imbalance for those under 50 on the top marginal rate, the net benefit is $3,125.  For those over 50 it's $4,375.  This benefit is capped by maximum contribution limits of course.  IMO, the best way to deal with this inequity is to reduce or eliminate contributions tax for lower income earners (as with the LISC) - something the current government will not do because their core constituency are the wealthy (Abbott and co. clearly believe in trickle-down economics).  It should now be quite clear to low and middle income earners who voted for the Abbott government that they have been deceived.




			Treasury analysis shows that high income earners benefit far more than low-income earners from superannuation tax concessions (including those associated with contributions, earnings, and withdrawals).9 It shows that the top 10% of income earners received 38.2% of superannuation tax concessions in 2009-10. This is more than the share of the bottom 60%, combined. The bottom 10% received a negative share of the total, as they paid more on their super than on other income. The analysis also shows that the support given to high income earners in the form of superannuation tax concessions exceeds that enjoyed by lower income earners in the form of the age pension. The Treasury found that “the top 1 per cent of income earners received the most combined support,” taking both the age pension and super concessions into account.
		
Click to expand...


Not doubt this data is explained by the fact that the wealthy can afford to contribute the maximum amounts permitted.




			Tax expenditures associated with super are estimated to be worth $31.8 billion in 2012-13, rising to $44.8 billion by 2015-16.10 Unions support the concessional taxation of superannuation, but these concessions must be sustainable and equitably distributed. This is not currently the case. The Commission must recommend reform to the size and distribution of these tax expenditures if it is to seriously grapple with the medium to long-term budget pressures facing the Commonwealth.
		
Click to expand...


_There must be an incentive for people to save for retirement with more becoming self-funded.  The cost of funding pensions for an aging population into the future is more of a concern than the immediate cost of tax concessions for super.

There are other *uncapped* tax concessions that deserve more of your and the governments attention like those provided to property investors, capital gains tax reduction, dividend imputation etc.  It's tax advantaged vehicles such as this that are major contributors to wealth concentration in society.


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## sptrawler (19 May 2014)

FxTrader said:


> There are other *uncapped* tax concessions that deserve more of your and the governments attention like those provided to property investors, capital gains tax reduction, dividend imputation etc.  It's tax advantaged vehicles such as this that are major contributors to wealth concentration in society.




+1 hit the nail right on the head there fx trader.


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## medicowallet (19 May 2014)

sptrawler said:


> +1 hit the nail right on the head there fx trader.




yeah but it is not politically or socialistically cool to do so because only the people who contribute by far the most in tax do it.

Everyone else does negative gearing into property which is far more detrimental to society and government finances, although it is sooooo cool to rip people off behind the guise of being a battler.


MW


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## Bill M (20 May 2014)

Be warned everyone, particularly younger people, even 50 year olds take note. Joe Hockey has mentioned that they are going to look at changing *when* you will be able to access your super, it's on his mind and Abbott's mind. Be careful!

Go to the "retirement age" section at around the 56th minute. Watch the section with the guy in the red polo Shirt.

http://www.abc.net.au/tv/qanda/txt/s3989246.htm

If I was a younger person I would think long and hard before I put anything extra into super, you might not be able to get it until 70........


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## rryall (20 May 2014)

Bill M said:


> Be warned everyone, particularly younger people, even 50 year olds take note. Joe Hockey has mentioned that they are going to look at changing *when* you will be able to access your super, it's on his mind and Abbott's mind. Be careful!
> 
> Go to the "retirement age" section at around the 56th minute. Watch the section with the guy in the red polo Shirt.
> 
> ...




Yeah I have to admit this has me a little concerned. I'm a 30yo business owner making the maximum 25k contribution each year for tax purposes. I think he mentioned a 5 year differential between the pension age and accessing super which would mean 65 for accessing super down the track. I'll certainly be frustrated if I have a nest egg saved up which I can't access because the goal posts have been shifted after I have made my contributions. Long live the baby boomers..


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## McLovin (20 May 2014)

Bill M said:


> If I was a younger person I would think long and hard before I put anything extra into super, you might not be able to get it until 70........




I have hardly anything in super and intend to keep it that way. I've long thought this was on the cards, or at least the rules and tax around super would be changed well before I reach retirement.


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## pinkboy (20 May 2014)

rryall said:


> Yeah I have to admit this has me a little concerned. I'm a 30yo business owner making the maximum 25k contribution each year for tax purposes. I think he mentioned a 5 year differential between the pension age and accessing super which would mean 65 for accessing super down the track. I'll certainly be frustrated if I have a nest egg saved up which I can't access because the goal posts have been shifted after I have made my contributions. Long live the baby boomers..




Don't be so naÃ¯ve then.  There is a full 2 generations of governments between now and when you retire, so plenty of scope for Superannuation rules to change.  

Better off paying a little more tax and putting that extra cash to good use outside of Super, knowing full well there is much more flexibility of its use.

Ive been in business 9yrs now (Im 31), and have only been putting the bare minimum in for myself, and putting any extra cash back into the business, or paying the extra tax and putting it to good use.

Why let others control what you cant control for 40yrs?


pinkboy


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## CanOz (20 May 2014)

McLovin said:


> I have hardly anything in super and intend to keep it that way. I've long thought this was on the cards, or at least the rules and tax around super would be changed well before I reach retirement.




Agree, i have a little over 150k invested in emerging markets equities. Once i move back to Australia I'll buy property with whatever is left and sit on it until i need it, contributing the minimum to it until then.


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## sptrawler (20 May 2014)

The last few comments are exactly what I've been explaining to Sydboy, there will be a loss of confidence in the super sytem and people will not put extra in. 

Therefore more people will rely on a pension as they will have inadequate super.

This in turn will force the government to force a higher contribution which is an impost on business, or co contribution which is an impost on the wage earner.

People really need to be carefull what they wish for with super, it is a double edged sword.IMO

Tax it, hammer it as hard as you like, it's your money, you'll wear it, one way or another.


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## McLovin (20 May 2014)

sptrawler said:


> The last few comments are exactly what I've been explaining to Sydboy, there will be a loss of confidence in the super sytem and people will not put extra in.




I'd fall backwards off my chair if younger people <40 as a group were putting that much additional into super. There must be a report about that somewhere.

I'd rather keep my money outside of super where I'm free to do with it as I want.


----------



## sptrawler (20 May 2014)

McLovin said:


> I'd fall backwards off my chair if younger people <40 as a group were putting that much additional into super. There must be a report about that somewhere.
> 
> I'd rather keep my money outside of super where I'm free to do with it as I want.




Absolutely. 
I'm in my late 50's and it wasn't untill ill health in the last few years, that I sold investments to put money in super.
I've just commenced an account based pension and there is no way I would recomend younger people put extra in.
The ever increasing call to tax it harder, why would you lock your money away for 20 - 30 years. Far better off waiting till closer to your retirement and see what the tax treatment is.
The existing super sytem was never intended to be a complete pension replacement for the baby boomers, very few have much in there.


----------



## FxTrader (20 May 2014)

pinkboy said:


> Better off paying a little more tax and putting that extra cash to good use outside of Super, knowing full well there is much more flexibility of its use.



How much more flexibility do you want?  With SMSF I can invest in shares, property, CFDs, Options, Forex, Warrants, Collectibles etc. 



> Ive been in business 9yrs now (Im 31), and have only been putting the bare minimum in for myself, and putting any extra cash back into the business, or paying the extra tax and putting it to good use.



If your business provides a good return on your equity then this may make sense as long as this situation lasts.  However, paying the extra tax to make the same investments outside of super can easily add up to tens of thousands of dollars every year.  Super is easily the most tax advantaged structure currently available.  Don't believe me?  Talk to an accountant.



> Why let others control what you cant control for 40yrs?



Nobody has control over taxation concession policy except government.  There is sufficient motivation for government to maintain the tax advantaged status of super indefinitely.  The older the population becomes, the more government will need to incentivize self-funded retirement.

Unforutnately for Hockey and future governments, over 50s actually vote in this country and our numbers are growing rapidly.  We shall see the ballot box verdict on any proposal to change the super access age soon enough.


----------



## craft (20 May 2014)

rryall said:


> Yeah I have to admit this has me a little concerned. I'm a 30yo business owner making the maximum 25k contribution each year for tax purposes. I think he mentioned a 5 year differential between the pension age and accessing super which would mean 65 for accessing super down the track. I'll certainly be frustrated if I have a nest egg saved up which I can't access because the goal posts have been shifted after I have made my contributions. Long live the baby boomers..




The moving of the preservation age certainly seems to be on their minds.

It is also the moving of the goal posts after the contributions are made that would frustrate me if they don’t grandfather things adequately.

The die is cast for me.  I was butt poor from a butt poor family and concluded early that the demographics didn’t look good for me to get a government pension, so I embraced super wholeheartedly. I concluded I would need additional savings over the then 3% super guarantee amount to have any sort of standard of living in retirement and I figured I needed to get compounding working for me which meant starting early and I also concluded that the most disposable income I would ever likely have would be pre family and kids.

So from the day I started work until I left employment at around 30 I salary sacrificed the maximum I could, which wasn’t that much because of the age based deductibility limits for under 35’s (around 10K pa) but it was a decent whack of my wage % wise and a big sacrifice at the time.

In calculating how much extra I needed to contribute in those early days two variables were critical to the calculation – time remaining (I used 55 – then preservation age) and investment return – (I used 3% after tax/inflation/fees.)  Turns out I dramatically underestimated my investment return and it would seem now I dramatically underestimated the time remaining.

So now I sit here at age 43 with a super fund that could easily fund us for the rest of our lives but can’t utilise it.  We are forced to keep it tax sheltered and growing for at least another 17 years and maybe more. That tax shelter is going to provide us many, many, millions that would otherwise be paid in tax but don’t blame me, I knew no better when I underestimated the investment return and time to preservation age is out of my hands.

We are not being forced to save for our retirement any more, We (or at least the kids if we don’t make it) are being forced to becoming stupidely rich.  I guess any long run system is going to have unintended consequences and they need to think about them as they make changes.


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## pinkboy (20 May 2014)

FxTrader said:


> How much more flexibility do you want?  With SMSF I can invest in shares, property, CFDs, Options, Forex, Warrants, Collectibles etc.
> 
> But when you need to sell something, say in an emergency, you cant use the cash....it is in there for life until the rules allow you to access.  I know if I have to lend my company a couple hundred thousand $$$ to tie over wages for a couple weeks on a large project, I know I can can....where as had I punched it into Super, it would not be able to be used.
> 
> ...





I do see your points loud and clear, however believe some flexibility is needed if someone is 40yrs from retirement age.  5-15yrs, not so much, but there is still an uncertainty cloud hanging over Superannuation which makes people nervous and think twice before contributing bulk funds there.

pinkboy


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## McLovin (20 May 2014)

craft said:


> So now I sit here at age 43 with a super fund that could easily fund us for the rest of our lives but can’t utilise it.  We are forced to keep it tax sheltered and growing for at least another 17 years and maybe more. That tax shelter is going to provide us many, many, millions that would otherwise be paid in tax but don’t blame me, I knew no better when I underestimated the investment return and time to preservation age is out of my hands.
> 
> We are not being forced to save for our retirement any more, We (or at least the kids if we don’t make it) are being forced to becoming stupidely rich.  I guess any long run system is going to have unintended consequences and they need to think about them as they make changes.




There should be an upper limit to super fund balances after which the remaining must be moved out of the fund or is taxed inside the fund at normal rates of tax. Much like the tax free status of super funds in pension phase there is a point at which the fund is no longer operating as intended (to provide an alternative to a state pension)


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## Julia (20 May 2014)

McLovin said:


> There should be an upper limit to super fund balances after which the remaining must be moved out of the fund or is taxed inside the fund at normal rates of tax. Much like the tax free status of super funds in pension phase there is a point at which the fund is no longer operating as intended (to provide an alternative to a state pension)



+1.


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## sptrawler (20 May 2014)

FxTrader said:


> How much more flexibility do you want?  With SMSF I can invest in shares, property, CFDs, Options, Forex, Warrants, Collectibles etc.
> .




The problem is, it is basically a joint account with the government, with you being the minority holder. 
They can tell you how and when you can draw on it. 
How much they are going to tax it. 
They can put limits on it. 
They can decide what you can and can't invest in e.g residential property.
They can make you sell assets.
They can tell you to leave a certain amount unaccesible, to cover possible health and or longevety problems.
Really they can do just about anything they want, to it.

Currently it is tax advantageous, however if that changes, there is very little you can do to change your plan.

There are and allways will be tax advantaged investments outside super, that allow wealth creation without losing the ability to remove the capital.
Also with the increased burden on the welfare system, I would think it will become easier to put money into super as the governments increasingly want people to self fund.


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## craft (20 May 2014)

McLovin said:


> There should be an upper limit to super fund balances after which the remaining must be moved out of the fund or is taxed inside the fund at normal rates of tax. Much like the tax free status of super funds in pension phase there is a point at which the fund is no longer operating as intended (to provide an alternative to a state pension)




Agreed - I'd argue that moved out would be the equitable thing.


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## sptrawler (20 May 2014)

McLovin said:


> There should be an upper limit to super fund balances after which the remaining must be moved out of the fund or is taxed inside the fund at normal rates of tax. Much like the tax free status of super funds in pension phase there is a point at which the fund is no longer operating as intended (to provide an alternative to a state pension)




The second idea is probably better, tax funds when an upper level is reached. Or even as was sugested last year, tax earnings above a certain level. Both ways are flexible and taxing could be changed accordingly.

The problem with setting an upper limit, where funds have to be removed when reached, is it doesn't allow for the devaluation of the capital due to inflation.
It wasn't long ago that $500,000 was enough money to buy several houses, or see you through a comfortable retirement.


----------



## craft (20 May 2014)

sptrawler said:


> The second idea is probably better, tax funds when an upper level is reached. Or even as was sugested last year, tax earnings above a certain level. Both ways are flexible and taxing could be changed accordingly.
> 
> The problem with setting an upper limit, where funds have to be removed when reached, is it doesn't allow for the devaluation of the capital due to inflation.
> It wasn't long ago that $500,000 was enough money to buy several houses, or see you through a comfortable retirement.




Is it fair to have no access and no concessions?


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## FxTrader (20 May 2014)

sptrawler said:


> The problem is, it is basically a joint account with the government, with you being the minority holder...  Currently it is tax advantageous, however if that changes, there is very little you can do to change your plan... There are and allways will be tax advantaged investments outside super, that allow wealth creation without losing the ability to remove the capital.






			
				pinkboy said:
			
		

> But when you need to sell something, say in an emergency, you cant use the cash....it is in there for life until the rules allow you to access. I know if I have to lend my company a couple hundred thousand $$$ to tie over wages for a couple weeks on a large project, I know I can can....where as had I punched it into Super, it would not be able to be used.



It's not possible, but neither would it be practical nor prudent to place all of one's assets in super, including cash.  The assumtpion here is that if I park all surplus discretionary cash in super I have stranded assets (if under 60).  This would only make sense if you're nearing retirement and even so it's limited. Allocation to super is part of an investment strategy, excluding it can be a costly mistake once you reach retirement.

The restrictions placed on super access are obviously intended to preserve capital for retirement.  If you want to retire at 32 and have the means to do this then you obviously don't need superannuation savings and you represent much less than 1% of the population.


----------



## craft (20 May 2014)

FxTrader said:


> Allocation to super is part of an investment strategy, excluding it can be a costly mistake once your reach retirement.




I agree - just because it caries legislative risk doesn't mean you shouldn't utilise the benefits altogether. It works well(maybe too well for sustainability at current settings - allow for it) as part of a bigger picture.


----------



## sptrawler (20 May 2014)

craft said:


> Is it fair to have no access and no concessions?




No, I'm all for leaving super alone, I'm reliant on it.lol

I was meaning if they put a limit on how much you can have in super, it would have to be indexed to account for inflation.
However, it would be difficult for some people to put more in. 
I would think it would be better to let people put as much as they can in. 
But tax either the earnings or principle above a certain amount.
Like currently there is 15% during accumulation, it could be on anything above an arbitary amount that can be changed.
Or as was suggested earnings above an arbitary amount get taxed, again that amount could be changed as required.
Much like the changes to the drawdownrules, that applied post gfc.

In my opinion picking a maximum amount would be quite difficult. I've seen the Aussie dollar at $1.25U.S and 50c, I've also seen great wages at $30k and $180k.
Just my humble opinion.

P.S 
Just had a thought, in accumulation you could tax at 15% upto a certain balance, then say 30% above that, then 47% above a max.

In pension phase, the drawdown is taxed at varying rates at different levels. But the income is tax free, if the capital goes up the drawdown goes up which means the tax goes up.


----------



## Ves (20 May 2014)

I agree that placing limits (within reason) on the amount that can be placed into a tax haven like superannuation  (and others like trusts, negative gearing etc.) should be considered.

The problem is the administration and application of these ideas in practice.  And these aren't cheap,  they add a lot of costs to the system. Anyone number an accountant has to calculate costs money for the end user - trust me I know.

For instance, how would these limits be enforced?  Would they be on 30 June only?  SMSFs for instance only report on that date.  How strictly would valuations be enforced on assets that are not valued easily on a market?  (property, collectibles, private unit trusts etc. all can be valued perhaps,  but could potentially be valued in a contrived fashion in certain circumstances). 

If there is an asset limit for super, and then you tax earnings on assets above this limit at a higher rate,  how to do work out which assets are above the limit and which income relates to those assets?  Is there a special formula that you had in mind? Is it the weighted return of all assets?  Would this be similar to calculating the exempt pension income of a fund, in that you would be required to pay an actuary? Surely you could not pick and choose which assets (aka segregation methods).

It _might_ be achievable for single member funds,   and even then you need to figure out how to pro-rata the income  (do you pick a set day 30 June to apply the "limit test" on the income?).  But what about Funds with multiple members? What if some are under the limit and some are not?  Makes it very tricky to work out the earnings and the extra tax for the affected accounts.  What about individuals who have multiple superannuation accounts  (yes - it is possible to have more than one SMSF even, as many as you want).  These things make it very hard to track and apply.  As far as I am aware,   if I have multiple funds, the ATO / government has no bloody idea how much taxable income they generate in total.   In fact they are not tracked on an individual basis,  but a fund basis.   All that is reported to the ATO is the net account movement  (from market values + earnings).

It hurts my head thinking of how they'd do such a thing,   after the ordeals and complications in the past with things like RBL limits and surcharge levies.

I can almost guess now that this won't happen - not because it's not a good idea, but because it's too hard to implement.


----------



## sptrawler (20 May 2014)

Ves said:


> I agree that placing limits (within reason) on the amount that can be placed into a tax haven like superannuation  (and others like trusts, negative gearing etc.) should be considered.
> 
> The problem is the administration and application of these ideas in practice.  And these aren't cheap,  they add a lot of costs to the system. Anyone number an accountant has to calculate costs money for the end user - trust me I know.
> 
> ...




Yes, good points Ves, I was thinking from a two member fund, the problems would be enormous for large retail and industry funds.
Oh well, maybe best to leave it to the Government.lol


----------



## qldfrog (20 May 2014)

Bill M said:


> Be warned everyone, particularly younger people, even 50 year olds take note. Joe Hockey has mentioned that they are going to look at changing *when* you will be able to access your super, it's on his mind and Abbott's mind. Be careful!
> 
> Go to the "retirement age" section at around the 56th minute. Watch the section with the guy in the red polo Shirt.
> 
> ...




Bill,
this is clear for me as a  47y old  now: I now have to work till 70 at least before I can retire and get the money I put in the last 20 years  when being told I could get it at 65;
and the next stage will be: you can not touch your super, regardless of age unless you have no asset left otherwise;
and super will be what it has always been for younger people: a sucker game where 9% of your income is stolen, feeding unions AND bankers (an unholy alliance) for pathetic returns while you struggle  at end of month and pay a mortgage and a car/personal credit...


----------



## pinkboy (20 May 2014)

qldfrog said:


> Bill,
> this is clear for me as a  47y old  now: I now have to work till 70 at least before I can retire and get the money I put in the last 20 years  when being told I could get it at 65;
> and the next stage will be: you can not touch your super, regardless of age unless you have no asset left otherwise;
> and super will be what it has always been for younger people: a sucker game where 9% of your income is stolen, feeding unions AND bankers (an unholy alliance) for pathetic returns while you struggle  at end of month and pay a mortgage and a car/personal credit...




Hang on there son.  Superannuation is paid on top of your wage by your employer by law.  You were never entitled to it as income.

The government that introduced it (not sure which off the top of my head) did so that you were forced to save it by employers directly putting those funds away for you, not just giving you extra cash to 'invest', because the average punter would spend it on further discretionary items.

pinkboy


----------



## qldfrog (20 May 2014)

and to add more:
super is both a scam and a tax rort, 
1) for a 50y old or younger: you may never ever be able to access it, 70y old  before access now, 150 in 20 years?
why not it may become the centenary bingo? There is no limit to government greed; and maybe why not a CG when you get it out after 50 years?


RY:
the flexibility missing is not the way you can invest it, it is the freedom of access, and the absence of rights as a citizen in this country where retrospective laws are so convenient:
shifting sand policies is the only constant
For me super is an extra 9% tax with a nice wrapping around so that i get warm feeling;

but now take the position of a 65 year old, still working a bit in his company:
2) he put all income in super with hardly any tax and can probably get it back tax free again (or via his partner) at the same time;
a rort
The budget and this is not going to be the last, is a current pensionner dream [as were the last few ones], at the expense of the country and anyone younger;
you wait 6 month if 20y old to access welfare but someone who has had decades to get ready has no waiting period, etc etc.


----------



## qldfrog (20 May 2014)

pinkboy said:


> Hang on there son.  Superannuation is paid on top of your wage by your employer by law.  You were never entitled to it as income.
> 
> The government that introduced it (not sure which off the top of my head) did so that you were forced to save it by employers directly putting those funds away for you, not just giving you extra cash to 'invest', because the average punter would spend it on further discretionary items.
> 
> pinkboy




no way: I deal with my employer as a value for money:
you speak like a labour  member there
I have a cost, compete against other workers O/S for a total package:
this is a tax on my income: if I do not work, the employer does not pay it.
when you discuss a job, you do not care about super you discuss a package: and this see the super removed from it.


----------



## qldfrog (20 May 2014)

pinkboy said:


> Hang on there son.  Superannuation is paid on top of your wage by your employer by law.  You were never entitled to it as income.
> 
> The government that introduced it (not sure which off the top of my head) did so that you were forced to save it by employers directly putting those funds away for you, not just giving you extra cash to 'invest', because the average punter would spend it on further discretionary items.
> 
> pinkboy




Government then increased the amount because both side of the politics benefit from that rort:
unions with nice retirement positions as member of boards of employee super funds, and liberals  as gifts flow from AMP/CBA wealth units etc
Never has common Joe been thought about;
And i remember seing my pay roll decrease when the super increased, and this is the way it should be
otherwise why would governement who always try to show how much better they are at managing money than you , would allow this?


----------



## pinkboy (20 May 2014)

qldfrog said:


> no way: I deal with my employer as a value for money:
> you speak like a labour  member there
> I have a cost, compete against other workers O/S for a total package:
> this is a tax on my income: if I do not work, the employer does not pay it.
> when you discuss a job, you do not care about super you discuss a package: and this see the super removed from it.




I can assure you that I have never voted Labor. 

On contrary you sound more like an 'entitlement' Labor voter with your 'my employer owes me more than my package and Super should be it' attitude. 

I don't agree with everything about Super either, but you can only fu*k with the d!ck you got!

pinkboy


----------



## k.smith (20 May 2014)

McLovin said:


> There should be an upper limit to super fund balances after which the remaining must be moved out of the fund or is taxed inside the fund at normal rates of tax. Much like the tax free status of super funds in pension phase there is a point at which the fund is no longer operating as intended (to provide an alternative to a state pension)




I agree. 

The question isn't about who is paying too much tax and who isn't paying any. It is about the fairness of how some are advantaged more than others by their use of the nation's super system. I think that is quite different to issues such as negative gearing, primary residence exemption, corporate structures/family trusts.


http://www.crikey.com.au/2014/05/14...d-on-low-income-earners/?wpmp_switcher=mobile

''...The Australia Institute showed in 2009 that the* top 5% of income earners obtain 37% of all superannuation tax concessions. *The multibillion-dollar rise in superannuation tax concessions ”” which cost “just” $30 billion this financial year ”” is thus primarily a multibillion-dollar handout to high-income earners, primarily those above $180,000 a year. In fact, the cost of the deficit levy to people on those incomes and above ”” just over $3 billion ”” will be entirely swamped by the increase in tax concessions on superannuation from this year ($30 billion) to next alone ($36 billion)...''.

Interesting read here..
http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Report/Chapter-4

"...Four principles have informed the Charter Group’s work in recommending the form of a Charter. The terms of reference required the Charter Group to develop and recommend a Charter which embodies the principles of certainty, adequacy, fairness and sustainability...''


----------



## sptrawler (20 May 2014)

k.smith said:


> I agree.
> 
> The question isn't about who is paying too much tax and who isn't paying any. It is about the fairness of how some are advantaged more than others by their use of the nation's super system. I think that is quite different to issues such as negative gearing, primary residence exemption, corporate structures/family trusts.
> 
> ...




Interesting read, as per usual they are miles ahead of us.


----------



## Julia (20 May 2014)

qldfrog said:


> Bill,
> this is clear for me as a  47y old  now: I now have to work till 70 at least before I can retire and get the money I put in the last 20 years  when being told I could get it at 65;



Isn't the retirement age for someone who is now 47 going to be 67, courtesy of the last Labor government?
If so, the 'retirement age' merely represents when you can apply for a taxpayer funded age pension, not when you are able to access your Super.  I stand to be corrected on this.  Ves, you will know, as will others.



> and super will be what it has always been for younger people: a sucker game where 9% of your income is stolen, feeding unions AND bankers (an unholy alliance) for pathetic returns while you struggle  at end of month and pay a mortgage and a car/personal credit...



No one is stealing anything from you.  Without the contribution to Super your employer would, in most instances, simply pay you less as a salary.
Super is not an investment entity of itself so cannot be a 'sucker game'.  It's simply a tax advantaged vehicle for investing in pretty much anything, as previously outlined by FX Trader.
I don't know much about public Super Funds, but if you're not happy with their efforts, you have the option of starting a SMSF and maximising your profits according to your investment ability.  Then there's no one to blame but yourself.




pinkboy said:


> Hang on there son.  Superannuation is paid on top of your wage by your employer by law.  You were never entitled to it as income.
> 
> The government that introduced it (not sure which off the top of my head) did so that you were forced to save it by employers directly putting those funds away for you, not just giving you extra cash to 'invest', because the average punter would spend it on further discretionary items.
> 
> pinkboy



+1.



qldfrog said:


> no way: I deal with my employer as a value for money:
> you speak like a labour  member there
> I have a cost, compete against other workers O/S for a total package:
> this is a tax on my income: if I do not work, the employer does not pay it.



If you do not work your employer does not pay it to you.  He pays it to whomever he employs instead.



> when you discuss a job, you do not care about super you discuss a package: and this see the super removed from it.



Well, that would be pretty silly.   I'd have thought you'd discuss the entire package, Super included, and come to some mutually acceptable agreement.

Ves, thank you for very rational description of all the potential complications involved in some of the options suggested re Super.  Nothing is ever as simple as it may first appear.


----------



## craft (20 May 2014)

Ves said:


> I agree that placing limits (within reason) on the amount that can be placed into a tax haven like superannuation  (and others like trusts, negative gearing etc.) should be considered.
> 
> The problem is the administration and application of these ideas in practice.  And these aren't cheap,  they add a lot of costs to the system. Anyone number an accountant has to calculate costs money for the end user - trust me I know.
> 
> ...




Thanks for the post Ves - great insight. Do you see any obvious or easy solutions?


----------



## Ves (20 May 2014)

Julia said:


> Isn't the retirement age for someone who is now 47 going to be 67, courtesy of the last Labor government?
> If so, the 'retirement age' merely represents when you can apply for a taxpayer funded age pension, not when you are able to access your Super.  I stand to be corrected on this.  Ves, you will know, as will others.



Hi Julia

The superannuation preservation age is still 60 for those born after 1 July 1964.  This is the earliest date in which you could access your superannuation benefits provided that you have met a condition of release.  To do this you would need to:

a) retire permanently with the intention of never returning to the work force or;
b)  commence a transition to retirement pension   (4% minimum withdrawal limit and 10% maximum withdrawal limit per annum)

The only exceptions would be that for some reason your balance has unrestricted non-preserved components, which are a carry over from the older superannuation rules.

In rare cases early access to benefits may be permitted:  ie. incapacity, severe financial hardship, temporary residents leaving Australia, terminal medical condition... but there are very strict rules and requirements that need to be met in these cases.

Otherwise you would need to wait until you are 65, which is the current age in which superannuation cashing restrictions are removed in all cases  (ie. your balance becomes entirely an unrestricted non-preserved component).

As always,   trustees should also consult their trust deed closely to see if the intended benefit is also allowed under the rules of the Fund.

The Abbott government has come out this week and commented that whilst the preservation age for superannuation benefits has not been changed, it is being considered.   However, no such change would happen until their second term of government.

One of their pre-election core promises was to leave superannuation unchanged.

http://www.theaustralian.com.au/nat...reservation-age/story-fn59niix-1226923766162#


----------



## Ves (20 May 2014)

craft said:


> Thanks for the post Ves - great insight. Do you see any obvious or easy solutions?



Nope - but I will say that any proposed changes will be ruthlessly opposed by the vested interests in the industry  (the big funds,   investment institutions,  the superannuation bodies ie. SPAA,  the accounting bodies).   They lobby fairly hard obviously because big swathes of funds in super benefits them,   but so does clarity of purpose of governments in terms of superannuation. So much relies on a system that is easy to understand,  with a long-term view towards legislation.  Whilst they do have vested interests they are correct in saying that there can be a big hit to people's confidence in the system if the goal posts are constantly moved (especially if they contributed to superannuation on the basis that such and such would still be in place when they reach retirement).

I don't think it could be easily implemented on the basis of market values -  they by their very nature fluctuate too much,  and it would be much harder to enforce the rules on this basis.   And you do not want big amounts of money bouncing out of Funds and back into individual's hands - it creates a mess and more potential for mistakes to be made by trustees.   It also seems to contradict the "early release" and "preservation rules."   Is it fair that you suddenly get to access your excess super before you have attained age 60 just because you have too much in there?  Don't think that sends a good message.

Life-time superannuation contribution limits for non-concessional contributions could be considered, rather than yearly or rolling 3 year period caps.  Much like they do for Business CGT Retirement Rollovers etc.

Arguably the biggest drag on the government coffers is the tax concessions which come from paying very little or no tax on high income within superannuation so it makes sense to target higher taxable incomes within superannuation if something must be done.  There is also no tax on withdrawals post 60 to consider too.

Taxing withdrawals is relatively straight forward  -  and would have to be tracked on the individual's tax return as the super fund itself would not know the marginal tax rates,  and indeed, if there were other funds involved.  It would obviously increase paperwork.   But these kinds of withdrawals were taxed at far less generous rates pre-1 July 2007.  Please, whatever the government does,  do not install a complicated tax system based on life time withdrawal limits.  It's too hard to track.  Doable,  but would definitely need to be streamlined very well.

Earnings are much harder to tax for the reasons stated in my previous post,  but probably easier than market values to address.  My personal opinion is that it should be an average of the last 3-5 years.   Earnings as we know can get lumpy,  especially when capital gains are involved.  You do not want those paying higher tax rates due to lumpy asset sales, when normally they would have much lower taxable income in their superannuation funds.

It's hard to track taxable earnings allocated to a member within the Fund with multiple members, let alone for an individual who has memberships in multiple funds.  Accounting software and systems could obviously begin to track this if the ATO / government provided a reasonable basis for doing so. They need to pick a single method and enforce it - too much choice would mean more opportunities to shark the system.  I suppose it would need to be done on a weighted average balanced basis over the year to calculate the member's proportion of the taxable income.  This would need to be reported to the ATO on the Fund's return.   In the same way that excess contributions tax (ECT) is paid - the excess income would be need to be added the individual's taxable income for that financial year.   I suppose it would be a separate assessment notice like ECT...   due to timing of reporting for superannuation funds and lodgment dates for individual tax returns it would be hard for it to be included in the member's individual tax return.  Perhaps the individual would get to choose whether they paid this amount from their own personal savings or from their nominated superannuation account (again similar to ECT).

Hmm sounds like a massive headache, both in planning and in on-going administration.

I don't know what limits should be imposed, all that I know is that the practical methods for enforcement are not as easy as they first appear.  Any requirements of superannuation fund trustees in terms of reporting will come with associated costs,   so they cannot do this lightly... whatever benefits to the budget must heavily outweigh the costs of implementation.


----------



## sptrawler (20 May 2014)

Ves said:


> Nope - but I will say that any proposed changes will be ruthlessly opposed by the vested interests in the industry  (the big funds,   investment institutions,  the superannuation bodies ie. SPAA,  the accounting bodies).   They lobby fairly hard obviously because big swathes of funds in super benefits them,   but so does clarity of purpose of governments in terms of superannuation. So much relies on a system that is easy to understand,  with a long-term view towards legislation.  Whilst they do have vested interests they are correct in saying that there can be a big hit to people's confidence in the system if the goal posts are constantly moved (especially if they contributed to superannuation on the basis that such and such would still be in place when they reach retirement).
> 
> I don't think it could be easily implemented on the basis of market values -  they by their very nature fluctuate too much,  and it would be much harder to enforce the rules on this basis.   And you do not want big amounts of money bouncing out of Funds and back into individual's hands - it creates a mess and more potential for mistakes to be made by trustees.   It also seems to contradict the "early release" and "preservation rules."   Is it fair that you suddenly get to access your excess super before you have attained age 60 just because you have too much in there?  Don't think that sends a good message.
> 
> ...




Could it be done as per the existing rules for pensions taken between 55 and 60, where the individual pays payg tax.


----------



## Faramir (21 May 2014)

This is a very long thread and I only managed to read a very small percentage of it. Scanning this thread, no one made mention of this story I think I am safe to post an article written 6 Feb 2013 titled:
"Dear Under-50 Investor"

http://rogermontgomery.com/dear-under-50-investor/

I only want opinions of his article/insights. I know the author's name divides everyone's opinion. I just want to know if you agree with: for example "Super is designed by baby boomers for baby boomers" or you can state "No, Super is designed for everyone."

Simply saying 'the article is crap' or 'this article is the best thing written' is not what I want. Do not worry about his subscribers' comments.

Note that this article was written before last year's Federal Election.

It will influence how much I will continue to put into Super


----------



## Judd (21 May 2014)

Julia said:


> I've looked into it fairly thoroughly, Judd, and found no suggestion anywhere that the Seniors Card is affected.
> It has never been means tested and is purely age related.  It's also State based and the benefits offered vary State to State.  What is possible, I suppose, is if the States and the Feds don't sort out their grievances over schools and hospitals funding and the States are required to find more money themselves for this, such privileges as the Seniors Card might then have to go.  There would be a massive outcry, however, because everyone I know over, I think, 55 has one.




This is the aspect to which I was referring, Julia.  Whether it actually occurs remains to be seen.

http://www.theage.com.au/money/planning/retirement-rethink-20140520-38klv.html



> *Pensioner concessions*
> 
> Biti says one of the main strategies of financial planners is to structure their wealthier clients' financial affairs so they pick up at least a couple of dollars of the age pension each fortnight. That is because even a few dollars of age pension entitles the client to pensioner discounts. These are extensive and, combined with the seniors cards offered by the states and territories, provide discounts on utilities bills, rates and car registration. Private businesses also recognise the cards for discounts.
> 
> ...


----------



## Ves (21 May 2014)

sptrawler said:


> Could it be done as per the existing rules for pensions taken between 55 and 60, where the individual pays payg tax.



It might also include this in some form or another. But this would have to do with the timing that the tax is paid to the tax office, rather than what tax is actually paid.  But again,  this might be hard to track for individuals with membership interests in multiple funds.

They probably could only do the PAYG Withholding Tax on withdrawals if they decided to tax those again,   might be too complicated for higher tax on earnings above a certain threshold, depending on who pays that tax (Fund or individual).


----------



## Judd (21 May 2014)

Ves said:


> It might also include this in some form or another. But this would have to do with the timing that the tax is paid to the tax office, rather than what tax is actually paid.  But again,  this might be hard to track for individuals with membership interests in multiple funds.
> 
> They probably could only do the PAYG Withholding Tax on withdrawals if they decided to tax those again,   might be too complicated for higher tax on earnings above a certain threshold, depending on who pays that tax (Fund or individual).




Didn't the Government do away with RBLs because the cost of tracking each and every fund at member level plus IT maintenance costs far outweighed the amount of revenue received.  I recall reading about that but forget the source.  Maybe introducing something akin to that could have a similar outcome.


----------



## Ves (21 May 2014)

Judd said:


> Didn't the Government do away with RBLs because the cost of tracking each and every fund at member level plus IT maintenance costs far outweighed the amount of revenue received.  I recall reading about that but forget the source.  Maybe introducing something akin to that could have a similar outcome.



Yes, that was definitely one of the reasons provided.   And that is why I am unsure of how you could change the superannuation taxation regime without upsetting the apple cart too much in terms of administration costs and added complication in how all of this is tracked.


----------



## CanOz (21 May 2014)

Faramir said:


> This is a very long thread and I only managed to read a very small percentage of it. Scanning this thread, no one made mention of this story I think I am safe to post an article written 6 Feb 2013 titled:
> "Dear Under-50 Investor"
> 
> http://rogermontgomery.com/dear-under-50-investor/
> ...




Faramir, great article. For me, its a good history of pensions and Super in Australia. If anything it highlights the temptation there is for governments to steal from the pot. Which they will inevitably do. It makes sense to me that he's saying it was for boomers...It really tells me that when it comes to Super, there are no certainties. Don't put all your eggs in this basket.

Thanks for posting it, I'll continue to build investments outside of Super that offer the best prospect for long term growth whist trying to avoid paying too much tax on them when I'll need them...if that makes sense.

What do Ves and Co. think?


----------



## Judd (21 May 2014)

It's a difficult one for sure CanOz.  I suppose it depends on attitude to a large extent.

I know of one person (not me) who has no super, her dividend income is in the six figure range (with a number greater than one) and she does not concern herself with tax issues and the like.  I have what, and can do what, I want I want darling so why worry? is her attitude.  Others I know are almost obsessed with tax and superannuation.  Sometimes I wonder what sort of life they have.  Again I know of people who are seemingly casual but canny receiving a far amount of mostly franked dividends, a good tax free account-based pension a portion of which they then invest in the sharemarket.  On around $90k pa and still receive a tax refund.

It's how you want to play the game really and there is probably no one answer.


----------



## Julia (21 May 2014)

Judd said:


> This is the aspect to which I was referring, Julia.  Whether it actually occurs remains to be seen.



Thanks, Judd.  Yes, I realised that would have been what you were referring to yesterday and think I mentioned it in the Abbott government thread.
Since we were discussing it I actually put it to Centrelink's FIS.  Got the predictable stuff about how nothing is decided, all has to be legislated, yada yada, but the FIS bloke said it refers to retirees who are not eligible for the age pension because assets or income test rules them out, but who - at least under the present rules where Super income is not assessed amongst the income test - are eligible for the Commonwealth Seniors Health Card.

This confers most of the benefits of the actual pension card, especially including eg PBS medicines discount which often becomes important as people get older.

It would also apply to those who have a Seniors Card as these are State based and if the Commonwealth is going to withdraw funding given to the States to provide this, then they are certainly going to say they can't afford to fund those concessions.

His main point was that people on age pension, even minimum part pension, will not be affected by the proposed legislation.


----------



## tinhat (21 May 2014)

pinkboy said:


> Hang on there son.  Superannuation is paid on top of your wage by your employer by law.  You were never entitled to it as income.
> 
> The government that introduced it (not sure which off the top of my head) did so that you were forced to save it by employers directly putting those funds away for you, not just giving you extra cash to 'invest', because the average punter would spend it on further discretionary items.
> 
> pinkboy




The very first compulsory employer contribution arrangement was a deal between the unions (ACTU) and the government under the wages accord, back in the days of arbitrated wage fixing, where the unions and the government agreed that employees were to be paid an above CPI productivity bonus, in recognition of real gains in labour productivity that had been achieved through the accord, but that it would be paid as a "productivity dividend" by way of a new scheme of compulsory employer super contributions for all wage earners initially set at 3% of pre tax wages.


----------



## sptrawler (21 May 2014)

Faramir said:


> This is a very long thread and I only managed to read a very small percentage of it. Scanning this thread, no one made mention of this story I think I am safe to post an article written 6 Feb 2013 titled:
> "Dear Under-50 Investor"
> 
> http://rogermontgomery.com/dear-under-50-investor/
> ...




I believe that is a fairly accurate assesment of what will happen. Currently average balances are too low and the government don't wish to shake peoples confidence in the system.
Once the average super balance can supply an income similar to the government pension, watch out.


----------



## FxTrader (21 May 2014)

sptrawler said:


> I believe that is a fairly accurate assesment of what will happen. Currently average balances are too low and the government don't wish to shake peoples confidence in the system.
> Once the average super balance can supply an income similar to the government pension, watch out.



A key factor Montgomery ignores is the voting power of an aging population and it's influence on government policy.  Even the razor gang of economic rationalists headed by Hockey and Corman recognize the need to tread carefully on super policy.

Currently, super tax policy is probably to generous thanks to Costello.  I expect changes over time but none that would create a situation where there are to many disincentives to put additional funds into super savings.  That's a lose/lose scenario and political poison.

Montgomery himself, being a multi-millionaire, has no incentive to put money into super and his disdain for a super system where tax policy will change seems odd, tax policy changes regularly and not just around super.  Perhaps he should put out yet another missive warning property investors to shun future property investment because the government may restrict or eliminate negative gearing deductions 20 years from now.

Given that Montgomery criticized those who predicted the GFC as doomsayers and did not foresee the global implications of the property bubble that precipitated the GFC, I have little faith in his forecasting of taxation policy on super.  It would seem that he has become what he previously criticized, a doomsayer and scaremonger.


----------



## CanOz (21 May 2014)

Thanks FXTrader...Always great to hear your view.


----------



## craft (21 May 2014)

FxTrader said:


> Given that Montgomery criticized those who predicted the GFC as doomsayers and did not foresee the global implications of the property bubble that precipitated the GFC, I have little faith in his forecasting of taxation policy on super.  It would seem that he has become what he previously criticized, a doomsayer and scaremonger.




One thing you can count on is Montgomery serving his self interest.  If his business ever becomes predominantly mandates from super funds instead of direct retail investors, history suggest he would write the exact opposite article and say that he had previously placed all funds possible into super because it is such a good idea.

At the moment he has a vested interest in his followers placing money in his fund rather than into their superannuation funds that do not give him mandates to manage it.


----------



## sptrawler (21 May 2014)

craft said:


> One thing you can count on is Montgomery serving his self interest.  If his business ever becomes predominantly mandates from super funds instead of direct retail investors, history suggest he would write the exact opposite article and say that he had previously placed all funds possible into super because it is such a good idea.
> 
> At the moment he has a vested interest in his followers placing money in his fund rather than into their superannuation funds that do not give him mandates to manage it.




Thanks for the heads up, didn't realise he had a vested interest. Just thought he was a columnist giving an opinion.


----------



## sydboy007 (21 May 2014)

_An Australian Financial Review analysis of Australian Taxation Office statistics shows almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years, and the number of funds with over $10 million has doubled…

Tax advisers have raised the alarm on the number of super-wealthy clients able to have incomes taxed at zero to 15 per cent, instead of the current top rate of 46.5 per cent, by using generous concessions and “cracks” in the superannuation system.

“These are people with $10 million to $20 million in self-managed super, they’ve funded their retirement several times over, they don’t need concessions,” said one tax lawyer…

The most popular [strategy] is 55-year-old executives who start drawing a tax-free pension from their fund, while tipping their entire salary into it and effectively reducing their taxable income from 46.5 per cent to about 15 per cent…

Advisers say the sheer volume of this behaviour is causing “material leakage” to the nation’s revenue position._

and from John Hewson recently - _As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners._

In the latest Retirement and Retirement Intentions survey by the Australian Bureau of Statistics found that _“of those who had made contributions, 55% had received all or part of their superannuation funds as a lump sum payment”. It also found that “many of those who received a lump sum payment used it to pay off or improve their existing home or purchase a new home… or to buy or pay off a motor vehicle”. _

From Industry Super Australia CEO, David Whiteley - _“There’s 3.5 million Australians earning less than $35,000 that don’t get tax concessions on their super contributions. So the first thing you do is fix that. The second thing you do, is not increase the super guarantee.”_

So it seems to me that super is more a cash drain to the budget in that it has had little effect on the amount of aged pension currently being received, and from current forecasts in 20 years till we will still see something like 80% of people receiving a full or part pension.  So I have to ask what's the $30B in tax expenditures and $20B fees of the retail and industry funds and prob $5B+ for the SMSF market actually getting us?


----------



## Knobby22 (21 May 2014)

I saw in the Age today that Joe Hockey flagged a delay to getting super access on Q&A.

They mentioned the figure of 5 years which would mean you would have to be 65 to get access. Not long ago it went from 55 to 60 under Labor.  Abbott made the promise before the election that they wouldn't do this but we all know that means nothing.

Not happy Jan.

And you are right sydboy, huge savings to the budget could be made regarding super but that would effect the wealthy, so it won't happen. It is strange that that the poor are actually penalised in super being taxed at a higher rate than they would get otherwise. Gotta make the divide bigger seems to be the philosophy.


----------



## FxTrader (21 May 2014)

sydboy007 said:


> The most popular [strategy] is 55-year-old executives who start drawing a tax-free pension from their fund, while tipping their entire salary into it and effectively reducing their taxable income from 46.5 per cent to about 15 per cent…



Just to fact check the claims made here, if your preservation age is 55 and you are not retired you can start a Transition to Retirement income stream that allows you to withdraw funds but such funds are concessionaly taxed (not tax free) and capped at a maximum of 10% of available funds.  As for tipping one's entire salary into super, if that exceeds $150k you get slapped with a tax of 46.5%.  Just a bit of sloppy journalistic exaggeration here to grab attention.

The contribution caps for 2013-2014 are shown below.




BTW, you can access super in some special circumstances as well, your funds are not as stranded in super as some here suggest they are...

compassionate grounds
    severe financial hardship
    terminal medical condition
    temporary incapacity
    permanent incapacity
    temporary residents leaving Australia permanently
    super death benefits (inheriting super)
    super less than $200.​


----------



## sptrawler (21 May 2014)

I would assumes if the $150,000 is non concessional, it has had tax paid on it above the $25k or $35k concessional limit. 
That article sounds like a misrepresentation of the facts Syd.


----------



## k.smith (21 May 2014)

sydboy007 said:


> _An Australian Financial Review analysis of Australian Taxation Office statistics shows almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years, and the number of funds with over $10 million has doubled…
> 
> Tax advisers have raised the alarm on the number of super-wealthy clients able to have incomes taxed at zero to 15 per cent, instead of the current top rate of 46.5 per cent, by using generous concessions and “cracks” in the superannuation system.
> 
> ...




it's worth reading in it's entirety.....
http://www.afr.com/p/national/tax_leakage_alarm_over_super_wealthy_kf7K4fYSDcSI1437kKAMUN


----------



## sptrawler (21 May 2014)

k.smith said:


> it's worth reading in it's entirety.....
> http://www.afr.com/p/national/tax_leakage_alarm_over_super_wealthy_kf7K4fYSDcSI1437kKAMUN




Thanks for the link to the whole article K.Smith.

The three things that stood out to me were.

1. 9200 funds have more than $5m in them, so if they are two member funds thats 9500 people with $2.6m each in super out of a population of 24million.

2. There are a number of funds with over $10m in super, but it is obviously such a small number that they won't say the number.

3. The tax white paper review process will begin soon and will include super.

Therefore I would glean from that, not many super rich use super, probably high net worth middle class.
Those same people have left themselves in a very exposed financial position, regards government regulation.


----------



## k.smith (21 May 2014)

sptrawler said:


> Thanks for the link to the whole article K.Smith.
> 
> The three things that stood out to me were.
> 
> ...




sptrawler

 re 1. won't 9200 funds with 2 people in each involve 18,400 people? at  $2.6m each? wow...then again, there could be a lot more members in the larger accounts

also, these stats (re SMSF's) are a few years old, but a bit of an insight
http://www.superguide.com.au/how-super-works/super-rich-is-smsf-bigger-rest

It seems terribly wrong that the government co-contribution for low income people was reduced from $1500 to $1000 and then $500, given that they gain so little by doing the very thing that the whole purpose of super was about in the first place. On the other end of the spectrum ...
http://www.afr.com/p/national/tax_leakage_alarm_over_super_wealthy_kf7K4fYSDcSI1437kKAMUN


----------



## sptrawler (21 May 2014)

k.smith said:


> sptrawler
> 
> re 1. won't 9200 funds with 2 people in each involve 18,400 people? at  $2.6m each? wow...then again, there could be a lot more members in the larger accounts]



Yes my mistake, trying to talk to the missus and type is difficult.lol Still not a lot of people really.



k.smith said:


> also, these stats (re SMSF's) are a few years old, but a bit of an insight
> http://www.superguide.com.au/how-super-works/super-rich-is-smsf-bigger-rest
> 
> It seems terribly wrong that the government co-contribution for low income people was reduced from $1500 to $1000 and then $500, given that they gain so little by doing the very thing that the whole purpose of super was about in the first place. On the other end of the spectrum ...
> http://www.afr.com/p/national/tax_leakage_alarm_over_super_wealthy_kf7K4fYSDcSI1437kKAMUN




I'll read the links tommorrow, I'm coping a bit of flak.

The good thing is, hopefully they will hit super hard with the white paper. 
With a bit of luck all super won't be available untill pension age and no pension is available untill all your super is exhausted.
That sounds fair for everyone.


----------



## qldfrog (21 May 2014)

Julia said:


> Isn't the retirement age for someone who is now 47 going to be 67, courtesy of the last Labor government?



No, 70 after the last budget as I understand it;
Please Please tell me I am wrong, at least I have some chance to use what i am forced to put in my super;

And definitively for my type of work and until I became fully self employed [and so it became irrelevant as I am also my own employer]
we discuss package  and a package includes super.
do i do get 120k/150k  and if the mandatory super increases you just get less in your pay cheque.


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## pinkboy (21 May 2014)

qldfrog said:


> No, 70 after the last budget as I understand it;
> Please Please tell me I am wrong, at least I have some chance to use what i am forced to put in my super;
> 
> And definitively for my type of work and until I became fully self employed [and so it became irrelevant as I am also my own employer]
> ...




You might want to take a step back and understand it a bit more.  The latest budget will raise the age to 70 to be phased in over a 21 year period to 2035. It's not a one hit wonder.

You are still not understanding how super is contributed; it is employer imposed. As the increases take effect over the next decade it will rise in increments from 9% last financial year (currently 9.25%) through to 12%. It does not impact your pay a single dollar. It is paid on top of your wage entirely by your employer.  It is not deducted from your gross or net earnings.

Might really want to school up on Super if you are going to get in the business of self employment especially if you want to employ people. 

pinkboy


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## Julia (21 May 2014)

Qld frog:  suggest you check the Budget papers.  The 70 age is a proposal only at this stage, and as I understand it would only come in many years into the future.  Even then it would have to get through the Senate which is looking completely unlikely.

Do your own research on this as you would on anything else.  Don't take what you read on any internet forum written by anyone as necessarily gospel.


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## Knobby22 (21 May 2014)

qldfrog said:


> No, 70 after the last budget as I understand it;
> Please Please tell me I am wrong, at least I have some chance to use what i am forced to put in my super;
> 
> And definitively for my type of work and until I became fully self employed [and so it became irrelevant as I am also my own employer]
> ...




Unfortunately it looks like it will only be the baby boomers who will get to use it. We will never have that luxury.
The next thing they will do after raising the age is to make you take it like a pension with no freedom to take a lump sum and have some enjoyment before you become decrepit. You will note the ones supporting the changes have already retired or of an age where they won't be affected. It feels like communism to me. I want to get the money and spend and invest it as I see fit.this country is really starting to suck.


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## Faramir (21 May 2014)

FxTrader said:


> A key factor Montgomery ignores is the voting power of an aging population and it's influence on government policy.




Thank you everyone who answered my question. It was very interesting to get everyone's views. I only quoted FxTrader cos it leads to my next question.

Can I take the focus off the author and can we focus on FxTrader's quote?

For people roughly aged between 35-50 years, when we reach "Grey Power" age, will there be enough of us to influence Government Policy? In stereo-type assumption is that Baby Boomers were always politically active and thus they can influence Policy. It is stereo-type attitude that our generation is less political active and the generation below ours even more less poitically active. (I know am very wrong on many counts, I am wrongly stereo-typing.)

Will the generations below us have more influence on Super Policy than us than we reach "Grey Power" since they will be in Government? The Generation before Baby Boomers did not (on the most part) have Super. Baby Boomers will be the first, Gen X, Gen Y and so on will have more Super.

I think the less politcally active each generation becomes, the more likely Governments will know that they get away with more taxes, more rule changes, etc. I am making some very broad based assumptions here. Please express your opinions and let me know where I have overlooked things.


----------



## sptrawler (21 May 2014)

sptrawler said:


> Yes my mistake, trying to talk to the missus and type is difficult.lol Still not a lot of people really.
> 
> 
> 
> ...




Hello K.Smith
Right I'm back, so 936 funds have over $10m.
And why did the govt drop the co contribution to $500.

O.K Well to make it fair, charge everyone their marginal rate minus 15% on contributions. 
Nobody would put any extra in. The govt would get extra paye tax, unless the person decided to negative gear the $35k in property, or buy shares in a company that pays franked dividends at 30%.

Meanwhile the low income earners co contribution, I'm sure if you look into it there will be a reason. 
It may be that $500 is the maximum that is being put in, so to drop it from $1500 to $500 isn't in reality an actual reduction just a budgetry reduction.


I'm not saying it doesn't need changing, just saying it might not work out the way everyone thinks. 
But one thing for sure it will change, so don't worry too much, this government doesn't seem to worry about stepping on toes.


----------



## Faramir (21 May 2014)

k.smith said:


> It seems terribly wrong that the government co-contribution for low income people was reduced from $1500 to $1000 and then $500, given that they gain so little by doing the very thing that the whole purpose of super was about in the first place. On the other end of the spectrum ...
> http://www.afr.com/p/national/tax_leakage_alarm_over_super_wealthy_kf7K4fYSDcSI1437kKAMUN



This is one beef I have against Super. I am low income and I took advantage of the Government co-contribution. I feel stupid putting money into something I can't get my head around. Now running my own business, if I want to, I can put nothing into Super. Many Business Owners have very little in Super. Many Advisors and newspaper columnists are crying out that it is a bad idea. Given the trend of this thread, maybe it is better to invest money back into the business or some other form of investment.


----------



## Knobby22 (21 May 2014)

sptrawler said:


> One thing for sure, I will bet the review into super hurts the lower to middle class 100 times more than it hurts the wealthy.IMO




Too true


----------



## k.smith (22 May 2014)

sptrawler said:


> Hello K.Smith
> Right I'm back, so 936 funds have over $10m.
> And why did the govt drop the co contribution to $500.
> 
> ...




As to what happened to the super co-contribution, originally for $1500 and now $500 I found best explained here

http://www.smh.com.au/money/super-and-funds/the-axe-falls-on-cocontributions-20111129-1o59m.html

''...The Assistant Treasurer, Bill Shorten, said the co-contribution was being cut because the new low income super contribution would benefit more than three times as many people.
He said 3.6 million low earners were expected to receive the benefit, which refunds the 15 per cent contributions tax for those earning less than $37,000. It will  be streamlined so the refund is paid automatically to members' super accounts without requiring them to lodge tax returns...."

I was speaking from the experience of my own circumstances, rather than appreciating the complete picture. I can understand that it was a better move for most low income contributors, thus  will withdraw my comment. But as you point out, some things don't work out as everyone thinks.

Our circumstances were such that I (we) were better off with the  co-contribution (over 60, SMSF both in pension phase, 80% loss suffered in 2008..but recovering  Husband, 65, received a part aged pension this month ). 

 My expectations of saving inside super have always been to provide exactly what I understand super was designed for... an income in retirement, so I draw just the minimum amount as a pension. Make it last as long as possible.

Now that I have become more active in my investments and the issues surrounding them, I am aghast that one can withdraw lump sums to go on holidays or buy a new car, and THEN line up at Centrelink. And especially appalled  that there seems no end to the amount of funds high income earners can place into super. I would support a ceiling on tax concessions (perhaps there should be a $$ limit on the 15% contributions tax one can "pay" inside super? Could that be implemented more easily than a ceiling limit on fund size? )And I would support a tax on lump sum withdrawals. imo, get the tax break, stay infor the long haul ..

ps...I have a term deposit outside of super which I was intending to place into my super account next month.
After consulting my FA,  have decided to re-invest it outside of super for another 6 months. 
To wait and see what happens after Jan 2015.


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## sptrawler (22 May 2014)

k.smith said:


> As to what happened to the super co-contribution, originally for $1500 and now $500 I found best explained here
> 
> http://www.smh.com.au/money/super-and-funds/the-axe-falls-on-cocontributions-20111129-1o59m.html
> 
> ...




I'm in a similar situation, had to quit work do to ill health at 56, super was hit hard with gfc and now at 58 have to start a pension, so have all the pre 60 tax hassles.

Getting back on the super issue. From life experience, I know that any punitive measures to hit the few that have mega bucks in super, will have an adverse effect on the lower end, i.e us.

I just hope they change the ability to put money in, rather than change the taxation of funds already in there.

For example I have a friend the same age as me, who had a recent marriage break up. He has used what money he had left to buy a house, he still had to borrow money.
He is hoping to work to 67 and use some of his super to pay off the mortage. If he loses his job, he is hoping to be able to use his super to pay of the house.
His super is worth $90k, his mortage is $70k, he earns $50k.

With regard money outside of super, you and your husband can earn $18k each tax free outside super.
I know when I'm 60, i'll be going that way, but that is just my opinion.


----------



## k.smith (22 May 2014)

sptrawler said:


> .....
> Getting back on the super issue. From life experience, I know that any punitive measures to hit the few that have mega bucks in super, will have an adverse effect on the lower end, i.e us.
> 
> I just hope they change the ability to put money in, rather than change the taxation of funds already in there.
> ...




http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Submissions

There are quite a few new issues raised in some of the submissions here...
I haven't read them all


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## FxTrader (23 May 2014)

k.smith said:


> Now that I have become more active in my investments and the issues surrounding them, I am aghast that one can withdraw lump sums to go on holidays or buy a new car, and THEN line up at Centrelink.



Lump sum withdraw, cash splash then going on the pension is an attractive option for those with low super balances.  If you only have a small sum in super it's never going to provide a sufficient retirement income anyway, no doubt this is how some view this option. 

The bigger issue to me is how assets can be packaged to collect the age pension.  Because the principle residence is exempt from the assets test, at your preservation age you can draw money from super tax-free and structure your assets in a way that could allow you to live in a million dollar plus home in retirement and still collect either a full or part pension payment.  Your nearest financial planner can tell you all about it and many specialize in this area.  The whole issue of millionaire property owners collecting a government pension is a vexed one that the government will need to look at eventually.  Super savings should provide a retirement income stream and not be used as vehicle to manipulate finances to collect the age pension.


----------



## k.smith (23 May 2014)

FxTrader said:


> Lump sum withdraw, cash splash then going on the pension is an attractive option for those with low super balances.  If you only have a small sum in super it's never going to provide a sufficient retirement income anyway, no doubt this is how some view this option.
> 
> The bigger issue to me is how assets can be packaged to collect the age pension.  Because the principle residence is exempt from the assets test, at your preservation age you can draw money from super tax-free and structure your assets in a way that could allow you to live in a million dollar plus home in retirement and still collect either a full or part pension payment.  Your nearest financial planner can tell you all about it and many specialize in this area.  The whole issue of millionaire property owners collecting a government pension is a vexed one that the government will need to look at eventually.  Super savings should provide a retirement income stream and not be used as vehicle to manipulate finances to collect the age pension.




so many complications ! I think that you have a valid point that low balance super is problematic, fees eat into funds, there is an article in the SMH about that today


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## k.smith (23 May 2014)

FxTrader said:


> Lump sum withdraw, cash splash then going on the pension is an attractive option for those with low super balances.  If you only have a small sum in super it's never going to provide a sufficient retirement income anyway, no doubt this is how some view this option.
> 
> The bigger issue to me is how assets can be packaged to collect the age pension.  Because the principle residence is exempt from the assets test, at your preservation age you can draw money from super tax-free and structure your assets in a way that could allow you to live in a million dollar plus home in retirement and still collect either a full or part pension payment.  Your nearest financial planner can tell you all about it and many specialize in this area.  The whole issue of millionaire property owners collecting a government pension is a vexed one that the government will need to look at eventually.  Super savings should provide a retirement income stream and not be used as vehicle to manipulate finances to collect the age pension.




So many complications !

I think that you have a valid point that low balance super is problematic,  there is an article in the SMH about that today...

http://www.smh.com.au/business/the-...tliving-their-super-funds-20140523-38s31.html


''...The superannuation system is among the world's most expensive, according to an April report by Grattan Institute, with Australians paying $20 billion in fees and expenses on their balances, more than three times the median charged in other countries. "High fees would not be a concern if Australians were getting value for money. But high fee funds are damaging our retirement savings," it noted.

Returns from these funds have been dismal. In 2012, for example, Australia was one of only two countries to post a negative rate of return, according to OECD global pension statistics. Over the five years to 2012, Australian pension funds lost 2.6 per cent.....''

While paying off the mortgage of one's principal residence makes some sense, wouldn't people then lean towards relying on super to pay off their home loans? And if it were deemed OK to pay off the home loan, wouldn't it be so easy to raise new mortgages against the home for other purposes...cars, boats, holidays ?

AS for including the family home in the assets basket to be able to weed out those that are "sitting", how can that be administered? Property values differ from state to state. The average house price in each state? above a certain level?

It seems to me that the more complicated things become, the more loopholes become possible. Such a huge kitty of super $$$ is attracting a lot of interests, and we are being bombarded with advertising for super constantly. And by the looks of the article above, it is going to get even more complicated. Choice, choice and more choice... !

I think we should do more about getting people to save in the first place. 
Let kids experience the benefits of compound interest by hands on experience with their own bank account in the maths class...etc..


----------



## FxTrader (23 May 2014)

k.smith said:


> AS for including the family home in the assets basket to be able to weed out those that are "sitting", how can that be administered? Property values differ from state to state. The average house price in each state? above a certain level?



An issue that needs to be dealt with is - can I draw out my entire super balance (say $500k) as a lump sum from super tax free, pay off the mortgage on my million dollar home and collect a government pension?  (Answer: Yes)  In what way is this socially equitible or financially sustainable for our society?

Every council issues property owners with a property valuation (usually undervaluation) for rates purposes.  This can be used as a basis for determining pension eligibility, whatever the upper limit assigned.  The government can facilitate with the regulation and establishment of reverse mortages in coordination with the banks as an option for those property millionaires that don't qualify for the age pension but have inadequate savings to fund expenses should they elect to stay in their homes and not cash out.  Tough decisions are required to address the issue of funding the retirement of an aging population including limiting lump sum withdraws and age pension eligibility.


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## Judd (23 May 2014)

k.smith said:


> ''...The superannuation system is among the world's most expensive, according to an April report by Grattan Institute, with Australians *paying $20 billion in fees and expenses on their balances*, more than three times the median charged in other countries. "High fees would not be a concern if Australians were getting value for money. But high fee funds are damaging our retirement savings," it noted.




And why do you think the Financial Services Council (aka banks and AMP et al) have have promoted a call for a radical overhaul of the supervision of the SMSF sector  - home for more than $530 billion and the *nation’s fastest-growing nest egg?  Surely not because the industry and commercial super funds don't like SMSFs as they are growing quickly and undermining their market share?  After all $530 billion x 1.5% is a mere $8 billion not going to assist with the funding of the lease on the Lambo.  I mean really, such hardship is intolerable.


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## sptrawler (23 May 2014)

k.smith said:


> so many complications ! I think that you have a valid point that low balance super is problematic, fees eat into funds, there is an article in the SMH about that today




You should probably watch the Keating interview on Lateline, last week. It will be on the ABC website.

At the moment, the focus is on super being a pension replacement.

When in fact the super system was introduced to be a suplement to the pension, to give working people a better retirement and enhance their old age as the pension was always a struggle. 
The initial 3% super contribution, was in leiu of a pay rise under the wages accord.

That is being morphed into, if you have super, you don't require a pension or your pension should be reduced. I'm *NOT* talking about the *fat cats* scamming it.

These bloody politicians especially Labor need to re read the conditions super were implemented under. Jeez i get angry, the way history is re written.

 Below is a good read.

http://www.smh.com.au/business/the-...tliving-their-super-funds-20140523-38s31.html

I suppose what all these outraged Fairfax media people should be really jumping on.
Is the lie perpetrated on working class Australia, by Hawke and Keating, that the supersystem was designed to let you put money away to enhance your retirement.


----------



## Julia (23 May 2014)

sptrawler said:


> You should probably watch the Keating interview on Lateline, last week. It will be on the ABC website.



I did watch that and didn't find it a criticism of the current compulsory Super as much as advice that we need to adjust savings programs according to the ever changing demographics of people living longer and longer.
As I understood what he was saying, he was recommending that a further 'insurance scheme' should be put in place to cover the possibility that people might live into their 90's and beyond.
He made complete sense to me, but I imagine politically it would be a hard sell.



> At the moment, the focus is on super being a pension replacement.
> 
> When in fact the super system was introduced to be a supplement to the pension, to give working people a better retirement and enhance their old age as the pension was always a struggle.



Really?   I wasn't living here when compulsory super was introduced so I've always assumed it was introduced with the aim that - over time - it would provide an alternative to the age pension.  Even at that time demographers would have foreseen the blow out which inevitably would occur as more retirees came into the system with fewer workers supporting them.

  How do you define "a struggle"?

eg A pensioner couple receives nearly twice as much as a single pensioner, but the single pensioner has the same council rates, insurance, phone, electricity etc.  Who is struggling?  Both kinds of households?  Just the single pensioner?

It doesn't seem reasonable to me that compulsory super would have been introduced just to make life 'better' in retirement.  Surely that should be up to individuals?
eg if they want to go for extended overseas holidays, update their car every year etc, surely it shouldn't be at the expense of the taxpayer and they should be prepared to save separately for that sort of lifestyle.

Where do you expect the money to come from to fund full age pensions, if not from compulsory Super, eventually?
From the same taxpayer who funds Newstart, Youth Allowance, Disability Support Pension, Carer Pension, Sickness Allowance,  Family Tax Benefits etc etc etc?
There will simply not be enough of them to balance the numbers of retirees with the baby boomers living as long as they probably will.

Surely politicians should be able to take into account changing demographics and other circumstances, such as diminished income from the once great mining boom etc, without being hung out to dry over the need to adjust community expectations?

I've just watched most of Joe Hockey on Q & A from last Monday and commend his patience.
Only one question I heard was not antagonistic and demonstrating a reluctance to accept reality.
Further, he was presented with outraged examples of questions that had no basis in fact, eg presumably people taking as gospel what they had read in the SMH or heard from Labor et al.
Mr Hockey managed to, without losing his calm, and in the face of overt antagonism from the host, disabuse most of these people from their erroneous assumptions.

Good on him for being prepared to face what he would have known would be a largely hostile audience and host.  He is a far better communicator than Mr Abbott.



> Below is a good read.



Do you really think so?  One extract from this typical SMH approach:



> But the industry is plagued by high fees and a narrow range of products for retirees to invest their savings in. Coupled with poor spending decisions by retirees - who often cash in their super and splash out on holidays and cars - it has meant more Australians are outliving their investments.



Well, duh!  Perhaps don't spend up quite so prolifically on expensive holidays and new cars.
We all make choices throughout our lives.  No reason retirement should be any different imo.

And if you don't like the fees in the public super funds, get financially literate and run your own fund.
Just for god's sake, stop whining!


----------



## sptrawler (23 May 2014)

Julia said:


> I did watch that and didn't find it a criticism of the current compulsory Super as much as advice that we need to adjust savings programs according to the ever changing demographics of people living longer and longer.
> As I understood what he was saying, he was recommending that a further 'insurance scheme' should be put in place to cover the possibility that people might live into their 90's and beyond.
> He made complete sense to me, but I imagine politically it would be a hard sell.
> 
> ...




Julia if you watched the Keating interview, he said super was designed to help people have a better retirement, but it was designed to 80 years life expectancy.
The pension was always a minimal amount, it was only really made decent by Rudd, prior to him i think the single pension was about $13,000, so we are not talking many years ago.

Here is my memories of how super was born, from a workshop floor perspective.
Back in the late 70's early 80's post Whitlam, Fraser put in place a wages freeze as they had huge debt from Gough.
John Howard was his treasurer and it was quite funny, he was always on t.v appologising for stuffing up a bit like Wayne Swan. The difference was Howard picked up the nickname of honest John, Wayne wasn't so lucky.
Everyone got sick of the wages freeze and prices kept going up.

So along comes the Jimmy Barnes of politics, Bob Hawke, the working class hero. 
The promise i remember was he would do away with import parity pricing, as fuel was a tax on the working man, needless to say he didn't, instead he introduced the current fuel excise with indexing.lol

Unemployment and interest rates were very high, I remember going for a job in Perth in 1982 in a small business employing 4 people, there were 170 applicants.
Anyway Hawke/Keating and Kelty(ACTU) decided the best way forward was an agreement between the unions and the government. 
The unions agreed to not pursue wage rises outside the industrial wages commission, who the government controlled and wage rises would be linked to cpi.

Well non of the payrise(from memory) ever equalled cpi and when the workers kicked up the unions shut them down, told them they didn't have union support and risked personal litigation.
This brought down wages in real terms and also brought down unemployment and inflation.
Anyway in 1992 the super gaurantee was introduced and 3% was put away instead of a payrise.

It was started because Australians had no savings and the banks borrowed all their funding overseas.

Here is a link to Keatings interview, it starts off fairly dry but gets interesting from around the 10minute mark. He more or less says the claim that super is a huge tax burden is a furphy by treasury. Also it is being talked up by the media, wow would you believe that, Tony looked aghast.lol

http://www.abc.net.au/news/2014-05-...gevity-tax-to-supplement-super-income/5440986

With regard Hockey on Q & A, I loved the young lady that said she was being made redundant in Canberra by the Government, and wouldn't be able to recive the dole for six months as she was under 30. 
Hockey said by the current rules you wouldn't be able to access the dole untill your reduncy ran out anyway. 
She showed how stupid she was, those rules have been around forever, if you get 12 months redundancy pay, you cant claim the dole for 12 months.jeez
Tony jumped in trying to save the day" she aaaasked ana anaother question" what a dick.


----------



## banco (24 May 2014)

k.smith said:


> AS for including the family home in the assets basket to be able to weed out those that are "sitting", how can that be administered? Property values differ from state to state. The average house price in each state? above a certain level?




A million dollar asset is a million dollar asset whichever way you cut it.  If you don't want to sell it that's fine but don't expect to get the pension.


----------



## qldfrog (24 May 2014)

as I see it, the pension should be merged in a a single minimal welfare safety net; 
be irrespective of age and be VERY low: a subsistence only level;
This minimum subsistence income would ne the same for each individual: 20y old newstart, disability, etc
It would not be in any way an incentive and should not be provided to anyone with any assets now;
if I am unemployed tomorrow,I will not received a cent ever until bankrupt;
Some will say we should not change the rules halfway, but rules for me have been change again and again and i pay, i do not recive... so not that keen on hearing winging...


I am amazed by the fact  that as a top percentile working taxpaper, i am doing all my self funding planning on earning 60k a year (for a couple) saving with two incomes our whole life. 
I will spend my whole life taxed to the max aiming at this, while current pension is distributed without much check and is around 30k a year (more than half what my ultimate aim is after taxes)  to some people who may have spent their life boozing gambling or not even work ever!
Where is the fairness there? And if there is no fairness, you seed potential social and economic drama, or incite peope to rort the system;

Abbot budget is a disaster but it has the merit of raising the issue.


----------



## Julia (24 May 2014)

It's interesting to consider all the perspectives on welfare, isn't it.   Qld frog regards the pension as much too generous, whilst it seems most of the people receiving it feel extremely hard done by and believe somehow they have prepaid an entitlement to something much more, to the point where - even though there are actually no cuts to be made, just a change as from a few years hence in the way increases are indexed - they are full of outrage (commendably egged on by Labor and Fairfax) and apparently about to expire prematurely because they will be completely unable to afford a maximum of $70 p.a. to visit their GP.

And so many of them are saying how Gen Y have such a sense of entitlement!!

Ferrett:  I don't think too many people would disagree with you over broken promises, but I wonder how many promises relating to what Abbott et al said prior to this last election have been broken?

Certainly the proposed $7 co-payment constitutes a breaking of the promise to make no changes to Medicare, and there might be other examples which you or other people can clarify.

But eg as I've just described above, people have managed to believe their pension is going to be cut when it's not, and when afaik, any changes to the indexing of future rises will not occur until after the next election.  Someone will correct me if I'm wrong on this.

Ditto the claims by Fairfax and the ABC that lowest income groups will be 'taking a cut of x%'.
That implies their actual Newstart, Sickness Allowance/whatever is going to be reduced.
I don't think that's right at all in most instances but rather future increases will be at lower rate.
Again, happy to be corrected if I'm wrong in this interpretation.  I also don't know anything about family tax benefits and how they work.

I'm a bit surprised that people are so astonished that Mr Abbott has broken any promises.
Don't we all remember when he said it was only a promise if you had it from him in writing?

There seems to be a bit of rewriting of history going on with the impression being cast about that people voted enthusiastically for Mr Abbott in the belief that he would carry out everything he said before the election, that he had no history of being extremely tricky (?shifty, even) over the time he has been in parliament.

Isn't what really happened that the electorate had just decided Labor had to go, for entirely valid reasons, and the Coalition were elected by default?
Perhaps I'm unfairly cynical, but I never had any expectation that an Abbott government would be anything like the government run by John Howard, and don't know why anyone else would either.


----------



## Julia (24 May 2014)

PS to above post:
Another clear broken promise was "no new taxes", then telling high income earners they would be paying a deficit reduction 'levy'.


----------



## medicowallet (24 May 2014)

Right on Julia,

The average joe doesn't understand the difference between a cut on an expected rate of increase vs a real cut.

AFAIK, what you are saying is correct, and that this future spending was put in by Labor et al. as a poison pill to make a future LNP coalition look like the bad guys when they reversed the unsustainable pseudo-promises.

Quite "clever' really 

MW


----------



## qldfrog (24 May 2014)

Julia said:


> Isn't what really happened that the electorate had just decided Labor had to go, for entirely valid reasons, and the Coalition were elected by default?
> Perhaps I'm unfairly cynical, but I never had any expectation that an Abbott government would be anything like the government run by John Howard, and don't know why anyone else would either.



totally agree Julia, it was very painful for me to vote Abbot: you could have given me a Costello or a Turnbull and I would have planted posters in my front yard; But i still had a fine hope i was maybe wrong: Tony Abbott is a Rhode scholar (my spelling?) and I have a lot of respect for that;
but no, redneck attitude toward science/solar energy; integrist vision on economy; so will i join the voters for the next clown palmer or others at the next election;
At least he stopped the boats, but all the rest has been disappointment after disappointment;
A nation  succeeds on vision, shared aim, well not with T Abbott
Anyway i divert and the vision for super is:
do not count on anything in your older age;
I was naively still thinking that after 90 if i reach it I might be able to rely on some help;
well forget it, and i will probably be taxed heavily on my self funded retirement income: the ants have to pay for the cicadas...


----------



## Smurf1976 (24 May 2014)

Whilst I did not agree with some of Howard's ideas and policies, he was undoubtedly a far more respectable, honest and overall reasonable Prime Minister than Tony Abbott will ever be.

Part of the difference comes down to personal attitude. Howard seemed willing to accept that he may not be right, and that the other side of the debate warranted at least listening to. Not so with "my way or the highway" Tony Abbott.

Back to superannuation, I have never contributed one cent voluntarily. The reason is simple, I just don't trust government not to meddle with this already highly regulated investment vehicle in some way. There's just no point ending up with enough money to retire at age 60 then having the government decide that you can't access it until you're on your death bed. 

Whilst I have taken steps to ensure that the employer contributions are invested wisely, overall I treat superannuation as a bonus if I get it rather than something that can be relied upon in retirement. I just don't trust them (governments) not to change the rules in some way to the detriment of most.


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## k.smith (25 May 2014)

Julia said:


> I did watch that and didn't find it a criticism of the current compulsory Super as much as advice that we need to adjust savings programs according to the ever changing demographics of people living longer and longer.
> As I understood what he was saying, he was recommending that a further 'insurance scheme' should be put in place to cover the possibility that people might live into their 90's and beyond.
> He made complete sense to me, but I imagine politically it would be a hard sell....''




It perhaps worthwhile to post a link to the* transcript *of Mr. Keating's interview on Lateline. 

http://www.abc.net.au/lateline/content/2014/s4001033.htm

He also spoke about "shelter" wealth....




Julia said:


> ''....Really?   I wasn't living here when compulsory super was introduced so I've always assumed it was introduced with the aim that - over time - it would provide an alternative to the age pension.  Even at that time demographers would have foreseen the blow out which inevitably would occur as more retirees came into the system with fewer workers supporting them....''




I think sptrawler is right.

http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Discussion-Paper

''...Australia has a three pillar approach to the provision of retirement incomes, comprising the means tested and publicly funded Age Pension, compulsory private savings through the Superannuation Guarantee arrangements, and voluntary private savings supported by taxation concessions. 
*The Age Pension remains the main support in retirement for those who are not able to save a sufficient amount during their working life.* Superannuation was designed to reward and support all Australians to save for a comfortable, secure and financially adequate retirement....''






Julia said:


> ......How do you define "a struggle"?
> 
> eg A pensioner couple receives nearly twice as much as a single pensioner, but the single pensioner has the same council rates, insurance, phone, electricity etc.  Who is struggling?  Both kinds of households?  Just the single pensioner?.....'




This...

http://www.humanservices.gov.au/cus...ink/age-pension/payment-rates-for-age-pension 

Single Pension = $842.80 per fortnight ($421.40 per week)

Couple = $1270.60 per fortnight - just 66% more ( $635.30 per week)

$421.40 a week or $60.20 per day.
Or in recent terminology...
http://www.smh.com.au/federal-polit...e-hockey-defends-7-gp-fee-20140515-zrdb6.html

$60.20 per day is the equivalent of the cost of 2.7 packets of cigarettes a day. 



Julia said:


> ......
> It doesn't seem reasonable to me that compulsory super would have been introduced just to make life 'better' in retirement.  Surely that should be up to individuals?
> eg if they want to go for extended overseas holidays, update their car every year etc, surely it shouldn't be at the expense of the taxpayer and they should be prepared to save separately for that sort of lifestyle.....''




What percentage of a basic wage would it take to save for a self-funded retirement? 
The less income a person earns, the higher percentage goes in basic living essentials, and the less chance there is that there will be surplus to save, isn't that the reason we got compulsory super ? It is the best chance of savings that many will get, but for many, unless there is a pension, it's will never be enough. 
And compulsory super's stated aim is to provide for a "comfortable, secure and financially adequate retirement" imo  that rules out both excessive retirement pensions by the multimillionaire depositors, and taking out lump sums for cars or holidays.
Home mortgage, perhaps.


----------



## k.smith (25 May 2014)

Julia said:


> .....Where do you expect the money to come from to fund full age pensions, if not from compulsory Super, eventually?
> From the same taxpayer who funds Newstart, Youth Allowance, Disability Support Pension, Carer Pension, Sickness Allowance,  Family Tax Benefits etc etc etc?
> There will simply not be enough of them to balance the numbers of retirees with the baby boomers living as long as they probably will....




Hopefully,some pressure will be alleviated by more people who just keep working?
According to the ABS, 25% of people between 60-69 are still working, and some super funds online are saying a lot more expect to work into their seventies. Perhaps there will also need to be a shift in the distribution of wealth?
http://www.abs.gov.au/ausstats/abs@...ummary&prodno=6554.0&issue=2011–12&num=&view=



Julia said:


> ...And if you don't like the fees in the public super funds, get financially literate and run your own fund....




Wouldn't that depend on how much you have in super?
From my experience, the cost of running a SMSF is $2000 p/a +, and imo, small balance super would not support such a fee.
Julia,  everyone can go to the "university of finance", but that doesn't mean that they will qualify with a diploma...people are all different


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## Judd (25 May 2014)

k.smith said:


> Snip*
> 
> And I would support a tax on lump sum withdrawals.
> 
> Snip*




A thought crossed my mind, obviously as I wouldn't be typing this, if such an arrangements were implemented there would need to be some clear way to distinguish between funds placed into superannuation on an after-tax basis and those which  weren't as well as, maybe, earnings on those funds.  Could be messy.  Nevertheless worthy for consideration.


----------



## Julia (25 May 2014)

sptrawler said:


> With a bit of luck all super won't be available untill pension age and no pension is available untill all your super is exhausted.
> That sounds fair for everyone.



How would that work?  If no government pension is available until ALL your Super is exhausted, where is one's income in retirement going to come from when the Super balance is too low to generate a return that is enough to live on?  Or are you actually suggesting people should be forced to use up all their capital before having any access to government pension, regardless of their age or circumstance?



FxTrader said:


> The bigger issue to me is how assets can be packaged to collect the age pension.  Because the principle residence is exempt from the assets test, at your preservation age you can draw money from super tax-free and structure your assets in a way that could allow you to live in a million dollar plus home in retirement and still collect either a full or part pension payment.  Your nearest financial planner can tell you all about it and many specialize in this area.  The whole issue of millionaire property owners collecting a government pension is a vexed one that the government will need to look at eventually.  Super savings should provide a retirement income stream and not be used as vehicle to manipulate finances to collect the age pension.



+100.



k.smith said:


> http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Discussion-Paper
> 
> ''...Australia has a three pillar approach to the provision of retirement incomes, comprising the means tested and publicly funded Age Pension, compulsory private savings through the Superannuation Guarantee arrangements, and voluntary private savings supported by taxation concessions.
> *The Age Pension remains the main support in retirement for those who are not able to save a sufficient amount during their working life.* Superannuation was designed to reward and support all Australians to save for a comfortable, secure and financially adequate retirement....''




Um, you post a link to what appears to be a Treasury paper, including what I'd assumed was a quote from Treasury, although it sounded more like what a politician would say than the way Treasury articulates.
Sure enough, your quote is from a foreword to the discussion paper from none other than Mr Bill Shorten.
Given Mr Shorten doesn't believe we have any sort of structural problem and there is no need to address the fact that Australia has the highest spending growth projection in the world, I'm less than disposed to take his word for anything to do with Super or, for that matter, savings in general.



> Single Pension = $842.80 per fortnight ($421.40 per week)
> 
> Couple = $1270.60 per fortnight - just 66% more ( $635.30 per week)




OK, your definition of a welfare payment that is a struggle is the above.  I wonder how you'd define the Newstart payment of around $250 p.w.?   Let's remember that most aged pensioners will at least own their own home and car.  In contrast, a large number of people who lose their jobs - or can't find one - will be renting and have minimal savings.  Good luck with finding rental accommodation in most areas where the jobs exist for $250 p.w., let alone provide yourself with food, transport etc etc.

That's a dilemma for governments.   Already there are people who are disinclined to look for a job.  The government is trying to address this with its harsh new measures.   Perhaps it will work.  I don't know.
Perhaps it's worth a try, or work for the dole, even just to get people to understand the ethic of a structured day and putting in the effort of making a contribution, as opposed to sitting at home playing with the studs in their noses.

All welfare obviously needs to be a safety net, not a long term viable way to live imo.



> What percentage of a basic wage would it take to save for a self-funded retirement?



OK, let's take a very rough look at this:

Average wage $1500 p.w.   ergo  $78,000 p.a.
Let's round it down to just $70,000 and, even more ridiculously conservatively, suggest it doesn't rise during a working life of age 25 to 65, forty years.
Let's even assume it earns nothing and is not compounded, neither of which would actually happen.

At 15% compulsory super, again rounding down for simplicity, that would be $400,000.

So, obviously above is almost meaningless because it doesn't represent a real situation where the 15% p.a. amount would be earning a return, and compounding would have huge effect.

I'm not suggesting $400K would be enough for self funded retirement, but I'm guessing the resulting amount from a fully calculated invested, compounded amount might be.  Obviously inflation would need to be taken into account also, as would the reality that no one is going to be staying on the same salary all their working lives.

So perhaps not as difficult as you might think.



> The less income a person earns, the higher percentage goes in basic living essentials, and the less chance there is that there will be surplus to save,



Yes, agree.  But all around us we see evidence of people on high incomes who haven't bothered to save, and others on much less who have set different priorities and have saved substantial amounts.  Also, some folk who have sought financial literacy and learned how not to lose money.  Seems to me it's often about attitude and goals than just dollar amounts.

Or I might be entirely misguided, and it's all about luck, nothing to do with effort.



k.smith said:


> Hopefully,some pressure will be alleviated by more people who just keep working?
> According to the ABS, 25% of people between 60-69 are still working, and some super funds online are saying a lot more expect to work into their seventies. Perhaps there will also need to be a shift in the distribution of wealth?



Well, I don't know about you, but I certainly wouldn't want to be working until I was 70.  And it's just not going to be feasible for a lot of people engaged in hard physical labour.

Before that happens, I'd like to see some of the excessively generous treatment of Super curtailed somewhat.
We have already discussed the unfairness of people living in exempt multi million dollar homes and receiving the full pension.  Also surely there should be a limit to the wealth creation being engaged in quite legally by people who are very well off and continuing to receive tax concessions in Super with accounts of $10M and $20M.  Just seems to me extremely unfair that tax is being applied to young people on the average wage, trying to get together enough for deposit on their first home, so that that tax can continue supporting the full age pension for some wealthy widow.



> Wouldn't that depend on how much you have in super?
> From my experience, the cost of running a SMSF is $2000 p/a +, and imo, small balance super would not support such a fee.



Accounting/audit costs vary enormously.  Some of the big glossy firms will charge $6000 for what a good suburban accountant with SMSF experience will do for $1200.
Anyone who is accepting an arrangement where fees are charged on % of assets basis is being suckered imo, especially as the amount becomes higher.
The fee should be based on the number of hours of work required to complete the tax return.  If there are few transactions, it's pretty hard to see any justification for $2000+.

I don't know what fees public super funds charge, even if you only had $200K to start with, a fee of, say, $1200, would only represent about 0.06%.  Is that actually more than you'd pay an often poorly performing public fund?


> Julia,  everyone can go to the "university of finance", but that doesn't mean that they will qualify with a diploma...people are all different



Totally agree.  And there will be people who simply don't have the capacity to go to your 'university of finance' in the first place.  There will always be a safety net for them.

I'm not talking about people like that.  I've always felt strongly that we need to recognise the differences in individual capacities, whether derived from genes, childhood modelling, or life circumstances.
I'm talking about the well educated, highly intelligent people who just don't think about the need to save, the folk who regard income not required for non-discretionary payments like insurances, rates, etc., as money for a holiday, new car etc.

OK, fine, we all have our own priorities.  I'm just a bit sick of some of these people making remarks like
"we couldn't be expected to have enough in retirement because compulsory super only came in in the last years of our working lives".  Well, duh!   Perhaps just give a bit of thought to whether you want to be restricted to income from only what will inevitably be a dwindling age pension as the numbers seeking it more and more blow out in relation to those workers who are going to be paying for it.


----------



## sptrawler (25 May 2014)

Julia said:


> How would that work?  If no government pension is available until ALL your Super is exhausted, where is one's income in retirement going to come from when the Super balance is too low to generate a return that is enough to live on?  Or are you actually suggesting people should be forced to use up all their capital before having any access to government pension, regardless of their age or circumstance?
> .




The quote was tonque in cheek, poor attempt at sarcasm after build up of frustration. Appologies


----------



## k.smith (25 May 2014)

Julia said:


> .....Um, you post a link to what appears to be a Treasury paper, including what I'd assumed was a quote from Treasury, although it sounded more like what a politician would say than the way Treasury articulates.
> Sure enough, your quote is from a foreword to the discussion paper from none other than Mr Bill Shorten.
> Given Mr Shorten doesn't believe we have any sort of structural problem and there is no need to address the fact that Australia has the highest spending growth projection in the world, I'm less than disposed to take his word for anything to do with Super or, for that matter, savings in general....




Ok...perhaps you might be more inclined to read it from an Australian Government document released 12 May 2014

http://www.guidesacts.fahcsia.gov.a...guide-4.8/ssguide-4.8.1/ssguide-4.8.1.10.html

''..... Purpose of superannuation
The primary purpose of a superannuation scheme is to provide its members with financial resources and other benefits during their retirement............Extended superannuation coverage, due to award provisions and the SGC legislation, has increased the level of retirement benefits available to Australians. This, together with voluntary savings *and the age pension*, will fund higher living standards during retirement....''


----------



## Julia (25 May 2014)

sptrawler said:


> The quote was tonque in cheek, poor attempt at sarcasm after build up of frustration. Appologies



No apology required, sp.  Just thought I might have been missing something in what you were meaning.  Totally understand your frustration.


----------



## k.smith (25 May 2014)

Julia said:


> .....OK, let's take a very rough look at this:
> 
> Average wage $1500 p.w.   ergo  $78,000 p.a.
> Let's round it down to just $70,000 and, even more ridiculously conservatively, suggest it doesn't rise during a working life of age 25 to 65, forty years.
> ...




Perhaps it is more difficult than *you* think....

My question was  _"....What percentage of a* basic *wage would it take to save for retirement?_

Your example was for an amount of $78,000. 
You are talking about an average wage...
if 5 wage earners receive $20k, $30k, $40k, $50k and $600k, the average wage is $148k

The stats suggest that more than 80% of wage earners receive LESS than $78,000. I know the stats are from 2010-2011, but I don't think wages have increased that much in the last three years? 

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5673.0.55.003 see Table 2.
PERCENTAGE DISTRIBUTION OF EARNERS, SELECTED WAGES AND SALARIES INCOME RANGES, AUSTRALIA, 2010-11



       $0     - $15,600                  18.1%

$15,600    - $31, 200                 17.2%

$31,200    - $52,000                   25.4%

$52,000    - $78,000                   20.9%

$78,000 +                                   18.5%


Does anyone have any thoughts about the aged 55+ transition period?
Is it really a good idea to draw down at such a "young" age?


----------



## sptrawler (25 May 2014)

k.smith said:


> Perhaps it is more difficult than *you* think....
> 
> My question was  _"....What percentage of a* basic *wage would it take to save for retirement?_
> 
> ...




It is all a very difficult and personal journey.
I was brought up in a family with four siblings, my parents always found it difficult to make ends meet, this caused a lot of arguement and physical conflict.
This in turn motivated me, to make sure I was never in a financial situation, that could cause the same issues in my family life.
I made it my personal goal to save in my early years, pay cash or don't buy it and invest money so it makes money.
I left school at 15, did an apprenticeship, had four children before I was thirty and always worked for wages.
I retired at 55 due to health issues and am self funded, I don't expect to ever be on the age pension.
So in a nutshell k.smith, if you work towards it and plan for it from an early age, 55 retirement is possible. There was no minimum or maximum put away, just minimal wastage.
I would have prefered to have worked to 60, from a personal perspective.


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## Judd (26 May 2014)

sptrawler said:


> It is all a very difficult and personal journey.
> I was brought up in a family with four siblings, my parents always found it difficult to make ends meet, this caused a lot of arguement and physical conflict.
> This in turn motivated me, to make sure I was never in a financial situation, that could cause the same issues in my family life.
> I made it my personal goal to save in my early years, pay cash or don't buy it and invest money so it makes money.
> ...




Yep.  Took me a few years to realise it was more important to focus on what I can do in regard to my fiances rather than looking over the fence at others.  So what if others have "spent their life boozing gambling or not even work ever!"  I've probably have a better standard of living than those individuals and can take some personal pride in my achievements.


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## FxTrader (26 May 2014)

k.smith said:


> Does anyone have any thoughts about the aged 55+ transition period?
> Is it really a good idea to draw down at such a "young" age?



This only applies if you are born before 1 July 1960 and retire.  Even then from a tax perspective it's much more advantageous to delay retirement until age 60, or until age 65+ if you're also planning to collect an age pension.

The challenge though for many in this age group will be retaining or securing work and maintaining an adequate health condition to work.  Having experienced ageism when seeking employment myself, I can sympathize with the dilemma many older workers face trying to maintain and gain employment.  Retirement is forced on many due to the reluctance of employers to hire mature age workers, whatever their experience level, due to loss of previous employment.

It's just fanciful nonsense that a significant number of people can or will work to age 70, the stats on this are clear.  The current government knows this but has crafted a policy based on this fiction to cut the cost of providing the age pension.  A more creative, thoughtful and researched response is required to deal with the financial needs of an ageing population.


----------



## pixel (26 May 2014)

FxTrader said:


> This only applies if you are born before 1 July 1960 and retire.  Even then from a tax perspective it's much more advantageous to delay retirement until age 60, or until age 65+ if you're also planning to collect an age pension.
> 
> The challenge though for many in this age group will be retaining or securing work and maintaining an adequate health condition to work.  Having experienced ageism when seeking employment myself, I can sympathize with the dilemma many older workers face trying to maintain and gain employment.  Retirement is forced on many due to the reluctance of employers to hire mature age workers, whatever their experience level, due to loss of previous employment.
> 
> It's just fanciful nonsense that a significant number of people can or will work to age 70, the stats on this are clear.  The current government knows this but has crafted a policy based on this fiction to cut the cost of providing the age pension.  *A more creative, thoughtful and researched response is required to deal with the financial needs of an ageing population*.




+100% and "Amen to that!"
Ageism has been in place for decades. The only alternative I had at 55: Going it alone, as a "Sole Trader".


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## sptrawler (26 May 2014)

FxTrader said:


> The current government knows this but has crafted a policy based on this fiction to cut the cost of providing the age pension.  A more creative, thoughtful and researched response is required to deal with the financial needs of an ageing population.




As did the previous Government when lifting the retirement age to 67, lets keep the discussion balanced.

But I agree 100% with your sentiments. 
The rhetoric is probably aimed more, at keeping the aged workers focusing on holding their current jobs untill 70. Rather than considering early retirement or job swapping.


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## sydboy007 (26 May 2014)

k.smith said:


> http://www.abs.gov.au/ausstats/abs@.nsf/mf/5673.0.55.003 see Table 2.
> PERCENTAGE DISTRIBUTION OF EARNERS, SELECTED WAGES AND SALARIES INCOME RANGES, AUSTRALIA, 2010-11
> 
> 
> ...




The much bigger issue is the cost of shelter these days compared to 20+ years ago.  Rents chew up a greater share of incomes than they did in the past, and mortgages are generally quite unaffordable.  In this scenario it's quite difficult to have a lot of surplus income to save, and with the precarious nature of employment today, I'd say anyone salary sacrificing into super better have a nut equivalent to 6 months after tax income or they could be in trouble pretty quickly.

When I compare buying my house in Sydney in 1997, the $300K purchase was roughly 3.5 times my income.  Now it would be roughly 9 times.

http://www.macrobusiness.com.au/2014/05/what-we-earn-is-irrelevant-when-we-pay-so-much/

Problem? It is if you’re trying to buy into the housing market. Take a modest house of say $400,000 (very modest depending on location). A worker on $50,000 – and these represent nearly two thirds of all workers remember – is facing a price multiple which is 8 times their gross pre-tax income. *Basically, two thirds of us are stuffed in terms of affording even a modest $400,000 property if we weren’t already in the market*. A more reasonable price multiple of say 5 times income would require an income of $80,000 per annum or more. But there are less than 15% of Australians who fit this category.

But even based on combined household incomes, *a third of all households earn less than $52,000 per annum*. Another 14% to 15% earn between $52,000 and $78,000 and another 11% or 12% earn between $78,000 and $104,000. A reasonably healthy 30% of all households bring in a combined $104,000 per annum or more, but seven in ten bring in less than that.

*Taking our modest $400,000 home again, and roughly half of all household incomes fall short of the $80,000 mark required for a price-to-income multiple of five*. For one in three of every households, their combined income means a price to income multiple of eight times. They are pretty much stuffed, still.

Personal income profiles of the 25-34 year old age group are pretty much in line with the Australia wide picture. More than half earn less than $52,000 and roughly eight in ten earn less than $78,000 per annum, which means eight in ten of this age group – who are at the peak of their family formation potential – would be faced with a price multiple of more than 5 times incomes on a $400,000 property, and more than half would be faced with a price multiple which is eight times their income, or more.

None of this is great news. For developers trying to provide affordable new housing in new greenfield estates in urban fringe locations, the reality of these income profiles can’t be escaped. I had the privilege of visiting one such estate in south east Queensland recently and what I saw was absolutely first class product at very good entry level prices in a very well designed environment. No ‘McMansions’ here – just quality new detached three and four bedroom homes, on small lots, priced from around $350,000 – and in some cases less.

But even at $350,000, only around 15% or so of the *target 25 to 34 year old demographic* could afford to get in with a price multiple of less than 5 times an individual’s income. That proportion would rise taking into account combined incomes for this age group, but it won’t rise beyond around a quarter or a third. *The reality is that more than half this age group would find an entry level $350,000 home would be six times their combined incomes or more.* It would be tough going.


----------



## pixel (26 May 2014)

sydboy007 said:


> The much bigger issue is the cost of shelter these days compared to 20+ years ago.  Rents chew up a greater share of incomes than they did in the past,




Spot-on, Sydboy;
but that also applies to Aged-Pensioners - the older ones of whom won't even have had a chance to accumulate any meaningful Superfund "nest egg". In spite of having worked all their lives, paying taxes under the premise that would entitle them to a pension, they're now lumped into one bag with dole bludgers, drunks, and reckless spenders that should've saved for their future, but didn't.
In light of the above, I find it utterly offensive if the right-wingers now tar everyone with the same brush.
Ms Rich Bitch doesn't miss a meal if the GST for caviar goes up to 15% or also applies to bread and milk. But what about the 80-year old widow in a Homeswest flat, who stands to lose concessions for water and power rates, on top of unit charges going up?


----------



## sptrawler (26 May 2014)

sydboy007 said:


> The much bigger issue is the cost of shelter these days compared to 20+ years ago.  Rents chew up a greater share of incomes than they did in the past, and mortgages are generally quite unaffordable.  .




Agree Syd, I hope they do something to deflate the price of housing, as opposed to infate away the issue. 

If they chose the later, it will make it even more difficult, for those with little earning capacity or with no ability to bargain for higher wages.


----------



## FxTrader (26 May 2014)

sydboy007 said:


> The much bigger issue is the cost of shelter these days compared to 20+ years ago.  Rents chew up a greater share of incomes than they did in the past, and mortgages are generally quite unaffordable.  In this scenario it's quite difficult to have a lot of surplus income to save, and with the precarious nature of employment today, I'd say anyone salary sacrificing into super better have a nut equivalent to 6 months after tax income or they could be in trouble pretty quickly.



Not wanting to stray to far of topic here, but expect housing afforadability to only worsen if ABS projections for population growth come true - http://www.abs.gov.au/AUSSTATS/abs@.nsf/mediareleasesbyReleaseDate/7DB4DD841EA3A2A5CA2574B9001E26F6?OpenDocument.  

Compulsory super is only compulsory for employers, it should propabaly be so for individuals as well.


----------



## k.smith (26 May 2014)

k.smith said:


> Perhaps it is more difficult than *you* think....
> 
> My question was  _"....What percentage of a* basic *wage would it take to save for retirement?_
> 
> ...






sydboy007 said:


> The much bigger issue is the cost of shelter these days compared to 20+ years ago.  Rents chew up a greater share of incomes than they did in the past, and mortgages are generally quite unaffordable.  In this scenario it's quite difficult to have a lot of surplus income to save, and with the precarious nature of employment today, I'd say anyone salary sacrificing into super better have a nut equivalent to 6 months after tax income or they could be in trouble pretty quickly.
> 
> When I compare buying my house in Sydney in 1997, the $300K purchase was roughly 3.5 times my income.  Now it would be roughly 9 times.......




Your post sydboy007 goes some way into illustrating the problems there are for people to save.
So much of the income of so many is required for just basic living. To put a roof over one's head, whether you buy it or rent it eats into a large percentage of even a duel income family on $104k. 
What about the cost of groceries? Even the most basic of foods, a 3kg bag of "ordinary" unwashed potatoes cost $6.49 in our big name supermarket this morning ! Then there is gas and electricity, rates, insurance... do the sums, add up the list !
( and no, I am NOT whining....we still work, we save $$ by chopping wood and growing veggies, and enjoy doing that! but that is a lifestyle choice that most people either do not have the opportunity or the know  how to do )

The possibility of 60.7% (that is those earning less than $52k) of people putting that bit extra away and saving enough for retirement imo is remote. So there will have to be a safety net...the aged pension. We will have to reach a consensus on how that will be funded. The high income earners say they pay too much already and the low income earners complain that they will not have enough food on the table. I think that the facts are that low income earners will have a very bad time of it, and I think you do not have to be Einstein to figure that the social consequences will be detrimental to our society. 

 In time, with increased compulsory super contributions over a long period of perhaps more than 40 years of one's working life, I think the super system may work to provide retirement income for most. And that is a great thing. In the meantime, we have a system where all wage earners pay compulsory super, and some are financially able to contribute extra. Me too ! But in such times as where the government is looking to elk out more from the basic living costs of those who can least afford it, it has surely got to be time to curtail the massive tax concessions that occur in the super system at the high end and put a limit to tax free super withdrawals.


----------



## sptrawler (26 May 2014)

k.smith said:


> The possibility of 60.7% (that is those earning less than $52k) of people putting that bit extra away and saving enough for retirement imo is remote. So there will have to be a safety net...the aged pension. We will have to reach a consensus on how that will be funded. The high income earners say they pay too much already and the low income earners complain that they will not have enough food on the table. I think that the facts are that low income earners will have a very bad time of it, and I think you do not have to be Einstein to figure that the social consequences will be detrimental to our society.
> 
> In time, with increased compulsory super contributions over a long period of perhaps more than 40 years of one's working life, I think the super system may work to provide retirement income for most. And that is a great thing. In the meantime, we have a system where all wage earners pay compulsory super, and some are financially able to contribute extra. Me too ! But in such times as where the government is looking to elk out more from the basic living costs of those who can least afford it, it has surely got to be time to curtail the massive tax concessions that occur in the super system at the high end and put a limit to tax free super withdrawals.




From what information I can gather, from people who are retired in my circle of aquiantaces. 

The retirees that are doing it hard are those that don't own their own home, this is compounded if they smoke and drink.

Those that own there own homes are finding the pension adequate, and if they don't smoke or drink regularily , can afford small holidays.

Super was designed so workers could put money away to enhance their retirement. Once that super balance reached a certain level, their pension would be reduced gradually upto a point that it was felt you didn't require any pension.

So the real issue is, the people who reach retirement age and don't own there home, they are at the mercy of the rental market and still want a reasonable quality of life. 
That is very expensive to fund from consolidated revenue.

I think all these other side issues of people spending their 'super' to get the pension, is a smoke screen to hide the real issue.
It has nothing to do with super.IMO


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## k.smith (26 May 2014)

http://www.abc.net.au/news/2014-05-26/janda-tax-avoidance-name-and-shame/5478450

''...
A couple of weeks ago, fellow economic journalist Peter Martin from Fairfax published an article about the 75 ultra-high-earning Australians paying no tax.

All of them, according to the ATO's statistics, made more than $1 million from investments and/or wages in 2011-12 - the average was $2.6 million - yet none paid any income tax, Medicare levy or Medicare surcharge.

The reason was that, through Australia's generous system of tax concessions and loopholes, these seven-figure earners managed to cut their taxable income to $82.

It's not just the ultra rich either - the same ATO figures showed that 1,095 Australians earned over $150,000 that financial year without paying tax....''




I note that even a journalist earns less than the "average" wage of $78k...


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## sptrawler (26 May 2014)

k.smith said:


> http://www.abc.net.au/news/2014-05-26/janda-tax-avoidance-name-and-shame/5478450
> 
> ''...
> A couple of weeks ago, fellow economic journalist Peter Martin from Fairfax published an article about the 75 ultra-high-earning Australians paying no tax.
> ...




If it is true, then the ATO are well aware of how they are doing it. Therefore the labor government(2011-2012) and the current government are well aware of it.

Also if you are an economic journalist, you were probably aware of it.

Shame everyone sits on their thumbs for so long.

Also the reporter stating the average journalist earns less than $78k, must be very selective.
Rumpole's post of Ross Gittens, who i think is an average juornalist, said he earns heaps, in the post.


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## medicowallet (26 May 2014)

k.smith said:


> http://www.abc.net.au/news/2014-05-26/janda-tax-avoidance-name-and-shame/5478450
> 
> ''...
> A couple of weeks ago, fellow economic journalist Peter Martin from Fairfax published an article about the 75 ultra-high-earning Australians paying no tax.
> ...





I hope you realise that this is a SUPERANNUATION thread

NOT a thread on PROPERTY NEGATIVE GEARING.

But hey, if you change super rules, then this is what higher income earners will do, instead of paying a guaranteed 15% (well almost )  on earnings via super.
MW


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## medicowallet (26 May 2014)

sydboy007 said:


> The much bigger issue is the cost of shelter these days compared to 20+ years ago.  Rents chew up a greater share of incomes than they did in the past, and mortgages are generally quite unaffordable.  In this scenario it's quite difficult to have a lot of surplus income to save, and with the precarious nature of employment today, I'd say anyone salary sacrificing into super better have a nut equivalent to 6 months after tax income or they could be in trouble pretty quickly.
> .




And, I'll say it once again..

The great big elephant in the room is middle class welfare where middle income earners are given eg $10000 per annum which services $200000 of loan which allows them to bid up prices.

Then piss and moan when the gov lessens the money given to them.


Bring back reality where middle income earners support themselves, house prices will fall, and then middle class income earners will not be so dependent on handouts for their lifestyles...

Then scale off pensioners getting full pension if they get their super payouts and channel it into overpriced, unproductive property, and watch it fall again...

A win for australian society, and a way which will ensure that super can cover retirement that bit longer.

MW


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## brty (27 May 2014)

Very good reading this discussion, congratulations to all contributors, some very good points raised.

Just adding a little to the topic of putting money away for investment from a young age. It is not just the housing issue for the low/middle income earners. it is the HECS (or whatever it is now called) loan that is also a huge burdon for the young. Just as they start out, start earning more, thinking house family etc, BAM, out of left field kicks in the increased tax payments to pay it off. Young nieces and nephews are just entering this stage, though we are talking 30yo.
The combination of HECS and a mortgage is hurting those in the 25-34 age bracket. The high cost of child care means that nothing much is gained by Mum going back to work, while stay at home, doesn't cover everything. It's a situation where nothing can be put away for retirement. The lucky ones have grandmothers and grandfathers who step up to the plate in regard to childcare.

The both parents working, paying a mortgage and HECS, with a young family is the area of middle income welfare, we cut back much there, and there is no chance of them saving for retirement outside of the compulsory super, until they are into their late 40's to early 50's.

We, the baby boomers, have been lucky. We had no HECS, we bought houses relatively cheaply, then paid them off with the aid of inflation during the 70's and 80's. After paying off the house, we were set with a great deal of time and earning capacity to invest for the future, hence why so many posters here are doing well.
We also had relatively permanent employment, if one wanted it, another luxury the young find very hard to obtain, especially when having a mortgage.


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## sptrawler (27 May 2014)

brty said:


> Very good reading this discussion, congratulations to all contributors, some very good points raised.
> 
> Just adding a little to the topic of putting money away for investment from a young age. It is not just the housing issue for the low/middle income earners. it is the HECS (or whatever it is now called) loan that is also a huge burdon for the young. Just as they start out, start earning more, thinking house family etc, BAM, out of left field kicks in the increased tax payments to pay it off. Young nieces and nephews are just entering this stage, though we are talking 30yo.
> The combination of HECS and a mortgage is hurting those in the 25-34 age bracket. The high cost of child care means that nothing much is gained by Mum going back to work, while stay at home, doesn't cover everything. It's a situation where nothing can be put away for retirement. The lucky ones have grandmothers and grandfathers who step up to the plate in regard to childcare.
> ...




So what is your sugestion?

Keep blowing out the deficit?
Tax the crap out of the baby boomers, so all are on a pension?
Tax the crap out of manufacturing industries, that are closing down?
Tax the crap out of electricity, because everyone uses it, but they don't think it's a tax?
Tax the crap out of small industry, who is going broke anyway?
Tax the crap out of superannuation, so no one puts money in other than the employer contribution?
Tax the miners, when we are praying they don't fold?
Tax the retailers who can't make a profit?
Or set a price on a degree, that takes the place of the old leaving certificate and matriculation, if you want it work for it?
Funny how what goes around comes around, it took a long time to get rid of exams, then everyone could go to university. 
Now everyone goes to university we have to charge.lol


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## brty (27 May 2014)

sptrawler,



> Keep blowing out the deficit?




I thought this had already been discussed and dismissed, Australia has one of the lowest deficits in the world as a percentage of GDP, it's just a line used by politicians to justify whatever they want.

Think for a minute what would happen if the deficit was raised. 

The $Aus would fall.

 Manufacturing would be better off, Agriculture better off, mining better off. Higher inflation, GST income for the states better off, house prices might fall because of higher interest rates.

In reality, what solves a lot of Australia's perceived problems is a lowering of the $Aus, against the $US and especially against the Chinese Yuan. It is often called a race to the bottom, but why should we be last?

When looking at the forecasts in different companies DFS, with OZLs Khasmin yesterday being a good example, the $Aus they use for the future 2016-2018 always seems to be in the 80-85c range against the $US, not what it actually is. The other numbers are all very close to existing prices. The mining companies are clearly telling government to lower the dollar for investment to happen.

What will lowering the deficit do to the $Aus? 

Everyone wants a nice, clear, easy answer to problems, often there isn't one. I do not proclaim that just lowering the dollar will provide all the answers, just that it is one of a range of aspects that need close inspection. I certainly do not have all the answers, I just wanted to point out why and how it is now different to earlier times, therefore solutions probably need to be different as well.
We seem to be giving old solutions to new problems, it's not likely to end well.


----------



## FxTrader (27 May 2014)

brty said:


> I thought this had already been discussed and dismissed, Australia has one of the lowest deficits in the world as a percentage of GDP, it's just a line used by politicians to justify whatever they want.
> 
> Think for a minute what would happen if the deficit was raised. The $Aus would fall.
> 
> ...



Drifting off topic, but yes, being fiscally and monetarily responsible has kept the AUD exchange rate high releative to our trading partners thus supporting imports and damaging the competiveness of local industry.  That coupled with not so free trade agreements that heavily favour our trading partners is moving us back toward banana republic territory.  The tough budget we had to have will support the AUD if fully implemented.

As for taxing super, limiting the abuse of it by the very wealthy would be a good start.  Why not return to the concept of an indexed RBL?  Any realistic solution to funding the retirement of an aging population will involve compulsion and incentives to save that lock in funds over decades.  The alternative is excessive taxation on a shrinking working class.


----------



## craft (27 May 2014)

brty said:


> Very good reading this discussion, congratulations to all contributors, some very good points raised.
> 
> Just adding a little to the topic of putting money away for investment from a young age. It is not just the housing issue for the low/middle income earners. it is the HECS (or whatever it is now called) loan that is also a huge burdon for the young. Just as they start out, start earning more, thinking house family etc, BAM, out of left field kicks in the increased tax payments to pay it off. Young nieces and nephews are just entering this stage, though we are talking 30yo.
> The combination of HECS and a mortgage is hurting those in the 25-34 age bracket. The high cost of child care means that nothing much is gained by Mum going back to work, while stay at home, doesn't cover everything. It's a situation where nothing can be put away for retirement. The lucky ones have grandmothers and grandfathers who step up to the plate in regard to childcare.
> ...




I like this post BRTY, nice insight into what other generations are facing.

The age cohort that is facing a lot of pressure goes a bit higher than 35 probably as high as 45. 
The generation after the baby boomers missed out on full community funded education, face high housing costs (rent/purchase).  Need to save for their retirement whilst also contributing to the old system of intergenerational transfer for pensions. Now face supporting their kids until 30 if there are no jobs (or see their kids run up ridiculous education debts) and there will be less jobs because they can’t retire to free up positions. Tax relief for raising young families is not seen as valid and is being torn down as middle class welfare.

A dual income family making MEDIAN wages with a couple of school age kids would have to be the most squeezed group I could think of and the last budget kicked them in the balls when they were already down. I know families like this and they are doing it harder than other families I know where neither parent works.

People are screaming middle class welfare must end, but I think it is this middle class that is getting the crap squeezed out of them. Sure stop the benefits, but lighten the tax take on them so it’s not viewed as welfare.

I’ve got no issue with the transfer system looking after those that can’t look after themselves, disability, old age, temporary unemployment etc – but those that could help themselves and don’t, really annoy me because not only are they ‘stealing’ tax payers money on false pretences but they also bugger up the goodwill towards those that truly need a hand.  Look here for a Moral place to cut spending.

As for raising more revenue – look at closing the loopholes where capital goes to dodge the headline progressive income rates. Its time wage earner had a little weight lifted from their back.  A wage earner that needs to spend what they make to live has nowhere to hide. Capital is basically handed an invisibility cloak.  Tax me more (just don’t give it to bludgers)


----------



## sptrawler (27 May 2014)

craft said:


> I like this post BRTY, nice insight into what other generations are facing.
> 
> The age cohort that is facing a lot of pressure goes a bit higher than 35 probably as high as 45.
> The generation after the baby boomers missed out on full community funded education, face high housing costs (rent/purchase).  Need to save for their retirement whilst also contributing to the old system of intergenerational transfer for pensions. Now face supporting their kids until 30 if there are no jobs (or see their kids run up ridiculous education debts) and there will be less jobs because they can’t retire to free up positions. Tax relief for raising young families is not seen as valid and is being torn down as middle class welfare.
> ...




Good post Craft, I agree, also another loop hole that requires looking at is the disability pension.
Currently the government doesn't look at a persons super balance when means testing the disability pension. I wonder why not.


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## Julia (27 May 2014)

brty said:


> I thought this had already been discussed and dismissed, Australia has one of the lowest deficits in the world as a percentage of GDP, it's just a line used by politicians to justify whatever they want.



I don't think anyone is questioning our debt to GDP ratio in comparison to the rest of the world.
Isn't the problem more the upward trajectory of our spending?   The government is pointing out that with the increasing numbers of people on age pensions in the coming decades, plus the additional health resources they will consume as they live longer, coupled with fewer workers paying tax to support them, we will have a considerable problem in the future.  So, instead of just opting for what will make them popular immediately with the electorate, they are attempting to address the longer term.   Seems like a worthy enough aim to me.

If everyone is worried now about hardship for their children and grandchildren, perhaps consider that if something isn't done, the resulting burden that falls on those generations will be that much greater.

We've all agreed that the government has gone about the actual design of how best to fulfil their aim less well than they should, but that's pretty obviously all going to be modified before it gets through the Senate anyway.  As already discussed, there's considerable room for modifying the over-generous tax concessions in Super, including the family home over X amount etc., in order to take some of the pressure off middle income earners.

Just pretending that because the present debt to GDP situation is relatively OK, shouldn't be a reason not to address the potential problems in the future imo, though I get that much of the population would disagree, even some here.



> Think for a minute what would happen if the deficit was raised.



We would be borrowing even more than the present $1 Billion per month to pay the interest, for one thing.


----------



## sptrawler (27 May 2014)

brty said:


> sptrawler,
> 
> 
> 
> ...




Doesn't the deficit increase the governments borrowing cost and put upward pressure on interest rates? Also more exposure to overseas borrowing, and as with European countries with high deficits, external political pressure from other countries, from whence the borrowings came.
 External exposure to overseas money markets are what sent us into a tailspin after the 1987 crash i.e why compulsory super was started.
How would we be travelling now, if when the gfc hit and we had saya $600billion deficit running. That would no doubt be over $1trillion now, that would require servicing, and people think this budget is hard.lol

Wouldn't lowering the deficit, free up government money to assist in covering welfare and infrastructure costs.

In my opinion the Aussie dollar will fall, when the financial markets have finished playing with our economy, but as you say it won't end well.


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## McLovin (27 May 2014)

brty]The combination of HECS and a mortgage is hurting those in the 25-34 age bracket. The high cost of child care means that nothing much is gained by Mum going back to work said:


> People are screaming middle class welfare must end, but I think it is this middle class that is getting the crap squeezed out of them. Sure stop the benefits, but lighten the tax take on them so it’s not viewed as welfare.




The problem is that it's the middle class that is paying for the welfare. The OECD released a report a few years ago (sorry I can't find it) that showed the typical middle class Australian family had one of the highest tax burdens in the world, but after transfers had the lowest effective tax rate in the OECD. Iirc, it was a shade over 6%.

Taking someone's money, repackaging it, and giving it back to them, is an incredible waste of resources.


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## DeepState (27 May 2014)

brty said:


> Think for a minute what would happen if the deficit was raised.
> 
> 1. The $Aus would fall.
> 
> ...




1. Please see below a chart showing the Federal Budget surplus/deficit together with AUDUSD exchange rate and Terms of Trade.




It shows the period since the introduction of our current inflation targeting regime.  When the terms of trade were stable until large demand for Australia's natural resources from China began to appear in commodity pricing, it can be seen that a move to budget surplus in the late 1990s and early 2000s occurred at the same time as a significant fall in the relative value of the AUD.   Thereafter, terms of trade became a significant explanatory factor of relative exchange performance.  This has occurred despite a sharp deterioration in budget position in 2009.  More recently, the budget position has been gradually improved (less deficit)...and the AUD has fallen.

These observations are at odds with the statement.

Interest rates are not even closely related to the budget surplus/deficit.  The following chart is the 10 year bond yield:




It shows that ten year bond yields have declined over the period despite a pattern of generally deteriorating budget positions.  After the initial gains of yield reduction that accompanied a move towards inflation targeting, the bond rate stayed fairly level from the point as which the budget moved to surplus in 1997 through to when it punched through zero in 2009.  A very poor budget position from 2009 to 2012 occurred during a period of further declines in the yield.  As the budget position was reigned in, yields rose.  During the period that the Coalition has been elected with strong messages of fiscal responsibility, rates have largely been flat.

The outcomes do not concur with the expectations expressed.


2. The RBA had been jawboning the AUD down through much of 2013.  When the AUD experienced a significant fall in Q4 2013, it was accompanied by a sharp spike in tradables inflation.  Given non-tradables inflation runs at a rate above the RBA target, a fall in the AUD produced an adverse consequence. If sustained, it would have required a monetary response. Gov Stevens ceased jawboning on the release of the data.  In minutes and speeches subsequent to that date, reference is only made to the fact that the AUD is trading at historically high levels.  This occurred despite that exchange rate rising above the points at which threats to intervene etc. were made.


Not for a moment am I saying this stuff is easy or inherently obvious.


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## sptrawler (27 May 2014)

DeepState said:


> 1. Please see below a chart showing the Federal Budget surplus/deficit together with AUDUSD exchange rate and Terms of Trade.
> 
> View attachment 58130
> 
> ...




Thanks for the explanation retired young, I followed you upto, please see below a chart, then you lost me.lol


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## craft (27 May 2014)

DeepState said:


> 2. The RBA had been jawboning the AUD down through much of 2013.  When the AUD experienced a significant fall in Q4 2013, it was accompanied by a sharp spike in tradables inflation.  Given non-tradables inflation runs at a rate above the RBA target, a fall in the AUD produced an adverse consequence. If sustained, it would have required a monetary response. Gov Stevens ceased jawboning on the release of the data.  In minutes and speeches subsequent to that date, reference is only made to the fact that the AUD is trading at historically high levels.  This occurred despite that exchange rate rising above the points at which threats to intervene etc. were made.






The dollar will fall when/if the national income falls – The importance of importing inflation via tradables is now hugely significant.

Nationally we will have falling income and rising expenses, either there is a reduction in demand response or an inflation response.  Either way (increasing unemployment/higher rates) the non-self liquidating mortgage debt is the elephant in the room.

Gov’t debt is just one piece of the pie, net foreign Liabilities is the big picture and in the last decade we were going backwards despite the resource boom and terms of trade. What a wasted opportunity.


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## Julia (27 May 2014)

brty said:


> The both parents working, paying a mortgage and HECS, with a young family is the area of middle income welfare, we cut back much there, and there is no chance of them saving for retirement outside of the compulsory super, until they are into their late 40's to early 50's.



No chance of people saving outside Super?  Seems like a large and very negative generalisation to me.  Certainly it's tough for people on low incomes, but I still see people doing extremely well in their 30's.  Own their own home outright and have two or three IPs.
No financial assistance from family.

Perhaps it might have something to do with the fact that their holidays are camping, and a day out is a home made picnic at the beach rather than a $100 breakfast.  Or the fact that always they have grabbed all the additional hours of work they can to build up funds for deposits on property.  Continued studying in order to further their careers.  And that they don't feel compelled to buy a new $500 phone every couple of months.  Sometimes you make your own luck.



> We, the baby boomers, have been lucky. We had no HECS, we bought houses relatively cheaply, then paid them off with the aid of inflation during the 70's and 80's.



Yes, and what a wonderful opportunity to make money via investment properties.   Everyone was wailing about high interest rates - 22% is what I paid on my first IP - but there was a dearth of rentals, plenty of quality tenants and rents were well able to cover what seemed like high costs, even before you factored in the very large capital gains.

I remember, when I outlined my plan to try to borrow a pretty substantial amount and buy several places, my friends threw up their hands in horror.  "Just put your money in the bank", they said, "interest rates on deposits are good".  Sure, but inflation is dealing with most of that.  Then, from the ex husband:  "you'll never be able to borrow any money, let alone that much:  you're just a woman."
Fortunately the bank manager was a little more enlightened.

Most people face difficult periods in their lives.  There seems to me a huge variation in how we cope with such times.  Do we allow ourselves to be overwhelmed by apparent insoluble hardship, lament how tough it all is, or do we look at each of these situations and consider how we might instead find a way through, turn it to our ultimate advantage?


----------



## k.smith (27 May 2014)

medicowallet said:


> I hope you realise that this is a SUPERANNUATION thread
> 
> NOT a thread on PROPERTY NEGATIVE GEARING.
> 
> ...




Yes, there's always that "well almost"  a statement that reminds me of this


http://www.abc.net.au/news/2014-05-26/janda-tax-avoidance-name-and-shame/5478450

''.... the famous Kerry Packer maxim on taxation:

_I am not evading tax in any way, shape or form. Now, of course, I am minimizing my tax, and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra._​
To his credit, the late Mr Packer was typically upfront about his tax philosophy.
However, most wealthy individuals are not subject to the same level of public scrutiny as the media mogul was, and, aside from a few high-profile individuals targeted by the ATO as part of its deterrence strategy, most can keep their tax details secret, especially if their minimisation techniques are legal.

*The problem, of course, with Kerry Packer's attitude to tax is that those who can't or won't minimise their tax - i.e. the vast bulk of people who simply can't afford to get high-end tax advice and set up complex financial structures - end up footing the bill for the wealthy who do.*

....''


And yes, this thread is about Superannuation. So why, with such growth of high enders contributing into super why are they opting to pay 15% on their super if they can negatively gear and pay zilch?

http://www.smh.com.au/business/bank...exploiting-superannuation-20140522-38po9.html

''...Analysis by Fairfax Media of Australian Taxation Office statistics shows almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years, and the number of funds with over $10 million has doubled.


----------



## Ves (27 May 2014)

Julia said:


> Most people face difficult periods in their lives.  There seems to me a huge variation in how we cope with such times.  Do we allow ourselves to be overwhelmed by apparent insoluble hardship, lament how tough it all is, or do we look at each of these situations and consider how we might instead find a way through, turn it to our ultimate advantage?



Probably more relevant to a thread on temperament, but....  

Marcus Aurelius - The Meditations (from Book V)



> Now it is true that these may impede my action, but they are no impediments to my affects and disposition, which have the power of acting conditionally and changing: for the mind converts and changes every hindrance to its activity into an aid; and so that which is a hindrance is made a furtherance to an act; and that which is an obstacle on the road helps us on this road.


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## k.smith (27 May 2014)

Julia said:


> No chance of people saving outside Super?  Seems like a large and very negative generalisation to me.  Certainly it's tough for people on low incomes, but I still see people doing extremely well in their 30's.  Own their own home outright and have two or three IPs.
> No financial assistance from family.
> 
> Perhaps it might have something to do with the fact that their holidays are camping, and a day out is a home made picnic at the beach rather than a $100 breakfast.  Or the fact that always they have grabbed all the additional hours of work they can to build up funds for deposits on property.  Continued studying in order to further their careers.  And that they don't feel compelled to buy a new $500 phone every couple of months.  Sometimes you make your own luck.
> ...




I know that some of us that post here are doing OK... I am gauging that there is not anyone here who is really poor and perhaps most here do not fall into the multi $$kk bracket. But the fact that we are even having this discussion is imo an indicator of our degree of capability and also perhaps resilience. You obviously have the skills to make a success of your finances. Despite my absolute MIS fiasco, I have knuckled down and made repairs to mine. But for some, it is really hard. I had contact with a lot of investors  after the MIS schemes collapsed, and it taught me (amongst a huge lot of other things) that overcoming the "difficult periods" in our (financial) lives comes down to so many variables - Health (both physical and psychological) intelligence, family relationships and support, employment, their bank balance, communication skills...etc.. I know of some who committed suicide. Many suffered from acute depression and anxiety.  So not everyone can get back up on the perch.

I wonder whether the next generation of thirty year olds will do so well ? 

http://www.abc.net.au/news/2013-08-30/janda-home-ownership-and-future-aged-underclass/4924862

''...The latest round of home price rises, which is most evident in Sydney, is mostly driven by investors, now including a substantial cohort of self-managed super funds.

These investors provide the competition that prices many first-home buyers out of the market and forces them into being long-term, perhaps lifetime, private renters.

The number of these investors has ballooned from 1.3 million at the end of last century to more than 1.8 million in 2010-11, the latest year for which Tax Office statistics are available.

What has also ballooned is the subsidy these taxpayers claim from the public purse: from posting rental profits of $700 million in 1998-99, investors now claim rental losses of almost $8 billion on their income tax returns....''

The whole article is rather illuminating imo..


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## k.smith (27 May 2014)

sptrawler said:


> '.....Now everyone goes to university we have to charge.lol




I wonder who will be better off in the long run?
A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?


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## FxTrader (27 May 2014)

k.smith said:


> I wonder who will be better off in the long run?
> A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?



If one views higher education just from a monetary benefit perspective, the tradesman has an early lead and if he/she invests wisely and/or starts a successful business may indeed end up better off financially longer term.  Higher education can and does have a higher purpose than simply making more money; it overcomes poverty of the mind, enriches the lives of those who participate and provides many benefits to society as a whole.  Making higher education less accessible and affordable is born of an elitist ideology promoted by those who embrace economic rationalism and free market mechanisms as the best way to value everything.


----------



## sptrawler (27 May 2014)

k.smith said:


> I wonder who will be better off in the long run?
> A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?




A lot will depend on the degree the student takes and his/her aptitude. Most of the university graduates I met during the course of my working career, were extremely well paid, when compared to those on wages.

Also I have observed that just because a person is well paid and well educated, doesn't necassarily mean they are astute investors. Conversely, just because someone leaves school early and is on low wages, doesn't mean they won't make a success out of life, spiritually and financially.

I have a sibling who did an engineering degree, has been highly paid, yet has nothing but an old home in a country town. Always spent everything.

I have a good friend who left school at 14 always worked for wages, lives on the river in a multi million house and bought 500,000 telstra when they were $3.30.
He is a canny investor.


----------



## sptrawler (27 May 2014)

Julia said:


> Most people face difficult periods in their lives.  There seems to me a huge variation in how we cope with such times.  Do we allow ourselves to be overwhelmed by apparent insoluble hardship, lament how tough it all is, or do we look at each of these situations and consider how we might instead find a way through, turn it to our ultimate advantage?




So true Julia, it is easy for people now, to say you had it easy due to inflation. 
However when you took on the risk, you weren't to know how things would pan out.

You actually did nothing other than borrow money and make that money work for you.

It is a bit pathetic, all this baby boomer bashing, there was an opportunity for everyone to make money, six years ago. 
Westfarmers $12 - now $42, CBA $26 - now $80, ANZ $13 - now $33 , there were heaps more.

How many people took the risk and borrowed money to buy into the market? Only the lucky ones, people will say.

It is a bit the same with SMSF, I know ex workmates that always talked about starting their own fund.
Most(27 out of 30) have just left it in the fund they were in during their working lives, it's easier and takes less responsibility.


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## k.smith (27 May 2014)

FxTrader said:


> If one views higher education just from a monetary benefit perspective, the tradesman has an early lead and if he/she invests wisely and/or starts a successful business may indeed end up better off financially longer term.  Higher education can and does have a higher purpose than simply making more money; it overcomes poverty of the mind, enriches the lives of those who participate and provides many benefits to society as a whole.  Making higher education less accessible and affordable is born of an elitist ideology promoted by those who embrace economic rationalism and free market mechanisms as the best way to value everything.




Absolutely agree with you, just think that it will so obviously be hard for some to do a higher education.
Education should be accessable to all. Geez, I'm 60yrs old, and remember this issue at high school ! I feel like we are going backwards...


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## brty (27 May 2014)

Throw out a line or two and look at all the bites. Where to start...

Firstly Julia,



> No chance of people saving outside Super? Seems like a large and very negative generalisation to me. Certainly it's tough for people on low incomes, but I still see people doing extremely well in their 30's. Own their own home outright and have two or three IPs.
> No financial assistance from family.




I have no doubt there are many in that category, but certainly not the majority nor the average. We are not talking about those doing extremely well, more those on median incomes which are below average. They are struggling with HECS  debt on top of the mortgage and a family. I have a sister who is basically a child minding service for her grand children, it's the only way her kids can keep up with all the payments needed. One of them just crossed the line recently of paying extra on their earnings for HECS. They had forgotten about when repayments kicked in, and plans to pay off the mortgage with the extra are out the window for a few more years until HECS is paid off.
The girl in particular was not an outstanding student, did the wrong course originally (ie couldn't get a job in the field), then a second one where there was employment. Husband works in low to middle earning job without qualifications nor much prospect of advancement. There are no $100 breakfasts, nor $500 phones every few months. The house (outer suburbs Melbourne) and the HECS debt will not be paid off until they are in their 40's. Only then can they really start thinking of retirement savings.
My wife and I however paid off our first house in our 20's, and had invested in property by 30, a huge difference, yet types of jobs/incomes for the age were roughly equal.

RY,
It is quite easy to interpret whatever you want from those graphs. Sometimes they correlate, sometimes they don't. Change the scales, lag one or other by some period and they say whatever you want them to, but you knew that when you posted them.



> Not for a moment am I saying this stuff is easy or inherently obvious.




I agree entirely.

K.Smith



> I wonder who will be better off in the long run?
> A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?




I tried for years to talk my own children into being plumbers, electricians, mechanics, none of them listened. I suspect you are correct for many, but not all. It comes down to the career path chosen. Going to Uni to do 'arts' is probably a dumb idea with HECS, yet successfully completing a medical degree is an entirely different matter.

The original concept of this thread was about super being a cash cow for governments in the future. I fully agree that they (politicians, both parties) will not be able to resist raiding it at some point. They are already heading down that path.


----------



## sptrawler (27 May 2014)

k.smith said:


> Absolutely agree with you, just think that it will so obviously be hard for some to do a higher education.
> Education should be accessable to all. Geez, I'm 60yrs old, and remember this issue at high school ! I feel like we are going backwards...




If you are 60 years old, the issues are nothing like the were. Since you were in high school technical colleges have been made into universities and tafe courses are now degrees.

The junior certificate was dropped and all students automatically went through to year 12.
The leaving and matriculation exams were dropped and everyone, even those doing multiple choice passed.
Now laws have been passed that all students do year 12.

So how you fund free university for everyone, and I mean everyone, seems a bit far fetched. 

If the system isn't prepared to examine students, then a system has to be put in place that makes the student self appraise their commitment and ability. IMO

Seems like we definitely are drifting down the woe is me path and not the superannuation path.
It just seems nobody wants to answer the hard self effacing answers, much easier to say it's too hard.


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## DeepState (27 May 2014)

brty said:


> RY,
> It is quite easy to interpret whatever you want from those graphs. Sometimes they correlate, sometimes they don't. Change the scales, lag one or other by some period and they say whatever you want them to, but you knew that when you posted them.





The graphs are contemporaneous. They are plainly drawn.  They show large violation of your stated relationships to highlight that things like this are not bread and butter even if you think about it for a minute. That was all they were intended to do.  You can change the scales however you like. They show the same thing.  Feel free to redraw them to accord with your view.  You will become the next Picasso.

What I do know is that you have a remarkable ability to look at a cat and see a giraffe.


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## medicowallet (27 May 2014)

k.smith said:


> And yes, this thread is about Superannuation. So why, with such growth of high enders contributing into super why are they opting to pay 15% on their super if they can negatively gear and pay zilch?
> 
> http://www.smh.com.au/business/bank...exploiting-superannuation-20140522-38po9.html
> 
> ''...Analysis by Fairfax Media of Australian Taxation Office statistics shows almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years, and the number of funds with over $10 million has doubled.




Because

1. Diversification
2. You don't have to know how to invest money wisely to have lots of money 
3. That might be chicken feed for a lot of them
4. Risk management / protected money.

and many others which I don't wish to brainstorm at the moment. 

The fact is that I can make more money off $1000000 negatively geared into property, than $1000000 in super, even after tax.   Unfortunately I don't invest in property any more.

MW


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## Julia (27 May 2014)

brty said:


> I have no doubt there are many in that category, but certainly not the majority nor the average. We are not talking about those doing extremely well, more those on median incomes which are below average. They are struggling with HECS  debt on top of the mortgage and a family. I have a sister who is basically a child minding service for her grand children, it's the only way her kids can keep up with all the payments needed. One of them just crossed the line recently of paying extra on their earnings for HECS. They had forgotten about when repayments kicked in, and plans to pay off the mortgage with the extra are out the window for a few more years until HECS is paid off.
> The girl in particular was not an outstanding student, did the wrong course originally (ie couldn't get a job in the field), then a second one where there was employment. Husband works in low to middle earning job without qualifications nor much prospect of advancement. There are no $100 breakfasts, nor $500 phones every few months. The house (outer suburbs Melbourne) and the HECS debt will not be paid off until they are in their 40's. Only then can they really start thinking of retirement savings.
> My wife and I however paid off our first house in our 20's, and had invested in property by 30, a huge difference, yet types of jobs/incomes for the age were roughly equal.



brty:  a truism for you:  
"We are where we are as a result of the decisions we make, taking into account the circumstances which surround us at the time".

We cannot expect governments to pick up the pieces when we stuff it up.
Then, if we become accustomed to being so supported by government largesse, we will fail to develop self sufficiency.
 I have no expectation that such a philosophy will be acceptable to anyone who prefers that governments of any persuasion will continue to provide succour when we can't be bothered to do it for ourselves.



sptrawler said:


> A lot will depend on the degree the student takes and his/her aptitude. Most of the university graduates I met during the course of my working career, were extremely well paid, when compared to those on wages.
> 
> Also I have observed that just because a person is well paid and well educated, doesn't necessarily mean they are astute investors. Conversely, just because someone leaves school early and is on low wages, doesn't mean they won't make a success out of life, spiritually and financially.
> 
> ...



+1.


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## Julia (27 May 2014)

k.smith said:


> I wonder who will be better off in the long run?
> A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?



Great question.  However, it has to do with more than just the financial benefits or otherwise.
Sadly, many people who have spent a great number of years at university, doing multiple post grad work etc., cannot now find a job in their chosen field.
Which would be your choice, k.smith, if you were 20 now?   
(No obligation to answer, of course.  No wish to intrude on your personal decisions about anything.)


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## sptrawler (27 May 2014)

Another interesting side to the super debate, on Q &A a couple of weeks ago, one of the panelists was a media executive. 
They were debating the budget and he commented that he is on a six figure salary, yet gets his super tax free, he felt it was wrong.
I also have a friend, who is a staunch Labor voter, he says he shouldn't get his super tax free as he has a lot of money. I suggested he draw the money out and put it in the bank, that shut him up.
Maybe the tax department should have a declaration, these tormented individuals can sign, to allow them to pay tax.lol


----------



## Julia (27 May 2014)

sptrawler said:


> Another interesting side to the super debate, on Q &A a couple of weeks ago, one of the panelists was a media executive.
> They were debating the budget and he commented that he is on a six figure salary, yet gets his super tax free, he felt it was wrong.
> I also have a friend, who is a staunch Labor voter, he says he shouldn't get his super tax free as he has a lot of money. I suggested he draw the money out and put it in the bank, that shut him up.
> Maybe the tax department should have a declaration, these tormented individuals can sign, to allow them to pay tax.lol


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## brty (27 May 2014)

RY,

How about you come out of the 9nth dimension and into the real world.

Just because I offered proof that one of your high flying ideas does not always work, as claimed, you seem intent on harrassing at every opportunity, give it a rest, it is so tiresome.

In the graphs you presented, as the surplus shrunk from '99-02 the $aus fell. As the surplus rose from '02 to late '07 so did the $Aus, both fell in the GFC.  As the deficit reached it's largest in early '10, it correlated with a low in the dollar. From that point the deficit reduced and the $Aus rose through to late '12. Then from early '13 as the deficit got larger, the $Aus fell again. Yes there were a couple of times they went in different directions. 

Did you even look at your own graph?? 

Do you really think that if governments racked up huge deficits it would not have an influence on interest rates, just because a graph showed it didn't happen in the last 20 years?? 

Julia,



> We cannot expect governments to pick up the pieces when we stuff it up.




Actually, that is exactly what I thought government welfare was all about, to help the down trodden. Not everyone makes the correct choices in life, people make mistakes. They are the people that I want my taxes to go to. How we separate those that are the bludgers on the system from those that tried and failed is the hard part. Both can present as the same. 

Julia, my point is that there is less space for error for the young today compared to the baby boomer generation. We were the lucky ones with relatively cheap housing, free tertiary education, and easily obtained ongoing employment, plus the helping hand of inflation in paying off our early loans.


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## sptrawler (27 May 2014)

brty said:


> RY,
> 
> 
> Actually, that is exactly what I thought government welfare was all about, to help the down trodden. Not everyone makes the correct choices in life, people make mistakes. They are the people that I want my taxes to go to. How we separate those that are the bludgers on the system from those that tried and failed is the hard part. Both can present as the same..




Who says they are down trodden, they make mistakes, they make life choices. 
You can make a choice and give your money to them, you can take them into your home, you can volunteer your time. 
That is your choice, why does it have to be mine? 



brty said:


> My point is that there is less space for error for the young today compared to the baby boomer generation. We were the lucky ones with relatively cheap housing, free tertiary education, and easily obtained ongoing employment, plus the helping hand of inflation in paying off our early loans.




How do you know you/we are the lucky ones, you are making your assesments by looking back over the last 20 - 30 years. You haven't got a clue what the fiscal landscape will be in 10 years.

You may be on the forum in 10 years saying, I wish I had sold my house 10 years ago, or you may be saying houses were cheap 10 years ago.
You may be retired with $1m and everyone saying it should be taxed, in 10 years the average wage may be $250k/yr. Then your $200k that's left will look pretty sick.

Tertiary education was free because there were not many going to uni, in W.A back in the 80's there was UWA and Murdoch.

If you had a loan when inflation was high, interest rates were high.

Easily obtained employment, obviously you had a government job in the 1982 and 1990 recessions.

If the national debt blows out to the expected $600b, the issues we have now will seem miniscule.


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## brty (27 May 2014)

SPtrawler,



> You haven't got a clue what the fiscal landscape will be in 10 years




Please enlighten me.

Who do you think the government should help? 



> If you had a loan when inflation was high, interest rates were high.




Yes we locked in a loan at 14%, they then dropped to 12%, then rose to 18%, by then we had paid off the loan with deflated dollars, a choice not currently available. Wages doubled in about 6-7 years due to inflation, made it easy to pay off a loan despite high interest rates.



> You may be on the forum in 10 years saying, I wish I had sold my house 10 years ago, or you may be saying houses were cheap 10 years ago.




Not a chance, you know nothing about me. We have more than one property without loans.



> You may be retired with $1m and everyone saying it should be taxed, in 10 years the average wage may be $250k/yr. Then your $200k that's left will look pretty sick.




You might be getting closer, but why would I only have $250k left in 10 years??



> You can make a choice and give your money to them, you can take them into your home, you can volunteer your time.




We do donate to charities and have sponsored aid organizations for over 35 years. We also spend a lot of time in voluntary work and have for many years. 

What is the point and relevance of any of this??

Why the venom?? Do you think I am completely wrong and it is easier for the young??


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## DeepState (28 May 2014)

brty said:


> RY,
> 
> How about you come out of the 9nth dimension and into the real world.
> 
> ...




Tiresome? For whom?  I am examining the factual accuracy of assertions which get made and posted as truth.  Sometimes I agree.  Sometimes not.  In this case, I do not.


1. Did you look at all the documents and references - supplied by others - who confirmed that what I was saying all along was accurate?   


2. Did I look at the charts? Yes.  

What matters for currency is not the change in the rate of budget surplus, but the level of the surplus.  The level affects the rate of debt accumulation.  The change in the budget surplus, a concept you have - perhaps unknowingly and not unreasonably given the technicality - used to explain away the 99-02 period, represents the rate of change in the rate of change in the debt position.  It is entirely inappropriate to correlate that with the exchange rate.  You cannot invest in a rate of change of the rate of change in the debt position.

When you looked at the graph you might have noticed a red line representing the terms of trade.   It is the single biggest driver of currency performance over that period. Ask the RBA - perhaps their charts are plainer and consistent references to such might help you understand this point.  Do you think that a currency appreciation from early 2002 to 2004 from around 50c to 80c was due to a marginal improvement in the budget position?  Surely you must be joking.

You surely could not be so blind to the relationship between the AUD and terms of trade that it isn't even mentioned in your retort?  Given it's absolute towering prominence in the performance of the AUD, that point could not have escaped you.

Apparently you see that from early 2013 period the deficit got larger too. On whose chart?  Not the one I posted. The size of the deficit was shrinking.  And yet the Australian dollar fell. How could you conjure this statement?


3. Now let's look at the real world - which does include the 9th dimension.  Apparently loading up with "huge deficits" leads to higher interest rates.  Let's have a look at what is happening in the real world right now.

What has the US federal debt grown to?  Whoa....Interest rate: 2.53% 
What about France?  Whoa.....Interest rate: 1.79%
What about Japan? Whoa....Interest rate: 0.60% 
How about Italy? Whoa....Interest rate: 2.97%
United Kingdom? Whoa...Interest rate: 2.64

I mean, these are only the biggest economies in the developed world.  They have "huge deficits"...and their interest rates are at historic lows.

As to the future and whether other "huge deficits" will lead to higher interest rates or, more accurately "have an influence" on them.  The answer, very surprisingly, actually is - it depends. As has been shown by straight observation of 20 years in the current monetary regime, it is not simply a matter of saying higher deficits leads to higher interest rates and a lower dollar. Far from it. Who'd have guessed?  I too would not believe it if it were not right in front of me.


Where we do agree is that this stuff is not simple or necessarily intuitive.  A point you have made.


----------



## sptrawler (28 May 2014)

brty said:


> SPtrawler,
> 
> 
> 
> ...




Firstly those who can't help themselves, then those who are trying to help themselves. 



brty said:


> Yes we locked in a loan at 14%, they then dropped to 12%, then rose to 18%, by then we had paid off the loan with deflated dollars, a choice not currently available. Wages doubled in about 6-7 years due to inflation, made it easy to pay off a loan despite high interest rates.??




Well our local council workers have just recieved an 8% payrise, correct me if i'm wrong but inflation is about 2% and loans are about 5%.





brty said:


> Not a chance, you know nothing about me. We have more than one property without loans.??




Of course I know nothing about you, I was answering your statement that you had cheap housing, it proved cheap because wages went up. Who is to say wages will stay stagnant.





brty said:


> You might be getting closer, but why would I only have $250k left in 10 years????




I was again using a generic example, it wasn't about you.





brty said:


> We do donate to charities and have sponsored aid organizations for over 35 years. We also spend a lot of time in voluntary work and have for many years.
> 
> What is the point and relevance of any of this??
> 
> Why the venom?? Do you think I am completely wrong and it is easier for the young??




Yes I think it is easier for the young, if you remove the abnormal housing cost issue out of the equation, the young have much more disposable income than the baby boomer generation had.

I have a daughter who is a single mother working 3.5 days a week on $45k/annum. She has a small mortage on a 2 bedroom unit. She has her hair coloured every 3 weeks and acrylic nails, the three year old grandson has new toys everytime we see him. I ask her if everything is o.k, does she need any money, she says everything is great.

So in a nutshell I think you are a careing person, but I think, it isn't as bad as you think.

But let's get back to super.lol


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## brty (28 May 2014)

SP,

I have a suspicion it's because we are in different parts of the country, and conditions are varying for the different perceptions. 

I agree we should get back to the topic of Super. 

Most of our assets are outside super, for the very reason that governments keep changing the rules. In another 10 years they are likely to be vastly different to today, irrespective of who is in power.


----------



## sptrawler (28 May 2014)

brty said:


> SP,
> 
> I have a suspicion it's because we are in different parts of the country, and conditions are varying for the different perceptions.
> 
> ...




Agree 100%


----------



## brty (28 May 2014)

RY,



> Apparently you see that from early 2013 period the deficit got larger too. On whose chart? Not the one I posted. The size of the deficit was shrinking. And yet the Australian dollar fell. How could you conjure this statement?




Isn't the little green squiggly line the deficit, seems to say that on the legend. You can't see it turn down in 2013, at the same time the $Aus does? Maybe you should look again. 



> 1. Did you look at all the documents and references - supplied by others - who confirmed that what I was saying all along was accurate?




I agreed with you that on the macro scale, that is indeed the case. You were implying that on a micro level it would also work. I had a suspicion that it wouldn't, spent quite a few days testing on a random, yes random, not specially selected as you claimed, portfolio; to see how it would go on a relatively small portfolio. On the stocks used, B&H way outperformed over the short term and I identified why. In that portfolio it was some gold stocks and mining services stocks that went down, and stayed down, that ended up with a disproportionate investment in them, and hadn't come back up in price. Likewise there were a couple of outstanding performances in stocks that continued to go higher, that were greatly cut down in profitability, by selling down too early.  
Instead of being involved in active discussion on where lines should be drawn in terms of excess investment in one area, you just went the accusation route, of myself being deliberately misleading. Nothing could have been further from the truth, I was interested to if it could work on the small scale. Otherwise I would not have spent so much time doing it.

Perhaps we should try to stick to the topic of Super.


----------



## Smurf1976 (28 May 2014)

sptrawler said:


> If you had a loan when inflation was high, interest rates were high.




Taking out a loan when rates and wages growth are high, followed by a trend of falling rates and wages growth is one thing. Painful at the time but pretty soon it gets relatively easy to repay the loan.

It's a very different story if you take out a loan when rates are low and then they go up unless there is corresponding wages growth. In that situation you're pretty much stuffed.

It comes down to probability. The future is uncertain but looking at where we are today there is a definite risk that we see a rise in interest rates which exceeds wages growth, and a relatively low probability that interest rates fall significantly. That's not based on any serious analysis, simply on noting that rates are very low by historical standards - how much lower can they really go? 

It's like saying that your fridge is struggling to stay cold in January in Perth or Adelaide in a house without air-conditioning. Not ideal but things can't get much worse really so if it's just coping then the odds are it will be fine in due course. But it's very different if the fridge isn't coping in Hobart in July, since it's almost certainly going to get hotter at some point. Same scenario for anyone buying their first home etc when rates are very low - there's a very real possibility that they'll see a big rise in rates at some point before the debt is repaid versus not much room for them to go down.


----------



## sptrawler (28 May 2014)

Smurf1976 said:


> Taking out a loan when rates and wages growth are high, followed by a trend of falling rates and wages growth is one thing. Painful at the time but pretty soon it gets relatively easy to repay the loan.
> 
> It's a very different story if you take out a loan when rates are low and then they go up unless there is corresponding wages growth. In that situation you're pretty much stuffed.
> 
> ...




People take risks whenever they take loans. If they take a loan to purchase a dwelling comensurate with their earnings, then ensure all their excess money goes into improving their equity, it will work out fine.

The RBA seem to be focused on keeping interest rates and infllation around 3%, pay rises appear to be around 4%.
If there was ever a time to invest without risk, I've never seen it.
At the moment there is a housing construction boom going on.

A lot of SMSF are jumping in.
Just to try and get it back on thread


----------



## Julia (28 May 2014)

brty said:


> Julia,
> Actually, that is exactly what I thought government welfare was all about, to help the down trodden.



Who is talking about the downtrodden?   How do you define 'downtrodden'?

I've always been totally clear about believing we should be generous in helping those who really cannot help themselves, ie people with real disability/mental illness, social disadvantage.
But why should we extend that to the people who, eg, through greed put most of their investable capital into some super dupa speculative stock which bombs, rather than take a more realistic approach?
Or those who inherit money, then blow it, or win Lotto and do likewise, falling back onto taxpayer funded welfare?  Or, as already discussed, those who take advantage of tax benefited super only to spend the lump sum rather than take it on retirement as an allocated pension?



> Not everyone makes the correct choices in life, people make mistakes. They are the people that I want my taxes to go to.



Are you prepared to consider that if there are no consequences to making rash decisions which fail, allowing someone to receive taxpayer funded benefits 'in compensation', we will not be breeding a society of people who value personal initiative and sense of responsibility?



> How we separate those that are the bludgers on the system from those that tried and failed is the hard part. Both can present as the same.



Yes, they can at times.  But it wouldn't take much research into each individual to discover the path that led to their application for welfare.
The more difficult question is how much right the State has to adjudicate on how anyone should spend what is actually theirs.  This is something I'd like to see a public discussion on, perhaps led by Simon Longstaff of the St. James Ethics Centre.



> Julia, my point is that there is less space for error for the young today compared to the baby boomer generation. We were the lucky ones with relatively cheap housing, free tertiary education, and easily obtained ongoing employment, plus the helping hand of inflation in paying off our early loans.



I  have already acknowledged the great opportunity of property investment during the high inflation period.
Not sure how many actually took advantage of it, however.

I'm glad you felt so lucky.  Looking back on my first marriage, during the two years we were engaged (does anyone still get engaged these days?) and several years into the marriage, I worked two jobs and my husband three jobs.  I don't think we regarded it as any sort of hardship, just what we needed to do to get the property paid off.  Looking back now, remembering my husband coming home several nights a week in the small hours stinking and filthy from working in a rubber factory, and both of us working in a corner shop all weekend, it probably wasn't all that much fun.


----------



## brty (28 May 2014)

Julia, you are going to extremes,



> But why should we extend that to the people who, eg, through greed put most of their investable capital into some super dupa speculative stock which bombs, rather than take a more realistic approach




So the type of people, ordinary hard working people, who thought they were paying for savvy advice from Storm, then lost the lot, house, super etc, you would deny the pension because they made a mistake (ie conned)??

The corner store owner who worked hard all his life developing the business, only to have a supermarket open up around the corner and put him out of business, you would deny the dole (now in his 50's and penniless), then deny the pension, because he made a mistake somewhere along the line in persisting with his store until it's bankruptcy. 

Some how you managed to take young people that made simple mistakes and turn them into "greed with their investable capital" and "those who inherit money, then blow it, or win Lotto and do likewise". Please bring it back and look at average ordinary mistakes that are much more common than those. 



> Are you prepared to consider that if there are no consequences to making rash decisions which fail, allowing someone to receive taxpayer funded benefits 'in compensation', we will not be breeding a society of people who value personal initiative and sense of responsibility?




Andrew Forrest made a rash decision to spend billions of dollars on his own railway and building the company. It could still all fall to pieces. If he loses the lot, does he deserve the pension, if the correct age and asset criteria? Absolutely!! 
If there was nothing to fall back on for those who try and fail, then everybody would play safe. Risk taking to advance the economy (via building a company with director guarantees) would go out the window.


----------



## sptrawler (28 May 2014)

brty said:


> Julia, you are going to extremes,
> 
> 
> 
> ...




We appear again to be drifting from superannuation to all forms of welfare.

I don't think anyone dissagrees with welfare. 
I think the issue is arising, from those who want to fund the welfare, by taking from those that have sacrificed to save and be self funded.

We are not talking about the 10,000 that have taken the pizz and put $5m+ in super.

We are talking about the vast majority of self funded, ex working class people that have probably sold all their investments, to put the money in super and be self funded.

Why wouldn't they be worried, a lifetime of saving and doing without, then to be held up as the reason for insufficient government funds.

Maybe the politicians should look at their super first and foremost.


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## brty (28 May 2014)

SP,



> We appear again to be drifting from superannuation to all forms of welfare.




I agree, let's get back to super, sorry for going OT, just had to reply to Julia.

I see the greatest problem with super is the constant tinkering of it by governments!!! 

How can anyone be assured of anything regarding retirement savings in this form, when we now have the treasurer admitting they are going to change things again ie retirement ages to start with (from Q&A questioning).


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## sptrawler (28 May 2014)

brty said:


> SP,
> 
> 
> 
> ...




So true, and it is more worrying for those that saw it as a way to live independently. 
They trusted that due to the rules governing super, if they reached a pre set goal, their retirement would in their minds be secure.
Then they get the government, the papers and everyone else saying "your o.k give us some of it". What galls more is politicians saying it, when they have a ridiculous taxpayer funded superannuation, federal and state.

Again I'm not talking about people with stupid amounts in super. 
I'm talking about people that may have downsized, sold a business, salary sacrificed and lived of the wifes wage, sold an investment property, normal people.

The hard thing is most of these people would have been disciplined savers working toward that goal.
Now when they have achieved it everyone wants to change the goal posts, they are now not in a position to change their situation, they're retired. 
A bit like getting a fixed price contract, then the supplier turning around and saying "no we've changed our minds, you will pay more".
I'm sure most people would kick up.


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## qldfrog (29 May 2014)

+1 and thanks (not God but my government suspicious) I never added more in my super than what was mandatory;
a point which seems lost:
the pension will soon become linked to the CPI and not wages;
if I were a pensionner i would rub my hands:
as per experience in western europe/US:
real wages increases are below CPI : Australia was an exception during the boom, last year wage growth was below CPI (and I will not discuss the CPI figures ..so twisted)
Anyway, Joe has just done a nice present to pensionners and no one realises it


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## sydboy007 (29 May 2014)

brty said:


> I see the greatest problem with super is the constant tinkering of it by governments!!!
> 
> How can anyone be assured of anything regarding retirement savings in this form, when we now have the treasurer admitting they are going to change things again ie retirement ages to start with (from Q&A questioning).




The problem is that the initial design of super was already flawed.  We'd have been better off it super had:

* been run by the Govt or at least had maximum fees set - $20B+ annual cost is simply outrageous when the Norwegians are able to run their SWF at a cost of roughly 0.1%

* been set up to provide a fair level of Govt assistance to all - something like a stabilisation fund so that in good times more was deposited into accounts and during recessions more money was put into the economy to get growth going again.  This approach would certainly have helped to manage the resource boom in a much better way.

* tax free super is and will continue to grow as an unaffordable change.

I think bringing back RBLs would be the easiest and fairest way to start limiting the revenue drain of super.  That would allow the removal of pre tax annual contribution caps as there's a negative financial consequence to go above the RBL.  To make it easier for couples they should allow a combined RBL on a similar basis as to the couples pension so say 165% of the single RBL limit.  I would feel Ok with an RBL of ~ $600K for a single and $1M for a couple.  before people coplain that is too low, there is nothing to stop people from saving more outside super.  $1M in super should easily provide $50-60K a year.  I don't see why anyone deserves tax payer subsidies to provide a bigger nest egg.  Increase RBL limits based on the pensioner CPI each year.

Limiting lump sum withdrawals also has to be brought in, otherwise how is the system supposed to help alleviate the cost of the aged pension?  Why should I help fund a persons super balance only to have them use it to pay off personal debt like a mortgage, buy a new car, go on a holiday and then expect the full pension?  The majority of people able to access their super tax some form of lump sum, so it's not a minority doing it issue.  

Remember that for every $ of super tax expenditures there has to be a $ of increased taxation elsewhere, or a $ in reduced spending on other services.


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## Julia (29 May 2014)

brty said:


> So the type of people, ordinary hard working people, who thought they were paying for savvy advice from Storm, then lost the lot, house, super etc, you would deny the pension because they made a mistake (ie conned)??



I've not said any such thing.   What I would like to see happening is - instead of the government being the proverbial ambulance at the bottom of the cliff - to instead be encouraging people to achieve a basic level of financial literacy so they are not conned.   I agree with the government's philosophy of government being there to do for people *what they cannot do for themselves.
*.  I want people to access the considerable amount of financial education that is freely available so that they at least appreciate that any scheme (since you have raised Storm) that has the client access most of the equity of their home to buy shares and then leverage again off that with a margin loan understand that there is no way they can regard such a scheme as a safe investment in retirement.  Enough has already been said on the Storm thread about common sense etc.



> The corner store owner who worked hard all his life developing the business, only to have a supermarket open up around the corner and put him out of business, you would deny the dole (now in his 50's and penniless), then deny the pension, because he made a mistake somewhere along the line in persisting with his store until it's bankruptcy.



(Sigh.)  Such emotive illustrations.  No, of course I wouldn't deny him the dole, neither would it happen at least in the foreseeable future.  But unless the ever increasing welfare bill is better managed, then the day might come when that dole, even now imo not enough to live on, will not be available.
What I'd like your store owner to do is have a plan B for the likely eventuality - given how the major supermarkets are establishing themselves everywhere - that his business does become threatened.  
Does he have a niche to offer, a personal service eg free delivery, home made cakes, anything that will protect him?  Or perhaps when preparing his business plan to consider in the first place that such a venture is too risky and he could lose the majority of his investment.



> Andrew Forrest made a rash decision to spend billions of dollars on his own railway and building the company. It could still all fall to pieces. If he loses the lot, does he deserve the pension, if the correct age and asset criteria? Absolutely!!



Andrew Forrest is a great example to look at.  I understand his early life was a far cry from his present success.
But he has learned from everything that has occurred in his life.  And he is *resilient*.   He will always have various options to which he can turn if the current project fails.  I very much doubt that the dole would be one of them.



> If there was nothing to fall back on for those who try and fail, then everybody would play safe. Risk taking to advance the economy (via building a company with director guarantees) would go out the window.



Good point.  But there's a difference between doing something foolhardy and reckless and taking a carefully calculated risk.

I don't know whether I've yet made clear what I'm trying to convey.  I am not, as you seem to be suggesting, wanting to remove access to taxpayer funded assistance.  But I am very much wanting people to be encouraged to think about how not to need it in the first place.  Big difference.



sptrawler said:


> I think the issue is arising, from those who want to fund the welfare, by taking from those that have sacrificed to save and be self funded.
> 
> We are not talking about the 10,000 that have taken the pizz and put $5m+ in super.
> 
> We are talking about the vast majority of self funded, ex working class people that have probably sold all their investments, to put the money in super and be self funded.



Yes, and those people who are well educated, have had good jobs with high earning, yet just decline to even think about how they might look after themselves in retirement.  

My frustration over this whole question has been provoked by essentially two factors:

1.  the phrase, heard over and over again:  "I couldn't be expected to contribute much to my retirement because compulsory super has only been around for less than half of my working life"
Implicit in this statement is the assumption that the individual has no personal responsibility for his/her own retirement funds.

2.  since the Budget (which we are all agreed is unfairly weighted against the poor and disadvantaged, so let's not go there again) pretty much everyone who might be affected in any way at all wailing that they shouldn't be the ones to experience any disadvantage.   Always someone else.



sptrawler said:


> So true, and it is more worrying for those that saw it as a way to live independently.
> They trusted that due to the rules governing super, if they reached a pre set goal, their retirement would in their minds be secure.
> Then they get the government, the papers and everyone else saying "your o.k give us some of it".



Correct.  And this has already started.  Self funded retirees who previously qualified for the Commonwealth Seniors Health Card which provides some concessions with electricity, rego, PBS etc, will from next year have any income from Super included in the means test of $50,000 p.a.  So here's one of the first disincentives for making the effort to be self funded if you're doubtful about it in the first place.

I don't disagree with it, btw, but it's a good example of what you're saying, sptrawler, about people having planned and then having that plan changed because the government need your money to fund someone else.



> Again I'm not talking about people with stupid amounts in super.
> I'm talking about people that may have downsized, sold a business, salary sacrificed and lived of the wifes wage, sold an investment property, normal people.
> 
> The hard thing is most of these people would have been disciplined savers working toward that goal.
> ...



Agreed.



sydboy007 said:


> Limiting lump sum withdrawals also has to be brought in, otherwise how is the system supposed to help alleviate the cost of the aged pension?  Why should I help fund a persons super balance only to have them use it to pay off personal debt like a mortgage, buy a new car, go on a holiday and then expect the full pension?  The majority of people able to access their super tax some form of lump sum, so it's not a minority doing it issue.
> 
> Remember that for every $ of super tax expenditures there has to be a $ of increased taxation elsewhere, or a $ in reduced spending on other services.



+1.


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## Wysiwyg (29 May 2014)

People are still being weened off the pension mentality. Once we reach the stage where someone's whole working life has had CS paid into a fund then the pension should be a thing of the past. It has been running for about 22 years so the magic of compounding hasn't had time to work even if you started in 1992. Try 50 years of CS and a sizable sum will be available for both the financially savvy and the financial dumbo's. Based on this days Superann. structure of course.


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## Junior (30 May 2014)

Wysiwyg said:


> People are still being weened off the pension mentality. Once we reach the stage where someone's whole working life has had CS paid into a fund then the pension should be a thing of the past. It has been running for about 22 years so the magic of compounding hasn't had time to work even if you started in 1992. Try 50 years of CS and a sizable sum will be available for both the financially savvy and the financial dumbo's. Based on this days Superann. structure of course.




I agree wysiwyg.  Too often I'm hearing that the current super structure is inadequate and most retirees won't have enough.  It's b/s.  

For someone who started their working life with Super Guarantee contributions, you're working for 40-50 years and your employer is paying 9-12% into a fund through this period...assuming financial markets go OK over this period you should have more than enough, especially for a couple.  Add to that some assets outside of super and some extra contributions from age 50 onwards, should be plenty unless the Government start taxing the hell out of it.


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## sydboy007 (30 May 2014)

I think it boils down to what you consider an adequate retirement income.

On the east cost over 2/3 of people earn less that $52K a year

I did a few basic excel calcs and found:

52K with 3% inc growth and 6% fund earnings over 45 years you'd end up with neat $1.7M but then with inflatin at 2.5% that would be equivalent of $600K in todays $$.

Personally I think 3% income growth is maybe unrealistic - I've not had a pay rise near that for nigh on a decade.

So if I chance income growth to 2.5% we get a final balance in current $$ of $514K

Considering inflation has been relatively high for a while what happens if it averages 2.75% - that $1.7M is worth just $413K

Remember, we're talking about an income level that only 1/3 of people earn at or more.

What does things look like for someone on 40K a year - $429K in current $$$ (2.5% inf and 3% inc growth) or $385K if inflation is 2.75%

I've yet to see a reasonable definition of what a retirement income should be like, and usually they're quite high so as to involve travel and other luxuries, but is it fair to force ALL tax payers to subsidies this kind of lifestyle?  Should super only be about providing a decent to basic level of income - certainly better than the pension -  of say $35K for a single and $50K for a couple.  Remember that under current policies with no tax payable they're actually better off than 35-40% of current income tax payers.  Factor in a lot of people at pension age are mortgage free then they would have far more disposable income than maybe half of the working population.


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## Wysiwyg (30 May 2014)

sydboy007 said:


> I think it boils down to what you consider an adequate retirement income.



I think it boils down to what one prepares to have as a retirement income. Now more than ever people have control over their Super nest egg. Most mates at my workplace think Super will look after itself and accept the default investment option which just happens to be low risk low return. Less than 40 years old and the care factor is zero.



> On the east cost over 2/3 of people earn less that $52K a year



Accurate data is extremely important when hypothesising, albeit conservatively, on future outcomes. Below is the average weekly earnings according to the Australian Bureau of Statistics data Nov. 2013. 

$1400/week * 52 weeks is  *$72800/year* both sexes.    



> Personally I think 3% income growth is maybe unrealistic - I've not had a pay rise near that for nigh on a decade.



That is odd. I have had a 4% increase per year for the last three years with the company offering same again for next three years. Right across the board people earn more or less. For me it was a matter of changing employers. 



> Should super only be about providing a decent to basic level of income - certainly better than the pension -  of say $35K for a single and $50K for a couple.



  Yes yes yes. The secret is that people have the choice of creating so much more inside Super via choice of Super Fund, Salary Sacrifice, Personal Contributions and Investment Options. Outside of Super people have their own financial goals or not.


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## medicowallet (30 May 2014)

Wysiwyg said:


> Accurate data is extremely important when hypothesising, albeit conservatively, on future outcomes. Below is the average weekly earnings according to the Australian Bureau of Statistics data Nov. 2013.
> 
> $1400/week * 52 weeks is  *$72800/year* both sexes.




Average is different to medians / percentage over $x

though there is such a difference, you both could be wrong 

MW


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## k.smith (30 May 2014)

Wysiwyg said:


> I think it boils down to what one prepares to have as a retirement income. Now more than ever people have control over their Super nest egg. Most mates at my workplace think Super will look after itself and accept the default investment option which just happens to be low risk low return. Less than 40 years old and the care factor is zero.
> 
> Accurate data is extremely important when hypothesising, albeit conservatively, on future outcomes. Below is the average weekly earnings according to the Australian Bureau of Statistics data Nov. 2013.
> 
> ...




The average of $20k + $40k + $60k + $80k + $10,000k is $2040k
but 4 out of 5 fall below $80k. Talk of average wage income does not reflect the true position of more than 60.7% of the population who earn less than $52,000
see table 2 
http://www.abs.gov.au/ausstats/abs@.nsf/mf/5673.0.55.003

An individual with an income of $72,800 p/a has a much better chance of being able to save enough to provide for his/her retirement than an individual on an income of less than $52,000.  

Wage growth of 4% is certainly not "average"..! !

http://www.abc.net.au/news/2014-02-19/abs-figures-show-annual-wages-growth-slowest-on-record/5269480

"...The Bureau of Statistics wage price index (WPI), which looks at hourly pay rates excluding bonuses, rose just 0.7 per cent in the December quarter and 2.6 per cent over the past year.

ABS director of the wage price index Robin Ashburn says that is the smallest annual increase on record. 
"The growth in wages over the last year of 2.6 per cent, seasonally adjusted, was the smallest through the year rise since the series commenced in 1997," she noted in the report.

Wages growth is so low that it has slipped below the inflation rate, as measured by the ABS consumer price index (CPI).....''


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## sydboy007 (31 May 2014)

The most recent median income figure I can get is ~47K.

So if we assume a 45 year working life, 3% income growth, 6% earning, 2.5% inflation, 9.25% SGC, then based on that and no extra contributions over a working life a final balance of $1,533,508 or 505K in current $$.

At a 6% yield that should produce a $30K income which is around 8K higher than the current single rate pension or an increase of 36%.

The fact is less than half the population will achieve that kid of balance without extra contributions.  Anyone on less than $35K a year will struggle to have a super balance that can realistically provide more than the current pension - likely around 30% of the working population.

I honestly don't think that the Government should be providing expensive tax expenditures to provide for much above that kind of income.

A 650K single RBL and 1M combined RBL is around where I think Govt support should be capped.  If people want a retirement with overseas travel and the luxuries of life then save outside super to fund that, but for me I feel super should be purely to provide a slightly better life than what the current pension offers.  It's already an expensive policy with $30-35B in tax expenditures growing at 12% and $20B+ in fees to managed it.  A policy that costs more than the problem it's designed to resolve is not in my view has not been targeting to problem very well


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## Julia (31 May 2014)

So, Syd, if your above suggestions were to be taken up by government to provide the income you describe as slightly better than the current age pension, would you anticipate that should replace the age pension?


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## k.smith (31 May 2014)

sydboy007 said:


> The most recent median income figure I can get is ~47K.
> 
> So if we assume a 45 year working life, 3% income growth, 6% earning, 2.5% inflation, 9.25% SGC, then based on that and no extra contributions over a working life a final balance of $1,533,508 or 505K in current $$.
> 
> ...







View attachment super_charter_report.pdf


The projections here are based not on 9.25% but 12% and

* the amount of people who will receive the FULL age pension will decline
* the amount of people receiving a part pension will increase
* there will be a gradual increase in retirement income for people alongside the pension.
* the Henry review Retirement income consultation paper issued in December 2008 discussed that the amount of concessions are "heavily weighted" to individuals on higher personal tax rates.

http://www.crikey.com.au/2014/05/14/...witcher=mobile

''...The Australia Institute showed in 2009 that the top 5% of income earners obtain 37% of all superannuation tax concessions....''

And that, imo is the issue that we should be discussing in this forum. Taxpayers are supporting a public superannuation system where their taxes pay more towards the retirement fund of a "wealthy" contributor than an contributor in the category that more than 60% of us fall into. While some here have pointed out that if this were to change, i.e if the tax concessions were to be less favourable to individuals on higher personal income tax, their behaviour would change, and they would look for tax reductions elsewhere, isn't that a separate issue? Others have spoken at length how the onus lies on people to accept responsibility to save for themselves. I agree, but I do not agree that it is possible for many to do so on low incomes where 60.7% of wage earners earn less than $52k, and where about 36% earn less than $32k. Is it right that a person earning $52k pays around $8447 in taxes, has little $$ left after his living expenses to save for retirement, but where his taxes supports a super system which advantages the minority?


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## sydboy007 (31 May 2014)

Julia said:


> So, Syd, if your above suggestions were to be taken up by government to provide the income you describe as slightly better than the current age pension, would you anticipate that should replace the age pension?




In time yes.  It has to otherwise we have to increase taxation to cover the costs, and you can't target a diminishing workforce too much more.

I'd prefer to see us move towards taxing land, resources, consumption and minimally taxing work and profits.


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## sydboy007 (31 May 2014)

k.smith said:


> View attachment 58169
> 
> 
> The projections here are based not on 9.25% but 12% and
> ...




The lack of equity in the current system has been known since super was rolled out to the masses.  Recent tax cuts have tended to make it less attractive to the bottom 30-40%.  It riles me that Abbott sided with 16000 rich superannuants that received over 100K in tax free super pensions each year and cancelled the LISC to help the bottom 1/3 who receive little to no benefit from super.

I don't know if I agree using 12% super as a base since we're only at 9.25%, the moved to 12% will occur over an extended period of time, or it may never happen.  0.25% differences over 45 years cause major changes to final balances due to the effects of compounding.

I think the bottom third would be better off if the Govt set up a SWF legally required to be run for the benefit of the members, then promised to provide a certain % of income above the pension.  The level of fees charged would plummet, a longer term focus could be taken to produce better returns, and these people would actually get a liveable income at the end.  I don't see it happening though.

Removal of RBLs and tax free super have to be some of the biggest costs to the budget a Government has ever introduced.  It really does leave tax payers facing an unfair burden of tax unless major reforms occur.

Remember 50% of wage earners are on less than $47K a year, and roughly $35K year is likely to only get you an income roughly equivalent to the current pension.

Personally I think inflation will increasingly become a major destructor of wealth as resource depletion becomes a growing problem and the cost of all resources goes up, where we use more resources just to do the same level of economic activity as before.  New sources of oil are already at $80-100 break even points, new iron ore mines seem to be up around the $60-70 tonne point.  Higher inflation, stagnating wages does not paint a good future for people being able to increase their rate of savings for future retirement.


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## sydboy007 (6 June 2014)

http://www.macrobusiness.com.au/2014/06/unraveling-pension-system-confusion/

well worth a read

summary:

_The other important point here is that there is nothing that makes pay-go systems unsustainable that wouldn’t also make a fully-funded system unsustainable, though I think neither system is. Each is merely a transfer from one group to another in society, with the same level of output to be shared at each point in time.

Let’s be clear about this. In the pay-go system wealth is transferred between tax payers and the retirees each year. The retirees share of the economic pie is whatever is determined by demographics and government policy on retirement pensions.

In the fully-funded system we have the bizarre situation of working age people buying assets from retired people who had accumulated them in the past, so that they can then sell them when they retire. There is a lot of asset churn in this system to generate what is a transfer from working age to the retired at all points in time. In essence, it is a pay-go system with the added cost of private funds management.

My point here is that this is yet another example of economists inappropriately equating savings, which are transfers, with investment, which is the production of new capital equipment._

and referenced in the article is another good one http://www.macrobusiness.com.au/2013/01/the-pre-saving-myth-of-superannuation/

The below is what the under 50s are currently facing

_What it interesting is what happens when we examine the effects of transitioning from pay-as-you-go to fully funded.  The children in the household not only pay for their parents during the transition period, they must also buy the house from them.  That means the parents get twice the income – once from the transfer, and once from the asset sale. Only after that generation has lived with less than their fair share does the system become fair again for the third generation.

The generation facing the transition needs to work more for the same income, and may retire later due to tightening of social security for unfunded pensioners.

The net effect of a transition between the systems is to transfer wealth from the working generation to the retiring generation. Policies such as this deserve the criticism they receive about intergenerational fairness.  The same logic applies to transition from fully funded to pay-as-you-go university eduction.  In this scenario the working age generation benefits by not having to fund the younger generations education._


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## craft (6 June 2014)

sydboy007 said:


> The below is what the under 50s are currently facing
> 
> _What it interesting is what happens when we examine the effects of transitioning from pay-as-you-go to fully funded.  The children in the household not only pay for their parents during the transition period, they must also buy the house from them.  That means the parents get twice the income – once from the transfer, and once from the asset sale. Only after that generation has lived with less than their fair share does the system become fair again for the third generation.
> 
> ...




Not widely understood, I bet.  And it won't end, tax free super will be a thing of the past by the time these under 50's get to 60, as will home exemptions from pension assets test, retirement age increases etc. etc.


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## craft (6 June 2014)

sydboy007 said:


> My point here is that this is yet another example of economists inappropriately equating savings, which are transfers, with investment, which is the production of new capital equipment.[/I]




This is a little contentious. If the savings pool size is staying the same  then yes it is only transfers.

Changes in the size of the savings pool however need to come from aggregate under consumption with corresponding investment in capital goods.



> Each is merely a transfer from one group to another in society, with the same level of output to be shared at each point in time.



 This is an important point, even subtracting the dispute about whether self funded system's increase the output.

It has huge ramifications and is the underlying reason that I pay scant attention to current asset prices but huge attention to how much economic production my assets generate. 

How are house prices going to hold up in comparison to medical services when the economy is struggling to meet medical demand from people that no longer have luxurious accommodation requirements?


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## sydboy007 (6 June 2014)

craft said:


> _My point here is that this is yet another example of economists inappropriately equating savings, which are transfers, with investment, which is the production of new capital equipment._
> 
> This is a little contentious. If the savings pool size is staying the same  then yes it is only transfers.
> 
> ...




I can't find an article I read the last few days, but it basically said that buying and currently exisiting assets is not investment in the economic sense since it does not lead to the formation of new capital - it's just a shuffle of ownership.

The argument was that by increasing the savings pool you do not automatically increase the formation of new assets.  What seems to have been happening is the bidding up of the value of current assets has mainly occurred.  Australian residential property is a classic example as over 90% of investors are buying pre existing housing, so there's really no new capital formation, just a shuffling of ownership most likely from one specufestor to another.

You could argue that the forced savings leads to lower demand.  Lower demand leads to lower investment as you don't need as much capacity to meet the lowered level of demand.

I'm prob not quite explaining it exactly correct, but that was my understanding of it all.


----------



## craft (6 June 2014)

sydboy007 said:


> I can't find an article I read the last few days, but it basically said that buying and currently exisiting assets is not investment in the economic sense since it does not lead to the formation of new capital - it's just a shuffle of ownership.
> 
> The argument was that by increasing the savings pool you do not automatically increase the formation of new assets.  What seems to have been happening is the bidding up of the value of current assets has mainly occurred.  Australian residential property is a classic example as over 90% of investors are buying pre existing housing, so there's really no new capital formation, just a shuffling of ownership most likely from one specufestor to another.
> 
> ...




Syd - this is how I see it. (disclaimer - I'm an idiot)

Ultimately there must be a seller – yes there may be thousands of transactions churning existing assets in-between a new entrant and an exiting seller but a net seller there must be.  

The entrant has to under consume compared to his productivity to have the money to pay for the asset. He can do this before buying the asset (savings) or after (debt funded). 

The seller can now over consume compared to his current productivity. If his over consumption doesn’t equal the entrants under consumption an amount remains (increase in the savings pool)  for purchasing capital goods (remembering he is the net seller of existing assets – so by definition will not be re-investing in existing assets but new production)

Ongoing mark to market of asset values is just an illusion until people try to exchange their claims on the real economy for current needs, i.e. become a net seller of an asset.  Those decreasing investments in property, downsizing or dying are making windfall gains from housing now but it will be equalled out overtime by net losers in real terms– this is effectively just a transfer of lifetime consumption ability.


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## FxTrader (6 June 2014)

sydboy007 said:


> I can't find an article I read the last few days, but it basically said that buying and currently exisiting assets is not investment in the economic sense since it does not lead to the formation of new capital - it's just a shuffle of ownership.
> 
> The argument was that by increasing the savings pool you do not automatically increase the formation of new assets.  What seems to have been happening is the bidding up of the value of current assets has mainly occurred.  Australian residential property is a classic example as over 90% of investors are buying pre existing housing, so there's really no new capital formation, just a shuffling of ownership most likely from one specufestor to another.



I don't concur with the generalist nature or logic of the argument put forward here.  If you just churn existing property between new owners then yes, no capital formation is occurring. When billions are invested by super funds in businesses that add to capital (equipment, buildings and other intermediate goods) that produces goods and services then they contribute to capital formation.  How that "savings pool" is invested proportionally in different asset classes determines the total level of capital formation occurring.

The consumption habits of most self-funded retirees (relying on a superannuation income stream) would likely be quite modest. The accumulated wealth/savings of older generations that remains as they die off does not evaporate, it's passed down in most cases through inheritance, not transferred at a higher price to the next generation via a sale transaction.

Collectively that asset pool is growing though not equitably.  The tax treatment of super may well be too generous for the moment but some form of mandatory savings contribution scheme is required or the problem of underfunded or unfunded retirement will become an overwhelming burden to future generations.


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## DeepState (6 June 2014)

sydboy007 said:


> ...
> 
> 1. it basically said that buying and currently exisiting assets is not investment in the economic sense since it does not lead to the formation of new capital - it's just a shuffle of ownership.
> 
> ...




1. Savings equals investment.  It is a tautology.  However, savings does not have to equal new capital formation.  New capital formation is a form of investment.  So is saving to buy shares already listed which does not, in of itself, equate to new capital formation.

Given you can direct your savings to activities that deepen the capital stock by erecting structures, building machines etc. there is also the possibility to form capital with savings.

As mentioned, savings does not have to lead to capital formation.  But, really, that's just an extreme end concept which, whilst correct, does not actually occur.

Either form of savings can be good or bad for economic wealth.  Speculation in the property market just boosts prices and, with it, savings or investment - however you want to look at it (it is both).  Clearly it can be destroyed.  Savings deployed to roads and highways can be good...or just being pissed up against the wall.  It depends on the value of the investment ultimately perceived by the users of the asset.  Either way, savings deployment into a bad investment destroys wealth.

2. That is a reasonable example of adding credit to an otherwise closed system.  It is not necessarily a bad thing if the valuation of properties is being brought to a level which approximates/equates to the value which the users actually believe it is worth or, more correctly, will derive value from.  Beyond that point and you get into various degrees of speculation.  Below that point, it is understating true wealth and will constrain consumption behavior.  This is the wealth effect.

3. Increased saving does indeed lead to lower consumption or 'immediate' demand.  But the savings can be deployed into capital formation which is a different kind of demand.  If capital formation is occurring, which is not of the sort which darkens walls, these have much larger economic multipliers than consumption and increase wealth which increases long term consumption.  Planning for capital deployment can take these types of effects into account.  If the savings are being put to speculation with no resulting capital formation directly or subsequently by the investment recipient (the guy who sold you the share and went off to buy another) or the subject of investment (the company), it can still lead to wealth effects that increase consumption.


All of the above is governed by a system of price indications, preferences and structures like tax, law, monetary policy etc... which helps the system to equilibrate itself to maximize real wealth...until it occasional ruptures itself for all sorts of reasons.


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## DeepState (6 June 2014)

sydboy007 said:


> ...
> 
> 1. it basically said that buying and currently exisiting assets is not investment in the economic sense since it does not lead to the formation of new capital - it's just a shuffle of ownership.
> 
> ...




1. Savings equals investment.  It is a tautology.  However, savings does not have to equal new capital formation.  New capital formation is a form of investment.  So is saving to buy shares already listed which does not, in of itself, equate to new capital formation.

Given you can direct your savings to activities that deepen the capital stock by erecting structures, building machines etc. there is also the possibility to form capital with savings.

As mentioned, savings does not have to lead to capital formation.  But, really, that's just an extreme end concept which, whilst correct, does not actually occur.

Either form of savings can be good or bad for economic wealth.  Speculation in the property market just boosts prices and, with it, savings or investment - however you want to look at it (it is both).  Clearly it can be destroyed.  Savings deployed to roads and highways can be good...or just being pissed up against the wall.  It depends on the value of the investment ultimately perceived by the users of the asset.  Either way, savings deployment into a bad investment destroys wealth.

2. That is a reasonable example of adding credit to an otherwise closed system.  It is not necessarily a bad thing if the valuation of properties is being brought to a level which approximates/equates to the value which the users actually believe it is worth or, more correctly, will derive value from.  Beyond that point and you get into various degrees of speculation.  Below that point, it is understating true wealth and will constrain consumption behavior.  This is the wealth effect.

3. Increased saving does indeed lead to lower consumption or 'immediate' demand.  But the savings can be deployed into capital formation which is a different kind of demand.  If capital formation is occurring, which is not of the sort which darkens walls, these have much larger economic multipliers than consumption and increase wealth which increases long term consumption.  Planning for capital deployment can take these types of effects into account.  If the savings are being put to speculation with no resulting capital formation directly or subsequently by the investment recipient (the guy who sold you the share and went off to buy another) or the subject of investment (the company), it can still lead to wealth effects that increase consumption.


All of the above is governed by a system of price indications, preferences and structures like tax, law, monetary policy etc... which helps the system to equilibrate itself to maximize the utility/happiness of the members of the system ...until it occasional ruptures itself for all sorts of reasons.


----------



## qldfrog (6 June 2014)

sydboy007 said:


> http://www.macrobusiness.com.au/2014/06/unraveling-pension-system-confusion/
> 
> well worth a read.....[/I]



Indeed look at it this way: I mam 45 I pay taxes which fund the pensions on current retirees (or the su[er exemptions of the 60y olds
but I have to save (ie pay a mandatory tax) for my own super while payinmg back morgages, my child education, etc

so indded I am the sucker for the 60y plus;
Should I pity the 20yold gen Y?
Well we are more or less together in the same boat ; by the time I reach 70y (if I do), i will have no access to the pensions , my super will be taxed and the unemployed masses of youngster  will have no super aside as they will have had no work or poorly paid ones
(european scenario Australia is following blindly mistake after mistake and has been for the last 20y)
So the baby boomer will have had a win all life, the following generation (mine0 will start hurting and the coming gen Y and later will be scr#wed: they'd better enjoy their ipads.....
And the last budget was a good indicator


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## sydboy007 (6 June 2014)

FxTrader said:


> I don't concur with the generalist nature or logic of the argument put forward here.  If you just churn existing property between new owners then yes, no capital formation is occurring. When billions are invested by super funds in businesses that add to capital (equipment, buildings and other intermediate goods) that produces goods and services then they contribute to capital formation.  How that "savings pool" is invested proportionally in different asset classes determines the total level of capital formation occurring.
> 
> The consumption habits of most self-funded retirees (relying on a superannuation income stream) would likely be quite modest. The accumulated wealth/savings of older generations that remains as they die off does not evaporate, it's passed down in most cases through inheritance, not transferred at a higher price to the next generation via a sale transaction.
> 
> Collectively that asset pool is growing though not equitably.  The tax treatment of super may well be too generous for the moment but some form of mandatory savings contribution scheme is required or the problem of underfunded or unfunded retirement will become an overwhelming burden to future generations.




Buying existing shares in a company is not investment.  Purchases of newly issues shares via an IPO or issue of new shares is likely to be investment, but then maybe not depending on what the raised funds are put to.

For example, during the GFC lots of new shares were issued, but little of it was actually invested - it went to paying down debt, or in the case of the banks, used to improve their capital buffers or replace debt from overseas.  I doubt there was actually any new capital formation, especially with teh contraction in demand until the Govt stimulus started flowing.

If you build a new office tower - that's investment.  Selling the building when it's finished, well the new owners aren't actually investing are they?  Thee's be no newly created asset.

Looking at shares, the share price of company has practically no relevance to the company's propensity to invest.  If the owners see a large opportunity and the shares are undervalued in their opinion, this may act as a constraint since they would be unlikely to want to issue a lot of new shares at below (their opinion) fair value.


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## qldfrog (6 June 2014)

sydboy007 said:


> Looking at shares, the share price of company has practically no relevance to the company's propensity to invest.  If the owners see a large opportunity and the shares are undervalued in their opinion, this may act as a constraint since they would be unlikely to want to issue a lot of new shares at below (their opinion) fair value.



the share price maybe not but an IPO can be used for example to purchase an existing business and then get some synergy and grow the sum of the two tackling another market (or swallowing competition);
but I agree the price of the shares is of no importance ..or should be except for the end of year bonus of the pigs lining  for the trough with their gifts of options ...am i cynical?
but starting to be off subject here?????


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## Smurf1976 (6 June 2014)

sydboy007 said:


> New sources of oil are already at $80-100 break even points, new iron ore mines seem to be up around the $60-70 tonne point.  Higher inflation, stagnating wages does not paint a good future for people being able to increase their rate of savings for future retirement.




Agreed with your point about resources but it could be argued that this is also an effect of broader inflation.

Looking at how inflation is commonly measured (CPI), there is a significant skewing due to the globalised economy. Eg a TV would cost a lot more than it does today if we still manufactured them in Australia as we used to. The relocation of production, combined with technology improvement in both the product and production processes (anyone under a certain age has probably never seen a TV in a wooden cabinet - but they were all like that at one point and a wood box is more labour intensive to manufacture than simply putting a plastic back on an LCD). So to put it another way, the cost of doing things in Australia has inflated more than the cost of doing them in some other places, the ability to relocate masking the effect from the perspective of consumers (but not for producers) in Australia.

But with resources the opportunity to relocate production is far less. If you're going to mine iron ore in Australia or drill for oil in the USA (and the US is still a major oil producer, has been since 1859) well then you are going to incur your costs in Australia or the US. You can't get someone in China or somewhere else with cheap labour to do it for you, you have to actually dig the ore or drill the wells where the resource is. Hence the cost of extracting the resource increases along with local inflation where the resource is located which, in practice, has been a faster rate of increase in many countries with resources as compared to the ability to relocate the production of consumer goods to wherever is cheaper.

I don't doubt that resources and the "we've already picked the low hanging fruit" argument is valid, but there's also a general inflation aspect to it given the limited options for relocating production to wherever labour is cheapest.


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## sptrawler (6 June 2014)

qldfrog said:


> Indeed look at it this way: I mam 45 I pay taxes which fund the pensions on current retirees (or the su[er exemptions of the 60y olds
> but I have to save (ie pay a mandatory tax) for my own super while payinmg back morgages, my child education, etc




Who paid for the baby boomers parents, many who are still alive and had no super?

I know a mate looked after his mother and her sister, in his house, well into their 90's.


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## medicowallet (6 June 2014)

sptrawler said:


> Who paid for the baby boomers parents, many who are still alive and had no super?
> 
> I know a mate looked after his mother and her sister, in his house, well into their 90's.




The baby boomers had to contribute much much less because:

1. There were wars which decreased the amount of older people
2. Life expectancies were much lower.

The current Gen Y etc have it much worse than what we had it, unfortunately people of my generation whine and carry on about how easy they have it.

Sure they have more TVs and larger houses, but to survive now you need dual incomes, have to sacrifice having a large family / having families younger etc.

AND this is compounded because people retiring now use the stupidity of the system to piss away their super then draw on the pension, which is not what super was all about.

MW

Things like this always make me realise that the average Joe looks out only for average Joe, and cannot comprehend what this kind of selfishness means (though often the beneficiaries of the generosities of others)


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## medicowallet (6 June 2014)

sydboy007 said:


> Buying existing shares in a company is not investment.  Purchases of newly issues shares via an IPO or issue of new shares is likely to be investment, but then maybe not depending on what the raised funds are put to.
> 
> For example, during the GFC lots of new shares were issued, but little of it was actually invested - it went to paying down debt, or in the case of the banks, used to improve their capital buffers or replace debt from overseas.  I doubt there was actually any new capital formation, especially with teh contraction in demand until the Govt stimulus started flowing.
> 
> ...




Surely a strong share price gives a company stability, opportunity to borrow etc.

eg if my company is worth $1000000, I cannot borrow as much against its underlying value as I could if it were worth 100 times as much.   Also if a foreign investment company saw the awesome things I was doing with my investing, they could not as easily take it over etc, also giving some stability. (and also net inflow of cash into the country in quite a few cases)

Now plowing money into realestate on the other hand.... nope, don't really see how that improves income into the country, all I see is net outflow from the country.

But try to explain the fact to people who believe that internal churning of money is important.

MW


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## sydboy007 (6 June 2014)

medicowallet said:


> Surely a strong share price gives a company stability, opportunity to borrow etc.
> 
> eg if my company is worth $1000000, I cannot borrow as much against its underlying value as I could if it were worth 100 times as much.   Also if a foreign investment company saw the awesome things I was doing with my investing, they could not as easily take it over etc, also giving some stability. (and also net inflow of cash into the country in quite a few cases)
> 
> ...




Isn't it more about the income earning potential of the company.  It's like asking someone which is more expensive?  The $1 share, or the $600 share.  Wouldn't, or shouldn't, it be the case that the one providing the better yield, and the likelihood of increased income wins?  Certainly larger companies have easier access to debt markets, but that is not relevant to the share price, or are you saying that if 2 companies with billion dollar market caps could be judged by banks differently because 1 has a share price of $100 and the other only $20?

I'd say only the ASX 20-50 are take over proof, otherwise pretty much most Australian companies are easy takeover targets because they're not really worth much on a global scale, and with practically free money available in the US and EU getting the debt to buy prob isn't much of an issue either, especially now the PIK (Payment In Kind) loans are making a comeback.


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## sptrawler (6 June 2014)

sydboy007 said:


> Isn't it more about the income earning potential of the company.  It's like asking someone which is more expensive?  The $1 share, or the $600 share.  Wouldn't, or shouldn't, it be the case that the one providing the better yield, and the likelihood of increased income wins?  Certainly larger companies have easier access to debt markets, but that is not relevant to the share price, or are you saying that if 2 companies with billion dollar market caps could be judged by banks differently because 1 has a share price of $100 and the other only $20?
> 
> I'd say only the ASX 20-50 are take over proof, otherwise pretty much most Australian companies are easy takeover targets because they're not really worth much on a global scale, and with practically free money available in the US and EU getting the debt to buy prob isn't much of an issue either, especially now the PIK (Payment In Kind) loans are making a comeback.




There isn't a company in Australia, that couldn't be bought out, unless the Government intervened?

For example Wallmart market cap $249billion, our big retailers Woolies, Wesfarmers $40 - 50 billion

Woodside market cap $34b whereas Chevron have a market cap of about $240b.


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## DeepState (6 June 2014)

First, this is just some economic relationships showing that, at least for national accounts, savings equals investments:

http://www.freeeconhelp.com/2011/11/why-savings-equals-investment-si-and.html

Second, there seems to be a sense that investment not in the form of new capital formation is not actually investment.  I have some sympathy for this.  Savings directed to existing assets just doesn't seem as productive.  It's like the primary market is where all the value is created but the secondary market just rotates ownership around.

Why it is important, though, is to act as a store of wealth in a form other than to build a machine or something that is capital formation (including creating IP in the form of a Hollywood movie...can you believe it).  It also forms a mechanism which fosters price discovery helping with capital allocation decisions.  These choices are very important to guide money to what might be the best opportunities.  This then helps to more accurately decide the build vs rent trade-off.  Thus, at the very least, investment which is not in the form of capital formation helps to decide where capital formation might be most effective.  Price discovery can occur in the absence of a secondary market though. Additionally, if the builders (those forming fixed capital) cannot sell the asset they create, their capital is forever locked up and cannot be redeployed to pursue their skill of building.  Other 'passive' investors must take that load for the primary market to function or hurdle rates would be enormous. Though indirect, the presence of a secondary market in any form, listed or unlisted, lowers cost of capital and greatly enhances the propensity of capital formation and, usually, leads to improved productivity.  Both need to exist in some form for an efficient deployment of capital in all forms to take place (GFCs and other calamities aside).

Share prices per se don't mean anything.  The market value implied by the share price does mean something.  Without affecting their internal operations, management faced with a low share price relative to their assessment of fair value can engage in a debt funded buy back (or just taking it out of cash resources, or offering a dividend reinvestment plan).  The converse occurs also.  Hence they engage in balance sheet engineering.  If they have a pipeline of direct investment opportunities which requires more capital than available within the firm, the relative value will impact the extent to which these plans are implemented and also the form of financing undertaken (ie. more debt finance, where possible, if share price is judged to be below fair).  Same deal for purchases of secondary investments as per take-overs.  Hence share prices impact capital allocation and finance structure.

A company trading below fair is a greater likehood for being an acquisition target.  However, synergy issues and other deal terms etc. will impact the propensity for being an active target despite other factors being identical.


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## FxTrader (6 June 2014)

sydboy007 said:


> Buying existing shares in a company is not investment.  Purchases of newly issues shares via an IPO or issue of new shares is likely to be investment, but then maybe not depending on what the raised funds are put to.



 Really?  Your flawed argument was that such investment did not contribute to capital formation.  Since shares represent an ownership stake in a business however small, the extent to which a business participates in capital formation is attributable to the owners of the business entity.

*Investment:* the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value. What dictionary are you reading from or are you asserting a new definition for the term "investment"?



> If you build a new office tower - that's investment.



Such an "investment" may indeed contribute to capital formation if goods or services production occurs as a result of its use.  The act of building an office tower in itself is not capital formation.

*Capital Formation:* The creation of productive assets that expand an economy's capacity to produce goods and services. Private savings facilitates capital formation by allowing resources to be diverted to corporate investment rather than individual consumption.


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## medicowallet (7 June 2014)

sydboy007 said:


> Isn't it more about the income earning potential of the company.  It's like asking someone which is more expensive?  The $1 share, or the $600 share.  Wouldn't, or shouldn't, it be the case that the one providing the better yield, and the likelihood of increased income wins?  Certainly larger companies have easier access to debt markets, but that is not relevant to the share price, or are you saying that if 2 companies with billion dollar market caps could be judged by banks differently because 1 has a share price of $100 and the other only $20?
> 
> I'd say only the ASX 20-50 are take over proof, otherwise pretty much most Australian companies are easy takeover targets because they're not really worth much on a global scale, and with practically free money available in the US and EU getting the debt to buy prob isn't much of an issue either, especially now the PIK (Payment In Kind) loans are making a comeback.




No. I am saying a company worth 1 billion and zero borrowings and access to an investment with excellent returns xan borrow more than a similar company with a value of 100000 dollars.

Plus the argument is bs anyway. At the end of the day it comes down to money coming into the country vs money leaving it.   Asset prices within the country are kess important imo.  

Like i inferred all that can happen is like what hapoened over the past ten years where we had heaps of money coming in eg from mining and our stupid govt facilitated it going into overpriced unproductive residential housing which generates net outgoings of money from the country.  Sure we feel richer, but what we have done is squandered the opportunity afforded by the boom.

Stupid govts have no idea how to make lifestyles better and more sustainable as the general population only want what is best for the individual, and cant see past their own wants


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## k.smith (13 June 2014)

these two articles say it all...

http://www.eurekastreet.com.au/article.aspx?aeid=41519#.U5ql4unlrmK

''....Wealthy beneficiaries often claim they are entitled to pay no tax because they paid some while working. But they still have a big income. Unless they pay tax on it, younger people will have to fund more of the growing cost of government services for retirees who are often better off financially. Many low and middle income employees would be better off if their compulsory contributions to super were instead paid out as higher take-home income when they are often struggling to bring up a family, pay off a mortgage, education fees and so on.

According to conservative Treasury projections, scrapping the concessions should increase revenue by over $35 billion in 2016–17, rising each year. This money could be used to improve living standards for the workforce via tax cuts and improvements to health care, education and infrastructure. Moreover, reputable studies show that the cost of the concessions outweighs the likely savings on the age pension costs.

Compulsion has another bad result. It distorts the flow of resources away from more productive uses. It encourages fund managers to trade existing financial assets rather than help mobilise capital for productive new investment to boost growth in a country with an ageing population....''

http://citynews.com.au/2014/increasing-inequality-brings-high-social-cost-report/

''....But from the mid-1970s, full-time wages for the bottom tenth of the income distribution have grown only 15%, while full-time earnings for the top tenth have increased by 59%.

Australia’s unemployment benefit is the lowest of OECD countries and 20% below the poverty line. Many government benefits “have barely kept place with inflation over recent decades”, the report finds.

Australia is one of the lowest-taxing countries in the industrialised world and its welfare spending as a proportion of GDP is among the lowest in the OECD....''


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## sydboy007 (14 June 2014)

Hewson also notes that there is no comprehensive list of tax expenditures (or tax breaks, as we know them more commonly) included in the budget, which keeps Australians in the dark about how much we are losing in forgone revenue.

According to one of the report's authors, Richard Denniss (the executive director of the Australia Institute and a former adviser to former Greens leader Bob Brown), if we abolished all super tax concessions, we could give the aged pension to everyone, and increase it by about 25 per cent

Read more: http://www.smh.com.au/comment/joe-h...ing-the-war-20140612-zs5v2.html#ixzz34ZBB5iKt


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## FxTrader (14 June 2014)

k.smith said:


> "Australia is one of the lowest-taxing countries in the industrialized world...''



Not even close to being correct with respect to the top marginal tax rate (top 10) and the income level this kicks in at with the deficit tax pushing us further up the list.  Yes, low to middle income taxation ranks us lower but this is as it should be - the wealthy pay proportionally more tax.






> Compulsion has another bad result. It distorts the flow of resources away from more productive uses. ...''



LOL, would those more productive uses by chance include foreign made consumer goods like TVs and appliances, a better car, more expensive houses etc. (how most people choose to spend disposable income rather than save and invest it)?  Consumption is the problem not the solution. Compulsion to save is the solution to funding the retirement of an aging population.  How super savings are deployed for investment is restricted by legislation.


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## FxTrader (14 June 2014)

sydboy007 said:


> According to one of the report's authors, Richard Denniss (the executive director of the Australia Institute and a former adviser to former Greens leader Bob Brown), if we abolished all super tax concessions, we could give the aged pension to everyone, and increase it by about 25 per cent



Of course that's it, eureka! Why hasn't anyone else proposed this simple solution.  Abolish compulsory super and just pay an aging population a tax funded age pension and keep increasing it every year starting with an immediate increase of 25%!!!  Pure genius .

Oh wait, what happens when a shrinking proportion of the working population needs to fund an ever growing age pension obligation via government taxation?  Conclusion, it's unsustainable in the long run.


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## sydboy007 (14 June 2014)

FxTrader said:


> Of course that's it, eureka! Why hasn't anyone else proposed this simple solution.  Abolish compulsory super and just pay an aging population a tax funded age pension and keep increasing it every year starting with an immediate increase of 25%!!!  Pure genius .
> 
> Oh wait, what happens when a shrinking proportion of the working population needs to fund an ever growing age pension obligation via government taxation?  Conclusion, it's unsustainable in the long run.




Note, they didn't say abolish superannuation, just the tax breaks.  It's compulsory, so why do we need massive tax breaks to encourage compulsory savings??


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## FxTrader (15 June 2014)

sydboy007 said:


> Note, they didn't say abolish superannuation, just the tax breaks.  It's compulsory, so why do we need massive tax breaks to encourage compulsory savings??



The point is that if you don't provide tax incentives to save for retirement in a long term savings vehicle like superannuation then why would anyone bother to add to it?  The CSG levy alone is insufficient and doesn't apply to the self employed, additional voluntary contribution is required.  Advocating for the removal of tax incentives for superannuation is advocating for it's demise.  Arguing for more fairness with respect to how such tax incentives are apportioned is a different matter.


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## banco (15 June 2014)

FxTrader said:


> The point is that if you don't provide tax incentives to save for retirement in a long term savings vehicle like superannuation then why would anyone bother to add to it?  The CSG levy alone is insufficient and doesn't apply to the self employed, additional voluntary contribution is required.  Advocating for the removal of tax incentives for superannuation is advocating for it's demise.  Arguing for more fairness with respect to how such tax incentives are apportioned is a different matter.




Whatever system of tax breaks you have it's hard to get around the fact that the people who are most likely to end up on the old age pension are also the ones least likely to have excess cash to put into super.


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## FxTrader (15 June 2014)

banco said:


> Whatever system of tax breaks you have it's hard to get around the fact that the people who are most likely to end up on the old age pension are also the ones least likely to have excess cash to put into super.



Exactly what the age pension should be, a safety net pension income stream for those with inadequate retirement income and/or assets that can support the basic necessities of life in old age.  However, the principle asset many elderly have is their home.  Exempting this asset from the assets test is one of the loopholes that turns the age pension into a lifestyle supplement rather than a retirement income safety net.  This loophole needs to be closed.


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## sydboy007 (15 June 2014)

FxTrader said:


> The point is that if you don't provide tax incentives to save for retirement in a long term savings vehicle like superannuation then why would anyone bother to add to it?  The CSG levy alone is insufficient and doesn't apply to the self employed, additional voluntary contribution is required.  Advocating for the removal of tax incentives for superannuation is advocating for it's demise.  Arguing for more fairness with respect to how such tax incentives are apportioned is a different matter.




* tax incentives go to those who need them the least

* taxing super contributions at marginal rates would allow a significant drop in income taxes and / or increase in spending on infrastructure which should increase GDP growth and a larger economy is better able to support the same $ costs of the pension.

* By around 2017 the tax expenditures associated with super will cost more than the aged pension.  What's the point of spending more than the cost savings?

* super tax expenditures are currently growing at ~12% while the aged pension is at ~4%.  So roughly every 7 years the cost of super is doubling, while the aged pension takes 18 years.  Possibly around 2025 super tax expenditures could be ~70% higher than the aged pension.

* there's nothing stopping those who make the most use of super tax expenditures from saving elsewhere.

* something really needs to be done to close down the transition to retirement pension re-contribution tax minimisation scam.


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## sptrawler (15 June 2014)

sydboy007 said:


> Note, they didn't say abolish superannuation, just the tax breaks.  It's compulsory, so why do we need massive tax breaks to encourage compulsory savings??




If you abolish the tax break on super, you are changing the intent of the contract, allowing the removal of 9% of your wages.
You then have to give the person the option, whether they want 9% taken out of their pay, they may decide they need the money know.
You could say that over a certain amount it will be taxed higher, oh they already do that.

Don't you think your statement is a bit out there, "do we need tax breaks to encourage something that is compulsory"?
The system was sold on its tax concesions, your statement sounds as though it's ok to scam people.
You are forcing people to have money taken from their pay, that they can't access. 
Then you are taxing them on that money at their marginal rate, it would be easier just to put up the marginal tax rates.
It the tax concessions on super are costing more than they are saving, the system needs closing down and another system designed.

Also you say super tax expenditure will cost $x that is a bit of a furphy, it isn't an expenditure, isn't it a non collection. 
Expenditure is an outgoing, from memory, like the pension.


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## banco (15 June 2014)

sptrawler said:


> If you abolish the tax break on super, you are changing the intent of the contract, allowing the removal of 9% of your wages.
> You then have to give the person the option, whether they want 9% taken out of their pay, they may decide they need the money know.




I'm not sure why you'd have to give the person the option?


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## k.smith (15 June 2014)

FxTrader said:


> The point is that if you don't provide tax incentives to save for retirement in a long term savings vehicle like superannuation then why would anyone bother to add to it?  The CSG levy alone is insufficient and doesn't apply to the self employed, additional voluntary contribution is required.  Advocating for the removal of tax incentives for superannuation is advocating for it's demise.  Arguing for more fairness with respect to how such tax incentives are apportioned is a different matter.




Tax incentives to* save for retirement *... sure. 
But surely not into "infinity and beyond" where the pursuit of tax minimisation seems to have become an art form?   

http://www.macrobusiness.com.au/2014/06/smsf-property-investment-surges/

''....Meanwhile, the ATO has reportedly begun a crackdown on SMSF property investors using a loophole in the rules whereby they lend money to their SMSFs at zero or low interest rates in order to get around contribution limits, thereby increasing the amount of money taxed at low rates and minimising tax paid:


The loan was at zero or low interest with long repayment terms and the money was to be used by the self-managed superannuation fund to invest in property, generating rental income taxed at 15 per cent, instead of at the top personal rate of 46.5 per cent......''


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## sptrawler (16 June 2014)

banco said:


> I'm not sure why you'd have to give the person the option?




Although some may be too young to remember, the first 3% of the super levy was in leiu of a payrise. The basic terms of the super guarantee were laid down then.
I would have thought, if the terms of the super system were going to be turned completely on their head. People would have to be given the option of whether they wanted to remain in the scheme.
It is one thing tying peoples money up for the majority of their lives, allowing it to be a slush fund for the markets, when their is a tax incentive.
It is completely another to remove your money and giving you no benefit. Other than a hope there is some for you at the end.


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## Vixs (16 June 2014)

banco said:


> I'm not sure why you'd have to give the person the option?




You'd voluntarily give up 9%, soon to be 12%, of your pay into an account you can't touch until the government says so? Whatever, I've got things I'd rather do with my money. If they take away the concessions I would vote in a heartbeat for whoever will end compulsory contributions and get my 12% pay-rise.


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## sydboy007 (16 June 2014)

sptrawler said:


> If you abolish the tax break on super, you are changing the intent of the contract, allowing the removal of 9% of your wages.
> You then have to give the person the option, whether they want 9% taken out of their pay, they may decide they need the money know.
> You could say that over a certain amount it will be taxed higher, oh they already do that.
> 
> ...




Then how do we afford the current system over the next couple of decades?  As more people hit the magic 60 year mark and can turn their super into tax free income, how does the system work with a rapidly declining participation rate?  Possibly by 2030 super tax expenditures could be double cost of the aged pension.

I'm all for forcing people to save for their retirement, but is it fair to provided hundreds of thousands of dollars in tax expenditures for the ultra wealthy to accumulate millions in super?  At a minimum we need to go back to RBLs to stop the near unlimited loss of tax revenue from super.  I'm also not sure how long we can afford to have tax free super pensions when the number of people receiving them is likely to double by around 2030.

Considering how little money someone on <37K a year would accumulate in super, I think they'd be better off receiving their super as an increase in income.  They're going to get a full pension at retirement anyway, and when you factor in that fees take out a larger % on smaller balances, it's a large burden on the poor for little to no benefit, or in the case for those on < 18K they pay more tax on their super income than wages.


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## sptrawler (16 June 2014)

sydboy007 said:


> Then how do we afford the current system over the next couple of decades?  As more people hit the magic 60 year mark and can turn their super into tax free income, how does the system work with a rapidly declining participation rate?  Possibly by 2030 super tax expenditures could be double cost of the aged pension.
> 
> I'm all for forcing people to save for their retirement, but is it fair to provided hundreds of thousands of dollars in tax expenditures for the ultra wealthy to accumulate millions in super?  At a minimum we need to go back to RBLs to stop the near unlimited loss of tax revenue from super.  I'm also not sure how long we can afford to have tax free super pensions when the number of people receiving them is likely to double by around 2030.
> 
> Considering how little money someone on <37K a year would accumulate in super, I think they'd be better off receiving their super as an increase in income.  They're going to get a full pension at retirement anyway, and when you factor in that fees take out a larger % on smaller balances, it's a large burden on the poor for little to no benefit, or in the case for those on < 18K they pay more tax on their super income than wages.




Absolutely, if the system requires overhauling then it has to be fair to those that have also placed money in super, in good faith.
Super is made up of taxable and taxfree components, those with large sums in super would have mainly taxfree money in there.
The taxfree component is generally money that has been put in after tax, therefore if it is to be taxed differently the member should be given the optoin of removing it.
Then what is left is the taxable component that was placed in with a tax concession, the government would then be able to do what it likes with it.
The problem is the taxfree component is such a large proportion in the large super balances , the removal of it would probably leave a lot of super funds embarrassingly short of funds.
Isn't the excessive earnings tax still comming in to being, whereby earnings over $100k get taxed at 15%.

If you are going to take money out of peoples take home pay at their marginal tax rates, then give it to fund managers who have no responsibilty to look after it, people won't be happy.


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## banco (16 June 2014)

sptrawler said:


> Absolutely, if the system requires overhauling then it has to be fair to those that have also placed money in super, in good faith.
> Super is made up of taxable and taxfree components, those with large sums in super would have mainly taxfree money in there.
> The taxfree component is generally money that has been put in after tax, therefore if it is to be taxed differently .




In other words the changes should be grandfathered in to ensure the baby bomers aren't hit?  Just like Hockey's increase in the retirement age.


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## sptrawler (16 June 2014)

banco said:


> In other words the changes should be grandfathered in to ensure the baby bomers aren't hit?  Just like Hockey's increase in the retirement age.




Not necessarily, as long as a member has the option of removing after tax personal contributions, no one should be able to complain.
Other than that, grandfathering of funds in the pension phase would probably be required, as the pension was commenced with existing rules.
Somewhat like what would happen if a change was made to negative gearing.

That would put super back to just a savings account, see how that works.lol


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## k.smith (16 June 2014)

sptrawler said:


> Not necessarily, as long as a member has the option of removing after tax personal contributions, no one should be able to complain.
> Other than that, grandfathering of funds in the pension phase would probably be required, as the pension was commenced with existing rules.
> Somewhat like what would happen if a change was made to negative gearing.
> 
> That would put super back to just a savings account, see how that works.lol




On the other side of the equation, how many low income Australian workers paying their compulsory 9.25% into Super - costing them 15% PLUS costs - have complaints about the co-contribution scheme being withdrawn ? 

Especially when they're told that super is all about saving for their retirement, but oops...they're paying up to 15% more than if they were to take their meagre 9.25% $$ (which will become 12% in 2019 ) home and pay their loans off... while at the same time  funds with over $10million has reportedly doubled over the last three years? 

And then to be told that whether low income earners receive the co-contribution or not will make no difference in the end because they will get the pension anyway ?

it's all in the transcript
http://www.financeminister.gov.au/transcripts/2014/0613-radio-national.html


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## sptrawler (16 June 2014)

k.smith said:


> On the other side of the equation, how many low income Australian workers paying their compulsory 9.25% into Super - costing them 15% PLUS costs - have complaints about the co-contribution scheme being withdrawn ?
> 
> Especially when they're told that super is all about saving for their retirement, but oops...they're paying up to 15% more than if they were to take their meagre 9.25% $$ (which will become 12% in 2019 ) home and pay their loans off... while at the same time  funds with over $10million has reportedly doubled over the last three years?
> 
> ...




I thought we were talking about getting super down to a basic system where there is no unequal benefit.
If the personal contribution is removed, and contributions are taxed at your marginal rates, there is no benefit.

Now you are talking about co contributions, to people who supposedly have none of their own money left over, to put in anyway. 

Also the last statement is correct, someone with no money, recieves a pension income similar to having $600,000 in term deposit and it is indexed.

The difference is, *if* a person who saved $600,000 couldn't get any pension, why would they save it?


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## sydboy007 (17 June 2014)

sptrawler said:


> Absolutely, if the system requires overhauling then it has to be fair to those that have also placed money in super, in good faith.
> Super is made up of taxable and taxfree components, those with large sums in super would have mainly taxfree money in there.
> The taxfree component is generally money that has been put in after tax, therefore if it is to be taxed differently the member should be given the optoin of removing it.
> Then what is left is the taxable component that was placed in with a tax concession, the government would then be able to do what it likes with it.
> ...




The issue isn't so much the after tax income put into super, though the 15% earning rate is a nice bonus for those on the top marginal rates, but the very generous tax savings on concessional contribitions.  As it stands if you're in the top 2 marginal rates and able to have 35K of concessionally taxed super are able to save between 8225 and 11025 in tax.  We're talking around half the cost of the aged pension each year as a tax break to the very wealthy, while those < 37K a year are pretty much getting no benefit.  It's a massively expensive system that's doing little to actually reduce the need for the aged pension.

This issue mainly came about due to Howard removing the RBLs as they basically stopped excessive savings within super.  Bring back RBLs with a higher level of annual concessional super contributions and that way it makes it relatively easy to save within super in your later years without being overly generous.


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## sptrawler (17 June 2014)

sydboy007 said:


> The issue isn't so much the after tax income put into super, though the 15% earning rate is a nice bonus for those on the top marginal rates, but the very generous tax savings on concessional contribitions.  As it stands if you're in the top 2 marginal rates and able to have 35K of concessionally taxed super are able to save between 8225 and 11025 in tax.  We're talking around half the cost of the aged pension each year as a tax break to the very wealthy, while those < 37K a year are pretty much getting no benefit.  It's a massively expensive system that's doing little to actually reduce the need for the aged pension.
> 
> This issue mainly came about due to Howard removing the RBLs as they basically stopped excessive savings within super.  Bring back RBLs with a higher level of annual concessional super contributions and that way it makes it relatively easy to save within super in your later years without being overly generous.




I don't disagree with the reasoning of what you are saying. 
However if the person is going to be taxed at 47% on the $37k, why would they want it put in super? Why not negative gear a property with it?

I know the super is compulsory, but I think there would be grounds for a legal challenge, to at least have the option to opt out of the system. The changes, would be enough to give rise to, change in intended pupose of the original scheme.
As I said in the last post, there is a big difference between people willingly giving their money because it is treated concessionally, to fund managers. 
Than taking it at their marginal rate, never to be seen again untill you are given permission, that's if the money is still there and hasn't been lost by shonky planners.lol
I think there would and should, be a backlash by all working people.

They are putting away money, that will cause them to lose some if not all the pension, and you say they should do that at their marginal rate. 
Because it is unfair on low income earners who pay little or no tax and in all likelyhood will get a full tax payer funded pension.

It's a noble thought, best of luck with that. 
Just my thoughts.


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## craft (17 June 2014)

sydboy007 said:


> The issue isn't so much the after tax income put into super, though the 15% earning rate is a nice bonus for those on the top marginal rates, but the very generous tax savings on concessional contribitions.  As it stands if you're in the top 2 marginal rates and able to have 35K of concessionally taxed super are able to save between 8225 and 11025 in tax.  We're talking around half the cost of the aged pension each year as a tax break to the very wealthy, while those < 37K a year are pretty much getting no benefit.  It's a massively expensive system that's doing little to actually reduce the need for the aged pension.
> 
> This issue mainly came about due to Howard removing the RBLs as they basically stopped excessive savings within super.  Bring back RBLs with a higher level of annual concessional super contributions and that way it makes it relatively easy to save within super in your later years without being overly generous.




Syd the tax savings on contributions are chicken feed to the large funds. If you have a 10M fund and make 10% return the tax savings between marginal rate and super earnings rate is $340K.

If your wealthy its not about how much you can save by putting money into super but about how much you can lend your fund to access the 15% earnings rate.

Lend your fund 10M at an arms length rate (many loans are not even made at arms length rates and I have not heard of that being tested in court by the ATO yet - it actually appears they are accepting of it) and make a 5% return above the lending rate and that's 500K pa. of profit taxed at 15% rather then higher personal or corporate rates. 

Concession caps - pffftt, the're just for the poor workers.

The earnings rate in conjunction with the easing of borrowing restrictions is the honeypot.


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## Ves (17 June 2014)

craft said:


> If your wealthy its not about how much you can save by putting money into super but about how much you can lend your fund to access the 15% earnings rate.
> 
> Lend your fund 10M at an arms length rate (many loans are not even made at arms length rates and I have not heard of that being tested in court by the ATO yet - it actually appears they are accepting of it) and make a 5% return above the lending rate and that's 500K pa. of profit taxed at 15% rather then higher personal or corporate rates.



Most legal professionals and SMSF advisers that our office has had discussions with had a really cautious attitude towards the "zero interest" rate loans between related parties and their SMSFs.  The "non-arms length" and "non-commercial" nature of these loans was a pretty big red flag. It was always a do-this-at-your-own-peril situation and considered to be "too good to be true" by a lot in the industry. 

The ATO appeared to be accepting of them,   but did not come out and say it in certain terms.  What they did say seemed to allude to the view that they generally accept that it _might_ be possible.  

However recently they have been making some noises.  There was a private ruling for a related party non-zero loan to which people doing it should pay attention.

Here is a link to the ATO private ruling.

Here is an article from Aaron Dunn's blog that explains the ramifications of this.

(Aaron Dunn's blog is a good source of information by the way)

In short: If the non-arms length income provisions are applied to the assets linked to these loans, then any income derived from these assets would be taxed at  45%.  Non-arms length income does not qualify for any pension exemptions, either.


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## craft (17 June 2014)

Ves said:


> Most legal professionals and SMSF advisers that our office has had discussions with had a really cautious attitude towards the "zero interest" rate loans between related parties and their SMSFs.  The "non-arms length" and "non-commercial" nature of these loans was a pretty big red flag. It was always a do-this-at-your-own-peril situation and considered to be "too good to be true" by a lot in the industry.
> 
> The ATO appeared to be accepting of them,   but did not come out and say it in certain terms.  What they did say seemed to allude to the view that they generally accept that it _might_ be possible.
> 
> ...




Hi Ves

That ruling was very interesting because it contradicts previous rulings on non-arms length implications of zero interest rates (change of heart maybe). For example:

https://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/1012414213139.htm

https://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/1012396819768.htm

You only get edited versions of private rulings so there may be other detail that sent the verdicts in two different ways. In any case the whole topic is begging for a public ruling but probably requires a test case in the courts before we see one.  

Putting completely juicing the loop hole with a zero interest rate to the side - its still a great way of circumventing the contribution limits and getting serious money exposed to the lower earnings rate.


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## sydboy007 (17 June 2014)

craft said:


> Syd the tax savings on contributions are chicken feed to the large funds. If you have a 10M fund and make 10% return the tax savings between marginal rate and super earnings rate is $340K.
> 
> If your wealthy its not about how much you can save by putting money into super but about how much you can lend your fund to access the 15% earnings rate.
> 
> ...




That's why RBLs were so effective.  Before Howard got rid of them there was no incentive to go over the RBL because after that the tax effectiveness was minimal.  For the financial year ending 30 June 2005, the lump sum RBL was $619,223 and the pension RBL was $1,238,440.  I think around 600K for a single person and 1M for a couple is a reasonable amount in super.  It should provide a higher income than the pension without costing a fortune in tax expenditures.


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## sptrawler (17 June 2014)

sydboy007 said:


> That's why RBLs were so effective.  Before Howard got rid of them there was no incentive to go over the RBL because after that the tax effectiveness was minimal.  For the financial year ending 30 June 2005, the lump sum RBL was $619,223 and the pension RBL was $1,238,440.  I think around 600K for a single person and 1M for a couple is a reasonable amount in super.  It should provide a higher income than the pension without costing a fortune in tax expenditures.




If $600k/single or $1m/couple was all that was allowed in super. I would upgrade the house and car, then aim for the max allowable, that gives full aged pension. Also I would start taking the o/s holidays I was putting off untill retirement.


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## sydboy007 (17 June 2014)

sptrawler said:


> If $600k/single or $1m/couple was all that was allowed in super. I would upgrade the house and car, then aim for the max allowable, that gives full aged pension. Also I would start taking the o/s holidays I was putting off untill retirement.




Go for it.  At least with RBLs there's a chance income taxes can be reduced because the super tax expenditures aren't growing at 12% a year.  I doubt there's any other part of the budget growing at that rate.

600K at 5% interest is 30K.  The single aged pension is 19916 - 50% increase over the aged pension ain't a bad deal.  5% on 1M is 50K.  The couple aged pension is 30K - 66% increase.

Under the current expensive system people are already blowing their super on renovations, cars and holidays.  It's all about getting things so they can get the maximum pension.  What's the point of providing all these tax benefits if people can blow their super and still get the full pension?


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## k.smith (17 June 2014)

craft said:


> Syd the tax savings on contributions are chicken feed to the large funds. If you have a 10M fund and make 10% return the tax savings between marginal rate and super earnings rate is $340K.
> 
> If your wealthy its not about how much you can save by putting money into super but about how much you can lend your fund to access the 15% earnings rate.
> 
> ...




it seems that the bigger the smsf is, the bigger the likelihood of achieving higher returns. win and win...
isn't the super system supposed to encourage all to save for retirement, including the poor worker, who really needs the most encouragement, rather than the least? Make a big song and dance that the low paid don't pay tax, then just take their 9.25% and tax it inside super ! All while the big fat elephant keeps growing with zero interest rate loans and  $10million funds which double every three years...because they are saving for their retirement




sydboy007 said:


> That's why RBLs were so effective.  Before Howard got rid of them there was no incentive to go over the RBL because after that the tax effectiveness was minimal.  For the financial year ending 30 June 2005, the lump sum RBL was $619,223 and the pension RBL was $1,238,440.  I think around 600K for a single person and 1M for a couple is a reasonable amount in super.  It should provide a higher income than the pension without costing a fortune in tax expenditures.




I agree with what you say, and that such figures seem reasonable limits.... what about indexing???
http://inside.org.au/two-indexes-two-very-different-prospects-for-pensions/ 



sptrawler said:


> If $600k/single or $1m/couple was all that was allowed in super. I would upgrade the house and car, then aim for the max allowable, that gives full aged pension. Also I would start taking the o/s holidays I was putting off untill retirement.




The reason I saved for retirement in the first place was because I worked out long ago that existing on the pension alone would be just that ...existing ! Blowing savings on holidays and home improvements would be like going back to square one. Would you really go on a big cruise and come home to stare at the new wallpaper just to qualify for a pension? 



sydboy007 said:


> Go for it.  At least with RBLs there's a chance income taxes can be reduced because the super tax expenditures aren't growing at 12% a year.  I doubt there's any other part of the budget growing at that rate.
> 
> 600K at 5% interest is 30K.  The single aged pension is 19916 - 50% increase over the aged pension ain't a bad deal.  5% on 1M is 50K.  The couple aged pension is 30K - 66% increase.
> 
> Under the current expensive system people are already blowing their super on renovations, cars and holidays.  It's all about getting things so they can get the maximum pension.  What's the point of providing all these tax benefits if people can blow their super and still get the full pension?




I agree.... lump sums should be discouraged.


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## Julia (17 June 2014)

sydboy007 said:


> Under the current expensive system people are already blowing their super on renovations, cars and holidays.



Are they?   Can you provide stats to that effect?
Why use the pejorative "blowing their super"?  Perhaps people have during the last decade or so of their working lives saved more than ever in order to replace their car, do necessary upgrades for mobility or other reasons to the house etc, when they retire.   How is that not their right?



> It's all about getting things so they can get the maximum pension.



Says whom?


> What's the point of providing all these tax benefits if people can blow their super and still get the full pension?



Seems to me you're making a lot of assumptions about the way people plan their retirement.  I've not ever heard any expert in the field attest to your assertion that people just blow what they have saved in a tax advantaged situation in order to access a government pension.

Most people I've ever known who have worked and saved diligently to be independent in retirement would have absolutely no intention of wasting it just to access the meagre age pension. 

You seem to be somewhat judgmental about how other people manage their money.  Perhaps just look after your own situation and be a little less accusatory about others.


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## sptrawler (17 June 2014)

k.smith said:


> Would you really go on a big cruise and come home to stare at the new wallpaper just to qualify for a pension?
> .




No I wouldn't, just hate young people telling me how much money is enough. 
They will be just as annoyed as me when they become self funded and some young person is telling them they have had it easy.

There is plenty of evidence to show, that people who were carefull with their money pre retirement, remain carefull post retirement.

I would also hazard a guess that no matter how much money you throw at welfare, it will never be enough.

Reminds me of Bob Hawke saying, "no child will be living in poverty by 1990". Just because you mean well and throw more money, doesn't translate into those on welfare spending wisely.

Where Syd is getting wires crossed, is thinking those who have saved with the ambition of becoming self funded and independent, are the ones spending their money to access a pension.

Nothing could be further from the truth IMO. 

I think you will find those that spent all their money through out their lives. Spend their super as soon as they get access to it, it is common sense IMO.


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## Junior (18 June 2014)

I've written 100s of retirement plans over the past few years, and I can tell you, folks do not blow all their cash to access age pension.  Full age pension for a couple is roughly $35k per annum.  Say you only have $200k in super, you can still access full age pension....so why would you spend your $200k in one go??

Better to draw a pension of say 7% from super to supplement age pension...now your income is $49k per annum.  If markets perform OK this is sustainable and Age Pension is indexed.


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## FxTrader (18 June 2014)

Julia said:


> Most people I've ever known who have worked and saved diligently to be independent in retirement would have absolutely no intention of wasting it just to access the meagre age pension.



True in my experience as well, yet many elderly property millionaires expect to be paid an age pension as an entitlement and live a subsistence lifestyle in their multi-million dollar homes.  Watching 92yo Zara Grayspence on SBS Insight last night telling a national audience why she deserves to receive a government pension while living in a 2 million dollar home in Mossman was revealing.  Zara could live quite comfortably on a reverse mortgage yet chooses to live below the povery line on an age pension out of ignorance of other options or in spite of them.  Incredibly many people on Facebook, ignorant of Zara's options, believe she is entitled.  This notion of universal entitlement to a government pension for property millionaires by many should be a real concern for an aging society.


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## craft (18 June 2014)

FxTrader said:


> True in my experience as well, yet many elderly property millionaires expect to be paid an age pension as an entitlement and live a subsistence lifestyle in their multi-million dollar homes.  Watching 92yo Zara Grayspence on SBS Insight last night telling a national audience why she deserves to receive a government pension while living in a 2 million dollar home in Mossman was revealing.  Zara could live quite comfortably on a reverse mortgage yet chooses to live below the povery line on an age pension out of ignorance of other options or in spite of them.  Incredibly many people on Facebook, ignorant of Zara's options, believe she is entitled.  This notion of universal entitlement to a government pension for property millionaires by many should be a real concern for an aging society.




I like the idea of recouping the pension paid from the estate in these situations.  It means those that want to stay in their expensive property because it is their HOME with all the sentiment attached can do so and don’t need to worry about any complexity of entering the private market for reverse mortgages etc.

Those whose primary purpose is to maximise intergenerational wealth transfer whilst living off the pension will be thwarted. (from my observations this is a large and sometimes sad driver of why many people stay in large and inappropriate housing in their old age – Its probably more about being selfless for their kids benefit then gaming the pension for their own sake but if it wasn’t possible a lot of older people may make different decisions for themselves)


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## McLovin (18 June 2014)

craft said:


> Those whose primary purpose is to maximise intergenerational wealth transfer whilst living off the pension will be thwarted. (from my observations this is a large and sometimes sad driver of why many people stay in large and inappropriate housing in their old age – Its probably more about being selfless for their kids benefit then gaming the pension for their own sake but if it wasn’t possible a lot of older people may make different decisions for themselves)




I was speaking to someone a few weeks ago who was bemoaning how unfair including the family home in pension eligibility was. His grandparents had already had to transfer their holiday home out of their name so that they could claim the pension. When I pointed out it wasn't really fair to expect taxpayers to fund those who can support themselves I was told of the sentimental value of the holiday home and that they had worked hard all their life.


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## Judd (18 June 2014)

McLovin said:


> I was speaking to someone a few weeks ago who was bemoaning how unfair including the family home in pension eligibility was. His grandparents had already had to transfer their holiday home out of their name so that they could claim the pension. When I pointed out it wasn't really fair to expect taxpayers to fund those who can support themselves I was told of the sentimental value of the holiday home and that they had worked hard all their life.




Yes.  The funniest situation I heard was from a work colleague.  He purchased this house and the family was waxing lyrical about how wonderful the family home was, the emotion they felt for the place and the grand time they had had in it.  He kept silent and after they disappeared round the corner, fired up the D8 and knocked the heap of rubbish down.


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## sydboy007 (18 June 2014)

Julia said:


> Are they?   Can you provide stats to that effect?
> Why use the pejorative "blowing their super"?  Perhaps people have during the last decade or so of their working lives saved more than ever in order to replace their car, do necessary upgrades for mobility or other reasons to the house etc, when they retire.   How is that not their right?
> 
> 
> ...




http://www.abs.gov.au/ausstats/abs@...238.0&issue=July 2012 to June 2013&num=&view=

_Of those who had made contributions, *55% had received all or part of their superannuation funds as a lump sum* payment (54% of men and 57% of women). Many of those who received a lump sum payment used it to pay off or improve their existing home or purchase a new home (32% of men and 31% of women) or to buy or pay off a motor vehicle (14% of men and 11% of women)._

Pretty much the MSM is full of tips on how to milk the super system.  Whether it's re-contribution schemes to use transition to retirement pensions to increase concessional contributions via receiving tax free super income, or how to spend a bit of money tarting up the house so as to get more pension.  

I am only questioning a system that has the stated goal of reducing the cost of the aged pension so the tax system is able to cope with a doubling of the over 65s by 2030.  With the current system nearly costing the same as the aged pension, more if we add the $20+B cost of running it, and quite likely from 2016-17 to cost more, what is the logic of it?  How is that sustainable over the long term?  Why are we encouraging super balances in the millions?  I'd say before Howard removed RBLs the number of individuals with super balances over $1.2M would have been close to 0 because there was notax incentives to accumulate over the RBL.

With the reduction in the participation rate, less tax payers per pensioner, combined with tax free super meaning a growing share of the population not contributing much in the way of revenue to keep the country running, it's not sustainable.  Income taxes are higher than they need to be to pay for this.  Every dollar in super tax expenditures equates to a $ extra of other taxation.

It wouldn't be such an issue if we taxed land / consumption / resources appropriately because at least then the burden of providing the necessary revenue for the services we expect would be more fairly shared.  Overly taxing income and company profits while encouraging speculation via NG and half CGT is not the way to make an economy that is able to compete on the global stage.


----------



## FxTrader (18 June 2014)

sydboy007 said:


> _Of those who had made contributions, *55% had received all or part of their superannuation funds as a lump sum* payment (54% of men and 57% of women). Many of those who received a lump sum payment used it to pay off or improve their existing home or purchase a new home (32% of men and 31% of women) or to buy or pay off a motor vehicle (14% of men and 11% of women)._



Indeed, lump sum withdraw should be limited to deter such behaviour.  The other contributing factor is the primary residence exemption from the age pension assets test as discussed here already.  Structuring of finances to draw the maximum age pension possible is becoming a significant source of business for advisors assisting those about to retire.  This is hardly surprizing and quite prudent for those with small super balances. 



> Pretty much the MSM is full of tips on how to milk the super system.  Whether it's re-contribution schemes to use transition to retirement pensions to increase concessional contributions via receiving tax free super income, or how to spend a bit of money tarting up the house so as to get more pension.



Use of the pejorative phrase "milk the super system" is quite unnecessary.  Retirement planning is important to everyone and more so for those approaching retirement.  It's those who don't plan or save for retirement you should be more concerned about.



> I am only questioning a system that has the stated goal of reducing the cost of the aged pension so the tax system is able to cope with a doubling of the over 65s by 2030.  With the current system nearly costing the same as the aged pension, more if we add the $20+B cost of running it, and quite likely from 2016-17 to cost more, what is the logic of it?  How is that sustainable over the long term?  Why are we encouraging super balances in the millions?  I'd say before Howard removed RBLs the number of individuals with super balances over $1.2M would have been close to 0 because there was notax incentives to accumulate over the RBL.



The current super system needs adjustments to deter high income/wealth individuals from unfairly exploiting its tax advantages no doubt.  However, without it the age pension will certainly be unsustainable.



> With the reduction in the participation rate, less tax payers per pensioner, combined with tax free super meaning a growing share of the population not contributing much in the way of revenue to keep the country running, it's not sustainable.  Income taxes are higher than they need to be to pay for this.  Every dollar in super tax expenditures equates to a $ extra of other taxation.



Taxation reform is required but any such reform should contain tax incentives to save for one's retirement via superannuation contribution.  The foregone tax revenue should be quantified but not in the context of cost comparisons with the age pension as the lowest common denominator.  The age pension should be a safety net for the poor and not used as a lifestyle benchmark for all retirees.


----------



## Julia (18 June 2014)

sptrawler said:


> No I wouldn't, just hate young people telling me how much money is enough.
> They will be just as annoyed as me when they become self funded and some young person is telling them they have had it easy.



Equally some not so young person casting aspersions on how that self funded income should be spent.



FxTrader said:


> True in my experience as well, yet many elderly property millionaires expect to be paid an age pension as an entitlement and live a subsistence lifestyle in their multi-million dollar homes.  Watching 92yo Zara Grayspence on SBS Insight last night telling a national audience why she deserves to receive a government pension while living in a 2 million dollar home in Mossman was revealing.  Zara could live quite comfortably on a reverse mortgage yet chooses to live below the povery line on an age pension out of ignorance of other options or in spite of them.  Incredibly many people on Facebook, ignorant of Zara's options, believe she is entitled.  This notion of universal entitlement to a government pension for property millionaires by many should be a real concern for an aging society.



Seems the entitlement philosophy is alive and well across all age groups.  I turned it off after multiple assertions from that young bloke who insisted he should have the right to remain on Newstart for as long as it took to find the exact IT job he wanted.  With an attitude like that, the taxpayer would be funding him for a pretty long time.



craft said:


> I like the idea of recouping the pension paid from the estate in these situations.  It means those that want to stay in their expensive property because it is their HOME with all the sentiment attached can do so and don’t need to worry about any complexity of entering the private market for reverse mortgages etc.



Good idea.  About a year ago, amongst discussion of the family home being taken into account above a certain level, say $1million, the idea was floated that the resulting diminished age pension entitlement could be supplemented by a loan via Centrelink, to be paid off when the person dies.  So a reverse mortgage, but without the need to use a commercial lender and presumably at a fixed rate.
How would this be?  Any reason why it wouldn't be a useful solution?



> Those whose primary purpose is to maximise intergenerational wealth transfer whilst living off the pension will be thwarted. (from my observations this is a large and sometimes sad driver of why many people stay in large and inappropriate housing in their old age – Its probably more about being selfless for their kids benefit then gaming the pension for their own sake but if it wasn’t possible a lot of older people may make different decisions for themselves)



I expect that's right which is a sad commentary on human nature.  
How much of a problem is this in real terms, i.e. are the numbers of people owning very expensive property and accessing full pension high?  I have no idea about this.



sydboy007 said:


> Of those who had made contributions, *55% had received all or part of their superannuation funds as a lump sum* payment (54% of men and 57% of women).



We don't know from that what sums were involved.  From memory, most people reaching retirement now and in even the next decade will have very small amounts of Super, so for about half of them to take it as a lump sum to pay off their mortgage seems pretty reasonable to me.

Surely a simple restriction on the amount able to be taken as a lump sum and the proviso that the balance be taken as an income stream would solve this?



> Many of those who received a lump sum payment used it to pay off or improve their existing home or purchase a new home (32% of men and 31% of women) or to buy or pay off a motor vehicle (14% of men and 11% of women).[/I]



Again, that seems to me a pretty reasonable way to approach retirement when finances will probably be tighter than when working.  Why would you not want to stop paying interest on loan for house and/or car?



> Pretty much the MSM is full of tips on how to *milk the super system*.  Whether it's re-contribution schemes to use transition to retirement pensions to increase concessional contributions via receiving tax free super income, or how to spend a bit of money *tarting up the house* so as to get more pension.



As  has already been noted, you use pejorative language to describe what people have a perfect right to do with their own money.  Just unnecessary and unfair.  We seem to have all agreed that inclusion of at least part of the family home in the assets test would redress some of the present inequity.


----------



## sptrawler (18 June 2014)

Julia said:


> We don't know from that what sums were involved.  From memory, most people reaching retirement now and in even the next decade will have very small amounts of Super, so for about half of them to take it as a lump sum to pay off their mortgage seems pretty reasonable to me.
> 
> Surely a simple restriction on the amount able to be taken as a lump sum and the proviso that the balance be taken as an income stream would solve this?.




There is already a provision in the SIS act to allow a tax free removal of $180,000 of the taxable component (indexed). This rule has been around a long time and was put in place to allow people to settle their affairs on retirement.

https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=6




Julia said:


> Again, that seems to me a pretty reasonable way to approach retirement when finances will probably be tighter than when working.  Why would you not want to stop paying interest on loan for house and/or car?
> .




I agree, it would be stupid to commence retirement and not pay off outstanding loans, if possible.


----------



## sydboy007 (18 June 2014)

Julia said:


> I expect that's right which is a sad commentary on human nature.
> How much of a problem is this in real terms, i.e. are the numbers of people owning very expensive property and accessing full pension high?  I have no idea about this.




Pretty much any pensioner within 30KM of an east coast capital city CBD would have a valuable house.  In Sydney the median is 678k.  The Australian weighted average median house price is now $606,500.  Generally the older a person is the more likely they own an above average valued house purely because they were able to buy low well before the boom.



Julia said:


> We don't know from that what sums were involved.  From memory, most people reaching retirement now and in even the next decade will have very small amounts of Super, so for about half of them to take it as a lump sum to pay off their mortgage seems pretty reasonable to me.




So is super for providing a retirement income, and help to reduce the costs of the aged pension, or to be used as a person pleases?



Julia said:


> Surely a simple restriction on the amount able to be taken as a lump sum and the proviso that the balance be taken as an income stream would solve this?




There was a system in place up to 2007.  It was called the Reasonable Benefits Limit.  The Howard Government removed this and basically allowed all super to be take tax free as a lump sum, as well as allowing the accumulation of millions within super where earnings and capital gains are tax free from age 60.



Julia said:


> Again, that seems to me a pretty reasonable way to approach retirement when finances will probably be tighter than when working.  Why would you not want to stop paying interest on loan for house and/or car?




So a person receives large amounts of tax expenditures for saving within super but then can spend as much of it as they please and still expect to receive a full pension.  How is that fair on the remaining tax payers?



Julia said:


> As  has already been noted, you use pejorative language to describe what people have a perfect right to do with their own money.  Just unnecessary and unfair.  We seem to have all agreed that inclusion of at least part of the family home in the assets test would redress some of the present inequity.




A large amount of a person's super balance is due to the concessional tax treatment, so is it fair they can choose to spend all of it as they please and then get a full pension?  Shouldn't the rest of tax payers have some say in how that super balance should be used to minimise the cost of the aged pension?

Why are remaining tax payers penalised for someone choosing to not pay their mortgage off before retirement, or fund a new car or holiday after retirement?



sptrawler said:


> I agree, it would be stupid to commence retirement and not pay off outstanding loans, if possible.




The question is why do they have these debts when they retire.  Why should tax payers subsidise their decisions?  

-----------

The way I see it, the super system is broken

It costs over $30B in tax expenditures, the retail / industry super funds cost over $18B a year in fees, the SMSF and corporate funds would probably add another $4-5B to that figure.  The Norwegians are able to run their SWF which has about 50% of assets as compared to the Australian super system, but they are able to manage it at a < 0.2% MER.  What are we doing wrong?  The tax expenditures are growing at 12% a year, and that rate will increase as more and more people are able to stop paying tax on their super.  The fees taken by the super industry will continue to grow exponentially while the FUM model is used.

Then we have the sad fact that there's no legal requirement for people to actually use their super to reduce their aged pension requirements.  So we're costing ourselves something over $50B annually to reduce the cost of the aged pension of $35B.  I'm not sure how sane that is.


----------



## sptrawler (18 June 2014)

sydboy007 said:


> The question is why do they have these debts when they retire.  Why should tax payers subsidise their decisions?
> .




Well Syd, they are probably the low income earners you are constantly championing, oh you must have forgotten.


----------



## sptrawler (18 June 2014)

sydboy007 said:


> There was a system in place up to 2007.  It was called the Reasonable Benefits Limit.  The Howard Government removed this and basically allowed all super to be take tax free as a lump sum, as well as allowing the accumulation of millions within super where earnings and capital gains are tax free from age 60.
> .




Syd, when RBL's were stopped the limit was $1.238,440 . 
You suggested a limit of $1,000,000 would be reasonable today?

So nearly 10 years later, you think a lesser sum is reasonable. I think you're unreasonable, or maybe have an agenda?

Read the next post, you talk about 12% growth, your suggestion goes backwards about 15 years and ou think Abbott's lost the plot.lol


----------



## sptrawler (18 June 2014)

sydboy007 said:


> Go for it.  At least with RBLs there's a chance income taxes can be reduced because the super tax expenditures aren't growing at 12% a year.  I doubt there's any other part of the budget growing at that rate.
> 
> 600K at 5% interest is 30K.  The single aged pension is 19916 - 50% increase over the aged pension ain't a bad deal.  5% on 1M is 50K.  The couple aged pension is 30K - 66% increase.




The pension is *guaranteed and indexed*.

At the moment *guaranteed* term deposits are getting 3.5%, let's use actual figures.

$600k at 3.5% $21k.  10% increase over age pension
$1m at 3.5%  $35k.    17% increase over age pension

*No indexation*.

You're talking #############


----------



## Wysiwyg (18 June 2014)

sptrawler said:


> You're talking #############



Thankfully those hare-brained ideas will never go beyond this thread. Depriving people some semblance of life enjoyment in their later years would start riots.


----------



## sptrawler (19 June 2014)

Wysiwyg said:


> Thankfully those hare-brained ideas will never go beyond this thread. Depriving people some semblance of life enjoyment in their later years would start riots.




I wasn't meaning to be provocative. 
But when someone suggests it is reasonable, that you get the same outcome if you spend all your money, or save it.
I find that a bit off.

One could say," but they still have the capital", conversely the ones on the pension, "have allready spent their capital".

I'm talking about the 500,000 self funded 'normal people', not the 1.700 'fat cats' that are rorting the system.

When we talk super everyone focuses on the minority rorting, when we talk welfare they say don't focus on the minority that are rorting.
Talk about selective choices.lol


----------



## Wysiwyg (19 June 2014)

sptrawler said:


> I wasn't meaning to be provocative.
> But when someone suggests it is reasonable, that you get the same outcome if you spend all your money, or save it.
> I find that a bit off.
> 
> One could say, but they still have the capital, conversely the ones on the pension have allready spent the capital.



1)No doubt there has to be a strict cut-off point for pension entitlement. People will take the free money if they can legally get it.
2)The money people have in their super gets churned through the system again when accessible.
3)Removing incentives to build a larger retirement fund is d.u.m.b.
4)If retirees blow their super (wealth exchanging hands) then a meager pension is all they deserve.



> When we talk super everyone focuses on the minority rorting, when we talk welfare they say don't focus on the minority that are rorting.
> Talk about selective choices.lol



Yes that is what gets one's goat.


----------



## sydboy007 (19 June 2014)

sptrawler said:


> Syd, when RBL's were stopped the limit was $1.238,440 .
> You suggested a limit of $1,000,000 would be reasonable today?
> 
> So nearly 10 years later, you think a lesser sum is reasonable. I think you're unreasonable, or maybe have an agenda?
> ...






sptrawler said:


> The pension is *guaranteed and indexed*.
> 
> At the moment *guaranteed* term deposits are getting 3.5%, let's use actual figures.
> 
> ...




Then can you give me an explanation that shows how a super system with:

* $30B in tax expenditures - cost growth of 12% a year
* Around $23B in management fees a year - growing due to the FUM model
* tax free super with a falling participation rate and stagnant tax base (when excluding income and company profits)

is sustainable.

I believe a couple in retirement able to generate $50K a year should have a comfortable life.  I don't believe my taxes should be higher to help them achieve any more than that within the minimally taxed super environment.  The Association of Superannuation Funds of Australia estimates a ‘comfortable‘ living standard requires an income of about $1,000 a week. To generate this income, you need about $670,000 as a lump sum - note I believe that income level on the capital would require too high a risk hence why I feel $1M for a couple is fair.  To put that into perspective the ABS income deciles are in the below chart.  A 52K tax free income puts you well into the top half of household income.  Note they are gross values, so 52K tax free for a couple is probably into the 6th decile, and considering the money is supporting just 2 people, they're even better off again, especially if they're mortgage free.

What is the maximum income you believe someone is entitled to get Government support to achieve?  Are you proposing being more well off than 50-60% of households ain't enough?

I think this argument would be easier to understand if super statements had contributions and earnings taxed at full marginal rates, with a rebate section from the Government showing how much Government support you received in the year via the super tax expenditures to get the tax rate back to 15%.

If you're only achieving 3.5% on your money then I'd say either get some advice or sack the person providing you the advice.  There's quite a diversity of low risk options that would provide a minimum 5% yield.  The bonds within my SMSF achieved over 6%, the hybrids over 7%.  A portfolio made of CIB and IAB would provide the protection against inflation with the cash flow required for living expenses.  Current options are still providing around 6% yield when combined in this way.

So the actual figures for a competent investor would be:

600K at 6% = 36K or roughly 14K over the single pension or > 50%
1M at 6% = 60K or roughly 28K over the couples pension or just under 50% increase

Every quarter the income increase with the CPI, so real purchasing power is maintained over the life of the bonds.  It's quite easy to set up, and there's no running costs to this option.  You generally sit at the top of the capital tree, so should be the last to suffer a loss should anything go wrong with the underlying companies.  The below table from S&P shows how unlikely you are to loose money IF you the bond you purchase has an investment rating.


----------



## craft (19 June 2014)

sydboy007 said:


> I think this argument would be easier to understand if super statements had contributions and earnings taxed at full marginal rates, with a rebate section from the Government showing how much Government support you received in the year via the super tax expenditures to get the tax rate back to 15%.




Its notional revenue not raised - not expenditure.

If there was no super pool their would be no revenue at all from Super. Would the savings pool exist in some other fashion? Maybe but probably no where near as large and it would still be undoubtedly sheltered some other way like negative gearing, main residence exemption from Capital Gains, family trusts, corporate structures, tax haven accounts etc.

So a notional revenue forgone figure is riddled with fairy-tale assumptions.

Can't isolate super and try to fix it - the approach has to be comprehensive.


----------



## sydboy007 (19 June 2014)

craft said:


> Its notional revenue not raised - not expenditure.
> 
> If there was no super pool their would be no revenue at all from Super. Would the savings pool exist in some other fashion? Maybe but probably no where near as large and it would still be undoubtedly sheltered some other way like negative gearing, main residence exemption from Capital Gains, family trusts, corporate structures, tax haven accounts etc.
> 
> ...




Very true.  NG needs to be fixed, halving CGT removed, expedite the G20 to coming up with a solution on large companies siphoning billions in profits out of Australia and not paying tax.

Fix the super taxes along with meaningful tax reform is the only way forward.  We over tax hard work and encourage too much speculation - hence why since the GFC nearly 95% of new bank lending has been to housing.  That does not help to create or sustain a globally competitive economy.


----------



## craft (19 June 2014)

sydboy007 said:


> We over tax hard work and encourage too much speculation




I'm not sure I would just single out 'speculation' I would say labour carries far more tax burden then capital and given the current persuasion of political power I can't see that changing with a tax review. Some re-jigging for efficiencies but the overall burden is likely to go even further in favour of capital - That is pretty evident Liberal Ideology and we live in a democracy so I presume that is what the majority voted for.


----------



## Junior (19 June 2014)

I don't think our super system is that bad with regard to ongoing costs....there's so much choice.  There's 100s of different retail and industry platforms to choose from, all with different fee structures, investment and insurance options.

If you set up a SMSF you can invest in almost anything.  Ongoing costs can be as low as around $1,000 pa.  Not bad if you are approaching retirement and have combined super of >$500k.

The costs are only as bad as you allow them to be, there are cheap options.  The average MER is pushed up by the amount of FUM sitting in old and expensive retail platforms, some of the newer products are much cheaper.

A major issue is that most of the working population has neither the knowledge or desire to shop around and make sure they are getting a good deal.  If that happened it would encourage more fierce competition re costs.


----------



## Julia (19 June 2014)

Junior said:


> A major issue is that most of the working population has neither the knowledge or desire to shop around and make sure they are getting a good deal.  If that happened it would encourage more fierce competition re costs.



+1.  The apathy demonstrated by most people regarding their Super is quite incomprehensible to me.

The other factor, however, is the lack of trust in the financial advice industry.  Nothing personal, Junior, of course.
Disasters like the rogue planners at CBA, Storm, etc have understandably shaken people's confidence in seeking advice.

And unless your average Australian is prepared to acquire at least some basic financial literacy they will simply not know what they don't know and are therefore not in a position to evaluate the worth or otherwise of any advice they may be offered.


----------



## Duckman#72 (19 June 2014)

Julia said:


> And unless your average Australian is prepared to acquire at least some basic financial literacy they will simply not know what they don't know and are therefore not in a position to evaluate the worth or otherwise of any advice they may be offered.




That is a very important point Julia. The only thing the majority of investors and fund holders understand and focus on is cost. It is a dangerous concept to compare financial advice based on fees alone.

You can get a bargain basement SMSF for low $$$ but you get what you pay for. I recently met with a new client who had a SMSF set up with low cost "experts" with a high profile in the media who had to pay $40,000 tax because their advisors told them to transfer BHP shares from their own name into their fund. Great idea - except for the personal capital gain! But at least the fund was set up for $500 and the administration, accounts and audit for the first year was only $1000! Bargain? You be the judge.

Duckman


----------



## Macquack (19 June 2014)

Julia said:


> +1.  The *apathy demonstrated by most people *regarding their Super is quite incomprehensible to me.




Sorry Julia if I am picking on you today, but a lot of people simply don't have the *luxury of being retired to have the time* to even comprehend the concept of superannuation.


----------



## k.smith (19 June 2014)

Julia said:


> +1.  The apathy demonstrated by most people regarding their Super is quite incomprehensible to me.
> 
> The other factor, however, is the lack of trust in the financial advice industry.  Nothing personal, Junior, of course.
> Disasters like the rogue planners at CBA, Storm, etc have understandably shaken people's confidence in seeking advice.
> ...






The problem imo is much more complex than being a case of apathy. Evidence suggests that there are a lot of Australians who don't even know the meaning of words such as " incomprehensible". 


http://www.abs.gov.au/ausstats/abs@... of literacy and numeracy (Media Release)~200


''....ABS Director of the National Centre for Education and Training Statistics, Andrew Webster, said the recent PIAAC survey assessed people's literacy and numeracy skills and their ability to solve problems in technology-rich environments. 

 "The survey measures participants on a scale of one to five, one being the lowest and five being the highest," he said.

 "The survey found that 44 per cent of Australians aged 15 to 74 (7.3 million) had literacy skills at levels one or two, a further 39 per cent (6.4 million) at level three and 17 per cent (2.7 million) at levels four or five. 

 "For numeracy skills, 55 per cent of Australians (8.9 million) were assessed at level one or two, 32 per cent (5.3 million) at level three and 13 per cent (2.1 million) at levels four or five....''


To acquire basic financial literacy it seems to me that one first needs to achieve some reasonable literary and numeracy skills, which is not achievable overnight. This is a major reason why I believe that any watering down of the FOFA reforms would expose many investors and superannuants to a new round of risk and potential losses. Education may be the answer, but it's going to have to start in the school classroom. Too many entrants to the "University of Finance"  do not seem capable of passing the entrance exam, let alone achieve a degree that helps them identify the many perils of investing their hard-earned.   


http://www.smh.com.au/business/retirees-fight-fofa-reforms-20140328-35oi2.html

''....Ian Silk, the chief executive of 2-million-member industry fund AustralianSuper, said Australian Bureau of Statistics data showed almost half the adult population had low levels of literacy and numeracy. They needed strong protections, he said. ''The purpose of a commission is to reward a person for selling a product which may be entirely different from advising them to purchase the best product for them,'' he said. Industry funds have never paid commissions to financial advisers.

But it is not just the proposed amendment that allows conflicted pay on general advice that is opposed by seniors' groups and consumer groups such as Choice. They are opposed to the proposed amendment of the FOFA reform that puts planners under a legal obligation to act in their clients' best interests. They say the amendment risks reducing legal obligation to ''tick box'' compliance. Seniors' groups are also opposed to the amendment that drops the ''opt-in'' requirement. This is where the planner has to obtain the client's written consent every two years for the relationship to continue. Opt-in is designed to deal with the situation where planners could receive ongoing fees and not provide any advice. Another of the government's amendments limits FOFA's annual disclosure of fees to those who became clients of planners from the middle of last year.

Mr Silk said that Labor's reforms were negotiated over about two years. ''FOFA was already a compromised outcome,'' he said. Mr Silk said even though Labor's FOFA was a negotiated compromise, it still achieved a better balance as it is than it would if the government's amendments went ahead....''


----------



## Julia (19 June 2014)

Macquack said:


> Sorry Julia if I am picking on you today, but a lot of people simply don't have the *luxury of being retired to have the time* to even comprehend the concept of superannuation.



I don't feel picked on, Macquack.  You're entirely free to raise any point you want to.
I will, however, totally disagree with the premise of your suggestion.   I recognised the need for financial literacy many years before being retired in my late 40s.   Worked long hours, and way before the huge advantage of the internet meant everyone could access good education.
It has nothing to do with being retired or not.   

Further, people who have had not much formal education can and often do learn the necessary skills of how to protect capital and invest reasonably safely.  How hard is it to buy, e.g. shares in well known companies of proven profits and good management, such as most of the big banks, Woolworths, etc?  Most 'ordinary Australians' can do this.  Even schools use the ASX sharemarket game as a teaching tool.

People can't comprehend the concept of superannuation????   Really?  You must assume your fellow Australians to be way more dim than most of them are.  Are you seriously telling me that you think most people do not understand that they are compulsorily contributing to a scheme which is designed (if the rate is high enough and they participate long enough) to provide them with an income in retirement when, just fancy this, your income from your job actually stops?



k.smith said:


> The problem imo is much more complex than being a case of apathy. Evidence suggests that there are a lot of Australians who don't even know the meaning of words such as " incomprehensible".



OK, so what?  They don't need to have a sophisticated vocabulary to understand the concept of Super as expressed above in my response to Macquack.

On apathy, I have mentioned several times before many well educated people I know, some with PhDs, who are financially illiterate.  They acknowledge this, yet decline to do anything about it.  Tell me that's not apathy.

You do not need to convince me of the woeful standard of literacy and numeracy in Australia.  I've been a voluntary tutor in adult literacy for about 15 years in an attempt to make some contribution to improving this in a small way.

It's the failure of the education system when for several years they messed about with dispensing with basics and embracing nonsense like whole word/whole sentence recognition in really little kids who just need simple phonics at that stage.
It will not get better quickly because many of those children are now today's teachers, god help us.



> To acquire basic financial literacy it seems to me that one first needs to achieve some reasonable literary and numeracy skills, which is not achievable overnight. This is a major reason why I believe that any watering down of the FOFA reforms would expose many investors and superannuants to a new round of risk and potential losses. Education may be the answer, but it's going to have to start in the school classroom. Too many entrants to the "University of Finance"  do not seem capable of passing the entrance exam, let alone achieve a degree that helps them identify the many perils of investing their hard-earned.



I agree entirely that the watering down of the reforms should not happen.
When I first heard, I think amongst the enquiry into Storm Financial, that *it was proposed in future*
that financial advisers should be obliged to act in the client's best interest, I just couldn't believe it.
I'd have believed without question that that would be the 100% expectation with which one would consult a financial adviser.   I have since been sadly disabused of that idealistic and naive belief.


----------



## Julia (20 June 2014)

Macquack said:


> Sorry Julia if I am picking on you today, but a lot of people simply don't have the *luxury of being retired to have the time* to even comprehend the concept of superannuation.



Macquack, just a PS to my earlier response:  if you wait until you're retired to think about superannuation you've rather missed the bus, haven't you?


----------



## Junior (20 June 2014)

As a member of the Financial Planning industry for 10 years now, I'm disgusted at the watering down of FOFA.  The big 4 banks control this country, and this government has ensured that we will continue to see Storm Financial, Timbercorp, Great Southern etc. regularly going forward.  These collapses come at a huge cost to the taxpayer and devastate 1000s of families.  

Something to consider re MIS, more than $1 billion was invested in Timbercorp schemes alone....as these schemes only ever made losses, this amount was claimed as a deduction against individuals income, with the expectation that at some point these schemes would be profitable and the earnings taxed.  The end result is that these were never profitable, and the only parties to extract profits were the directors of Timbercorp, accountants, financial planners and then solicitors/liquidators.  Wealth transferred to these groups from the lower, middle class and taxpayers.

In my opinion the minimum education standard to become an FP is still the biggest issue.  You can be qualified and giving advice after completing a short course which your average 15 year old would be able to breeze through.  Should be FP specific bachelors degree at a minimum, with the CFP course compulsory if you have completed a non-business degree.

Sorry to get off-topic!


----------



## FxTrader (20 June 2014)

Junior said:


> Something to consider re MIS, more than $1 billion was invested in Timbercorp schemes alone....as these schemes only ever made losses, this amount was claimed as a deduction against individuals income, with the expectation that at some point these schemes would be profitable and the earnings taxed.  The end result is that these were never profitable, and the only parties to extract profits were the directors of Timbercorp, accountants, financial planners and then solicitors/liquidators.  Wealth transferred to these groups from the lower, middle class and taxpayers.



Additional benefactors of the Timbercorp collapse included the companies that bought the distressed assets.  Some of the ex-directors actually went as far as to try and seize the timber assets of investors via a land holding company they controlled.  I believe the government was culpable as well via tax rules that allowed loan deductions to be brought forward, this incentivised investment in these schemes for tax minimization purposes.  The pain has not ended for those who refused to pay back loans to Timbercorp Finance hoping for their loans to be voided by court action.


----------



## Judd (20 June 2014)

FxTrader said:


> Additional benefactors of the Timbercorp collapse included the companies that bought the distressed assets.  Some of the ex-directors actually went as far as to try and seize the timber assets of investors via a land holding company they controlled.  I believe the government was culpable as well via tax rules that allowed loan deductions to be brought forward, this incentivised investment in these schemes for tax minimization purposes.  The pain has not ended for those who refused to pay back loans to Timbercorp Finance hoping for their loans to be voided by court action.




Maybe but try telling the investors at the time it was a bad deal as well as standing in the way of getting a nice tax deduction.  You'd have no hope.  A lesson I learned years go when a group of work colleagues tried to get me involved in one of those property things where you are flown “free of charge and no obligation” to some place for an inspection.  Not in a fit on my part.

One came back after buying five properties and the others had at least two each.  All excited and happy chaps about their future wealth.

No so happy about a year later when they discovered after the expiry of the guaranteed rental period that none of the tenants had been paying that rate and it had been subsidised by the developer from the purchase price they had paid plus the properties were worth only about half of what they had contracted to fork out.

I was not Mr Popular when I showed little sympathy for their plight.  Probably a case of disliking someone when they have been proven correct and aren't in the same financial stress.


----------



## k.smith (20 June 2014)

View attachment report.pdf


Tax concessions on super contributions appear to be way ahead of tax concessions on negative gearing and capital gains tax discounts. If the tax concessions to super were to be reduced, would there really be a dramatic shift to negative gearing etc? It seems to me that super has really been "the ultimate cash cow"...


----------



## Judd (20 June 2014)

k.smith said:


> View attachment 58400
> 
> 
> Tax concessions on super contributions appear to be way ahead of tax concessions on negative gearing and capital gains tax discounts. If the tax concessions to super were to be reduced, would there really be a dramatic shift to negative gearing etc? It seems to me that super has really been "the ultimate cash cow"...




Not only for Guvmnt but also for fund managers.

There has of late been a plethora of Listed Investment Companies floated by organisations involved in unlisted funds.  The reason in my view?  Fees.  SMSF's in a number of instances seem to favour LICs as a "one-stop-shop."  To capture this - whether by fair means or foul - someone will attempt to extract some of it.

So now we have LICs with management fees ranging between 1% to 1.5% of FUM including cash holdings and gross FUM rather than nett. Plus performance fees up to 20% some which are based on average swap interest rates rather than equities.  Long-term that is where rests "the ultimate cash cow" as these managers try and add to the already excessive fee take of $18B pa by taping into the SMSF market.


----------



## k.smith (20 June 2014)

Julia said:


> ''......People can't comprehend the concept of superannuation????   Really?  You must assume your fellow Australians to be way more dim than most of them are.  Are you seriously telling me that you think most people do not understand that they are compulsorily contributing to a scheme which is designed (if the rate is high enough and they participate long enough) to provide them with an income in retirement when, just fancy this, your income from your job actually stops?...........
> 
> ........ They don't need to have a sophisticated vocabulary to understand the concept of Super .....''




They may not need a sophisticated vocabulary as such, but they need to have a vocabulary which gives them skills to appraise concepts. According to a paper entitled "Literacy and Numeracy Skills and Labour Market Outcomes in Australia'' it would appear some 44% have some difficulties.

View attachment literacy-numeracy-skills.pdf


''....Below level 1 (0 to < 176 points) 
• Tasks at this level require the respondent to read brief texts to locate a single piece of specific information. • There is seldom any competing information in the text and the requested information is identical in form to information in the question. • Only basic vocabulary knowledge is required, and the reader is not required to understand the structure of sentences or paragraphs. • Tasks do not make use of any features specific to digital texts. 

Level 1 (176 to < 226 points) 
• Tasks at this level require the respondent to read relatively short digital or print texts to locate a single piece of information that is synonymous with the information given in the question.  • Some tasks require personal information to be entered onto a document. • Little, if any, competing information is present. • Some tasks require simple cycling through multiple pieces of information. • Knowledge and skill in recognising basic vocabulary, evaluating the meaning of sentences, and reading of paragraph text is expected.

Level 2 (226 to < 276 points) 
• Tasks at this level require respondents to make matches between the text (which may be digital or printed) and information, and may require paraphrasing or low-level inferences. • Some competing pieces of information may be present and may require the respondent to: - cycle through or integrate two or more pieces of information - compare and contrast or reason about information requested in the question, or - navigate within digital texts to access-and-identify information from various parts of a document.
...''

Worthwhile article by Dr Bill Garner, Research Associate at the School of Social and Political Sciences at the University of Melbourne has just come online 
http://www.canberratimes.com.au/com...-opportunity-is-a-big-con-20140617-zsa6d.html

''...But we all know people don't start from the same place financially, educationally, in terms of health, or culturally. The only way we might get people even near such a starting line is by redistribution of wealth, but redistribution on a sufficient scale is labelled by Hockey as "unfair" to those who have accumulated it.

When the debate shifts from equality to inequality, the role of intuitive popular understanding changes sides: this time it is on the side of those who believe that the degree of inequality is both unfair and increasing. This appears to be not only the view of the majority of people in Australia, but of the majority of people in the world.

The history of welfare in Australia has always been a changeable mix of private and public provision, but the recent enthusiasm by neo-liberal governments for a greater reliance on charity (and personal responsibility) is a remarkable turn back to the darkest days of the 19th century and the "deserving" and "undeserving" poor. Charity was then a creator and marker of class division: the "givers" were morally superior and the "takers" were morally inferior. Conservatives thought it instrumentally useful that the takers of charity should feel shame. Apparently they still do....''


----------



## Julia (20 June 2014)

Junior said:


> As a member of the Financial Planning industry for 10 years now, I'm disgusted at the watering down of FOFA.  The big 4 banks control this country, and this government has ensured that we will continue to see Storm Financial, Timbercorp, Great Southern etc. regularly going forward.  These collapses come at a huge cost to the taxpayer and devastate 1000s of families.
> 
> In my opinion the minimum education standard to become an FP is still the biggest issue.  You can be qualified and giving advice after completing a short course which your average 15 year old would be able to breeze through.  Should be FP specific bachelors degree at a minimum, with the CFP course compulsory if you have completed a non-business degree.
> 
> Sorry to get off-topic!



Not off topic at all, Junior.  The competence of financial planners is central to the discussion.  If the people who lack the interest or the skills to manage their own Super feel they can't trust a planner to give advice in their best interest, that's an awful comment on the industry.

Could you, without of course compromising anyone's confidentiality, give us an idea of the sort of people who approach you for advice, i.e. do most of them have enough financial literacy to easily understand what you explain in terms of their options?

I'd have thought people with a substantial amount to invest would have a pretty good idea, given they've acquired that substantial amount in the first place.  But one investor in Storm who had, I think, well over $1m, still succumbed to Storm's  persuasions.

On the government's changes to reforms, they're saying commissions will be banned, but in the next breath someone points out that there is nothing to stop the banks, for example, paying 'incentives' to such as tellers who recommend customers to the bank's financial planning branch.
Perhaps trailing commissions won't happen any more, but I wouldn't doubt for a moment that the big banks will find ways round the regulations.

Mr Cormann is saying that the reason the rule that the planner must act in the best interests of the client is unnecessary is that this already exists in the Corporations Act.  Really?   Isn't the debacle of Storm and other similar fleecing schemes testimony to the inadequacy of anything in the Corporations Act?

Then again, I suppose it's just not possible to legislate completely for gullibility.  Or greed.
Just seems counter-intuitive to reduce what might be safeguards for what reason?
One can only assume to keep the big banks on side.



Judd said:


> Maybe but try telling the investors at the time it was a bad deal as well as standing in the way of getting a nice tax deduction.  You'd have no hope.  A lesson I learned years go when a group of work colleagues tried to get me involved in one of those property things where you are flown “free of charge and no obligation” to some place for an inspection.  Not in a fit on my part.
> 
> One came back after buying five properties and the others had at least two each.  All excited and happy chaps about their future wealth.
> 
> No so happy about a year later when they discovered after the expiry of the guaranteed rental period that none of the tenants had been paying that rate and it had been subsidised by the developer from the purchase price they had paid plus the properties were worth only about half of what they had contracted to fork out.



Exactly what I fear is going to  happen to a friend of mine who - in response to a cold phone call out of the blue - went to a 'wealth creation seminar' and as a result bought a residential house off the plan 20 kms from Gladstone.  No rental guarantee, nothing.  Just a lot of hype from the salesman.  He has borrowed the entire amount, his present house and some of his Super as collateral.  That was about a year ago.  Building has still not started.

And, for k.smith, he's a teacher of English and History for 30 years.  Extremely literate, extensive vocabulary.
Ain't no guarantee of avoiding being suckered.


----------



## sydboy007 (21 June 2014)

Judd said:


> Not only for Guvmnt but also for fund managers.
> 
> There has of late been a plethora of Listed Investment Companies floated by organisations involved in unlisted funds.  The reason in my view?  Fees.  SMSF's in a number of instances seem to favour LICs as a "one-stop-shop."  To capture this - whether by fair means or foul - someone will attempt to extract some of it.
> 
> So now we have LICs with management fees ranging between 1% to 1.5% of FUM including cash holdings and gross FUM rather than nett. Plus performance fees up to 20% some which are based on average swap interest rates rather than equities.  Long-term that is where rests "the ultimate cash cow" as these managers try and add to the already excessive fee take of $18B pa by taping into the SMSF market.




I've often been shocked when looking at LICs or managed investments as to the kind of fees they charge.  The fact you can quite often get pretty much the same investment outcome using ETFs seems to escape a lot of people.  Also the lack of understanding as to how much an effect of an extra 1% in fees over an extended period of time can have on the eventual total return.

There really needs to be an addition to the current school curriculum, either within maths or as a separate area of study, that gives a decent level of financial and economic understanding by the time you finish high school.  I also feel there needs to be some sort of legislation brought into play where the FUM model is restricted.  It's Ok to allow access for those with small balances, but after a certain point it should become a fixed cost.  I've yet to see anyone provide a plausible reason why someone with 500K should pay 5 times as much as someone with 100K in a fund.  Our super industry shouldn't be costing us roughly $23B a year to run.  The fact our major political parties are pretty much beholden to the FIRE sector means this kind of change is as likely as my herd of flying pigs taking wing. 



k.smith said:


> They may not need a sophisticated vocabulary as such, but they need to have a vocabulary which gives them skills to appraise concepts. According to a paper entitled "Literacy and Numeracy Skills and Labour Market Outcomes in Australia'' it would appear some 44% have some difficulties.
> 
> The history of welfare in Australia has always been a changeable mix of private and public provision, but the recent enthusiasm by neo-liberal governments for a greater reliance on charity (and personal responsibility) is a remarkable turn back to the darkest days of the 19th century and the "deserving" and "undeserving" poor. Charity was then a creator and marker of class division: the "givers" were morally superior and the "takers" were morally inferior. Conservatives thought it instrumentally useful that the takers of charity should feel shame. Apparently they still do....''




I'm continually surprised by the lack of basic financial knowledge with the people I work with.  The majority would have some form of tertiary education, yet have difficulty in grasping what franked dividends are and that it's the total (grossed) up value of the income you receive that's important.  It's gotten to the point where I've made a few word documents explaining the basics on a few things since I'm now not only the got to guy for travel advice but questions about the share market and basic financial concepts.  Trying to get people to understand risk can be tricky. 

I'm very concerned with the changes that's occurring within Australia, especially in education.  With the way funding to public schools is deteriorating against the private sector, we're facing the stratification of potential pretty much from the age of 5.  If you don't have the resources to either live near a good public school or afford a private school, then you're children are pretty much behind the 8 ball in terms of reaching their potential.  Not to say some wont, but it's less likely.


----------



## Julia (21 June 2014)

sydboy007 said:


> There really needs to be an addition to the current school curriculum, either within maths or as a separate area of study, that gives a decent level of financial and economic understanding by the time you finish high school.



First you need to find the teachers who can impart this to students.  Agree, however, it would be a great addition to the curriculum.  
The government is apparently re-introducing the learning of Latin into schools.   It's an interesting language but you'd like to think some financial instruction would be a bit more relevant.



> I also feel there needs to be some sort of legislation brought into play where the FUM model is restricted.



Is % of FUM how most public super funds operate?   No choice for consumers?



> I'm continually surprised by the lack of basic financial knowledge with the people I work with.  The majority would have some form of tertiary education, yet have difficulty in grasping what franked dividends are and that it's the total (grossed) up value of the income you receive that's important.



I'm glad to know it's not just my social circle.


> It's gotten to the point where I've made a few word documents explaining the basics on a few things since I'm now not only the go to guy for travel advice but questions about the share market and basic financial concepts.  Trying to get people to understand risk can be tricky.



Syd, you say above that you've done a few word docs to help people understand basics like grossed up yield etc.
In response to a request from an acquaintance who was thinking of buying some shares I did likewise.  Just explaining in very simple terms dividends, franking, that as she didn't pay tax she would receive the franking credit in cash, etc.   She (who has a PhD) declared it much too hard to understand, deduced that was because she wasn't an economist, and went out and spent over $300 on books on economics!

And then, on providing information to others,  you have this realistic comment from Judd:


> A lesson I learned years go when a group of work colleagues tried to get me involved in one of those property things where you are flown “free of charge and no obligation” to some place for an inspection. Not in a fit on my part.
> 
> One came back after buying five properties and the others had at least two each. All excited and happy chaps about their future wealth.
> 
> ...




This raises the question of whether it actually makes sense to express any opinion at all when a friend or colleague is clearly about to make a financial mistake because of inexperience.  If I were making a decision about something in which I'd had minimal experience, I'd really appreciate advice, would go looking for it, but obviously it can be seen as interference when someone is actually only looking for endorsement of what they plan.


----------



## Judd (21 June 2014)

sydboy007 said:


> I've often been shocked when looking at LICs or managed investments as to the kind of fees they charge.  The fact you can quite often get pretty much the same investment outcome using ETFs seems to escape a lot of people.  Also the lack of understanding as to how much an effect of an extra 1% in fees over an extended period of time can have on the eventual total return.................




I'm just as shocked with some EFT's where the activities are not completely transparent.  Take IOO as an example.  Few would know that its holdings, and those of its stalemates, are possibly available for short selling.  To discover that, investors would also need to refer to the US Prospectus which governs its listing on the ASX.  Not saying the activity is evil or anything like that but investors should be clearly informed of the arrangement and I wonder if they are.  I could be wrong of course since it is quite a while since I investigated this brand and things may have changed in the meantime.

Many, many aspects should be tidied up for the public but I suspect it will not happen.  Gad, I am such a cynic sometimes.


----------



## Judd (21 June 2014)

Julia said:


> .............
> 
> Syd, you say above that you've done a few word docs to help people understand basics like grossed up yield etc.
> In response to a request from an acquaintance who was thinking of buying some shares I did likewise.  Just explaining in very simple terms dividends, franking, that as she didn't pay tax she would receive the franking credit in cash, etc.   *She (who has a PhD) declared it much too hard to understand, deduced that was because she wasn't an economist, and went out and spent over $300 on books on economics!*




I know I shouldn't laugh at the lady but I couldn't help doing so.  That is very funny in a dark sort of way.


----------



## sydboy007 (22 June 2014)

Julia said:


> Is % of FUM how most public super funds operate?   No choice for consumers?
> 
> 
> I'm glad to know it's not just my social circle.
> ...




Pretty much every retail and industry super fund charges fees based on FUM.

While they might directly charge various account keeping fees as a fixed $ amount, the investment choices are based on a % of FUM.

For example, Australian super have you invested in the default "balanced" fund, will charge you $1.50 per week paid from your account PLUS 0.66% ($66M for each $1B) a year of your account balance for investment management for the year ended 30 June 2013.  The investment choice fees range from 0.08% (cash) pa to 1.06% pa.  That kind of fee structure is pretty much the norm within the industry.  Basically only SMSFs allow you to get a relatively fixed cost base, depending on your investment choice. Considering the retail and industry funds charged $18B on roughly $1.2T of assets means they're getting a 1.5% cut.  Not a bad lurk.  I know the compliance costs have to come out of it, but the economies of scale should allow them to do it pretty cheaply.  the fact half of them couldn't get ready for the super stream system next financial year after havign 3 years says a lot about the lack of efficiency in the sector.  Most roll overs are still handled by cheque.

I suppose I try not to give advice.  I just ask people to do some simple calculations and ask them if they think that kind of return is good or bad, and are they thinking of alternative investments.  The easiest argument I make for someone with practically no clue to investing is for them to compare investing in their mortgage which gives them a guaranteed after tax return of X%.  On a 5% mortgage rate that would be about 8.13% pre tax.  I just ask how much more than that would they require before they felt comfortable they were being rewarded for the extra risk, especially when they don't know what their return will be.  It's an easy introduction to risk rewards.  Fortunately so far I've been met with thanks for the simple questions posed.


----------



## sydboy007 (22 June 2014)

Judd said:


> I'm just as shocked with some EFT's where the activities are not completely transparent.  Take IOO as an example.  Few would know that its holdings, and those of its stalemates, are possibly available for short selling.  To discover that, investors would also need to refer to the US Prospectus which governs its listing on the ASX.  Not saying the activity is evil or anything like that but investors should be clearly informed of the arrangement and I wonder if they are.  I could be wrong of course since it is quite a while since I investigated this brand and things may have changed in the meantime.
> 
> Many, many aspects should be tidied up for the public but I suspect it will not happen.  Gad, I am such a cynic sometimes.




My understanding is some super funds also allow their shares to be used by short sellers.  I can understand the lure of the extra income, but not overly confident it's in the best interests of the fund members


----------



## Judd (23 June 2014)

Possibly the title of this thread should be changed to “Superannuation: Everybody wants your money.”

It is rather bizarre in some ways.  Various quarters of the financial industry suggest that SMSF should have a minimum balance of $250k.  By implication it means amounts less than that remain with them and so will fees.  And it is possible that once there the funds will remain “sticky” money.

Some industries, such as the art one, claim it cannot remain viable without superannuation.  So the products are overpriced are they, fellas?  Anyway, I understand super was introduced to assist with funding retirement not to support a particular industry.

Potential infrastructure organisations wish to impose investment mandates on super.  BrisConnections anyone? 

Unlisted fund managers are moving into the listed space and bring along with them the unlisted fee structures.  Bemused to see one LIC at end-of-year initially not declare a dividend but the managers were quite happy to take cash in management and performance fees.  Don't worry about income, dear shareholders, feel the capital gain while you fund our North Shore weekender.

Spivs are out in force enticing investment in property both commercial and residential, for a fee of course.  Look out for another fee feast, litigation, Parliamentary inquiries and more regulation if or when it all goes horribly wrong.

Clarion calls by the media and others on restrictions in the amount which can be invested in super to prevent 0.01% of SMSFs rorting the system.  Great, so more regulation which imposes more compliance costs to be spread over all superannuation funds rather than on those who actually caused the perceived problem.  However, it will surely make lawyers and other hanger ons happy.  No, I am not happy about the activities of the 0.01% either but I'd rather have that then super being hit with increased costs on the basis a fund may, but not necessarily will, indulge in dubious practices.

With all the hungry beasts circling it, superannuation could be in danger of becoming an sick and expensive joke.

Wow, I'm in a real cranky mood today.  I may just turn around and reclaim the $5 I gave to the homeless beggar outside the supermarket this morning.  After all, he is a parasite and drugo who simply cannot be bothered to get a job.


----------



## sydboy007 (23 June 2014)

http://www.businessspectator.com.au/news/2014/6/23/economy/gruen-urges-reduced-super-fees

_Australians spend around $20 billion annually on superannuation fees, which equates to over one per cent of GDP.

“A microeconomic reform that permanently reduced costs across the economy by a few tenths of 1 per cent of GDP would be considered a significant and worthwhile reform,” he said.

“Significant reductions in superannuation fees would have widespread benefits for society as a whole.”

Mr Gruen said while international comparisons are difficult, it is estimated in 2011 Australians’ average superannuation fees were around three times those of the UK._

below charts are sobering reading.  we're being legally bilked year after year.


----------



## sptrawler (23 June 2014)

sydboy007 said:


> I'm continually surprised by the lack of basic financial knowledge with the people I work with.  The majority would have some form of tertiary education, yet have difficulty in grasping what franked dividends are and that it's the total (grossed) up value of the income you receive that's important.  It's gotten to the point where I've made a few word documents explaining the basics on a few things since I'm now not only the got to guy for travel advice but questions about the share market and basic financial concepts.  Trying to get people to understand risk can be tricky.
> .




I'd say you are probably the go to guy on any subject.

There isn't a subject here ,you aren't expert on, be it fiscal, energy, enviromental,welfare,superannuation,power production and distribution, agricultural development, telecommunications. You name it, you know it.

One thing for sure, you will be fine in your retirement, with your understanding of the scheme of things.


----------



## sptrawler (23 June 2014)

Another thing Syd, why do you keep using hyperbole terms, to make mileage.

A while back, I, with limited knowledge of accounting posted. On 15th June #932.

_Also you say super tax expenditure will cost $x that is a bit of a furphy, it isn't an expenditure, isn't it a non collection. 
Expenditure is an outgoing, from memory, like the pension_.

Now when I get back from a trip away apparently you're still going on about it, I'm sure Craft knows what he is talking about, even if I don't. On 19th June # 971.

_Its notional revenue not raised - not expenditure.

If there was no super pool their would be no revenue at all from Super. Would the savings pool exist in some other fashion? Maybe but probably no where near as large and it would still be undoubtedly sheltered some other way like negative gearing, main residence exemption from Capital Gains, family trusts, corporate structures, tax haven accounts etc.

So a notional revenue forgone figure is riddled with fairy-tale assumptions.

Can't isolate super and try to fix it - the approach has to be comprehensive_.

You immediately move away, on both occassions, from answering the subject. One thinks you're debate might not be as it seems, me thinks.

All good intentions, become a rant, when not based on truthfull intent.


----------



## Vixs (23 June 2014)

sydboy007 said:


> http://www.businessspectator.com.au/news/2014/6/23/economy/gruen-urges-reduced-super-fees
> 
> _Australians spend around $20 billion annually on superannuation fees, which equates to over one per cent of GDP.
> 
> ...




Yeah, because everything else in Australia is so cheap compared to the rest of the world...

That's one cost of our mountains of red tape.


----------



## Vixs (23 June 2014)

Judd said:


> I'm just as shocked with some EFT's where the activities are not completely transparent.  Take IOO as an example.  Few would know that its holdings, and those of its stalemates, are possibly available for short selling.  To discover that, investors would also need to refer to the US Prospectus which governs its listing on the ASX.  Not saying the activity is evil or anything like that but investors should be clearly informed of the arrangement and I wonder if they are.  I could be wrong of course since it is quite a while since I investigated this brand and things may have changed in the meantime.
> 
> Many, many aspects should be tidied up for the public but I suspect it will not happen.  Gad, I am such a cynic sometimes.




And yet the iShares ETFs are still leaps and bounds ahead of those that don't actually hold the real assets, just use derivatives to gain comparable exposure.


----------



## sptrawler (23 June 2014)

sydboy007 said:


> http://www.businessspectator.com.au/news/2014/6/23/economy/gruen-urges-reduced-super-fees
> 
> _Australians spend around $20 billion annually on superannuation fees, which equates to over one per cent of GDP.
> 
> ...




Yet all in the U.K get the Government pension, regardless of them having personal super? What the.lol


----------



## Julia (23 June 2014)

The UK might have a similar system to NZ which has universal superannuation.  It is not means tested but forms part of an individual's taxable income.  There is no tax free threshold in NZ.  Every dollar of income incurs tax.

Probably a whole lot more simple to administer and probably more functional.


----------



## sptrawler (23 June 2014)

Julia said:


> The UK might have a similar system to NZ which has universal superannuation.  It is not means tested but forms part of an individual's taxable income.  There is no tax free threshold in NZ.  Every dollar of income incurs tax.
> 
> Probably a whole lot more simple to administer and probably more functional.




Yes, absolutely a better system. 
We had the same system, before the Government absorbed the universal welfare tax, and said they would pay pensions from consolidated revenue.

The NZ welfare model is certainly standing up better than ours.


----------



## sydboy007 (24 June 2014)

sptrawler said:


> Another thing Syd, why do you keep using hyperbole terms, to make mileage.
> 
> A while back, I, with limited knowledge of accounting posted. On 15th June #932.
> 
> ...




From what I've read a tax expenditure is pretty much equivalent to spending within the budget.

If you have to raise a certain amount of revenue and you choose to tax certain forms of income at lower or nil rates, how is that different than taxing them at the full rate and then providing a refund / rebate to bring the net tax rate.

I do acknowledge that if you start to reduce or remove the tax expenditures around super that the funds flowing into the system will likely change, so small changes aroun tax levels, or introducing RBLs again, are likely to cause large reductions in the lost revenue.

that's why we need meaningful reform with the tax system, including NG, CGT, super, better targeting of the aged pension from age based to those in need.

My beed with the super system is:

* over $20B a year to run which is quite expensive
* tax expenditures are nearly equal to the cost of the aged pension
* generally those who would likely be able to save enough to reduce or remove their reliance on the aged pension get the most help, while the poor get little to no benefit, so the cost of the system does not appear to actually help the budget actually cope better over time with the cost of the aged pension.
* there is no legal obligation for someone to use their super to reduce their reliance on the aged pension

I do no believe a super system that sees revenue leakage increasing at 12% a year is sustainable.  I do not believe a super system that has no legal obligation for someone to use their balance to reduce their aged pension payments is sustainable.  I do not believe a super system that provides tax free income for those over the age of 60 is sustainable when combined with a falling participation rate.

So unless we're going to continually increase the overtaxing of labour and corporate profits, which are the 2 most inefficient taxes, then either services have to continue to decline, or Govt debt will increase


----------



## sydboy007 (24 June 2014)

Julia said:


> The UK might have a similar system to NZ which has universal superannuation.  It is not means tested but forms part of an individual's taxable income.  There is no tax free threshold in NZ.  Every dollar of income incurs tax.
> 
> Probably a whole lot more simple to administer and probably more functional.




I'd be quite happy if we had something similar to the Singapore system with their provident fund where employees and employers both contribute around 20% into the fund each and the Government runs it.

There has to be a cheaper way to save for retirement than the Australian super system.  Plenty of overseas examples we could look to, but the FIRE sector is way to powerful.  Think it's now ~40% of the ASX so that gives you an idea of the economic and political power they're able to wield to stop changes that would have a negative consequence to their ability to ticket clip and make monopoly style returns.  It's a sad indictment that the average level of fees has gone UP in the last decade.


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## craft (24 June 2014)

sydboy007 said:


> From what I've read a tax expenditure is pretty much equivalent to spending within the budget.
> 
> If you have to raise a certain amount of revenue and you choose to tax certain forms of income at lower or nil rates, how is that different than taxing them at the full rate and then providing a refund / rebate to bring the net tax rate.




So on the same basis should we say in relation to business that X amount is  ‘tax expenditure’ because the corporate tax rate is flat and lower then the income tax scales?

Trying to make up and hang a ‘tax expenditure’ number on super seems to be about big number theatrics rather than common sense.

End of the day the pension is transfer system (from one person to another) and we do need to consider who pays for it and who gets it.

The super system is a self sufficiency system. (Where the transfers is from you to you over time) 
The cost (costs being real expenses not fairy-tale ‘tax expenditure’ assumptions) of it is a legitimate concern.
Limiting the upper end utilisation of it is also a legitimate consideration but this point needs to be thought of in the context of there being a defensible argument for taxing capital lightly to grow the economy – and that is the philosophy of our current government. Just closing down the top end of super and leaving all the other wealth protection avenues open would only be a political exercise if it was to occur and would capture very little extra tax revenue. 

Ideology (subconscious or otherwise) in this thread prevents a really good discussion. Just like the national discussion really.


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## sydboy007 (24 June 2014)

craft said:


> So on the same basis should we say in relation to business that X amount is  ‘tax expenditure’ because the corporate tax rate is flat and lower then the income tax scales?




I don't believe your example meets the criteria for a tax expenditure.  You've also ignored theose on the lowest tax rates, so by your aguemtn they are receiving a tax expenditure compared to corporate taxation and those on higher marginal rates.

A tax expenditure program is government spending through the tax code. Tax expenditures alter the horizontal and vertical equity of the basic tax system by allowing exemptions, deductions, or credits to select groups or specific activities. For example, two people who earn exactly the same income can have different effective tax rates if one of the tax payers qualifies for certain tax expenditure programs.



craft said:


> Trying to make up and hang a ‘tax expenditure’ number on super seems to be about big number theatrics rather than common sense.




If the concessionally taxed super contributions were received as income, the extra tax revenue could be used by the Govt to be put into some fund that would serve the purpose of paying our future pension liabilities.  If people want a higher retirement income than this they are free to save to achieve that goal.



craft said:


> End of the day the pension is transfer system (from one person to another) and we do need to consider who pays for it and who gets it.




All welfare fits that criteria.



craft said:


> The super system is a self sufficiency system. (Where the transfers is from you to you over time)
> The cost (costs being real expenses not fairy-tale ‘tax expenditure’ assumptions) of it is a legitimate concern.
> Limiting the upper end utilisation of it is also a legitimate consideration but this point needs to be thought of in the context of there being a defensible argument for taxing capital lightly to grow the economy – and that is the philosophy of our current government. Just closing down the top end of super and leaving all the other wealth protection avenues open would only be a political exercise if it was to occur and would capture very little extra tax revenue.




Why is the loss of tax revenue irrelevant, especially if in the near future it will cost more than the aged pension.

I've regularly argued that changes to super need to occur within meaningful tax reforms as well.  Bring in RBLs and you will need to make changes to NG like quarantining it to the asset's income and maybe even on only new asset formation.  If you believe capital should be lightly taxed, then increase the time an asset has to be held to get a reduce tax rate.  maybe bring the reduction in as 10 or 20% a year instead of halving after a year.  Lightly taxing capital means other taxes have to be higher to provide the same level of services, and we're already overly reliant on income and corporate taxes.

With a steadily declining participation rate, rapidly rising tax free pension system, how is it sustainable in the long term?  Unless we start taxing land / consumption / resources more we're doomed to either massive deficits or head towards third world levels of Government services.



craft said:


> Ideology (subconscious or otherwise) in this thread prevents a really good discussion. Just like the national discussion really.




Then why don't you share your views rather than just criticising?


----------



## craft (24 June 2014)

sydboy007 said:


> I don't believe your example meets the criteria for a tax expenditure.  You've also ignored theose on the lowest tax rates, so by your aguemtn they are receiving a tax expenditure compared to corporate taxation and those on higher marginal rates.




I have no idea what meets your criteria of a tax expenditure - the whole concept seems whacked to me. But it would seem if you hold the logic steady then the low income are indeed receiving a tax expenditure. Nearly everything could be seen as a tax expenditure dependent on what rate of tax you think should be the base case.  




sydboy007 said:


> A tax expenditure program is government spending through the tax code. Tax expenditures alter the horizontal and vertical equity of the basic tax system by allowing exemptions, deductions, or credits to select groups or specific activities. For example, two people who earn exactly the same income can have different effective tax rates if one of the tax payers qualifies for certain tax expenditure programs.




Perhaps if quoting Wikipedia you could have included their disclaimer



> This article has multiple issues. Please help improve it or discuss these issues on the talk page.
> 
> This article needs additional citations for verification.  (January 2011)
> 
> This article is written like a personal reflection or opinion essay that states the Wikipedia editor's particular feelings about a topic, rather than the opinions of experts.  (January 2011)







sydboy007 said:


> If the concessionally taxed super contributions were received as income, the extra tax revenue could be used by the Govt to be put into some fund that would serve the purpose of paying our future pension liabilities.  If people want a higher retirement income than this they are free to save to achieve that goal.





Is it concessionally taxed? Its a savings system designed with a flat rate.  The corporation rate is also a flat rate system and doesn't cop all the concessionally taxed rhetoric.





sydboy007 said:


> Why is the loss of tax revenue irrelevant, especially if in the near future it will cost more than the aged pension.
> 
> I've regularly argued that changes to super need to occur within meaningful tax reforms as well.  Bring in RBLs and you will need to make changes to NG like quarantining it to the asset's income and maybe even on only new asset formation.  If you believe capital should be lightly taxed, then increase the time an asset has to be held to get a reduce tax rate.  maybe bring the reduction in as 10 or 20% a year instead of halving after a year.  Lightly taxing capital means other taxes have to be higher to provide the same level of services, and we're already overly reliant on income and corporate taxes.
> 
> With a steadily declining participation rate, rapidly rising tax free pension system, how is it sustainable in the long term?  Unless we start taxing land / consumption / resources more we're doomed to either massive deficits or head towards third world levels of Government services.




Who receives benefits and who pays is not irrelevant but there are many defensible views from capitalist to socialist perspectives and every degree in-between. 



sydboy007 said:


> Then why don't you share your views rather than just criticising?




Not intending to criticise - just observing and its an observation applicable to myself as well.

I have put my views here quite a few times (probably too many) and in many ways they are similar to you in that I basically come down on the side of labour being overtaxed and society facing increasing inequality - but that's my ideology and I try to not let it stop me from taking on board the views of those that want to tax capital lightly to drive economic growth and get trickle down benefits to minimise the need for government transfers.


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## Junior (25 June 2014)

I am strongly opposed to the view here that 'tax expenditure' is the same thing as welfare.  They are very very different.  One is an expense, the other is a reduced level of revenue.  Revenue and expenses.....not the same.

The government has to budget for the age pension.  It does not have to budget and plan long term for a tax concession, it's not a long term commitment, they do not have to find revenue to fund a tax concession as there is no payment or obligation to meet.  It's simply applying a lower tax rate than what it would otherwise be, and therefore results in less revenue.

Put it this way, in the event of a budget crisis (ACTUAL crisis, not the imaginary one we currently have) it would be very easy for the government to immediately scale back tax concessions within a 1-3 year period.  This would result in a quick boost in tax revenue.  This is because it is a concession which applies to those in our society who can afford to be paying tax in the first place...

It would not be possible, however, to suddenly reduce welfare expenditure.  This would need to be implemented over a long timeframe as there are individuals relying on this welfare to survive, i.e. pay for shelter, food, utilities, medical.

WHY?  Because this is outright spending, it's welfare, actual PAYMENTS which must be funded.  Outgoings.  Tax concessions are a reduced rate of tax which apply to individuals have have enough wealth and earn enough income to pay tax.  They affect the revenue side of the ledger, they are unrelated to spending.

Apologies for the rant, I just can't get over this tax expenditure issue.


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## sptrawler (25 June 2014)

Junior said:


> I am strongly opposed to the view here that 'tax expenditure' is the same thing as welfare.  They are very very different.  One is an expense, the other is a reduced level of revenue.  Revenue and expenses.....not the same.
> 
> The government has to budget for the age pension.  It does not have to budget and plan long term for a tax concession, it's not a long term commitment, they do not have to find revenue to fund a tax concession as there is no payment or obligation to meet.  It's simply applying a lower tax rate than what it would otherwise be, and therefore results in less revenue.
> 
> ...




Well put Junior.

Another thing with expenditure is, it can be reduced or increased with minimal effect to the operation of the economy. As you say most of it is welfare and generally is spent on lifes necessities. Therefore if welfare payments grow at a slower rate, the welfare component of the gst take grows slower, but there is a corresponding reduction in welfare cost.

This is not the case with taxes. Increasing taxes will have some effect as the sector that you increase the taxing on, change their spending pattern. 
If it is a company, they will reduce investment spending or cut back costs, if it is the individual they will reduce their consumption or  investment spending.

I don't think it is as easy as people think, to just increase a tax and reduce another one, the flow on ramifications could be far worse than expected. 
I'm no expert on the subject, but I would think it will be a massive job to overhaul our tax system, however I do think it needs to be done.
The ad hock approach by the last government, is an example of the chaos that can happen, with poorly thought out changes.


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## sydboy007 (25 June 2014)

Junior said:


> I am strongly opposed to the view here that 'tax expenditure' is the same thing as welfare.  They are very very different.  One is an expense, the other is a reduced level of revenue.  Revenue and expenses.....not the same.
> 
> The government has to budget for the age pension.  It does not have to budget and plan long term for a tax concession, it's not a long term commitment, they do not have to find revenue to fund a tax concession as there is no payment or obligation to meet.  It's simply applying a lower tax rate than what it would otherwise be, and therefore results in less revenue.
> 
> ...




Considering the near impossibility of making changs to NG, I don't believe making changes to tax concessions is as easy as you say.  Just look at the changes Labor proposed with the statutory method for car FBT and the uproar fanned by the media, and how the then opposition ran to protect those benefiting from the current system.  Meaningful reforms are quite difficult without bipartisan support.  Scare campaigns and appealing to those benefiting from the status quo is far easier.

Back in the 2010-11 tax year wages totalled $521B.  I doubt there's any easy way to attribute this to the various tax rates.  

For simplicity lets say that 9% of that income was put into the super system ie. $46.89B - this would be the minimum amount as there's a decent level of salary sacrificing going on.

If it was taxed at 30% - then govt revenue would be $14B
In super with 15% tax the Govt revenue would be $7B

So wouldn't there be a revenue loss of $7B from this situation?  Doesn't that mean other taxation has to be higher to compensate?  How is the current system any different to full taxation with a rebate of $7B?

Making non concessional contributions also makes sense for those on higher incomes since you can receive over 20% lower tax rate on earnings which is a 60% reduction in taxation.

I'm not sure what he best way is to meet the retirement needs of the country, but the current system isn't meeting them.  It's expensive to run, after 20 years hasn't reduced the cost of the aged pension to the budget in any material way and from reports I've read something like 80% of retirees will still get some form of aged pension even by 2040. 

It seems silly to me that there's no legal requirement to use a super balance to provide retirement income.  It's all revenue drain and no gain.


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## McLovin (25 June 2014)

sydboy007 said:


> For simplicity lets say that 9% of that income was put into the super system ie. $46.89B - this would be the minimum amount as there's a decent level of salary sacrificing going on.
> 
> If it was taxed at 30% - then govt revenue would be $14B
> In super with 15% tax the Govt revenue would be $7B
> ...




Syd, I think this a very strange way of looking at the tax system. The purpose of super is to reduce government liability in the future (yes, it's not a perfect system, I think we all agree on that). When you create these tax expenditure examples, you're only looking at the revenue side today, not the spend side tomorrow.


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## Junior (25 June 2014)

sydboy007 said:


> Considering the near impossibility of making changs to NG, I don't believe making changes to tax concessions is as easy as you say.  Just look at the changes Labor proposed with the statutory method for car FBT and the uproar fanned by the media, and how the then opposition ran to protect those benefiting from the current system.  Meaningful reforms are quite difficult without bipartisan support.  Scare campaigns and appealing to those benefiting from the status quo is far easier.




Agreed it's a politically difficult/impossible, but it wouldn't increase poverty or smash the lower class in the way that cutting a welfare payment like Age Pension would.



sydboy007 said:


> It seems silly to me that there's no legal requirement to use a super balance to provide retirement income.  It's all revenue drain and no gain.




I agree and disagree with this...I mean superannuation does not belong to the government, so they shouldn't have the power to dictate when and how you spend it.  But perhaps this does need to happen to an extent in order to reduce reliance on government pension.

My preference is to simply tighten up income and assets test, and index pension payments to CPI only.

I personally believe that the superannuation system isn't that bad, we just haven't seen the benefits of it yet as current retirees didn't benefit from 45 years of SG contributions.


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## sydboy007 (25 June 2014)

McLovin said:


> Syd, I think this a very strange way of looking at the tax system. The purpose of super is to reduce government liability in the future (yes, it's not a perfect system, I think we all agree on that). When you create these tax expenditure examples, you're only looking at the revenue side today, not the spend side tomorrow.




But there's an immediate impact to Govt revenue from super.  You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.

I've not been able to find any research that can conclusively show the tax revenue forgone via the super system will eventually be eclipsed by the reduction in aged pension.  The amount of revenue forgone so far would be quite considerable.

A good first start would be getting the cost base of super down to at least the OECD average.  That's at least $13B a year in savings or over a 1/3 of the current aged pension.


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## sydboy007 (25 June 2014)

Junior said:


> Agreed it's a politically difficult/impossible, but it wouldn't increase poverty or smash the lower class in the way that cutting a welfare payment like Age Pension would.
> 
> 
> 
> ...




I'd prefer if the Govt had a system whereby fully taxed income was put into super and a tax rebate provide to get it back to 15% avg.  The tax rebate is locked in to being used to fund a retirement income - it's tax payer rather than an individuals money.  The individual can decide what to do with their share of the super balance, but there should be some financial carrot and or stick to push them to minimise their drain on the public purse.  RBLS seemed to do this relatively well.  It doesn't seem fair to remaining tax payers that someone can spend their super balance in a way to maximise or at least increase their access to the aged pension.  it seems to be counter to the main purpose of saving for retirement.


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## McLovin (25 June 2014)

sydboy007 said:


> But there's an immediate impact to Govt revenue from super.  You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.




I'm not disputing that, I just don't understand your obsession with it. There's millions of different scenarios we could come up with that result in differing spend/revenue assumptions. I just don't see the big difference between a cash handout and a "tax expenditure". They're both redistributive. The rest just seems to be semantics.


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## craft (25 June 2014)

sydboy007 said:


> I'd prefer if the Govt had a system whereby fully taxed income was put into super and a tax rebate provide to get it back to 15% avg.  The tax rebate is locked in to being used to fund a retirement income - it's tax payer rather than an individuals money.  The individual can decide what to do with their share of the super balance, but there should be some financial carrot and or stick to push them to minimise their drain on the public purse.  RBLS seemed to do this relatively well.  It doesn't seem fair to remaining tax payers that someone can spend their super balance in a way to maximise or at least increase their access to the aged pension.  it seems to be counter to the main purpose of saving for retirement.




Treasuries Main residence exemption _estimate_ for 2013/14 was 30 Billion. Should this ‘Tax expenditure’ be quarantined to provide provision for retirement?  The wealthier you are the more expensive your house the bigger your tax expenditure benefit. Not only do we not expect people receiving this tax expenditure to mandatorily fund their retirement with the tax expenditure benefit they received we actually exempt homes from the pension assets test.  Why should the expectations for receiving tax expenditure for housing be different to receiving tax expenditure for saving?  

Is super really that bad? If the super pool wasn’t there, most private savings (to the reduced extent that they would exist) would most likely be in housing, benefiting from main residence exemption or negative gearing and contributing less then what the government actually collects from taxing super at 15%.


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## sptrawler (25 June 2014)

sydboy007 said:


> But there's an immediate impact to Govt revenue from super.  You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.
> 
> I've not been able to find any research that can conclusively show the tax revenue forgone via the super system will eventually be eclipsed by the reduction in aged pension.  The amount of revenue forgone so far would be quite considerable.
> 
> A good first start would be getting the cost base of super down to at least the OECD average.  That's at least $13B a year in savings or over a 1/3 of the current aged pension.




Isn't the $13billion more in tax revenue, that you are talking about, $13billion less in superannuation deposits. Won't this show up at a later date as a shortfall on the savings ledger, that may result in increased pension obligations?

A bit like your assumption that $1m in super is adequate, what happens if there is a period of high inflation and or a large currency correction.
The $1m could be rapidly devalued and the members may not be in a financial position to recover the capital base, or be too close retirement to recover. This then again loads up the Government pension costs as more qualify.
It is o.k looking at things in a simplistic manner, however things seldom pan out as we expect.


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## Vixs (25 June 2014)

Just wanted to address a previous post by Junior that I was reluctant to respond to for want of keeping the thread on topic, but that I think shouldn't be left where it was.

*SPOILER: THIS IS LONG AND NOT ON-TOPIC.
*


			
				Junior said:
			
		

> As a member of the Financial Planning industry for 10 years now, I'm disgusted at the watering down of FOFA. The big 4 banks control this country, and this government has ensured that we will continue to see Storm Financial, Timbercorp, Great Southern etc. regularly going forward. These collapses come at a huge cost to the taxpayer and devastate 1000s of families.



What about the removal of constant opt-in agreements, fee disclosure statements for legacy clients and allowing existing advisers to transition their businesses to other licensees without loss of current income is going to bring about the next Storm Financial or Timbercorp? 

Through the removal of all investment product commissions, which is still in place, the inability to charge percentage based fees on geared portfolios, which is still in place, the removal of the accountant's exemption, and the inclusion of the best interests duty, which is STILL IN PLACE there have been solid impediments to the repeat of those exact events you've mentioned above. It's not even a loose correlation - it's exactly what these changes will impact.



			
				Junior said:
			
		

> Something to consider re MIS, more than $1 billion was invested in Timbercorp schemes alone....as these schemes only ever made losses, this amount was claimed as a deduction against individuals income, with the expectation that at some point these schemes would be profitable and the earnings taxed. The end result is that these were never profitable, and the only parties to extract profits were the directors of Timbercorp, accountants, financial planners and then solicitors/liquidators. Wealth transferred to these groups from the lower, middle class and taxpayers.




It was the poor and average Bob & Jane that were hit hardest by forestry schemes, was it? Were they the ideal candidates for being sold upfront tax deductions to the tune of millions of dollars, with loans paid for using borrowed funds? It was those that needed the tax relief? *What absolute garbage.* The investors burned were the lawyers, the doctors, successful investors and the rest of the high income earners that were seeking relief from high income tax bills with a sweetener of a 'high performing' investment.

The only thing I agree with is that it was a wealth transfer to those involved in the manufacture and distribution of the schemes, and some did very well out of the sale of those investments.



			
				Junior said:
			
		

> In my opinion the minimum education standard to become an FP is still the biggest issue. You can be qualified and giving advice after completing a short course which your average 15 year old would be able to breeze through. Should be FP specific bachelors degree at a minimum, with the CFP course compulsory if you have completed a non-business degree.
> 
> Sorry to get off-topic!




This is not the biggest issue. The biggest issue is that you can't educate someone that lacks ethics into being an ethical operator. 

To tout that the FPA has the answer and that a degree is the basic requirement is absurd. The bulk of my colleagues are tertiary educated and yet can't write, interpret or problem solve to the level needed to add value. University standards aren't high enough in this country for a degree to be a measure of someone's capability - maybe that used to be a reliable indicator, but it's not anymore. 

For planners performing the tasks needed to help every day Australian's improve their finances, greater knowledge than an Advanced Diploma seems that it would rarely be worthwhile. You are taught about life insurance, investments, superannuation, leverage, SMSFs, basic knowledge of financial structures, social security and retirement planning, and how to apply the technical to the problems they face. In order to provide accessible advice to these people, you don't need 5 years of formal education - you need to be able to articulate to them how they repay their home loan sooner, what's the most cost-effective way of financing their new car, how do they pay for school fees, and once that's all said and done, how do they live a dignified and stress-free retirement?

For those with more complex situations, business operators, those with family with disabilities that may utilise special disability trusts, high net worth individuals with diverse holdings and interests, investors using various structures to hold their investments and people that want to utilise complex strategies in wealth creation, their needs will be greater. These people, often successful in their fields, will do what they've done in the past - seek out intelligent, well educated experts with shared interests and drive, to get meaningful financial advice from. They will choose the more capable advisers, they don't need mandated bachelor degree educated people that are otherwise unremarkable in their own field.

The firm I work for has a huge client base of people affected by wealth destruction as a result of forestry schemes. They were sold, every single one of them, by CFPs and CPAs. Tens of millions of dollars of wealth from medical specialists and high profile lawyers incinerated because of the failed products they had invested their  money in thanks to planners and accountants that were educated and members of professional bodies. They didn't lack education, they lacked integrity.

Lack of education is not the problem. Business models that provided incentives for transactional business that was at odds with client needs is the problem. Lack of enforcement of the laws, standards and codes of conduct and practice that are already in place, and that FOFA in the form being recommended has delivered and added upon - that is the problem.

As someone who has been a member of the industry for 10 years now it is a shame that you would think more pieces of paper are the answer, and that you don't recognise the immense change that is already underway and has occurred. At a time when good financial planning is going to become more important than ever, and with such drastic change in businesses in the industry moving forward, it would be nice if the participants of said industry could get off the bandwagon and stop tearing strips off their own reputations.

I am sorry that this had nothing to do with superannuation being a government cash cow, (it's a revenue! it's an expenditure! it's a revenue! it's an expenditure!) however I couldn't ignore it, and I didn't feel it warranted a thread of its own. 

Perhaps if others want to continue this discussion we should do so in a new thread.


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## medicowallet (25 June 2014)

sydboy007 said:


> But there's an immediate impact to Govt revenue from super.  You can't shift 9% of income from a progressive tax system to a flat tax system and not have a reduced revenue base in the current year.
> 
> .




You could make the top marginal tax rate 15% and then there would be no problem.

Funny thing is that is ok to expect high income earners to pay approx 50% tax to fund socialist's lifestyles, but then be highly critical of a scheme which helps fund their retirement, has limited ability to tax minimise within the vehicle and offers a very stable revenue stream for the government.

I'll take a flat 15% income tax for all Australians thankyou very much, as opposed to paying more than my fair share at times!

MW


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## sydboy007 (25 June 2014)

McLovin said:


> I'm not disputing that, I just don't understand your obsession with it. There's millions of different scenarios we could come up with that result in differing spend/revenue assumptions. I just don't see the big difference between a cash handout and a "tax expenditure". They're both redistributive. The rest just seems to be semantics.




Deloitte superannuation adviser Wayne Walker said it was important Australians not get too complacent about the compulsory retirement savings system, which now accounts for $1.8 trillion…

The ‘Adequacy and the Australian Superannuation system’ paper forecasts that 75 per cent of retirees will still be eligible for all or some of the aged pension in 20 years time.

From John hewson

_As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners._

So why are we redistributing from the bottom 10% to the top 10% and 1%?

If we cut back on the assistance going to the top, we could either lower income and corporate taxes and / or increase spending on services.  The $ figures are in the billions.  This is not small change semantics.


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## sydboy007 (25 June 2014)

craft said:


> Treasuries Main residence exemption _estimate_ for 2013/14 was 30 Billion. Should this ‘Tax expenditure’ be quarantined to provide provision for retirement?  The wealthier you are the more expensive your house the bigger your tax expenditure benefit. Not only do we not expect people receiving this tax expenditure to mandatorily fund their retirement with the tax expenditure benefit they received we actually exempt homes from the pension assets test.  Why should the expectations for receiving tax expenditure for housing be different to receiving tax expenditure for saving?
> 
> Is super really that bad? If the super pool wasn’t there, most private savings (to the reduced extent that they would exist) would most likely be in housing, benefiting from main residence exemption or negative gearing and contributing less then what the government actually collects from taxing super at 15%.




Could we achieve the stated goal of decreasing the reliance on the aged pension cheaper?  If deloitte are right and 75% of retirees will still receive at least a part pension in 20 years, what's the point of super?  Is the reduction on pension payments in 20 years going to be less than if whatever level of savings without super would contribute in extra taxes?

Clamp down on negative gearing so it's forced into new construction.  At least that way the private funds are actually helping to alleviate the housing shortages in most capital cities.


----------



## sydboy007 (25 June 2014)

sptrawler said:


> Isn't the $13billion more in tax revenue, that you are talking about, $13billion less in superannuation deposits. Won't this show up at a later date as a shortfall on the savings ledger, that may result in increased pension obligations?
> 
> A bit like your assumption that $1m in super is adequate, what happens if there is a period of high inflation and or a large currency correction.
> The $1m could be rapidly devalued and the members may not be in a financial position to recover the capital base, or be too close retirement to recover. This then again loads up the Government pension costs as more qualify.
> It is o.k looking at things in a simplistic manner, however things seldom pan out as we expect.




I'll ask you again, what level of income do you believe a person should be entitled to with Government support?

$50k a year puts a couple well above half of households.  

As for $1M being adequate, there's nothing stopping that figure from begin increased by the CPI each year.  Let people top up to the new amount to help keep the real purchasing power.

I would like the Govt to publish figures on the annual cost of super since 1994 which includes fees and tax foregone compared to annual reduction in pension entitlements.  I'm pretty confident the accumulated balance would be a very large 3 figure billions in the negative for savings.  Will the system actually ever save more than it costs?  I'm sceptical.  It would be interesting to see if there has been any forecasting done by treasury on this.


----------



## sydboy007 (25 June 2014)

medicowallet said:


> You could make the top marginal tax rate 15% and then there would be no problem.
> 
> Funny thing is that is ok to expect high income earners to pay approx 50% tax to fund socialist's lifestyles, but then be highly critical of a scheme which helps fund their retirement, has limited ability to tax minimise within the vehicle and offers a very stable revenue stream for the government.
> 
> ...




Which is why I say changes to super need to be done along with meaningful tax reform.  On the current political circus I think the chances of that happening are near nil.

The below chart shows how our current tax base is moving further and further away from efficient taxes to increasing reliance on corporate and income taxes.  Way to go in slugging hard work and rewarding speculation.


----------



## Wysiwyg (25 June 2014)

Superannuation unit prices for the Australian Shares option in my superfund have remained at all time highs although the Aussie market has been trending sideways/down since the peak two months ago. Although invested in top 20 blue chippers which have all come off their highs as they weight the market, the unit price is apparently immune to any downside.


----------



## medicowallet (26 June 2014)

sydboy007 said:


> So why are we redistributing from the bottom 10% to the top 10% and 1%?
> 
> If we cut back on the assistance going to the top, we could either lower income and corporate taxes and / or increase spending on services.  The $ figures are in the billions.  This is not small change semantics.




The problem with making such a poor statement like the above Sydboy is that you do not understand the absolute basics.

The person in the bottom 10% pays no tax, and is in fact the recipient of govt assistance.

The person who is in the top 10% pays net tax.

How is the person who can sacrifice $30kish and still pays net tax of 15% being subsidised by the person who is receiving a net benefit from the government?????

MW


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## Junior (26 June 2014)

Vixs said:


> Just wanted to address a previous post by Junior that I was reluctant to respond to for want of keeping the thread on topic, but that I think shouldn't be left where it was.
> 
> *SPOILER: THIS IS LONG AND NOT ON-TOPIC.
> *




Hi Vixs, I won't go into detail and address all of your points.  As you said it's off-topic.

We've clearly had very different experiences in the industry, which has led to different points of view.  The FPs I've worked with don't fit the mould you describe (ie. formally educated).  The MIS clients I dealt with also don't fit into the high income earning category.

I agree that the changes which have been implemented are important (removal of upfront commission on investment products, and asset based fees on geared portfolios), but more changes need to be made in my opinion.  Dodgy operators have found other areas to make a quick buck.


----------



## Junior (26 June 2014)

Vixs said:


> It was the poor and average Bob & Jane that were hit hardest by forestry schemes, was it? Were they the ideal candidates for being sold upfront tax deductions to the tune of millions of dollars, with loans paid for using borrowed funds? It was those that needed the tax relief? *What absolute garbage.* The investors burned were the lawyers, the doctors, successful investors and the rest of the high income earners that were seeking relief from high income tax bills with a sweetener of a 'high performing' investment.
> 
> The only thing I agree with is that it was a wealth transfer to those involved in the manufacture and distribution of the schemes, and some did very well out of the sale of those investments.




You completely missed my point here.  I was referring to the fact that the failed schemes were a drain on the federal budget due to the tax deductions claimed by investors......upfront tax deductions were claimed by growers, in the expectation that harvest income would be taxed at some point in the future.  Schemes never turned a profit and therefore grower/investors never incurred income tax on harvest proceeds.


----------



## Vixs (26 June 2014)

@Sydboy007:
From the Treasury, 2009-2010:
"Personal income tax distribution
The personal income tax system is progressive ”” the tax share increases for those who earn more, while those individuals who have limited means bear relatively little or no tax liability (Chart 11).

For the 2009-10 income year (the latest year for which tax return data is available from the ATO), 57.5 per cent of personal income tax was collected from the 17.4 per cent of taxpayers earning more than $80,000 (with around 24.0 per cent of personal income tax coming from the 2.3 per cent of taxpayers earning over $180,000).

In comparison, the 30.5 per cent of taxpayers who earned less than $35,000 in taxable income paid only 4.0 per cent of the total net tax payable on income.

The 52.1 per cent of taxpayers in the $35,001 to $80,000 income range paid 38.6 per cent of total net tax payable on income.


	

		
			
		

		
	
"

You've got two trains of thought on the go - the first is that we need any changes made to the current system to be part of an overall tax reform. I agree with this.

The other, however, is that the current system is overly generous to the top end of the spectrum and that it is the people at the bottom that miss out. I don't think you can justify that by looking at who is actually contributing the tax revenue in the first place. When you add on consumption taxes like the GST, the top end contribution is even greater than the bottom end again, increasing the gap. Saying they can afford it is not justification in and of itself. The concessions to superannuation are limited by the caps, the concessions on earnings are of course not limited once they're in there. 

The discussion as to how many of these massive funds are out there has been had earlier in the thread. There are very few funds with $5-$10m+ in them, and those that are there largely came about as a result of systems that have now been changed. The only way to get those kinds of balances in super now is through loan arrangements, and this is an area where I think HNW individuals that utilise these strategies are taking the piss and some action should be considered to close loopholes that allow super to be used in such a way. The number of instances where this is occurring, however, is likely to be even smaller again than the large funds referred to above. Not everyone wants to be on the cutting edge of what is acceptable and what isn't in the eyes of the ATO.

There are areas that should be addressed, but your focus should instead be 'What is going on that contravenes the purpose of superannuation and is being used to exploit the tax concessions?' rather than shaking your first in the air and demanding more from those that already give the most.

@Wysiwyg:
What fund has the Australian share option that isn't being repriced, out of interest? I know the ones in my super are repriced daily and reflect yesterday's close. Is it an Industry Super Fund by any chance?

@Junior:
I see your point about the wealth transfer occurring through the tax deductions that were claimed upfront for the earnings that never eventuated. I wasn't looking at it from that perspective and I agree that it was a shocking outcome.

The fact that your experience with MIS scheme exposure has been from everyday people that aren't high income earners is another appalling indictment of all involved and the misselling that was going on. Perhaps it was being used differently to the strategies I have seen that have fallen apart over the last 7 years, or perhaps it was simply smaller amounts per investor.

The dodgy operators have of course, as they always will, found another way to make a quick buck. How many times this week have you seen advertisements related to investing in geared property through super, or the establishment of SMSFs in general? It's everywhere. CPA Australia said in 09 that their survey found 49% of SMSF trustees weren't even aware they were trustees, yet 69% said they had a good understanding of their responsibility as trustees. These people should not be running their own funds, and the removal of the accountant's exemption should help on that front by reducing the flogging of SMSF establishment as a service in its own right. We have shut down more SMSFs in the last 2 years than we have established - all funds set up by accountants that then provided no investment advice, and no referral to a planner to get any. The trustees had no interest or capacity to make investment decisions, and the responsibilities of a trustee and the consequences for failing them actually scared the clients when they were told what they were.

Our individual experiences of the consequences of all the agribusiness projects may have led us to different conclusions on that front, but I still think the fundamental issue is that you can't educate ethics, you just need to enforce the rules in place so that those that lack them lose their ability to practice.

I agree there is more work to be done, but is it not time to shift the spotlight and let the changes that have been enacted get put to work? It was the bashing of the industry that we're all so used to reading by now that frustrated me, particularly for someone who opens with the fact that they work in it themselves. It's time for the politicians, the press and the regulator to move the spotlight, and start looking at property spruikers and inappropriate SMSF establishment practices. After 5 years of being hung up to dry, I would think that the cockroaches in planning have long been out of that spotlight and into the darkness.

Apologies Junior for some of the tone, but I stand by the content if not the wording.


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## Julia (26 June 2014)

Vixs, thanks for your comments.   I think I've been somewhat guilty of generalising when  discussing financial planners.  That's unfair to people like yourself who are obviously not part of the overtly self interested group.

May I ask a question?  If someone contacted  you and asked if you'd make a 15  minute consultation available without a fee, so that they can understand how you work, would that be acceptable to you?


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## sydboy007 (26 June 2014)

Vixs said:


> @Sydboy007:
> From the Treasury, 2009-2010:
> "Personal income tax distribution
> The personal income tax system is progressive — the tax share increases for those who earn more, while those individuals who have limited means bear relatively little or no tax liability (Chart 11).
> ...




It would be good to know the level of wealth for each income group as well.  If say the level of taxation support provided by those in the top rate is roughly equivalent to the level of wealth they own within the economy, I'd argue they are paying a reasonable level of tax since it's roughly equal to their benefit within the economy.  See below ABS graph to get an idea of what I mean.  The top 10% income earners have roughly 56% of the wealth of the country.  Seems there's a reasonable balance between wealth and level of taxation.

To get a large balance into super is relatively easy if you run a business.  You can transfer business assets into the fund.  The latest non concessional contributions limit is now a bit over $150K a year, so it's possible to funnel over $185K a year into super with the right arrangements. The below CGT exemptions can also help to build up a decent super balance.

*Small business 15-year exemption*
If your business has owned an asset for 15 years and you are aged 55 years or over and are retiring, or if you are permanently incapacitated, you won’t have an assessable capital gain when you sell the asset.
*Small business 50% active asset reduction*
You can reduce the capital gain on a business (active) asset by 50%.
*Small business retirement exemption*
A capital gain from the sale of a business asset will be exempt up to a lifetime limit of $500,000. If you are under 55 years of age, the exempt amount must be paid into a complying superannuation fund or a retirement savings account to obtain the exemption.

Is there any point continuing to provide tax relief to someone to contribute more to super if they've reached a level where they would no longer receive the aged pension?


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## Vixs (26 June 2014)

To keep it brief, yes my firm offer initial consultations, usually an hour, at no cost to determine if we are a good fit for the potential client and possible scope of advice needed.

A lot of planners get paid a lot of money to do not a lot of work, and many planners deserve the reputations they've earned - there are sharks in the water and there was a disconnect between client and adviser interests for a long time. Moving forward however, I like the direction the industry is going and believe it will result in better outcomes for clients. Even the banks seem to have made genuine and significant changes, from management staff down to how bank planners are paid.


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## Julia (26 June 2014)

Vixs said:


> To keep it brief, yes my firm offer initial consultations, usually an hour, at no cost to determine if we are a good fit for the potential client and possible scope of advice needed.
> 
> A lot of planners get paid a lot of money to do not a lot of work, and many planners deserve the reputations they've earned - there are sharks in the water and there was a disconnect between client and adviser interests for a long time. Moving forward however, I like the direction the industry is going and believe it will result in better outcomes for clients. Even the banks seem to have made genuine and significant changes, from management staff down to how bank planners are paid.



Thank you, Vixs.
Just as a somewhat ironic side note to this issue, the Senate Committee which looked at the CBA 'rogue planners' and ASIC's role there today recommended a Royal Commission into it all.
The SP of CBA today rose $1.04, presumably just with the tide of the overall market, but darkly funny all the same.

I have a neighbour who has used a FP since retiring from the public service about 25 years ago.  I asked him if he considered the FP to be good.  Answer:   "Yes, excellent. "
When enquiring about what it was about the person/service that made him happy, these were the reasons:

"He's based in Brisbane but still goes to the trouble of driving up here (about 4 hours drive) to see me once a year."

"His firm has a research division.  That means they go out and visit and analyse all the funds and fund managers and pick the best ones."

He then disclosed that he has opted for the conservative option which means most of his funds are in cash and fixed interest, with smaller amounts in a couple of managed funds.

When I asked if they were actually achieving a positive return for him he hesitated and then said "well, it's going up a little bit".

On fees:  He has around $1M invested.  Pays 2% p.a.
That's $20,000 p.a. to an 'adviser' for doing almost nothing plus one pleasant sojourn up the coast per year.

But the client is happy because he doesn't know what he doesn't know.  I expect there are thousands just like him.


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## Ferret (26 June 2014)

Julia said:


> On fees:  He has around $1M invested.  Pays 2% p.a.




Goodness me, that sounds high!  It's hard to imagine there are many financial planners who would consistently achieve more than 2% outperformance for their clients.


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## sydboy007 (27 June 2014)

Ferret said:


> Goodness me, that sounds high!  It's hard to imagine there are many financial planners who would consistently achieve more than 2% outperformance for their clients.




Even within good corporate bonds it would be hard to get 5% fixed yield these days, though if bought 4-6 years ago they could be sitting on a purchase yield of 8-10% with significant capital gains now as yields fell.

Still with inflation near 3%, much higher if you're not purchasing a lot of imports, another 2% in fees and any tax "leakage" it would be hard to see performance being any more than standing still.

Maybe the ACCC needs to step in like they did with the mobile carriers.  Can you believe just 10 years ago there was a 21c / minute termination charge for calls to mobiles.  The ACCC was eventually forced to act, and after a series of drops has been set to just 3.6c / minute since jan this year.  At least make a person sign a page that shows the $ figures they will likely pay.  Percentages are too easily dismissed as not much money.


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## Vixs (27 June 2014)

sydboy007 said:


> It would be good to know the level of wealth for each income group as well.  If say the level of taxation support provided by those in the top rate is roughly equivalent to the level of wealth they own within the economy, I'd argue they are paying a reasonable level of tax since it's roughly equal to their benefit within the economy.  See below ABS graph to get an idea of what I mean.  The top 10% income earners have roughly 56% of the wealth of the country.  Seems there's a reasonable balance between wealth and level of taxation.
> 
> To get a large balance into super is relatively easy if you run a business.  You can transfer business assets into the fund.  The latest non concessional contributions limit is now a bit over $150K a year, so it's possible to funnel over $185K a year into super with the right arrangements. The below CGT exemptions can also help to build up a decent super balance.
> 
> ...




The tests to meet the Small business CGT exemption are rigid enough that they're challenging to meet in genuine circumstances - they're certainly not a loophole open for exploitation.

There is also the lifetime limit of ~$1.25m to consider - it's not open slather to get assets in, as they either fall under that lifetime limit or get counted as non-concessional contributions.

It's designed to allow small business owners to get the proceeds of a business sale into super to bring them onto a level playing field with lifetime PAYG employees. It's not unusual for business owners not to make any contributions to super throughout their lives, or certainly not to the level that employees would. They've gotta be in a pretty comfortable position to decide the best use of their money is locked up until the govt says they can spend it.

You're righr in that the purpose of tax relief to encourage people to take steps to be independent of the Age Pension loses some weight once they're well and truly beyond eligibility for the pension. With super fund assets being deemed for the Centrelink income test from January 1 on all new pensions, eligibility is already getting tightened.

With deemed income on pension accounts, plus actual income from compulsory minimum payments, the amount of cash rich Australians that could have received the pension just significantly reduced. No action has been taken to impact those with the 'valuable' PPRs yet, but it will happen in time, it's not an if, but a when.


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## Vixs (27 June 2014)

sydboy007 said:


> Still with inflation near 3%, much higher if you're not purchasing a lot of imports, another 2% in fees and any tax "leakage" it would be hard to see performance being any more than standing still.
> 
> ... At least make a person sign a page that shows the $ figures they will likely pay.  Percentages are too easily dismissed as not much money.




Everyone does sign off on the fees they pay as a % and as a $, that's already the way it's done and has been for years. Same with insurance commissions & home loan commissions. Every dollar a financial services provider is paid in Australia must be disclosed, unless it's a real estate related commission - which is why the property spruikers exist - they can still get paid by someone else and tell you they're the good guys just trying to help you out. He who pays the piper calls the tune - although I don't think disclosed commissions fall into that category as it is evident who is paying.

@Julia, re: fees. 2% is high if it's just for asset management, but it depends how they pay for their other services. It's a disgusting amount to charge for a portfolio of managed funds in a wrap account, but it's a more reasonable fee for managing a direct share portfolio, acting as the post-box and managing their tax and accounting needs as well. It would still be high for a % based fee at that level. 

I'm a big fan of people asking their adviser how they calculate their fees - most people will just get a stunned look or some garbage explanation. It's not even the answer that's important but whether or not your adviser can look you in the eye and justify their fees. There is a big variance in the capability of, and services provided by, financial planners - especially considering that up until recently they were mostly charging the same amount. I think that asking the question "What do I get for the fees I pay, and how are they calculated?" Anyone embarrassed about what they get paid is being paid too much.

A lot of clients are happy paying fees because they have no idea and no interest in getting any idea, how to manage a portfolio themselves. This discussion has been had on the forums in a few different threads over the years, and it was pretty well agreed that the type of people on a forum like this are not the type of people happy paying someone else to make the decisions.


----------



## Judd (27 June 2014)

There is also another perspective on paying adviser fees, Vixs.  I am aware of one person who essentially pays what could loosely be termed a stipend.  Apparently, it's a very low amount in relation to the assets.  One reason is the adviser has access to a dealer group and sometimes get a firm allocation of  shares for a placement and makes an offer to clients.  The other is the person wants occasional access to confirm technical aspects.  Sure they generally know the ins and outs but likes the peace of mind by bouncing an idea off an independent person with qualifications in the area – and gets a quick turnaround from the adviser.  From what I understand it is a pretty happy arrangement for both.

Sometimes there is joy in the world in regard to adviser fees.  I was informed the other day where a client had substantial assets in superannuation, a high income and was claiming the adviser fee as a personal tax deduction.  All cooked up by this advisory firm.  Tax stepped in, had a look and went Oh no you don't.  The assets outside superannuation were say a 50 CBA shares compared with substantial assets in superannuation.  Apportion the fee between both thank you according to assets under advice and by the way we're doing an audit of your previous year's tax returns.  Laugh!  Never had such a good laugh for ages.


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## Junior (27 June 2014)

Vixs said:


> I'm a big fan of people asking their adviser how they calculate their fees - most people will just get a stunned look or some garbage explanation. It's not even the answer that's important but whether or not your adviser can look you in the eye and justify their fees. There is a big variance in the capability of, and services provided by, financial planners - especially considering that up until recently they were mostly charging the same amount. I think that asking the question "What do I get for the fees I pay, and how are they calculated?" Anyone embarrassed about what they get paid is being paid too much.




Hi Vixs, out of interest how do you calculate fees and how do you present this to clients?  Is it only when they ask or do you include a calculation in the Statement of Advice?


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## sptrawler (30 June 2014)

sydboy007 said:


> I'll ask you again, what level of income do you believe a person should be entitled to with Government support?.
> 
> $50k a year puts a couple well above half of households. .




Firstly, I pay tax on the taxable component of my SMSF pension as I am under 60, it does qualify for a 15% offset.
I don't pay any tax on the taxfree component of my pension, as the funds were put in as after tax contributions.
So it is a furphy saying after $50k, you should pay tax. What if all the pension comes from after tax contributions, as opposed to concessionally treated contributions.



sydboy007 said:


> As for $1M being adequate, there's nothing stopping that figure from begin increased by the CPI each year.  Let people top up to the new amount to help keep the real purchasing power..




That's all well and good if the person is working, and can add extra to it, what if they are drawing a pension?

If currently the cap was $1m giving a return of 3.6%, that would mean $36k income, as opposed to a Government pension of $32k.
The only way the majority of "normal" people, can get sort of money into super, is by putting in after tax dollars. This could be done by downsizing, selling investments or just doing without and putting as much cash as you can in.
If the result was going to be the above example, why would anyone bother?
Especially as it could get taxed higher, at any time, if the Government decides to.



sydboy007 said:


> I would like the Govt to publish figures on the annual cost of super since 1994 which includes fees and tax foregone compared to annual reduction in pension entitlements.  I'm pretty confident the accumulated balance would be a very large 3 figure billions in the negative for savings.  Will the system actually ever save more than it costs?  I'm sceptical.  It would be interesting to see if there has been any forecasting done by treasury on this.




As Keating said, it is a national savings pool, which allows us to be less exposed to overseas money markets. It isn't all about the pension.

Applogies for the late reply, been away from the internet for awhile.lol


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## Vixs (1 July 2014)

Junior said:


> Hi Vixs, out of interest how do you calculate fees and how do you present this to clients?  Is it only when they ask or do you include a calculation in the Statement of Advice?




Had the response typed out the other day but closed the tab by accident and haven't had the opportunity to retype it. Busy EOFY.

Can elaborate on the components later, but we explain and disclose the fees as a single establishment fee, and an ongoing asset management fee that is fixed annually in advance. Scope of advice, complexity of strategies being used, amount of work in implementation and risk to the business are all factored in. No one has ever asked for a full breakdown of the fee, but it's their if they want to see it. The reason the fee methodology is so important to me is the same as the reason an insurance needs analysis methodology is so important - when prompted, you can easily articulate why you've said what you said, and know it is based on actual work done or actual needs. It's a lot easier for both parties to understand than having plucked a number out of the air for insurance or used an arbitrary % just because that's what always been done.

The only reason I raised the matter of fees was that you and I have both likely seen people that are not looking after their clients as much as they're looking after themselves. Some of these people are not deserving of the trust vested in them or the fees they collect. A simple question as to how their fees are calculated can help people smell a rat, because again, if someone is embarrassed about how much they're being paid when quizzed on it, it's likely because they know they're being paid too much.

This is all well and truly off topic now, so if anyone would like clarification I will respond by PM, or if there was a separate thread I'd contribute to that.

*Back to your regularly scheduled class warfare.*


----------



## Judd (1 July 2014)

Vixs said:


> ...........
> The only reason I raised the matter of fees was that you and I have both likely seen people that are not looking after their clients as much as they're looking after themselves. Some of these people are not deserving of the trust vested in them or the fees they collect. *A simple question as to how their fees are calculated can help people smell a rat*, because again, if someone is embarrassed about how much they're being paid when quizzed on it, it's likely because they know they're being paid too much.
> 
> This is all well and truly off topic now, so if anyone would like clarification I will respond by PM, or if there was a separate thread I'd contribute to that.
> ...




Hmm, maybe.  The 7% commission charged by Storm Financial didn't seem to deter participation unfortunately.  I suppose one factor could be the level of front the sales personnel put on.  The smiling shark syndrome.

However, yes, financial planners should be prepared to openly discuss their fees as it is the clients who finally pay.


----------



## k.smith (7 July 2014)

sptrawler said:


> Firstly, I pay tax on the taxable component of my SMSF pension as I am under 60, it does qualify for a 15% offset.
> I don't pay any tax on the taxfree component of my pension, as the funds were put in as after tax contributions.
> So it is a furphy saying after $50k, you should pay tax. What if all the pension comes from after tax contributions, as opposed to concessionally treated contributions.
> 
> ...




http://www.superannuation.asn.au/media-release-3-july-2014

''Amidst ongoing public debate regarding the equity of superannuation tax concessions, a report released by the Association of Superannuation Funds of Australia (ASFA) today provides a clear picture of where superannuation tax concessions flow. 'The report found that the tax concessions applied to concessional superannuation contributions are not significantly skewed towards high-income earners, and, in fact, support the bulk of the working community to save for their retirement.

Based on an analysis of superannuation contributions and tax concessions by taxable income bracket, around 75 per cent of the tax concessions applied to contributions go to those paying either the 30 per cent or 38 per cent marginal tax rate.

*However, the report also found that, when it comes to the tax concessions applied to superannuation investment earnings, a large portion of tax concessions flow to middle-to-high-income earners, with 65 per cent flowing to those earning over $80,000, and 23 per cent to those with a taxable income of more than $180,000.*

ASFA CEO Ms Pauline Vamos says that development of public policy regarding the equity and sustainability of the superannuation system must be based on sound assumptions and facts.

“This report clearly shows that when it comes to the tax concessions applied to superannuation concessional contributions, the majority flow to those in the middle-income bracket, who make up a large part of the Australian workforce.

“This provides evidence that the contribution caps, which have been lowered substantially over the past few years, are working to reduce the concessional contributions made by upper-income earners, while continuing to provide support to the majority of Australians to help them save for their retirement.”

Notwithstanding this, Ms Vamos says there are various policies that could be adjusted to increase the equity of the system.

“While tax concessions are a very important feature of our superannuation system, once people have accumulated more than enough money to fund a comfortable lifestyle in retirement, they no longer require government assistance. With this in mind, there are a number of ways government policy could be adjusted to make sure that people are using superannuation for retirement purposes, and not as a wealth accumulation tool.”

*The report makes a number of recommendations in this area, including applying a lifetime cap to non-concessional contributions, and looking at ways to remove the concessional tax treatment for very high superannuation balances in excess of $2.5 million.
*
“This would help ensure that people are using superannuation as a means to provide enough income for a comfortable retirement, and not for wealth accumulation or estate planning purposes,” says Ms Vamos.
....''

What do you think about the recommendation of capping at $2.5million?


----------



## sptrawler (7 July 2014)

k.smith said:


> http://www.superannuation.asn.au/media-release-3-july-2014
> 
> ''Amidst ongoing public debate regarding the equity of superannuation tax concessions, a report released by the Association of Superannuation Funds of Australia (ASFA) today provides a clear picture of where superannuation tax concessions flow. 'The report found that the tax concessions applied to concessional superannuation contributions are not significantly skewed towards high-income earners, and, in fact, support the bulk of the working community to save for their retirement.
> 
> ...




So the system is working, most of the tax concessions on *contributions* are given to those on the 30 - 38% tax bracket 'normal workers'.

The paragraph you highlighted, is common sense, the highest account balances are going to make the highest earnings. 
As I said those 'normal' people with high account balances, have put the money in with after tax dollars.

I agree completly with the last paragraph, it just has to be realistic caps, as life expectancy grows the money has to last longer.

There is no point in having caps that forces everyone on welfare by the time they are 75. I would think $2.5m is reasonable, but I'm no expert. 

I remember when I was in my mid 20's, I thought $300k would be enough, houses were about $50k. 
Then in my mid 30's I thought $600k was enough, houses were about $120k.
Now in my late 50's, I think $2.5m is o.k, houses are about $500k.

The economy is very much geared toward the cost of housing, as it is the major cost of living outgoing. What is left over is disposable income, that is all that's left for everyone else to get a piece of.

So if the cost of housng plateaus for a reasonable period of time, the value of the capital will be sustained.
If housing keeps going up, wages will follow and the value of the lump sum is eroded. 
That is not even taking into account currency, interest rate and market fluctuations, let alone tax changes and government tampering.

There are some knowledgeable guys on this thread, who would have a much better idea than me, as to what cap would be appropriate.


----------



## sptrawler (7 July 2014)

Another furphy that some would have us believe.

People are taking lump sums from their super 'blowing it' to get a pension.

It is a crock of you know what.
Nine years ago, APRA statistics recorded that retirees took about twice as much in lump sums as pensions. Yet the total amounts being taken as pensions or lump sums have been almost neck-to-neck for about the past four years.

This is the second consecutive year where pensions have outstripped lump sums. And it is part of an important long-term trend in which many more retirees appear to recognise the long-term tax and retirement-income attributes of super pensions.

Interestingly, members of self-managed funds have been by far the leaders of the trend to favour pensions over lump sums. 

The current Superannuation Market Projections report, published late last year by Rice Warner Actuaries, estimates that just 3 per cent of SMSF members take their super as a lump sum

I for one, get fed up with young people making erroneous sweeping statements, to support their drive for higher super taxes, to support their drive to lower their personal tax.


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## sydboy007 (16 July 2014)

If the below ATO figures are correct then that means based on a $1.8T super funds base

* 2% of accounts hold ~ $540B in assets

* 10% of accounts hold ~ $1T in assets

* remaining 90% of accounts hold ~ $720B in assets

Certainly shows how lopsided the super system is.

Based on the income deciles, it's also plain to see where the tax expenditures are going, and it's not really targeted at minimising future pension liabilities.


----------



## sydboy007 (16 July 2014)

sptrawler said:


> I for one, get fed up with young people making erroneous sweeping statements, to support their drive for higher super taxes, to support their drive to lower their personal tax.




Of course. Why would someone near or over 60 years want to see change in tax free super when it's possible to have an 80K super pension tax free and in the last FY earn another 20.5K outside super tax free as well when using the LITO.

Golly gosh, a $100K income and not a cent to pay in tax.  Shame on those PAYG tax slaves wondering how they'e supposed to fund everything with a declining participation rate and swelling ranks of politically powerful over 55s.


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## Junior (16 July 2014)

sydboy007 said:


> If the below ATO figures are correct then that means based on a $1.8T super funds base
> 
> * 2% of accounts hold ~ $540B in assets
> 
> ...




The interim results of the Murray review were interesting, however I anticipate that the Abbott government will take little/no action following the release of the final report.  Most of these recommendations will be detrimental to the short term profitability of the Big 4 and Wealth Management industry which is already taking a beating in the media with the whole FOFA debacle.

The focus on reducing total fees in super I also expect will be ignored... the purpose of MySuper is to reduce cost and this is still in the process of being implemented.

Sydboy, tax concessions for high income earners and large super balances clearly need attention, but I wouldn't hold my breath on this one!  Tax reform still a while off.


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## sydboy007 (16 July 2014)

Junior said:


> The interim results of the Murray review were interesting, however I anticipate that the Abbott government will take little/no action following the release of the final report.  Most of these recommendations will be detrimental to the short term profitability of the Big 4 and Wealth Management industry which is already taking a beating in the media with the whole FOFA debacle.
> 
> The focus on reducing total fees in super I also expect will be ignored... the purpose of MySuper is to reduce cost and this is still in the process of being implemented.
> 
> Sydboy, tax concessions for high income earners and large super balances clearly need attention, but I wouldn't hold my breath on this one!  Tax reform still a while off.




ALL tax reform is a long way off.  Sadly I think it will be the next recession that gives some impetus to reform, though it'll depend if there's anyone leader with the political cajones to actually get the voters to understand what needs to be done and support it.  making sure there is some equity involved would go a long way to getting that public support


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## Julia (16 July 2014)

sydboy007 said:


> ALL tax reform is a long way off.  Sadly I think it will be the next recession that gives some impetus to reform, though it'll depend if there's anyone leader with the political cajones to actually get the voters to understand what needs to be done and support it.  making sure there is some equity involved would go a long way to getting that public support



That is to assume the wider public know or care enough to even think about it in the first place.  Do you really think your average Australian spends time pondering tax reform?


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## sydboy007 (16 July 2014)

Julia said:


> That is to assume the wider public know or care enough to even think about it in the first place.  Do you really think your average Australian spends time pondering tax reform?




Prob not, which is why the Politicians have no interest in it either, nor anyinterests in cleaning up the industry or stopping the fee gouge.

It's like sweeping the CBA scandal under the rug by saying it's just a few bad apples (some still employed) and there's no need to do any further investigations.  Compare that response with the way ASIC has gone attack dog on  Jonathan Moylan for his fake ANZ media release last year claiming they were withdrawing funding for Whitehaven Coal's Maules Creek project on environmental grounds, or the way John Gay CEO of Gunns was given a slap with a piece of limp celery for insider trading.


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## sydboy007 (17 July 2014)

With generosity like the below I can see teh ending of teh ageof entitlement any time soon

http://www.smh.com.au/money/super-a...ons-as-asset--rules-shift-20140711-zt3dz.html

_The upper annual income threshold applying to the income test for the age pension, at which point there is no entitlement to an age pension, is $47,986 for singles and $73,455 for couples.

Under the deeming rules that will apply to account-based pensions started after January 1, 2015, an individual with a superannuation pension account of more than $1,391,600, and a couple with more than $2,132,900, would not be eligible for any age pension.

If the deeming rates are applied to eligibility for a CSHC, and the only source of income is a pension from a superannuation fund, a single person could have up to $1,449,000 in a superannuation pension account and a couple could have up to $2,319,000 and still be eligible for the CSHC.

*What is surprising about the changes announced is that the deeming rates of income will not be applied to other financial assets to assess eligibility for the card.*_

Considering the primary residence is not included anyone at the upper end of those asset limits is very wealthy.  If they're not making at least 5% tax free on their money then they need to get some decent advice or change their advisor.  A single person with a million in an account should be making 50K a year, yet they're still going to be entitled to extra cheap PBS medicines.  if they own their own home then their cost of living is quite low.  They'll be in the same pre tax income decile as someone earning roughly $62K, well above the median wage of roughly $47K.

If a person got to this stage with no Govt support, I could understand, but considering the large amounts of low taxed super, and the fact it's now tax free income for them, surely much lower levels of assets have to be considered to make the whole pension system sustainable?


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## Junior (8 August 2014)

This article in The Age reflects my view on our super system, in that it's not as expensive as it's made out to be. 

Older, more expensive products are still being phased out and replaced by lower cost options.  MySuper is still being implemented.

We have vast choice & flexibility in respect of investment and insurance options.




> The head of the Financial Services Council, John Brogden, has accused the Grattan Institute think tank, and Financial System Inquiry chairman David Murray, of sloppy use of data to back their arguments that superannuation fees are too high.
> 
> Mr Brogden said critics had not taken into account Australia’s more active management, choice and life insurance options when comparing costs to international pension schemes.






> Mr Brogden, who will stand down from the group in January to head the Australian Institute of Company Directors, said it was “remarkable” the Grattan Institute had concluded that MySuper had already failed. He pointed to research commissioned by his group from Rice Warner, which found that MySuper had reduced fees in default superannuation from 0.92 per cent to 0.73 per cent between 2011 and 2013.
> 
> This fee level compared with CalPERS in the US at 0.77 per cent, the Canada Pension Plan at 0.92 per cent, the Government Pension Fund of Norway at 0.74 per cent and the MPF system in Hong Kong at 1.30 per cent.
> 
> Rice Warner chief executive Michael Rice told the conference that across all superannuation products, fees had fallen between 2002 and 2013 from 1.37 per cent to 1.12 per cent and with MySuper, this would head below 1 per cent.




Read more: http://www.smh.com.au/business/bank...es-council-20140808-101qru.html#ixzz39ll4ddhn


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## sydboy007 (9 August 2014)

Junior said:


> This article in The Age reflects my view on our super system, in that it's not as expensive as it's made out to be.
> 
> Older, more expensive products are still being phased out and replaced by lower cost options.  MySuper is still being implemented.
> 
> We have vast choice & flexibility in respect of investment and insurance options.




I'd prefer to see a change in the way we're billed for super to a more flat rate regime.  There doesn't seem to be any logic being a % of FUM model, unless there was a tiered rate structure that heps to lower the level of fees paid as balances grow.

Better would be to have a fixed account fee with a low fee based on the account balance.

I doubt even the silver doughnut could actually prove that as FUM increases average costs don't decrease.

The amount of work required to manage 500K is not 5 times as much to manage 100K


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## sptrawler (11 August 2014)

sydboy007 said:


> Of course. Why would someone near or over 60 years want to see change in tax free super when it's possible to have an 80K super pension tax free and in the last FY earn another 20.5K outside super tax free as well when using the LITO.
> 
> Golly gosh, a $100K income and not a cent to pay in tax.  Shame on those PAYG tax slaves wondering how they'e supposed to fund everything with a declining participation rate and swelling ranks of politically powerful over 55s.




There you go again Syd, bending things again.

If someone near 60 is getting an $80k pension, that equates to 4% of $2m, how does someone get $2m into super other than after tax dollars. 

The salary sacrifice component will be taxable, and the 20.5k he/she earns will be added to that taxable component, then taxed minus the 15% offset.
The component of the $80k, that was put into the super after tax, is tax free. Or would you have them taxed on that as well? A bit like taxing you on money you withdraw from the bank.lol

Looking at your example, lets say the $2m is made up of $1m salary sacrifice and $1m after tax contribution.
Therefore 50% of the $80k is taxable, i.e $40k, add to this the $20.5k earned at Bunnings and the taxable income is $60.5k less a 15% tax offset.

In reality the salary sacrificed component would probably be much less, due to the contribution caps, therefore the taxable component would be even less.

If the person is over 60, then your example is accurate, however even if you taxed peoples pension, it would only be on the taxable component. I don't think that part of the equation is as big a deal as you are making out.
The bigger issue is tax free earnings in the fund.

Ves, Craft and Junior can correct me if I'm wrong


----------



## sydboy007 (11 August 2014)

sptrawler said:


> There you go again Syd, bending things again.
> 
> If someone near 60 is getting an $80k pension, that equates to 4% of $2m, how does someone get $2m into super other than after tax dollars.
> 
> ...




The point I was making is if you are near 60 or over 60 then why would you want any changes to the current very generous tax system around super.  

I have an issue where a small subset of super pension recipients are able to  receive tax breaks more than the pension - tell me how that makes budgetary sense.  It seems all tax expenditures are off limits in the current environment.  The below graph sums up pretty well how little super willa ctually help with reducing the cost of the aged pension because little of it actually goes tot hose that will receive it.

Earnings in the funds is where the tax benefits are going to grow the fastest.  I've got to a super balance last year where the earnings was within a few hundred dollars of my employer contributions, so I'm now at the point where the tax breaks on the fund earnings will usually be higher than on contributions.


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## FxTrader (11 August 2014)

sydboy007 said:


> The point I was making is if you are near 60 or over 60 then why would you want any changes to the current very generous tax system around super.



Certainly none that would affect those in that age bracket who have engaged in retirement planning around the existing super taxation laws.  Benefits will need to be wound back depending on one's age bracket, the younger you are the less generous future benefits will likely be.  In my view, the biggest inequity in the whole system  is the primary residence exemption from the age pension assets test.  Property millionaires should not have access to the age pension period, future generations will likely be less inclined or able to support such largess.



> The below graph sums up pretty well how little super willa ctually help with reducing the cost of the aged pension because little of it actually goes tot hose that will receive it.



True, but penalizing those about to retire or already retired by changing the current system will not solve the long term funding issue either. 



> Earnings in the funds is where the tax benefits are going to grow the fastest.  I've got to a super balance last year where the earnings was within a few hundred dollars of my employer contributions, so I'm now at the point where the tax breaks on the fund earnings will usually be higher than on contributions.



Already there and I still have a way to go yet before I will have sufficient funds to be a self-funded retiree.


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## sptrawler (11 August 2014)

sydboy007 said:


> The point I was making is if you are near 60 or over 60 then why would you want any changes to the current very generous tax system around super.
> 
> I have an issue where a small subset of super pension recipients are able to  receive tax breaks more than the pension - tell me how that makes budgetary sense.  It seems all tax expenditures are off limits in the current environment.  The below graph sums up pretty well how little super willa ctually help with reducing the cost of the aged pension because little of it actually goes tot hose that will receive it.
> 
> Earnings in the funds is where the tax benefits are going to grow the fastest.  I've got to a super balance last year where the earnings was within a few hundred dollars of my employer contributions, so I'm now at the point where the tax breaks on the fund earnings will usually be higher than on contributions.




The point I was making, was you don't give accurate information to support your arguements.

With regards the tax breaks greater than the pension.
If you are going to tax individuals when their self funding pension is greater than the government funded free pension. Why would anyone put their own money in?

This would then lead to the only money going into super, being the employers contribution. Which in turn would leave everyone with inadequate funds in super.

I don't dissagree the tax breaks on super need reviewing, just think it has to be in a realistic manner.

Everything you mention, would in my opinion, cause the super system to fail. Ridiculously low caps, tax on earnings and on pensions.
As I said above, how can you tax people on their own money when they are withdrawing it?
If the individuals pension is composed mainly of after tax contributions, how can you tax their pension just because it is more than the age pension. That's crazy.


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## sptrawler (11 August 2014)

FxTrader said:


> Certainly none that would affect those in that age bracket who have engaged in retirement planning around the existing super taxation laws.  Benefits will need to be wound back depending on one's age bracket, the younger you are the less generous future benefits will likely be.  In my view, the biggest inequity in the whole system  is the primary residence exemption from the age pension assets test.  Property millionaires should not have access to the age pension period, future generations will likely be less inclined or able to support such largess.
> 
> 
> True, but penalizing those about to retire or already retired by changing the current system will not solve the long term funding issue either.
> ...




+1 agree with your assesment. The system is only 20years old, I'm sure it will be modified and adjusted.


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## sydboy007 (11 August 2014)

sptrawler said:


> The point I was making, was you don't give accurate information to support your arguements.
> 
> With regards the tax breaks greater than the pension.
> If you are going to tax individuals when their self funding pension is greater than the government funded free pension. Why would anyone put their own money in?
> ...




From what I've read, when comparing the Australian super system to overseas variants, we have probably the most tax light system out there.

We have minimal tax on the way in and tax free on the way out.  No other country does this.

Most countries provide minimal to no tax on the way in or the way out.  In the US there's no tax on benefits going in, but they pay normal income tax rates on pensions paid from the 401K plans.

The current system is not affordable.  Is it fair that gen X and those behind them have to pay higher taxes to fund tax free super? 

As wayne said, how is it reasonable for property millionaires to be able to claim a full pension, especially if they've used their 100-200K super balance to pay off the mortgage?  The longer the unfair level of support to the super system continues, the more we will see budgets like this year were students, families, the unemployed face the brunt of spending cuts.


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## sptrawler (12 August 2014)

sydboy007 said:


> From what I've read, when comparing the Australian super system to overseas variants, we have probably the most tax light system out there.
> 
> We have minimal tax on the way in and tax free on the way out.  No other country does this.
> 
> ...




I don't disagree, but what is the difference between taxing lightly on peoples savings( super), or giving away tax money to family benefits or students doing degrees or the unemployed?

Why is it o.k, to tax those that forego lifestyle to be self funded. 
Yet not o.k, to demand those who are recipients of handouts, prove they are genuine.

Another interesting thing in your post, you usually are bagging the U.S for their deplorable social systems. This post you throw them up as an example to show a better way.lol

I do believe the family house should be included in the asset test.


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## sydboy007 (12 August 2014)

sptrawler said:


> I don't disagree, but what is the difference between taxing lightly on peoples savings( super), or giving away tax money to family benefits or students doing degrees or the unemployed?
> 
> Why is it o.k, to tax those that forego lifestyle to be self funded.
> Yet not o.k, to demand those who are recipients of handouts, prove they are genuine.
> ...




* What's your definition of self funded?

* Is it forgoing lifestyle to enter retirement with a mortgage and use up all your super to pay it off and then get a full pension?

* I highlighted the US as an example of what the majority of countries do ie they don't provide generous tax advantage to private pension systems on both the contributions AND pension phases.  The fact Australia does is one of the main reasons why our system is so expensive.  They also limit the amount that can be contributed to just under 13K per year which seems a reasonable fair limit to receive a tax subsidy to save for retirement.

* Including the primary residence, or at least the value over say a certain limit would likely stop the super lump sum into mortgage payment from being as lucrative.


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## sptrawler (12 August 2014)

sydboy007 said:


> * What's your definition of self funded?
> 
> * Is it forgoing lifestyle to enter retirement with a mortgage and use up all your super to pay it off and then get a full pension?
> 
> ...




I don't know about the U.S, but the U.K and Canada pay a pension to everyone, irrespective of whether they have private super or not.

My definition of self funded, is an individual or couple, who have planned and organised their finances such that they will never have to access a Government pension.
It takes a long term plan and needs to commence as soon as they start working and it will include foregoing lifestyle.IMO
That is unless you fall into the silver spoon brigade, unfortunatelly I didn't.


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## Julia (12 August 2014)

sydboy007 said:


> * What's your definition of self funded?



Exactly what it says.   And as sptrawler describes.  ie being able to fund your own retirement without any dependence on your fellow taxpayer.   Nothing at all as you describe in



> * Is it forgoing lifestyle to enter retirement with a mortgage and use up all your super to pay it off and then get a full pension?




How is that being self funded?   If you're getting any pension then you fairly obviously are not self funded.
I don't understand your asking such a question.


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## sydboy007 (12 August 2014)

SP and Julia

http://www.abs.gov.au/ausstats/abs@...238.0&issue=July 2012 to June 2013&num=&view=

Late last year the latest Retirement and Retirement Intentions survey by the Australian Bureau of Statistics (ABS) revealed that more than half of retirees withdraw their super as a lump sum, with many then blowing the windfall on their homes or a new car:

Of those who had made contributions, 55% had received all or part of their superannuation funds as a lump sum payment (54% of men and 57% of women). Many of those who received a lump sum payment used it to pay off or improve their existing home or purchase a new home (32% of men and 31% of women) or to buy or pay off a motor vehicle (14% of men and 11% of women).

How is it fair that those continuing to pay taxes are forced to pay higher taxes to cover the lost revenue of super tax concessions, then continue to pay higher taxes because there's no legal requirement to actually use a super balance to reduce your access to the pension, and if anything the whole system is designed to allow massive levels of wealth to be pumped into the the primary residence shielded from any tax consequences?

SP

Australia practically pays a pension to everyone, and those that don't receive one due to their accumulated wealth outside super have probably received more in super tax concessions than they would ever receive from a pension.

As noted by Treasurer Hockey on Budget night, “currently, an individual with a home and almost $800,000 in assets still qualifies for the age pension; a couple with a home and almost $1.1 million in assets also qualify for the age pension”. This level of taxpayer support is clearly more generous than necessary and allows precious tax dollars to flow to those that are not in genuine need.

SP and Julia

There aren't that many truly self funded retirees, and most have gotten there due to the generous tax concession provided within super.

Estimates are that by 2047 we will have seen a mighty increase from ~17% to a grand total of ~20% of all retirees being truly self funded.  This due to super tax concessions that have been growing at a compound rate of 12% a year or 3 times faster than the cost of the pension.  From 2016 or 2017 the cost of super tax concessions will be higher than the pension.

ASFA chief executive Pauline Vamos said the case for change was backed by findings that some personal super funds had swelled to $30m, with no tax *applied on the earnings.

Almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years. Some have over $100 million. Given that 92 per cent of SMSFs have only one or two members, many could easily have an income from super of $500,000 a year or more, from age 60 when no tax applies.

The ‘Adequacy and the Australian Superannuation system’ paper forecasts that 75 per cent of retirees will still be eligible for all or some of the aged pension in 20 years time - yet super will soon cost more than the aged pension, so how does that work economically?

As a result of this poorly targeted tax concession, 36.1 per cent of the benefits go to the top 10 per cent of income earners, whereas the bottom 10 per cent don’t receive any assistance at all, but are instead penalised…

Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In contrast, the top 1 per cent of male income earners receives about $520,000 support over their lifetime, because of significant tax concessions to high-income earners.

There’s 3.5 million Australians earning less than $35,000 that don’t get tax concessions on their super contributions.  THat's nearly 1/3 of the working population.

Treasury predicts superannuation tax breaks will cost $36.25 billion in 2014-15. The super concessions will in total cost $171 billion over the following three years - that's the down side of the compund growth.

The cost of the aged pension is forecast to have grown to just $72B in 10 years.  Super tax concessions will be headed to double that.

How is a system designed to reduce the burden of the aged pension on the budget economically rational when it will be bleeding revenue at much higher rates?  Surely there's something wrong with the current system and change needs to occur.


----------



## sptrawler (13 August 2014)

Syd you really are a citric type of person aren't you.

You use a post that I have put up previously, that said there is a shift AWAY from taking a lump sum and a move toward pensions. Yet you focus on the negative.
*With regard SMSF only 3% take the money as a lump sum*. You really are bending reality, as usual.

Obviously all the explanations by Ves, Craft and Junior haven't  improved your understanding of the taxation system.

I certainly hope you don't apply your theology to your own long term financial roadmap.

The theory you espouse is based on the status quo going on ad infinitum, that's dumb, it will be modified.
The normal super balance is $150k, yet you throw up 9,200 that have obscene amounts costing us zillions of dollars. 
Then you focus on the ones with $150k withdrawing it, to obtain the pension.
What you are really saying is do away with the super system.
It either costs too much, or people are pulling out their money, the only ones you don't pick on are the ones who have pi$$ed everything up and pull a government tax free indexed pension.WTF
How much do you think the the intergenerational welfare recipients, who won't move to areas of work are going to cost?

All your BS is in 2047 or in 20 years time, nothing will be anything like it is now, in 10 years time.
Jeez you really need to think about the reality, nothing stays the same, nothing is forever.


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## Junior (13 August 2014)

For someone retiring now, say they have less than $200k in super and not much in savings...they will likely be eligible for full Age Pension anyway.  Whether they withdraw as a lump sum or an income stream is irrelevant.


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## sptrawler (13 August 2014)

Junior said:


> For someone retiring now, say they have less than $200k in super and not much in savings...they will likely be eligible for full Age Pension anyway.  Whether they withdraw as a lump sum or an income stream is irrelevant.




Yes Junior, what Syd would like to see is, those with less than $200k not allowed to take it as a lump sum to pay off their debts and it should be counted against their pension.


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## sydboy007 (13 August 2014)

sptrawler said:


> Syd you really are a citric type of person aren't you.
> 
> You use a post that I have put up previously, that said there is a shift AWAY from taking a lump sum and a move toward pensions. Yet you focus on the negative.
> *With regard SMSF only 3% take the money as a lump sum*. You really are bending reality, as usual.
> ...




If we don't talk about the potential costs of inaction are then nothing WILL CHANGE.  By default the status quo remains until change is forced through.  

So far the only changes to super have made the tax concessions more generous.  Removal of RBLs has allowed the super system to morph from saving for a comfortable retirement to allow those with the resources to accumulate as much wealth within super so as to avoid paying tax when they hit age 60.  Tax free super after 60 also massively increased the cost of super tax concessions.  It's now about wealth protection within a minimally tax environment so it can be bequeathed to family.

So forgive me for worrying that our political leaders have so far not been taking appropriate actions to reign in the ballooning costs of the super system, and that forecasting the future based on current trends seems to be the logical course of action as the last decade has only seen Government action increase super tax concessions.  When Labor tried to make super pensions over 100K taxable, Abbott blocked them, so even a small attempt to make the system less costly and fairer has been blocked ie the status quo has been entrenched.

If as Juniour says most people end up with sub 200K super balances, and even in 10 years a large amount of people will not have accumulated much more than this on getting to age 60, what was Howard's purpose in removing RBLs?  RBLs were a very effective way to limit the cost of the super system, but now we're seeing the ultra wealthy making extreme use of SMSFs to receive hundreds of thousands of dollars in tax free super.


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## sptrawler (13 August 2014)

Syd, I don't disagree with a lot of your points.
What annoys me, is your preoccupation with telling people what should and shouldn't be done, with what is argueably their money.

Yet if it was suggested, that there be some form of control on what welfare recipients could spend their money on, i.e food and shelter not smokes and booze.

You would be at the front of the que screaming it is unfair, yet the welfare cost is by far the biggest tax drain in the country and there is no accountabilty on what it is spent on. Just people screaming it isn't enough.

If you think the tax breaks on super are unaffordable, wait untill the extended families, of those who can't be mentioned join the welfare que.lol

I would rather see all pensioners on a self funded tax free pension, than see most on a tax funded pension, now that is unaffordable.
Especially when anyone who has been here 5 years qualifies. Tell me another country that extends that kind of charity, someone has to pay for it.
You constantly suggest it should be the workers who have paid taxes and saved.


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## sydboy007 (13 August 2014)

sptrawler said:


> Syd, I don't disagree with a lot of your points.
> What annoys me, is your preoccupation with telling people what should and shouldn't be done, with what is argueably their money.




Isn't super exactly the same thing - the Govt telling you what you can do with your money?  9.25% of your income that you don't have any choice on how it is used for 40 up to odd years.

lets take the typical scenario where someone has been accumulating super for the last 20ish years.  They've had to accept a reduced income over that period so had less money to pay the mortgage / rent and other expenses in life.  They bank on the lump sum paying off the mortgage and relying on the aged pension as pretty much their sole source of income.

Is that a better outcome than no super, and reaching retirement with the mortgage paid off and relying on the pension as pretty much your retirement income?  I'd argue it'd probably have been a cheaper way of doing things - no 1% or so in FUM fees going to the financial industry, less inherent risk as to what will happen with your money, and for most any investments that they do with the extra income is likely to involve a lot more conscious effort.

The lack of super tax concessions would also mean tax revenue is higher and the aged pension is likely to be more easily affordable at this point in time.  IIRC an article I read recently was pushing the point that super is now reducing the cost of the aged pension by either $5B or $7B a year, though they glossed over the fact that this achievement is currently costing around $30B in tax revenue.



sptrawler said:


> Yet if it was suggested, that there be some form of control on what welfare recipients could spend their money on, i.e food and shelter not smokes and booze.
> 
> You would be at the front of the que screaming it is unfair, yet the welfare cost is by far the biggest tax drain in the country and there is no accountabilty on what it is spent on. Just people screaming it isn't enough.




Actually I do support welfare recipients who have gotten into trouble by poor money management to have some restrictions on what they can spend their welfare on eg no booze or cigs.  Sometimes one of the parents would probably like this as well because it's probably hard to stop the money drain happening when there's no limit on how much of it can go to the non essentials of life..



sptrawler said:


> I would rather see all pensioners on a self funded tax free pension, than see most on a tax funded pension, now that is unaffordable.
> Especially when anyone who has been here 5 years qualifies. Tell me another country that extends that kind of charity, someone has to pay for it.
> You constantly suggest it should be the workers who have paid taxes and saved.




So what is your view on the optimal way to achieve this?  IS the current super sytem optimally achieving the majority to be fully self funded retirees?  If not, what changes would you advocate for?

My understanding is you have to have lived in Australia for a minimum of 10 years to be eligible for the aged pension.


----------



## Julia (13 August 2014)

sydboy007 said:


> SP and Julia
> 
> Late last year the latest Retirement and Retirement Intentions survey by the Australian Bureau of Statistics (ABS) revealed that more than half of retirees withdraw their super as a lump sum, with many then blowing the windfall on their homes or a new car:



Junior has addressed this point.   "blowing the windfall"?   why should they not use their Super to pay off their mortgage.   Why would anyone want to go into retirement encumbered by mortgage payments?   It's their money, their mortgage, their business, isn't it?



> There aren't that many truly self funded retirees, and most have gotten there due to the generous tax concession provided within super.



How do you know how most have 'gotten there'?   Why could it equally not have been nothing to do with tax concessions, and rather making saving and investing a priority from an early age, taking on loans with interest rates around 22% on IP, often at the expense of holidays, social stuff, clothes etc., making do with frugal lifestyle, older model car?

You keep going over and over the same premise.   I don't recall anyone disagreeing with the idea that eg
the family home should not be exempt from the assets test over a set level, and/or there should be a limit to the amount of wealth that can be eligible for the tax concessions.
Another option future governments might consider is the requirement for some of Super to be taken as an income stream, though I'd anticipate a considerable fight about that.


----------



## sydboy007 (13 August 2014)

Julia said:


> You keep going over and over the same premise.   I don't recall anyone disagreeing with the idea that eg the family home should not be exempt from the assets test over a set level, and/or there should be a limit to the amount of wealth that can be eligible for the tax concessions.
> Another option future governments might consider is the requirement for some of Super to be taken as an income stream, though I'd anticipate a considerable fight about that.




Then what is the point of the super system at this present time when the majority of participants :

* pay out a decent level of fees in the super system 
* don't have super balance large enough to reduce their aged pension costs
* Those with larger balances find it relatively easy to structure there assets in such a ways as to access at least a partial pension and associated seniors card benefits.

The concept behind super was to help fund future pension liabilities.  It isn't.  It's cut people's incomes, and now siphoning some $18B a year from the non SMSF sector, while the SMSF sector is being billed another $3-5B a year.

Income taxes are higher than they would be without the super tax concessions.

The removal of RBLs has lead to an escalating cost of the system because high net worth families now view super as a tax minimisation system rather than as funding retirement.  Almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years.  I doubt that growth rate will slow considering how tax effective super is.

Abbott sided with the roughly 16000 who were receiving super pensions over 100K to stop them being taxed.  So if just 16000 individuals can lead to changes to reduce the cost of the system being blocked, what hope is there that the primary residence is ever going to be factored into eligibility for the aged pension?  What chance of bringing RBLs back now the wealthy have a taste of what they can achieve within super?

If 75% of people will still get some form of pension in 20 years time then what's the point?  Why feed the massive level of fees to the financial institutions for very little benefit to society?  Wouldn't it be cheaper to just provide super as extra income to people, tax it and have the funds available for the pension?  Helps to get rid of the $20B+ dead weight of fees.  The Govt could say use the extra tax revenue to build up a pension fund to generate returns over time to help fund the pension - similar to Norway and Singapore.


----------



## sptrawler (15 August 2014)

sydboy007 said:


> Isn't super exactly the same thing - the Govt telling you what you can do with your money?  9.25% of your income that you don't have any choice on how it is used for 40 up to odd years.
> 
> lets take the typical scenario where someone has been accumulating super for the last 20ish years.  They've had to accept a reduced income over that period so had less money to pay the mortgage / rent and other expenses in life.  They bank on the lump sum paying off the mortgage and relying on the aged pension as pretty much their sole source of income.
> 
> Is that a better outcome than no super, and reaching retirement with the mortgage paid off and relying on the pension as pretty much your retirement income?  I'd argue it'd probably have been a cheaper way of doing things - no 1% or so in FUM fees going to the financial industry, less inherent risk as to what will happen with your money, and for most any investments that they do with the extra income is likely to involve a lot more conscious effort..




That system was in place before the introduction of super, people didn't save, they spent everything they earned.
The secondry problem to that scenario, was the banks had to source all their funding from overseas, as we had no savings.
This situation left us exposed to fiscal shocks in overseas markets, as happened in the 1987 stock market crash.
The resultant fall out nearly sent three of our banks into insolvency, and so the enforced savings programe(super) was introduced. 
The pretence was that workers would have money taken from their wage to give them a better standard of living in retirement.
But as can be seen from your perception, that isn't going to happen. 



sydboy007 said:


> The lack of super tax concessions would also mean tax revenue is higher and the aged pension is likely to be more easily affordable at this point in time.  IIRC an article I read recently was pushing the point that super is now reducing the cost of the aged pension by either $5B or $7B a year, though they glossed over the fact that this achievement is currently costing around $30B in tax revenue..




Absolutely for a short period of time, then people will remove all the funds they can from super, into a more favourable tax shelter.
Then what happens? The tax reciepts drop, people are only having the minimum contribution going in, more qualify for increased pension.





sydboy007 said:


> Actually I do support welfare recipients who have gotten into trouble by poor money management to have some restrictions on what they can spend their welfare on eg no booze or cigs.  Sometimes one of the parents would probably like this as well because it's probably hard to stop the money drain happening when there's no limit on how much of it can go to the non essentials of life...




IMO it is critical that welfare is tightened, bringing in O/S workers, because our unemployed don't want to relocate. Tells you life is too good, that is a ridiculous situation, unless there is a good reason the unemployed should take on remote work.
Having a welfare system where anyone who can get here can have a taxpayer funded lifestyle, at the expense of our own population is stupid. 




sydboy007 said:


> So what is your view on the optimal way to achieve this?  IS the current super sytem optimally achieving the majority to be fully self funded retirees?  If not, what changes would you advocate for?
> 
> My understanding is you have to have lived in Australia for a minimum of 10 years to be eligible for the aged pension.




I tend to think the super pension system for those between 55 - 60 is quite good, where the taxable component is taxed with a 15% offset.
Also I agree with you, there should be a RBL where the super rich can't stick $5-10m in there, that's stupid .

However having said that, the RBL should be at a level that doesn't stop people aspiring to a terrific retirement.

The last 10 years in the property market, has shown me inflation can run out of control, it is just everything else hasn't caught up.


----------



## sydboy007 (15 August 2014)

sptrawler said:


> That system was in place before the introduction of super, people didn't save, they spent everything they earned.
> The secondry problem to that scenario, was the banks had to source all their funding from overseas, as we had no savings.
> This situation left us exposed to fiscal shocks in overseas markets, as happened in the 1987 stock market crash.
> The resultant fall out nearly sent three of our banks into insolvency, and so the enforced savings programe(super) was introduced.
> ...




So you're proposing that the super system actually provides the banks with their main funding source?  over 50% still comes from overseas and that's with a $1.8T in the super system, so it' not really making the system that much more stable.  Consdiering the banks are at it again increasing their foreign SHORT TERM borrowings they're setting themselves up for more issues when the next crisis emerges.  Short terminism is what got them into the situation they had to be saved by the Govt.  This is as much an APRA regulatory failing as the banks being short sighted.



sptrawler said:


> Absolutely for a short period of time, then people will remove all the funds they can from super, into a more favourable tax shelter.
> Then what happens? The tax reciepts drop, people are only having the minimum contribution going in, more qualify for increased pension.




So all tax reform should be off the agenda because the behaviours your describing will pretty much occur whenever you change the relative tax merits of investments.



sptrawler said:


> IMO it is critical that welfare is tightened, bringing in O/S workers, because our unemployed don't want to relocate. Tells you life is too good, that is a ridiculous situation, unless there is a good reason the unemployed should take on remote work.
> Having a welfare system where anyone who can get here can have a taxpayer funded lifestyle, at the expense of our own population is stupid.




Please pop over to sydney for a couple of months, live on the equivalent of the doles while paying rent and living expenses then let me know your views on the "life style"



sptrawler said:


> I tend to think the super pension system for those between 55 - 60 is quite good, where the taxable component is taxed with a 15% offset.
> Also I agree with you, there should be a RBL where the super rich can't stick $5-10m in there, that's stupid .
> 
> However having said that, the RBL should be at a level that doesn't stop people aspiring to a terrific retirement.
> ...




Why should I fund someone's terrific retirement?  Why shoudl super be about a terrific retirement?  When 75% of people entering retirement will still get some form of aged pension shouldn't the system be focused on that part of the market and not the upper extreme?

I'll leave the SMSF sector out for now since the issues I have with it are different to the industry / retail sector.

There's roughly $1.2T in the non SMSF super sector.  It's currently costing us $18B a year to run - ~50% of the cost of the aged pension - but the TOTAL super system is only reducing the aged pension cost by at most $7B a year.  I'll leave out the super tax concessions - they do add considerably to the cost of the system.

Due to the FUM model employed by the industry the costs involved are increasing at fund earnings + contributions - withdrawls each year.  With the run up of markets last year I'd expect the fee gouge would be significantly over $18B now.

I don't believe the aged pension savings from the super system will ever exceed the fees charged to run it.

A fairer system would be to have set up a SWF 20 odd years ago and legislated a certain % of tax revenue had to be contributed every year.  Set the access regime to be pretty generous so only say the top 10% in terms of wealth would not have access.  Set the level of income to around $30K in todays dollars for a single and $45K for a couple (same % diff as the current aged pension) indexed to the CPI.

This system would surely cost less than $18B to run and would cost a lot less in taxation losses.  In the 2012-13 year the Future fund had a MER of 0.67%.  Ignoring the very real economies of scale to be achieved could see just $12B lost in fees instead of the $23B+ the current system is being bilked for.  With $1.8T to throw around I'm sure the FUM model could be revoked and fixed rates for asset management brought it.


----------



## sptrawler (16 August 2014)

sydboy007 said:


> So you're proposing that the super system actually provides the banks with their main funding source?  over 50% still comes from overseas and that's with a $1.8T in the super system, so it' not really making the system that much more stable.  Consdiering the banks are at it again increasing their foreign SHORT TERM borrowings they're setting themselves up for more issues when the next crisis emerges.  Short terminism is what got them into the situation they had to be saved by the Govt.  This is as much an APRA regulatory failing as the banks being short sighted..




50% is still a lot better than the situation that prevailed pre 'super'





sydboy007 said:


> So all tax reform should be off the agenda because the behaviours your describing will pretty much occur whenever you change the relative tax merits of investments..




I think tax reform, will have as much chance of happening as Government spending reform, with the current political climate.



sydboy007 said:


> Please pop over to sydney for a couple of months, live on the equivalent of the doles while paying rent and living expenses then let me know your views on the "life style".




Please pop over to any other country in the world, other than the U.K and live on their welfare system. 
I'm sure you would wish you were in Sydney on the dole.

Also like I said, why are we bringing in 457 visa cleaners, for the mining camps, when there is people on the dole in Sydney and every other capital city?




sydboy007 said:


> Why should I fund someone's terrific retirement?  Why shoudl super be about a terrific retirement?  When 75% of people entering retirement will still get some form of aged pension shouldn't the system be focused on that part of the market and not the upper extreme?.




Why should anyone put anything into super, if not to improve their retirement fiscal position?
With a welfare state, you will always fund someone's terrific retirement. 



sydboy007 said:


> I'll leave the SMSF sector out for now since the issues I have with it are different to the industry / retail sector.
> 
> There's roughly $1.2T in the non SMSF super sector.  It's currently costing us $18B a year to run - ~50% of the cost of the aged pension - but the TOTAL super system is only reducing the aged pension cost by at most $7B a year.  I'll leave out the super tax concessions - they do add considerably to the cost of the system.
> 
> ...


----------



## sydboy007 (16 August 2014)

sptrawler said:


> 50% is still a lot better than the situation that prevailed pre 'super'




proof?  Pre GFC local funding for banks was at 40%.  Considering the high level of non cash investments of the retail and industry funds I'd find it unlikely that the super system provided much funding to local banks, unless you're going to include the frozen RMBS market.



sptrawler said:


> I think tax reform, will have as much chance of happening as Government spending reform, with the current political climate.




Plenty of reform going on.  Carbon and mining taxes have been revoked.  FOFA reforms gutted.  LISC removed, super pensions over 100K tax free again.  None of them have helped the long term structural balance of the budget though.  The removal of the carbon tax is over $7B in lost revenue.



sptrawler said:


> Also like I said, why are we bringing in 457 visa cleaners, for the mining camps, when there is people on the dole in Sydney and every other capital city?




Considering the number of reports coming out on how the 457 system has been rorted with companies applying for a small number of visas and then employing tens to hundreds of times more woerks, do you have proof that locals even got a chance to apply, or has the 457 system been more about bringing in unskilled labour on the cheap and suppressing wages?




sptrawler said:


> Why should anyone put anything into super, if not to improve their retirement fiscal position?
> With a welfare state, you will always fund someone's terrific retirement.




Your $2M super balance terrific retirement idea and mine of a comfortable 30K retirement income are pretty far apart.  Bit like PPL versus the current Govt funded scheme.

Just reading in the paper today that Chile has been able to get default fund fees down to 0.2% since they started a competitive tendering system to manage the usually apathetic who's balances end up in the default fund.  That's a policy change I'd support, but considering Abbott has been siding with the financial industry for the last year I doubt that's a worthy change that would come through.

You avoided the whole cost of the system though.  Our super system is expensive.  It doesn't provide a good cost benefit ratio, especially for those at the lower end of the income spectrum.  Reports are starting to show that at the lower balance levels that fees end up reducing final balances by 25-50%.  Someone on less than the median income would likely be better off receiving their super as income since whatever amount of super they will accumulate will likely be withdrawn as a lump sum and not reduce their access to the aged pension.  So what value do they receive from the reasonably high level of fees they are paying?

If 1.2T costs $18B a year to manage, then in 10 years it's quite conceivable with the effects of compound growth and 9.25%+ contributions each year that fees in the non SMSF sector alone will be at a similar level to the cost of the aged pension.  At that point why bother with the super system when it's not saving us money?

Abbott sided with the 16000 who were going to face a tax bill on their over 100K super pensions, so how likely do you think bringing back RBLs or some form of limit on super balances?  While the number of accounts currently is small, the amount of tax leakage is massive, and with something like 30% compound annual growth in balances over $5M, the problem is quickly getting out of hand.


----------



## sptrawler (16 August 2014)

sydboy007 said:


> proof?  Pre GFC local funding for banks was at 40%.  Considering the high level of non cash investments of the retail and industry funds I'd find it unlikely that the super system provided much funding to local banks, unless you're going to include the frozen RMBS market.
> 
> 
> 
> ...




As usual Syd, we've done it to death again, and the world keeps turning. It was an interesting interlude as always, hope you have a great weekend.


----------



## Julia (16 August 2014)

Syd, re your


> Your $2M super balance terrific retirement idea and mine of a comfortable 30K retirement income are pretty far apart




I can't see too many people finding $30K, when inflation is factored in, being sufficient even at the start of their retirement, let alone after 20 or more years.  Even if it were put into inflation adjusted environment, it wouldn't allow much for travel, upgrading car, home maintenance etc.   You might be happy with that much but I'd guess most of the population might aspire to a little more if they're going to the effort of providing for their own retirement.


----------



## qldfrog (16 August 2014)

as a couple with kid, we live happily on 60k a year so 30k a year  is very sufficient IMHO as long as you are debt free and do not waste your money;
I will not go down the path Syd takes: he has given all the argument.
But even if i could,  I hardly put any of my money  into super: just the mandatory 9 % (which I could avoid as director of my business).
Why do I prefer being taxed at now 51% instead of low super tax rate?
Because I see the current super system as a huge rort benefiting the 60y+ population.Let's call them baby boomer if we want;
I am not that young, have sizable income in the toptop centiles yet as opposed to what Syd would probably think ; I am not using that system;
the reason is that last year I learnt I will not be able to touch that money until 70 (well at the earliest until the next push) and was not surprised at all by the news

Superannuation is a generational wealth transfer ; similar to what the distribution system is/did in Europe;
It is fundamentally unsustainable and is only up and running as both parties have their hands in the trought:
labour via their union mates cashing on the industry funds and  the right aka Abbott via their mates at AMP/Macquarie.
Syd is wrong to consider this as a class based " the rich benefit and the poor pay"
People on pension right now at 60+ are very lucky even if they may not admit it
It is a generational warfare where the system sacrifices the younger generations to carry on a status quo and a seat in government;
If you are below 55 not to say 55, in my opinion, consider that super contribution money poured in the drain!


----------



## sydboy007 (16 August 2014)

Julia said:


> Syd, re your
> 
> 
> I can't see too many people finding $30K, when inflation is factored in, being sufficient even at the start of their retirement, let alone after 20 or more years.  Even if it were put into inflation adjusted environment, it wouldn't allow much for travel, upgrading car, home maintenance etc.   You might be happy with that much but I'd guess most of the population might aspire to a little more if they're going to the effort of providing for their own retirement.




Probably true, but the fact is very few people will end up with much more than that in todays dollars.

My argument is when the system is so expensive in terms of fees and tax leakage, why are we wasting so much on it

The median income is $47K.  Even with the increase in employer contributions to 12% they wont have much in the kitty at retirement.

over a 45 year working life with 3% pay rises every year (possibly unrealistic in the current environment of wage stagnation) their final balance would be roughly $1.88M if their fund makes them 6% a year net of fees - about what most balanced funds aim for over the long term.

With inflation averaging 2.5% each year (mid band of the RBA target) we'd be looking at that 1.88M being worth closer to $630K in todays dollars.

a FUM fee model of 0.7% would have totalled nearly $170 or roughly $56.6K in todays dollars.

What happens if you're a part time worker who's just on 35K and continues on for 45 years?

The you're looking at roughly $470K at the end after forking out $42K in fees

You could argue people should top up their super, but with rents now a major share of income and mortgages taking even bigger slice, it's not particularly easy to save when you're at the lower end of the income scales. 

Super pretty much benefits the top 30%.


----------



## Julia (16 August 2014)

> as a couple with kid, we live happily on 60k a year so 30k a year is very sufficient IMHO as long as you are debt free and do not waste your money;



Qld frog:  that's somewhat of a disingenuous conclusion.   A single person living in a similar house to your couple with kid will have all the same non-discretionary outgoings, viz council rates, electricity, maintenance, insurance, running of one vehicle etc etc.

The other factor which needs to be considered is the increasing cost of health care when ageing.   Just today I read about PBS co-payments increasing substantially.  We are, imo, going to be facing ever increasing user pays systems in healthcare and aged care.  

Someone wishing a very frugal lifestyle may well be able to survive on just $30K, but I don't see that as being sustainable to the end of that person's retirement years.
And if someone has worked and saved hard all their working lives, why shouldn't they aim for a retirement which includes a level of comfort, rather than just a level of survival.


----------



## sptrawler (16 August 2014)

Julia said:


> Qld frog:  that's somewhat of a disingenuous conclusion.   A single person living in a similar house to your couple with kid will have all the same non-discretionary outgoings, viz council rates, electricity, maintenance, insurance, running of one vehicle etc etc.
> 
> The other factor which needs to be considered is the increasing cost of health care when ageing.   Just today I read about PBS co-payments increasing substantially.  We are, imo, going to be facing ever increasing user pays systems in healthcare and aged care.
> 
> ...




Julia, untill someone gets to 55 and starts to contemplate supporting themselves, on the funds they have accumulated.
They are just talking off the top of their heads.
I have retired from a workplace that is closing down, untill the older workers are faced with the prospect of "what you have is what you've got", they don't realise the enormity of it.
The realisation that there isn't another job around the corner sinks in, then $hit I don't think I have enough.

Well that's my experience.


----------



## qldfrog (16 August 2014)

True that the 60k for two may not be 30k for one;
Julia, you have a point

But I am seriously considering stopping 8 to 5 work within 2 to 5  years and I base my computations on $55k to $60k a year (inflation ajusted) for both of us
I can not count on super for another 20 to 25 years so has to really be self funded and this will have to include sale of capital/assets along the way.
I would agree with sp that most people have absolutely no idea how much assets are required to actually be self funded;
my own spreadsheet indicates a figure around the 2.5 M  if you want to get that 60k a year  inflation ajusted and  based on conservative investment returns;
and that is not that easy to get!


----------



## sptrawler (17 August 2014)

qldfrog said:


> True that the 60k for two may not be 30k for one;
> Julia, you have a point
> 
> But I am seriously considering stopping 8 to 5 work within 2 to 5  years and I base my computations on $55k to $60k a year (inflation ajusted) for both of us
> ...




That is the figure I reckon is needed, qldfrog. 
Like you say, getting that sort of money together takes some doing.


----------



## sptrawler (2 September 2014)

Well it looks as though the first step in reducing the cost of super is locked in.

http://www.smh.com.au/business/aust...funded-retirement-on-ice-20140902-10bi1j.html


----------



## qldfrog (2 September 2014)

sptrawler said:


> Well it looks as though the first step in reducing the cost of super is locked in.
> 
> http://www.smh.com.au/business/aust...funded-retirement-on-ice-20140902-10bi1j.html



thanks for that;
I do resent the article:
"The freeze hits the lower paid disproportionately. "

In my view, the freeze helps the lower paid disproportionately. 
And this is good!When you are struggling and paying credit card interest rate to go from month to month, the last thing you need is a lower pay check whith a grand 3 or 4% return on that money after inflation, probably less after fees


----------



## sptrawler (3 September 2014)

qldfrog said:


> thanks for that;
> I do resent the article:
> "The freeze hits the lower paid disproportionately. "
> 
> ...




As some posters on here say, why should someone with a low super balance be allowed to take it out, to pay off debts when they retire.
I agree with you, why not let them have the money now, to pay down their debts before they retire?
It is weird how the do gooders want to help everyone, by punishing them.lol


----------



## FxTrader (3 September 2014)

sptrawler said:


> As some posters on here say, why should someone with a low super balance be allowed to take it out, to pay off debts when they retire. I agree with you, why not let them have the money now, to pay down their debts before they retire? It is weird how the do gooders want to help everyone, by punishing them.lol



The notion that the lower paid are "disproportionately" worse off is misinformation at best.  Employers are not under any obligation to wear the progressive increase in the SGL and many did not, just adjusted down the salary component of the package.  The only way for those on lower incomes to have any prospect of being self-funded in retirement is compusory co-contribution and this seems politically impossible to sell here.


----------



## sydboy007 (4 September 2014)

FxTrader said:


> The notion that the lower paid are "disproportionately" worse off is misinformation at best.  Employers are not under any obligation to wear the progressive increase in the SGL and many did not, just adjusted down the salary component of the package.  The only way for those on lower incomes to have any prospect of being self-funded in retirement is compusory co-contribution and this seems politically impossible to sell here.




The current couple full pension is roughly $30K a year.

At a 5% yield you'd need 600K to provide that.

The couple will still receive 10.5K p.a in pension between them.  45K a year tax free for a home owner isn't a bad income.

The below table is the latest income deciles (June 2014)

The bottom 40% of households are sitting at < 53K a year.  After living costs there's not going to be much surplus income for investing, and being in such a precarious state of low income I'd argue they'd be better off saving outside super.

The tax benefits to a couple with a combined income of less than 53K a year are minimal.  Most likely both wage earners are in the 19c tax rate so the benefits of 15% super tax are minimal.  Then there's the fee gouge for super.  After a decade the fees on their super are probably approaching the tax savings they're getting.

Since RBLs were removed super has turned from being something to provide a decent retirement income to a tax shelter for the wealthy.  When RBLs were removed in 2007 a couple could have a tad over $2M in super before they'd suffer high taxes.  CPI increases till today would probably see that figure towards the $2.5M mark.  Why is the Govt bleeding revenue to allow people to accumulate far higher amounts than this?  Does't that mean other taxes have to be higher to compensate, or the Govt has to spend less on services and infrastructure?

The bottom 40% of individual income earners receive ~8% of super tax reductions.  The top 10% receive ~37%.  The top 20% receive ~57%.

Super is not the only way to save for retirement, but it's increasingly becoming one of the most expensive ways for us to do it.  $23B in fees alone annually and counting.  In 10 to 15 years those fees will be more than the cost of the aged pension.


----------



## sptrawler (4 September 2014)

sydboy007 said:


> The current couple full pension is roughly $30K a year.
> 
> At a 5% yield you'd need 600K to provide that..




The current pension is *secured and indexed*, secure yeilds are 3.5% not 5%. 
$600k ? you really are joking, aren't you? 



sydboy007 said:


> The couple will still receive 10.5K p.a in pension between them.  45K a year tax free for a home owner isn't a bad income..




How much lifestyle have they foregone to obtain that $45k, whereas the people who haven't foregone lifestyle enjoy $30k lifestyle anyway. I'm seeing this scenario unfold before my eyes, with friends of my age, it is scary. 



sydboy007 said:


> The below table is the latest income deciles (June 2014)
> 
> The bottom 40% of households are sitting at < 53K a year.  After living costs there's not going to be much surplus income for investing, and being in such a precarious state of low income I'd argue they'd be better off saving outside super..








sydboy007 said:


> The bottom 40% of individual income earners receive ~8% of super tax reductions.  The top 10% receive ~37%.  The top 20% receive ~57%..




The bottom 40% of income earners probably pay minimal net tax, so do you think the tax payers should also be paying savings for them, to give them more in retirement?
It would be easier to just up the pension and make it more difficult to access.



sydboy007 said:


> Super is not the only way to save for retirement, but it's increasingly becoming one of the most expensive ways for us to do it.  $23B in fees alone annually and counting.  In 10 to 15 years those fees will be more than the cost of the aged pension.




That's true, but as Keating said in his rebuke of Abbott, it underpins alot of our fiscal exposure, it isn't all about pensions.

It's about time you realised, you can't buy people a sense of responsibilty and you can't keep crucifying those that have one.
Eventually you end up with everyone at the lowest common denominator.


----------



## sydboy007 (4 September 2014)

sptrawler said:


> The current pension is *secured and indexed*, secure yeilds are 3.5% not 5%.
> $600k ? you really are joking, aren't you?




Depends on your definition of secure.

If you're world is only Government bonds and TDs then yes, getting 5% yield is nigh on impossible,

If you're willing to upgrade your risk profile a bit then some hybrids and corporate bonds will provide you with a 5% yield relatively easily.

If you don't want hybrids a combination of CIBs and IABs would give you 5.5% easily, with INFLATION proection, where income is sourced from monopoly assets and regulated returns, or assets used by Governments, so in theory should be reliable payers of interest and return of capital.

I have no sympathy for someone who's only willing to get barely above CPI yields.


----------



## sptrawler (4 September 2014)

sydboy007 said:


> Depends on your definition of secure.
> 
> If you're world is only Government bonds and TDs then yes, getting 5% yield is nigh on impossible,
> 
> ...




This is the issue you aren't understanding.

The baby boomers that are retiring, with a reasonable sum in super, are the conservative ones.
( and don't demean me, and your arguement, by bringing up the 0.0001% who are rorting the system).

They have squirreled away money, the less conservative would have lost most in the GFC and the spenders didn't have any.

That is why most of the SMSF have a conservative spread, i.e a lot in cash. Yes they are conservative and yes they are afraid of loosing what they have worked hard to accumulate.
When you are at the end of your working life you will see it through different eyes.

You have no sympathy for those who wish to protect, what they saved hard for.
Yet you are full of sympathy for those who saved nothing. Strange IMO.

You criticise a culture of saving and acting responsibly, yet applaud a culture of spending and welfare dependence.


----------



## sptrawler (9 September 2014)

Well Rice Warner, agree that most people who have saved a nest egg in super, aren't blowing it, to get on the pension.
It's o.k for some to debunk, the NBN Myths, while perpertating their own Superannuation Myths.

*Myths of Retirement Income.*

The subject of retirement income is cloaked in "myths" and "suppositions", says Rice Warner Actuaries in its submission to the Australian Government's current inquiry into the financial system, chaired by David Murray.

As Rice Warner states, a range of myths and suppositions makes it difficult to conduct a debate about how to improve Australia's retirement income system - one of the core issues being examined by the Murray inquiry.

Most of the myths highlighted in the Rice Warner submission revolve around the attitude of retirees to retirement incomes.

It is widely reported - based on interpretations of government statistics - that a high proportion of retirees take much of their super as a lump sum rather than a pension. In other words, Australia is often regarded as a lump sum society. Rice Warner begs to differ, estimating that just 15 per cent of the value of retirement benefits is taken as a lump sum.

"It is true that more than 50 per cent of [superannuation] accounts are paid out as lump sums," Rice Warner acknowledges. "However, these are generally small amounts." Keep in mind that there is an average of more than two accounts for each member.

Other factors contributing to the myth about the favouring of lump sums include the reality that a proportion of fund members roll their super out of their funds upon retirement to take a pension in another fund. Additionally, some retirees choose to move their savings out of super into personally-held term deposits and other income-producing investments.

An associated myth addressed is that "Australians do not buy retirement incomes". In fact, many retirees draw a regular income from account-based pensions rather than buying an annuity.

Another much-discussed myth is that "retirees spend their superannuation too quickly". However, Rice Warner comments: "In practice, most retirees are frugal and many take the legislated minimum withdrawal amount [from their super pensions] each year." (The firm calculates that the average amount drawn down annually as a super pension is 7 per cent of a member's pension assets.)

It seems that despite myths and suppositions to the contrary, many retirees regard an income stream as the key means to stretch their savings for as long as possible.

The next challenge is try to ensure that the investment portfolio backing the income stream is as appropriate and effective as possible. That is a challenge for individual retirees, super funds and government.

Smart Investing also discussed this issue on August 28 in Let the Great Retirement Income debate begin.



Written by Robin Bowerman, Principal, Market Strategy and Communications


----------



## Julia (9 September 2014)

Very interesting, sptrawler.  Thanks for posting the above.  Good to see some of the categorical assertions exposed as myth.


----------



## sydboy007 (9 September 2014)

sptrawler said:


> It is widely reported - based on interpretations of government statistics - that a high proportion of retirees take much of their super as a lump sum rather than a pension. In other words, Australia is often regarded as a lump sum society. Rice Warner begs to differ, *estimating* that just 15 per cent of the value of retirement benefits is taken as a lump sum.




So basically they're forming a contrary "suppositions", or estimate, but don't have a lot of proof to back up their claims.

They might be on the right track, maybe not.

What is a small amount?

It would have been good if they'd been able to say the median lump sum is $XXXX

What is the value of the 15% lump sum?  Is that on an annual basis?  How much does that increase access to the pension?


----------



## sptrawler (9 September 2014)

sydboy007 said:


> So basically they're forming a contrary "suppositions", or estimate, but don't have a lot of proof to back up their claims.
> 
> They might be on the right track, maybe not.
> 
> ...




Actually their estimates are very conservative.

From other sources, which I posted earlier in the thread, of those who operate a SMSF only 3% withdraw lump sums. Most draw a pension.

But as you say it is only estimates, similar to those presented in the NBN roll out arguement.
How much credibility you give it, is dependent on how much interest you have in the outcome and that is probably proportional to the effect it has on you personaly.


----------



## sydboy007 (9 September 2014)

sptrawler said:


> Actually their estimates are very conservative.
> 
> From other sources, which I posted earlier in the thread, of those who operate a SMSF only 3% withdraw lump sums. Most draw a pension.
> 
> ...




Definitely.  When you're account / advisor says taking a lump sum of $XXXXX and spenidng it on a holiday or renovations will get you $XXX in extra pension every fortnight I'm sure plenty of interest will be expressed.


----------



## sptrawler (9 September 2014)

sydboy007 said:


> Definitely.  When you're account / advisor says taking a lump sum of $XXXXX and spenidng it on a holiday or renovations will get you $XXX in extra pension every fortnight I'm sure plenty of interest will be expressed.




I don't know how that works, all the people I know are just drawing the minimum drawdown, applicable to their age.

Ah the penny drops, you mean old age pension, I'm not anywhere near that and can't get it untill I'm 66.5.

Most of the guys I worked with, were fairly active investors while working. So most won't qualify for any pension, they will be self funded.

But I do agree those with low balances, that are heavily reliant on the Government pension, would no doubt make money disappear.


----------



## sptrawler (9 September 2014)

sydboy007 said:


> Definitely.  When you're account / advisor says taking a lump sum of $XXXXX and spenidng it on a holiday or renovations will get you $XXX in extra pension every fortnight I'm sure plenty of interest will be expressed.




Actually following your train of thought, if someone has a super balance that qualifies them for a part Government pension, maybe lump sums should be prohibited.


----------



## Julia (9 September 2014)

sptrawler said:


> Actually following your train of thought, if someone has a super balance that qualifies them for a part Government pension, maybe lump sums should be prohibited.



Really?  So you're going to deny someone who has done their best to save as much as possible into Super, especially women whose earning capacity is less than that of men, particularly the child bearing years out of the workforce, the ability to pay off any remaining mortgage when they retire, maybe upgrade that 20 year old car to something that will last them out?

Why would you do that?  What sort of moral authority would say to such a person:  
"You may not pay off your mortgage.  Instead, although your Super will only provide you with less than the age pension if taken as an allocated pension or annuity, that's what you will have to do."

Flies totally in the face of everything you have previously said.
It would also be counterproductive to the idea of making voluntary contributions to Super.  Instead, if your proposed conditions were to be imposed, that person would be much better off making higher mortgage repayments.


----------



## sptrawler (9 September 2014)

sydboy007 said:


> Definitely.  When you're account / advisor says taking a lump sum of $XXXXX and spenidng it on a holiday or renovations will get you $XXX in extra pension every fortnight I'm sure plenty of interest will be expressed.




Maybe we could expand the concept even further.
If it is a rort to spend your super and get more pension.
Maybe we could extend that to welfare recipients that own assets, if a person has assets they can reverse mortage them untill they get a job, rather than the dole.
Why should taxpayers have to fund someones unemployment benefit, when they own a $1million house?


----------



## qldfrog (10 September 2014)

sptrawler said:


> Maybe we could expand the concept even further.
> If it is a rort to spend your super and get more pension.
> Maybe we could extend that to welfare recipients that own assets, if a person has assets they can reverse mortage them untill they get a job, rather than the dole.
> Why should taxpayers have to fund someones unemployment benefit, when they own a $1million house?



my understanding is that you do not get any  unemployment benefit if you owe more than 30k...
Which explain the low unemployment figure in australia, i do not know any unemployed person getting benefit, but i know a lot  of person "not currently working"
Australia is such a place of leisure...


----------



## sydboy007 (10 September 2014)

sptrawler said:


> Maybe we could expand the concept even further.
> If it is a rort to spend your super and get more pension.




Is it sustainable to forgo income tax on super contributions, allow lump sums of any amount, allow lump sums to be spent / capitalised into the primary residence, then increase pension payments because of this.

Factor in that current Federal spending on aged services, including the pension, is already $55B out of a $360-370B budget, 7000 people a week are hitting retirement age (trend will accellerate for the next decade or so).

The participation rate has already fallen considerably since the GFC, it has a lot further to fall.

So is it sustainable to continue to allow very easy / increased access to the pension by simply spending your super?

Is it wrong to think that current income taxes are higher because of this?

Will it get increasingly difficult to stop the taking of lump sums as more and more people are eligible to do it?


----------



## Junior (10 September 2014)

sydboy007 said:


> Definitely.  When you're account / advisor says taking a lump sum of $XXXXX and spenidng it on a holiday or renovations will get you $XXX in extra pension every fortnight I'm sure plenty of interest will be expressed.




I've been written 100s of SOAs for around 30 different financial planners over the past 10 years.  Not once have I seen this suggestion.  No one *wants* to rely on full age pension in retirement.  Far better to live on a mix of part age pension and account based pension from super.  This results in a better standard of living with a lump sum sitting in super in case of emergency.


----------



## sptrawler (10 September 2014)

Junior said:


> I've been written 100s of SOAs for around 30 different financial planners over the past 10 years.  Not once have I seen this suggestion.  No one *wants* to rely on full age pension in retirement.  Far better to live on a mix of part age pension and account based pension from super.  This results in a better standard of living with a lump sum sitting in super in case of emergency.




Syd would have us believe it is the driving ambition of the majority of baby boomers, to avail themselves of the age pension.
If that were the case, it would show a complete lack of ambition and foresight, of a generation.
Then in another thread, Syd would have us believe it is the baby boomers, that have reaped the rewards of a debt driven 20 year wealth creation boom.
Why someone would "blow" the nest egg they have taken a lifetime to accumulate, to put themselves at the mercy of a Government handout, he is yet to explain.


----------



## sydboy007 (10 September 2014)

Junior said:


> I've been written 100s of SOAs for around 30 different financial planners over the past 10 years.  Not once have I seen this suggestion.  No one *wants* to rely on full age pension in retirement.  Far better to live on a mix of part age pension and account based pension from super.  This results in a better standard of living with a lump sum sitting in super in case of emergency.




So just to clarify, you're saying none of the clients the SOAs were designed for has taken a lump sum from their super?

The super system, because of the income and assets test, is biased towards home owners.  There is an inbuilt bias to keep the highest value primary residence since it's "invisible".  That hits the states taxation system where SD makes it costly for someone to trade down to a smaller residence, along with they now have an asset outside the family home that could reduce the level of aged pension.

Have you ever written an SOA that advised someone to trade down their property, because the increase in income yielding assets is higher than the reduction int eh aged pension?



sptrawler said:


> Syd would have us believe it is the driving ambition of the majority of baby boomers, to avail themselves of the age pension.
> If that were the case, it would show a complete lack of ambition and foresight, of a generation.
> Then in another thread, Syd would have us believe it is the baby boomers, that have reaped the rewards of a debt driven 20 year wealth creation boom.
> Why someone would "blow" the nest egg they have taken a lifetime to accumulate, to put themselves at the mercy of a Government handout, he is yet to explain.




One does not have to blow it.  One just has to renovate the primary residence or upgrade.

If no one is doing it, then what's the problem with restricting how much / what % of a super balance can be used as a lump sum?

Regularly I see people asking Noel Whittacker for advise on how to maximise their pension entitlements.  A simple google search for _how to maximise aged pension access_ brings up plenty of financial companies offering advise on how to structure your finances to achieve the goal.  How common it is?  Probably very hard to determine because the records are not particularly easy to access, but if companies are advertising they can hep you acheive it then they must believe there's a market for that kind of advise.

We're the only country that has no legal requirement to actually use a pensions savings account to provide an income in retirement.


----------



## sptrawler (10 September 2014)

sydboy007 said:


> So just to clarify, you're saying none of the clients the SOAs were designed for has taken a lump sum from their super?
> 
> The super system, because of the income and assets test, is biased towards home owners.  There is an inbuilt bias to keep the highest value primary residence since it's "invisible".  That hits the states taxation system where SD makes it costly for someone to trade down to a smaller residence, along with they now have an asset outside the family home that could reduce the level of aged pension.
> 
> Have you ever written an SOA that advised someone to trade down their property, because the increase in income yielding assets is higher than the reduction int eh aged pension?.




Don't mean to jump in on Juniors question, however there is a surge in baby boomers downsizing, which is leading to a shortfall in smaller housing stock being available. Well that is what our local real estate agents are reporting. 





sydboy007 said:


> One does not have to blow it.  One just has to renovate the primary residence or upgrade.
> 
> If no one is doing it, then what's the problem with restricting how much / what % of a super balance can be used as a lump sum?
> 
> ...




As has been said on numerous occassions, those with small balances are withdrawing it, for all sorts of reasons.

I doubt anybody is spending money to gain 50cents of extra pension, for every $1 they get rid of. 
If it is happening, it will be by people who are in their predicament, by following that very sort of reasoning.
However if someone hits retirement and still owes $100k on their house and have $80k in super, it would be silly of them not to pay the $80k off the house.IMO
Having said that, they would get the full pension wether they spend the $80k or not and I'm sure many would keep the $80k as a buffer.

Now let's take someone who has say 10,000 CBA shares in their SMSF, they are getting around $50k dividend and a tiny bit of pension.
You're telling me they are going to sell a chunk of the shares to get extra pension? I think you are dreaming.
Even if they only had 2000 shares in CBA, they wouldn't be selling them to get more pension, unless they are stupid.IMO 


Our system was developed on the same system as the U.K and Canada. 
Everyone in those countries, who has paid taxes into the pension system recieves a pension irrespective of their savings, or wealth.

There are several companies offering ways to access your super early, does that mean a large number are doing it?
Probably not.
But as you say, there must be a market for it, one can only go off ones own experience and personal knowledge.


----------



## Bill M (10 September 2014)

I think that the pension assets test cuts the government pension out at around $1.1 Million for a couple.

If I was in a position of having $1.2 Million then I would seriously consider up dating my car, kitchen and bathroom and spending 150K in order to get a part pension. 

The difference between having $1.05 M and $1.2 M private pension is not massive and then the part government pension and all the benefits that come with it will make up some of that income (if not all) you forgo. It is a good strategy IMHO and I would probably do that if I was coming up to Pension age. I don't make the rules but I certainly will abide by them and use them to my advantage.


----------



## sptrawler (10 September 2014)

Bill M said:


> I think that the pension assets test cuts the government pension out at around $1.1 Million for a couple.
> 
> If I was in a position of having $1.2 Million then I would seriously consider up dating my car, kitchen and bathroom and spending 150K in order to get a part pension.
> 
> The difference between having $1.05 M and $1.2 M private pension is not massive and then the part government pension and all the benefits that come with it will make up some of that income (if not all) you forgo. It is a good strategy IMHO and I would probably do that if I was coming up to Pension age. I don't make the rules but I certainly will abide by them and use them to my advantage.





I agree with that.

But someone with say $2m isn't going to spend $1m to get $1 of pension and the perks. The goal posts could be moved two days later and they lose it.

Same as someone with $500k isn't going to go out of his/her way to spend $100k to get an extra $4000/year pension. Just guessing numbers as an example.

Bill if they cut the assetts test to $500k would you get rid of $700k to get part pension?


----------



## Bill M (10 September 2014)

sptrawler said:


> I agree with that.
> 
> Bill if they cut the assetts test to $500k would you get rid of $700k to get part pension?




No never, I would only do it if it was a very low and insignificant amount to me.


----------



## sptrawler (10 September 2014)

Bill M said:


> No never, I would only do it if it was a very low and insignificant amount to me.




My point exactly.

If the pension cut off point becomes say $500 or $600k, no one will put anything extra into super. 
Why would Mr and Mrs Joe average put away their own money, to get $700 or $800k into super, which will give him an income of say $35,000/p.a
When he could just forget about super, pay off the house, have overseas holidays, buy a run out Falcon GT, 200 series Landcruiser and caravan and generally not worry too much. Then pick up a $32,000 Government pension.

So where does that leave us? right where we are, the average amount in super is for males $150k and females about $80k. So everyone on a full pension.

The current system Joe average probably gets $5k - 10k part pension, on top of his self funded $35k, a net saving of probably $20 - $25k to the government.
But that $10k Government top up, makes it attractive for Joe to try and get the $700k in super and keep it there.


----------



## sydboy007 (11 September 2014)

sptrawler said:


> My point exactly.
> 
> If the pension cut off point becomes say $500 or $600k, no one will put anything extra into super.
> Why would Mr and Mrs Joe average put away their own money, to get $700 or $800k into super, which will give him an income of say $35,000/p.a
> ...




So what's the point of the current system, if as you say the majority have small balances?  What's the point of a complex system that costs $18B a year to run (most of these smaller balances wouldn't be in a SMSF).  Are we better off to have provided lower taxes on the super balance only to see it pay off debts on retirement?  Seems like tax churn to me.

It seems easier to access cheaper investment options outside most super funds, and possibly people would be more inclined to get lower fees since they'll be more likely to take an interest in the money they're investing.

One of the reasons given by the Govt for stopping the increase in the super guarantee contribution rate was because it would save the budget money.  Is that just a short term saving, or possibly it's a perpetual saving?  I'd be inclined to think the later.


----------



## sptrawler (11 September 2014)

sydboy007 said:


> So what's the point of the current system, if as you say the majority have small balances?  What's the point of a complex system that costs $18B a year to run (most of these smaller balances wouldn't be in a SMSF).  Are we better off to have provided lower taxes on the super balance only to see it pay off debts on retirement?  Seems like tax churn to me..




Low balances are only the norm at the moment, but the system is currently designed, so people such as yourself can put away extra. 
I'm sure caps will be introduced to stop excessive balances being accumulated and withdrawl taxes will be introduced.
The super system has to encourage those who can afford it, to lock away money to be self funded, a bit like private health/ medicare.



sydboy007 said:


> It seems easier to access cheaper investment options outside most super funds, and possibly people would be more inclined to get lower fees since they'll be more likely to take an interest in the money they're investing..



That is why there has to be a tax break on super, otherwise people would do exactly that.
You keep saying the tax breaks will cost $x in 2030... .
There is no way the tax breaks will be there when the balances reach a point of being positive in growth. 

The system demands greater amounts be drawn as the account holder ages, this is to ensure the balance doesn't increase. The last thing the Government wants is intergenerational wealth transfer on that magnitude.



sydboy007 said:


> One of the reasons given by the Govt for stopping the increase in the super guarantee contribution rate was because it would save the budget money.  Is that just a short term saving, or possibly it's a perpetual saving?  I'd be inclined to think the later.




The problem really is, the low income earners are in all likelyhood never going to have enough in super to reduce their pension payment. 
The only ones who are likely to become self funded and not require any pension are middle and high income earners.
However could you imagine the uproar if a Government said, the super guarantee only applies to income over $x.


----------



## sydboy007 (15 September 2014)

http://www.afr.com/p/opinion/repair_weak_super_foundations_tW9VzV2wnI2lshxC0uChVK

Coalition MP, and former advisor to Peter Costello, Kelly O’Dwyer:

_If you knew there were weaknesses in the foundations for a building, would you make sure the foundations could be fixed and repair them before increasing its size by more than 25 per cent?..

Under Labor’s timetable for an increase in compulsory superannuation, the Commission of Audit concluded that there was unlikely to be an increase in the proportion of Australians who were fully self-sufficient… *[T]he proportion of people eligible for an age pension would remain constant at about 80 per cent for the next forty years. That’s the same proportion of the population that received the pension in the late 1970s…*

The Commission of Audit and Henry Tax Review each canvassed reforms to the eligibility tests for the pension…

Australia’s superannuation system is [also] unusual by world standards in allowing Australians to withdraw their entire superannuation as a lump sum…

*Research cited in the Inquiry’s Interim Report highlights that approximately 44 per cent of retirees who take a lump sum use it to pay off housing and other debts, to purchase a home or to make other home improvements. A further 28 per cent use the lump sum to purchase a holiday or new vehicle*…

The system effectively encourages Australians to over-capitalise on their homes, spend all or some of the balance on other forms of consumption, and then turn to the age pension…

Naturally, the situation is exacerbated by yet another quirk in the system, where the access age to superannuation (60, if you are retired and were born after July 1, 1964) differs from the eligibility age for the age pension (currently 65, rising to 70)…

*Then there are other issues: like the level of competition in superannuation and whether it is resulting in fees which truly represent the value delivered, rather than blatant rent seeking…*_

She's pretty much on the money.

For those who argue that super has helped improve our level of savings, the blow chart seems to indicate we've just stopped saving outside super.  There's been a pretty significant downward trend in the real household saving rate since super was introduced.

Notice how's there's a reasonable inverse relationship between private and Govt debt ratios in the second chart.  Without running a trade surplus I don't see how both the private and public sectors can de-leverage at the same time


----------



## sptrawler (15 September 2014)

sydboy007 said:


> http://www.afr.com/p/opinion/repair_weak_super_foundations_tW9VzV2wnI2lshxC0uChVK
> 
> *Research cited in the Inquiry’s Interim Report highlights that approximately 44 per cent of retirees who take a lump sum use it to pay off housing and other debts, to purchase a home or to make other home improvements. A further 28 per cent use the lump sum to purchase a holiday or new vehicle*…




So 44% pay of house or debts and 28% only have enough super to buy a car or have a holiday.

That means effectively 72% have realatively small super balances, that can't support a reasonable self funded pension .



sydboy007 said:


> [
> 
> The system effectively encourages Australians to over-capitalise on their homes, spend all or some of the balance on other forms of consumption, and then turn to the age pension…




That is an opinion not based on anything. Why would someone want to get rid of their own money to obtain a lower standard of living.
It doesn't make sense, for those that have a reasonable amount and as I have posted earlier only 3% of SMSF pull lump sums.
Therefore as SMSF are a large represtative group of retirees, it would indicate the author hasn't done a lot of research, to support his theory.
Statistics show those with low balances spend the balance, I haven't seen any statistics that show people are overcapitalising in their houses to obtain a pension.
On the contrary, many people are downsizing, when reaching retirement.


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## Judd (16 September 2014)

sptrawler said:


> .............That is an opinion not based on anything. Why would someone want to get rid of their own money to obtain a lower standard of living............




They did at one stage.  When I was in the former Department of Social Security, it was astonishing to me individuals/couples who would dispose of assets which could have generated income in the five figures area, just to get the pension and benefits (which were then worth about $2,500) because "I've paid taxes all my life and I'm entitled to it."

I don't think it really applies now due to the gifting rules but I've been out of that area for many years.  However, it would not surprise me if there is lingering resentment by some at being denied their "rights" due to the income and assets tests.


----------



## sptrawler (16 September 2014)

Judd said:


> They did at one stage.  When I was in the former Department of Social Security, it was astonishing to me individuals/couples who would dispose of assets which could have generated income in the five figures area, just to get the pension and benefits (which were then worth about $2,500) because "I've paid taxes all my life and I'm entitled to it."
> 
> I don't think it really applies now due to the gifting rules but I've been out of that area for many years.  However, it would not surprise me if there is lingering resentment by some at being denied their "rights" due to the income and assets tests.




That's true Judd, my father was hell bent on getting the pension, I think people are now more financially informed.

When my parents were in their 30's the last thing they were interested in was owning a house, now it is the foremost thing in young peoples minds.
Society is always evolving, wether that be for the better or worse who knows.


----------



## Bill M (14 October 2014)

Seems like we are doing something right.

---
AUSTRALIA'S SUPER SYSTEM 2ND BEST: REPORT

Australia has the second best retirement savings system in the world, according to a survey of global pensions.

The Melbourne Mercer Global Pension Index found Australia's ability to fund the lifestyles of retirees trailed only Denmark.

Full Story Here:http://www.thebull.com.au/articles/a/49384-australia's-super-system-2nd-best:-report.html
---


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## sptrawler (30 October 2014)

Bill M said:


> Seems like we are doing something right.
> 
> ---
> AUSTRALIA'S SUPER SYSTEM 2ND BEST: REPORT
> ...




I don't know how long that rating will last, with interest rates at present settings and drawdown rates back to normal, the balances will be reducing substantionally.


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## sptrawler (1 December 2014)

Well here is an ATO list of SMSF balances, by value, just so people can be accurate when making statements.


Asset ranges 2013
$0–$50,000   =  6.7%

>$50,000–$100,000   = 5.1%

>$100,000–$150,000  = 5.4%

>$150,000–$200,000  = 5.1%

>$200,000–$500,000  = 24.7%

>$500,000–$1m  = 23.4%

>$1m–$2m  = 17.6%

>$2m–$5m  = 9.9%

>$5m–$10m  = 1.8%

>$10m  = 0.4%

Total
100%


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## banco (1 December 2014)

sptrawler said:


> Well here is an ATO list of SMSF balances, by value, just so people can be accurate when making statements.
> 
> 
> Asset ranges 2013
> ...




Seems like the Government in these dire fiscal times should look at creaming off some cash from those with 1 million or above.


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## sptrawler (1 December 2014)

banco said:


> Seems like the Government in these dire fiscal times should look at creaming off some cash from those with 1 million or above.



Actually if they started at $200k and worked up, it would catch a lot more.


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## Julia (1 December 2014)

sptrawler said:


> Actually if they started at $200k and worked up, it would catch a lot more.




Are you seriously suggesting that should happen????


----------



## lesm (1 December 2014)

sptrawler said:


> Actually if they started at $200k and worked up, it would catch a lot more.






banco said:


> Seems like the Government in these dire fiscal times should look at creaming off some cash from those with 1 million or above.




You have to be joking.

The Government of the day introduced a mandatory system for contributions to Superannuation funds, without any basic protection of contributor funds in place. Did a good job of creating another revenue/profit earning mechanism for the Financial Sector though. The fund managers can invest or lose contributors money without any real penalties or consequences applying. A bit like 'all care and no responsibility'. Oh shoot we lost 30/40/50 % of contributors funds, oh well another day another dollar.

Any suggestion related to creaming money from contributors funds makes a mockery of why compulsory superannuation was originally introduced.


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## banco (1 December 2014)

lesm said:


> You have to be joking.
> 
> The Government of the day introduced a mandatory system for contributions to Superannuation funds, without any basic protection of contributor funds in place. Did a good job of creating another revenue/profit earning mechanism for the Financial Sector though. The fund managers can invest or lose contributors money without any real penalties or consequences applying. A bit like 'all care and no responsibility'. Oh shoot we lost 30/40/50 % of contributors funds, oh well another day another dollar.
> 
> Any suggestion related to creaming money from contributors funds makes a mockery of why compulsory superannuation was originally introduced.




The reality is we are going to have very big bills to pay going forward for the baby boomers' pensions and healthcare.  The better off baby boomers are going to have to help pay for the not so well off baby boomers.


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## lesm (1 December 2014)

banco said:


> The reality is we are going to have very big bills to pay going forward for the baby boomers' pensions and healthcare.  The better off baby boomers are going to have to help pay for the not so well off baby boomers.




The mandatory superannuation system was actually introduced to address what you refer to as the reality.

It was known at least in the early seventies that Government would not be in a position to fully fund pensions once baby boomers started to retire.

Over time baby boomers who thought that they were well enough funded to support or be in a position to support themselves in retirement. A number of those were caught later in life, so at best they may only have been in a position to partly fund their retirement and then be funded via the pension. As in any age group or generation there are those that will be in a better position to fund their retirement than others. Some will be quite happy to live on the pension.

Therefore, why should those who have planned for a self funded retirement be penalised, due to the poor planning of those who did not?

Additionally, without appropriate protections in place super funds are vulnerable to market forces and the management of fund managers, whereas SMSFs are under the control of the individual who is managing their own fund.

The ability of different mangers or individuals will have an impact on how well contributor funds grow.

So, you are saying those who have been astute enough to plan and fund their retirement, so as not to be reliant or a burden upon the pension system have to subsidise the Government yet again. Be mindful that some of those individuals have been subsidising systems, such as the Australian Social Welfare System for years, due to the amount of tax they pay.

This is really circular situation. We (the Government) will not be able to fund you when you reach pensionable age as we won't have enough money and we will introduce new legislation mandating superannuation contributions. 

Now that quite a number of you are in a position to self fund your retirement, without being a burden on the Social Welfare System we are going to double whammy you again and take a % of you super savings and profits to fund the pension, as we still can't afford to support the baby boomers reaching pensionable age who cannot self fund their retirement.

Maybe the Government and its advisors need to go back to the School of Financial Management. Would be interesting to know what modelling they did when the original numbers were calculated related baby boomers and the amount need to support them and/or if they considered potential loss scenarios, which decimated some peoples retirement funds, especially those whom had already retired and were not in a position to return to the work force or could effect a meaningful financial recovery in the time frame they were looking at.


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## Julia (1 December 2014)

lesm, exactly right.

The only change I'd make to what you've said is from this



> as we still can't afford to support the baby boomers reaching pensionable age who cannot self fund their retirement.




to this



> as we still can't afford to support the baby boomers reaching pensionable age *who have chosen* not to self fund their retirement.




Plenty of us who are self funded have put money into savings and investments at the expense of a more affluent and luxurious lifestyle all through our working lives in order to be secure in retirement.


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## lesm (1 December 2014)

Julia said:


> lesm, exactly right.
> 
> The only change I'd make to what you've said is from this
> 
> ...




Thanks Julia, reads much better with your change.


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## sptrawler (1 December 2014)

Julia said:


> Are you seriously suggesting that should happen????




No, just pointing out to banco, that arbitary numbers could start anywhere, not necassarily where you want it to.


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## McLovin (1 December 2014)

lesm said:


> The mandatory superannuation system was actually introduced to address what you refer to as the reality.
> 
> It was known at least in the early seventies that Government would not be in a position to fully fund pensions once baby boomers started to retire.
> 
> ...




By this logic, the only people who should pay taxes are those who rely on the public purse. Why should I subsidise all the public services that you consume?


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## lesm (1 December 2014)

McLovin said:


> By this logic, the only people who should pay taxes are those who rely on the public purse. Why should I subsidise all the public services that you consume?




Would you mind pointing out where that is stated or implied?

The original post that was being referred to was related to creaming money out of superannuation accounts above a certain amount to subsidise funding pensions for baby boomers.


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## McLovin (1 December 2014)

lesm said:


> Would you mind pointing out where that is stated or implied?




Sure. Right here.



			
				lesm said:
			
		

> So, you are saying those who have been astute enough to plan and fund their retirement, so as not to be reliant or a burden upon the pension system have to subsidise the Government yet again.




--



			
				lesm said:
			
		

> The original post that was being referred to was related to creaming money out of superannuation accounts above a certain amount to subsidise funding pensions for baby boomers.




How's the equality of a system with a reduced tax rate on contributions, a reduced tax rate on earnings while in accumulation and then a zero tax rate, regardless of account balance, on entering pension phase? Who's going to pay for your healthcare?


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## banco (1 December 2014)

Julia said:


> lesm, exactly right.
> 
> The only change I'd make to what you've said is from this
> 
> ...




There's no good solution to the moral hazard problem.


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## lesm (1 December 2014)

McLovin said:


> By this logic, the only people who should pay taxes are those who rely on the public purse. Why should I subsidise all the public services that you consume?






McLovin said:


> Sure. Right here.
> 
> 
> 
> ...




You overlooked quoting the entire paragraph. It says nothing about people not paying taxes.

Selective reading and quoting is an old game 

Back on your equality band wagon. One day Nirvana or paradise may exist where everything is equal, but doubt it will occur in our lifetimes, if ever.

So, giving something back to those of have contributed via the tax system for their entire working lives is something that you have an issue with? 

Should be a good weekend for fishing, guessed you would bite :


----------



## McLovin (1 December 2014)

lesm said:


> You overlooked quoting the entire paragraph. It says nothing about people not paying taxes.
> 
> Selective reading and quoting is an old game
> 
> ...




So then what are you saying? Super should be taxed or it shouldn't?

ETA: I assumed that when banco said cream off he meant tax. Maybe he just meant take in which case I misunderstood.


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## lesm (1 December 2014)

McLovin said:


> So then what are you saying? Super should be taxed or it shouldn't?
> 
> ETA: I assumed that when banco said cream off he meant tax. Maybe he just meant take.




My understanding was that it was with respect to targeting super fund contributions above a certain amount. It really wasn't that clear if this was just from a tax angle or not.

The dilemma we all face is that we don't know when the superannuation rules (legislation) will change or what impact it will have on superannuation funds held by individuals.

My personal angst in terms of super, is that the Government introduced legislation that mandated superannuation contributions, but did nothing to put anything in place to protect those funds to a reasonable degree.

It borders on a form of negligence, when you realise how much money has been lost by superannuation funds over the years, yet they still get paid. Certainly looked after the interests of the finance and investment sector.

Everyone (taxpayers) are going to bear the brunt of it one way or another, not only baby boomers, but especially the generations following on behind.

Our healthcare system is not cheap by world standards. It was rated in the top 4/5 most expensive healthcare systems in the world a number of years ago. Haven't seen any recent numbers. All the relevant support services will also need to be funded from somewhere.

Bandaid fixes by Governments are not going to fly long term, neither is robbing Peter to pay Paul with some of the  superannuation changes that have been made over the last couple years to increase revenue will have a longer term impact. You need Governments that think in true strategic terms rather than election cycles.

If the y increase tax on super contributions/earnings then they are going to need to find the appropriate balance, otherwise it would be expected that there will be a backlash.

Who knows what the answer is, but it could make super start looking like a dud from an investment and retirement planning perspective, especially if they get it wrong.

If people start to become penalised via the tax system or other means for making astute investment decisions to self fund their retirement then where does that leave them. Might as well go on the dole and collect the pension at pensionable age or suffer being punished for saving or making profitable investments.


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## sydboy007 (1 December 2014)

Obviously the problem is there's no other way to save for retirement than within super.

It seems unfair to be so critical of the boomers who didn't bother to save for retirement till compulsory super was available to all.

People who find the above silly argue against limiting the amount that can be accumulated in super, as if people would suddenly stop saving for their retirement.  Pretty much anyone who was bumping up against some form of RBL would continue to save outside super, and just stop receiving massive amounts of public support.

How about we limit the amount in super to the pension assets test?  What is the benefit to the budget and remaining tax payers to allow millions in assets to be saved away tax free in super?

If the figures from the ATO are reasonably correct then we currently already have around 30% of super balances at a point where the balances would preclude the members from gaining access to the pension.  Those same members are receiving the greatest level of public assistance to increase their balances, even though there's no corresponding benefit to future pension cost reductions.  How is that sensible economic policy?  5% yield on a $1M portfolio is $50K.  If the person is still in the workforce their yearly super tax break could easily be more than the cost of the pension.  How is that equitable, let alone economicaly sensible?

I find it quite unfair that last year I received roughly $5000 in super tax breaks.  As a high income earner, well on the way to a comfortable retirement, why do I get so much Govt. largesse when there's over 2M Australians who get penalised by the super tax system?  It doesn't make sense to me.


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## sydboy007 (2 December 2014)

if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.


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## sptrawler (2 December 2014)

sydboy007 said:


> if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.




It will be interesting to see what, if anything comes of the 'white paper'.

Hopefully more comes of it, than came of the Henry report. As we say time will tell.

They didn't seem to have any problem, getting the 30% pay rises, through parliament.lol


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## Junior (2 December 2014)

sydboy007 said:


> if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.




Those in the lower income deciles can't receive much in the way of tax concessions, as they don't actually pay much tax.


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## sptrawler (2 December 2014)

Junior said:


> Those in the lower income deciles can't receive much in the way of tax concessions, as they don't actually pay much tax.




Yes I think we went around that loop last time, it doesn't seem to help.

I think  it ended up with, a super contribution for them is just an increase in welfare payment, so why not just increase their welfare? rather than tie it up in super.


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## Junior (2 December 2014)

sptrawler said:


> Yes I think we went around that loop last time, it doesn't seem to help.
> 
> I think  it ended up with, a super contribution for them is just an increase in welfare payment, so why not just increase their welfare? rather than tie it up in super.




Thanks sp.  Endless deja vu in this thread.


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## k.smith (2 December 2014)

sydboy007 said:


> if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.




The top 20%, some 2 million people, get 60% of around $35 billion in tax concessions, or around $21 billion.
average concession per person = $10k plus.


why should the bottom 80% be happy to support that?


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## sptrawler (2 December 2014)

k.smith said:


> The top 20%, some 2 million people, get 60% of around $35 billion in tax concessions, or around $21 billion.
> average concession per person = $10k plus.
> 
> 
> why should the bottom 80% be happy to support that?




You missed juniors point, most of the bottom 80% aren't paying tax.

You said above:  
the average tax concession per person = $10k.  The average tax per person in the top 20% probably= 40% which may be $60k plus

Average tax per person in the bottom 50% probably = $0 or minus$.

How are they supporting anything?

I suppose the easy answer is to do what happened here and in the U.K, 40 years ago, just hit everyone on high incomes 60% tax.
Then they all relocate their head offices overseas, jeez
I was an electrician, always worked for wages, why can I see that constant handouts and constant tax increases can't work.
Obviously there is something wrong with my logic.

Syd's had the best idea with RBL's

Then he blows his feet off,IMO, with non sensical emotional garbage


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## banco (2 December 2014)

The only outcome of superannuation tax concessions to the top decile is likely to be making an already relatively comfortable retirement more comfortable.


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## Julia (2 December 2014)

sptrawler said:


> You missed juniors point, most of the bottom 80% aren't paying tax.
> 
> You said above:
> the average tax concession per person = $10k.  The average tax per person in the top 20% probably= 40%
> ...



+1.  

Mid year NATSEM data shows:


> The analysis also reveals for the first time which family types are most reliant on the public purse.
> 
> The results would shock many in Australia, according to NATSEM principal research fellow, Ben Phillips.
> 
> “Most people rightly or wrongly think they pay too much tax and don’t receive enough benefits,” Mr Phillips said. “So people might be surprised to learn only about half of Australian families pay more tax than they receive back in benefits.”


----------



## sptrawler (3 December 2014)

Julia said:


> +1.
> 
> Mid year NATSEM data shows:






It's really hard to get people to understand that simple concept.


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## sptrawler (3 December 2014)

banco said:


> The only outcome of superannuation tax concessions to the top decile is likely to be making an already relatively comfortable retirement more comfortable.




Well then stop super, because the bottom decile don't pay tax.

At least then the top decile, can have the extra money in their pockets, to spend as they like and move it into family trusts.

Then they can at least claim the pension, like everyone else.duh:1zhelp:

HELP, PLEASE HELP. Syd explain rbl's again.


----------



## Bill M (3 December 2014)

They use to have Reasonable Benefit Limits (RBL's) before. From memory when the Super Guarantee first started it use to be around 450K and it was indexed every year (I think). That, somewhere along the line, was abolished and now there are no limits. 

What do readers think would be a fair RBL these days? $1 M, $2 M, $3 M or what? For me $2 Million sounds fair but others will think much more is needed.

Getting onto the discussion about tax and low income earners, we have never had it better. An individual can earn up to 20K before having to pay any tax at all, (that is by getting the low income tax offset as well). If you are married then that's 20K each. Structure your investments (or you work income) so you are both receiving 20K each and you are on $40,000 a year without paying any tax, not bad at all.


----------



## Junior (3 December 2014)

Bill M said:


> They use to have Reasonable Benefit Limits (RBL's) before. From memory when the Super Guarantee first started it use to be around 450K and it was indexed every year (I think). That, somewhere along the line, was abolished and now there are no limits.
> 
> What do readers think would be a fair RBL these days? $1 M, $2 M, $3 M or what? For me $2 Million sounds fair but others will think much more is needed.
> 
> Getting onto the discussion about tax and low income earners, we have never had it better. An individual can earn up to 20K before having to pay any tax at all, (that is by getting the low income tax offset as well). If you are married then that's 20K each. Structure your investments (or you work income) so you are both receiving 20K each and you are on $40,000 a year without paying any tax, not bad at all.




A couple in that scenario would also have access to Government Co-contribution ($500 each from the government should they add to their super) and LISC (zero tax on SG contributions).  If they have kids they would also receive Family Tax Benefits.


----------



## k.smith (3 December 2014)

sptrawler said:


> You missed juniors point, most of the bottom 80% aren't paying tax.
> 
> You said above:
> the average tax concession per person = $10k.  The average tax per person in the top 20% probably= 40% which may be $60k plus
> ...




Tax on $180,001 = $54,547, or 30.3% 
Plus 2% medicare levy = total 32.3%

While I acknowledge that some at the bottom end need may need to lift a bit harder, it seems to me that the majority are beholden to the wages they receive, and taxed accordingly, such as tax on $80k is approx. 22%.
 It is the majority of us who make it possible for the top deciles to achieve. We buy what they produce, we use their professional services, etc. The top end then pays a higher proportion of tax as being part of their responsibilities within our social structure. They can hardly achieve what they achieve in a land where everyone achieves equally !  I have no problems with such a democratic system. But taxing the top end, and then handing it back as tax concessions?


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## banco (3 December 2014)

Bill M said:


> They use to have Reasonable Benefit Limits (RBL's) before. From memory when the Super Guarantee first started it use to be around 450K and it was indexed every year (I think). That, somewhere along the line, was abolished and now there are no limits.
> 
> What do readers think would be a fair RBL these days? $1 M, $2 M, $3 M or what? For me $2 Million sounds fair but others will think much more is needed.
> 
> Getting onto the discussion about tax and low income earners, we have never had it better. An individual can earn up to 20K before having to pay any tax at all, (that is by getting the low income tax offset as well). If you are married then that's 20K each. Structure your investments (or you work income) so you are both receiving 20K each and you are on $40,000 a year without paying any tax, not bad at all.




It should be tied to some multiple of the age pension ie if you have accumulated enough money to be able to live on 200% of the pension for 25 years then you shouldn't be able to get any more super tax concessions etc.


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## sydboy007 (3 December 2014)

Bill M said:


> They use to have Reasonable Benefit Limits (RBL's) before. From memory when the Super Guarantee first started it use to be around 450K and it was indexed every year (I think). That, somewhere along the line, was abolished and now there are no limits.
> 
> What do readers think would be a fair RBL these days? $1 M, $2 M, $3 M or what? For me $2 Million sounds fair but others will think much more is needed.
> 
> Getting onto the discussion about tax and low income earners, we have never had it better. An individual can earn up to 20K before having to pay any tax at all, (that is by getting the low income tax offset as well). If you are married then that's 20K each. Structure your investments (or you work income) so you are both receiving 20K each and you are on $40,000 a year without paying any tax, not bad at all.




In the 2006-07 tax year the limit was $678,149 as a lump sum or $1,356,291 if at least half was taken as some form of pension / annuity.  Howard's introduction of tax free super for the over 60s also abolished RBLs, even though they impacted a very small number of people.  Since then the balances within SMSFs have really taken off since there's no limit on the level of assets that can be accumulated.

As for a couple on 40K tax free a year never having it better, well they're likely to never be able to afford their own home anywhere they can get work.  A 200K property would put them into sever mortgage stress.  A $200K property at 6.5 over 25 years would cost them $16200 a year.  factor in council / body corp / water / maintenance and there's half their income gone.  That wouldn't get you much, and there's no point saying they could move outside a big city because then they'd not likely have jobs.



banco said:


> It should be tied to some multiple of the age pension ie if you have accumulated enough money to be able to live on 200% of the pension for 25 years then you shouldn't be able to get any more super tax concessions etc.




I suppose until there's a consensus as to what super is going to achieve, it will be quite tricky to decide on what the reasonable amount of lightly taxed funds that can be accumulated.

I have a fairly utilitarian view.  Minimise the impact of the aging tsunami on the budget.  Currently I don't believe super is achieving this goal as the tax concessions are out weighing any reduction in the cost of the aged pension.  Some will argue the super system hasn't been running long enough, and that may be true, but we seem to be in a massive deficit so far in terms of the benefits to ongoing tax payers.

So if single / couple has enough money in super to exclude them from receiving the pension, is there any benefit to the remaining tax payers for allowing extra money to be saved away?  Currently for a couple those levels would be no primary residence $1,145,500 or with $1,292,000.  Those levels allow for an income at double the current pension.  Seems this isn't a high enough income to satisfy people on this forum.  On the one hand they criticise some boomers for complaining super wasn't around long enough for them to save for their retirement, yet believe if we limit the how much can be saved in super people will stop saving for retirement.  It's a compulsory system so savings is pretty much guaranteed.

I'd say the person without their own house is being short changed, but then everything within the tax system benefits housing over just about everything else.  So I'd say once a person achieves the balance to exclude them from receiving the pension they can no longer make contributions.  Receive their super payments as extra income, and should their balance fall below the current threshold they can top up easily enough.  With a conservative portfolio one should be able to achieve a fairly high balance above the actual contributions threshold.  You could then get rid of the annual contributions limits as there's no real need for them.

We've got to consider that as each year passes the participation rate keeps falling.  The dependency rate keeps on increasing.    How do we continue to afford the level of services we currently have when each year there's less people paying tax (as a proportion of the population)?  

Is tax free super affordable over the next 30 year?  It might be when the super system is fully mature, but is it during the transition phase where young boomers and gen x are forced to cover both systems?

From some of the arguments presented it seems people believe higher income earners deserve their super tax breaks because they already pay the majority of tax receipts.  I say bumpkin to that.  It's just another symptom of the inefficiencies we have in the tax expenditures riddled tax system that's grown over years.

We'd be better off tax super at full marginal rates on the way in, siphon off half that money as deficit reduction and half to lowering income taxes.  Quarantine NG to new housing builds.  Once again split the savings 50 50 between debt reduction and lowering income taxes.  Personally constructing tax measures like this would make them far easier to sell and get us to a more globally competitive income tax system.

We have to stop treating the primary residence as being invisible to pension system.  Pretty much every Australian views housing as an asset rather than a home these days, so start treating it like one.  As i said before, use the land value as part of the assets test, bring in reverse mortgages supplied by the Govt at cpi or the Govt bond rate to help those who have their pensions cut.  You could use these savings to bump up the pension asset limits as well as fund health care.

The less tax leakage we have in the system, the lower the headline rates need to be for income tax, and the less incentive there is to try and beat the system.  Then we can start to really examine what levels of income require got support.  Kill off the tax churn that is a major feature of the system.  Get rid of the dead hand of Govt at each step of taking and giving.  We might be better off with a tax free threshold of $35-40K for singles and 50K for those with children.  Gut the welfare system so it only provides assistance to those on the bottom 3 income deciles.


----------



## Julia (3 December 2014)

banco said:


> It should be tied to some multiple of the age pension ie if you have accumulated enough money to be able to live on 200% of the pension for 25 years then you shouldn't be able to get any more super tax concessions etc.



That doesn't sound unreasonable.  



sydboy007 said:


> We have to stop treating the primary residence as being invisible to pension system.  Pretty much every Australian views housing as an asset rather than a home these days, so start treating it like one.



You're making an assumption there.    I think most people really want to live in a home they own because they can change it, do what they like, have a sense of security.

How would your land value idea work, given the huge variation in values between mid capital city etc and the boondocks?



> Kill off the tax churn that is a major feature of the system.  Get rid of the dead hand of Govt at each step of taking and giving.  We might be better off with a tax free threshold of $35-40K for singles and 50K for those with children.  Gut the welfare system so it only provides assistance to those on the bottom 3 income deciles.



Yep, agree.

Also, I know a lot of people disagree, but I'd like to see an obligation for a proportion of pension to be taken as allocated pension.  Just not fair for people to spend the lump sum so they can then access age pension.
I know "it's my money, I'll do what I like with it" is popular, but it's about time we faced up to being a bit more realistic.  If you get the tax concessions, then you have an obligation to spend those accordingly.


----------



## sydboy007 (3 December 2014)

Julia said:


> You're making an assumption there.    I think most people really want to live in a home they own because they can change it, do what they like, have a sense of security.
> 
> How would your land value idea work, given the huge variation in values between mid capital city etc and the boondocks?




People talk about housing as a financial asset these days.  It's all about the value of your property.  It's the BBG topic of choice.  Yes people still like the benefits of home ownership, but in general terms the family home is the biggest asset most people will have in their lives.

Where you live is to a degree based on wealth  You don't get millionaires living at Liverpool.  You don't get median wage earners living at point piper.  Wealthy people know buying an asset that can't be increased ie water front land or in desirable suburb - is a great way to store wealth.  That's why properties in NYC with views of central park go in the tens of millions.

So someone living outside of a capital city will in general terms have less wealth than one living in the city.  There's also the issue where the current system traps people in their current housing because of the generous invisibility of the primary residence.  Start treating the land component as visible and then it makes it easier for people to downsize or move to a cheaper suburb.

By focussing on the land value you don't need to start up a whole new bureaucracy and systems to calculate what should be included in the assets tests.  There's also well understood methods to seek a variation if you believe the land valuation is incorrect.



Julia said:


> Also, I know a lot of people disagree, but I'd like to see an obligation for a proportion of pension to be taken as allocated pension.  Just not fair for people to spend the lump sum so they can then access age pension.
> I know "it's my money, I'll do what I like with it" is popular, but it's about time we faced up to being a bit more realistic.  If you get the tax concessions, then you have an obligation to spend those accordingly.




Now now Julia, everyone on this forum has been saying this doesn't happen, or for those that do it the balances are not that big so it doesn't matter.  I find it unfair that someone not owning their home has their $100K super balance fully accounted for, but someone with a $1M property (there's plenty of them in Sydney and Melbourne) can spend some money on renovations and get the full pension.  Much fairer to maybe treat the super balance at retirement a bit like the way gifting works _(Any gift or gifts with a total value greater than the allowable amounts will be assessed as a deprived asset for 5 years from the date of gift and will be subject to the income deeming provisions)_.  I'd prefer to see the 5 years increased as the balance of super spent increases and also still be part of the pension assets test.  That way there wouldn't be an incentive to scoot off on a holiday or spend $50K renovating the house.


----------



## sptrawler (3 December 2014)

sydboy007 said:


> People talk about housing as a financial asset these days.  It's all about the value of your property.  It's the BBG topic of choice.  Yes people still like the benefits of home ownership, but in general terms the family home is the biggest asset most people will have in their lives.
> 
> Where you live is to a degree based on wealth  You don't get millionaires living at Liverpool.  You don't get median wage earners living at point piper.  Wealthy people know buying an asset that can't be increased ie water front land or in desirable suburb - is a great way to store wealth.  That's why properties in NYC with views of central park go in the tens of millions.
> 
> ...



The other way is to bring back death duties.





sydboy007 said:


> Now now Julia, everyone on this forum has been saying this doesn't happen, or for those that do it the balances are not that big so it doesn't matter.  I find it unfair that someone not owning their home has their $100K super balance fully accounted for, but someone with a $1M property (there's plenty of them in Sydney and Melbourne) can spend some money on renovations and get the full pension.  Much fairer to maybe treat the super balance at retirement a bit like the way gifting works _(Any gift or gifts with a total value greater than the allowable amounts will be assessed as a deprived asset for 5 years from the date of gift and will be subject to the income deeming provisions)_.  I'd prefer to see the 5 years increased as the balance of super spent increases and also still be part of the pension assets test.  That way there wouldn't be an incentive to scoot off on a holiday or spend $50K renovating the house.




You are really starting to nail it Syd, I think you could just about present your suggestion as a viable platform.
For what it's worth, well done.


----------



## Julia (3 December 2014)

sydboy007 said:


> People talk about housing as a financial asset these days.  It's all about the value of your property.  It's the BBG topic of choice.  Yes people still like the benefits of home ownership, but in general terms the family home is the biggest asset most people will have in their lives.



That doesn't alter the basic premise that the ownership of the home is primarily a personal security and even 'emotional warmth' concept.



> By focussing on the land value you don't need to start up a whole new bureaucracy and systems to calculate what should be included in the assets tests.  There's also well understood methods to seek a variation if you believe the land valuation is incorrect.



Could you explain how this would work?  That's what I asked earlier.  When you have X sqm of house of similar standard in Sydney CBD on the one hand and the same in regional Australia, obviously they will be worth vastly different amounts.  How are you going to address the tax you suggest on both of these?


----------



## sydboy007 (5 December 2014)

Julia said:


> Could you explain how this would work?  That's what I asked earlier.  When you have X sqm of house of similar standard in Sydney CBD on the one hand and the same in regional Australia, obviously they will be worth vastly different amounts.  How are you going to address the tax you suggest on both of these?




The house is irrelevant.  The value based on location is irrelevant.  In general terms the more valuable the land you own, the wealthier you are.  Most of that value hasn't been "earned".  I've not done anything to have caused the value of my small 127 sqm of land in the inner west of Syd to jump from $165K in 97 to $500K in 2013.  Seems one way to bring some of the economic rent back into the public purse, and regain some of the privatised profits from public infrastructure spending.

Base the pension assets test on the value of the unimproved land.  This is pretty much how council rates work.

The information is already available to the Government.  It would be a very easy system to implement, it would also be pretty cheap to implement.  Most likely would need to bring in some for of Govt subsidised reverse mortgage scheme ie CPI interest rate - so those seeing their pension reduced would still have enough income to live on.

You'd definitely need to provide an increase in the pension assets tests limits, but raise them too much and there wouldn't be much of a saving on the aged pension.


----------



## Bill M (5 December 2014)

Yesterday I bumped into a 74 year old man whilst I was on one of my walks. We got on to talking about pensions and savings.

He went on to say that when he was 6 Months away from turning 65 he went to see Centerlink about getting his government funded pension. The only problem was that Centerlink told him he had too much money and was not entitled to one. He said that it was his right and that he worked all of life and felt that he wasn't going to get duded by the Government. 

He ended up disposing his assets in ways that when he did turn 65 he was entitled to a full pension. He said, "now I have everything, my pension, health card and all the perks". He said, I just don’t think it is fair that someone can spend their whole life drinking, smoking and gambling their money away whilst another person who saves his money, buys a house and then gets penalised for it. I kind of saw the old mans point of view and why he was thinking like he was.

The reason why I mention this is because there are many Aussies out there that will go to all lengths in order to get a Government funded pension. It just doesn't matter what the rules are, there will always be a way of getting around them legally. I think over taxing, penalising and complicating the Super system is the wrong way to go. People need to have reasons to save, otherwise they will put the whole deal in the too hard basket and say things like, why should I save, anymore than $XXX in the bank or super and they will take my pension away.

The Super system encourages me away from the pension system, isn't that a good thing?


----------



## poverty (5 December 2014)

Bill M said:


> The Super system encourages me away from the pension system, isn't that a good thing?




Only because you're a member of a forum like this.  The average joe, with the socialist welfare mentality that we have allowed to breed in this country cannot leave free money on the table.  He will take his super as a lump sum and dispose of it any way he can.  Gotta get that pension, or, gotta get that part pension.  Buy a caravan and spend a few years travelling Australia blowing your super and you'll be on that free-welfare time befre you know it, with all the perks.  Gotta blow the money, gotta blow it, gotta blow it to get the free money.  This is Australia.


----------



## banco (5 December 2014)

Bill M said:


> Yesterday I bumped into a 74 year old man whilst I was on one of my walks. We got on to talking about pensions and savings.
> 
> He went on to say that when he was 6 Months away from turning 65 he went to see Centerlink about getting his government funded pension. The only problem was that Centerlink told him he had too much money and was not entitled to one. He said that it was his right and that he worked all of life and felt that he wasn't going to get duded by the Government.
> 
> ...




Next time you run into him he'll probably complain about the deficit.


----------



## FxTrader (7 December 2014)

poverty said:


> The average joe, with the socialist welfare mentality that we have allowed to breed in this country cannot leave free money on the table.  He will take his super as a lump sum and dispose of it any way he can.  Gotta get that pension, or, gotta get that part pension.  Buy a caravan and spend a few years travelling Australia blowing your super and you'll be on that free-welfare time befre you know it, with all the perks.  Gotta blow the money, gotta blow it, gotta blow it to get the free money.  This is Australia.



The scenario you describe here would only apply to those with relatively small super balances and even then represents poor planning and decision making.  If one is determined to collect a full or part pension from the government then restructuring asset allocation to store wealth in your PPOR and minimize assessable assets to meet assets test limits must be your priority. Millionaire property owners collecting the pension are now quite common and politicians don't have the will or courage to propose a change to this situation.


----------



## Bill M (7 December 2014)

FxTrader said:


> Millionaire property owners collecting the pension are now quite common and politicians don't have the will or courage to propose a change to this situation.




I have a friend right now who is relocating to his principle place of residence in Sydney worth $1.5 Million and his reason why was "I hope to pick up a bit more of the government pension". He was renting it out previously but if he moves in the rents gone and the Governments picks up his pension tab.


----------



## Julia (7 December 2014)

The following is summary from Trish Power of "Superguide" on today's release of recommendations by David Murray.  As she points out, they are recommendations only so hopefully not too much hysteria will be generated by an assumption that they will necessarily all be implemented.



> Note: The items below are only recommendations and the federal government is consulting with industry and consumers until 31 March 2015 before making any final decisions on the recommendations. I encourage all readers to make submissions about any recommendation that you are concerned about. (You can access the full FSI Final Report at the end of this article). I will expand on some of these recommendations in the December 2014 newsletter.
> 
> Ban use of limited recourse borrowing arrangements by super funds (that is, by SMSFs). The FSI committee describes LRBAs as ‘direct borrowing’ which is not strictly correct, since there is an interposed trust used between the SMSF and the lender, but the key message remains the same. The FSI committee recommend that LRBAs no longer be used by super funds, restricting the ability of SMSFs to use gearing to purchase fund assets. Current arrangements would be allowed to continue. I will expand on this recommendation in the December 2014 newsletter.
> Enshrine in legislation core objectives of superannuation system. Any policy proposals would then need to be consistent with these objectives. The FSI Final Report suggests objectives (Table 3 on page 95) which SuperGuide will publish in the December 2014 newsletter, and the report also recommends establishing a publicly funded independent body to assess the superannuation system’s performance and report on policy changes.
> ...


----------



## sptrawler (8 December 2014)

Julia said:


> The following is summary from Trish Power of "Superguide" on today's release of recommendations by David Murray.  As she points out, they are recommendations only so hopefully not too much hysteria will be generated by an assumption that they will necessarily all be implemented.




Very interesting reading, Murray has taken a very broad view with his recommendations, one would think the white paper will have a more thorough and in depth approach.


----------



## sydboy007 (8 December 2014)

Bill M said:


> I have a friend right now who is relocating to his principle place of residence in Sydney worth $1.5 Million and his reason why was "I hope to pick up a bit more of the government pension". He was renting it out previously but if he moves in the rents gone and the Governments picks up his pension tab.






Julia said:


> The following is summary from Trish Power of "Superguide" on today's release of recommendations by David Murray.  As she points out, they are recommendations only so hopefully not too much hysteria will be generated by an assumption that they will necessarily all be implemented.




The politico housing industry has already fired off a few broad shots to try and minimise and changes.

From Housing Industry Association chief economist Harley Dale. _“Any reduction in negative gearing provisions for residential property would increase rents and lower Australian living standards. The capital gains tax exemption for the family home is an indelible part of Australia’s social fabric as well as its economic system”…_

Someone needs to educate him to the fact that those buying rental properties have only continued to increase their purchasing of pre existing dwellings since Ng was reintroduced, though his views on the tax free status of the primary residence will resonate with the voters.

I have to say I'm surprised at how the poachers have turned into game keepers.  Doubt Abbott was expecting anything like this to be dumped on him.  Lets hope the Govt has the intestinal fortitude to push through most of what Murray has recommended.  Certainly a better use of political capital than continually reinventing PPL to continued calls for its dropping.

Removing gearing for super would be good.

Am sure the FIRE sectors will be lobbying Govt ministers full time during the summer holidays.


----------



## Wysiwyg (8 December 2014)

sydboy007 said:


> I have to say I'm surprised at how the *poachers have turned into game keepers*.



ASIC boss Greg Medcraft used those words when referring to his earlier years in America. His address was to the Press Club about the Financial Services Industry, insider trading etc. Must have been stretching the rules a bit eh.


----------



## sptrawler (8 December 2014)

sydboy007 said:


> Removing gearing for super would be good.
> .




Super funds gearing into property is going to end in tears, I wonder why Gillard allowed it?

Syd, with these non recourse loans that SMSF are using, does that mean the trustee has to use their own property as collateral?

If that is the case, it is just another 'rope the dope' excercise, they are propping up the property bubble and risking their PPR.

Just shows storm financial is alive and well.IMO

What's the end game? Industry funds can say SMSF trustees are incompetent, when it goes 'belly up'?


----------



## Junior (9 December 2014)

sptrawler said:


> Super funds gearing into property is going to end in tears, I wonder why Gillard allowed it?
> 
> Syd, with these non recourse loans that SMSF are using, does that mean the trustee has to use their own property as collateral?
> 
> ...




Limited Recourse means the bank can't pursue other SMSF assets, i.e. only the property used as security.  However, in the event the sale of the property doesn't extinguish the loan, they can pursue the member's assets including PPR.

Most geared SMSFs would have the property at max 80% LVR, and with SG contributions being paid into the Fund and other SMSF assets aside from the property, it would take significant change in circumstances for default to occur AND for the LVR to be >100%.  

Not saying it can't happen, but IMO it would take a significant increase in interest rates/unemployment and/or significant fall in property values before widespread carnage would occur in that space.

Having said that I agree super funds shouldn't be allowed to borrow.  If you want to borrow there's plenty of options available without using preserved super benefits.


----------



## sydboy007 (9 December 2014)

sptrawler said:


> Super funds gearing into property is going to end in tears, I wonder why Gillard allowed it?
> 
> Syd, with these non recourse loans that SMSF are using, does that mean the trustee has to use their own property as collateral?
> 
> ...




Technically Howard introduced gearing into super, Labor just opened the door wider by allowing the non recourse loans.

My understanding is a lot of the non recourse loans are moving the liability to the Trustees assets outside the SMSF.  To my mind they're not truly non recourse, but so far this has been allowed to happen.

I suppose the whole gearing into property within SMSFs is really just an extension of the tax issues surrounding property that Murray has highlighted.  

It will be interesting to see how it all pans out.  I think the voting power of those who have SMSFs would be so considerable I doubt the Govt would be willing to take them on in terms of limiting access to them.  You could make an argument though that there should be some form of education process and certification prior to someone starting up an SMSF so that they fully understand their role as trustee and the various investment options they have access to.  If you can explain why the value of a bond changes inversely to changes in interest rates, you probably don't have the financial nous to run your own investments competently.


----------



## sptrawler (9 December 2014)

Thanks Junior and Syd, for the explanation.


----------



## Bill M (20 January 2015)

We are still a nation of bad savers and Super may not be the ultimate cash cow after all but without it I think we would be much worse off.

---
The global survey of 16,000 showed Australians expect their retirement to last an average of 23 years, but their savings and investments are on track to run dry within 10 years, making it the largest gap in Asia and the fourth largest globally.

The research also revealed more than half of the nation has never saved specifically for retirement outside of compulsory superannuation.

"Australians are in denial about retirement planning," HSBC head of retail banking and wealth management Graham Heunis said.

https://au.news.yahoo.com/thewest/business/national/a/26032489/aussies-face-13-year-retirement-shortfall/
---


----------



## Julia (20 January 2015)

The News.com.au report on this also added:


> he Association of Superannuation Funds of Australia’s Retirement Standard said for Australians to have a “comfortable” retirement single people need $430,000 in retirement savings and couples need $510,000.
> 
> An ASFA spokeswoman said people are living longer in retirement than ever before ”” the average life expectancy in Australia is 83 ”” and they need to prepare for this.




I don't think I'm extravagant at all, but I wouldn't like to be retiring at 65, living to 83, and funding it on only $430,000.

I wonder what the main reason behind the lack of retirement savings is:  lack of interest - an uninformed assumption that when retirement eventually occurs the age pension will be just fine, thanks?

Or cost of living too high for people on lower and middle incomes to be able to save more than the compulsory amount?

If self funded, some frustration at not being able to access concessions available to pensioners on rates, pharmaceuticals etc?   As a result reportedly numbers of people spend some money in order to qualify for just the minimum age pension so as to acquire access to the concessions.


----------



## Tooth Faerie (20 January 2015)

Julia said:


> The News.com.au report on this also added:
> 
> 
> I don't think I'm extravagant at all, but I wouldn't like to be retiring at 65, living to 83, and funding it on only $430,000.




Me neither. That does not seem "comfortable" at all.



Julia said:


> I wonder what the main reason behind the lack of retirement savings is:  lack of interest - an uninformed assumption that when retirement eventually occurs the age pension will be just fine, thanks?
> 
> Or cost of living too high for people on lower and middle incomes to be able to save more than the compulsory amount?




Personal observations (anecdotal), it seems to be a bit of both.

Personally, I'm on a pretty low income but I'm able to save at least 50% of my income because I'm still living at home and read Sir O's budgeting post. My income would be mostly be used to survive if I had to live on my own.


----------



## sydboy007 (22 January 2015)

Julia said:


> The News.com.au report on this also added:
> 
> 
> I don't think I'm extravagant at all, but I wouldn't like to be retiring at 65, living to 83, and funding it on only $430,000.
> ...




$430K should be providing a 5% return, and it's still possible to get some bonds providing around the 6% yield.

That would provide around $21.5K in income each year

Under this scenario they would receive a $13K part pension, for a total income of $34.5K.  Definitely quite liveable when you don't have a mortgage and other expenses are modest.  Then factor in the many savings pensioners get for eg council (~$250) / water ($200+) / car rego ($200+).  In NSW you can also get a $235 rebate on your electricity bill over the year, and travel all day on public transport for just $2.50, which could add up to an extra $1000 of income equivalent.

This would compare to someone earning a pre tax income of $38244.  That would put you in about the middle of the 6th income decile ie you're in roughly the top third of income earners in the country.

I think these days the cost of rent and mortgages is making it very difficult for people to save extra.  The issue is likely to get worse as income growth stalls and turns negative, interest rates continue to get crushed, and bond yields continue to tumble.


----------



## qldfrog (22 January 2015)

Syd I disagree with your figures:


sydboy007 said:


> $430K should be providing a 5% return, and it's still possible to get some bonds providing around the 6% yield.
> 
> That would provide around $21.5K in income each year



5% return before inflation;
take into account inflation and you get half that return in actual relevant dollars.
so you will earn less than half your quoted figures in inflation adjusted dollars : around 10K in 2015 dollar equivalent;
That may at best cover your utility costs/insurances and home maintenance costs if you are lucky not to have any morgage or renting costs
you then basically fully rely on the pension for your meal
good luck!
PS I do not include any taxation on income at all.


----------



## sptrawler (4 April 2015)

sydboy007 said:


> $430K should be providing a 5% return, and it's still possible to get some bonds providing around the 6% yield.
> 
> That would provide around $21.5K in income each year
> 
> ...




Jeez Syd, I thought your ideas were rough, but they're really generous compared to what is being suggested.

http://www.abc.net.au/news/2015-04-02/millane-pension-deal-an-offer-hard-to-refuse/6368830

A short extract:

_The proposal, put forward by the Australian Council of Social Services (ACOSS), is to tighten the pension assets test by lowering the asset-free threshold for people who own their home, and to increase the taper rates so that eligibility for a part pension cuts out sooner. This also means that eligibility for the Seniors Health Card and associated benefits cuts out sooner too.

This is a prudent recommendation because* it will only affect wealthy pension recipients - those who own a home (of any value), with additional assets of $100,000 or more for singles and $150,000 or more for couples.* For Morrison, it is also appealing because it avoids the debate about whether to count the family home in the means test._ My bolds

Beautifull, just beautifull, $100k and your pension start reducing, magic, why save?

There won't be many people putting extra into super at the moment, and if they are, they need their heads read.lol

The Government will be in serious strife, if they floated the lunacy ACOSS is suggesting. It just changes super from a retirement enhancement system, to pension self funding system.
Absolute lunacy.

The first thing people will be doing, is seeking permission to withdraw contributions, made after tax.


----------



## banco (4 April 2015)

sptrawler said:


> Jeez Syd, I thought your ideas were rough, but they're really generous compared to what is being suggested.
> 
> http://www.abc.net.au/news/2015-04-02/millane-pension-deal-an-offer-hard-to-refuse/6368830
> 
> ...




It's not the people putting extra into super the government needs to worry about.  I'd be surprised if banning all extra super contributions didn't improve the Government's fiscal position as the money they would lose from tax concessions is likely to outweigh they money they'd otherwise by paying out in pensions etc.


----------



## sptrawler (4 April 2015)

banco said:


> It's not the people putting extra into super the government needs to worry about.  I'd be surprised if banning all extra super contributions didn't improve the Government's fiscal position as the money they would lose from tax concessions is likely to outweigh they money they'd otherwise by paying out in pensions etc.




I agree with you, the problem is what about the blue collar workers, who have been saving in super rather than the bank?

It is still their money, if they paid full tax on it, well it is like putting it in the bank, isn't it?

If they stop lump sum withdrawals, will it include the tax free component?


----------



## Ferret (4 April 2015)

sptrawler said:


> Beautifull, just beautifull, $100k and your pension start reducing, magic, why save?
> 
> There won't be many people putting extra into super at the moment, and if they are, they need their heads read.lol




I really don't understand this sort of thinking.  What's wrong with aspiring to be a self-funded retiree?  

I have no intention of ever taking any pension and living off the fairly meagre income that would allow that.  My aim is to have enough retirement funds to generate an income many times in excess of the pension.  

Getting funds into concessionally taxed super will help achieve this, so it makes perfect sense to be putting extra in now.


----------



## banco (5 April 2015)

sptrawler said:


> I agree with you, the problem is what about the blue collar workers, who have been saving in super rather than the bank?
> 
> It is still their money, if they paid full tax on it, well it is like putting it in the bank, isn't it?
> 
> If they stop lump sum withdrawals, will it include the tax free component?




Well if said blue collar worker takes out a lump sum and pisses it away on cruises etc. and five years later gets the pension then they become the taxpayer's problem.  

I understand with the disability pension if say you are in an accident and would otherwise be eligible for the disability pension but receive a compensation payout the Government will say to you "that payout should last 5 years and you'll be ineligible for the disability pension during those 5 years so make it last". 

If people could take lump sum withdrawals on the proviso that they are ineligible for the pension for a certain number of years (depending on the size of the withdrawal) that would be one thing but we aren't going to do that so restricting lump sum withdrawals is the only option.


----------



## banco (5 April 2015)

Ferret said:


> I really don't understand this sort of thinking.  What's wrong with aspiring to be a self-funded retiree?
> 
> I have no intention of ever taking any pension and living off the fairly meagre income that would allow that.  My aim is to have enough retirement funds to generate an income many times in excess of the pension.
> 
> Getting funds into concessionally taxed super will help achieve this, so it makes perfect sense to be putting extra in now.





Yes but why should the taxpayer help you generate an income many times in excess of the pension through favourable tax concessions?


----------



## Bill M (5 April 2015)

sptrawler said:


> This is a prudent recommendation because* it will only affect wealthy pension recipients - those who own a home (of any value), with additional assets of $100,000 or more for singles and $150,000 or more for couples.* For Morrison, it is also appealing because it avoids the debate about whether to count the family home in the means test.[/I] My bolds




What a silly idea, so the family home won't be counted and you are only allowed 100K in assets. Here's what will happen, people will simply sell their average homes and put most of their money into high end expensive ones and leave themselves with a $100K in the bank. Then Centrelink picks up the tab for a full pension, medical and other freebees. Isn't this what we are trying to avoid? Oh, and house prices keep going up.


----------



## sptrawler (5 April 2015)

banco said:


> Well if said blue collar worker takes out a lump sum and pisses it away on cruises etc. and five years later gets the pension then they become the taxpayer's problem.
> 
> I understand with the disability pension if say you are in an accident and would otherwise be eligible for the disability pension but receive a compensation payout the Government will say to you "that payout should last 5 years and you'll be ineligible for the disability pension during those 5 years so make it last".
> 
> If people could take lump sum withdrawals on the proviso that they are ineligible for the pension for a certain number of years (depending on the size of the withdrawal) that would be one thing but we aren't going to do that so restricting lump sum withdrawals is the only option.




So the only people who are eligible for pensions, are those who spend all their money on cruises, holidays, flash cars, during their working lives.

To me, that is double dipping.

Why should the person, who saves during his/her working career be discriminated against, when they want to spend it?
As opposed to those who spent all their money and are eligible for a handout.


----------



## sptrawler (5 April 2015)

I see Nick Xenophon is suggesting tightening the asset test for "wealthy pensioners".

I wonder if he will be including himself in the list, doesn't he have 20 investment properties?

Will he be taking his taxpayer funded tax free politicians pension, or will he say he shouldn't qualify.


----------



## DB008 (5 April 2015)

Letting people take lump sum super payouts, then having them on the pension defeats the purpose of super.

It should be an investment vehicle and gives the owner an income (like dividends) to survive on, instead of them relying on the Government for help.


David Murray was on Richo+Jones (Sky) a few weeks ago. He was brilliant and they spoke about 'super'

http://www.skynews.com.au/video/program_richojones/2015/03/18/richo---jones-march-17.html


----------



## Ferret (5 April 2015)

banco said:


> Yes but why should the taxpayer help you generate an income many times in excess of the pension through favourable tax concessions?




I'm not saying they should, and I expect there will be changes to this.  

Still, these exist at the moment so back to the point I was making - Why do you need your head read for taking advantage of this?


----------



## sptrawler (5 April 2015)

DB008 said:


> Letting people take lump sum super payouts, then having them on the pension defeats the purpose of super.
> 
> It should be an investment vehicle and gives the owner an income (like dividends) to survive on, instead of them relying on the Government for help.
> 
> ...




I agree you shouldn't be able to take lump sums from your concessionally treated super. I feel you should be able to take lump sums from your tax free component.

To say you can only take your tax free component as a pension, is the same as telling people they can't withdraw lump sums from the bank.

For example someone has $200k in the bank, he gets $6,000 interest tax free and most of his pension. He wants a holiday or a car or to upgrade his house, he just withdraws the money.

The same person puts the $200k into super after tax, your saying he can only withdraw it as a pension, sounds weird to me.


----------



## DB008 (5 April 2015)

sptrawler said:


> I agree you shouldn't be able to take lump sums from your concessionally treated super. I feel you should be able to take lump sums from your tax free component.
> 
> To say you can only take your tax free component as a pension, is the same as telling people they can't withdraw lump sums from the bank.
> 
> ...




All l said;

Super should be used a vehicle that gives you dividends so that you shouldn't have to rely on the Government

If you take a lump sum payout, spend it all, then you are on the Government pension and back to square one


----------



## sptrawler (5 April 2015)

DB008 said:


> All l said;
> 
> Super should be used a vehicle that gives you dividends so that you shouldn't have to rely on the Government
> 
> If you take a lump sum payout, spend it all, then you are on the Government pension and back to square one




Yes, but I said all money in super hasn't been given a tax concession.

What is the difference between taking a lump out of your bank account, or taking a lump out of the tax free component of your super account.
Both enable the person to access the pension.

All of this hype, will only stop people putting voluntary contributions into super, a person can hold $500k outside of super and pay no tax.
Why would they put it in super, if they are going to be told how they can spend it.

Don't get me wrong, I'm pulling a self funded pension and had no thought of pulling any lumps of  money out.
The current political talk about super, is making me have second thoughts, in case they do enact something stupid.


----------



## banco (5 April 2015)

sptrawler said:


> Yes, but I said all money in super hasn't been given a tax concession.
> 
> What is the difference between taking a lump out of your bank account, or taking a lump out of the tax free component of your super account.
> Both enable the person to access the pension.
> ...




All money in super has been given a tax concession (unless your accountant is an idiot).


----------



## sptrawler (5 April 2015)

banco said:


> All money in super has been given a tax concession (unless your accountant is an idiot).




If the money was put in non concessionally, it hasn't been given a tax concession, its earnings may have.

However, now that the tax free threshold has been lifted to $18k. 
I doubt there is much advantage for having super, if the account balance is less than $300k.


----------



## Bill M (5 April 2015)

sptrawler said:


> Yes, but I said all money in super hasn't been given a tax concession.
> 
> What is the difference between taking a lump out of your bank account, or taking a lump out of the tax free component of your super account.
> Both enable the person to access the pension.
> ...




I agree with everything you say. Right now I am waiting for the May budget, if there is anything detrimental to my super savings then I will be pulling the lot out of one of my funds. Restricting people on what they can do with their money under rules they have abided by for the last 25 years will destroy the super industry.


----------



## Bill M (5 April 2015)

banco said:


> All money in super has been given a tax concession (unless your accountant is an idiot).






sptrawler said:


> If the money was put in non concessionally, it hasn't been given a tax concession, its earnings may have.




That is exactly right. 70% of all my super contributions were put in non concessionally (after tax).


----------



## sptrawler (5 April 2015)

Bill M said:


> That is exactly right. 70% of all my super contributions were put in non concessionally (after tax).




That is the whole problem Bill, Labor has demonised super, and everyone thinks it is money that has had a tax advantage. You just have to read what banco says, to realise everyone has half ar$ed understanding of the system.

I'm the same as you 65% of the money in my super is tax free and like you, I will be looking at removing a chunk to fall under the $18k tax free threshold outside of super.

Also the wife can get $18k tax free outside of super, then you can spend it as you like.

Funny I liked the idea of never claiming a pension, now I think it is a stupid old fashioned idea, get with the younger generation.

Super is going to be a basket case, wait and see the funds scream with the reduction of non concessional contributions.lol


----------



## sptrawler (5 April 2015)

Bill M said:


> I agree with everything you say. Right now I am waiting for the May budget, if there is anything detrimental to my super savings then I will be pulling the lot out of one of my funds. Restricting people on what they can do with their money under rules they have abided by for the last 25 years will destroy the super industry.




Just a thought Bill, may be time to evaluate AMP etc.


----------



## Pager (6 April 2015)

About half my super is non concessional and I still have a few years before I retire, so hope im not going to regret doing that 

I have a feeling that much of what is speculated has been exaggerated by the media, so any new measurers and restrictions wont be anywhere near as severe or restrictive as we think, all the same this has highlighted to me that in the coming years the government of the day could change the rules and there would be not much I can do about it, so having my money in and out of super is maybe a good idea, not so tax effective now but I really think there is another risk factor we need to take into consideration when putting additional funds into super.

So despite what happens in May and what promises are made (if any) I will be adding very little additional funds other than employer and salary sacrifice if its tax effective to do so in the future.


----------



## sptrawler (20 April 2015)

At last some of the experts are telling the truth about super.

http://www.smh.com.au/business/the-...ugh-to-retire-in-comfort-20150419-1modsc.html

One of the better statements in the article says:

In the quest to ensure our super taxes are equitable, there's the potential for heavy collateral damage to be sustained to a large cohort of the people we're trying to help. These are the middle-income households hoping to accumulate sufficient nest eggs to mainly self-fund a reasonably comfortable retirement," said Mr Cooper, who chaired the super system review in 2010.


----------



## sydboy007 (20 April 2015)

sptrawler said:


> At last some of the experts are telling the truth about super.
> 
> http://www.smh.com.au/business/the-...ugh-to-retire-in-comfort-20150419-1modsc.html
> 
> ...




yet no one actually comes out and specifies what a self-funded _reasonably comfortable retirement_ is.

If the $$ foregone in tax revenue are greater than the $$ saved via lower pension payments, and the revenue lose benefits a small wealthy percentage of the population, then how is the current overly generous system benefiting taxpayers, especially gen x and those that come after them?


----------



## sptrawler (20 April 2015)

sydboy007 said:


> yet no one actually comes out and specifies what a self-funded _reasonably comfortable retirement_ is.
> 
> If the $$ foregone in tax revenue are greater than the $$ saved via lower pension payments, and the revenue lose benefits a small wealthy percentage of the population, then how is the current overly generous system benefiting taxpayers, especially gen x and those that come after them?




I'm talking about never pulling any Government pension, not topping up your retirement with part pension.

With $1m you will end up on a Government pension, be it full or part.

I think people should aim to have enough, that you can have a comfortable retirement and never claim a Government pension.

If interest rates were at the long term norm of 7 - 8%, $1m would possibly be adequate.

However the likely hood, of a low interest rate environment prevailing for some time, seems more probable. 

If that proves correct $1m will be no where near enough.

As you have said before, RBL's would cap the amount of concession being given.


----------



## shouldaindex (20 April 2015)

The only time I hear $1m isn't enough is from managed fund companies.

In that article Challenger actually just shows how much of a rip of their annuities are if $1m only gets you 3.3% P.A.

Even savings accounts are about 4% and you don't lose your $1m.


----------



## Value Collector (20 April 2015)

sptrawler said:


> If interest rates were at the long term norm of 7 - 8%, $1m would possibly be adequate.
> 
> .




That can be achieved easily if you use a share market index.

I don't think people should try and live off bank interest, a portfolio made up of property, shares and bond securities should get a decent cash flow and growth in excess of inflation.


----------



## sptrawler (20 April 2015)

Value Collector said:


> That can be achieved easily if you use a share market index.
> 
> I don't think people should try and live off bank interest, a portfolio made up of property, shares and bond securities should get a decent cash flow and growth in excess of inflation.




When in retirement, you don't have the ability to recover loses, that is why SMSF carry a reasonable percentage in cash.
One it gives them a buffer, so they don't have to sell at depressed prices.
Two it gives them the option to buy, if there is a GFC event. It is no good having opportunity, with no cash to take it up.
To have a super fund made up of property, shares and bond securities, what would you think are reasonable percentages of each?


----------



## Vixs (20 April 2015)

shouldaindex said:


> The only time I hear $1m isn't enough is from managed fund companies.
> 
> In that article Challenger actually just shows how much of a rip of their annuities are if $1m only gets you 3.3% P.A.
> 
> Even savings accounts are about 4% and you don't lose your $1m.




Love to know where I can get 4% on $1m at the moment.

That looks like roughly the rate for a RCV100 lifetime annuity based on current rates, so in that case they wouldn't be losing their $1m either. Not enough information to make a judgement and quite frankly pretty poor by them for providing the figure with so little context, or by the journalist for not providing the full context - either or.

A lot of variables impact the pricing of annuities - payment frequency, inclusion of a reversionary beneficiary, surrendering withdrawal guarantees... Again, not enough info to make a judgement comparing it to anything else.


----------



## sptrawler (20 April 2015)

Vixs said:


> Love to know where I can get 4% on $1m at the moment.




I'm interested to see the asset allocation of $1m in property, shares and bonds, also what return is expected.

Apparently, it will give you a decent cash flow and keep up with inflation.

Give me the info on that, Please.


----------



## shouldaindex (21 April 2015)

Prior to the last interest rate cut there were savings accounts and term deposits at 4%.  

Now they look like around 3.5-3.7%.

Which is still higher than the Challenger quote of paying 1m for 33k (3.3%).  You can keep your capital for 3.5% savings or term deposits, which are likely to be higher rates in the future as well.


----------



## Triathlete (21 April 2015)

Vixs said:


> Love to know where I can get 4% on $1m at the moment.




Try this site...

www.fiig.com.au

Indicative rates 
at Monday 13 April 

                                      Wholesale investors only*             Retail investors 
Fixed rate bonds                        up to 6.54%                      up to 6.42%  
Inflation linked bonds^               up to 5.39%                      up to 5.33%  
5-bond portfolio                         up to 6.08%                      up to 5.47%  
1 year term deposits#                up to 3.00%                      up to 3.00%


----------



## qldfrog (21 April 2015)

all that with a 2 to 3% inflation?

I target living till 95 (average expectancy I am told ) so 20 years of income with current return environment and a real inflation around 2/3 % (quite conservative when you consider a retiree main expenses: medical, rate and power, food and services)
And does the 1million include or exclude a fully paid PPOR?
if it exclude it, and assume you have an asset of 0.5million extra to sell in your later year that might be enough, but i would not take that bet...


----------



## sydboy007 (21 April 2015)

Vixs said:


> Love to know where I can get 4% on $1m at the moment.
> 
> That looks like roughly the rate for a RCV100 lifetime annuity based on current rates, so in that case they wouldn't be losing their $1m either. Not enough information to make a judgement and quite frankly pretty poor by them for providing the figure with so little context, or by the journalist for not providing the full context - either or.
> 
> A lot of variables impact the pricing of annuities - payment frequency, inclusion of a reversionary beneficiary, surrendering withdrawal guarantees... Again, not enough info to make a judgement comparing it to anything else.




Envetra 2025 ILB, SYD 2020 or 2030 ILB, G8 Education, JEM Southbank, Mackay Sugar, ElectraNet, Plenary Justice SA, are just a few companies with corporate bonds providing in excess of 4% yield, son in excess of 5%

AYF invests in various hybrids and offers aroudn 6.5% gross yield

MXUPA also offers over a 6% yield

EPX is currently offering 9% yield.

yes, it's riskier than keeping the money in cash, but if someone chooses to keep your money in cash when there's options providing a good deal more yield with not too great an increase in risk, then they need to accept the cost involved with their choice.


----------



## sydboy007 (21 April 2015)

sptrawler said:


> When in retirement, you don't have the ability to recover loses, that is why SMSF carry a reasonable percentage in cash.
> One it gives them a buffer, so they don't have to sell at depressed prices.
> Two it gives them the option to buy, if there is a GFC event. It is no good having opportunity, with no cash to take it up.
> To have a super fund made up of property, shares and bond securities, what would you think are reasonable percentages of each?




2 years of cash reserves would be adequate.

There will be no fixed ratio as people will have different requirements

For myself I'd be comfortable with bonds that cover my essentials and a bit more.  That way I know I can survive the ups and downs of the markets.  Inflation linked bonds will help to give you a real % income every quarter.

After that I'd be looking at some hybrids for extra yield and shares to provide a bit of growth.  In the current market I'd be investing in foreign shares to hedge against a falling dollar and the likely better growth prospects of other economies relative to Australia.

I hate the financial repression going on with those in debt favoured over those lending, but I can't change it so I have to work within the system as it is.  There's still plenty of opportunities that are providing a decent yield relative to the risk compared to a savings account.


----------



## sptrawler (21 April 2015)

sydboy007 said:


> 2 years of cash reserves would be adequate.
> 
> There will be no fixed ratio as people will have different requirements
> 
> ...




I have probably been a bit risk averse and will have to look into bonds and hybrids, as this low interest period appears to be setting in for the longer term..

As for overseas shares, the capital growth is there, however you are always chasing the next winner. But with a falling dollar, there is a lot of upside.

While franking is in operation, it fits well with the SMSF, as you can have a bit of a sit and forget attitude.


----------



## Value Collector (21 April 2015)

sptrawler said:


> When in retirement, you don't have the ability to recover loses, that is why SMSF carry a reasonable percentage in cash.
> ?




pretty much every big crash has come after a big boom, so the crash is usally largely offset by the growth in the years before, and the recovery in the years after.

I am not saying go 100% shares at the top and then sell out at the bottom, you could just continue collecting dividends on the shares and property throughout the crash and supplement the dividends by drawing down on the cash component.




> To have a super fund made up of property, shares and bond securities, what would you think are reasonable percentages of each




What ever works for you, but if you had $1,000,000. You could break it up as follows.

$400,000 shares
$300,000 property securities
$150,000 Bonds and hybrids
$150,000 cash / fixed interest

That mixed would probably throw off $50K a year in tax advantaged income, and that income would grow over time because the shares and the property provide a hedge against inflation but should also have organic growth.

If you owned your own home, You should be able to survive on $50K, however over time you can also increase this by drawing down some capital growth, or even your original principle.

If you plan on living 20years in retirement, you need growth assets, cash won't ever cut it, Inflation, low interest and the need to draw down capital far out weighs the risk of a market crash.


----------



## Value Collector (21 April 2015)

sptrawler said:


> I have probably been a bit risk averse and will have to look into bonds and hybrids, as this low interest period appears to be setting in for the longer term..
> 
> As for overseas shares, the capital growth is there, however you are always chasing the next winner. But with a falling dollar, there is a lot of upside.
> 
> While franking is in operation, it fits well with the SMSF, as you can have a bit of a sit and forget attitude.




A broad cross section of the market like the ASX200 index should provide the cash flow and inflation hedge you need, and most superfunds will be able to offer you some diversified property securities. 

Just remember chasing high yield can be a trap, growth is very important, and asx 200 index I believe is the right mix of cashflow, growth potential and stability.


----------



## banco (21 April 2015)

sptrawler said:


> I have probably been a bit risk averse and will have to look into bonds and hybrids, as this low interest period appears to be setting in for the longer term..
> 
> As for overseas shares, the capital growth is there, however you are always chasing the next winner. But with a falling dollar, there is a lot of upside.
> 
> While franking is in operation, it fits well with the SMSF, as you can have a bit of a sit and forget attitude.




Chris Joye has written a few columns about how hybrids are much riskier than they appear to be.


----------



## Value Collector (21 April 2015)

banco said:


> Chris Joye has written a few columns about how hybrids are much riskier than they appear to be.




for sure, each issue has to be analysed on it's own merits, and the pros and cons weighed against taking a straight stock or bond position in the company.

Would probably recommend those not well versed in analysing securities to use a managed fund to gain access to such securities rather than picking individual issues, which normally leads them to just picking the ones with the highest yield.


----------



## Vixs (21 April 2015)

shouldaindex said:


> Prior to the last interest rate cut there were savings accounts and term deposits at 4%.
> 
> Now they look like around 3.5-3.7%.
> 
> Which is still higher than the Challenger quote of paying 1m for 33k (3.3%).  You can keep your capital for 3.5% savings or term deposits, which are likely to be higher rates in the future as well.




Again, that figure of 3.3% is nowhere near enough information to base an opinion on. It doesn't even include the age or gender of the annuitant, and again whether or not there is a reversionary beneficiary. It's like trying to get prices for a new car and basing it on "Must have an engine." I'm not some annuity cheerleader that feels the need to swing in and defend them, but I do want genuine, useful information out there if people are going to use it to form opinions.

Current term deposit rates for 12 months paid at maturity are in the vicinity of 2.5 - 3%. You can't plan retirement on at-call savings accounts with bonus rates and introductory offers - there is no certainty, not to mention there are often modest deposit size limits with those incentives (less than 100k etc).



Triathlete said:


> Try this site...
> 
> www.fiig.com.au
> 
> ...




Hi Triathlete, my sarcasm didn't translate very well across text. There is an enormous difference in terms of risk between cash and corporate bonds. I'm not sure what's included in those portfolios to get the 'up to' rates, but I'd put a wager on that it's not all federal government debt and bank deposits.

If you keep to the realms of sovereign debt for the sake of security, inflation linked bonds provide a point of difference to traditional government bonds. If you were to look at an ILB with a 15 year maturity in 2030, you're getting a 2.5% p.a. coupon paid quarterly indexed with CPI. Based on that bond, the price you are paying for what is now $112.43 face value is $149. That's a pretty rubbish yield of 0.317% p.a. ILBs trading near their adjusted face value are paying lovely coupons of 1 to 1.25% p.a. paid quarterly. Not much interest from me at this point in time. 

Regular old government bonds will get you yields of 1.5 - 2.75% at present, and with record low interest rates if I were a retiree I would not be keen to pile in for the long haul to hold them until maturity - when rates rise people are going to eat a loss on them in the short term as market yields rise and they trade closer to or below face value.



sydboy007 said:


> Envetra 2025 ILB, SYD 2020 or 2030 ILB, G8 Education, JEM Southbank, Mackay Sugar, ElectraNet, Plenary Justice SA, are just a few companies with corporate bonds providing in excess of 4% yield, son in excess of 5%
> 
> AYF invests in various hybrids and offers aroudn 6.5% gross yield
> 
> ...




When you're talking about the risk free rate then jumping into corporate bonds and hybrids is a relatively great increase in risk. Terms on hybrids have gotten progressively worse for those taking them up in the chase for yield than the kind of offerings available pre-GFC. The conversion terms on most hybrids have gone from being instruments that truly made sense and you could get behind as an investment vehicle, offering a regular income with equity upside, to the current offerings where the conversion terms aren't based on the share price at issue but rather the share price at time of conversion - where's the equity upside compensation in that?



sydboy007 said:


> 2 years of cash reserves would be adequate.
> 
> There will be no fixed ratio as people will have different requirements
> 
> ...




You're right, there's no point bemoaning the woes of savers vs spenders. If we all saved the economy would be shafted as consumer spending drops. Our infinite growth dependent economic models require us to borrow, spend, consume, consolidate and repeat. It's not healthy, but we won't see much incentive given to savers. The real risk is exactly what's being documented in this thread - people cannot live off the income from low risk investments anymore and as a result are willing to accept growth asset risk that most can little afford to take.



banco said:


> Chris Joye has written a few columns about how hybrids are much riskier than they appear to be.




Absolutely. Haven't read their column but the carefree attitude many have towards hybrids, particularly perpetual notes, is not befitting the risks involved.

It feels like this will all end in tears again.


----------



## Vixs (21 April 2015)

On the topic of superannuation and the government, Tony Abbott restated that there will be no changes to superannuation policies until the next election. I look forward to that promise being upheld, or the roasting that the government thoroughly deserve if they will make promises like that and then break them.

Little faith in either side of parliament's ability to make the right choice with regards to superannuation policy.


----------



## sydboy007 (21 April 2015)

the below graphs shows how poorly targeted the super + pension system really is

http://www.abc.net.au/news/2015-04-21/super-tax-concessions-fc/6365098


----------



## sptrawler (21 April 2015)

From those graphs, it would appear it is only the top 10% that is causing an issue. 
If you only view the graphs upto 90%, when you consider the system is still young, it isn't bad.

Obviously things need tweaking, however it isn't as bad as I presumed.

One has to keep in context, that super was meant to be a pension supplement not a pension replacement, it was to encourage people to save to enhance their retirement.

The side benefit for the Government, was less dependence on the pension due to means testing and a sovereign wealth fund of sorts.


----------



## craft (21 April 2015)

sydboy007 said:


> the below graphs shows how poorly targeted the super + pension system really is
> 
> http://www.abc.net.au/news/2015-04-21/super-tax-concessions-fc/6365098
> 
> ...




I wonder if the pretty graphs take into account the fairly recent DIV 293 tax which results in a 30% tax rate on contributions for income over 300K?  

I suspect most over 300K will be structuring outside super to cap their tax rate at the 30% corporate rate any way.  So the concession calculations to the top end are more ‘notional’ then real life.


----------



## sydboy007 (21 April 2015)

craft said:


> I wonder if the pretty graphs take into account the fairly recent DIV 293 tax which results in a 30% tax rate on contributions for income over 300K?
> 
> I suspect most over 300K will be structuring outside super to cap their tax rate at the 30% corporate rate any way.  So the concession calculations to the top end are more ‘notional’ then real life.




They're also purely based on SG contributions and don't take into account the use of salary sacrificing or non concenssional contributions.


----------



## sydboy007 (21 April 2015)

sptrawler said:


> From those graphs, it would appear it is only the top 10% that is causing an issue.
> If you only view the graphs upto 90%, when you consider the system is still young, it isn't bad.
> 
> Obviously things need tweaking, however it isn't as bad as I presumed.
> ...




It does seem perverse that the true middle class are being shafted mainly to provide the excess benefits to those 10%, which would be over 1 million individuals.  The $$$ would probably help fund all of Gonski, something that would improve the long term economic potential of the country.

It's not like we're facing a $40B deficit and possibly the fastest fall in the ToT over the last 100 years that we can continue with this generosity towards those who don't really need the help, yet we're talking about cutting back on the increase in the pension to limit costs, increasing the costs of Uni and TAFE fees.  If all tax reform is on the table, why does the Govt treat super and NG as sacred white cows immutable to change?


----------



## sptrawler (22 April 2015)

sydboy007 said:


> It does seem perverse that the true middle class are being shafted mainly to provide the excess benefits to those 10%, which would be over 1 million individuals.  The $$$ would probably help fund all of Gonski, something that would improve the long term economic potential of the country.
> 
> It's not like we're facing a $40B deficit and possibly the fastest fall in the ToT over the last 100 years that we can continue with this generosity towards those who don't really need the help, yet we're talking about cutting back on the increase in the pension to limit costs, increasing the costs of Uni and TAFE fees.  If all tax reform is on the table, why does the Govt treat super and NG as sacred white cows immutable to change?




It will be interesting to see what actually comes out of the tax 'white' paper, also which side of politics is prepared to take the unsavoury aspects, to the next election.

Up to now, neither side has addressed the real issues, for fear of electoral backlash.


----------



## sptrawler (22 April 2015)

sydboy007 said:


> It does seem perverse that the true middle class are being shafted mainly to provide the excess benefits to those 10%, which would be over 1 million individuals.  The $$$ would probably help fund all of Gonski, something that would improve the long term economic potential of the country.




This is where the story becomes confusing to the general population.
Some say as you do there are 1million individuals who have excessively high balances in super.

Then you get others making theses statements:

In all it has been estimated that some *60,000* superannuation accounts have balances exceeding $1.5 million at present.

A recent assessment by the Association of Superannuation Funds of Australia put the number of superannuation millionaires with $10 million-plus account balances at* 475*. ASFA also concluded there were another *24,000 *people with $2 million-plus accounts - both groups earning hundreds of thousands and even millions in tax-free income from their superannuation.

The above came from this article:

http://www.theage.com.au/federal-po...-future-labor-government-20150421-1mq49r.html 

It is difficult to reconcile who is talking facts and who is fudging.

But it is obvious something needs doing, $10m in super generating tax free income and earnings, is as obscene as top politicians getting $300,000 tax free, indexed for life.

They have lost the plot.lol


----------



## Ferret (22 April 2015)

So Labor want to put a 15% tax on super earnings over $100,000.  Didn't they want to do something similar when in government but backed away because it was going to be too complex?

The problem is that as a long term investment, Super has to have very good years sometimes (>15%) to make up for the negative years.  

A balance of $667k will be hit by the tax in a 15% year.  That's the sort of balance many ordinary people would have.


----------



## craft (22 April 2015)

Ferret said:


> So Labor want to put a 15% tax on super earnings over $100,000.  Didn't they want to do something similar when in government but backed away because it was going to be too complex?
> 
> The problem is that as a long term investment, Super has to have very good years sometimes (>15%) to make up for the negative years.
> 
> A balance of $667k will be hit by the tax in a 15% year.  That's the sort of balance many ordinary people would have.




Big difference seems to be only earnings in the pension phase will be impacted. 



> From July 1, 2017,* once a person is retired and drawing *on their super, the first $75,000 in super income will remain tax free but earnings above that would be taxed at the concessional rate of 15 per cent.




All things considered it seems pretty reasonable too me. You have access to your money at that stage - so if you don't like it take your money out. A maximum cap in the retirement phase would probably be cleaner and simpler. ie anything over 2Mill has to be removed immediately from the tax favoured super environment. 

My issue with Labors  last proposal was they were changing the rules during the period when you don't have access. A breach of terms under which money was put in without the means to remove it again.


----------



## Ferret (22 April 2015)

$75k is proposed as you point out.  I still don't like that you get taxed in the good years, but presumably no tax credits for the bad years.

Not sure about having to immediately take out funds if over $2m.  Could work, but might be difficult for someone with a property in an SMSF.


----------



## Junior (22 April 2015)

Ferret said:


> $75k is proposed as you point out.  I still don't like that you get taxed in the good years, but presumably no tax credits for the bad years.
> 
> Not sure about having to immediately take out funds if over $2m.  Could work, but might be difficult for someone with a property in an SMSF.




A 15% return doesn't equal 15% earnings though.  It depends when gains are actually realised, and therefore assessed as income.

Also....if you're earning that much in super it's likely there's plenty of franking credits to offset any potential tax.

I bet it wouldn't raise anywhere near as much revenue as what they're claiming.


----------



## craft (22 April 2015)

Ferret said:


> I still don't like that you get taxed in the good years, but presumably no tax credits for the bad years.




Simple then - take the money out and get taxed at marginal rates starting at 32.5% for 75K. (but alas still no tax credits for the bad years either)


Then again maybe the proposed super option aint so bad even without a tax credit for the bad years.


----------



## orr (22 April 2015)

Ferret said:


> So  a 15% tax on super earnings over $100,000.
> 
> 
> A balance of $667k will be hit by the tax in a 15% year.  That's the sort of balance many ordinary people would have.




In this hypothetical good year the $667k superannuant would pay $7.50 in tax, on $100,050.00 presuming that they couldn't find $50 of costs.


----------



## Ferret (22 April 2015)

orr said:


> In this hypothetical good year the $667k superannuant would pay $7.50 in tax, on $100,050.00 presuming that they couldn't find $50 of costs.




Since 75k is the actual limit being proposed, the tax on $667k in the hypothetical 15% return good year would be $3757.50.


----------



## Junior (23 April 2015)

Ferret said:


> Since 75k is the actual limit being proposed, the tax on $667k in the hypothetical 15% return good year would be $3757.50.




No, it wouldn't.  

Unless you realise ALL capital gains for that particular financial year (i.e. actually sell all profitable investments, rather than holding), your super fund has no deductible expenses, and you receive no franked dividends as part of your return.

It's also worth noting that limit would presumably be per member.  So, for a couple there would be able to receive up to $150,000 in earnings completely tax free within your fund.  Still very generous!!


----------



## sptrawler (23 April 2015)

Junior said:


> No, it wouldn't.
> 
> Unless you realise ALL capital gains for that particular financial year (i.e. actually sell all profitable investments, rather than holding), your super fund has no deductible expenses, and you receive no franked dividends as part of your return.
> 
> It's also worth noting that limit would presumably be per member.  So, for a couple there would be able to receive up to $150,000 in earnings completely tax free within your fund.  Still very generous!!




That would only be if both members had similar amounts.
What about funds where the male member has the much larger sum? As is usually the case.
Balancing the sum takes time, if at all, due to contribution and age constraints.


----------



## Junior (23 April 2015)

sptrawler said:


> That would only be if both members had similar amounts.
> What about funds where the male member has the much larger sum? As is usually the case.
> Balancing the sum takes time, if at all, due to contribution and age constraints.




You are correct, I guess my point is, there will no doubt be strategies you can implement to take advantage of the tax free amount.  

Tax free earnings of up to $75k each within the super environment, combined with the tax free threshold for each member of a couple outside of super means you can still accumulate plenty of wealth for retirement, and pay very little tax.


----------



## sptrawler (23 April 2015)

Junior said:


> You are correct, I guess my point is, there will no doubt be strategies you can implement to take advantage of the tax free amount.
> 
> Tax free earnings of up to $75k each within the super environment, combined with the tax free threshold for each member of a couple outside of super means you can still accumulate plenty of wealth for retirement, and pay very little tax.




Good points Junior, I think there will be a lot of shuffling going on in the forseable future.


----------



## Ferret (23 April 2015)

Junior said:


> No, it wouldn't.
> 
> Unless you realise ALL capital gains for that particular financial year (i.e. actually sell all profitable investments, rather than holding), your super fund has no deductible expenses, and you receive no franked dividends as part of your return.




You're only thinking of SMSFs.  There are many people (myself included) who have their super in a managed fund that gives an annual net investment return.


----------



## Brickie2 (23 April 2015)

Junior said:


> No, it wouldn't.
> 
> Unless you realise ALL capital gains for that particular financial year (i.e. actually sell all profitable investments, rather than holding), your super fund has no deductible expenses, and you receive no franked dividends as part of your return.
> 
> It's also worth noting that limit would presumably be per member.  So, for a couple there would be able to receive up to $150,000 in earnings completely tax free within your fund.  Still very generous!!




In Our SMSF in Pension mode all unrealised & realised C/Gns & Fr/Credits are counted in each years income.
As we have been in pens for over 15 years we have no losses carried fwd ( Not done I'm told), we lost about 35% in GFC.
Some years we have losses and some gains, will they even these out.
Don't forget the sting in the tail of SMSFs etc when you finally fall off your perch ( I'M getting close) your adult beneficiaries will pay tax on the untaxed amount they receive at their marginal tax rate.
Does the proposer of this new tax not realise good Generals lead from the front, not a mention of cutting their pensions + Perks.


----------



## sptrawler (23 April 2015)

Brickie2 said:


> Don't forget the sting in the tail of SMSFs etc when you finally fall off your perch ( I'M getting close) your adult beneficiaries will pay tax on the untaxed amount they receive at their marginal tax rate.
> .




Are you sure of that? 
It is my understanding that the untaxed component is taxed at 16.5%, when it is rolled out into the estate.


----------



## Boggo (23 April 2015)

Does anyone have the content of the Robert Gottliebsen article in the Business Spectator re how SMSF's will benefit from Shorten's proposal.

Seems you have to be a subscriber to access it.


----------



## Junior (24 April 2015)

Brickie2 said:


> In Our SMSF in Pension mode all unrealised & realised C/Gns & Fr/Credits are counted in each years income.
> As we have been in pens for over 15 years we have no losses carried fwd ( Not done I'm told), we lost about 35% in GFC.
> Some years we have losses and some gains, will they even these out.
> Don't forget the sting in the tail of SMSFs etc when you finally fall off your perch ( I'M getting close) your adult beneficiaries will pay tax on the untaxed amount they receive at their marginal tax rate.
> Does the proposer of this new tax not realise good Generals lead from the front, not a mention of cutting their pensions + Perks.




The untaxed element has a maximum tax rate of 30% when passed down to non-dependant beneficiaries...so it would be the lower of their marginal rate or 30%.  You might be able to consider moving more funds outside of the super environment, or putting in place a testamentary trust if you're concerned about this.  There are strategies available.  This is not advice, DYOR.

With unrealised gains/losses, they might be reported as far as showing the performance of your fund each year.  However, capital gains/losses are not included in assessable income until they are realised.


----------



## Brickie2 (24 April 2015)

Junior said:


> The untaxed element has a maximum tax rate of 30% when passed down to non-dependant beneficiaries...so it would be the lower of their marginal rate or 30%.  You might be able to consider moving more funds outside of the super environment, or putting in place a testamentary trust if you're concerned about this.  There are strategies available.  This is not advice, DYOR.
> 
> With unrealised gains/losses, they might be reported as far as showing the performance of your fund each year.  However, capital gains/losses are not included in assessable income until they are realised.




Thanks for that Junior, more research needed at my end it seems, have tried the ATO site but was more confused than when I started so will get the Admin people onto it.

Regards counting unrealised Cp/Gns etc as income will have to see how they set the Bill up.
My returns will have to be rearanged if it gets in.DYOR etc.
thanks again.


----------



## sydboy007 (24 April 2015)

Brickie2 said:


> In Our SMSF in Pension mode all unrealised & realised C/Gns & Fr/Credits are counted in each years income.
> As we have been in pens for over 15 years we have no losses carried fwd ( Not done I'm told), we lost about 35% in GFC.
> Some years we have losses and some gains, will they even these out.
> Don't forget the sting in the tail of SMSFs etc when you finally fall off your perch ( I'M getting close) your adult beneficiaries will pay tax on the untaxed amount they receive at their marginal tax rate.
> Does the proposer of this new tax not realise good Generals lead from the front, not a mention of cutting their pensions + Perks.




Super is designed to provide an income during retirement.

if it's not used for that purpose, then shouldn't a more normal rate of tax be applied, otherwise it's just more encouragement for people to treat super as a tax shelter.

I do think it would make things easier of super contributions were taxed at full rates with an offset to bring it down to 15%.  The same for earnings could also be done.

This would help people to understand just how much Govt support is directed at super.  I'm currently receiving the equivalent of 1/3 of the single pension in super tax concessions on an annual basis, and that level will likely increase as my balance grows and fund earnings increasingly outweigh contributions.  I still have 24 years till retirement, so it's possible I'll receive more in super tax concessions that the Govt would save on pension payments.


----------



## craft (24 April 2015)

sydboy007 said:


> Super is designed to provide an income during retirement.
> 
> if it's not used for that purpose, then shouldn't a more normal rate of tax be applied, otherwise it's just more encouragement for people to treat super as a tax shelter.
> 
> ...





Syd you keep sing the same tune.

Here’s the thing – I have already contributed much more in actual tax dollars paid to the government via my super fund with the flat tax rate at 15% on earnings then I would have if the earnings tax rate was full marginal.   I have to compound the tax concessions up because I don’t have access – Yes I have a larger balance because of the concessions but the gov’t has made a good investment by taking a 15% cut on the ongoing compounding of the tax concessions rather than an upfront 45%. I think your tax concession argument is seriously flawed.


----------



## McLovin (24 April 2015)

Brickie2 said:


> Don't forget the sting in the tail of SMSFs etc when you finally fall off your perch ( I'M getting close) your adult beneficiaries will pay tax on the untaxed amount they receive at their marginal tax rate.




This got me thinking.

Any of the resident accountants care to chime in...

What happens in a scenario where Joe is on his death bed and empties his super fund as an untaxed pension a few days before he dies, can it be passed on to his heirs tax free or does the ATO treat it differently?

From an estate law point of view, gifting assets to people close to death to get around the inheritence laws will generally be considered to be inheritence in kind and can be reversed by the court. I'm wondering if the ATO takes the same view in relation to tax.


----------



## sydboy007 (24 April 2015)

craft said:


> Syd you keep sing the same tune.
> 
> Here’s the thing – I have already contributed much more in actual tax dollars paid to the government via my super fund with the flat tax rate at 15% on earnings then I would have if the earnings tax rate was full marginal.   I have to compound the tax concessions up because I don’t have access – Yes I have a larger balance because of the concessions but the gov’t has made a good investment by taking a 15% cut on the ongoing compounding of the tax concessions rather than an upfront 45%. I think your tax concession argument is seriously flawed.




i don't see how it's possible to pay more in tax within super than at marginal rates, except if you're truly at the bottom of the income scale, in which case you're paying 15% extra tax while someone on $180+ gets a 32% break.

Super tax concessions are growing at twice the rate of the aged pension.  It just doesn't seem to be providing the value we're told it does, except if you'e part of the finance industry scooping out their obscene profits from it then the gravy train is all good.


----------



## sptrawler (24 April 2015)

sydboy007 said:


> i don't see how it's possible to pay more in tax within super than at marginal rates, except if you're truly at the bottom of the income scale, in which case you're paying 15% extra tax while someone on $180+ gets a 32% break.
> 
> Super tax concessions are growing at twice the rate of the aged pension.  It just doesn't seem to be providing the value we're told it does, except if you'e part of the finance industry scooping out their obscene profits from it then the gravy train is all good.




Syd, after debating with you over a long per, it has become obvious to me, that your suggestion of RBL's which are adjusted makes the most sense.

The only issue I would have is the starting point, our ToT and currency is in freefall, the economy is a basket case.

Therefore I would say it would be prudent, to set the starting point at a level that gives a good standard of living.

Then the RBL could be stopped, increased or decreased as the economy dictates, allowing for cpi and inflation.

This would obviously create difficulties, when people exceed the RBL in accumulation phase and pension phase, but that should be able to be overcome.


----------



## Bill M (24 April 2015)

sptrawler said:


> Therefore I would say it would be prudent, to set the starting point at a level that gives a good standard of living.




I reckon that amount should be $2 Million. Reason being that it should give you a comfortable retirement where your money is invested in a term deposit or other cash "safe" investments. Right now for a year term you can get around 3.2%, that would pay you $64,000 which near enough to today's average salary. That would be a fair starting point, it gives the conservative investors their piece of mind and if you were an active sharemarket investor it could provide a lot more.


----------



## craft (24 April 2015)

sydboy007 said:


> i don't see how it's possible to pay more in tax within super than at marginal rates, except if you're truly at the bottom of the income scale, in which case you're paying 15% extra tax while someone on $180+ gets a 32% break.




The only thing that changes in the spreadsheet is the tax rate.




The lower the return the longer it takes to get to tax paid breakeven but hopefully the example gives you the gist. Overall tax foregone by the government over a typical superannuation time frame, with typical return will be nothing like the simplistic snap shot notional tax concessional calculations that are bandied around.


----------



## qldfrog (25 April 2015)

craft:
I like you excel snapshot:
a simple way to demonstrate how high taxation rate destroys the actual tax income


----------



## sydboy007 (25 April 2015)

sptrawler said:


> Syd, after debating with you over a long per, it has become obvious to me, that your suggestion of RBL's which are adjusted makes the most sense.
> 
> The only issue I would have is the starting point, our ToT and currency is in freefall, the economy is a basket case.
> 
> ...




* What is a good standard of living?  Does that include holidays?  What level of lifestyle do people deserve to have Govt subsidies to enjoy?  

* If the RBL can go up and down then what certainty does a person have?  it would be simpler to just set a level then let it increase by CPI or wages growth.

* I suppose if the RBL needs to be decreased causing some to be over it, then the simplest way would be to make further contributions at marginal rates, which limits the attractiveness of going over the RBL.



Bill M said:


> I reckon that amount should be $2 Million. Reason being that it should give you a comfortable retirement where your money is invested in a term deposit or other cash "safe" investments. Right now for a year term you can get around 3.2%, that would pay you $64,000 which near enough to today's average salary. That would be a fair starting point, it gives the conservative investors their piece of mind and if you were an active sharemarket investor it could provide a lot more.




Is it fair to have general taxation much higher so as to allow a few to accumulate up to $2M, along with a PPOR  possibly in excess of that?  Remember that the ratio of workers to retirees is heading back to levels close to 40 or 50 years ago in the not too distant future.  Income tax rates were far higher back then, even though the pension consumed a far smaller % of Govt spending.

The median income is $48K.  Does it make sense to provide a massive level of tax expenditures to accumulate so much within super?

Personally I'd be happy with an RBL that provides a couple with 50% more than the current pension at a 4% yield.  $50.5K tax free seems a reasonable amount, and for those who want a better lifestyle there's nothing stopping them from down sizing their house or saving outside super to achieve that goal.

If RBLs are going to be that high then you'd need to more than undo the tapering adjustments of Howard and Costello, and give more serious consideration of at least partially including the PPOR  in the pension assets test.

We also have the situation with the removal of the LISC that poor people get penalised for any savings within super ie the poorest end up paying 15% extra tax while those at the top enjoy a 32% reduction.  That doesn't seem the way to encourage those on low incomes to actually get interested in saving for their future.


----------



## Bill M (25 April 2015)

sydboy007 said:


> We also have the situation with the removal of the LISC that poor people get penalised for any savings within super ie the poorest end up paying 15% extra tax while those at the top enjoy a 32% reduction.  That doesn't seem the way to encourage those on low incomes to actually get interested in saving for their future.




Several pages back I mentioned this terrible policy, I can't believe they took away the LISC and did nothing on the top end.

As to everything else you mentioned, yes I think everything in the accumulation phase of super is good now but I do agree that there should be reasonable benefit limit. I still think $2 M is a good starting point, indexed to CPI (up or down) each year. It's up to the punter if they save with super or not. In my working life I never earn't anywhere near the average wage, well under, but I still managed to save.


----------



## Pager (25 April 2015)

My wife has a part time job and at first I said to her she should salary sacrifice some of her wage into super, im the main bread winner and I thought if she added $100 a week she would pay less tax and without even noticing our super would get an additional $5K a year, THEN THE PENNY DROPPED  We would actually be worse off 

Does seem totally crazy and very unfair to have a flat tax of 15% on Super contributions from employer and salary sacrifice, surely a better way is to have it tiered in the same way income tax is, so those on low wages would pay none or very little and those on high salary’s would pay more, the current system is very much in favour of the high income earner, that way the low paid could accumulate a lot more to fund part of there retirement, in turn surely this would be less burden on the state.


----------



## sydboy007 (26 April 2015)

craft said:


> The only thing that changes in the spreadsheet is the tax rate.
> 
> The lower the return the longer it takes to get to tax paid breakeven but hopefully the example gives you the gist. Overall tax foregone by the government over a typical superannuation time frame, with typical return will be nothing like the simplistic snap shot notional tax concessional calculations that are bandied around.




left side is under the super system and right side is at marginal rates of tax.  

Assumed income growth 3% each year with earnings of 4.5% and cap growth of 4% each year.

Roughly 50% less tax paid within the super system over a 20 year period

Calculations based on SG contribution less appropriate tax ie earnings and capital growth calculated after tax

Annual total tax is based on tax from SG contribution and earnings.

it seems to show that saving within super more than halves the tax paid over a 20 year period, and stays at a similar level out to 30 years.


----------



## sptrawler (28 April 2015)

This article more or less backs up what Bill and myself have been saying, "it requires quite a lot of money, to support a sustainable self funded retirement".

http://www.smh.com.au/business/the-...retirement-income-system-20150427-1mukxg.html

Some feel we are being over the top, but having been retired for 3 1/2 years, I can already notice the escalating costs.
The problem is a difficult one and won't be resolved easily, finding the balance between reasonable returns, reasonable account balance and reasonable tax erosion of the capital will be difficult.


----------



## Knobby22 (28 April 2015)

sptrawler said:


> This article more or less backs up what Bill and myself have been saying, "it requires quite a lot of money, to support a sustainable self funded retirement".
> 
> http://www.smh.com.au/business/the-...retirement-income-system-20150427-1mukxg.html
> 
> ...




Glenn Stevens can see the problem obviously. Can our politicians?
Good post.


----------



## Pager (28 April 2015)

https://au.finance.yahoo.com/news/stop-making-super-rich-people-035407855.html


Australia needs to put an end to a superannuation debate that continually focuses on a minority of rich people while alienating the rest of the population, the head of a major industry fund says.
Between the unattractive jargon, inequitable government policy and overdramatic media headlines about needing $1 million in retirement, many Australians, particularly women, are tuning out when it comes to super, HESTA boss Debby Blakey says.
As chief executive of the industry super fund for health and community services, most of Ms Blakey's members are middle-aged women on modest wages, juggling part-time work with motherhood and with little superannuation to speak of.
Most of them will live on the age pension and use their super for little luxuries, like buying Christmas presents for their grandchildren, or having friends over for dinner, she says.


"Some of the mainstream media is obsessed with us needing $1 million in retirement and for many of our members, when they hear that, it actually switches them right off and they take the attitude that, `well I'm never going to reach $1 million so I won't even bother'," Ms Blakey told AAP.
"Who benefits from the conversation about needing $1 million in super? There's a very small part of the financial planning community that benefits from that conversation."
The whole point of superannuation is that it's for every Australian, Ms Blakey says.
The conversation needs to start including low income earners and women.
And while policy is needed to bridge the super gap between women and men, women also need to stop being complacent about superannuation, she said.
"The reality is that women don't think about it," Ms Blakey said.
"The reality is that nobody expects their marriage to end and the reality is that if it does, women are often left in a more difficult situation."
Super funds also need to do their bit, Ms Blakey said, by demystifying the complex language they use and communicating simple messages.


----------



## sptrawler (28 April 2015)

Pager said:


> https://au.finance.yahoo.com/news/stop-making-super-rich-people-035407855.html
> 
> 
> Australia needs to put an end to a superannuation debate that continually focuses on a minority of rich people while alienating the rest of the population, the head of a major industry fund says.
> ...




Which goes right back to what I've being saying, stop going on about the 450 people with $10m in super.

Stop talking about the cost of the tax breaks, and what they are costing, it is all garbage.

Limit the maximum amount you are allowed in super, and leave the rest alone.

Anyone with over $x in super, pull it out, you can re contribute as limits are lifted. Easy

Also just apply a 15% offset on contributions. ie if you are on a marginal rate of 49%, your contributions are taxed at 34% etc.


----------



## sptrawler (29 April 2015)

Apparently it isn't all doom and gloom on the pension.

http://www.smh.com.au/business/comm...hile-workers-stand-still-20150429-1mvwww.html


----------



## sptrawler (30 April 2015)

I thought I may as well check out what the pension for a couple is currently, well surprise it is $34,000.

That is the same as 3.4% on $1million in super, the only problem is the 3.4% in super is probably going lower and the $34,000 pension is going up faster than wages.

Why would anybody put anything into super, when Syd and myself started debating the issue a couple of years ago, the pension was $32,000.

It is obvious where the smart money is, or isn't.

On current trends the Government pension will make most SMSF pensions look like poor relatives.


----------



## Ferret (30 April 2015)

sptrawler said:


> I thought I may as well check out what the pension for a couple is currently, well surprise it is $34,000.
> 
> That is the same as 3.4% on $1million in super, the only problem is the 3.4% in super is probably going lower and the $34,000 pension is going up faster than wages.
> 
> Why would anybody put anything into super, when Syd and myself started debating the issue a couple of years ago, the pension was $32,000.



Well perhaps because if you selected a decent balanced fund you would have earned 7.7% pa average over the last 10 years.  Add another 1% at least if in pension mode.  

So $1m is bringing in 2 1/2 x the pension.  Why wouldn't you prefer this?


----------



## Vixs (1 May 2015)

sptrawler said:


> I thought I may as well check out what the pension for a couple is currently, well surprise it is $34,000.
> 
> That is the same as 3.4% on $1million in super, the only problem is the 3.4% in super is probably going lower and the $34,000 pension is going up faster than wages.
> 
> ...




The smart money are most definitely not reliant on the age pension to pay their bills. What kind of life is that?

A couple with $1m in super, assuming no other significant financial assets, could also be collecting about $11,600 p.a. from the age pension. Assuming they aren't keeping their $1m in cash long-term they'd be getting more than 3.4%...even a conservative multi-manager fund from CFS has a 10 year return of 6.3% in pension phase right now.

You don't need to exclude the age pension for people with superannuation and vice versa. While many people receive the full pension, a lot of Australians are on a part pension.


----------



## sptrawler (1 May 2015)

Vixs said:


> The smart money are most definitely not reliant on the age pension to pay their bills. What kind of life is that?
> 
> A couple with $1m in super, assuming no other significant financial assets, could also be collecting about $11,600 p.a. from the age pension. Assuming they aren't keeping their $1m in cash long-term they'd be getting more than 3.4%...even a conservative multi-manager fund from CFS has a 10 year return of 6.3% in pension phase right now.
> 
> You don't need to exclude the age pension for people with superannuation and vice versa. While many people receive the full pension, a lot of Australians are on a part pension.




The talk currently is dropping the cut off to around $800k

The point I'm making is, it takes most average working couples a lot of personal sacrifice to get $1m in super.

Why would that be better, than saving say $300k in super, and getting a full pension?

This also frees up the $700k to spend and or or invest as one wishes, as it is accessible, rather than locked up in super 'lucky dip' system.
The $700k doesn't disappear if it isn't put in super, it is either spent on lifestyle, or redirected to other tax free asets.
Don't get me wrong I'm self funded, but if I was starting out again now, I would not be walking the same path.
Unless some certainty can be placed in the super system, confidence and belief in the value of super, will quickly fall away.


----------



## banco (1 May 2015)

sptrawler said:


> The talk currently is dropping the cut off to around $800k
> 
> The point I'm making is, it takes most average working couples a lot of personal sacrifice to get $1m in super.
> 
> ...




Well given it's compulsory there's no great requirement for people to love the super system.


----------



## sptrawler (1 May 2015)

banco said:


> Well given it's compulsory there's no great requirement for people to love the super system.





Yes that's true, I was really only talking about putting extra money in super, as a retirement vehicle.

As per usual, the rich have over used it, and the plebs will be punished.


----------



## sydboy007 (2 May 2015)

i'm going to have to read it another time or two to see if I agree with what the writer is saying, but at first glance I can see the logic of his argument.  Not sure I agree, but food for thought

http://www.macrobusiness.com.au/2015/05/self-censoring-superannuation/



> The reason for that view is that there was never an economic logic for a compulsory superannuation system in the first place.
> 
> The modern superannuation system was introduced in 1992 to relieve pressure on the age pension system by forcing all workers to save for retirement. But forced saving does nothing to address the fundamental problem of a shrinking workforce – all the income streams drawn down from superannuation upon retirement rely on purchases of assets from those currently working. The net effect is exactly the same as if the working population simply gave retirees money through the tax system. Any problems with the age pensions system due to demographic change also affect the superannuation system.






> This lower rate of growth of goods and services must still be shared amongst all workers and retirees. Who get what out of the economic pie depends on who has which rights – which claims on incomes streams in any form, either assets, public pensions, or wages. Under a public pension system workers give up some of their rights to wages by paying taxes which would go directly to the pensions of the retired. Under a private superannuation system, workers give up some of the rights to wages to buy assets, which would be sold by retirees who had previously accumulated them, in order to provide a retirement income. The net effect of both of these schemes is identical.






> the asset classes that dominate the super system, like Australian shares, will see fewer buyers and more sellers, depressing the inflated prices and reducing the investment income of superannuation account holders. With lower account balances more funding will be needed from public pensions anyway. To be clear about this asset price effect, does anyone think the share market, or even the property market, would be at its current value without the massive inflow of funds from the compulsory super system?


----------



## banco (2 May 2015)

sydboy007 said:


> i'm going to have to read it another time or two to see if I agree with what the writer is saying, but at first glance I can see the logic of his argument.  Not sure I agree, but food for thought
> 
> http://www.macrobusiness.com.au/2015/05/self-censoring-superannuation/




This assumes that superfunds etc. don't have any overseas exposure.


----------



## DavidK (3 May 2015)

craft said:


> The only thing that changes in the spreadsheet is the tax rate.
> 
> View attachment 62374
> 
> ...




30% earning s ?!?


----------



## qldfrog (3 May 2015)

banco said:


> This assumes that superfunds etc. don't have any overseas exposure.



That helps but the trouble is the US, Europe and even China later on will face the same issue at the same time, i would even say before Australia so the slow drain out of funds in real dollar term will happen on a similar period.
And this is where the money is.
I do not believe we will see again these big long term market increases.
i hope being proven wrong but i do not expect much return in my own retirement plans


----------



## sptrawler (4 May 2015)

qldfrog said:


> I do not believe we will see again these big long term market increases.
> i hope being proven wrong but i do not expect much return in my own retirement plans




Which again makes the idea of taxing it, which in turn depletes it quicker, the wrong way to go. It would be massively inefficient. IMO
The idea of limits, on the amount you can have in super, is much more sensible.IMO

Then any amount above that, has to be returned to the normal tax scheme. 
The limit that can be held in super then can be indexed, stagnated or reduced as required to suit the fiscal climate of the day.
When in the accumulation phase, the limit, stops people abusing the system.


----------



## Ves (8 May 2015)

craft said:


> Syd you keep sing the same tune.
> 
> Here’s the thing – I have already contributed much more in actual tax dollars paid to the government via my super fund with the flat tax rate at 15% on earnings then I would have if the earnings tax rate was full marginal.   I have to compound the tax concessions up because I don’t have access – Yes I have a larger balance because of the concessions but the gov’t has made a good investment by taking a 15% cut on the ongoing compounding of the tax concessions rather than an upfront 45%. I think your tax concession argument is seriously flawed.



Hi craft

I understand the theory  (and agree over a long enough time frame there will always be a break even in cumulative tax paid because the higher taxed balance will suffer from return drag,  whilst the concessionally taxed balance will compound faster and eventually pay more and more tax on a higher base balance).

However,  aside from major outliers   (ie. compounding at 30%pa   or massive starting balances) it would appear that _most_ people in reality would be _dead_ long before reaching the cumulative tax break even point.

Am I doing something wrong?


----------



## craft (8 May 2015)

Ves said:


> Hi craft
> 
> I understand the theory  (and agree over a long enough time frame there will always be a break even in cumulative tax paid because the higher taxed balance will suffer from return drag,  whilst the concessionally taxed balance will compound faster and eventually pay more and more tax on a higher base balance).
> 
> ...




Principles are best seen at the extremes.  The average return may never reach payback but the principle shows how the static tax concession argument is bogus – the tax concession has to be modelled over a lifetime.

Whilst 30% may be an outlier to show the principle – so too are the large balances that look the worst under a static tax concession calculation.


----------



## Ves (8 May 2015)

Distilled in it's most basic terms it is an argument  of  short term   (pay more tax now)  or long-term (pay a lot more tax later).     _I note that it seems to be a common theme re the generational argument surrounding government debt,  except the two sides of the political spectrum seem to be strangely reversed._

By taking a snapshot of the concessions at point A (now)  it is entirely likely that we are not examining the impact of changing the rules when we arrive at point B,   point C and even point D.

Thanks,  it is a point well made and one I honestly haven't come across before....


----------



## McLovin (8 May 2015)

Ves said:


> Thanks,  it is a point well made and one I honestly haven't come across before....




Maybe because our minds are trained to think in terms of present values, rather than raw values?

Craft's point makes a lot of sense when you think about _when_ the super system is supposed take pressure off the tax system (ie when the superannuant reaches retirement).


----------



## ghotib (13 May 2015)

I don't know if this scenario is relevant to the thread exactly, but I'd be interested in people's comments. 

My mother moved into an excellent nursing home last year. She could only do that because her two children paid the $500K bond for her. There was a bit of a rush because the offer of a place doesn't stay open very long, and none of us thought about possible implications. But I've just turned 65, and realised that Mum's bond probably counts as my non-performing asset, which will affect my husband's and my entitlements to a gummint (part) pension. 

I'd do it again and my generous spouse says he would too. But???? How do you think about this sort of situation from a policy perspective?


----------



## sydboy007 (13 May 2015)

ghotib said:


> I don't know if this scenario is relevant to the thread exactly, but I'd be interested in people's comments.
> 
> My mother moved into an excellent nursing home last year. She could only do that because her two children paid the $500K bond for her. There was a bit of a rush because the offer of a place doesn't stay open very long, and none of us thought about possible implications. But I've just turned 65, and realised that Mum's bond probably counts as my non-performing asset, which will affect my husband's and my entitlements to a gummint (part) pension.
> 
> I'd do it again and my generous spouse says he would too. But???? How do you think about this sort of situation from a policy perspective?




What assets did your mother have prior to moving into aged care?  What his before July 1 2014.  Seems the rules change since this date.  Under the prior rules 

My understanding was you cannot be asked to pay an accommodation bond that will leave you with less than $46,000 in assets (from 20 March 2015 to 19 September 2015) - at least under the old rules.

It's a tough area to deal with.  How much is social responsibility and how much family?  My mum and her siblings are likely to face a similar issue in the next few years with my gran, but at least my gran has her house to sell to help with any kind of bond that's needed, though how that will interact with her pension is beyond me.  The whole welfare system is ripe for simplification, especially in terms of making the information far more accessible.


----------



## sptrawler (14 May 2015)

sptrawler said:


> The talk currently is dropping the cut off to around $800k
> 
> The point I'm making is, it takes most average working couples a lot of personal sacrifice to get $1m in super.
> 
> ...




Well that looks like the norm, save like hell to get $800k and get no pension.

Or spend and enjoy yourself and leave $300k in the kitty and get a full pension.

It's a no brainer.

The other option is to put extra money into super, on the hope that Labor get in, they've already said they will hammer it.

Can't wait to see the fiscal backlash, on this relatively small adjustment, to the goal posts.

Realistically the Government may as well reintroduce death duties, which Keating removed.

Then they can just tax the proceeds of the estate at 40%, no problems if you have little the tax is small, if you have zillions that's great.lol

Seems a better way, than tweaking at the edges, much fairer.

Those who earn it spend it, or the Government take a slab of it.lol


----------



## k.smith (14 May 2015)

sptrawler said:


> Well that looks like the norm, save like hell to get $800k and get no pension.
> 
> Or spend and enjoy yourself and leave $300k in the kitty and get a full pension.
> 
> ...




Why would anyone with $375k of assets be motivated to SAVE any further, be it in super or anywhere else?
Every $1000 saved means a pension reduction of $78 per year
With interest rates at record lows, even a return of 4% ( $40 ) on the $1000 results in a loss of $38 
Extend this example to $100,000 and that means $7800 less in pension, interest earnings of $4000 which means an end result of $3800 less in annual income for one's efforts.
The benefits of the tax concessions of depositing $1000 into super are in the tax year the deposit is made, for average contributors approx $150.  For people like me trying to build up a retirement fund, this is starting to feel like a trap, and I am wondering whether it is all worth the effort.
For the top end, who need never to rely on government pensions, nothing has changed. Their $1000 concessional contributions save them around $300+ in the year the contribution is made. The rich will keep getting richer.

So what to do?
Stop making concessional contributions and start spending? 
Pay that $150 extra tax, spend the $1000, and circulate the $$$ into the economy? Is that the direction we are being pushed into?


----------



## sydboy007 (14 May 2015)

sptrawler said:


> Well that looks like the norm, save like hell to get $800k and get no pension.
> 
> Or spend and enjoy yourself and leave $300k in the kitty and get a full pension.
> 
> It's a no brainer.






k.smith said:


> Why would anyone with $375k of assets be motivated to SAVE any further, be it in super or anywhere else?
> 
> So what to do?
> Stop making concessional contributions and start spending?
> Pay that $150 extra tax, spend the $1000, and circulate the $$$ into the economy? Is that the direction we are being pushed into?




You seem to have forgotten the invisible primary residence.

Just borrow at 100% I/O and get the most expensive house you can afford.

Keep trading up till retirement.

Then sit on that $2M house while basking in the knowledge you beat the Govt and have access to the full pension.


----------



## Knobby22 (14 May 2015)

sydboy007 said:


> You seem to have forgotten the invisible primary residence.
> 
> Just borrow at 100% I/O and get the most expensive house you can afford.
> 
> ...




Yes, that's my tactic, except I've always been a bit careful on how much I borrow...to my detriment.


----------



## k.smith (14 May 2015)

sydboy007 said:


> You seem to have forgotten the invisible primary residence.
> 
> Just borrow at 100% I/O and get the most expensive house you can afford.
> 
> ...




Syd, I hadn't forgotten about the issue re the house. Ours is a modest HOME, worth nowhere near $1mil+, and home being the operative word. It gave us some feeling of security in those dark days in 2008, when we lost around 80% of our retirement nest egg in managed investment schemes. So although I hear what you are saying, it is not an avenue that I want to pursue. I think it very sad that savers are being placed in a situation where they may resort to such a strategy.
Since our terrible losses in 2008, and until just recently, we lived on less than a single man's age pension (without ever receiving a cent from the government) and allocated all our remaining very modest income back into re-saving in rock solid investments. Financial responsibility was programmed into me from the time I was born. 

So I am peeved that it seems that our savings over the last year in particular, (+$375,000k) have been getting us nowhere.
I see the media today is full of the promises made that super will not be touched...
eg
http://www.afr.com/news/policy/budg...change-super-says-tony-abbott-20150513-gh0czj

and am cynical, because way this looks to me, they don't need to touch super. Just look at what is happening ! 

So what is the better option? A guaranteed, indexed government pension and $375k tucked away, or keep slogging and sacrificing to put away a lump sum without getting the pension? Super will go on, the wealthy will get wealthier, but many ordinary people will soon see that the climb to financial independence is too steep. Trouble is, the government imo will not care one way or the other. Every $1000 not put into super will be taxed at the full marginal tax rate. +++. big save on concessions +++ and it will go round in the retail sector+++.

I think it absolutely CRAZY.


----------



## k.smith (14 May 2015)

k.smith said:


> ''..... (+$375,000k) ...''




I mean the $XXX saved over the threshold of $375k

I wouldn't be writing if I could save +$375k in a year


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## sydboy007 (14 May 2015)

k.smith said:


> Syd, I hadn't forgotten about the issue re the house. Ours is a modest HOME, worth nowhere near $1mil+, and home being the operative word. It gave us some feeling of security in those dark days in 2008, when we lost around 80% of our retirement nest egg in managed investment schemes. So although I hear what you are saying, it is not an avenue that I want to pursue. I think it very sad that savers are being placed in a situation where they may resort to such a strategy.
> Since our terrible losses in 2008, and until just recently, we lived on less than a single man's age pension (without ever receiving a cent from the government) and allocated all our remaining very modest income back into re-saving in rock solid investments. Financial responsibility was programmed into me from the time I was born.
> 
> So I am peeved that it seems that our savings over the last year in particular, (+$375,000k) have been getting us nowhere.
> ...




The issue is not so much the ordinary peole like yourself and most on this forum.

The issue is that removing RBLs has turned super from saving for retirement to tax minimisation for the wealthy.

There's is no reason to allow people to accumulate 5 10 100 million in super.

All that's needed is to bring back some form of RBL so that there's no benefit in accumulating excessive amounts.

Super tax concessions are growing at 3 times the aged pension.  It will soon see more devoted to super tax expenditures than the aged pension.  To my way of thinking that's not a smart way of dealing with a problem when you spend more than it costs.

I'd be Ok with tax free super, but any lump sums should be taxed.  I don't see why it's fair to allow someone to take the money out of super and spend it to then get an increased pension.

It would be relaatively easy to resolve the issues around super, because any changes would only affect a few people, and I doubt anyone is going to feel much sympathy to someone on tonday tonight complaining how they can no longer have over say $1M in super, which is far FAAARRR above what most will ever accumulate.  Only 2.4% of people were impacted by RBLs, so one has to ask why they were removed.  I think the argument was they cost to much to administer, but he explosion of SMSFs since is testament to the effectiveness of keeping super for retirement income instead of as a tax shelter.

Changes will be made.  It'll just be if we decide to make them, or the downgrade of the ratings agencies forces us to.


----------



## k.smith (14 May 2015)

sydboy007 said:


> ........The issue is that removing RBLs has turned super from saving for retirement to tax minimisation for the wealthy.
> 
> There's is no reason to allow people to accumulate 5 10 100 million in super.
> 
> All that's needed is to bring back some form of RBL so that there's no benefit in accumulating excessive amounts......




Agreed... why should taxpayers collectively support wealth creation for the top end ?



sydboy007 said:


> ......Super tax concessions are growing at 3 times the aged pension.  It will soon see more devoted to super tax expenditures than the aged pension.  To my way of thinking that's not a smart way of dealing with a problem when you spend more than it costs.....




Super tax concessions for 2016-17 are projected to cost $50.7 bil.
The top 10% get around 40% or $20 bil, or around half the total cost of the aged pension:

http://www.treasury.gov.au/Policy-T...alysis-of-superannuation-taxation-concessions

and

http://www.smh.com.au/federal-polit...at-are-killing-the-budget-20140421-zqx7p.html



sydboy007 said:


> ......I'd be Ok with tax free super, but any lump sums should be taxed.  I don't see why it's fair to allow someone to take the money out of super and spend it to then get an increased pension......




again, I agree. My strategy has always been to try to preserve the nest egg for as long as possible.
I really do not understand why one would save a nest egg for anything other than that.... and if the system is being used for saving for the dream holiday, or saving to pay off mortgages imo it flys in the face of the purpose for what it was set up for. Such things should be saved for in their own right. 
However, I am becoming increasingly wary that the cost of running a SMSF may make it not viable to maintain. In such an event, I would want to be able to roll it over into my bank...not to spend, or to get more pension, but to save costs. Is that classed as a lump sum withdrawal?


----------



## sptrawler (14 May 2015)

I have always been interested in super and investment, started out with sod all, expected sod all.

My nest egg has been grafted over a lifetime of work, and I do take exception, to people demeaning it.

However, when the balances that people have in super are published, it becomes obvious RBL's need to be re introduced.
As Syd has been saying.


----------



## k.smith (14 May 2015)

sptrawler said:


> I have always been interested in super and investment, started out with sod all, expected sod all.
> 
> My nest egg has been grafted over a lifetime of work, and I do take exception, to people demeaning it.
> 
> ...




There is a saying more than 2000 years old

"....Poverty wants much; but avarice, everything..." (Publilius Syrus)

SP, the fallout of having lost so much in 2008 is that it has turned me from just a little worker with little idea about what was going on, to someone who now has her eyes wide open and sees injustice everywhere.
If more ordinary people understood, for instance, the stats re super concessions, I think there WILL be changes.


----------



## sptrawler (14 May 2015)

k.smith said:


> There is a saying more than 2000 years old
> 
> "....Poverty wants much; but avarice, everything..." (Publilius Syrus)
> 
> ...




I agree, but the fundamental reason for super, was for workers to have some of their wages put away, for an improved retirement.

The issue now revolves around the few rich people that rort the system, oh sorry you can't say rort anymore.

It would be much easier, to just address the limits, rather than how much it earns.

The problem with Labors idea is, it is somewhat like the ill conceived mining tax, one good year, does not a fortune make.


----------



## k.smith (15 May 2015)

sptrawler said:


> I agree, but the fundamental reason for super, was for workers to have some of their wages put away, for an improved retirement.
> 
> The issue now revolves around the few rich people that rort the system, oh sorry you can't say rort anymore.
> 
> ...




...which is pretty much what is in the AFR today...

http://www.afr.com/personal-finance...rt-for-pension-and-tax-reform-20150514-gh19lz

''....Association of Financial Advisers chief executive Brad Fox criticised the government for shying away from tackling the vexed issue of how to better target tax concessions amid the challenges of an ageing population and a maturing superannuation system. 

"While a core concern of ours is the need to have stability and consistency in the rules governing superannuation to encourage people to contribute voluntarily, it is obvious that the current tax concessions are something that future governments will eventually have to address," Mr Fox said.

"It would have been wiser to wait and see what the tax came up with before limiting its mandate."

The Self Managed Super Fund Association was hopeful the government would endorse the financial system inquiry's definition of the purpose of superannuation and revisit the idea of a holistic review of the retirement income system in the future.

"Hopefully when the government responds to the financial system inquiry later this year they will back the definition of the purpose of superannuation as outlined by David Murray. Recognising that the purpose of super should be to help people stay off the age pension, while protecting that safety net for those who need it, seems to have widespread support from both sides of politics and the industry," SMSFA senior manager technical and policy Jordan George said....''

and 
http://www.investordaily.com.au/superannuation/37548-govt-refusing-to-be-honest-on-super-bowen


----------



## craft (15 May 2015)

I’m a bit sick of reading about super rorters.

My wife & I have one of those large SMSF super balances. 

However we have only ever made pretty standard contributions and have not made any non-deductable contributions where the bigger caps exist(ed)

I suspect we have made fewer contributions then most talking about rorters.

The tax paid by our SMSF supports quite a few pensions for other people.

Yes our balance is larger because of the 15% earnings rate BUT the *overall* tax paid by our SMSF is greater under the 15% rate then if marginal rates had applied.

Since when did following the rules and making a good return make you a rorter?

I agree there should be a cap – but in fairness the money above the cap should be accessible irrespective of age. I would gladly “stop rorting” the system and remove money above the cap back into the non-super environment *if I was allowed.*

But what should I do within the rules to stop rorting the system? strive for lower returns? 

Maybe not all those high balances are rorters, maybe some of them would like to see change as well. 

Yours sincerely 
Dirty rotten rorter.


----------



## k.smith (15 May 2015)

craft said:


> .....I agree there should be a cap – but in fairness the money above the cap should be accessible irrespective of age. I would gladly “stop rorting” the system and remove money above the cap back into the non-super environment *if I was allowed.*....




Craft, I believe most "fair" minded people agree that something needs to be done. The snowball is becoming too large a burden.
http://www.alp.org.au/fairer_super_plan

''...A recent report by the Association of Superannuation Funds of Australia (ASFA) highlighted the unsustainable nature of the existing tax concessions, noting that there are 475 people with super balances in excess of $10 million who are earning tax-free income of about $1.5m each year. In addition, more than 24,000 self-managed super funds with account balances of more than $2m have annual tax-free earnings in the hundreds of thousands...''

I think it amazing that nothing is being done when it seems so obvious that the cap needs to be changed. And there should be a limit to the amount of earnings that come out of super tax free.  I agree with you that if the cap is changed, one should have the choice as to be able to access the excess funds and move them into a "non-super" enviroment or face changed conditions. But I think there will be a lot of chatter before common sense prevails.


----------



## sydboy007 (15 May 2015)

To think we got here because Howard decided to remove RBLs that affected only 2.4% of super accounts.

How much harm has been done to the system?  How much tinkering since to try and stop the revenue drain in ways that wont get too many voters off side?

An RBL, with no limits to annual after tax contributions, would be the simplest way forward.  It still allows people to get to a decent balance, but stops the clear tax minimisation that's going on.  Yes it might not be that many people, but the $$$ are pretty serious, the tax leakage quite large too.

Hockey can't even bring himself to talk about the super and pension systems and how they can be integrated to have a holistic view of retirement income.

When even the industry itself admits there's a problem, and the Govt still isn't willing to talk about the problem, well how does anything get fixed?


----------



## Ves (15 May 2015)

sydboy007 said:


> To think we got here because Howard decided to remove RBLs that affected only 2.4% of super accounts.
> 
> How much harm has been done to the system?  How much tinkering since to try and stop the revenue drain in ways that wont get too many voters off side?
> 
> An RBL, with no limits to annual after tax contributions, would be the simplest way forward.  It still allows people to get to a decent balance, but stops the clear tax minimisation that's going on.  Yes it might not be that many people, but the $$$ are pretty serious, the tax leakage quite large too.



That's an interesting comment.

I understand you want:

a)  unlimited contributions (providing they are after tax)

b)  Reasonable Benefit Limits (RBLs) reinstated

If they actually did this you would find that the tax burden would be even higher.   

Yes I agree,  you would be taxing people higher if they take money out over a certain limit.

RBLs never dictated that you had to take the money out of super.   There is nothing saying you ever have to take out more than you need (if any at all).

The problem is you suggest that can allow _a lot_ more money into the system due to point A,  which in my experience would far exceed the tax revenue gained from point B.    There are a lot of people with a lot of money that is stuck outside super due to the caps.

At any point you take away the contributions limits it makes it even easier to get money into the system and use it as a tax shield.  

I think we should be very careful in suggesting that politicians do not understand the consequences of their actions,  or criticise them for not taking action,  when perhaps some of us don't understand the issue as well as we let on.


----------



## sydboy007 (15 May 2015)

Ves said:


> That's an interesting comment.
> 
> I understand you want:
> 
> ...




i should be clear I meant that if say you have an RBL of say $1.5M then let people get there how fast or slow as they like.  make it easier for couples to combine at the same single / couple pension ratio.  Maybe it would be easier to have couples super accounts?

keep the current limits on concessional contributions, but let people put in big after tax lump sums if they can when they can, as long as they don't go over the RBL.  

It worked fairly well before.  There was no incentive to go over the RBL, and it had a built in incentive to take a pension rather than lump sum as the pension RBL was twice the lump sum RBL.

The RBL back in 2007 was around the 1.2M mark for the pension RBL.  Factor in inflation and that's close to $1.5M in todays dollars.


----------



## Ves (15 May 2015)

Syd,   correct me if I am wrong,  but RBL caps were only focused on withdrawing money from super,  but not putting it in.


----------



## McLovin (15 May 2015)

Ves said:


> Syd,   correct me if I am wrong,  but RBL caps were only focused on withdrawing money from super,  but not putting it in.




That's my understanding. The higher RBL for pensions than lump sums was designed to stop people taking large lump sums tax free and encourage them to take it as a pension over their lifetime.

It's all a bit before my time, so I might be totally wrong. I left Australia right after uni and didn't get back until 2010.


----------



## sydboy007 (15 May 2015)

Ves said:


> Syd,   correct me if I am wrong,  but RBL caps were only focused on withdrawing money from super,  but not putting it in.




There were 2 RBLs.

The pension RBL was twice the lump sum RBL.  There was encouragement to take your super as a pension.

After the Howard changes they're was no incentive to take your super as a pension.


----------



## k.smith (15 May 2015)

McLovin said:


> That's my understanding. The higher RBL for pensions than lump sums was designed to stop people taking large lump sums tax free and encourage them to take it as a pension over their lifetime.
> 
> It's all a bit before my time, so I might be totally wrong. I left Australia right after uni and didn't get back until 2010.




Looks like that is right..

http://en.wikipedia.org/wiki/Superannuation_in_Australia#Reasonable_benefit_limits

but I agree with Syd in what he is saying...
there should be a RBL* and* there should be a RCL (Reasonable Contributions Limit)
bit like the new $20,000 tax deductions, there should be a fence around four sides, not three.


----------



## sydboy007 (15 May 2015)

k.smith said:


> Looks like that is right..
> 
> http://en.wikipedia.org/wiki/Superannuation_in_Australia#Reasonable_benefit_limits
> 
> ...




people need to be able to save a decent amount in super, but at the same time the drain on the budget also needs to be contained.

30-35k a year in concessional contributions is reasonable as few would be able to take advantage of that.  Allowing any amount up of non concessional contributions up to the RBL would then encourage people to increase the amount they have within the low tax super system.

get that sorted and then the debate can move on to if we can afford tax free super pensions, but if you limited the ability to use super as a tax shelter then ;possibly tax free super may make sense.

Some consideration does need to be given to gen x and y as they are the ones who have to try and support both the old aged pension that relied on a much higher tax payer to pensioner ratio than we have or will have, while also trying to save enough before the current pension system collapses.


----------



## qldfrog (16 May 2015)

sydboy007 said:


> people need to be able to save a decent amount in super, but at the same time the drain on the budget also needs to be contained.
> 
> 30-35k a year in concessional contributions is reasonable as few would be able to take advantage of that.  Allowing any amount up of non concessional contributions up to the RBL would then encourage people to increase the amount they have within the low tax super system.



Am I missing something? I agree on the general principle but some of us do not have a steady income: good years /bad years:
my income this year is 20% from last year or so:I suggest that on a windfall/inheritance lottery gain whatever, you should be able to contribute as much as you want in any year up to a point;
so kind of same line as Syd but definitively no restrain in how fast you can reach that limit
Then what about the good year/bad year within the super fund;
you have a limit in contribution but you are a market genius and double your value in a year  doubling your super balance.
It should not be an issue and so maybe the amount above the max balance( which should increase yearly by at least CPI) should be reverted back to your personal account (taxation to be discussed for that part)
And the idea of getting money out of super before you retire will not please either government or the finance lobby
who both REALLY like this captive treasure.

do i make sense?


----------



## Pager (16 May 2015)

qldfrog said:


> Am I missing something? I agree on the general principle but some of us do not have a steady income: good years /bad years:
> my income this year is 20% from last year or so:I suggest that on a windfall/inheritance lottery gain whatever, you should be able to contribute as much as you want in any year up to a point;




If non Concessional then you can 

http://www.superguide.com.au/how-super-works/your-guide-to-non-concessional-after-tax-contributions

 If you’re under the age of 65, you can bring forward up to two years’ worth of non-concessional contributions, which means you can make up to $540,000 in super contributions in one year, representing your non-concessional (after-tax) cap over a three-year period.

Making a non-concessional contribution that is more than the annual non-concessional cap is known as a ‘bring forward’. The maximum bring forward for the 2014/2015 year is $540,000. When you contribute more than $180,000 in non-concessional contributions in one year, you automatically trigger the bring-forward rules for the following two years. Let’s look at three examples.

A $540,000 non-concessional contribution in one year: If you make a $540,000 non-concessional (after-tax) contribution to your super fund during the 2014/2015 year, say on 15 March 2015, you’re bringing forward two years of contributions for the purposes of the non-concessional contributions cap. You then cannot make another non-concessional contribution until July 2017 (that is, the 2017/2018 year).

A $360,000 non-concessional contribution in one year: If you make a $360,000 after-tax contribution during the 2014/2015 year, say on 15 March 2015, that only brings forward one year of contributions, but it means you trigger the bring-forward rules for the next two years. You then can only make another $180,000 in non-concessional contributions during the two-year period that ends on 30 June 2017.

A $210,000 non-concessional contribution in one year: If you make a $180,000 after-tax contribution during the 2014/2015 year, say on 15 March 2015, the $30,000 above the annual $180,000 cap triggers the bring-forward rules, which means over the next two years, you can make only $330,000 in non-concessional contributions.


----------



## sptrawler (16 May 2015)

sptrawler said:


> The talk currently is dropping the cut off to around $800k
> 
> The point I'm making is, it takes most average working couples a lot of personal sacrifice to get $1m in super.
> 
> ...




This article, probably explains my point better.

https://au.news.yahoo.com/thewest/wa/a/27959360/seniors-budget-pain-shock/

I think the last couple of paragraphs sum it up nicely.

_Those at the sharp edge of the changes will be couples who want to retire after January 1, 2017, who own their own home and have assets outside their home totalling more than $823,000.

They stand to lose $14,467 a year in pension and the cost-of-living allowance. They face paying full freight for medication and will have their council and water rates discounts slashed.

Financial planners estimate this group will be more than $16,000 a year worse off_


Add to this the fact, Labor has already said it will tax super earnings above $75,000 and I think this will cost Australia more than removing negative gearing.

Super funds will be choking on their weeties soon.IMO


----------



## k.smith (16 May 2015)

sptrawler said:


> This article, probably explains my point better.
> 
> https://au.news.yahoo.com/thewest/wa/a/27959360/seniors-budget-pain-shock/
> 
> ...




SP, this needs a big rethink. That there will be winners and losers and the rights and wrongs of that is a big issue in itself, but putting the brakes on peoples incentive to *SAVE *I think is crazy.

http://www.afr.com/personal-finance...nd-not-save-before-retirement-20150515-gh1o80

''....Even if a 5 per cent rate of return on assets is assumed, the disparity in income between the haves and have-nots still looks supernatural.

A home-owning couple with $1 million of assets and, subsequently, no access to any pension stand to earn $50,000 a year, while a couple with $400,000 of savings and a part pension of $33,000 will receive $53,000 annually, ASFA's analysis shows.

*Indeed, based on a 5 per cent rate of return, there is no incentive for a home-owning couple to save more than $200,000 for their retirement, unless they are confident they can amass closer to $1 million.*

"If your lifestyle is dictated purely by income, there is no difference between retiring with $400,000 and $1.1 million," adds Lewis....

 .....couples in their 50s and 60s with $500,000 of savings might choose to retire early, because they stand to earn more money than they would if they retired with $100,000 more.......  

...''


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## sptrawler (16 May 2015)

k.smith said:


> SP, this needs a big rethink. That there will be winners and losers and the rights and wrongs of that is a big issue in itself, but putting the brakes on peoples incentive to *SAVE *I think is crazy.
> 
> http://www.afr.com/personal-finance...nd-not-save-before-retirement-20150515-gh1o80
> 
> ...




It's worse than that Jim, it looks like the death of the super system as we know it.

That is probably why the LNP, have said they won't do anything to the super system, to try and prop it up.

Labor have said it is ripe for taxing, which makes it silly to park your money there, maybe forever.

One thing for sure, my head is spinning, running permutations. Fortunately I've always loved the game.

By the way, I think your statement: unless they can amass $1m, is a bit off the mark.

But what you are saying, is what I've been arguing for ages.lol


----------



## k.smith (18 May 2015)

I would very much like to know what forum members have to say about the following comments by M. Macklin (re Australian Democrats)

http://theconversation.com/the-100-...-retirement-bill-as-the-grey-vote-booms-41492

''....In the 1980, the Australian Democrats argued for a different superannuation system than the one introduced at that time.  We argued that in the long term it was unsustainable.  Our system was simpler and fairer.

We argued that everyone should be able to tell you exactly how the retirement system worked - instead of it being the preserve of highly specialised accountants.In essence the system was1. that there would be no tax deductions for money paid into superannuation (still not the case)2. that there would be no tax on money coming out of superannuation (introduced by Costello later)3. everyone would received the same Aged Pension regardless of income and this would be treated as normal taxable income (still not the case)

Instead of our simple system which everyone would be able to understand, we have a system close to breakdown which few comprehend.  Why?...''

maybe I am missing something, but this seems so rational.


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## Junior (19 May 2015)

k.smith said:


> SP, this needs a big rethink. That there will be winners and losers and the rights and wrongs of that is a big issue in itself, but putting the brakes on peoples incentive to *SAVE *I think is crazy.
> 
> http://www.afr.com/personal-finance...nd-not-save-before-retirement-20150515-gh1o80
> 
> ...




If you have $1,000,000 in capital, your lifestyle doesn't need to be 'dictated purely by income'.  You have the flexibility to be able to draw down on capital if and when appropriate.  

If investment markets have a great year, your $1,000,000 might turn into $1,150,000...you'll still receive $50,000 in income, and be able to make the decision to reinvest your profits, take a lump sum for a holiday or give yourself a pay rise.  In years of poor returns you can choose to wait it out and stay invested.

If heavily reliant on age pension you don't have such flexibility.  Your income levels are dictated by the government of the day.  If an unexpected medical cost comes up, or you want to help your kids buy a house, your options are limited.

I know which situation I'd prefer to be in.  The incentive to save, although eroded, is still there.


----------



## sptrawler (19 May 2015)

Junior said:


> If you have $1,000,000 in capital, your lifestyle doesn't need to be 'dictated purely by income'.  You have the flexibility to be able to draw down on capital if and when appropriate.
> 
> If investment markets have a great year, your $1,000,000 might turn into $1,150,000...you'll still receive $50,000 in income, and be able to make the decision to reinvest your profits, take a lump sum for a holiday or give yourself a pay rise.  In years of poor returns you can choose to wait it out and stay invested.
> 
> ...




The problem is Junior, as per your example, the attractiveness is the flexibility it currently enjoys. Take that away and it becomes somewhat pointless.
This is especially the case when one considers the $18k tax free threshold outside super.
The rich will always exploit the limits of any system, whereas the masses have to assess, the system which provides the most flexibility. 

I used the super system as it made sense, adding extra money all through my working life (I started putting money in in 1980) made perfect sense. 
The case is much more difficult to argue now, unless some certainty and sustainability is implanted into super, confidence in it will quickly erode.
Companies like AMP, IOOF have risen recently, on the back of stronger equity markets and a surge in contributions.

IMO extra contributions into super will reduce markedly, due to the pension changes and the changes Labor propose.

Time will tell.


----------



## sydboy007 (19 May 2015)

k.smith said:


> I would very much like to know what forum members have to say about the following comments by M. Macklin (re Australian Democrats)
> 
> http://theconversation.com/the-100-...-retirement-bill-as-the-grey-vote-booms-41492
> 
> ...




Yes, puts everyone on an even footing and at least means the top few % get no tax deduction on the way in, though there's no mention on if any tax on fund earnings while in the accumulation stage.  In the next year or 2 that tax expenditure will exceed the flat tax on concessional contributions, so if they had proposed no tax on earnings that would now be a reasonably giant hole in the budget, but I suppose if the earning are treated as taxable income like everyone else in the pension phase it will probably wash out.

The simplicity is probably what killed the idea.  How do the poor financial planners make money when the average punter can actually understand the system.


----------



## k.smith (19 May 2015)

Junior said:


> If you have $1,000,000 in capital, your lifestyle doesn't need to be 'dictated purely by income'.  You have the flexibility to be able to draw down on capital if and when appropriate.
> 
> If investment markets have a great year, your $1,000,000 might turn into $1,150,000...you'll still receive $50,000 in income, and be able to make the decision to reinvest your profits, take a lump sum for a holiday or give yourself a pay rise.  In years of poor returns you can choose to wait it out and stay invested.
> 
> ...





Yes, I bet most would prefer to be in a situation with $1,000,000 in super.
Even getting to $400,000 is a great achievement.
But the "penalty" for saving between that flexible $1,000,000  and pension-reliant $400,000 has suddenly doubled, from $1.50 to $3.00 less pension per $1000 per fortnight.  Given that the likelihood of being able to save those hundreds of thousands between $400,000 to $1,000,000 will not be a realistic possibility for most of us, I think the whole purpose of saving further has just been shot in the foot.


----------



## k.smith (19 May 2015)

sydboy007 said:


> Yes, puts everyone on an even footing and at least means the top few % get no tax deduction on the way in, though there's no mention on if any tax on fund earnings while in the accumulation stage.  In the next year or 2 that tax expenditure will exceed the flat tax on concessional contributions, so if they had proposed no tax on earnings that would now be a reasonably giant hole in the budget, but I suppose if the earning are treated as taxable income like everyone else in the pension phase it will probably wash out.
> 
> The simplicity is probably what killed the idea.  How do the poor financial planners make money when the average punter can actually understand the system.




The more I think about it, the more sense it makes .
I think there is a better argument for society supporting a non-means tested, universal aged pension than for the same $billions supporting super tax concessions where benefits are so skewed in favour of the top end.
It would seem that the cost of tax on concessions and fund earnings are about 50/50

http://www.treasury.gov.au/Policy-T...alysis-of-superannuation-taxation-concessions

"...Value of tax concessions
The 2011 Tax Expenditure Statement estimates tax concessions on superannuation  at approximately $32 billion in 2012-13.  This is the second largest tax expenditure.  *Concessions on contributions are estimated at $16.5 billion *and on superannuation earnings at $15.5 billion..."

It seems to me that a huge saving could be made.
If the aged pension costs around $40 bil, and around 80% of people aged 65+ get it, it would cost another $10 bil for everyone over 65 to get it, $50 bil ? Keep the tax on earnings in super at 15% and stop the concessions on contributions going in, saving around 50% of the total super tax concessions (see above)

 The other bonus is that it would reduce the work load for Centrelink. All those aged pension applications, and maintaining the accounts for part-pensions when resources at ASIC and ATO are reducing.


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## sptrawler (19 May 2015)

k.smith said:


> The more I think about it, the more sense it makes .
> I think there is a better argument for society supporting a non-means tested, universal aged pension than for the same $billions supporting super tax concessions where benefits are so skewed in favour of the top end.
> .




Wow sounds just like the system we had, before the Government put super into consolidated revenue.

Sounds exactly like the U.K and Canadian system, which ours was like.lol

The more things change, the more they stay the same.

We have been through this numerous times, it really is getting boring.


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## k.smith (19 May 2015)

sptrawler said:


> .....
> 
> The more things change, the more they stay the same.
> 
> We have been through this numerous times, it really is getting boring.




http://www.treasury.gov.au/Policy-T...alysis-of-superannuation-taxation-concessions

see table 2
The top 5% get *23.4%* of contribution concessions, and contribution concessions account for around half of total super tax concessions. Saving this would go a long way to providing a non-means tested aged pension for all. I think it fair that all get the aged pension and that all income earned within super is taxed equally. The incentive to save should be the tax free income stream at retirement. Worrying about lump sum withdrawals would be an issue that would rest entirely with the saver! It would also be so much easier for people to grasp such a system. And... something needs to be done.


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## craft (20 May 2015)

The concessional contribution cap for an under 50 is $30,000.

Somebody earning $200,000 who salary sacrifices the maximum of $11,000 in addition to the $19,000 superannuation guarantee amount will obtain a tax concession on contributions of $10,200. They will pay total tax of $67,057p.a and probably set themselves up to never require the pension.

Somebody on $60,000 will probably not salary sacrifice so will only obtain a tax concession on contributions of $1,112. They will pay total tax of $13,102p.a  they will probably never set themselves up to be fully self funded in retirement so will require transfer from other tax payers to support them to some extent in retirement.  Unfortunately some in this last category will only see the $9,088 in *theoretical* tax concessions that the high income example gets and think that more burden should be placed there so that they as a recipient of the transfer system get a sweeter deal with more favourable pension assets tests or whatever the case may be. 

Currently retirement funding is predominantly a *transfer system*. Somebody always pays for the benefits that others receive and the receivers always seem to think the payers should pay more.  If the politicians listen to the whingers who think they don’t get enough from the system then retirement affordability goes to hell in a hand basket because unless we throw open our borders to new workers the future demographic can’t sustain the current rates of *transfer*. To avoid future transfers you have to aid capital accumulation for self sufficiency and the only way gov't can foster that is with a lower rate of tax on capital formation. The 'theoretical' tax concession argument is simplistic, wrong and dangerous.


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## Junior (20 May 2015)

Good post Craft.  

The way this issue is commonly discussed, tax concessions are the same as government spending - which is really misleading.  

High income earners have access to tax deductions via negative gearing and salary sacrifice into super, but they are generally still paying a huge amount of income tax through their working lives, which is then distributed back out to others who have paid far far less in income tax throughout their lives, in the form of Age Pensions and health care card which provides big discounts on a range of purchases.

Of course this is the way our society sustains itself and supports the lower-middle class, via a transfer system.  My point is we should scale back on demonising high income earners, and quit describing tax concessions as being a burden on other taxpayers, who actually still pay far less tax and have a much lower average tax rate in the first place!!

There is not enough focus on bracket creep either, which is basically a tax hike every single year for workers at all income levels.


----------



## sptrawler (20 May 2015)

craft said:


> The concessional contribution cap for an under 50 is $30,000.
> 
> Somebody earning $200,000 who salary sacrifices the maximum of $11,000 in addition to the $19,000 superannuation guarantee amount will obtain a tax concession on contributions of $10,200. They will pay total tax of $67,057p.a and probably set themselves up to never require the pension.
> 
> ...




You would be supprised how many times this has been brought up in the thread, a lot of people won't accept the logic.
A classic example is the Government co contribution, to low income earners, to qualify for it you must earn a very low wage.
At that wage level, the tax payer is paying no net tax, after offsets and handouts.
So telling them if they put $500 in super the Government will match it, is stupid, they probably can't afford it. The Governments $500 just becomes another welfare payment and the recipient will no doubt end up on a full pension anyway.
So their money plus the Governments money, is tied up for years to achieve nothing, weird welfare system.


----------



## craft (20 May 2015)

k.smith said:


> Yes, I bet most would prefer to be in a situation with $1,000,000 in super.
> Even getting to $400,000 is a great achievement.
> But the "penalty" for saving between that flexible $1,000,000  and pension-reliant $400,000 has suddenly doubled, from $1.50 to $3.00 less pension per $1000 per fortnight.  Given that the likelihood of being able to save those hundreds of thousands between $400,000 to $1,000,000 will not be a realistic possibility for most of us, I think the whole purpose of saving further has just been shot in the foot.




Perhaps the pension should (and I have no doubt eventually will) become a true safety net rather than middle class welfare, with the same assets tests and no taper as per unemployment benefits, then there would be plenty of incentive to push on from 375K savings and make the most of things for yourself.


----------



## Junior (20 May 2015)

craft said:


> Perhaps the pension should (and I have no doubt eventually will) become a true safety net rather than middle class welfare, with the same assets tests and no taper as per unemployment benefits, then there would be plenty of incentive to push on from 375K savings and make the most of things for yourself.




Agreed.  I accept that there should be some benefits for retirees which aren't means tested (i.e. health care card, public transport concessions etc.), but I don't accept that everyone is entitled to a full age pension simply because they paid income tax all of their working lives.  

It's nice in theory, but unsustainable in reality given this country's demographics, and the extreme short term thinking by our policy makers.  The money simply won't be there when baby boomers retire en-masse.


----------



## sptrawler (20 May 2015)

craft said:


> Perhaps the pension should (and I have no doubt eventually will) become a true safety net rather than middle class welfare, with the same assets tests and no taper as per unemployment benefits, then there would be plenty of incentive to push on from 375K savings and make the most of things for yourself.




Agree 100%, far more equitable, welfare shouldn't be a lifestyle choice, people should be encouraged to aspire for more.
Once we sort that out, it will sort out a lot of our apathy and lack of endeavour, in all aspects and walks of life.IMO


----------



## banco (20 May 2015)

craft said:


> Perhaps the pension should (and I have no doubt eventually will) become a true safety net rather than middle class welfare, with the same assets tests and no taper as per unemployment benefits, then there would be plenty of incentive to push on from 375K savings and make the most of things for yourself.




The "no point going beyond 400k" assumes no big changes in government policy for 20 years or so despite the huge sums of money the baby boomers are going to cost.


----------



## Pager (21 May 2015)

banco said:


> The "no point going beyond 400k" assumes no big changes in government policy for 20 years or so despite the huge sums of money the baby boomers are going to cost.





And there lies the big question, and anyone basing retirement on the current government policy is going to be in for a shock a few years down the track.

Thought long and hard about this as im currently well over the $400K mark and at my present contribution rate, specifically the salary sacrifice and non concessional contributions I put in every year will comfortably exceed the magic million.

Have thought about stopping particularly the non concessional contributions I put in each year, as current policy favours me having less but there’s the big unknown “CURRENT POLICY” and that will in my opinion change and significantly so, better to assume I will get no state pension, than base assumptions on today.


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## Junior (21 May 2015)

Pager said:


> And there lies the big question, and anyone basing retirement on the current government policy is going to be in for a shock a few years down the track.
> 
> Thought long and hard about this as im currently well over the $400K mark and at my present contribution rate, specifically the salary sacrifice and non concessional contributions I put in every year will comfortably exceed the magic million.
> 
> Have thought about stopping particularly the non concessional contributions I put in each year, as current policy favours me having less but there’s the big unknown “CURRENT POLICY” and that will in my opinion change and significantly so, better to assume I will get no state pension, than base assumptions on today.




I've always thought it best to 'hedge your bets'.  Accumulate some wealth outside of super, as a backup in case the government drastically changes policy and you find it too much of your assets locked away in the super system.  

Having said that, it would be very very brave/stupid of any government to further raise the preservation age, or heavily restrict lump sum super withdrawals, without grandfathering existing arrangements or having a long transitional period.


----------



## christianrenel (21 May 2015)

Junior said:


> I've always thought it best to 'hedge your bets'.  Accumulate some wealth outside of super, as a backup in case the government drastically changes policy and you find it too much of your assets locked away in the super system.
> 
> Having said that, it would be very very brave/stupid of any government to further raise the preservation age, or heavily restrict lump sum super withdrawals, without grandfathering existing arrangements or having a long transitional period.




I agree with the above comment, having all your wealth inside superannuation is not the best option. I am currently working on the following split 66% of my wealth in super and 33% outside of super. This gives flexbility into the future and I have not over committed to superannuation.


Kind Regards 

christianrenel


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## craft (21 May 2015)

I find the last few posts on this thread a refreshing change to the normal content.

Perhaps changes to pension eligibility is the biggest risk – rather than adverse changes to the superannuation system.  

As the number of pensioners grow and the workforce to support them shrinks, the size of the transfers to fund the current level of entitlements are not realistic. 

I suspect we as a country will ‘strive’ to maintain an adequate safety net for the elderly who can’t do it for themselves and not want to see the pension so low that it causes enormous hardship or homelessness etc. 

But I bet as the size of the transfer burden really starts to bite it will become an expectation that people use up their own financial resources before receiving  the safety net and some day that will even include using equity in the family home.

If you are younger then the first of the Boomer generation it seems to me the most risk lies in not being financially self sufficient for your entire life.  The tax favoured superannuation system is designed to help you achieve that and risks to it are less than risks to relying on the old transfer pension system IMO.

I also agree that despite the tax benefits in super it is prudent to hedge your bets with some savings for retirement outside the super system. But to totally ignore super because of the potential legislative risks seems poor risk management to me and founded on unnecessary fear mongered up by a lot of the sort of content found in this thread.

Despite all the shrill calls to do so, undermining the super system by taxing it more to prop up the transfer system doesn’t seem to be  high on the politician agenda – even for balances at the top end,  Labor’s proposal was modest with grandfathering and no impact until after preservation age and the ability to remove your money.  Liberal don’t seem keen to even tighten the top end saying it was an aberration of past policy that won’t repeat under current contribution caps and to tax it now would be retrospective. 

Maybe Superannuation is not so bad or legislatively risky –* maybe super is NOT the ultimate government cash cow *to prop up the old transfer system – maybe the real risks are in finding yourself in a situation where you are reliant on the transfer system to stay at current levels.


----------



## sptrawler (21 May 2015)

Great posts Craft, I hope you are correct.

It certainly seems to be counter productive to constantly demonise savers and reward spenders.

The long term logics to that just reinforces a welfare mentality, which they keep saying is unsustainable, very contradictory.

As you say the current transfer system is destined to fail, and constantly searching for more tax avenues to support it, just exacerbates the structural problem.

I mentioned in another thread, I find it strange when politicians keep bashing the middle class, when that is what you need everyone to aspire to.
That's exactly what encourages endeavour, personal sacrifice, striving and achievement, that is what has built Australia. 
Currently we seem to be encouraging people, to look for the easy option, and that goes for most facets of our lives. IMO


----------



## sydboy007 (21 May 2015)

craft said:


> Despite all the shrill calls to do so, undermining the super system by taxing it more to prop up the transfer system doesn’t seem to be  high on the politician agenda – even for balances at the top end,  Labor’s proposal was modest with grandfathering and no impact until after preservation age and the ability to remove your money.  Liberal don’t seem keen to even tighten the top end saying it was an aberration of past policy that won’t repeat under current contribution caps and to tax it now would be retrospective.




Considering how easy it is to put non concessional $$ into super, not sure if that is valid.  35K concessional and $180 non concessional a year is not beer money.  Not sure how the carry forward provision works, but it seems like in your final year of work before retirement you could add up to an extra $360K of non concessional contributions on top of the usual $180K.

If super is to remain tax free for the over 60s then the primary residence is going to somehow have to impact on access to the pension, or the system will collapse as younger workers migrate to countries with less onerous tax systems.

When younger people are already facing exclusion from the housing market it's rather unfair to allow those lucky enough to be homeowners to benefit disproportionately from it.







sptrawler said:


> Great posts Craft, I hope you are correct.
> 
> It certainly seems to be counter productive to constantly demonise savers and reward spenders.
> 
> ...




As much the politicians fault pandering to people sense of entitlement.  when we have $250K or $150K mention as not beign particularly wealthy households, when in fact the opposite is true, you know something is wrong.  Back in 2011 when Swan set $150K as a cut off for a number of Govt benefits.  Abbott rushed to the defence of the affected families with his "And people earning $83,000 a year and families on $150,000 a year are not rich, especially if they’re paying mortgages in our big cities."  At the time the Average wage in Sydney was around $53K, so the Abbott strugglers were having trouble living on around 60% more than the average, or to put it another way, better off than 80% of Australians.  Most of their cost of living issues were self inflicted - large mortgages and expensive private school fees, combined with generally oversized housing that costs a bomb to heat and cool throughout the year.

I think people need to have a far better understanding of income distribution in the country.  Govt largesse shouldn't be available to anyone in the top half of income earners.  Cut back on the programs, cut the churn cost of money in and money out, and then lower taxes accordingly.


----------



## sptrawler (21 May 2015)

sydboy007 said:


> As much the politicians fault pandering to people sense of entitlement.  when we have $250K or $150K mention as not beign particularly wealthy households, when in fact the opposite is true, you know something is wrong.  Back in 2011 when Swan set $150K as a cut off for a number of Govt benefits.  Abbott rushed to the defence of the affected families with his "And people earning $83,000 a year and families on $150,000 a year are not rich, especially if they’re paying mortgages in our big cities."  At the time the Average wage in Sydney was around $53K, so the Abbott strugglers were having trouble living on around 60% more than the average, or to put it another way, better off than 80% of Australians.  Most of their cost of living issues were self inflicted - large mortgages and expensive private school fees, combined with generally oversized housing that costs a bomb to heat and cool throughout the year.
> 
> I think people need to have a far better understanding of income distribution in the country.  Govt largesse shouldn't be available to anyone in the top half of income earners.  Cut back on the programs, cut the churn cost of money in and money out, and then lower taxes accordingly.




Agree completely and as craft says, those on $150 or $250k should save to ensure their retirement lifestyle.

The best way to do that, is to have the pension the same as unemployment benefits, as a safety net.

You spend your assets before you qualify, it's simple it does away with all the lump sum withdrawls, buying expensive houses etc.

It is simple, you get a pension when you have an asset value of less than $x.

Then people can decide what sort of life they want to spend during the accumulation years, as opposed to the life they want to spend in retirement.

I resent doing without, during my accumulation years, and being victimised during my retirement years, just because I saved for them.


----------



## banco (22 May 2015)

Best one sentence summary of what the aim of super policy should be:

The tax system should support and encourage superannuation savings up to the point of making people independent of the government age pension

http://www.smh.com.au/business/comm...ciples-to-superannuation-20150522-gh7ep7.html


----------



## sydboy007 (23 May 2015)

banco said:


> Best one sentence summary of what the aim of super policy should be:
> 
> The tax system should support and encourage superannuation savings up to the point of making people independent of the government age pension
> 
> http://www.smh.com.au/business/comm...ciples-to-superannuation-20150522-gh7ep7.html




Yes, Pascoe on the odd occasion nails things down quite well.

But unless the Govt is willing to move away from Abbott's nope nope nope on super reform, the debate on how to achieve an affordable pension income system will be hard to achieve.


----------



## sptrawler (24 May 2015)

sydboy007 said:


> Yes, Pascoe on the odd occasion nails things down quite well.
> 
> But unless the Govt is willing to move away from Abbott's nope nope nope on super reform, the debate on how to achieve an affordable pension income system will be hard to achieve.




Well I suppose, someone in the accumulation phase, would agree with that.

The problem is, if you start taxing it when it is in the draw down phase, it just accelerates the time it takes to deplete it.
But I can understand those in the accumulation phase wanting government to support and encourage the accumulation.

The funny thing is, these same people will be screaming for tax breaks, when they are called upon to spend it.lol

Another example of the me, me, me generation.

Crafts idea is much simpler, leave it alone, put a lid on the amount you can have in there and you have to spend it before you qualify for a pension.

Fair all round, and actually, may be where LNP are heading.


----------



## sptrawler (3 August 2015)

I may be wrong (I often am), but these sort of articles, make me think people are shying away from super.

http://www.theage.com.au/money/supe...-labelled-scare-campaign-20150731-gip1d4.html

Super has become toxic.IMO

Salary sacrifice and after tax contributions, must have dried up. So that honey pot, will not save the economy. lol

It will just mean that more end up on the welfare ledger.


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## banco (3 August 2015)

sptrawler said:


> I may be wrong (I often am), but these sort of articles, make me think people are shying away from super.
> 
> http://www.theage.com.au/money/supe...-labelled-scare-campaign-20150731-gip1d4.html
> 
> ...




The ones that can afford to put much extra into super aren't the ones who would otherwise end up on welfare.


----------



## sptrawler (3 August 2015)

banco said:


> The ones that can afford to put much extra into super aren't the ones who would otherwise end up on welfare.




I don't know where you source your info from. But a lot of my friends work on the local council, blue collar workers, they were all salary sacrificing extra into super. They are all talking about stopping it, may be just talk, but they sound pretty fed up with super.
We are probably not talking about huge amounts individually, but when you consider the council employs 600 - 700 workers, I bet it adds up.


----------



## sptrawler (10 August 2015)

Now, after labor freed up regulation on SMSF being able to invest in the real estate bubble, we have the coalition getting SMSF to offload money.

http://www.smh.com.au/money/super-a...youve-saved-all-you-need-20150805-gisnei.html

if you have between $800k and $1m, it's a no brainer, if you are saving to get a comfortable retirement, think again.

Just another brain fart, that moves the problem further into the future, jeez what pi$$ poor management.

But still smarter than Labor's plan, of taxing earnings above $75k, in bad years they would pay nothing.

With the coalitions changes, the retirees with above $800k have to spend it, makes more sense.


----------



## sydboy007 (11 August 2015)

The average after tax income as reported by the ATO is approx $55K (not the 80K figure the Govt uses to justify leaving NG alone)

Why is it OK for a super pension to pay out any amount tax free?

From an equity perspective shouldn't there be a tax on super pension payments above what the average tax payer is left with?  Considering the super pension is likely to have a far lower cost of living as they'd be very likely to be a home owner, rather than the tax payer facing high rents or mortgage costs, along with the costs of raising children.

So why is it good policy to keep income taxes higher so that super pension taxes can be lower?


----------



## sydboy007 (11 August 2015)

sptrawler said:


> Now, after labor freed up regulation on SMSF being able to invest in the real estate bubble, we have the coalition getting SMSF to offload money.




The original change in rules to allow borrowing within SMSFs was by Howard - started in September 2007 under the simpler super changes.

Stupid policy for a country that was already massively over allocating scarce capital into a non productive asset.

From one of the hundreds of websties promoting property within super they have this great idea



> Buying sea-change property now as baby boomers begin the move to retirement, they should consider acquiring sea-change property now with their SMSF. Although they cannot use it until retirement, once they reach that milestone they can sell their home, contribute the proceeds into the fund and transfer the sea-change property to the member tax free as a lump sum superannuation benefit.




from the Murray Inquiry (had to get it from the recyling bin and Hockey's copy hadn't been read)



> “Direct borrowing by superannuation funds could pose risks to the financial system if it is allowed to grow at high rates. It is also inconsistent with the objectives of superannuation to be a savings vehicle for retirement income. Restoring the original prohibition on direct borrowing by superannuation funds would preserve the strengths and benefits the superannuation system has delivered to individuals, the financial system and the economy, and limit the risks to taxpayers.”




Further from the Murray Inquiry



> “the absence of leverage in superannuation funds meant that rapid falls in asset prices and losses [during the GFC] in funds were neither amplified nor forced to be realised. The absence of borrowing benefited superannuation fund members and enabled the superannuation system to have a stabilising influence on the broader financial system and the economy during the GFC. Although the level of borrowing is currently relatively small, if direct borrowing by funds continues to grow at high rates, it could, over time, pose a risk to the financial system.”




So I can understand your angst that Labor would actually read and understand an inquiry released by a Liberal Govt and mull changes based on recommendations from it.  Shame they didn't do the same with the Henry tax revue but hopefully they've learned from their mistakes.

The problem for Hockey is that this change isn’t one he can hand to the regulators — it requires legislative amendment. And the affected sector is a rusted-on section of the Liberal vote — higher income middle-aged Australians. Financial planners have also done well out of the burgeoning SMSF sector, and closing down loans will shut off a source of fees for advisers.


----------



## sptrawler (11 August 2015)

sydboy007 said:


> The average after tax income as reported by the ATO is approx $55K (not the 80K figure the Govt uses to justify leaving NG alone)
> 
> Why is it OK for a super pension to pay out any amount tax free?
> 
> ...




I suppose they could go back to the U.K, Canada and NZ model, where everyone gets the pension, but the money from your super is taxed as income.

Why punish those who saved, and reward those who spent? Same old loop.


----------



## christianrenel (11 August 2015)

sptrawler said:


> I suppose they could go back to the U.K, Canada and NZ model, where everyone gets the pension, but the money from your super is taxed as income.
> 
> Why punish those who saved, and reward those who spent? Same old loop.





Superannuation was designed to help everyone save for retirement, or put some some money for the future. The reality is that it is a tax shelter for higher income earners to put money aside at a tax rate of 15%. 

Over the next couple of years as the baby boomers start to leave the workforce, this drain on the government budget on Aged Pensions. Then we may see some tinkering with the super system and the how income stream will be taxed.


Kind Regards 

christianrenel


----------



## sydboy007 (11 August 2015)

sptrawler said:


> I suppose they could go back to the U.K, Canada and NZ model, where everyone gets the pension, but the money from your super is taxed as income.
> 
> Why punish those who saved, and reward those who spent? Same old loop.




Why make income and other taxation higher, or services provided lower, by providing excessive tax expenditures via super?

If someone has a super balance above the single pension assets test limit how are tax payers better off providing further tax breaks?  having a limit like this would impact few people, but it would help to provide a decent level of quity into the system.  The top 20% get over 50% of super tax expenditures.  Throw in that the top 10% get 73% of CGT tax expenditures, and the top 20% hold something like 80% of investor mortgage debt, and the progressive nature of the tax system is very much eroded.

There is absolutely nothing stopping a person from saving further outside super.  If they chose not to then they need to live with that decision.


----------



## sydbod (11 August 2015)

sydboy007 said:


> If super is to remain tax free for the over 60s *then the primary residence is going to somehow have to impact on access to the pension*, or the system will collapse as younger workers migrate to countries with less onerous tax systems.
> 
> .




Owning your home does impact on the pension.

To get the pension one has to pass an assets value test.
The assets test for a home owner is significantly lower than the assets test for a non home owner.
Have a look at the bottom of this link http://www.humanservices.gov.au/customer/enablers/assets/
Secondly, the NON home owner is also eligible for rent assistance where the home owner is eligible for some small discount in council rates only.

This provides a reasonable financial balance between the non home owner and the home owner.


----------



## sptrawler (11 August 2015)

sydboy007 said:


> Why make income and other taxation higher, or services provided lower, by providing excessive tax expenditures via super?
> 
> If someone has a super balance above the single pension assets test limit how are tax payers better off providing further tax breaks?  having a limit like this would impact few people, but it would help to provide a decent level of quity into the system.  The top 20% get over 50% of super tax expenditures.  Throw in that the top 10% get 73% of CGT tax expenditures, and the top 20% hold something like 80% of investor mortgage debt, and the progressive nature of the tax system is very much eroded.
> 
> There is absolutely nothing stopping a person from saving further outside super.  If they chose not to then they need to live with that decision.




As the article that I linked said, why save more than 500k in super, at the moment?

I think this will be the norm, also many more will be on the pension.IMO

This whole debacle will end up being a disaster, for Australians, time will tell.


----------



## sydboy007 (11 August 2015)

sydbod said:


> Owning your home does impact on the pension.
> 
> To get the pension one has to pass an assets value test.
> The assets test for a home owner is significantly lower than the assets test for a non home owner.
> ...




So you believe that someone with a million dollar property - the median in Sydney - is somehow not advantaged compared to someone who doesn't own their own home?

Lets see how that idea stacks up

To get a full pension the asset limits allows a non home owning couple to have an extra $146.5K.  Now if they can generate a 5% incomes stream that provides them with an extra $7325 a year.  The maximum rent assistance a couple can get is $3140.8.  A couple of minutes searching didn't provide me with any info on if there is an assets or income test or how much rent you need to be paying to get the maximum level of assistance.

So your argument that a renting couple is somehow equal to home owning couple only stacks up if the renting couple are able to save an extra 50% of financial assets and can get rent for $201 a week or less.  In Sydney that might get you a room in a share household.  But then this forgets the fact that the home owning couple can have any valued primary residence without affecting their ability to access the pension.

A person saving for their retirement outside the primary residence is penalised.  You can have a $2M home and get a full pension.  A renting couple can only have $440.5K of financial assets before they start losing some of their pension.


----------



## sptrawler (11 August 2015)

sydboy007 said:


> So you believe that someone with a million dollar property - the median in Sydney - is somehow not advantaged compared to someone who doesn't own their own home?
> 
> Lets see how that idea stacks up
> 
> ...




As we've said on numerous occasions, it's a real mess.


----------



## sydbod (12 August 2015)

sydboy007 said:


> So you believe that someone with a million dollar property - the median in Sydney - is somehow not advantaged compared to someone who doesn't own their own home?




Whooo there ... I never said that.
I also never said that a person in the outback that may only have a house valued at $50,000 is not greatly disadvantaged compared to a person with no house.

One can pick circumstances that will disadvantage one or the other as one chooses.

The point I am making is that "Owning your home does impact on the pension."
AND
"This provides a *reasonable* financial balance between the non home owner and the home owner."
Please note the word "*reasonable*"  ........ it may not be "just" or "fair" for all people and all situations,  but what the situation currently happens to be is within reason as it covers such a wide range of house values, living locations, rent costs etc.


----------



## sydboy007 (12 August 2015)

sydbod said:


> Whooo there ... I never said that.
> I also never said that a person in the outback that may only have a house valued at $50,000 is not greatly disadvantaged compared to a person with no house.
> 
> One can pick circumstances that will disadvantage one or the other as one chooses.
> ...




The number of 50K properties would be inconsequential to the number worth $500K+.  2/3 of the population live in the capital cities.  IIRC roughly 80% of pensioners are home owners.  They are the only age cohort to have increased home ownership over the 1994-2014 period.  Amazingly, it turns out that there are more homeowners over the age of 75 than there are among people in their 20’s and 30’s combined, yet income taxes are kept higher because of the lax standards for accessing the aged pension.

Shielding the primary residence from the pension asset test just encourages people to over invest into unproductive housing.  It also encourages people to not downsize as any excess funds are now part of the asset test.


----------



## sptrawler (12 August 2015)

sydboy007 said:


> Shielding the primary residence from the pension asset test just encourages people to over invest into unproductive housing.  It also encourages people to not downsize as any excess funds are now part of the asset test.




That sums it up well, what has to be focused on IMO, super is there to enhance your retirement. It isn't for wealth creation above that and IMO it shouldn't be a pension replacement tool.
In the same way, the dole shouldn't be worth more, than reward for working

Finding the right balance, where super is still more attractive, than spending all your money and relying on a government pension, is the trick.

At the moment IMO, the issue is being clouded by the few that have $3 million + in super.
As you pointed out, RBL would sort it.

Both sides of politics have trouble addressing the issue, as they are the worst offenders, their super is ridiculous. Also as was proven with the Bishop issue, there are plenty just waiting to highlight the politicians entitlement mentality.


----------



## sydboy007 (12 August 2015)

sptrawler said:


> At the moment IMO, the issue is being clouded by the few that have $3 million + in super.  As you pointed out, RBL would sort it.




Well unless there's some agreement as to what level an RBL should be that's not going to happen.

The current assets limit for a couple is $1,305,500.  At a 5% yield that's over $67K, and over double the pension.  At a 4% yield they'd still be living on over $52K which is some 60% better than the aged pension.

So how does it benefit tax payers to allow further accumulation of assets within super?  At the very least further contributions should be taxed at marginal rates.  May require some for of combined married account to make it easier to monitor how much has been accumulated.

Then someone would need to tackle the issues surrounding lump sum withdrawals and increased access to the pension.  It's an issue likely to become greater as super balances increase.

The longer these issues fester the harder change will be since more people will be affected by them



sptrawler said:


> Both sides of politics have trouble addressing the issue, as they are the worst offenders, their super is ridiculous. Also as was proven with the Bishop issue, there are plenty just waiting to highlight the politicians entitlement mentality.




It's been about a decade since changes to Govt super was made.  Anyone joining parliament from that time has a super system pretty much like you and me.  Basically those elected over the last 3 (4?) elections wont be able to access their super till aged 60 and wont be getting a defined level increasing each year like Chopper Bishop will be retiring on.


----------



## christianrenel (12 August 2015)

sydboy007 said:


> Well unless there's some agreement as to what level an RBL should be that's not going to happen.
> 
> The current assets limit for a couple is $1,305,500.  At a 5% yield that's over $67K, and over double the pension.  At a 4% yield they'd still be living on over $52K which is some 60% better than the aged pension.
> 
> ...




One of the options the government has with tax free income stream for superannuation, is to work out what is an acceptable living standard, less say $65k per year for couple. Any amount over this limit could be taxed at 15%. This may prevent people putting all the money into super, knowing that they may pay tax later. This will allow people to make investment in their own name as and use the marginal tax rate system.

Kind Regards 

christian Renel


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## sptrawler (12 August 2015)

sydboy007 said:


> Well unless there's some agreement as to what level an RBL should be that's not going to happen.
> 
> The current assets limit for a couple is $1,305,500.  At a 5% yield that's over $67K, and over double the pension.  At a 4% yield they'd still be living on over $52K which is some 60% better than the aged pension.




That is fair enough, but if people are expected to live for 30 years in retirement and allowing for the fact money halves in value approx every 10years, $1,305,500 won't last long. 
Then everyone is on part pension again, much better to have a realistic RBL where there is little chance of needing government support.IMO





sydboy007 said:


> It's been about a decade since changes to Govt super was made.  Anyone joining parliament from that time has a super system pretty much like you and me.  Basically those elected over the last 3 (4?) elections wont be able to access their super till aged 60 and wont be getting a defined level increasing each year like Chopper Bishop will be retiring on.




That's good to know, now all we have to do is wait for the last generation to move on, then we may see some realistic expectations.


----------



## sydboy007 (12 August 2015)

sptrawler said:


> That is fair enough, but if people are expected to live for 30 years in retirement and allowing for the fact money halves in value approx every 10years, $1,305,500 won't last long.
> Then everyone is on part pension again, much better to have a realistic RBL where there is little chance of needing government support.IMO




Even at a 4% yield al a person would need to do is save 2.5% of their income each year to maintain the real purchasing power.

A couple with 1.3M saved earning 4% and spending at 5% with their spending increasing by 2.5% a year to keep up with CPI would see their money last 25 years.  Now they would slowly see a small increase in their ability for a part pension, so it's possibly they might be able to limit the increase in spending.  At year 11 if they dropped their increased spending to just 2% they'd add over an extra year to how long their super lasts.

have a read of http://www.abs.gov.au/ausstats/abs@...ummary&prodno=6523.0&issue=2011-12&num=&view=

It will show you just how well off the above couple would be in relation to a couple over 65 who own their own home - double better off.


----------



## sptrawler (12 August 2015)

sydboy007 said:


> Even at a 4% yield al a person would need to do is save 2.5% of their income each year to maintain the real purchasing power.
> 
> A couple with 1.3M saved earning 4% and spending at 5% with their spending increasing by 2.5% a year to keep up with CPI would see their money last 25 years.  Now they would slowly see a small increase in their ability for a part pension, so it's possibly they might be able to limit the increase in spending.  At year 11 if they dropped their increased spending to just 2% they'd add over an extra year to how long their super lasts.
> 
> ...





Using your example $1.3m at 4% (which will require some risk to attain) will give an income of $52,000.

The full pension $34,000 +  say $300,000 invested at 4% will give an income of $46,000.

So for saving an extra million dollars, it is in reality making 0.8%, to keep you off the pension. Dumb, dumb, dumb.

No intelligent person will buy that.

Obviously you don't understand how hard it is to save $1,000,000 as well as own your own home.

So, you either have to make the pension less attractive, or make it worthwhile saving money not to get it.


----------



## sptrawler (12 August 2015)

Actually re reading your post, the self funded couple saving 2.5% of their $52,000 income, to allow for inflation, makes it a sillier proposition.

$52,000 - 2.5% (1,300) = $50,700.

When the couple with the pension, get it indexed at CPI or average weekly wage, whichever is the greater. 
It's a no brainer, F##k super.

With your scenario, save an extra $1,000,000 in super to gain an extra $4,700 in the first year.

After that it will reduce as the pension is indexed, sounds dumb to me, maybe you can explain the rationale.


----------



## sydboy007 (12 August 2015)

sptrawler said:


> Using your example $1.3m at 4% (which will require some risk to attain) will give an income of $52,000.
> 
> The full pension $34,000 +  say $300,000 invested at 4% will give an income of $46,000.
> 
> ...




So what's your solution?

We have a growing deficit.  We are facing years of low or possibly negative growth.  We already have some of the highest income and corporate taxes compared to those we trade with.  Super tax concessions already cost close to the aged pension and will surpass it in 2 or 3 years time.  The number of workers to pensioners is on decline till at least 2050.

Every dollar in super tax concessions has to be funded from:

* higher deficit
* lower govt spending
* higher taxation

Possibly a way forward in terms of generating the revenue to support larger super balances is to move to a broadly based land tax

https://www.prosper.org.au/2015/03/30/treasury-unearths-a-beautiful-tax/



> Modelling also suggests that broad-based land taxes, such as municipal rates, have a low economic cost (Chart 2.9). This is because land is immobile (unlike other capital) and cannot be moved or varied to avoid tax. The model applies this assumption to both domestic and foreign ownership of land. Land taxes paid by foreign and domestic landowners are only redistributed to the domestic households, providing a benefit to Australian households and generating a negative marginal excess burden for a broad-based land tax shown in the chart.




Treasury’s table suggests each dollar raised in land tax costs us 90c. Compare that with conveyancing Stamp Duty where a dollar raised costs the taxpayer $1.70. The 80c difference between the two taxes is simply wasted, spilled on the ground. Across Australia, we are talking tens of billions of dollars each and every year.


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## sydbod (12 August 2015)

Gentlemen (woops and ladies) this discussion is nonsensical as there are changes already put in place to change the landscape of superannuation. we all already know that the income /assets test changes will be different at the start of 2017.... yep less than 1.5 years away.
if one wants to talk about reforming superannuation (and the fairness of it) and have a sensible discussion about this topic then we should be talking about the assets tests and pension impacts that are to be introduced and not those that are becoming irrelevant as they will soon be phased out.

https://www.supercentral.com.au/sms...-government-drops-proposed-indexation-change/

With the lower threshold were the pension ceases to be available, and the taper rate of $3 per $1000 (7%) is making super a relatively unattractive proposition. When you go above the full pension cut off threshold, your pension is decreased as if you are earning 7.5% on your extra assets.

Why would a person NOW put more than full pension threshold into super. You have to earn better than 7.5% return .... and what sort of risk profile does that sort of investment have attached to it.

I suspect more people will be spending big or cutting their super contributions to stay under this threshold.


----------



## sptrawler (12 August 2015)

sydboy007 said:


> So what's your solution?
> 
> We have a growing deficit.  We are facing years of low or possibly negative growth.  We already have some of the highest income and corporate taxes compared to those we trade with.  Super tax concessions already cost close to the aged pension and will surpass it in 2 or 3 years time.  The number of workers to pensioners is on decline till at least 2050.
> 
> ...




All I was highlighting, was how your easy answer can't work.

You need to realise that not only should there be limits on super, but there should also be limits on access to pensions.
The access to pensions, should be limited to people who have just cause, for never contributing to the tax system.

Why should me and my wife, who have both worked since we left school, brought up four children and saved for our retirement.
Have to be discriminated against, to pay for people who have saved nothing and blown all their life savings on a good time?

I'm not saying they are the norm, but if you use your argument, that all self funded retirees are being subsidised to a ridiculous degrees .
It is the same argument in the opposite, everyone who isn't self funded is a bludger, that unless they haven't a disability they should have prepared for retirement. At least in some way.

I know guys I worked in the same workshop with, 40 years ago, they still don't own a house, but they have had a great life. Overseas holidays, new cars, everything that winks and wanks.

Your telling me I should subsidise their retirement? FF off.


----------



## sptrawler (12 August 2015)

sydbod said:


> Gentlemen (woops and ladies) this discussion is nonsensical as there are changes already put in place to change the landscape of superannuation. we all already know that the income /assets test changes will be different at the start of 2017.... yep less than 1.5 years away.
> if one wants to talk about reforming superannuation (and the fairness of it) and have a sensible discussion about this topic then we should be talking about the assets tests and pension impacts that are to be introduced and not those that are becoming irrelevant as they will soon be phased out.
> 
> https://www.supercentral.com.au/sms...-government-drops-proposed-indexation-change/
> ...




Yes sorry, we didn't realise the font of all knowledge had arrived, my apologies.

By the way what number is your post 1351 or something, did you read the previous posts, before sharing your brilliance.

Some of the people on this site actually are well versed in superannuation, and the thread in a lot of cases are an ongoing discussion.

There is an amazing amount of relevant information relating to super in the thread, if it is your field of interest, it would be well worth reading through.

I pride myself on knowing a reasonable amount about the super system, I run my own fund.

However there are members on here, who I would ask their opinion in a heart beat, real smarts not self professed smarts.IMO


----------



## sydbod (12 August 2015)

sptrawler said:


> Yes sorry, we didn't realise the font of all knowledge had arrived, my apologies.
> 
> By the way what number is your post 1351 or something, did you read the previous posts, before sharing your brilliance.
> 
> ......




Ouch ... that was a bit below the belt.

Yes I had read  from start to finish this whole thread.

Thank you for praising me as "the font of all knowledge", but I believe you are giving me way too much praise here.

The reason I posted my previous post was to highlight that using the old super tables for calculations has no merit because they are being changed in the very near future. There is no point in doing any calculations based on that about to be obsoleted data.

I am pleased to see you are running your own super fund. I also suspect that more that half the active members on this board are probably doing the same. I do not see how this has any relevance to what I posted.

Naturally there are many very bright and informed members on this forum. You can rest assured that I would not be here if they were not.


----------



## sptrawler (12 August 2015)

sydbod said:


> Ouch ... that was a bit below the belt.
> 
> Yes I had read  from start to finish this whole thread.
> 
> ...




Yes the thresholds change, but the general thrust of the debate doesn't vary much.

So it is easier to debate the general outcomes using the longer term thresholds, as most people are familiar with them.

As the new norms become entrenched, the discourse will more revolve around them.

The last financial year, which we are now reporting is on the old rules.

I hope that helps.


----------



## Vixs (13 August 2015)

With annuities not subject to the new deeming rules and instead being subject to the old centrelink income test with a deductible amount, we will see more find that an attractive option. It also continues to provide the same income but with a reducing asset value for centrelink purposes over time. It's no accident these are given relatively favourable treatment - the govt wants us locking in a level of guaranteed income in retirement as they have no intent to continue the generosity of the age pension in the future.

Any retirement plan that favours spending your own money that you have control over to access govt money you have no control over is foolish, as it's impossible to change it later.


----------



## Junior (13 August 2015)

sptrawler said:


> Your telling me I should subsidise their retirement? FF off.




Nice in theory, but it's not realistic.  It's the same as saying we should axe Newstart allowance, why should I fund someone who can't be f***ed working and supporting themselves??  Because we live in a society where we support those who can't or won't support themselves, we don't want 1 million ppl homeless on the streets.


----------



## sptrawler (13 August 2015)

Junior said:


> Nice in theory, but it's not realistic.  It's the same as saying we should axe Newstart allowance, why should I fund someone who can't be f***ed working and supporting themselves??  Because we live in a society where we support those who can't or won't support themselves, we don't want 1 million ppl homeless on the streets.




Very true Junior, but it doesn't make it any less frustrating.


----------



## sydboy007 (13 August 2015)

sptrawler said:


> You need to realise that not only should there be limits on super, but there should also be limits on access to pensions.
> The access to pensions, should be limited to people who have just cause, for never contributing to the tax system.




How would you get that to work?  Any system I can think of would undoubtedly harm the "innocent" as much as those you feel need to be punished.

Isn't much of the debate purely due to the boomer generation not saving enough and blaming it on not having super all their lives?  It seems much of the costs are being forced onto Gen X and those that come after.

Why do income taxes have to be maintained at internationally uncompettiive rates so boomers can over invest in housing?  It's not rational policy.

From the RBA yesterday in WA



> *Instead, what is perhaps more remarkable is the extra resources that Australian households have used to purchase, from one another, the land on which these bigger and better dwellings sit. Indeed, most of the extra money that has gone into residential property has not gone not into the physical stock of housing, but rather into land. So our fascination with housing is really, mostly, a fascination with land…*






sptrawler said:


> Why should me and my wife, who have both worked since we left school, brought up four children and saved for our retirement.
> 
> Have to be discriminated against, to pay for people who have saved nothing and blown all their life savings on a good time?




My parents are poor but work hard.  Never saved much in super because they never had much left over to add to it.  How would you ensure they continue to access the pension while your "leaners" are excluded?  What would you criteria be to define a leaner?  How would you ensure that we don't have a crime surge similar to what you reported in WA and what we see in the USA when people are so desperate they need to steal to survive?  How is rent seeking via NG or halving CGT much different to the person who has the attitude I paid my taxes and I have a right to get the pension?


----------



## sptrawler (13 August 2015)

There is no easy answer, other countries have different systems in place, maybe a combination of a few ideas.

The one thing that isn't going to work, is the system we have in place currently, where never working is a viable lifestyle choice. It is just as unaffordable as the current super system, eventually we run out of money to fund it.

It is a bit like a guy I know brought in and married a Thai girl, she then brought her children over, after obtaining Australian citizenship, she left. We just can't afford to keep providing lifetime welfare, to those who haven't contributed in any way.IMO

How that will be handled who knows, I believe in Germany you recieve a pension commensurate with the years you have worked. I don't know how it works in any detail.


----------



## sydboy007 (13 August 2015)

sptrawler said:


> There is no easy answer, other countries have different systems in place, maybe a combination of a few ideas.
> 
> The one thing that isn't going to work, is the system we have in place currently, where never working is a viable lifestyle choice. It is just as unaffordable as the current super system, eventually we run out of money to fund it.
> 
> ...




Problem with a lot of pension systems is they're under funded.  From the outside germany or France looks like an idylic life for pensioners, but it relied on a population ponzi and now that the number of workers to pensioners is not continuing to increase things are getting unsustainable.

Germany has a gross Govt debt of 82% of GDP and net debt of 57%, but I'd prob focus on the gross debt levels as who knows what the true value is of the bonds they hold.  So in theory the Australian system may be safer as the money is technically separate from Govt revenue.

But as I've read a number of times one of the benefits of a SMSF is you own the assets.  While you have a super balance will you be able to get your money in the future when the system is being drained of funds?

Would we have been better off following the norwegians with a SWF of some sorts to provide a base pensioner for all.  Leaving it to individuals to save more should they want more than a basic lifestyle in their twilight years.

We have a very expensive pension saving system.  $25B and counting.  The FUM model needs to be discarded.  Possibly the fees charged, and the tax expenditures involved, are reducing our ability to support the aged.


----------



## sptrawler (13 August 2015)

sydboy007 said:


> Problem with a lot of pension systems is they're under funded.  From the outside germany or France looks like an idylic life for pensioners, but it relied on a population ponzi and now that the number of workers to pensioners is not continuing to increase things are getting unsustainable.
> 
> Germany has a gross Govt debt of 82% of GDP and net debt of 57%, but I'd prob focus on the gross debt levels as who knows what the true value is of the bonds they hold.  So in theory the Australian system may be safer as the money is technically separate from Govt revenue.
> 
> ...




I think it is a huge problem, currently more people are putting into super, than are drawing down so the system works somewhat ponzi like.

That balance will change in the next 10 - 15 years, my guess is there will be some super funds, that may be short of funds.

There are a lot of changes yet to be played out in super, and as you say, the age pension as it stands may become unaffordable.

My personal belief is that we will resurect the original system, and the government will take a percentage of your super, to fund your base pension. Then the remainder of your money, when drawn, is taxed as per income.

The current pension system is far too generous, therefore many are relying on it by choice.

I believe two and three pensioners living together, works very well, do the sums. People aren't stupid.

Interesting times ahead, I think.


----------



## Vixs (14 August 2015)

sptrawler said:


> I think it is a huge problem, currently more people are putting into super, than are drawing down so the system works somewhat ponzi like.
> 
> That balance will change in the next 10 - 15 years, my guess is there will be some super funds, that may be short of funds.
> 
> ...





Hang on, what do you mean they will be short on funds? Your super is your super, whether it is sitting in SunSuper, Colonial First State or your SMSF. Those funds are yours, they aren't going to disappear. They're not unfunded pensions - the unfunded defined benefit pensions are a dying breed and are a different can of worms altogether which is why they haven't been open to new members for years and years.

If your point about super funds being short on funds was directed at the legacy defined benefit funds then i agree, some will be in trouble, but they were never funded by members assets so it's a different scenario to losing your own savings.


----------



## Junior (14 August 2015)

You guys have lost me with the 'short on funds' scenario.  Super is a unit trust arrangement.  You own those units.  Your money is invested in underlying assets which are primarily liquid assets - cash, bonds, shares, listed property etc.

It's not like a bank deposit where they don't actually have the funds available to pay out if everyone tries to withdraw at once.

Defined benefit schemes are the exception...I think the primary example is the Government's PSS Super scheme.  Future Fund was established to try and meet some of the future funding shortfall right?


----------



## sptrawler (14 August 2015)

Junior said:


> You guys have lost me with the 'short on funds' scenario.  Super is a unit trust arrangement.  You own those units.  Your money is invested in underlying assets which are primarily liquid assets - cash, bonds, shares, listed property etc.
> 
> It's not like a bank deposit where they don't actually have the funds available to pay out if everyone tries to withdraw at once.
> 
> Defined benefit schemes are the exception...I think the primary example is the Government's PSS Super scheme.  Future Fund was established to try and meet some of the future funding shortfall right?




There has already been instances of investment companies going broke, in reality it is no difference to a super fund. 
The funds are invested, people have a belief the information they are given is accurate, often it doesn't prove so.

I understand they are audited, but it wouldn't be the first time an audit has failed to uncover a problem.

In some ways, I think the fact a lot of the investors can't access their funds, could very easily compound any underlying problem.

Again it is only my personal belief, it isn't as though there hasn't been quite large financial companies, go under in the past. 
In some cases it isn't the fact there isn't underlying investments to cover the unit value, it is the quality of that underlying investment that causes the problem.
As I said earlier everything is rosy, while there are more funds being poured in than taken out, also it's only my opinion.
You guys that work in the industry, obviously know a lot more than I, regarding the safeguards and checks that are in place. 
How do these differ from the ones being used by financial investment companies, property trusts agribusiness trusts etc?

That's why I run my own SMSF, I know to the dollar, where my money is, and no one else can move it, touch it or reconfigure it.


----------



## sydboy007 (14 August 2015)

Vixs said:


> Hang on, what do you mean they will be short on funds? Your super is your super, whether it is sitting in SunSuper, Colonial First State or your SMSF. Those funds are yours, they aren't going to disappear. They're not unfunded pensions - the unfunded defined benefit pensions are a dying breed and are a different can of worms altogether which is why they haven't been open to new members for years and years.
> 
> If your point about super funds being short on funds was directed at the legacy defined benefit funds then i agree, some will be in trouble, but they were never funded by members assets so it's a different scenario to losing your own savings.




Remember during the GFC a number of REITs and other managed funds closed off access to customers.  For some it was years before they got their money, and sometimes the value of the assets was so low they didn't get a lot back.

Access to your money is at the discretion of the super fund trustee.

What happens to super once withdrawals are higher than contributions?


----------



## qldfrog (15 August 2015)

Junior said:


> Your money is invested in underlying assets which are primarily liquid assets - cash, bonds, shares, listed property etc.



And what do you think happens as a trend when there are more outflow than inflow, some of your fund under super will be in volatile assets, these price could fall radicalement, as a result, the "good" assets are sold be it real estate , blue chips are sold, but hey so does the fund next door 
and guess what your 20 and 40y old neighbours are paying too much tax to fund the pensionners and your heart attack surgery costs so they can not afford to chase the opportunity of buying back these bargains, so the price carry on going down;
Is that so extreme a view?

As a system, super builds a finance bubble with a known pin ready to pop it based on the age pyramid..
I have no SMSF but do agree this is the only way you would be actually sure "your funds" will remain available.


----------



## Vixs (15 August 2015)

sydboy007 said:


> Remember during the GFC a number of REITs and other managed funds closed off access to customers.  For some it was years before they got their money, and sometimes the value of the assets was so low they didn't get a lot back.
> 
> Access to your money is at the discretion of the super fund trustee.
> 
> What happens to super once withdrawals are higher than contributions?




The failure of highly leveraged property funds and credit funds wasn't limited to super, it was a failure of the investments as a whole. A lot of those property funds have delivered pretty decent returns as they wound down in an orderly fashion. Property trusts are running lower levels of leverage in order to better manage liquidity so that they don't cop it that badly all over again, and property funds have been excellent performers over the last few years.

Superannuation funds have to manage their investment options based on their members. Funds like AustralianSuper, that benefit from being the default super fund nominated in approx 70 of the Modern Awards, rely on the fact that most of their members are younger, disengaged accumulators. As a result, what they call a 'balanced' portfolio is what many funds with an older member base may consider a growth portfolio. Their members have, on average, a longer investment horizon and therefore can afford more risk. That said, they need to be able to meet liquidity requirements, including rollovers and pension payments. If you get bulk withdrawals exceeding what they may have accounted for then they may have to sell some growth assets at an inopportune time,  but that's what they do as part of their job, manage liquidity.

This can be a problem if your fund's assets aren't listed and don't trade regularly. If you have a tunnel, toll road, dam or power plant as an asset, you're going to end up in trouble if you need to sell down more assets than forecast. Industry funds are the perfect example - some even have their own corporate offices as assets of the fund. If your super is invested in listed assets you get the benefit of better liquidity and more accurate and regular valuations. You can control how it's invested, so if it concerns you, change it.

What happens to super funds when withdrawals exceed contributions? You sell the assets to fund the withdrawals. That's the whole point. It's no different in an industry or retail fund than it is in a SMSF. If you need more money than what's coming in, you sell the assets to provide cash for income.

Qldfrog, the demographic changes may be a problem down the road as we have more sellers than buyers. This is why it is so important that our bunch of total f***ing lemon politicians stop spending all their time fighting inevitable changes like same sex marriage and climate change and do their bloody jobs of building a prosperous nation with strong wage growth and high employment.  If we can support high employment with good wages we can go a long way to having an orderly transition of wealth between generations. It is also a prime example of why we need to maintain the favourable tax treatment of superannuation, stop messing with accessibility of our super funds by age or lump sum vs income stream, deliver certainty and then educate people that this is their future. Any dollar in super taxed is a dollar that won't be available to invest.

We are wedded to the model of perpetual growth. If we move away from it, it will only get harder over time so decisive action needs to be taken, but if we are going to continue to embrace it we need to go all out on wage growth and employment, because the only money added to the money supply comes from borrowing and promising to repay it.


----------



## Vixs (15 August 2015)

qldfrog said:


> As a system, super builds a finance bubble with a known pin ready to pop it based on the age pyramid..
> I have no SMSF but do agree this is the only way you would be actually sure "your funds" will remain available.




You don't need an smsf to have control of your super. You can do it in normal funds by investing across different managers and asset classes yourself. If you want to make sure you have control over which assets are sold to pay your pension and when, you can do that already. People do it every day. The majority of people are flat out working out how compound interest works and what inflation is - they don't have the aptitude to take on the responsibility of managing an investment portfolio.


----------



## qldfrog (15 August 2015)

Vixs said:


> You don't need an smsf to have control of your super. You can do it in normal funds by investing across different managers and asset classes yourself. If you want to make sure you have control over which assets are sold to pay your pension and when, you can do that already. People do it every day. The majority of people are flat out working out how compound interest works and what inflation is - they don't have the aptitude to take on the responsibility of managing an investment portfolio.



Vixs, I do it but actually wonder what would happen in crisis mode;
my sunsuper account is managed indeed as I would with my colonial first state, but if sun sunper actually hit s..hit,
is amy cash 20% or whatever be really available....
but point taken you can, and i do, choose some of your destiny within a super fund


----------



## Vixs (16 August 2015)

qldfrog said:


> Vixs, I do it but actually wonder what would happen in crisis mode;
> my sunsuper account is managed indeed as I would with my colonial first state, but if sun sunper actually hit s..hit,
> is amy cash 20% or whatever be really available....
> but point taken you can, and i do, choose some of your destiny within a super fund




It all depends on what's important to you. 

When pricing bonds one factor considered is liquidity premium - investors demand to be compensated with higher returns for the risks they take in purchasing an asset that may be more difficult to sell than a similar bond. You see the same thing in shares - private equity returns are usually quite attractive when things go well, but you may not be able to sell your stake when you need to without offloading at a massive loss. Property... the same.

Liquidity is a risk and investors should be compensated accordingly. As always, it looks great until the music stops. MTAA was the poster child for this issue a few years back, but as always, memories are shorter than business cycles.

Your cash should absolutely be available to you when you need it assuming you meet a condition of release. What you can't be sure of is what happens to unlisted assets that aren't marked to market price.


----------



## sptrawler (17 August 2015)

Vixs said:


> They're not unfunded pensions - the unfunded defined benefit pensions are a dying breed and are a different can of worms altogether which is why they haven't been open to new members for years and years.
> 
> .




The unfunded defined benefit pension is alive and thriving.

Married couple with $300,000 + full indexed $34,000 base pension, can of worms indeed.


----------



## CanOz (17 August 2015)

Not Australia, but relevant to the topic



> (RU) Reportedly Russia govt looking to take funds from $26B pension system to ease funding crunch - press (related USD/RUB RSX) - Source TradeTheNews.com


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## sptrawler (24 August 2015)

sydboy007 said:


> Would we have been better off following the norwegians with a SWF of some sorts to provide a base pensioner for all.  Leaving it to individuals to save more should they want more than a basic lifestyle in their twilight years.
> 
> .




There you go Syd, the U.K, Canada, N.Z system that we used to have.

I knew you would see sense in the end, it has been a long time coming.


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## sydboy007 (25 August 2015)

Great to see that the Liberals are continuing to back Costello and Howard allowing SMSFs to borrow and gear up into property.

http://www.canberratimes.com.au/bus...-smsf-property-borrowing-20150820-gj4amh.html



> Mr Frydenberg said he was troubled by stories of property spruikers pushing people to set up an SMSF so they could borrow against their retirement savings to make speculative property investments. However he said it was important to acknowledge that such events were the exception rather than the rule…
> 
> “To put it in context only 0.07 per cent, perhaps 6,500 properties, were held in an SMSF through a limited recourse borrowing arrangement in 2013,” he said.
> 
> “David Murray highlighted the risks associated with increased leverage in the financial system. Increased leverage always represents a risk and we recognise that. The government also recognises that most SMSFs do the right thing”…




Now just a little context to Frydenberg's claims that borrowing isn't really much of an issue.  SMSFs are piling into Australian property, with investment up by 11% in the past year and by nearly 60% since 2011.  Doesn't take growth at that rate for too much longer to turn the problem into a big one.

This is what the Govt's (ignored) Murray Inquiry had to recommend on the subject



> Recommendation 8
> Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds…
> 
> Further growth in superannuation funds’ direct borrowing would, over time, increase risk in the financial system… In addition, borrowing by superannuation funds implicitly transfers some of the downside risk to taxpayers, who underwrite adverse outcomes in the superannuation system through the provision of the Age Pension…
> ...


----------



## sptrawler (25 August 2015)

sydboy007 said:


> Great to see that the Liberals are continuing to back Costello and Howard allowing SMSFs to borrow and gear up into property.
> 
> http://www.canberratimes.com.au/bus...-smsf-property-borrowing-20150820-gj4amh.html
> 
> ...





As per usual, your selective reporting shows your leanings.
The rules on SMSF's were relaxed in September 2007, Labor took office in November 2007, so they, in fact oversaw the implementation.
They didn't have any problem overturning the stuff up, that they brought about, when stopping SMSF's buying shares off the members. To lay the resultant problem at Howard/ Costello's feet is a bit rich, Labor were there for the first six years of SMSF's jumping in and buying residential property.

http://www.tlfc.com.au/expertise/pr...ty-with-your-self-managed-superannuation-fund

But as I have always said, I don't agree with a super fund borrowing money, that isn't what it was designed for.IMO


----------



## sptrawler (26 August 2015)

With regard SMSF's buying residential property, here vis a general article covering some of the issues.

http://www.smh.com.au/money/investing/is-an-smsf-property-investment-worth-it-20150825-gj7br9.html

Further to the article, from what I have read, you can only maintain the property, not improve it. I don't even think you can buy a house on a subdivisable block, knock it over and develop the block. 
Junior and Vixs could probably clarify the actual rules.
It seems like a hell of a gamble for a hopeful capital appreciation. :1zhelp:


----------



## sydboy007 (26 August 2015)

sptrawler said:


> As per usual, your selective reporting shows your leanings.
> The rules on SMSF's were relaxed in September 2007, Labor took office in November 2007, so they, in fact oversaw the implementation.
> They didn't have any problem overturning the stuff up, that they brought about, when stopping SMSF's buying shares off the members. To lay the resultant problem at Howard/ Costello's feet is a bit rich, Labor were there for the first six years of SMSF's jumping in and buying residential property.
> 
> ...




So basically you're saying the Howard Govt, that controlled both the lower and upper houses when they introduced new rules to allow SMSFs to borrow, can wash it's hand of any blame since Labor came to office just a couple of months later?  The new rules were legislated before Labor took office.  There was no way they could block the legislation before the election, and would have had to wait a minimum of July 1 2008 before the Coalition lost control of the senate.

Are you saying the Liberals would have supported change in the senate to allow Labor to roll back the borrowing rules?  Working with MT on a carbon policy caused his leadership to implode, so I'm not sure that Labor would have been able to count on their support to undo some bad Howard & Costello policy.  The current Libs have gone down the path of increasing the tapering rate for the pension assets test simply because Labor was talking about taxing super pension income over 75K a year.  Politics over policy.

It's a bit like saying the person who makes the mess is no longer responsible because the person who saw the mess later didn't clean it up.  Now there's a second person who's seen the mess and decided they don't need to clean it up either, so does the blame now shift from Labor back to the party that originally created the SMSF borrowing mess?


----------



## Junior (26 August 2015)

sptrawler said:


> With regard SMSF's buying residential property, here vis a general article covering some of the issues.
> 
> http://www.smh.com.au/money/investing/is-an-smsf-property-investment-worth-it-20150825-gj7br9.html
> 
> ...




If an SMSF purchase residential property using an LRBA, they cannot improve/change the property or increase the borrowings beyond the initial loan.

If you wish to use SMSF to develop property, there are ways to do it using a trust and involving other parties.  It's quite complex though.


----------



## sptrawler (26 August 2015)

Junior said:


> If an SMSF purchase residential property using an LRBA, they cannot improve/change the property or increase the borrowings beyond the initial loan.
> 
> If you wish to use SMSF to develop property, there are ways to do it using a trust and involving other parties.  It's quite complex though.




Thanks for the explanation Junior


----------



## sptrawler (26 August 2015)

sydboy007 said:


> So basically you're saying the Howard Govt, that controlled both the lower and upper houses when they introduced new rules to allow SMSFs to borrow, can wash it's hand of any blame since Labor came to office just a couple of months later?  The new rules were legislated before Labor took office.  There was no way they could block the legislation before the election, and would have had to wait a minimum of July 1 2008 before the Coalition lost control of the senate.
> 
> Are you saying the Liberals would have supported change in the senate to allow Labor to roll back the borrowing rules?  Working with MT on a carbon policy caused his leadership to implode, so I'm not sure that Labor would have been able to count on their support to undo some bad Howard & Costello policy.  The current Libs have gone down the path of increasing the tapering rate for the pension assets test simply because Labor was talking about taxing super pension income over 75K a year.  Politics over policy.
> 
> It's a bit like saying the person who makes the mess is no longer responsible because the person who saw the mess later didn't clean it up.  Now there's a second person who's seen the mess and decided they don't need to clean it up either, so does the blame now shift from Labor back to the party that originally created the SMSF borrowing mess?





I'm not saying that Howard shouldn't wear some of the blame, but just highlighting the fact you apportion no blame on Labor.

From what I have read on the subject, as it does directly affect me, Labor actually relaxed the rules even further in 2010.

So all I'm saying, is keep it context.


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## sptrawler (31 August 2015)

Here is another example of politicians, who have no qualms about telling everyone there is one rule for us, and another for you plebs. Beautiful just beautiful.

http://www.smh.com.au/nsw/nsw-mps-pushing-for-more-generous-pension-scheme-20150831-gjc1yo.html


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## sptrawler (14 October 2015)

Interesting article.

http://www.abc.net.au/news/2015-10-14/jericho-aged-pension-and-welfare/6852860

When i started reading the comments, I found it interesting that the comments were leaning toward, finding more tax to pay for the pension.

Yet, in the opening paragraphs of the article, a pertinent point was made, but as usual no one picks up on it, except asylum seekers.

*The first thing to remember about Australia's welfare system is that it is unlike most other nations. As the commission notes: "In contrast to most OECD countries, in Australia eligibility for payments does not depend on a person's employment record and the rates of payment are flat and means-tested, rather than being at least partially linked to a person's earnings."*

This is a huge problem,IMO.

Meanwhile, we are scurrying around, trying to find more ways of taxing savers, to support a system that rewards non participation, or jumping in the queue and joining the gravy train.

We must be the dumbest people in the World.IMO
Just my opinion, but I've always lived by the belief, "you only get out, what you put in".

Shows what a 'Dick' I am. lol

The system is, if you've contributed nothing, or saved nothing, kudos to you.

If you've saved and worked, more fool you.lol


----------



## k.smith (10 November 2015)

I am interested to read what forum members think of this idea. 

https://theconversation.com/what-fair-superannuation-would-look-like-49879


----------



## sptrawler (10 November 2015)

k.smith said:


> I am interested to read what forum members think of this idea.
> 
> https://theconversation.com/what-fair-superannuation-would-look-like-49879




Sounds like, just an increase in personal tax rates to me, I'm interested in what you think.

What I would really like to see, is a system where, you are rewarded for your endeavour.
I have four middle aged kids, they are all in different socio economic groups, mainly from their personal choices.

We need to introduce a system similar to the U.K and Canada, it has been posted before.

The problem in our society is, the perception that everyone on welfare is needy and everyone on a $100k is a fat cat.lol


----------



## k.smith (11 November 2015)

sptrawler said:


> Sounds like, just an increase in personal tax rates to me, I'm interested in what you think.
> 
> What I would really like to see, is a system where, you are rewarded for your endeavour.
> I have four middle aged kids, they are all in different socio economic groups, mainly from their personal choices.
> ...




I'm still reading but so far, I like it.
I think it meets the four principles of Adequacy, Sustainability, Certainty and Fairness, see:

http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Report/Appendix-A

Adequacy ... faster growth potential of members accounts as no tax is paid during accumulation
Sustainability ...a more affordable system
Certainty ... tax free retirement income  
Fairness   ... tax is paid* before* contributions are made at one's personal tax rate, and the argument re super concessions would no longer apply.


http://www.theage.com.au/comment/wh...he-success-of-tax-reform-20151108-gktvvn.html
''...That's what Stephen King and Rodney Maddock from Monash University argue in a paper prepared for the Committee for Economic Development of Australia. The administrative savings would be enormous. Employers would deduct tax from earnings channelled into superannuation in exactly the same way as they deduct tax from earnings channelled into bank accounts.
Once in the super funds, the earnings wouldn't be taxed at all. Because the funds would become very attractive, extra contributions would be outlawed or allowed only within tight limits.
Melbourne University's John Freebairn gave the idea a road-test at the Melbourne Institute's Economic and Social Outlook Conference on Friday. "If you are a low earner paying zero income tax, your money would go into super untaxed," he explained. "If you are on  $180,000, 45 cents would be taken out before it goes in. That's exactly how we tax income."
He said it would save about $15 billion a year. He would do the same to fringe benefits, also taxing them as income. That would bring the saving to $20 billion a year. It would be enough to cut all income tax rates by 12 percentage points.
As he put it: "the losers would be those with more than average super and fringe benefits, the winners would be those with less than average super and fringe benefits".
....''


----------



## sptrawler (11 November 2015)

k.smith said:


> I'm still reading but so far, I like it.
> I think it meets the four principles of Adequacy, Sustainability, Certainty and Fairness, see:
> 
> http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Report/Appendix-A
> ...




I don't know how you could draw that conclusion.

Who is to say that down the track, they wouldn't decide to tax the retirement income anyway.

The argument would change from, they have paid their personal tax rate, to they have a very high balance and it should be taxed they can afford it.

It is really silly, just put a limit on how much an individual and a married couple can have in the super system.

The problem with that is, the Government and financial system is thriving on the contributions.
If they cease, the financial system gets all wobbly again.


----------



## k.smith (12 November 2015)

sptrawler said:


> I don't know how you could draw that conclusion.
> 
> Who is to say that down the track, they wouldn't decide to tax the retirement income anyway.
> 
> ...




The saying goes that there is nothing sure in this world other than death and taxes, but the proposal being discussed here is that tax is paid *before* it is contributed and that at the other end of the equation both the earnings within the accumulation period and the retirement income are tax free. Seems to me (first to admit no expert at this!) it would be much simpler and straightforward.

http://grattan.edu.au/news/super-system-allows-some-big-earners-a-tax-edge/

''... Every year, contributions concessions cost about $17 billion and earnings concessions about $16bn ”” and mostly benefit the top 20 per cent of income earners. Although you can’t add these numbers and not all the revenue would be collected if there were reforms, it is the biggest leak in the income tax system. It means government can’t afford to reduce bracket creep, which hits middle Australia hardest....''

I do not believe that contributions would cease if tax was paid before going into the fund. The lure of retiring with tax free income would remain unchanged and the sweetener is that the earnings are no longer taxed at 15% in accumulation, which with compounding would be fantastic for the next generations coming up. I can't see anything wobbly about that !


----------



## sptrawler (12 November 2015)

k.smith said:


> The saying goes that there is nothing sure in this world other than death and taxes, but the proposal being discussed here is that tax is paid *before* it is contributed and that at the other end of the equation both the earnings within the accumulation period and the retirement income are tax free. Seems to me (first to admit no expert at this!) it would be much simpler and straightforward.
> 
> http://grattan.edu.au/news/super-system-allows-some-big-earners-a-tax-edge/




It would only be a matter of time, before the fact it was paying no tax in accumulation and pension phase, would be seen as a loss of tax income.
Then there would be a debate, as we are having now, about the tax loss and how the earnings and or the pension should be taxed.
Unfortunately I don't believe, that the super system, will be there for your benefit, when it matures.



k.smith said:


> I do not believe that contributions would cease if tax was paid before going into the fund. The lure of retiring with tax free income would remain unchanged and the sweetener is that the earnings are no longer taxed at 15% in accumulation, which with compounding would be fantastic for the next generations coming up. I can't see anything wobbly about that !




You miss understood, what I was saying.
I said re introducing RBL's, would solve most of the issues surrounding high account balances, as people couldn't put more in super. 
But high account balances, is a red herring, the Government don't mind how much you have in super, they just want a cut of it.

Why stop at taxing the contribution at your marginal rate? Why not tax the earnings at your marginal rate also? 
As the authors of the report said, it's compulsory, the Government can do as it likes with the tax on it.


----------



## k.smith (12 November 2015)

sptrawler said:


> .......
> 
> Why stop at taxing the contribution at your marginal rate? Why not tax the earnings at your marginal rate also?
> As the authors of the report said, it's compulsory, the Government can do as it likes with the tax on it.





Contributions would not be taxed, it's your income which is taxed. By contributing into super, *you claim a tax concession.* What is fair about high earners being able to claim tax deductions of more than 45% for each dollar they contribute to super, while the low income earners in some cases get zero for each dollar they contribute?

A person on $200,000 has a tax obligation of $63,547 tax, but by contributing $35,000 of that $200,000 to super receives a concession of $14,550, reducing his tax obligation to $48,997.
The wealthiest 20% receive more than half of the superannuation concessions  Removing all concessions on super contributions would save a massive $17 billion.

http://thenewdaily.com.au/money/2014/12/16/hockey-protecting-fiscal-monkey-trap/

''..._When Paul Keating set up the ‘superannation guarantee’ in 1991, he gave tax concessions on contributions to encourage people to save as much as possible. The aim was to create a pool of national savings that would give us ‘retirement income’ that was not a state-funded pension. And so not taxing the ‘pension phases’ seems to make sense too.

All good so far.

The problem, highlighted again in MYEFO, is that the purpose of these tax breaks has largely changed. They are now worth $36.25 billion in forgone tax revenue, in a year where the ‘horror’ deficit is $40.4 billion.

The volumes of money washing through the super system, particularly the burgeoning self-managed super fund (SMSF) sector where balances tend to be much higher, mean that a large portion of those tax breaks is being used for ‘wealth management’ or ‘estate planning’ purposes....''_

It seems to me that it would make so much better sense to save the $17 billion by getting rid of the unfairness of the inequality of concessions entirely. It makes much better sense to remove the 15% on earnings _within _super during accumulation. The rewards - a tax free retirement income -  need to be at the end, not at the beginning.

I wonder what Paul Keating thinks about this idea?


----------



## sptrawler (12 November 2015)

k.smith said:


> Contributions would not be taxed, it's your income which is taxed. By contributing into super, *you claim a tax concession.* What is fair about high earners being able to claim tax deductions of more than 45% for each dollar they contribute to super, while the low income earners in some cases get zero for each dollar they contribute?




By your reasoning, what would be fair about a high income earners receiving the earnings of their high account balances, tax free?

I can't see the difference, you get all out of shape about high income earners getting a tax break on contributions.
Then you go on to say, it is o.k their earnings in super should be tax free, why?

IMO, it would be the next logical step.

Then the final step may as well be, tax their pension, if it is above a certain amount, say $75k.lol


----------



## k.smith (13 November 2015)

sptrawler said:


> By your reasoning, what would be fair about a high income earners receiving the earnings of their high account balances, tax free?
> 
> I can't see the difference, you get all out of shape about high income earners getting a tax break on contributions.
> Then you go on to say, it is o.k their earnings in super should be tax free, why?
> ...




There will always be high earners and low earners and those in the middle in our democratic system. The majority of our population - those at the low and middle - accept that those at the top earn more, and in return have voted for a system where the more you earn, the more tax you pay. The amount that people earn and save is their own personal matter, and the tally of their savings at retirement is their own personal matter.Where they invest it is their own personal matter. Each year, we all have to account for our earnings on our wages income and investment income, and pay our taxes accordingly. 

Then we come to superannuation, where the purpose of superannuation is to encourage people to save for their retirement by way of both compulsory and hopefully voluntary contributions. Lock your savings up for years and years until you retire, says the government, and in return, it will come out at retirement age tax free. Sounds good ? Where else can you get a deal like that? Sounds good for everybody!

While it's in super accumulating and earning investment income, we will tax it just 15% on every dollar you're earning for your retirement, says the government. That's after tax payers have paid out $17 billion in concessions for you to put those $$$ into super in the first place, most of which went to the high earners.

I think the problem is that high earners are using super to minimise their tax obligations. I do not care how much anyone earns or saves, that is entirely their own affair. The concept of dropping tax concessions on contributions and not taxing the earnings which are working to achieve the very purpose of superannuation imo makes things fairer and makes a lot more sense. And saves an incredible amount of $$.


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## sptrawler (13 November 2015)

k.smith said:


> There will always be high earners and low earners and those in the middle in our democratic system. The majority of our population - those at the low and middle - accept that those at the top earn more, and in return have voted for a system where the more you earn, the more tax you pay. The amount that people earn and save is their own personal matter, and the tally of their savings at retirement is their own personal matter.Where they invest it is their own personal matter. Each year, we all have to account for our earnings on our wages income and investment income, and pay our taxes accordingly.
> 
> Then we come to superannuation, where the purpose of superannuation is to encourage people to save for their retirement by way of both compulsory and hopefully voluntary contributions. Lock your savings up for years and years until you retire, says the government, and in return, it will come out at retirement age tax free. Sounds good ? Where else can you get a deal like that? Sounds good for everybody!
> 
> ...




That all sounds nice, however IMO the reality is, as the pot of money in super increases over time, so will the tax on it. 
This will be required, to fund a social welfare system, whose costs are increasing faster than the economy is growing.
It will become a future fund, for the provision of Government welfare obligations.IMO

How much you get out of it, will depend entirely on how much the Government needs out of it.


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## k.smith (13 November 2015)

sptrawler said:


> That all sounds nice, however IMO the reality is, as the pot of money in super increases over time, so will the tax on it. ....''




Yes, that is the problem, because as the pot of money increases, the tax concessions balloon out.
About $50 mil next year. The cost to the budget of these concessions needs to be addressed, and repeated tinkering at the edges only causes mistrust and insecurity.

I think that the idea here...

https://theconversation.com/what-fair-superannuation-would-look-like-49879

...would make a dramatic difference. Rather than pay out ever increasing concessions on contributions as an "inducement", to my mind it makes infinitely more sense that the incentive should be a tax free saving environment _within_ super during accumulation, which would markedly increase member accounts by the compounding of the tax saved.


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## sptrawler (14 November 2015)

k.smith said:


> Yes, that is the problem, because as the pot of money increases, the tax concessions balloon out.
> About $50 mil next year. The cost to the budget of these concessions needs to be addressed, and repeated tinkering at the edges only causes mistrust and insecurity.
> 
> I think that the idea here...
> ...




I thought that article, was poorly presented and therefore lacked credibility, also making statements that undermine peoples freedom of choice.

1.
Take the following extract from the article:

The common rationale is that we all need an incentive to compensate us because our savings are locked away for a long time. This is rather like a compensation for being compelled to do something. It is a bit odd though because the government compels us to do lots of things without any incentive payments. *There is no incentive payment for driving on the left, or for paying one’s taxes.* There is no obvious reason for the government to provide incentives for compulsory payments into superannuation. 

There is no incentive payment for driving on the left side of the road, or for paying one's taxes, but there are fines and penalties for not doing so.

2.
Let's go on to the next statement:

A more subtle explanation for the incentive would be that savings should always be lightly taxed (as argued in the Henry review). This is to provide equity between savers and consumers – *if I consume all my income today, but you save and then pay tax on your savings, you are paying higher taxes than I am. While this makes sense for voluntary savings, it is not relevant in the context of compulsory savings*.

That would rate up there, as one of the most deprecating statements about super I've heard.

Whether it is voluntary savings or compulsory savings, it's still your money, from your wages. 
If they want to change the taxation on it to your marginal rate, you should be able to chose, whether you want to contribute to it.

If you can't chose to opt out, and it is compulsory to stay in, then it is just a personal tax increase.

There is no guarantee, your money has to be there at the end, yet there is a guarantee the Government will take more of your money as tax, every pay day.

3.
Then the next stupid statement:

Once the savings are in the compulsory sector they would not need to be taxed further. Again this would simplify the system and reduce administrative complexity.

Who says it would not need to be taxed further? How dumb is that? People who agreed to the current system didn't expect it to be taxed further.:1zhelp:
That would rate highly in the dumb statements arena.

All just my opinion, same as the article was theirs. 
The difference is I think it is your money, they think it is the Governments money.
While there is a tax concession on that money, the Government can have a say. Once it is at your marginal rate, you should have the choice whether or not you participate.

4.
The Government has brought about the problem itself, we had a pension system similar to the U.K and Canada.
A portion of peoples tax was put aside to fund pensions, everyone recieved the pension.

Then the Government decided to incorporate the money, and pay pensions from consolidated revenue.
Next came means testing, so some people shouldn't get a pension, they have plenty of money anyway.

Then the problem, people spent their money and had little savings, which manifested itself during the 1987 stock market crash.
Because Australia had no savings reserves, our major banks borrowed all their money from overseas, they nearly went belly up.

So the Government goes "$hit that was close", we need a pool of savings to underpin our equity market, lets introduce compulsory savings.

We will tell the plebs it is to enhance their retirement, and will be in lieu of wage rises and give tax concessions to sell it.

Now we are here, priceless.

If they had kept their fingers out of the old system, pensions would be funded and superannuation pensions would be taxed as personal income.

Now that would be easier, to administer.

I think they would be better off just concentrating on returning to the original concept, rather than trying to get everyone off the pension. It won't happen, so give everyone the pension and tax super.


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## k.smith (14 November 2015)

sptrawler said:


> '''....4. The Government has brought about the problem itself, we had a pension system similar to the U.K and Canada.
> A portion of peoples tax was put aside to fund pensions, everyone recieved the pension.
> 
> Then the Government decided to incorporate the money, and pay pensions from consolidated revenue.
> ...




http://www.ifs.org.uk/bns/bn105.pdf


"everyone received a pension" it was a set amount, and the amount you received was relevant to the number of years you had worked, not how much you had earned. 

I think the aged pension IS an entitlement, and I think every tax payer, rich or poor, does have a right to a pension in their old age.  Not only would a universal pension greatly reduce the burgeoning administration dilemma of attending to the current means tests ( as well as treat people with some dignity) wouldn't it be fairer to just give it to everybody and _then_ apply tax as on other assets and income in tax returns? 

So agreed, the old system was much simpler and fairer, but it seems to me that we are too entrenched in the current super system now to revert back. The problems need to be addressed. 



sptrawler said:


> ''.....While there is a tax concession on that money, the Government can have a say. Once it is at your marginal rate, you should have the choice whether or not you participate.....''




We do not have a choice about compulsory contributions, whether we receive a tax concession or not. We have to contribute...the only choice is whether you contribute MORE. 


Here's the link to the report....

http://adminpanel.ceda.com.au/FOLDE...engeofRetirementIncomePolicySept2015FINAL.pdf


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## k.smith (15 November 2015)

sptrawler said:


> ''.....
> Whether it is voluntary savings or compulsory savings, it's still your money, from your wages.
> If they want to change the taxation on it to your marginal rate, you should be able to chose, whether you want to contribute to it.
> 
> ...




You keep talking as if contributions are taxed.... they aren't. It's your INCOME that is taxed. Contributions give you TAX BACK...
Your contributions (your capital) will be returned to you with compounded interest in retirement.
The more *capital *you contribute, the more you will get back. Yes, it's your money.
But why should some people get TAX BACK of more than 45% of their capital deposit, and some people get zilch?


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## sptrawler (15 November 2015)

k.smith said:


> You keep talking as if contributions are taxed.... they aren't. It's your INCOME that is taxed. Contributions give you TAX BACK...




The super guarantee when introduced was a contract between the workers and the Government, in lieu of a pay rise, there would be a compulsory levy introduced on your wages.

This levy was to take the form of national savings, to enhance peoples retirement and slowly reduce the requirement for a Government pension. The main reason for it being introduced, as per what Paul Keating said, was to help under pin our financial system, as the Banks were borrowing all their money from O/S at that time.

To forego the pay rise, the workers were told this levy would be taxed at 15%, these contributions are taxed.
The problem is perception, now the Government and blind believers, see the reduced tax rate as a loss to the ATO.
Where in actual fact, it is compensation for loss of take home pay, that the financial system is using to make them a lot of money.    




k.smith said:


> Your contributions (your capital) will be returned to you with compounded interest in retirement.




Where is that written?
There is an expectation, that will happen, but there are no guarantees. 
That is the main reason, I get annoyed when people say, there should be no concessions. 
If there isn't any concessions, why would I give my money to a complete stranger, to look after it till I retire?




k.smith said:


> The more *capital *you contribute, the more you will get back. Yes, it's your money.




Now you are starting to sound like an insurance salesman.



k.smith said:


> But why should some people get TAX BACK of more than 45% of their capital deposit, and some people get zilch?




I suppose it is a bit like asking why do some people pay 50% tax and some pay 0%.


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## k.smith (15 November 2015)

sptrawler said:


> The super guarantee when introduced was a contract between the workers and the Government, in lieu of a pay rise, there would be a compulsory levy introduced on your wages.......
> ........To forego the pay rise, the workers were told this levy would be taxed at 15%, these contributions are taxed.......





Concessional contributions are BEFORE TAX (i.e personal tax) contributions. There is a 15% tax to your *super *account of your fund account's income, which includes contributions.* Personal *taxable income is reduced by claiming a concession for the amount paid.

Example - A high income earner earning $200,000 p/a pays approx $19000 in compulsory super, his super fund account pays $2850 in taxes, and his personal taxable income is reduced from $200,000 to $181,000 which reduces his tax from $63,547 to $54,997 - saving him $8850. His super fund account is charged $2850.
Cost to the budget = $6000. ($8850 - $2850 = $6000)

A low income earner earning $20,000 p/a pays approx $1900 in compulsory super, his super fund account pays $285 in taxes, and his personal taxable income which was 0 remains 0. His super fund account is charged $285.
While at this stage the Low Income Superannuation Contribution (LISC) refunds his super account 15%, in this case $285,  this scheme is destined to end in June 2017. 

Each dollar the high income earner contributed as a concessional contribution in this case saved him 31.5 cents.
Each dollar the low income earner contributed as a concessional contribution saved him 0... and after 2017, will cost him 15 cents.

How can that be fair?



sptrawler said:


> ...
> The problem is perception, now the Government and blind believers, see the reduced tax rate as a loss to the ATO.
> Where in actual fact, it is compensation for loss of take home pay, that the financial system is using to make them a lot of money.    ...




If that is the case, do you think it fair that some are "compensated" more than others? Do you think it fair, in the example above, that a low income earner can be up to 46 cents worse off for each dollar he contributes compared to a high income earner? If so, why?

Perception is in the eyes of the beholder... I see buying beer and smokes as a loss of take home pay !
And by the growing tally of SMSFs, I'd say that the financial sector isn't the only one making a lot of money ! 




sptrawler said:


> ....
> Where is that written?
> There is an expectation, that will happen, but there are no guarantees.
> That is the main reason, I get annoyed when people say, there should be no concessions.
> ...




No, there are no guarantees, true enough. But if you think like that, what makes you think that your money is safer in the bank? Some countries now charge 1.2% of your bank account capital., see 
http://www.nortonrosefulbright.com/knowledge/publications/60997/netherlands-to-introduce-a-bank-levy
(plus high earners already pay up to 52% in NL on incomes over 57k euros)

Some of us have learnt the hard way about giving $$$ to strangers. 
These are my two favorite sites now
http://www.apra.gov.au/Pages/default.aspx
http://asic.gov.au/



sptrawler said:


> .....I suppose it is a bit like asking why do some people pay 50% tax and some pay 0%.




https://theconversation.com/the-super-rich-and-tax-lifters-or-leaners-27700

''....The 2011/12 tax statistics show that only 2% of income earners return a taxable income of more than $180,000, contributing 26% of the total tax revenue. This compares with 37.4% of income tax collected from the 14.4% of individuals earning between $80,000 and $180,000.
Many people would be surprised to find out that only 2% of Australians pay the top rate of tax, which raises questions over how high flyers are reporting their income, or structuring their tax affairs...''


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## k.smith (15 November 2015)

sptrawler said:


> The super guarantee when introduced was a contract between the workers and the Government, in lieu of a pay rise, there would be a compulsory levy introduced on your wages.
> 
> This levy was to take the form of national savings, to enhance peoples retirement and slowly reduce the requirement for a Government pension. The main reason for it being introduced, as per what Paul Keating said, was to help under pin our financial system, as the Banks were borrowing all their money from O/S at that time.
> 
> ...




Pay 50% on what? 
High earners are treated equally under the tax thresholds, and just as the low income earners, benefit from the tax free threshold, where the first $18k is tax free, and the following threshold, where they pay 19 cents etc... People who are paying the higher rate of tax are paying it on the proportion of their income which exceeds the previous threshold.
High earners do not pay 50% tax on all their income...they just pay a higher rate of tax on the higher portion of their income....


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## Wysiwyg (15 November 2015)

k.smith said:


> Concessional contributions are BEFORE TAX (i.e personal tax) contributions. There is a 15% tax to your *super *account of your fund account's income, which includes contributions.* Personal *taxable income is reduced by claiming a concession for the amount paid.
> 
> Example - *A high income earner earning $200,000 p/a pays approx $19000 in compulsory super, his super fund account pays $2850 in taxes, and his personal taxable income is reduced from $200,000 to $181,000 which reduces his tax* from $63,547 to $54,997 - saving him $8850. His super fund account is charged $2850.
> Cost to the budget = $6000. ($8850 - $2850 = $6000)



Not for me it isn't.
I earned 103k (on my group certificate) and this was my taxable income and was not reduced by how much compulsory super was paid to my super account.


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## k.smith (16 November 2015)

Wysiwyg said:


> Not for me it isn't.
> I earned 103k (on my group certificate) and this was my taxable income and was not reduced by how much compulsory super was paid to my super account.




Did you pay your compulsory contribution or did your employer?
Are you saying that you paid tax on an income of $103k and then paid a contribution of 9.5% of $103k - that is, are you saying that you paid $26k tax and then paid a contribution of $9785? If you did, shouldn't that reduce your taxable income ? 

And if paid a contribution after you had paid tax, isn't that a non-concessional contribution?

http://www.superguide.com.au/how-su...e_concessional_contributions_treated_tax-wise

''....An individual can choose to use a salary sacrificing arrangement as a way to pay less tax by reducing the amount of personal income that is taxable (although the concessional contributions are subject to at least 15% tax within the fund).
...''


----------



## poverty (16 November 2015)

You guys are just arguing semantics with regard to who pays the SG.  The worker earning 200K example is on a salary of 200k including super, so his actual income could also be described as $181,000pa + super.  It depends what industry you're in as to how it's worded I find.


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## k.smith (16 November 2015)

sptrawler said:


> ....
> 
> I think they would be better off just concentrating on returning to the original concept, rather than trying to get everyone off the pension. It won't happen, so give everyone the pension and tax super.




Here's the reason why I think it would be nigh impossible to return to the old system.
The problems need to be fixed.



_''...Fun managers rake out roughly $23.5 billion in fees each year from Australia's $2 trillion superannuation system. It mostly goes to the banks. Their fees are the highest and they control the greatest chunk of the market...''_

Read more: http://www.smh.com.au/business/bank...d-industry-20151112-gkxsi7.html#ixzz3rbLDm38l 
Follow us: @smh on Twitter | sydneymorningherald on Facebook


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## k.smith (16 November 2015)

poverty said:


> You guys are just arguing semantics with regard to who pays the SG.  The worker earning 200K example is on a salary of 200k including super, so his actual income could also be described as $181,000pa + super.  It depends what industry you're in as to how it's worded I find.




Agreed... the point is that concessional contributions cost the budget $17 bil, and the low earners are disadvantaged in this system.


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## Wysiwyg (16 November 2015)

poverty said:


> You guys are just arguing semantics with regard to who pays the SG.  The worker earning 200K example is on a salary of 200k including super, so his actual income could also be described as $181,000pa + super.  It depends what industry you're in as to how it's worded I find.



Yes I have always had my annual income represented without employer paid super included. This is the normal for wage employees I believe. To answer k.smith too


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## sptrawler (16 November 2015)

k.smith said:


> Pay 50% on what?
> High earners are treated equally under the tax thresholds, and just as the low income earners, benefit from the tax free threshold, where the first $18k is tax free, and the following threshold, where they pay 19 cents etc... People who are paying the higher rate of tax are paying it on the proportion of their income which exceeds the previous threshold.
> High earners do not pay 50% tax on all their income...they just pay a higher rate of tax on the higher portion of their income....




Look we can go on about this endlessly, I don't agree with the belief that the lowest income earners are missing out. They pay no effective tax and receive, tons of cash low income cash handouts. I'm sure I read the lowest 20% of wage earners receive about $435/week in concessions of one sort or another.

They will also qualify for a fully funded Government pension upon retirement, if you believe they require a further handout, in the form of a tax payer funded retirement bonus savings plan, that's your prerogative.

How much would you like them to have?
Wouldn't it be easier, to just up the pension?

Sooner or later, you will end up running out of other peoples money, to give away.

Look it may sound a bit harsh, it wasn't meant to.
We have one of the most generous welfare systems in the World, you may have noticed many are trying to get here to avail themselves of it.
It is funded by a low percentage of the workforce, paying a lot of direct and indirect taxes, this in turn makes these workers internationally uncompetitive and job losses result.

The way to fix the super system is to limit the amount a person can accumulate in it, when that is reached, no further can be added.

Then set the contributions, earnings and withdrawl taxes in a way that makes the system sustainable.

Running around with bandaids changing the system every couple of years, is a ridiculous situation.


----------



## k.smith (16 November 2015)

sptrawler said:


> Look we can go on about this endlessly, I don't agree with the belief that the lowest income earners are missing out. They pay no effective tax and receive, tons of cash low income cash handouts. I'm sure I read the lowest 20% of wage earners receive about $435/week in concessions of one sort or another.
> 
> They will also qualify for a fully funded Government pension upon retirement, if you believe they require a further handout, in the form of a tax payer funded retirement bonus savings plan, that's your prerogative.
> 
> ...




More handouts...???
I am suggesting we STOP ALL handouts on concessions and save $15 bil.
In the current super system it is the wealthy who are receiving the "taxfunded retirement bonus savings plan", certainly not the low earners... 
the crazy thing is that if the LISC stops in June 2017, the low earners will actually be paying for the high earners !!!

Crikey article is very to- the- point
http://www.crikey.com.au/2013/04/04...oor-to-give-to-the-rich/?wpmp_switcher=mobile


----------



## Wysiwyg (16 November 2015)

k.smith said:


> More handouts...???
> I am suggesting we STOP ALL handouts on concessions and save $15 bil.
> In the current super system it is the wealthy who are receiving the "taxfunded retirement bonus savings plan", certainly not the low earners...



Super could be taxed according to ones income level so concessions are still used. 100k to 150k pays 20%, 150k to 200k pays 25% and above 200k pays 30% for example


----------



## Bill M (16 November 2015)

sptrawler said:


> Running around with bandaids changing the system every couple of years, is a ridiculous situation.




I agree with your posts on this sptrawler, especially this part. People like knowing what they can put in, get taxed at and work towards the end result which is retirement without interference and changes half way through their working life.

Continually changing things makes people distrust the product and walk away. I remember when they changed access to Super from age 55 to age 60, I wonder how those people feel now that they have to work another 5 years?

Why would anyone want to change the Second best retirement system in the world? As you say, just cap the amount one can accumulate in it and stop the high end rorting, that just might do the trick.


----------



## Junior (16 November 2015)

Bill M said:


> Why would anyone want to change the Second best retirement system in the world? As you say, just cap the amount one can accumulate in it and stop the high end rorting, that just might do the trick.




Well said.  I think some people need to scale back their criticism of our retirement system.

Simply reducing the caps or introducing a limit would be a quick and simple fix, and would only impact the wealthiest individuals out there.

For those suggesting that everyone should be entitled to a government pension....I strongly disagree.  The government cannot be trusted to ensure that this is fully funded and sustainable over the long term, especially with the demographics of our population.  We have a shrinking pool of taxpayers and increasing life expectancy.  The cost of health and aged care is growing, we don't need to pay pensions to those who can comfortably afford to self-fund their retirement.


----------



## k.smith (16 November 2015)

Junior said:


> ''.... I think some people need to scale back their criticism of our retirement system....''




My criticism is directed to the fact that people are treated unequally in a government-initiated system where they are legally compelled to make deposits to super.  



Junior said:


> ''.....Simply reducing the caps or introducing a limit would be a quick and simple fix, and would only impact the wealthiest individuals out there.....''




Definitely agree with introducing a limit, but do not agree that such a quick and easy fix will fix the inequality.
I think better to forego the concessions on contributions (which means we all enter on equal terms, save the budget $15 billion, probably not need a GST hike, and retain the right to save in ratio to our individual earnings - within reason) and accumulate tax free within super. 

The next problem would be to do something about the fee structure. If funds were to be free of the 15% tax within the fund, funds under management would increase dramatically...more fees !  

http://www.smh.com.au/business/bank...lian-super-fund-industry-20151112-gkxsi7.html 

_"...Fun managers rake out roughly $23.5 billion in fees each year from Australia's $2 trillion superannuation system. It mostly goes to the banks. Their fees are the highest and they control the greatest chunk of the market....''
_



Junior said:


> ''....For those suggesting that everyone should be entitled to a government pension....I strongly disagree.  The government cannot be trusted to ensure that this is fully funded and sustainable over the long term, especially with the demographics of our population.  We have a shrinking pool of taxpayers and increasing life expectancy....''




What is the difference between trusting the government to fund government pensions or trusting the government to sustain every increasing super concessions? 





Junior said:


> ''.....  The cost of health and aged care is growing, we don't need to pay pensions to those who can comfortably afford to self-fund their retirement.




So why should we give the biggest tax concessions to "those who can comfortably afford to self-fund their retirement? 


http://www.theaustralian.com.au/opi...rners-a-tax-edge/story-e6frg6zo-1227393615401

_''....For those earning more than $180,000 a year, the tax saving is 30 cents for each dollar contributed. For those earning between $18,200 and $37,000 it is a tax saving of four cents for each dollar contributed......

....Every year, contributions concessions cost about $17 billion and earnings concessions about $16bn ”” and mostly benefit the top 20 per cent of income earners. Although you can’t add these numbers and not all the revenue would be collected if there were reforms,* it is the biggest leak in the income tax system.* It means government can’t afford to reduce bracket creep, which hits middle Australia hardest._
''....


----------



## McGherkin (16 November 2015)

Struggling to find some info so hoping someone can point me in the right direction / literature:

I anticipate retiring 65 to 68.

I don't anticipate relying on the Government for a single cent in retirement.  I'm also not interested in an annuity.

All money into my Super is Concessional.

My preference is to withdrawn yearly as a lump sum, say around $80K in today's dollars. Can I withdraw a yearly Lump Sum?  From my understanding this ($80K) would be taxed at my marginal tax rate or at 22%, whichever is lower.

After withdrawing a yearly lump sum, what happens to the balance in the fund?  Is the balance earning a crediting rate?  And is this earning tax free?  i.e. I only pay tax on the lump sum withdrawal?

Many thanks in advance.


----------



## sptrawler (16 November 2015)

k.smith said:


> More handouts...???
> I am suggesting we STOP ALL handouts on concessions and save $15 bil.
> In the current super system it is the wealthy who are receiving the "taxfunded retirement bonus savings plan", certainly not the low earners...
> the crazy thing is that if the LISC stops in June 2017, the low earners will actually be paying for the high earners !!!
> ...




You really seem to have a problem understanding, that low income earners actually pay less in tax, than they receive in concessions.
How you can come up with the statement above, just shows, we are on a completely different planet.

If a person is in effect paying no tax, due to concessions, why would you put LISC into their super? They would probably prefer the money in their pockets now. 
Also as they, in every probability, will be on a full pension, what is the point. 
It isn't going to reduce the Governments pension obligation, which is what super is about, according to you.


----------



## k.smith (17 November 2015)

sptrawler said:


> You really seem to have a problem understanding, that low income earners actually pay less in tax, than they receive in concessions.
> How you can come up with the statement above, just shows, we are on a completely different planet.
> 
> If a person is in effect paying no tax, due to concessions, why would you put LISC into their super? They would probably prefer the money in their pockets now.
> ...




My understanding is that low income earners who's income falls below the tax free threshold pay no tax, but are compelled by law to contribute 9.5% of that tax free income into super, where they are then charged a 15% contributions tax, which in effect leaves them paying tax on tax free income.  The Low Income Super Contribution (LISC) paid a rebate of up to $500 annually for low-income earners if you earn less than $37,000 a year, but this support is going to be withdrawn in 2017. 

On the other end of the equation, a high income earner in the highest tax bracket who deposits the maximum super contribution of $30k into super reduces his taxable income, and is more than 30% better off after paying the 15% contributions tax. 

I know we are on different planets   ! !
But the media reports that are published on the planet where I live support the argument !
For example, this:


_''...The more you put into super, the more the government provides support. The top 10% of wage earners, mostly men, receive 35% of super tax concessions - more than the amount received by the bottom 70% of the working population.

*Tax concessions double the retirement savings of Australia’s top earners.* Perversely, the lowest income earners - most of whom are women - pay more tax on their super than their take home pay and suffer a 14% reduction in their super savings....''
_
- See more at: http://www.industrysuperaustralia.c...ding-the-gender-pay-gap/#sthash.Pd0dJ7eM.dpuf

Happy to provide more links to more articles from the planet where I live !

Can you please explain what you perceive to be the ratio of concessions to tax regarding low income earners please?


----------



## Vixs (17 November 2015)

McGherkin said:


> Struggling to find some info so hoping someone can point me in the right direction / literature:
> 
> I anticipate retiring 65 to 68.
> 
> ...




You're making a straightforward scenario complicated. A financial planner would be able to help you.

EDIT: I would suggest googling the following to learn a bit more yourself as that's obviously the aim:
*Preservation Age
*Allocated Pensions
*Tax on Superannuation in Retirement

Your super fund will be able to provide some basic advice on how to draw an income in retirement and what the tax implications will be, but a financial planner will be able to assist with how much you can afford to withdraw depending on how long you want your super to last, how your super is invested etc. It takes quite a super balance to sustain $80k p.a. - I'd want professional advice if I was unsure what to do with that kind of money.


----------



## Vixs (17 November 2015)

k.smith said:


> My understanding is that low income earners who's income falls below the tax free threshold pay no tax, but are compelled by law to contribute 9.5% of that tax free income into super, where they are then charged a 15% contributions tax, which in effect leaves them paying tax on tax free income.  The Low Income Super Contribution (LISC) paid a rebate of up to $500 annually for low-income earners if you earn less than $37,000 a year, but this support is going to be withdrawn in 2017.
> 
> On the other end of the equation, a high income earner in the highest tax bracket who deposits the maximum super contribution of $30k into super reduces his taxable income, and is more than 30% better off after paying the 15% contributions tax.
> ...
> ...




Removing the LISC was a dumb move made by a dumb Liberal govt (coming from me, traditionally a Liberal voter). I agree with you in that it was a good move, and I think that whatever solutions come out of this review we will see something along the lines of the LISC or a change in how tax is applied so that low income earners don't pay tax they otherwise wouldn't have needed to. They are, however, still net tax recipients not tax contributors, and frankly any bleating about how it's not fair on them should take into consideration the welfare available in this country. I dislike the contributions and earnings tax on super for low income earners because it's inconsistent with our tax system, not because it's 'not fair'.

You have mentioned a few times that super doesn't need any tax concessions because it's compulsory. If they take away the tax concessions they should also take away the compulsory nature, otherwise it might as well be confiscation of private assets. Who are the government to tell private individuals how they should manage their money?

You've also taken aim at fees, with fund managers "Raking it in". What return would an everyday person get on their forced investments if they didn't have professional management? Hint: They'd be sitting in cash. A negative real return in cash doesn't help people save for retirement. For the benefit of generating a real return and growth over the long-term, what fees would be reasonable for managers to charge? Or should the government dictate them as well?

It's been said a few times here, and in about 95 other pages of this thread; capping the amount of assets in a super fund that receive concessional tax treatment is the only way to ensure the top end (who are few in number but large in balance) don't milk it for all it's worth. What needs to be preserved is people's ability to contribute to super at a time that suits them, through reasonable or generous contribution caps. Most people tend to play catch up towards retirement, and a large part of their super might all be contributed in the 10 years prior to them stopping work. They should still be able to get the money from the sale of an investment property, an inheritance or a significant redundancy into super - that's what the current non-concessional cap and bring-forward rule achieve. Limiting everyone's ability to do that because doctors, lawyers and engineers are in a position to take advantage of concessional contributions for more of their working life would be a crap solution.

*I'm in favour of more consistent treatment of lower income earners between income tax and super tax.
*I'd also like to sea reasonable benefit limits/asset caps on super balances after which point tax benefits are phased out gradually to 0 (to avoid reluctance to contribute to super at all for fear of going over the limit).
*I'd be in favour of significant inheritance taxes, as those that would be impacted would be most able to afford it, those that passed away won't miss it, and those that are receiving the assets as a result of the estate are essentially receiving a windfall anyway.

*I don't want to see the tax system and super system become more complicated.
*I don't want resources pumped into helping low income earners build up assets when they're unlikely to achieve enough to reduce their pension entitlement anyway.
*I really don't want contributing to super in general to be disincentivised or fall out of favour. People need to contribute more than they are as it is to fund a comfortable retirement.


----------



## Junior (17 November 2015)

k.smith said:


> What is the difference between trusting the government to fund government pensions or trusting the government to sustain every increasing super concessions?




A massive, massive difference.  

As I wrote in my previous post, I am in favour of reducing the concessional cap, or introducing a limit on super balances.  Thereby ensuring the system is sustainable.  This means those with the ability to fund their own retirement can continue to do so, without receiving excessive tax concessions.

Tax concessions are foregone revenue, whereas paying out age pension is an expenditure, which needs to be funded somehow.  It's a big difference.  Concessions can be taken away or reduced at any time, where once the government  sets a precedent that all retirees will be paid a government pension for life....it would be difficult/impossible to then take it away, no government would have the balls.  

Have a look at the countries who do pay out pensions to all....you will notice those countries are running massive budget deficits, and Australia is not.


----------



## Junior (17 November 2015)

http://www.smh.com.au/business/bank...p-on-superannuation-fees-20151115-gkzghy.html

Regarding the article about fees on superannuation.  It is well written, and I like Michael West as he tackles some important issues.

HOWEVER, anyone who reads this article and gets mad must realise it is very easy to change super funds.  There's a wealth of information online, all superannuation products fully disclose their fees on their website.  If you can't get your head around it, find a good adviser.  There are cheap products out there.


----------



## McGherkin (17 November 2015)

Vixs said:


> You're making a straightforward scenario complicated. A financial planner would be able to help you.
> 
> EDIT: I would suggest googling the following to learn a bit more yourself as that's obviously the aim:
> *Preservation Age
> ...



Thank You for that

No disrespect to Financial Planners, but I'll shy away from them unless I absolute must.  Noing personnal to them, just my opnion.

I've run the numbers through extensively myself.  All in todays's numbers: Anticiptate having $1.3M to $2.0M in Super dependant on whether I retire at 65 or go through to 70.  Haven't factored the equity in my House, downsizing from $1.2M to $600K either.  I'll be debt free from 65 (no need to use Super to pay any debts off).

I'm probably one of the 'hated' Super people in here.  On a circa $200K salary + Super, SGC fluctauates from $17K to $18.5K a year.  Salary Sacrificing $11K a year.  Hoping the Contribution Threshold is raised to $35K so I can get more Salary Sacrifice in. 

Cheers


----------



## sptrawler (17 November 2015)

Vixs said:


> Removing the LISC was a dumb move made by a dumb Liberal govt (coming from me, traditionally a Liberal voter). I agree with you in that it was a good move, and I think that whatever solutions come out of this review we will see something along the lines of the LISC or a change in how tax is applied so that low income earners don't pay tax they otherwise wouldn't have needed to. They are, however, still net tax recipients not tax contributors, and frankly any bleating about how it's not fair on them should take into consideration the welfare available in this country. I dislike the contributions and earnings tax on super for low income earners because it's inconsistent with our tax system, not because it's 'not fair'.
> 
> You have mentioned a few times that super doesn't need any tax concessions because it's compulsory. If they take away the tax concessions they should also take away the compulsory nature, otherwise it might as well be confiscation of private assets. Who are the government to tell private individuals how they should manage their money?
> 
> ...




+1 Great explanation Vixs, exactly what I have been trying to say, but unable to articulate.


----------



## Vixs (17 November 2015)

McGherkin said:


> Thank You for that
> 
> No disrespect to Financial Planners, but I'll shy away from them unless I absolute must.  Noing personnal to them, just my opnion.
> 
> ...




I can appreciate the scepticism, the reason I recommended seeing a planner is because the questions you're looking for answers to are bread and butter stuff for most financial planners. Concessional cap is already $35,000 for people over age 49, for example.

Financial planning is not what it was 10 years ago. I strongly recommend if this is the situation you're in and the questions you're facing, speak to a few planners to find one that seems genuinely interested in helping you reach your goals and not so concerned with changing around super fund products. Good luck to you - if you'd like to ask anything else feel free to PM me, I'd rather not derail this thread.


----------



## sptrawler (18 November 2015)

Here is a fairly good article, on the implementation and original intent of the super system. Also how it was sold to the workers at the time.

http://www.abc.net.au/news/2015-11-...esigned-to-get-people-off-the-pension/6923582

A couple of extracts, that highlight how intent and objectives get warped over time.

Ms O'Dwyer said: "When it was set up all those years ago in 1993, it was set up to be an alternative to the age pension so that people didn't have to rely upon the aged pension or even the part pension."

In the late 1980s, superannuation was sold as a supplement to the aged pension.
In 1989, the prime minister Mr Hawke said: "The pension will always be there for those who need it, but it will be supplemented by a range of superannuation options."
Instead, workers could "look forward to a better standard of living in retirement by supplementing the pension from their own savings".
Mr Howe tells Fact Check that "the age pension system is primarily designed as social security, whereas compulsory superannuation is about encouraging savings over and above the pension system".

Mr Howe tells Fact Check that "the age pension system is primarily designed as social security, whereas compulsory superannuation is about encouraging savings over and above the pension system".

"It was never imagined that one would replace the other," he says. 


Interesting in 2017 the assett test is going to reduce from $1.1m to $800,000, before you can get a part aged pension.

Funny all the experts are saying you will have a better lifestyle, having full age pension, and keeping just under the threshold.:

So much for the original intent, it will be interesting to see how much they wreck it, before it is incorporated back into consolidated revenue.


----------



## Bill M (18 November 2015)

sptrawler said:


> So much for the original intent, it will be interesting to see how much they wreck it, before it is incorporated back into consolidated revenue.




Thanks for sharing those videos sp. I liked the one one of Keating in the early 90's. We are so lucky here in OZ that at least somebody took it on and made it law that everybody would be entitled to super.

Just a bit of background from my own personal experiences through life. We had insurance salesmen back in the 70's selling us crappy products that returned very little. Just a hand full of us took those on and there was no super or pension scheme particularity for us plebs on the tools. The Government employees and those with good employers like BHP and CBA etc. were the lucky ones that did get a pension scheme as part of their package.

This went on for the next 20 years, me being a pleb on the tools got zilch and then we started hearing noises and it started to sound like someone was thinking about the future. Then came this wonderful super system we have. All my mates lived from pay packet to pay packet each week, no savings at all before compulsory super came in.

1993: Bang, we got compulsory super. To all those that think they are losing salary due to the super that your employer pays, this is not right. I remember exactly to the time super started to be paid. The employer paid it in addition to your salary. A freebee one could say. In some work places there was a bit of a trade off in wages growth for a year or two in order to absorb the super guarantee, no one really cared as in those times wages growth was like $8 a week or so. 

Now we have the second best system in the world and we have built up $trillions in savings, mostly thanks to the super guarantee.

I am still in contact with a friend of mine whom I was on the job with 26 years ago. In those days he had nothing and he had no hope of saving. He is still there, same job, no money in the bank, no home, no nothing BUT he has $500,000 in is Super. When Super came about, I convinced him to salary sacrifice into it. If there were no such things as concessional contributions then he wouldn't have put in and he would have only half of what he has now.

My message is, read, look, listen and learn. Know your history, we were a piss poor nation of savers. Now everybody has Superannuation, keep it going as it is and put a cap on top end savings and keep our Super system strong and worthwhile to put into.


----------



## Bill M (18 November 2015)

sptrawler said:


> Interesting in 2017 the assett test is going to reduce from $1.1m to $800,000, before you can get a part aged pension.




I missed this bit. So what would a normal sane human being with $1.1M in the bank be doing right now? 

Well this sane cookie will be blowing 350K on a new car, a complete refurbishment for our house and a cupla cruises around the world for my wife and I and then come back and pick up the age pension. You see folks, the more you hit those that have the means the more they reduce those means to get the freebees. We are not talking about multi million $ super thieves, just someone with $1.1 M in the bank.


----------



## sptrawler (18 November 2015)

Good posts Bill, I'm in the same boat as you. Left school at 15 started an apprenticeship on $17/ week, when super came out I put as much in as I could afford.
I also have mates, who are all around 60, most only have their super and a mortgage.

The thing that hurts most is, we were told if you put it away you will enhance your retirement.

What will probably end up happening is, the assett test will keep dropping, untill you have to spend all your savings before being eligible for any pension.

Similar to what I believe happens, to qualify for centrelink.


----------



## k.smith (19 November 2015)

Vixs said:


> Removing the LISC was a dumb move made by a dumb Liberal govt (coming from me, traditionally a Liberal voter). I agree with you in that it was a good move, and I think that whatever solutions come out of this review we will see something along the lines of the LISC or a change in how tax is applied so that low income earners don't pay tax they otherwise wouldn't have needed to. They are, however, still net tax recipients not tax contributors, and frankly any bleating about how it's not fair on them should take into consideration the welfare available in this country. I dislike the contributions and earnings tax on super for low income earners because it's inconsistent with our tax system, not because it's 'not fair'........




While I agree with some of what you say, my opinion that tax concessions on super contributions be abolished remain. 

We have a compulsory superannuation system where the minimum contribution for ALL is 9.5% of ordinary earnings, but where the consequences of making these contributions differ dramatically according to your income. Tax concessions on super contributions result in a loss to the economy of $17 billion. More than 50% of tax concessions go to the top 20% (and 20% of concessions to the top 3%) Low income earners are disadvantaged.  Tax concessions on super are unacceptable because of their inequality. Whether an earner is a "tax recipient or a tax contributor" is irrelevant, all are compelled by law to contribute. It isn't about who earns the most or who gets the most in benefits or rewarding or penalising earners. We're all in this together, some with more, some with less, and it needs to work for everyone. Whether you deposit $300 or the limit of $30,000 a year, the emphasis of tax concessions should be on the super accumulation phase.



Vixs said:


> ''.....You have mentioned a few times that super doesn't need any tax concessions because it's compulsory. If they take away the tax concessions they should also take away the compulsory nature, otherwise it might as well be confiscation of private assets. Who are the government to tell private individuals how they should manage their money?....''




Why would you regard this as a "confiscation of private assets" when the assets remain your property ?

Obviously, you are looking at this from the perspective of a top earner when you suggest that if concessions were removed, superannuation would be a "confiscation" of private assets. In fact, you reinforce the dilemma as this is exactly the position low earners currently face.  Why should they be in a position that you don't want to be in for doing exactly the same as all of us...contributing 9.5% of their $$$? Is it OK for them, but not for another? 

Where around 70% of tax payers earn less than the average wage, the benefits to the majority are significantly less than those at the top 10% who earn an average of $150k plus. While I really don't care who earns what, it seems to me that the only solution where earners get equality is by removing the concessions on contributions.



Vixs said:


> ''....You've also taken aim at fees, with fund managers "Raking it in". What return would an everyday person get on their forced investments if they didn't have professional management? Hint: They'd be sitting in cash. A negative real return in cash doesn't help people save for retirement. For the benefit of generating a real return and growth over the long-term, what fees would be reasonable for managers to charge? Or should the government dictate them as well?...''




"Raking it in" were not my words...they were the journalist's, see http://www.smh.com.au/business/bank...lian-super-fund-industry-20151112-gkxsi7.html

I said that I think something needs to be done about fees.

Interesting comments from the Treasury :

http://www.smh.com.au/federal-polit...es-too-high-says-treasury-20140623-3apqd.html

".....Australians are paying an extraordinary $20 billion per year in superannuation fees, about three times as much as they need to, the Commonwealth Treasury says.
Addressing the Committee for the Economic Development of Australia on Monday, Treasury director David Gruen said super fees averaged $726 per year for members with a fund balances of $50,000.There was little evidence to suggest the fees were value for money. On average high fees were "simply a net drain to investors".
Australia's fees are about three times those in Britain, accounting for 1 per cent of gross domestic product....''



Vixs said:


> ''....
> It's been said a few times here, and in about 95 other pages of this thread; capping the amount of assets in a super fund that receive concessional tax treatment is the only way to ensure the top end (who are few in number but large in balance) don't milk it for all it's worth. What needs to be preserved is people's ability to contribute to super at a time that suits them, through reasonable or generous contribution caps. Most people tend to play catch up towards retirement, and a large part of their super might all be contributed in the 10 years prior to them stopping work. They should still be able to get the money from the sale of an investment property, an inheritance or a significant redundancy into super - that's what the current non-concessional cap and bring-forward rule achieve. Limiting everyone's ability to do that because doctors, lawyers and engineers are in a position to take advantage of concessional contributions for more of their working life would be a crap solution....''




I agree with you re capping. ....think the cap being suggested here is probably a little low...
http://www.smh.com.au/business/bank...onal-super-contributions-20151117-gl0tja.html


----------



## sptrawler (19 November 2015)

k.smith said:


> While I agree with some of what you say, my opinion that tax concessions on super contributions be abolished remain.
> 
> We have a compulsory superannuation system where the minimum contribution for ALL is 9.5% of ordinary earnings, but where the consequences of making these contributions differ dramatically according to your income. Tax concessions on super contributions result in a loss to the economy of $17 billion. More than 50% of tax concessions go to the top 20% (and 20% of concessions to the top 3%) Low income earners are disadvantaged.  Tax concessions on super are unacceptable because of their inequality. Whether an earner is a "tax recipient or a tax contributor" is irrelevant, all are compelled by law to contribute. It isn't about who earns the most or who gets the most in benefits or rewarding or penalising earners. *We're all in this together, some with more, some with less, and it needs to work for everyone.* Whether you deposit $300 or the limit of $30,000 a year, the emphasis of tax concessions should be on the super accumulation phase.




It does have to work for everyone, that's why those with more than $800k, are going to get f##ck all pension.

Jeez your hard work, how much does the pension cost? yet you harp on about how much EXTRA your not getting out of, those who are paying the taxes, that are paying the pensions. FFS

Everyone has concensus that caps need to be applied, but you can't help yourself, you want to demonise anyone who has done the decent thing and saved for their retirement or has a high income..

Anyway, time for me to give this thread away.

Troll on. lol


----------



## k.smith (19 November 2015)

sptrawler said:


> It does have to work for everyone, that's why those with more than $800k, are going to get f##ck all pension.
> 
> Jeez your hard work, how much does the pension cost? yet you harp on about how much EXTRA your not getting out of, those who are paying the taxes, that are paying the pensions. FFS
> 
> ...




I will get a pension.... a part pension, just.
Am also in the top 20%

Except unlike most here, saved it not once, but twice.
Lost more than 3/4 in the GFC (400k +)
Husband had a heart attack and quad pass in 2007, so bad timing.
He worked rotating shifts for 30 years, 8 hour days, 12 hours on weekends.
Day, Night and Afternoon shifts.
Four kids, sent two to uni, one trade apprentice (the other became a good worker)
I stayed home to raise them. Our choice. Great kids. No problems TG for that !
I started work in 1994.
We both paid  taxes. Got around $80 per month for child endowment.
No other government benefit, peeved to have missed out on first homebuyers grant - and baby bonus...joke imo
We saved, saved . Paid off mortgage.

After the GFC losses, left with just $120k.
Faced with choice to spend the lot to qualify for benefits or get on with it
Got on with it.
Husband went back to work part time. Manual work.
Joint income less than $60k, including interest.
Determined to replace losses..
Lived on $25k...any idea what that takes???....oh, including private health insurance {$3k+ p/a}, have to, heart patient..

Never ever collected one cent in welfare, other than the low income supplement - $300 p/a.
Deposited $35k into super p/a (average) part concessional, part voluntary.
Tax concessions minimal, as in the lower tax bracket.

Husband still working to date to become financially independent.
Major surgery stopped me a year ago...

Lots of lessons learnt from the GFC.
I learnt to be sceptical. 


Never asked for a cent, trawler.....just posted an idea which makes sense to me.

Hard work isn't just done by the high earners.


----------



## sptrawler (19 November 2015)

k.smith said:


> I will get a pension.... a part pension, just.
> Am also in the top 20%
> 
> Except unlike most here, saved it not once, but twice.
> ...




Thanks for your honest reply, I see you have done it tough and you deserve the best retirement that the system can afford.

We brought up four kids with varying degrees of success, I had to retire due to multiple joint replacements.

Fortunately I have always saved for retirement, I'm just a tradesman and never ran a business. 
The gfc, knocked us for six also, had $700k before after, $350k. 
Fortunately I had purchased a couple of investment properties in the late 1990's, one for $60k, the other $140k.
Both positively geared. just in case someone wants to have a go.
Sold them and downsized the ppr, when I had to retire 5 years ago, put all the money into super.

As they say, life wasn't meant to be easy, the problem is finding a balance that encourages and rewards work and endeavour.
The welfare system in Australia, IMO, is very good, I will probably end up on it.

What must be kept in perspective, is that the cost to fund it adds to our already uncompetitive economy.

The consensus on this forum appears to be, that a cap or limit on how much can be held in super, is the obvious way to ensure its sustainability.


----------



## k.smith (19 November 2015)

have you read this?

http://www.superannuation.asn.au/Ar...er-and-high-account-balances_Apr2015.pdf.aspx


----------



## sptrawler (19 November 2015)

k.smith said:


> have you read this?
> 
> http://www.superannuation.asn.au/Ar...er-and-high-account-balances_Apr2015.pdf.aspx




Well at a quick read, that seems to support the same idea, the amount should be capped at a level that ensures a self funded reasonable retirement.

What shouldn't happen, is turning people against putting money away, for their retirement.

Currently the new cap, is a disincentive to add to your super.


----------



## qldfrog (20 November 2015)

sptrawler said:


> Well at a quick read, that seems to support the same idea, the amount should be capped at a level that ensures a self funded reasonable retirement.
> 
> What shouldn't happen, is turning people against putting money away, for their retirement.
> 
> Currently the new cap, is a disincentive to add to your super.



and the cap should not be stupidly on $xx per year but on a total (reviewed yearly): I made years at 250k, I will not get 50k this year.
you should be able to top your account up to a limit and be mandatory super free once reached.
The system is seen via the narrow view of employees earning smooth income year aftyer year.
This is and will be less and less relevant in our economy with more instability and self employed


----------



## k.smith (20 November 2015)

qldfrog said:


> and the cap should not be stupidly on $xx per year but on a total (reviewed yearly): I made years at 250k, I will not get 50k this year.
> you should be able to top your account up to a limit and be mandatory super free once reached.
> The system is seen via the narrow view of employees earning smooth income year aftyer year.
> This is and will be less and less relevant in our economy with more instability and self employed




The report http://www.superannuation.asn.au/Ar...er-and-high-account-balances_Apr2015.pdf.aspx shows how much of the concessions go to earners who took advantage of being allowed unlimited contributions in 2006.

I agree with you that there should be a limit of the amount that you can contribute over a lifetime .... if you contribute more, there should be no tax concessions/advantages. 

I would like to see a more equality in enticing the lower earners to contribute in the first place.


----------



## sptrawler (22 November 2015)

k.smith said:


> The report http://www.superannuation.asn.au/Ar...er-and-high-account-balances_Apr2015.pdf.aspx shows how much of the concessions go to earners who took advantage of being allowed unlimited contributions in 2006.
> 
> I agree with you that there should be a limit of the amount that you can contribute over a lifetime .... if you contribute more, there should be no tax concessions/advantages.
> 
> I would like to see a more equality in enticing the lower earners to contribute in the first place.




The lower income earning couple have a huge enticement to contribute, they are going to get an indexed tax payer funded pension, equivalent to having $1,000,000 in term deposit at 3.4% = $34,000. 

On top of that, if they can contribute any extra dollars it won't affect the pension upto what, $250,000.
Now if they are getting say the normal rate of 2.8% = $250,00 x 2.8% = $7,000

That equates to an annual income of $41,000.

Now take the person who saves like hell and gets $900,000 in super.

They are $hit scared of losing any, so they put it in term deposit at 2.8%, they earn $25,200, don't qualify for any pension or concession card, so pull out their capital.
Which isn't a bad thing, except next year it gets worse, interest rates drop and the age pension goes up with inflation.

Yep I think the those fat cats with $1m in super need hammering, for being stupid enough to save it.


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## qldfrog (23 November 2015)

My thoughts as well, but many do not like figures as they do not lie:
indeed, any pensionner is the equivalent of a 1 million in savings, no investment risk owner coming straight from the taxpayer pockets;
any limitcap below 2 millions at least would be a disgrace..
And no, i do not have anywhere like this amount in super...


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## k.smith (23 November 2015)

sptrawler said:


> The lower income earning couple have a huge enticement to contribute, they are going to get an indexed tax payer funded pension, equivalent to having $1,000,000 in term deposit at 3.4% = $34,000.
> 
> On top of that, if they can contribute any extra dollars it won't affect the pension upto what, $250,000.
> Now if they are getting say the normal rate of 2.8% = $250,00 x 2.8% = $7,000
> ...





It will be most interesting to read how super is to be defined when the government finally make up their minds.
Can't believe that we are compelled to contribute without a clear definition.

An income of $34k is a very basic income for a couple.
Who ever envisaged that the aged pension of $34k would be more than the interest on $1 mil ?
Who ever envisaged interest rates below 5%, let alone below 3%?
Even 5% on $900k would return $45k, big difference ! 
That conservative returns on investments are so low is a big problem for anyone with a nest egg.
The current system is making people less and less inclined to save, you are right about that ! 
http://www.humanservices.gov.au/cor...get/1516/measures/older-australians/43-002176
The incentive to save beyond $400k has evaporated... why????
From Jan 2017, $1000 invested by the conservative investor earns less than 3% or $30p/a and losses him $78 in pension, an effective loss of $48 per $1000 
What a crazy state of affairs!

All the more reason to approach this from another angle, imo :

1. Abolish super concessions.
2. Limit the lifetime contributions
3. Remove the 15% tax within super up to the new limit.
4. Set in stone that super will never be taxed when in pension mode. 

and do something to encourage saving, not discourage saving !


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## sptrawler (23 November 2015)

k.smith said:


> It will be most interesting to read how super is to be defined when the government finally make up their minds.
> Can't believe that we are compelled to contribute without a clear definition.
> 
> An income of $34k is a very basic income for a couple.
> ...




That sounds fair, it will be interesting to see what evolves.


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## sptrawler (16 March 2016)

So what are the pros and cons of, " enshrining the purpose of superannuation", for the average Joe?

Will it make it more difficult to remove money, from your super fund?
Will it make it more difficult for industry and retail, to fleece you for management fees?

What is the underlying driver? What is the end game?


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## Glen48 (16 March 2016)

Sounds like to me the Feds want the rich to reverse mortgage their home which means the owner takes the risk and the Feds save regardless..
This saves the feds from taxing home owners  and they are seen as the good guys.???


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## Bill M (17 March 2016)

There was quite a bit of discussion on TV last night about the ageing population, super and the pension. It was mentioned that the Super Guarantee of 9.5% is not enough and that you really need to be putting in 15% of your income over your working life. All those people with only the super guarantee will end up on some form of Government pension, they said.

They interviewed an old lady who owned a small timber cottage near the beach. Her husband had died and she worked as a cleaner all her life. She was around 70, had no other assets and was living on the single persons government pension. She said "why should I be forced to move or downsize my house to free up my money that I have worked hard for all my life." The one and only thing I have is my house and when I go I want to leave something for my kids, she said. She said something along the lines of, the government should keep their greedy hands off our assets and go after the big fish.

She also said that there is no way people in some jobs can work until 70. Cleaning, boilermaker and trench diggers were 3 such jobs she mentioned. Raising the pension age to 70 was not an option for some occupations.

My comments are, she is right. No one should be forced to sell/downsize what little they have and who the hell wants to work until 70? A lot of people start dying off around that age and will never have the chance to live a normal retirement. 

My wife's comments were, how about getting the politicians to give up their ridiculous, unfunded, scandalous pension payments and benefits after their "short"working lives. This infuriates many people out there.

Whist I understand that we are aging, I just think they are targeting the wrong people. People with just an ordinary home should not be targeted. Pensions and the Super scheme should always be strong and something worth saving for. Whether "enshrining"means that I don't know know. There is a lot of guessing/mind games going on within the Government right now. The sooner the budget comes out the better, then we can talk more about it.


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## Vixs (17 March 2016)

sptrawler said:


> So what are the pros and cons of, " enshrining the purpose of superannuation", for the average Joe?
> 
> Will it make it more difficult to remove money, from your super fund?
> Will it make it more difficult for industry and retail, to fleece you for management fees?
> ...




The primary benefit would actually be for future legislation to be limited to things that are consistent with the purpose. Successive governments haven't been able to leave super alone for 20 years. It's a sore tooth they can't help touching.

By having the purpose of super clearly defined and enshrined in legislation the biggest thing would be that any future changes would need to be consistent with the purpose of superannuation.

Access is already challenging, and for 95% of Australia the management fees they're "fleeced" are the only reason they get anything more than a cash return.


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## Vixs (17 March 2016)

Bill M said:


> There was quite a bit of discussion on TV last night about the ageing population, super and the pension. It was mentioned that the Super Guarantee of 9.5% is not enough and that you really need to be putting in 15% of your income over your working life. All those people with only the super guarantee will end up on some form of Government pension, they said.
> 
> They interviewed an old lady who owned a small timber cottage near the beach. Her husband had died and she worked as a cleaner all her life. She was around 70, had no other assets and was living on the single persons government pension. She said "why should I be forced to move or downsize my house to free up my money that I have worked hard for all my life." The one and only thing I have is my house and when I go I want to leave something for my kids, she said. She said something along the lines of, the government should keep their greedy hands off our assets and go after the big fish.
> 
> ...




9.5% is inadequate and yet the government sees fit to keep the lid on increases for another 10 years to keep business expenses down.

They're going to have to means test the family home at some stage, but just including it in the aged pension won't be a good solution. The states and local councils use land value for rates and land tax purposes, perhaps the value of your land that is higher than the postcode average could  be included in the test. I'm not sure if that would be sensible, just spitballing ideas. Postcode might not be appropriate, the area may need to be larger to be fair.

When it comes down to it though, the lady in your story is only wanting to hang on to the house to be able to give it to her kids. That's an emotional argument, not a rational one for why every other taxpayer should pay to support her estate plan. She said she worked hard for it all her life, and fair enough, but if she'd worked harder or been more successful she might have some more savings and not be in a position to need to sell her home to increase the income.

I personally believe that significant death duties would have to be one of the most effective solutions to this issue. It is not the responsibility of the rest of the country to support your estate plan while you rely on the age pension. If you won't sell your assets, you should need to have a slice taken off when you pass away. The deceased doesn't need it anymore, and if the beneficiary has been living without the benefit of those funds they presumably can continue to live without the benefit of 100% of those funds and still be better off.


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## Junior (17 March 2016)

Her story is nice in theory, but the reality is, if she's living in a home worth say $800,000 and expects full age pension, healthcare, aged care etc. for the next 20 years....without spending a $$ of her own money, and then be able to gift $800,000 tax free to her children upon passing, that is not a fair or sustainable way for our economy to operate.  The burden on the shrinking proportion of tax payers will become too great, and then we will all suffer as a result.

The system should allow for someone in her situation to stay in her home, and as noted above this could be through re-introduction of inheritance taxes, or the Government accumulating some equity in her home, in exchange for provision of full Age Pension benefits for the rest of her life.  If her goal is to provide her children with financial assistance, well she has the option of downsizing, or taking a reverse mortgage.  Or she could have considered this whilts still employerd, and set aside some funds for this purpose.  Relying on the Government and other taxpayers to finance her estate planning is not fair.

Agreed that raising the Age Pension age is tough for those in occupations with heavy manual labour.  Perhaps there could be different eligibility ages based on 'white collar' or 'blue collar' workers.  Having said that, blue collar workers retiring from now onwards should have at least $100k-$200k in super...which should provide a buffer if they are to retire before meeting age pension age.


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## Bill M (17 March 2016)

Vixs said:


> When it comes down to it though, the lady in your story is only wanting to hang on to the house to be able to give it to her kids. That's an emotional argument, not a rational one for why every other taxpayer should pay to support her estate plan. She said she worked hard for it all her life, and fair enough, but if she'd worked harder or been more successful she might have some more savings and not be in a position to need to sell her home to increase the income.
> 
> I personally believe that significant death duties would have to be one of the most effective solutions to this issue. It is not the responsibility of the rest of the country to support your estate plan while you rely on the age pension. If you won't sell your assets, you should need to have a slice taken off when you pass away. The deceased doesn't need it anymore, and if the beneficiary has been living without the benefit of those funds they presumably can continue to live without the benefit of 100% of those funds and still be better off.




Maybe a blanket cap on the value of the family home. Something like $1 Million maybe? Nearly every country (except 3rd world ones) has an old age pension for their citizens.

I got a mate who is Polish/Australian his Mother lives in an apartment in Warsaw, it is worth around $400,000 USD, she gets a full Government Pension and can sustain a livable life off it. Another mate of mine returned back to the UK after living in Australia for 35 years, he bought himself a small flat and picked up the full minimum UK Pension. None are asked to used the equity in their home to fund their pension.

Why should we go backwards towards a 3rd world standard? I guess if all those other countries can afford to pay a basic pension why can't Australia? I think it's all Government miss-management and waste. Personally I think a fair cap on the family home before you have to draw on it is a good way to go.


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## McLovin (17 March 2016)

Bill M said:


> Maybe a blanket cap on the value of the family home. Something like $1 Million maybe? Nearly every country (except 3rd world ones) has an old age pension for their citizens.
> 
> I got a mate who is Polish/Australian his Mother lives in an apartment in Warsaw, it is worth around $400,000 USD, she gets a full Government Pension and can sustain a livable life off it. Another mate of mine returned back to the UK after living in Australia for 35 years, he bought himself a small flat and picked up the full minimum UK Pension. None are asked to used the equity in their home to fund their pension.
> 
> Why should we go backwards towards a 3rd world standard? I guess if all those other countries can afford to pay a basic pension why can't Australia? I think it's all Government miss-management and waste. Personally I think a fair cap on the family home before you have to draw on it is a good way to go.




OTOH, Bill, the current system has made property ownership for people of my generation (I'm 34) very difficult without familial help. The system as it is prevents Gen Y from owning property, and to add insult to injury we're also expected to pay for the retirement of pensioners with substantial property holdings.

Something's not right with that system.


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## McLovin (17 March 2016)

Junior said:


> Her story is nice in theory, but the reality is, if she's living in a home worth say $800,000 and expects full age pension, healthcare, aged care etc. for the next 20 years....without spending a $$ of her own money, and then be able to gift $800,000 tax free to her children upon passing, that is not a fair or sustainable way for our economy to operate.  The burden on the shrinking proportion of tax payers will become too great, and then we will all suffer as a result.




She says she wants to leave something for the kids, in reality she wants the taxpayer to leave something for her kids.


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## sptrawler (17 March 2016)

Vixs said:


> Access is already challenging, and for 95% of Australia the management fees they're "fleeced" are the only reason they get anything more than a cash return.




Apologies Vixs, that was badly worded, of course fees have to be charged. I was referring to the perception, constantly pushed by the media, that fees are excessive.


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## sptrawler (17 March 2016)

Junior said:


> Her story is nice in theory, but the reality is, if she's living in a home worth say $800,000 and expects full age pension, healthcare, aged care etc. for the next 20 years....without spending a $$ of her own money, and then be able to gift $800,000 tax free to her children upon passing, that is not a fair or sustainable way for our economy to operate.  The burden on the shrinking proportion of tax payers will become too great, and then we will all suffer as a result.
> 
> The system should allow for someone in her situation to stay in her home, and as noted above this could be through re-introduction of inheritance taxes, or the Government accumulating some equity in her home, in exchange for provision of full Age Pension benefits for the rest of her life.  If her goal is to provide her children with financial assistance, well she has the option of downsizing, or taking a reverse mortgage.  Or she could have considered this whilts still employerd, and set aside some funds for this purpose.  Relying on the Government and other taxpayers to finance her estate planning is not fair.
> 
> Agreed that raising the Age Pension age is tough for those in occupations with heavy manual labour.  Perhaps there could be different eligibility ages based on 'white collar' or 'blue collar' workers.  Having said that, blue collar workers retiring from now onwards should have at least $100k-$200k in super...which should provide a buffer if they are to retire before meeting age pension age.




I can definitely see the inheritance tax re-introduced, at the moment it would be political suicide, but that won't always be the case.


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## McLovin (17 March 2016)

sptrawler said:


> I can definitely see the inheritance tax re-introduced, at the moment it would be political suicide, but that won't always be the case.




It's the easiest tax there is to get around. The people who pay will be the ones with enough to be taxed, but not enough to have paid for advice on how to get around the tax. The best solution, imo, is if someone has $x in assets and wants a state pension then the state takes a cut of the assets when the person dies. They get to live in their home until they die and in return the state is not left out of pocket.


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## Bill M (17 March 2016)

McLovin said:


> It's the easiest tax there is to get around. The people who pay will be the ones with enough to be taxed, but not enough to have paid for advice on how to get around the tax. The best solution, imo, is if someone has $x in assets and wants a state pension then the state takes a cut of the assets when the person dies. They get to live in their home until they die and in return the state is not left out of pocket.




That actually sounds like a good idea. No one is forced to move or sell their home and when they go the house can be sold on the open market, if there is anything left then the family gets it. The only thing is that no one will vote for any Government that wants to bring that in.


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## sptrawler (17 March 2016)

McLovin said:


> It's the easiest tax there is to get around. The people who pay will be the ones with enough to be taxed, but not enough to have paid for advice on how to get around the tax. The best solution, imo, is if someone has $x in assets and wants a state pension then the state takes a cut of the assets when the person dies. They get to live in their home until they die and in return the state is not left out of pocket.




The problem that I can see is, the assets will need to be monitored or some form of caveat put on them, to stop the person selling them. That then leads to the starting of an assets register, that would become another govt dept.


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## McLovin (17 March 2016)

sptrawler said:


> The problem that I can see is, the assets will need to be monitored or some form of caveat put on them, to stop the person selling them. That then leads to the starting of an assets register, that would become another govt dept.




I can't see it being that hard. The register already exists in each state, the government would just need to put a caveat on the existing title, which they already do for things like bail.


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## sptrawler (17 March 2016)

McLovin said:


> I can't see it being that hard. The register already exists in each state, the government would just need to put a caveat on the existing title, which they already do for things like bail.




So if the person has been on the pension for say 5 years, then decides to sell their property to down size, would the government get a percentage of the sale price? Or would the amount owing be carried over to the next property, that then brings in question, what happens when the amount owing exceeds the asset value?
Is the owner then evicted and the property sold?
Also would the pension forthcoming to someone who has underpining assets, be the same as someone who has no assets?
I think it may be difficult to sell the idea in a logical and  convincing way.


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## DaveDaGr8 (17 March 2016)

Not sure where the argument is here. Politicians don't have to sell their houses to get a pension, so why should anyone else ???

What's fair for one should be fair for all


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## Vixs (18 March 2016)

sptrawler said:


> Apologies Vixs, that was badly worded, of course fees have to be charged. I was referring to the perception, constantly pushed by the media, that fees are excessive.




No apology needed, just had to put that perspective in there because on an investment forum everyone drastically over-estimates the financial literacy of the average punter.

People borrow money, lots of it, for things like tattoos, weddings and holidays every day. This country is full of morons that the superannuation system is saving from themselves.


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## McLovin (18 March 2016)

sptrawler said:


> So if the person has been on the pension for say 5 years, then decides to sell their property to down size, would the government get a percentage of the sale price?




Yes.



sptrawler said:


> what happens when the amount owing exceeds the asset value? Is the owner then evicted and the property sold?




No. It's not supposed to be punitive.


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## Vixs (18 March 2016)

Bill M said:


> Maybe a blanket cap on the value of the family home. Something like $1 Million maybe? Nearly every country (except 3rd world ones) has an old age pension for their citizens.
> 
> I got a mate who is Polish/Australian his Mother lives in an apartment in Warsaw, it is worth around $400,000 USD, she gets a full Government Pension and can sustain a livable life off it. Another mate of mine returned back to the UK after living in Australia for 35 years, he bought himself a small flat and picked up the full minimum UK Pension. None are asked to used the equity in their home to fund their pension.
> 
> Why should we go backwards towards a 3rd world standard? I guess if all those other countries can afford to pay a basic pension why can't Australia? I think it's all Government miss-management and waste. Personally I think a fair cap on the family home before you have to draw on it is a good way to go.




I may have missed something in this thread but I think everyone here in this thread supports some reasonable level of home value excluded from any means testing. As with everything superannuation and pension related the challenge isn't whether or not to means test it's what the thresholds should be.

I'm sure there are a million ways to get around them but the UK has a 40% estate tax on all estate assets over 325k pounds (615k AUD at the moment). If we had that in Australia it wouldn't be such an issue, but there are going to be many thousands of million dollar homes inherited and sold tax-free transferring wealth over the next few years, after the parents collected age pensions for decades.

Generation Y is getting slammed for a sense of entitlement, but the sense of entitlement in hanging onto a house so that your kids get the warm and fuzzies of the house that grandpa built is out of whack with the economic value of the real estate being handed over. I know that the majority of the people in these circumstances didn't intend for this to happen and it was not their plan, but that's where we are.


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## Bill M (19 March 2016)

Vixs said:


> I may have missed something in this thread but I think everyone here in this thread supports some reasonable level of home value excluded from any means testing. As with everything superannuation and pension related the challenge isn't whether or not to means test it's what the thresholds should be.




Maybe something as generous as the USA? Look at this

---
There are several ways to give a home to your child. And a few are tax-free. But to get the best tax results, you’ve got to plan ahead. Here is a rundown of your options.

Stay put

If you plan to live in your home until you die, and your estate is below the unified federal estate gift and estate tax exemption amount *($5.45 million for 2016)*, this is your best strategy.

http://www.marketwatch.com/story/how-to-give-your-home-to-your-children-tax-free-2015-02-23
---


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## McLovin (19 March 2016)

Bill M said:


> Maybe something as generous as the USA? Look at this
> 
> ---
> There are several ways to give a home to your child. And a few are tax-free. But to get the best tax results, you’ve got to plan ahead. Here is a rundown of your options.
> ...




The high threshold is to avoid capturing family businesses. Personally, aside from the ease of avoidance, I think death tax is a pretty horrible concept. If you've paid tax all your life, have had no recourse to state pensions etc and your assets will continue to pay taxes after you pass, the government has little right to swoop in and take a % of your assets just because you carked it.

Look at Bill Gates, Buffett, Zuckerberg etc. They're donating their assets to a charitable trust (tax free) when they die to get around death taxes. Once the assets are inside the charity the earnings will be tax free. The government shoots itself in the foot.


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## Vixs (19 March 2016)

McLovin said:


> The high threshold is to avoid capturing family businesses. Personally, aside from the ease of avoidance, I think death tax is a pretty horrible concept. If you've paid tax all your life, have had no recourse to state pensions etc and your assets will continue to pay taxes after you pass, the government has little right to swoop in and take a % of your assets just because you carked it.
> 
> Look at Bill Gates, Buffett, Zuckerberg etc. They're donating their assets to a charitable trust (tax free) when they die to get around death taxes. Once the assets are inside the charity the earnings will be tax free. The government shoots itself in the foot.




It's no different to any any type of tax. I went to work all week, got paid and the government takes a third of it. The more I earn, the more they'll take. The difference is that these taxes directly reduce my ability to pay for things that I'll use now.

Estate taxes don't harm the people that have passed away - they're dead. The only people impacted are those that have received a windfall.

We are going to need to get the revenue from somewhere and excluding estate taxes from the mix leaves a bigger load to be carried by the living, breathing individuals raising families, running businesses, being part of the community...

It doesn't make sense to me that our whole progressive tax system is geared at those who have the means to pay, paying more, and yet estates should be exempt.


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## McLovin (19 March 2016)

Vixs said:


> It doesn't make sense to me that our whole progressive tax system is geared at those who have the means to pay, paying more, and yet estates should be exempt.




Estates, outside of super, are taxed though. After the person dies the estate's assets are still income producing and will still pay tax. They are not, at any point, exempt. 

Super on the other hand is taxed concessionally during accumulation, not taxed once in pension phase and then able to passed tax free to heirs.


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## Vixs (19 March 2016)

McLovin said:


> Estates, outside of super, are taxed though. After the person dies the estate's assets are still income producing and will still pay tax. They are not, at any point, exempt.
> 
> Super on the other hand is taxed concessionally during accumulation, not taxed once in pension phase and then able to passed tax free to heirs.




But estates aren't really taxed. Homes are inherited and can be sold CGT free within 2 years of death, non-CGT assets like savings are not taxed, CGT assets aren't taxable until they're sold.

Super is not passed tax free, only the tax-free component which for many people is minimal. The taxable component attracts 17% tax incl Medicare levy with no exempt threshold for assets received by non-dependents (which includes adult kids).


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## McLovin (19 March 2016)

Vixs said:


> But estates aren't really taxed. Homes are inherited and can be sold CGT free within 2 years of death, non-CGT assets like savings are not taxed, CGT assets aren't taxable until they're sold.




Sorry, I wasn't meaning residential property, I meant cash, shares, businesses. 



Vixs said:


> Super is not passed tax free, only the tax-free component which for many people is minimal. The taxable component attracts 17% tax incl Medicare levy with no exempt threshold for assets received by non-dependents (which includes adult kids).




You're correct. I thought super could be passed down a familial line tax free.


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## qldfrog (20 March 2016)

McLovin said:


> Sorry, I wasn't meaning residential property, I meant cash, shares, businesses.
> 
> 
> 
> You're correct. I thought super could be passed down a familial line tax free.



On the above I agree with Mc lovin that the act of handing over cash, investment etc may not need to be taxed as after all, they are the results of an already taxed process, but the family home of the deceased if passed to children should be taxed in a way as it was never taxed, and other assets handovers should be seen as CGT event s(acquisition) if not done yet
You should not penalise savings so the reason I favor a pension to everyone over a given age, doing otherwise selectively  as is done now is a prize to people who decided to splash out vs living frugal lives.This pension should also become part of overall income and be taxed as any other incomes, inc retirement saving incomes.


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## McLovin (20 March 2016)

qldfrog said:


> You should not penalise savings so the reason I favor a pension to everyone over a given age, doing otherwise selectively  as is done now is a prize to people who decided to splash out vs living frugal lives.This pension should also become part of overall income and be taxed as any other incomes, inc retirement saving incomes.




A universal state pension requires contributions to be made by employers, employees or both. It's not supposed to be a free cash handout from consolidated revenue beyond the basic pension which is designed to prevent retirees falling into poverty.


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## Bill M (20 March 2016)

qldfrog said:


> You should not penalise savings so the reason I favor a pension to everyone over a given age, doing otherwise selectively  as is done now is a prize to people who decided to splash out vs living frugal lives.This pension should also become part of overall income and be taxed as any other incomes, inc retirement saving incomes.




A friend of mine is a New Zealander. He is a multi millionaire. One day we were discussing pensions and the like and he told me that in New Zealand everybody gets the pension, no matter what your assets are. I nearly fell off my seat when he told me that. My question was, why would give a state funded pension to a millionaire? He said it wasn't as simple as that. He said, we don't get the benefits the same as you guys do and our system different to yours and we get taxed on it too. So what you are saying is already happening in NZ.


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## qldfrog (21 March 2016)

Bill M said:


> A friend of mine is a New Zealander. He is a multi millionaire. One day we were discussing pensions and the like and he told me that in New Zealand everybody gets the pension, no matter what your assets are. I nearly fell off my seat when he told me that. My question was, why would give a state funded pension to a millionaire? He said it wasn't as simple as that. He said, we don't get the benefits the same as you guys do and our system different to yours and we get taxed on it too. So what you are saying is already happening in NZ.



NZ is becoming more and more attractive to me and with the 50 billions they will not spend on submarines which will never be used except maybe as targets for enemy force drones, that is a lot of universal minimum (and I mean minimum) pension to everyone, taxed.
If pension was as it is meant to be,a way to avoid people starving in the street, it would be universal, regardless the age and same amount (even name) than other benefits: unemployment, youth allowance etc
One "do not starve under the bridge" minimum welfare for all; I am for it ... and have no problem being taxed for that, but I have a problem being taxed to pay money selectively to people who sit on millions of assets which will never be taxed, just because they are old.
My youth idealist unrealistic view of the world: girls are nice, old people are kind and wise has changed a lot with life experience.
Kudo on NZ


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## sptrawler (21 March 2016)

Bill M said:


> A friend of mine is a New Zealander. He is a multi millionaire. One day we were discussing pensions and the like and he told me that in New Zealand everybody gets the pension, no matter what your assets are. I nearly fell off my seat when he told me that. My question was, why would give a state funded pension to a millionaire? He said it wasn't as simple as that. He said, we don't get the benefits the same as you guys do and our system different to yours and we get taxed on it too. So what you are saying is already happening in NZ.




It is the same in Canada and the U.K, our system was the same, until the politicians decided to raid the pot.
Julia used to go mad about it, but no one listens, until it effects them.

The funny thing is we are dumb enough, to let it all happen again.:1zhelp:


----------



## sptrawler (3 May 2016)

Well what Scott Morrison is wanting to implement, will certainly please those who think, the current system is a rort.
Sydboy has finally got what he wanted, RBL's re introduced, makes a lot of sense. Shame the limits don't.lol 

http://www.superguide.com.au/retirement-planning/2016-federal-budget-summary

If this is correct, I wouldn't be putting anything extra into super, it is actually harsher than what Labor were suggesting.

It is a shame they didn't suggest reigning in their own pensions.lol

Funny how the limits are per person, but there is no suggestion of allowing a couple to average their totals, yet a lot of talk about spouses.


----------



## SmokeyGhost (4 May 2016)

The author of the article in SuperGuide does use somewhat emotional terms in a number of places , ie, '"devastating" etc which seems a little over the top.

Anyway, here is the actual budget paper no 2.  Read from page 40 onwards for the superannuation matters.

http://www.budget.gov.au/2016-17/content/bp2/download/BP2_consolidated.pdf

Note that it is also intended to remove the work test for those under 75 years of age so that group will have the ability to contribute a tax deductible $25k pa.  That part suits me if it gets through.  As I've already turned most of my SMSF into tax free using the $540k arrangements, I cannot complain as it was a good run while it lasted.


----------



## Bill M (4 May 2016)

Just had a read of it sp. Whilst the $1.6 Million cap balance per individual sounds high, you just can't get there. They introduced a lifetime cap of the non concessional limit of $500,000 per person. Just how do they suppose you can get there with such a low limit? The problem with this policy is that it is effective immediately. It means someone who was planing to do a major top up simply can not do it anymore. 500K is the limit, no more.

And now they are going to tax the earnings of a TRIP (transition to retirement pension). Talk about changing the goal posts half way through a retirement. Example, my wife is on a TRIP, she still wants to work 2 or 3 years more, they promised us no tax on earnings on a TRIP, now they will tax it? Thank you very much for nothing, thieving bastards. If we had known this 3 years ago we would not have taken out a TRIP.

To all Superannuation investors, this years changes are dramatic. Think long and hard as to whether you really want to put your money into super. The 500k lifetime non concessional limit is terrible. They didn't think about the people who have only had 23 years in the compulsory super system. Just how can they build a $1.6 Million super fund with a 500K limit? It is a step backwards in my opinion.

Be careful out there and don't trust the Government to do the right thing by you.


----------



## CanOz (4 May 2016)

qldfrog said:


> NZ is becoming more and more attractive to me and with the 50 billions they will not spend on submarines which will never be used except maybe as targets for enemy force drones, that is a lot of universal minimum (and I mean minimum) pension to everyone, taxed.
> If pension was as it is meant to be,a way to avoid people starving in the street, it would be universal, regardless the age and same amount (even name) than other benefits: unemployment, youth allowance etc
> One "do not starve under the bridge" minimum welfare for all; I am for it ... and have no problem being taxed for that, but I have a problem being taxed to pay money selectively to people who sit on millions of assets which will never be taxed, just because they are old.
> My youth idealist unrealistic view of the world: girls are nice, old people are kind and wise has changed a lot with life experience.
> Kudo on NZ




Bye bye!


----------



## SmokeyGhost (4 May 2016)

Hmm, some will accumulate $1.6M and some wont.  Just as is the case now.  Never been any surety that the previously "desired" amount of $1M was achievable or guaranteed for many.  About 95% of the population never had the ability to accumulate even that level in superannuation. So the potential for a hue and cry about "I'll wont get" $1.6M will be the usual hot air.

As for changes to tax arrangements, it has always been the case.  As an example, before the introduction of the GST in 2000, anything over $50k was taxed at 48.5%, so the population will do what it has always done; complain about tax or other revenue arrangements not being fair to them and then adjust according to the legislation.  Ya just get on with it I reckon.


----------



## Junior (4 May 2016)

Some over-reactions here.

Superannuation is still an extremely tax-effective structure.  Earnings tax 15% and then 0% from retirement.  CGT 10% and then 0% from retirement.  You don't get those tax rates anywhere else.

The TTR strategy was always a loophole and an unintended consequence, and has finally been closed.

$500,000 lifetime cap seems a little low, but when combined with concessional cap of $25k per annum it will be sufficient.  There's nothing stopping you from accumulating assets outside of super.  

Perhaps there should be a higher lifetime cap for those over 50 and with a low balance, to account for those who were planning on stuffing money into super just in time for retirement.


----------



## SmokeyGhost (4 May 2016)

You probably have a point there, Junior.

In my case about 1/3 of my income is from investments outside of superannuation and the account-based pension (tax free) makes up for the rest.  Plus with the tax free threshold as it applies to me, as it does to others, under the present taxation arrangements I still, and will still, get a tax refund.  I consider my annual income as more than adequate.

Never quite understood the emphasis on superannuation being the ONLY avenue for generating a retirement income but that's just me.  Frankly, I am now glad I rejected the advice of the planner who set up the SMSF, recommending that all investments be transferred to the SMSF.  That recommendation was rejected on the basis of being adverse to pay the ponce fees on assets on which they originally had no involvement.


----------



## craft (4 May 2016)

The 1.6M cap has a large impact on me as a lot of the Capital Gain I expected to convert tax free will now attracts 10% tax and a lump of future earnings that would have been tax free will now be taxed at 15%. (I can hear the violins now). But I do think the Cap is a fair idea. Not sure why its introduction is delayed until 2017 – that just enables people that are/become old enough to enter the pension phase to realise their gains tax free and then reshuffle the excess back to accumulation next year. Free kick for the rich oldies that younger people don’t get. (Queue the violin)

I do think that as the agreement on taxation for amounts over 1.6M have been changed then amounts above 1.6M should be available for withdrawal prior to reaching preservation age. I know I would reduce my balance if I was allowed (despite the still very generous structure).  Trying to make Super more fit for purpose and at the same time trapping excess funds in there prior to preservation age is a bit of a contradiction.


----------



## sptrawler (4 May 2016)

craft said:


> The 1.6M cap has a large impact on me as a lot of the Capital Gain I expected to convert tax free will now attracts 10% tax and a lump of future earnings that would have been tax free will now be taxed at 15%. (I can hear the violins now). But I do think the Cap is a fair idea. Not sure why its introduction is delayed until 2017 – that just enables people that are/become old enough to enter the pension phase to realise their gains tax free and then reshuffle the excess back to accumulation next year. Free kick for the rich oldies that younger people don’t get. (Queue the violin)
> 
> I do think that as the agreement on taxation for amounts over 1.6M have been changed then amounts above 1.6M should be available for withdrawal prior to reaching preservation age. I know I would reduce my balance if I was allowed (despite the still very generous structure).  Trying to make Super more fit for purpose and at the same time trapping excess funds in there prior to preservation age is a bit of a contradiction.




The other thing that is a bit odd is the $500k lifetime limit, it will make it difficult for couples to balance their accounts. But I guess that was the purpose.


----------



## sptrawler (4 May 2016)

Junior said:


> Some over-reactions here.
> 
> Superannuation is still an extremely tax-effective structure.  Earnings tax 15% and then 0% from retirement.  CGT 10% and then 0% from retirement.  You don't get those tax rates anywhere else.
> 
> ...




Good points Junior, as Bill says getting a reasonable amount in will now be the issue for older Australians, for example if they sell an property.


----------



## SmokeyGhost (4 May 2016)

craft said:


> The 1.6M cap has a large impact on me as a lot of the Capital Gain I expected to convert tax free will now attracts 10% tax and a lump of future earnings that would have been tax free will now be taxed at 15%. (I can hear the violins now). But I do think the Cap is a fair idea. Not sure why its introduction is delayed until 2017 – that just enables people that are/become old enough to enter the pension phase to realise their gains tax free and then reshuffle the excess back to accumulation next year. Free kick for the rich oldies that younger people don’t get. (Queue the violin)
> 
> I do think that as the agreement on taxation for amounts over 1.6M have been changed then amounts above 1.6M should be available for withdrawal prior to reaching preservation age. I know I would reduce my balance if I was allowed (despite the still very generous structure).  Trying to make Super more fit for purpose and at the same time still trapping excess funds in there prior to preservation age is a bit of a contradiction.




As requested:



Seriously, most unfortunate for you being on the wrong side of the ledger on this one.

It will only be curiosity on my part but I will watch with interest those who purchased property through the superannuation structure.  A very lumpy product for an account-based pension in my view.  In a private capacity I recently acted on behalf of an estate to sell a property to an SMSF and I think the purchaser may well be having second thoughts.  Fortunately for the sellers, settlement is this week.


----------



## sptrawler (4 May 2016)

SmokeyGhost said:


> As requested:
> 
> 
> 
> ...





That's a very good point Smokey, it will probably require the house to be valued every year. Also if it is valued at say $1.2m and not rented, it could well cause some stress.


----------



## Junior (4 May 2016)

What about all those geared property in SMSFs, relying on contribution caps to service/pay down debt?  It will get interesting for some.  All those property spruikers gearing up folks' super with off-the-plan property might find themselves in some trouble.


----------



## McLovin (4 May 2016)

sptrawler said:


> That's a very good point Smokey, it will probably require the house to be valued every year. Also if it is valued at say $1.2m and not rented, it could well cause some stress.




AFAIK, the $1.6m cap is enforced at the time the account is switched to pension phase. There will be no need for the house to be revalued subsequently and the value of assets in the pension account can rise above the $1.6m threshold with no penalty.

The changes are a step in the right direction, and, imo, reflect that the tide on super has shifted. I expect more tightening over the next decade.


----------



## craft (4 May 2016)

> the lifetime limit of $500,000 will take into account all non-concessional contributions paid into super funds since 1 July 2007




Just a coincidence I guess that the Costello 1 Million Dollar non-concessional contribution window in the 2006 Budget  closed 30 June 2007 so won't be counted.  That generation really got it super sweet.


----------



## sptrawler (4 May 2016)

McLovin said:


> AFAIK, the $1.6m cap is enforced at the time the account is switched to pension phase. There will be no need for the house to be revalued subsequently and the value of assets in the pension account can rise above the $1.6m threshold with no penalty.
> .




That's interesting, so why have a $1.6m cap, that is increased by average wage increases annually? 
If the value of the assets grow faster than that, I would have thought the excess would have to removed be annually, or why have a cap at all?
Ah I understand, thick me, yes it is only the balance on transfer as at 1/July /2017


----------



## McLovin (4 May 2016)

craft said:


> Just a coincidence I guess that the Costello 1 Million Dollar non-concessional contribution window in the 2006 Budget  closed 30 June 2007 so won't be counted.  That generation really got it super sweet.




Gee wiz, talk about the golden generation!


----------



## McLovin (4 May 2016)

sptrawler said:


> If the value of the assets grow faster than that, I would have thought the excess would have to removed be annually, or why have a cap at all?




To stop large super balances switching to tax free status.


----------



## craft (4 May 2016)

sptrawler said:


> That's interesting, so why have a $1.6m cap, that is increased by average wage increases annually?
> If the value of the assets grow faster than that, I would have thought the excess would have to removed annually, or why have a cap at all?




To stop you moving more than 1.6M *into* the tax free environment.  Interesting question that I guess will be covered in the detail is whether there will be a minimum drawdown requirement each year from the tax free environment or can you maxamise the accumulation there whilst meeting the minimum withdrawal requirements from the 15% taxed environment.


----------



## McLovin (4 May 2016)

craft said:


> To stop you moving more than 1.6M *into* the tax free environment.  Interesting question that I guess will be covered in the detail is whether there will be a minimum drawdown each year from the tax free environment or can you maxamise the accumulation whilst meeting the minimum withdrawal requirements from the 15% taxed environment.




In my reading this morning I've seen somewhere that pension drawdowns will remain but accumulation accounts will not be subject to drawdown. Sorry, I can't find the link, and I may be misquoting. Helpful, I know!


----------



## sptrawler (4 May 2016)

Anyone have any idea how the non concessional cap will be managed? Will there be annual limits? a bring forward option etc?


----------



## sptrawler (4 May 2016)

McLovin said:


> In my reading this morning I've seen somewhere that pension drawdowns will remain but accumulation accounts will not be subject to drawdown. Sorry, I can't find the link, and I may be misquoting. Helpful, I know!




That begs the question, what happens when you want to convert your second account , that is formed by your excess over the $1.6m cap?

Jeez it will take a while, for the dust to settle, on these changes.lol


----------



## Junior (4 May 2016)

sptrawler said:


> Anyone have any idea how the non concessional cap will be managed? Will there be annual limits? a bring forward option etc?




If it's a $500,000 Lifetime limit, I would think no need to have annual limits.  Up to the individual whether they use it in one lump sum or spread out over time.

Ideally you'd get the money in there as soon as possible, to try and accumulate up to the $1.6mill pension limit.


----------



## craft (4 May 2016)

McLovin said:


> In my reading this morning I've seen somewhere that pension drawdowns will remain but accumulation accounts will not be subject to drawdown. Sorry, I can't find the link, and I may be misquoting. Helpful, I know!




Thanks - that would have been my guess, I'll pencil that in for now unless I see different.

Cheers


----------



## Junior (4 May 2016)

sptrawler said:


> That begs the question, what happens when you want to convert your second account , that is formed by your excess over the $1.6m cap?
> 
> Jeez it will take a while, for the dust to settle, on these changes.lol




I would think you are forced to wait until you've drawn down your existing pension below $1.6mill, then 'recast' a new pension of $1.6mill.


----------



## SmokeyGhost (4 May 2016)

I'm guessing they will be using the data from income tax returns and match personal data with the super accounts either industry or SMSF.

It seems the $500k life-time non-concessional limit in conjunction with the $25k pa concessional may well have the impact of limiting, over time, the amount which can be placed into superannuation.

The concept of multiple properties in super appears to be now dead from my inexpert reading.

Gonna be fun for some.


----------



## craft (4 May 2016)

Junior said:


> I would think you are forced to wait until you've drawn down your existing pension below $1.6mill, then 'recast' a new pension of $1.6mill.




The 1.6M is a lifetime cap of conversion to the tax free environment - you can't keep toping it up when you spend it or invest it poorly.


----------



## SmokeyGhost (4 May 2016)

Well, I assume the Guv'ment expects superannuation to be consumed for retirement as it was originally intended until very clever people got in and distorted that intent.



> From Budget Paper No 2 2016
> 
> From 1 July 2017, the Government will introduce a $1.6 million transfer balance cap on
> the  total  amount  of  accumulated  superannuation  an  individual  can
> ...


----------



## SmokeyGhost (4 May 2016)

```
Budget Paper No 2 2016 - Page 28

From  1  July  2017,  the  Government  will  lower  the  Division  293  threshold  (the  point  at  
which high income earners pay addition contributions tax) from $300,000 to $250,000. 
The  Government  will  also  reduce  the  annual  cap  on  concessional  superannuation  
contributions to $25,000 (currently $30,000 under age 50; $35,000 for ages 50 and over).
```


```
Budget Paper No 2 2016 - Page 24

From  1  July  2017,  the  Government  will  improve  the  flexibility  of  the  superannuation  
system  by  removing  the  current  restrictions  on  people  aged  65  to  74  from  making  
superannuation  contributions  for  their  retirement.  People  under  the  age  of  75  will  no  
longer  have  to  satisfy  a  work  test  and  will  be  able  to  receive  contributions  from  their  
spouse.
```


```
Budget Paper No 2 2016 - Page 27

The Government will introduce a $500,000 lifetime non-concessional contributions cap 
to  improve  the  sustainability  of  the  superannuation  system.  To  ensure  maximum  
effectiveness  the  lifetime  cap  will  take  into  account  all  non-concessional  contributions  
made  on  or  after  1  July  2007,  from  which  time  the  Australian  Taxation  Office  has  
reliable  contributions  records,  and  will  commence  at  7.30 pm  (AEST)  on  3 May  2016.  
Contributions  made  before  commencement  cannot  result  in  an  excess.  However,  
excess contributions made after commencement will need to be removed or subject to 
penalty tax. The cap  will  be  indexed  to  average  weekly  ordinary  time  earnings  and  is  
estimated  to  have  a  gain  to  revenue  of  $550.0 million  over  the  forward  estimates  
period. 
The  lifetime  non-concessional  cap  will  replace  the  existing  annual  caps  which  allow  
annual  non-concessional  contributions  of  up  to  $180,000  per  year  (or  $540,000  every  
three years for individuals aged under 65).
```


```
Budget Paper No 2 2016 - Page 29

From 1 July 2017, the Government will improve the integrity and fairness of the system 
by removing the outdated anti-detriment provision. 
The  anti-detriment  provision  can  effectively  result  in  a  refund  of  a  member
’s  lifetime  superannuation contributions tax payments into an estate, where the beneficiary is the 
dependant of the member (spouse, former spouse or child). Currently, this provision is 
inconsistently applied by superannuation funds.

Removing  the  anti-detriment  provision  will  better  align  the  treatment  of  lump  sum  death  benefits  across  all  superannuation  funds  and  the  treatment  of  bequests  outside  of superannuation. Lump sum death benefits to dependants remain tax free.
```


----------



## SmokeyGhost (4 May 2016)

```
Budget Paper No 2 - Page 30

The Government will improve integrity in the superannuation system by removing the 
tax  exemption  on  earnings  of  assets  supporting  Transition  to  Retirement  Income  
Streams from 1 July 2017 (income streams of individuals over preservation age but not 
retired).

It   will   also   remove   a   rule   that   allows   individuals   to   treat   certain   
superannuation income stream payments as lump sums for tax purposes.
```


----------



## Bill M (4 May 2016)

Junior said:


> Perhaps there should be a higher lifetime cap for those over 50 and with a low balance, to account for those who were planning on stuffing money into super just in time for retirement.






sptrawler said:


> Good points Junior, as Bill says getting a reasonable amount in will now be the issue for older Australians, for example if they sell an property.




And this is the problem. I'm getting close to my 500K limit. I have no chance of getting concessional contributions as I stopped working a long time ago. Then I sold our investment property just over a year ago. The funds from that was earmarked for Super. Now I can't put it in because someone overnight had a brain fart and made it effective immediately, talk about going backwards. They really don't think these things through do they?


----------



## CanOz (4 May 2016)

Bill M said:


> And this is the problem. I'm getting close to my 500K limit. I have no chance of getting concessional contributions as I stopped working a long time ago. Then I sold our investment property just over a year ago. The funds from that was earmarked for Super. Now I can't put it in because someone overnight had a brain fart and made it effective immediately, talk about going backwards. They really don't think these things through do they?




This is the main problem i reckon. When i was with a big F500 company, we would take months to do our annual operating plans. We would start working on the following years plan only after starting to execute the current years plan. That plan was for medium size unit of the business, not a bloody country I can't believe how they even dream this stuff up.


----------



## Junior (4 May 2016)

Bill M said:


> And this is the problem. I'm getting close to my 500K limit. I have no chance of getting concessional contributions as I stopped working a long time ago. Then I sold our investment property just over a year ago. The funds from that was earmarked for Super. Now I can't put it in because someone overnight had a brain fart and made it effective immediately, talk about going backwards. They really don't think these things through do they?




I suspect the rules might be tweaked a bit, as there would be quite a few in your situation.  You would also have the $500k cap for your partner as well.


----------



## SmokeyGhost (4 May 2016)

I suspect the boffins do think these things through to a large extent which is why the guillotine on the 500k non-deductible contribution was made effective from 7:30 pm on 3 May, yet other initiatives are proposed to be introduced at a later date.  It has had the unfortunate effect of preventing some "smaller" players implementing their plan but I'm guessing it was done to prevent larger fish taking advantage.

Some of those dudes in Finance and Treasury are not the shallow thinkers many would like to believe.


----------



## CanOz (4 May 2016)

SmokeyGhost said:


> I suspect the boffins do think these things through to a large extent which is why the guillotine on the 500k non-deductible contribution was made effective from 7:30 pm on 3 May, yet other initiatives are proposed to be introduced at a later date.  It has had the unfortunate effect of preventing some "smaller" players implementing their plan but I'm guessing it was done to prevent larger fish taking advantage.
> 
> Some of those dudes in Finance and Treasury are not the shallow thinkers many would like to believe.




I don't think they're shallow or unintelligent....just a bit rushed and i suspect they could do better with more time and more collaboration.


----------



## SmokeyGhost (4 May 2016)

CanOz said:


> I don't think they're shallow or unintelligent....just a bit rushed and i suspect they could do better with more time and more collaboration.




Fair point.  Possibly was also an attempt to avoid spreading the word through leaks which I believe has happened in the past.

I've never dealt with them and only met a couple at private social gatherings.  Their level of conversation was enough to scare me into chatting about the weather and cricket (ex-public servant but my saving grace was I was only carried the bags and completely cashed out my super and rolled it into the SMSF - the taxpayer had funded me more than enough to shame me from taking a pension).


----------



## sptrawler (4 May 2016)

SmokeyGhost said:


> Fair point.  Possibly was also an attempt to avoid spreading the word through leaks which I believe has happened in the past.
> 
> I've never dealt with them and only met a couple at private social gatherings.  Their level of conversation was enough to scare me into chatting about the weather and cricket (ex-public servant but my saving grace was I was only carried the bags and completely cashed out my super and rolled it into the SMSF - the taxpayer had funded me more than enough to shame me from taking a pension).




You sound similar to me, once I looked into it, the depth their counter moves go to is scary. 
I did the same as you and rolled over into SMSF.

They would have covered all this through the "white paper", to think they haven't thought it through, is a mistake.:cry

One issue I was thinking about, was what happens if you are over the $1.6m threshold, and are over 60 in pension mode.
The money which you must remove, is it removed tax free, or is it removed with tax payable on the taxable component.


----------



## SmokeyGhost (4 May 2016)

sptrawler said:


> You sound similar to me, once I looked into it, the depth their counter moves go to is scary.
> I did the same as you and rolled over into SMSF.
> 
> They would have covered all this through the "white paper", to think they haven't thought it through, is a mistake.:cry
> ...






> Where   an   individual   accumulates   amounts   in   excess of $1.6 million, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15 per cent). Members already  in  the  retirement  phase  with  balances  above  $1.6  million  will  be  required  to  reduce their retirement balance to $1.6 million by 1 July 2017. Excess balances for these members may be converted to superannuation accumulation phase accounts.
> 
> A  tax  on  amounts  that  are  transferred  in  excess  of  the  $1.6 million  cap  (including
> earnings  on  these  excess  transferred  amounts)  will  be  applied,  similar  to  the  tax
> treatment that applies to excess non-concessional contributions.




That's from the Budget papers.  I'm no expert but I suppose it will depend on whether the excess is a tax-free component or not.

Yeah, they've thought it through.  I'm pretty sure of that now.


----------



## sptrawler (4 May 2016)

SmokeyGhost said:


> That's from the Budget papers.  I'm no expert but I suppose it will depend on whether the excess is a tax-free component or not.
> 
> Yeah, they've thought it through.  I'm pretty sure of that now.




As this aspect hasn't been enacted retrospectively, why couldn't someone over 60 in pension phase, just remove the excess now as a tax free withdrawal?
All withdrawals are a combination of taxable and tax free, dependent on the ratio applied, when the pension was started.
I just can't see why the account holder couldn't just remove it as a tax free withdrawal, as the rules stand currently.


----------



## SmokeyGhost (4 May 2016)

sptrawler said:


> As this aspect hasn't been enacted retrospectively, why couldn't someone over 60 in pension phase, just remove the excess now as a tax free withdrawal?




If I were in such a situation it's what I'd do.  Random thought:  Is that what is actually intended?

Could also be some fascinating unwinding of property if that is in some SMSF's.

Gee it's gonna be fun watching.


----------



## sptrawler (4 May 2016)

SmokeyGhost said:


> If I were in such a situation it's what I'd do.  Random thought:  Is that what is actually intended?
> 
> Could also be some fascinating unwinding of property if that is in some SMSF's.
> 
> Gee it's gonna be fun watching.




As usual the intent is lost in the fine print, it will be a fun ride, as the penny drops.


----------



## McLovin (4 May 2016)

sptrawler said:


> As this aspect hasn't been enacted retrospectively, why couldn't someone over 60 in pension phase, just remove the excess now as a tax free withdrawal?




Because it will be tax-free after the change as well.


----------



## sptrawler (4 May 2016)

McLovin said:


> Because it will be tax-free after the change as well.




Is that right, thanks for that McLovin, I knew one of you gurus would know the answer.

I can sleep easy, and tell my husband not to worry.


----------



## McLovin (4 May 2016)

sptrawler said:


> I can sleep easy, and tell my *husband* not to worry.




You're a woman? For some reason I always thought you were a man! 

May I suggest a better avatar...


----------



## luutzu (4 May 2016)

sptrawler said:


> Is that right, thanks for that McLovin, I knew one of you gurus would know the answer.
> 
> I can sleep easy, and tell my husband not to worry.




Homer? How was the (new) honeymoon?


----------



## sptrawler (4 May 2016)

You guys crack me up, enough humour for today.
 I just thought, maybe I had better show my feminine side.

Myself and the other half rode over to the major shopping mall today, about 10k's, when we alighted her bike was stolen.

Jeez she was pi$$ed with the walk home. The bikes were locked with a 10mm stainless braid cable and number lock.
Cut clean as a whistle. 
Just shows the needy can afford good quality tools, what a wonderful country, our future in their hands.lol


----------



## SmokeyGhost (4 May 2016)

sptrawler said:


> You guys crack me up, enough humour for today.
> I just thought, maybe I had better show my feminine side.
> 
> Myself and the other half rode over to the major shopping mall today, about 10k's, when we alighted her bike was stolen.
> ...




They don't buy them.  Simply back up the Pantech and load the goods on.  Sheese, $90k of snap-on tools gone in a flash including the bloody forklift they used to load 'em.


----------



## sptrawler (5 May 2016)

Has anyone got more enlightenment on the budget superannuation measures?

The more I think about it the more it seems very fair, I would like to find a viable argument against it, but I can't.


----------



## SmokeyGhost (6 May 2016)

The proposals did to some extent put a halt to my strategy, and that of others more than likely.  Unfortunate but legislative risk is always a possibility.  For me, as my SMSF currently is not too far from the proposed tax-free limit, I'll not worry about it, wait until the dust settles and continue to invest available funds outside of the superannuation structure - or buy that Gibson J-45 I've been lusting after for sometime.

However, taking the position the intent of the proposal is to limit the amount of funds available tax free in retirement and not using superannuation as a wealth creation structure, I can the rationale behind the the Budget proposal.

Heck, if one does have $1.6M at age 60, that is $64k. Haven't done any reverse calculations to determine what that would be gross under the personal income tax arrangements but it is certainly more than I received when I was working.  And I lived quite well on that income.


----------



## Junior (6 May 2016)

In general I like the changes and they are fair, except for the retrospective nature of the lifetime cap.

There are a number of people out there who plan to retire within say, 5 years, who were planning on using the $180k pa and $540k cap to boost their super at the last moment.  People in this situation include self-employed with low super balance, and widows who typically raised kids in the 80s/90s and therefore did not accumulate much of a balance.  I use these examples because I personally know many in this position.

These people would be using funds from an inheritance, sale of small business, sale of investment property, or downsizing of the family home to boost their super just in time for retirement.

Having the rules changed so radically at the last moment, has stuffed up the planning for a few people.  

So to say that $1.6mill is a reasonable amount to have in super, but only allow $500,000 to be contributed is unfair.  The $500k cap is plenty for younger folk who will have SG and concessional contributions every year until retirement, and it's plenty for a couple who can double that cap, but it's not enough for a single person in the situation I've described.

Labour will (and have already) pounce on this aspect of it, and I predict it will be amended to include either a higher lifetime cap, or a transitional arrangement for those over 50.


----------



## Bill M (6 May 2016)

Junior said:


> In general I like the changes and they are fair, except for the retrospective nature of the lifetime cap.
> 
> There are a number of people out there who plan to retire within say, 5 years, who were planning on using the $180k pa and $540k cap to boost their super at the last moment.  People in this situation include self-employed with low super balance, and widows who typically raised kids in the 80s/90s and therefore did not accumulate much of a balance.  I use these examples because I personally know many in this position.
> 
> ...




You have hit the nail on the head Junior, I agree with all aspects of your post.

The 2 main points I raised initially (lifetime caps and TRP) was raised on Channel 9 news 2 nights ago. It really does seem as though they did not take this big group of people into consideration. 

Example, my wife earns 26K per year part time and relies on her TRP for extra support. Now (even though she has been on the TRP for a couple of years) she will get taxed on the income earnings of that pension (at the stroke of a pen one could say). It is a unfair to enter a system under existing rules and then have them changed half way through. This is not catching big fish as the government would like to have us believe, this is penalising small time savers who are trying to maximise their super.

Otherwise I don't have any problems with the changes to Super.


----------



## k.smith (6 May 2016)

sptrawler said:


> Has anyone got more enlightenment on the budget superannuation measures?
> 
> The more I think about it the more it seems very fair, I would like to find a viable argument against it, but I can't.




What of those who contributed non-concessional $$$ into their SMSF and invested it in the many failed Managed Investment Schemes ? A lot of them lost most, if not all of their $$$. 
What if they have made further non-concessional contributions to their super over the last few years?
Will they be faced with having to withdraw these funds now? :1zhelp: there may be a negative balance ! Won't some face wind-up?

That doesn't seem fair !

http://www.afr.com/personal-finance...ving-to-withdraw-excess-funds-20160505-gon3l6

I support the there be a ceiling on super accounts, and on how much one can contribute. But as always, there are the fine details.


----------



## McLovin (6 May 2016)

k.smith said:


> Will they be faced with having to withdraw these funds now? :1zhelp: there may be a negative balance ! Won't some face wind-up?




No. The $1.6m cap is for account balances, not contributions. The $500k cap is retrospective only to the extent that it applies on future contributions. That is to say, if you have contributed $500k since 2007, then you cannot contribute any more; if you have contributed $750k since 2007, then you cannot contribute any more, but you do not have to remove the excess $250k you have already contributed.


----------



## SmokeyGhost (6 May 2016)

k.smith said:


> *What of those who contributed non-concessional $$$ into their SMSF and invested it in the many failed Managed Investment Schemes ? A lot of them lost most, if not all of their $$$.*
> What if they have made further non-concessional contributions to their super over the last few years?
> Will they be faced with having to withdraw these funds now? :1zhelp: there may be a negative balance ! Won't some face wind-up?
> 
> ...




The market and poor investment outcomes can be a beast but that is the extent of it.  It can go just as wrong outside the superannuation structure and rarely do individuals get compensation for that - at least I've never received any.


----------



## k.smith (6 May 2016)

McLovin said:


> No. The $1.6m cap is for account balances, not contributions. The $500k cap is retrospective only to the extent that it applies on future contributions. That is to say, if you have contributed $500k since 2007, then you cannot contribute any more; if you have contributed $750k since 2007, then you cannot contribute any more, but you do not have to remove the excess $250k you have already contributed.




Does this mean that a million dollar fund made up of $800k of post 2007 non-concessional contributions which lost 85% of it's investment and is now worth just $200k cannot make any further non-concessional contributions? And with current low returns on investments, how will such a fund grow, let alone survive, if it is no longer possible to add to the remaining balance?



SmokeyGhost said:


> The market and poor investment outcomes can be a beast but that is the extent of it.  It can go just as wrong outside the superannuation structure and rarely do individuals get compensation for that - at least I've never received any.




My concern here is that unlike losses outside of the super structure, losses within have the potential to have a detrimental effect on accounts left with smaller balances. Hardly worth having an account perhaps?


----------



## McLovin (6 May 2016)

k.smith said:


> Does this mean that a million dollar fund made up of $800k of post 2007 non-concessional contributions which lost 85% of it's investment and is now worth just $200k cannot make any further non-concessional contributions?




Yes.



k.smith said:


> And with current low returns on investments, how will such a fund grow, let alone survive, if it is no longer possible to add to the remaining balance?




Not letting whoever lost 85% of the funds assets near the fund is probably a good start.



k.smith said:


> My concern here is that unlike losses outside of the super structure, losses within have the potential to have a detrimental effect on accounts left with smaller balances. Hardly worth having an account perhaps?




For the overwhelming majority of people who lose that sort of money out of their retirement savings they state pension is what will realistically fund their retirement.


----------



## k.smith (6 May 2016)

McLovin said:


> Yes.
> 
> 
> 
> ...




 I think it ridiculous that it is still allowed to invest superannuation monies, including compulsory super contributions, into schemes where it is possible to loss ALL of your investment.


----------



## McLovin (6 May 2016)

k.smith said:


> I think it ridiculous that it is still allowed to invest superannuation monies, including compulsory super contributions, into schemes where it is possible to loss ALL of your investment.




Schemes, shares, bonds, hybrids. Any investment carries the risk of total loss. Where do you draw the line? 

Personally, I think it's too easy to set up an SMSF, and the average punter would do better having their super in a low cost index type fund. It's pretty hard to blow-up 85% of your assets in that scenario. There are way too many vested interests in the financial planning industry to ever get that over the line though.


----------



## SmokeyGhost (6 May 2016)

Assuming the superannuation fund is an SMSF, the operative phrase is *Self-Managed*.  It matters not whether the Trustee use the services of a financial adviser or not.  The Trustees place the money on behalf of the members of the fund and, fraudulent behaviour aside and the Courts have a view on that, it is the responsibility of the Trustees invest with due caution having regard to the risks.

When I'm in charge, and that will never happen fortunately, before any one even thinks of starting an SMSF gets near investing, I'd place them in a locked room, get in a lawyer well versed in superannuation law and read them the Riot Act on the roles and responsibilities of Trustees.  If, after shaking in their boots and pale faced, they still wish to establish a SMSF, only then should they be permitted to invest.

And losing money outside of superannuation can be just as devastating I'll have you know.  In the 30 plus years I have been involved, I have seen more than one or two who have been bankrupted and/or distressed when their investing dreams have been shattered beyond repair.


----------



## craft (6 May 2016)

Bill M said:


> You have hit the nail on the head Junior, I agree with all aspects of your post.
> 
> The 2 main points I raised initially (lifetime caps and TRP) was raised on Channel 9 news 2 nights ago. It really does seem as though they did not take this big group of people into consideration.
> 
> Example, my wife earns 26K per year part time and relies on her TRP for extra support. Now (even though she has been on the TRP for a couple of years) she will get taxed on the income earnings of that pension (at the stroke of a pen one could say). It is a unfair to enter a system under existing rules and then have them changed half way through. This is not catching big fish as the government would like to have us believe, this is penalising small time savers who are trying to maximise their super.



Do you need to borrow my violin bill?  



Bill M said:


> Otherwise I don't have any problems with the changes to Super.




No problems with the parts that don't effect you.  But are not all the changes, rules that have been changed half way through.


----------



## craft (6 May 2016)

Junior said:


> In general I like the changes and they are fair, except for the retrospective nature of the lifetime cap.
> 
> There are a number of people out there who plan to retire within say, 5 years, who were planning on using the $180k pa and $540k cap to boost their super at the last moment.  People in this situation include self-employed with low super balance, and widows who typically raised kids in the 80s/90s and therefore did not accumulate much of a balance.  I use these examples because I personally know many in this position.
> 
> ...




I’m not so sure I agree with the argument about life time caps mucking up plans. Super has always had legislative risk to those with money committed to it.  The 1.6M tax free cap is a change that will see my fund pay millions more in tax than I would have otherwise under the existing rules – fair enough. 

A lot of the money invested outside super with an eye to entering it at the last minute has been accumulated outside and held out so as to avoid such legislative risk. When that legislative risk goes against them they seem to cry like babies and want transitional arrangements. Tough luck – you had your chance.

Sure there may be some genuine cases - but most if not viewed through self interest bias's probably don't have much merit to transitional arrangements.


----------



## Ves (6 May 2016)

craft said:


> But are not all the changes, rules that have been changed half way through.



Most of the changes are actually changes to changes that were introduced half way through (1 July 2007).


----------



## Junior (6 May 2016)

craft said:


> I’m not so sure I agree with the argument about life time caps mucking up plans. Super has always had legislative risk to those with money committed to it.  The 1.6M tax free cap is a change that will see my fund pay millions more in tax than I would have otherwise under the existing rules – fair enough.
> 
> A lot of the money invested outside super with an eye to entering it at the last minute has been accumulated outside and held out so as to avoid such legislative risk. When that legislative risk goes against them they seem to cry like babies and want transitional arrangements. Tough luck – you had your chance.
> 
> Sure there may be some genuine cases - but most if not viewed through self interest bias's probably don't have much merit to transitional arrangements.




Legislative risk is always a factor, but the lifetime cap is a significant and largely unexpected change, and it is applied RETROSPECTIVELY.  That is unfair to those who have not/are not taking advantage of the system, but simply following the rules and are now locked out of the super system, at well below the reasonable benefit limit of $1.6mill.  The game has suddenly changed.

I hardly think you should be accusing people of 'crying like babies', since, according to your claim you must be in the top 0.01% who has $20,000,000+ already in tax-free pension phase.  Or is that an exaggeration that your fund will "pay millions more in tax" under these changes?


----------



## Ves (6 May 2016)

Junior said:


> There are a number of people out there who plan to retire within say, 5 years, who were planning on using the $180k pa and $540k cap to boost their super at the last moment.  People in this situation include self-employed with low super balance, and widows who typically raised kids in the 80s/90s and therefore did not accumulate much of a balance.  I use these examples because I personally know many in this position.
> 
> These people would be using funds from an inheritance, sale of small business, sale of investment property, or downsizing of the family home to boost their super just in time for retirement.
> 
> Having the rules changed so radically at the last moment, has stuffed up the planning for a few people.



There is literally no difference in the tax (not) paid between $540k of income producing assets (say $25-30k income per annum) held in the superannuation system versus holding it personally as an individual if that is the only asset base we are talking about  (ie. "I want it all in super before I retire" scenarios).

Unless you absolutely shoot the lights out with your investing skills (by which point,  it isn't going to affect your quality of life any way) the tax treatment only starts to converge when the amount invested is a fair bit higher.

So it really doesn't matter that it's stuck outside of super.  Most people in this case would be advised to have their higher-yielding / risk assets in the tax free super environment and their lower yielding,  lower risk assets  (fixed income etc.) outside of super if it's a problem.


----------



## McLovin (6 May 2016)

Ves said:


> Most of the changes are actually changes to changes that were introduced half way through (1 July 2007).




The 2007 changes were a free-for-all, and a not even thinly veiled electoral bribe. The ironic part was that within one or two years the "no changes half-way through" brigade was already trying to make sure those generous benefits were not touched.


----------



## SmokeyGhost (6 May 2016)

McLovin said:


> .............It's pretty hard to blow-up 85% of your assets in that scenario.........




Apparently not it would seem.


----------



## McLovin (6 May 2016)

For the small business/self-employed...



> Treasury has confirmed that the small business retirement exemption will continue, meaning sellers of small businesses can contribute up to $500,000 of the sale proceeds into their super in addition to the new $500,000 cap, effectively doubling potential contributions. The small business retirement exemption has been in place since 1999 and was amended in 2006.
> 
> "Taxpayers who sell their small business are in a much better position than the general population when it comes to accumulating money in superannuation because of the proposed lifetime cap," says Mark Molesworth, a partner with BDO Australia, a consultancy that offers tax advice.
> 
> ...





Read more: http://www.afr.com/news/policy/budg...more-into-super-20160505-gon264#ixzz47qtUcPQe


----------



## Junior (6 May 2016)

Ves said:


> There is literally no difference in the tax (not) paid between $540k of income producing assets (say $25-30k income per annum) held in the superannuation system versus holding it personally as an individual if that is the only asset base we are talking about  (ie. "I want it all in super before I retire" scenarios).
> 
> Unless you absolutely shoot the lights out with your investing skills (by which point,  it isn't going to affect your quality of life any way) the tax treatment only starts to converge when the amount invested is a fair bit higher.
> 
> So it really doesn't matter that it's stuck outside of super.  Most people in this case would be advised to have their higher-yielding / risk assets in the tax free super environment and their lower yielding,  lower risk assets  (fixed income etc.) outside of super if it's a problem.




Yes, with some decent financial advice, most people will be able to structure their arrangements such that it's not a major disadvantage.  It's a peace of mind thing also, as superannuation is the structure designed to house retirement assets.

My general point though, is that if $1.6mill is an acceptable limit, folks within a few years of retirement should have some transitional arrangement in place to allow themselves to move their assets into super.  The rules have been changed significantly and in my opinion, it's a bit harsh making it retrospective.

Particularly for the types I mentioned earlier who might have balances under $500k and are over 50 - i.e. single mums with now adult children who are downsizing homes, self-employed, people who had marriage breakdown etc.


----------



## craft (6 May 2016)

Junior said:


> Legislative risk is always a factor, but the lifetime cap is a significant and largely unexpected change, and it is applied RETROSPECTIVELY.  That is unfair to those who have not/are not taking advantage of the system, but simply following the rules and are now locked out of the super system, at well below the reasonable benefit limit of $1.6mill.  The game has suddenly changed.




the 1.6M is the UPPER limit.  They are not locked out unless they have already put in 500K (non-concessional) in the last 10 years plus work test is scrapped on concessional contributions up to 75.  Maybe everybody with enough funds outside to do so, can't reach the UPPER limit now - but hey they've just been caught on the wrong side of the legislative risk and will have to pay a little more  tax (or dump it into their primary residence or some such tax dodge that's not available in superannuation)




Junior said:


> I hardly think you should be accusing people of 'crying like babies', since, according to your claim you must be in the top 0.01% who has $20,000,000+ already in tax-free pension phase.  Or is that an exaggeration that your fund will "pay millions more in tax" under these changes?




I am accusing people of crying like babies because of rule changes. It seems to me that the prevailing attitude seems to be its O.K to change the rules if it effects somebody else but don't change the rules if it effects me.

15 Years to preservation (if they don't change it). No exaggeration - Millions!!!!  you do the numbers even assuming a *much* more moderate return going forward. 
https://www.aussiestockforums.com/forums/showthread.php?t=25070


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## Ves (6 May 2016)

McLovin said:


> For the small business/self-employed...



If I recall there's also a 15-year exemption where you can bank up to $1.395mil of the business sale proceeds into super (this is a life-time limit) that you can use. 

However,  I'm fairly it stops you from using the other concessions, though (which may or may not matter).

edit:

http://superoracle.firststatesuper....s-and-contributions-to-super/lifetime-cgt-cap

This is the one.


----------



## Junior (6 May 2016)

Ves said:


> If I recall there's also a 15-year exemption where you can bank up to $1.395mil of the business sale proceeds into super (this is a life-time limit) that you can use. However,  I'm fairly it stops you from using the other concessions, though.




Yes, the Small Business CGT Cap.....I believe that was always a separate cap over and above non-concessional and concessional.  There was no mention of that, so I assume it's still in place.


----------



## Ves (6 May 2016)

Junior said:


> Yes, the Small Business CGT Cap.....I believe that was always a separate cap over and above non-concessional and concessional.  There was no mention of that, so I assume it's still in place.



Yep, pretty sure it is.   I added a link above for those interested.

I've read about 8-10 Budget update publications from most of the major super providers and administrators and didn't see it mentioned.


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## Ves (6 May 2016)

Junior said:


> Yes, with some decent financial advice, most people will be able to structure their arrangements such that it's not a major disadvantage.  It's a peace of mind thing also, as superannuation is the structure designed to house retirement assets.
> 
> My general point though, is that if $1.6mill is an acceptable limit, folks within a few years of retirement should have some transitional arrangement in place to allow themselves to move their assets into super.  The rules have been changed significantly and in my opinion, it's a bit harsh making it retrospective.
> 
> Particularly for the types I mentioned earlier who might have balances under $500k and are over 50 - i.e. single mums with now adult children who are downsizing homes, self-employed, people who had marriage breakdown etc.



I just look at things in terms of raw numbers,   and there isn't much difference.   An adviser who can teach their clients to do the same has won most of the battle.

For some people, having the mechanics explained to them with the proper details _will_ provide enough security.   There has always been many different types of entities with different tax structures,  and knowledge of how they work definitely provides security in itself. 

Yes, some people are emotional in their decision making (ie.  unless it's in super it's not retirement savings) but you cannot make policies / decisions based on emotions.  I'm not sure why the government needs to cater to emotional thinking when there are alternative ways you can arrange your affairs and pay the same amount of tax (at the levels in my first post, probably none).


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## SmokeyGhost (6 May 2016)

Well, well, my, my and dear oh dear.  As for being forced, far from it.

http://www.theage.com.au/business/b...-smsf-property-borrowing-20160506-gonw0k.html



> *Budget 2016: Super tax crackdown to prompt spike in SMSF property borrowing*
> 
> Accountants and wealth advisers predict a spike in risky property borrowing by self-managed super funds because of tougher superannuation rules.
> 
> ...


----------



## Bill M (6 May 2016)

And then this, just what nobody wanted.

---
Fears emerge of a rush to the property market by wealthy Australians hit by new super rules

But for everyday workers whose biggest concern ”” housing affordability ”” was not addressed in the Budget, things could soon become even worse.

There are fears that the rich hit by the new super rules will simply plough their money into investment properties in greater numbers than ever.

And, as every frustrated househunter knows, it’s these investors who have put the heat into capital city markets, pricing out first home buyers from even far-flung outer suburban properties.

While high-income earners and wealthy retirees ring their accountants for advice on how to restructure their affairs, those still dreaming of home ownership will be wringing their hands in frustration.

http://www.dailytelegraph.com.au/li...s/news-story/4ef8f010c4ba9d529a223303b4f0a974
---


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## Bill M (6 May 2016)

Hypothetical.

Ves and others, am I right?

A couple who are both 60 or over.

Each have 100K in concessional contributions and 500K in non concessional contributions in their super.

Together it = $1.2 Million

They have a further 500K each outside of super. They do not wish to risk their returns on the 500K each more than the bond market. So lets say they get 3.5% running yields on that $1 Million.

Compulsory 4% super drawdown on $1.2 million = $42,000 P/A
3.5% on their out of super $1 Million = $35,000 P/A

Total $77,000 P/A.

As their super is untaxed after 60 all is good. The $17,500 each they make outside of super is also untaxed as it is under the tax threshold.

So in theory a couple could structure a $2.2 Million portfolio like this and pay no tax at all, is that correct? That's how I work it out anyway.?


----------



## Ves (6 May 2016)

Bill M said:


> So in theory a couple could structure a $2.2 Million portfolio like this and pay no tax at all, is that correct? That's how I work it out anyway.?



Yep,  that's a pretty good example.

Also remember,  from 1 July 2017 if the changes are legislated you could also put in $25k concessional contributions each (regardless of employment circumstances) and claim a tax deduction in your personal tax return to reduce the taxable income if need be.  

Also once you turn 65,  there is also the Senior Australian and Pensioner Tax Offset (SAPTO).

https://www.ato.gov.au/calculators-...-seniors-and-pensioner-tax-offset-calculator/


----------



## Bill M (6 May 2016)

Ves said:


> Yep,  that's a pretty good example.



Thanks Ves, then it isn't too bad is it?


----------



## dyna (7 May 2016)

As far as I can tell,the new super regime is not all that bad at all.Anyone with a few too many millions in pension phase,can schlep the excess back into an accumulation account and pay a flat tax rate of 15%,(maybe a bit less with franking credits) and just 10% CG tax.Take it out Now,and you can never get it back in...to what will still remain,one of our very best tax shelters.Copping 15% tax seems a better deal than risking it all on something else,like negative gearing.And how much longer will either side of politics be leaving that one,alone? At least after this latest budget,we can be fairly confident,it's settled for another decade or so.I'll never see another Howard or a Costello in my lifetime.Anyone crying their eyes out,today can blame those two.


----------



## craft (9 May 2016)

dyna said:


> As far as I can tell,the new super regime is not all that bad at all.Anyone with a few too many millions in pension phase,can schlep the excess back into an accumulation account and pay a flat tax rate of 15%,(maybe a bit less with franking credits) and just 10% CG tax.Take it out Now,and you can never get it back in...to what will still remain,one of our very best tax shelters.Copping 15% tax seems a better deal than risking it all on something else,like negative gearing.And how much longer will either side of politics be leaving that one,alone? At least after this latest budget,we can be fairly confident,it's settled for another decade or so.I'll never see another Howard or a Costello in my lifetime.Anyone crying their eyes out,today can blame those two.




Leaving the excess in to get the 15% earnings rate would have to be weighted against the prohibitive taxation on death benefits in superannuation. (other structures start to look a lot better)

Adult dependents receiving inheritance from superannuation have to pay 17% (15% + Medicare) death tax - outside super it is zero. Additionally even if benefits are paid in-species to the beneficiary the fund will still be liable for 10% Capital Gains Tax. Outside super that CGT is waived for a deceased.   

The 500K cap severely limits the future of the re-contribution strategy. 

Stuffing money into a Multi-million dollar primary residence (Negative gearing and other non super strategies) looks far better than super for intergenerational wealth transfer. I would say the crack down on super is fairly extensive  - except I doubt it will raise the government much revenue  - there is no use in just blocking one hole in a leaky bucket.

Now where's my real-estate.com link for Vaulcluse; Point Piper and surrounds gone?


----------



## k.smith (10 May 2016)

Bill M said:


> Hypothetical.
> 
> Ves and others, am I right?
> 
> ...




I'm a bit  with this example in relation to the budget.
Will earnings in pension accounts from which pensions are paid before age 65 (TTR pensions?) now become subject to a 15% tax or not? Or is that before age 60?


----------



## Junior (10 May 2016)

k.smith said:


> I'm a bit  with this example in relation to the budget.
> Will earnings in pension accounts from which pensions are paid before age 65 (TTR pensions?) now become subject to a 15% tax or not? Or is that before age 60?




If you meet a 'condition of release' (eg. retiring after preservation age, or reaching age 65) you can commence a regular account based pension.  For this type of pension, earnings within the Fund will continue to be taxed at a rate of 0%.

If you commence a TTR Pension (also known as a non-commutable pension), it is proposed that earnings will be taxed at 15% - regardless of age.  TTR Pensions are used where the individual is aged between preservation age and age 65, but has NOT met a condition of release.  i.e. they are still working.

There is no change to the treatment of either type of pension, for income tax purposes (i.e. how the pension income is treated in the hand of the individual).

If I missed anything, please correct me.


----------



## sptrawler (11 May 2016)

The only thing I can pick from the super changes, is the $1.6million cap, will ensure in most cases the money will be spent.

Which probably isn't a bad thing, the alternative doesn't bear thinking about.


----------



## SmokeyGhost (12 May 2016)

sptrawler said:


> The only thing I can pick from the super changes, is the $1.6million cap, will ensure in most cases the money will be spent.
> 
> Which probably isn't a bad thing, the alternative doesn't bear thinking about.




At a personal level, I'm not troubled by the proposals.  Sure, I may have to readjust where I place my funds in order to not trigger the $1.6M cap but I'll probably invest outside of the superannuation structure.

I already do and even though I consider my gross income (consisting of an account-based pension plus dividends) to be quite high, as a result of franking credits, I still get a tax refund which is a little bizarre in my view.

Other people, however, have had their immediate plans disrupted and it must be disconcerting to them.  However, I hope and assume, as happens with every change in taxation arrangements, they will adjust their financial situation to accommodate those changes.  I reckon it's the only way otherwise you could just sit in a puddle of despair which is not a good way to live.

Anyways, off to have fun in the UK next Wednesday, so take care y'all.


----------



## sptrawler (12 May 2016)

SmokeyGhost said:


> At a personal level, I'm not troubled by the proposals.  Sure, I may have to readjust where I place my funds in order to not trigger the $1.6M cap but I'll probably invest outside of the superannuation structure.
> 
> I already do and even though I consider my gross income (consisting of an account-based pension plus dividends) to be quite high, as a result of franking credits, I still get a tax refund which is a little bizarre in my view.
> 
> ...




Have a great trip.


----------



## sptrawler (12 May 2016)

See Michael Pascoe, has popped his head up, to make a headline.

http://www.smh.com.au/business/the-economy/more-superannuation-changes-to-come-20160512-got6fr.html

Shame his article is about as useful as t*** on a bull, as usual.

The info our learned members, post on this forum, is far better value. IMO


----------



## Junior (13 May 2016)

sptrawler said:


> See Michael Pascoe, has popped his head up, to make a headline.
> 
> http://www.smh.com.au/business/the-economy/more-superannuation-changes-to-come-20160512-got6fr.html
> 
> ...




Not much new info there, although I do agree with his comment that the Lifetime Cap will be altered in the short term.  

Turnbull has shown he's willing to backtrack and willing to succumb to pressure, like Abbott before him.  I think the cap will be raised or postponed.....or if Shorten wins it will be scrapped altogether.  I think it's inconsistent to support a $1.6mill balance but restrict contributions to the point where it's almost impossible to get there - unless you have a long working life and markets perform well.


----------



## piggybank (16 May 2016)

Hi,

I am looking for some advice to a simple question (and Yes I only ask simple questions)

Q) If you were 58 years old (presently unemployed and not employable) additionally you cannot claim any pension, etc until you are 67, do you think putting $15-20.000 into your superannuation would be a good idea rather than having it presently sitting in a bank account? 

If you did, would you have to pay tax on it now, or when you claim it? 
Or is there a better alternative - not including the share market directly?

Any feedback would be much appreciated

Regards
PB


----------



## Junior (16 May 2016)

piggybank said:


> Hi,
> 
> I am looking for some advice to a simple question (and Yes I only ask simple questions)
> 
> ...




With this sort of question, there are a number of considerations to take into account.  It depends on your personal situation.  We cannot give personal financial advice on this forum.

General comments relating to this issue:  

If you do not have much in the way of financial assets outside of super (and are unlikely to receive any major financial windfalls in future), there is no major advantage to be gained by contributing $20,000 into super.

As has been discussed in this thread previously.  If you are retired and have no other income, you can hold a fair sum of cash in your personal name before you're likely to pay much tax on the income generated.

For example if you have $300,000 in cash earning 3% interest.  This equates to income of $9,000 per annum - well under the tax-free threshold, and therefore no income tax payable.  If these funds were in super, earnings tax would be levied at 15% on the full $9,000.


----------



## sptrawler (16 May 2016)

piggybank said:


> Hi,
> 
> I am looking for some advice to a simple question (and Yes I only ask simple questions)
> 
> ...




IMO, Junior gave you a great reply.


----------



## CanOz (24 May 2016)

Just came across the tweet deck...



> Yes, it's that desperate "Queensland to raid public servant super to pay down debt" #qldpol #auspol afr.com/news/politics/…


----------



## christianrenel (24 May 2016)

sptrawler said:


> IMO, Junior gave you a great reply.




The benefit of the putting money into your super, when you are 57. If you were to apply for government benefits such New Start or Disabiltiy Pension. Money inside the superannuation environment does not count towards the income and assets test until you reach Aged Pension age 67. 

Puttting money into the super may increase your centrelink entitlements if you were to apply.

Kind regards 


christianrenel

christianrenel@hotmail.com


----------



## qldfrog (25 May 2016)

Not a real surprise:http://www.brisbanetimes.com.au/queensland/queensland-may-raid-defined-benefit-scheme-surplus-20160524-gp27z5.html
non only do governments not put money aside, but they plan to actually take the amounts which was at a arm's length...
pathetic


----------



## McLovin (25 May 2016)

qldfrog said:


> Not a real surprise:http://www.brisbanetimes.com.au/queensland/queensland-may-raid-defined-benefit-scheme-surplus-20160524-gp27z5.html
> non only do governments not put money aside, but they plan to actually take the amounts which was at a arm's length...
> pathetic






Presumably the state actuary is independent, so if they are saying fund is over capitalised why shouldn't the government take back the excess?


----------



## qldfrog (25 May 2016)

McLovin said:


> Presumably the state actuary is independent, so if they are saying fund is over capitalised why shouldn't the government take back the excess?



Where did you read about over capitalisation? based on projections as reliable as the next budget surplus, if all goes well, the amount might be sufficient.
the government just believe it could do better and spend the money in its own own project instead of having it invested as is currently the case; A robbery nothing else in my opinion


----------



## McLovin (25 May 2016)

qldfrog said:


> Where did you read about over capitalisation? based on projections as reliable as the next budget surplus, if all goes well, the amount might be sufficient.
> the government just believe it could do better and spend the money in its own own project instead of having it invested as is currently the case; A robbery nothing else in my opinion






> Last year's budget papers showed that the State Actuary indicated the DBS surplus was in the range of $10 billion.




Is the State Actuary mistaken?


----------



## qldfrog (25 May 2016)

McLovin said:


> Is the State Actuary mistaken?



Read the rest..based on irrealistic projections IMHO and taking into account expected generous returns obviously not negative ones of course;
Unless you genuinely believe this amount would be topped up after a few negative return years if need be by the gevernment of the time;
The principle was to put aside money out of government reach to avoid what is going to happen.

And if Actuaries were always right, we would be saved by Reserve Banks actions...
Numbers like statistics tell what you want them to tell and i can not trust the integrity of any government employee as by definition, they always know who their masters are.
Same goes for corporate employees as well on specific domains.
Anyway, why should I care.


----------



## sptrawler (12 June 2016)

Here comes the pressure from Super Funds, to try and force SMSF, to be pushed into mainstream. 

http://www.smh.com.au/business/bank...managed-financial-demise-20160609-gpfur3.html


----------



## SmokeyGhost (15 June 2016)

Personally, I don't give a damn about the SMSF Association.  I didn't elect them to represent my SMSF and in any event, it was or may be still is, a group representing the financial advisers to SMSFs.  If so, a slight conflict of interest there I believe.

As to the gist of the article, I do understand the concerns given the concessional taxation arrangements afforded SMSF's.  I am slightly doubtful about the statement: 







> The only conclusion that can be drawn is many SMSF members are being funnelled into SMSFs by financial advisers or accountants who are not acting in their best interests.




The SMSF I administer commenced with less that the 'desired' amount at the time it was established but in a relatively short period was above that figure through persistence.

I have noticed over the years the professional superannuation funds industry have made many statements on its view that the Trustees of SMSFs do not have the appropriate expertise and should be brought under the management of the said industry.  Again my view, but it's just talking its own book.  I have no wish to be under their management.  As at the end of last financial year, I calculated my "MER" was less than one-half a percent of assets.  I see no good reason to increase that the SMSFs costs in order to fund the lease on their Ferraris.

My view also that the authorities squibbed on continuing to permit borrowing by SMSFs but then I have an aversion to debt where investments are concerned having seen way to many people go to the wall as a result of it.

I recall seeing another article by this author suggesting there be a fund established to compensate those who were hammered by investing in MIS.  A lovely thought I suppose there was no proposal as to who should fund that compensation scheme but I certainly have no desire to fund the mistakes of others.

One thing should be made clear to all who wish to establish SMSFs or invest through other means and that is:

You are allowed to make mistakes and wipe yourself out financially as much as you are allowed to be successful.  You will be signing the cheques so whatever your do it is you who must accept responsibility for your decisions whether or not financial advice is involved as that is all it is - advice.  There is no requirement to act on that advice.

Then I am a little callous I guess.


----------



## sptrawler (15 June 2016)

SmokeyGhost said:


> One thing should be made clear to all who wish to establish SMSFs or invest through other means and that is:
> 
> You are allowed to make mistakes and wipe yourself out financially as much as you are allowed to be successful.  You will be signing the cheques so whatever your do it is you who must accept responsibility for your decisions whether or not financial advice is involved as that is all it is - advice.  There is no requirement to act on that advice.
> .




I would say, there are just as many, if not more, wiped out by bad professional advice as personal decisions.

I think you summed it up well, smokey.


----------



## qldfrog (15 June 2016)

after my post of last month:
"I told you so..."
http://www.brisbanetimes.com.au/queensland/queensland-budget-treasurer-to-take-advice-if-public-super-goes-into-deficit-20160615-gpjpt6.html


----------



## sptrawler (12 July 2016)

I see Bill is prepared to help Malcolm hang himself.

https://au.news.yahoo.com/thewest/a/32033393/labor-throws-a-lifeline-to-pm-on-super-changes/

Apparently there has been a big backlash, by the LNP supporters, it will be interesting to see it play out.


----------



## SmokeyGhost (26 July 2016)

Well, it's a potential cash cow for some.  Received advice recently, my SMSF has a cash component with an unlisted fund the units in which were redeemed some years ago.  Appears an audit revealed they had inadvertently overcharged on fees.

Now, as the trustee structure has changed and so have the bank accounts, I'll be having some fun getting those funds out.  Gotta lurve paperwork, especially when it should be unnecessary from my point of view.  Such a minuscule amount in the context of things too which is even more annoying.


----------



## SmokeyGhost (19 August 2016)

Recently I have come across articles suggesting the Government amend its proposal to limit the amount of non-concessional contributions to superannuation to allow contributing as a result of events such as lottery wins, divorce settlements and inheritances.  Hmm, probably stretching the friendship a little there as lottery wins are tax free I believe (wouldn't know as I have never, and never will, had one.  I guess you have to buy a ticket in them.  Bummer.)

I now see the Treasurer is adverse to amending the budget proposal and to allow lottery wins and inheritances to be included as exemptions to the non-concessional lifetime limit of $500k.  Hope they hold the line on this one.


----------



## Junior (19 August 2016)

SmokeyGhost said:


> Recently I have come across articles suggesting the Government amend its proposal to limit the amount of non-concessional contributions to superannuation to allow contributing as a result of events such as lottery wins, divorce settlements and inheritances.  Hmm, probably stretching the friendship a little there as lottery wins are tax free I believe (wouldn't know as I have never, and never will, had one.  I guess you have to buy a ticket in them.  Bummer.)
> 
> I now see the Treasurer is adverse to amending the budget proposal and to allow lottery wins and inheritances to be included as exemptions to the non-concessional lifetime limit of $500k.  Hope they hold the line on this one.




I'm astounded at this suggestion....it seems really, really dumb to me.  Who cares how the windfall came about?  Just because someone wins lottery they get a higher contribution cap than everyone else?  It's already tax free money, why should you get an additional boost from the government?  Unbelievably stupid, and lacking in logic.  Just work out how the NCC cap, or lifetime cap should work (and raise it a bit, and not make it retrospective), and leave the other proposals as they are.

If the government are saying a balance of $1.6mill is reasonable amount to have in super, why not just let everyone contribute until they can get to this level, regardless of their personal circumstances?


----------



## SmokeyGhost (19 August 2016)

I see your point, Junior.

I suspect the debate revolves around the situation where a person has already had an NCC.

My understanding is it is usually assumed an NCC is made with *after-tax* money, which may or may not actually be the case.  So if somebody was fortunate enough to receive a windfall, such as a lottery win which is tax-free, and they had already made the $500k NCC limit, to permit an additional NCC seems rather over-the-top I feel.

However, if a person had NOT reached the $500k and had previously made, say, a $300k NCC, I don't see any technical problem in making a further $200K NCC from a windfall. I'm not aware that the super fund, or the ATO, currently check the source of the NCC funds.  However, I don't have any expertise in these matters and others would know better than me.

As for the money from divorce, yeah, I can appreciate the suggestion for that exemption.  Like others, I know of many who are divorced (of both genders) and, mainly women though, their retirement plans are well and truly in disarray.  While I've never been in that situation, I do have a degree of sympathy and consider some arrangements should be considered.  Just my view of things.


----------



## Junior (19 August 2016)

SmokeyGhost said:


> I see your point, Junior.
> 
> I suspect the debate revolves around the situation where a person has already had an NCC.
> 
> ...




Agreed re divorce.  The system of caps per individual regardless of marital status should be considered.  The example of a divorced woman who has a history of being a stay-at-home mum, ending up with bugger all in super and only the $500k lifetime cap at say 65 years old certainly needs to be addressed.


----------



## SmokeyGhost (19 August 2016)

Another random thought.  One concept is to allow an exemption to the proposed NCC cap where accident compensation payment is involved.  There are, and possibly will be, a number of cases where a payment is made which has a component for future medical care (I understand Medicare benefits are not supposed to apply in these circumstances) and another for loss of future income plus the award could be discounted by varying percentages if the court determines contributory negligence is involved.

Hmm, should one be allowed to make a NCC when one component is supposed to be used on an on-going basis for medical treatment of the condition(s) and be allowed to contribute when another component may be for loss of future income?  All depends on the quantum of funds involved I guess but it'd be fascinating to see if the discussion paper even raises these matters and, if so, the arguments for and against.


----------



## SmokeyGhost (23 August 2016)

Hmm, well.  Seems some have had their noses yanked out of the trough.

http://www.smh.com.au/business/bank...itors-struck-off-by-asic-20160823-gqz2w9.html



> *More than 100 SMSF auditors struck off by ASIC*
> 
> More than 100 approved self-managed superannuation fund auditors have had their registration cancelled with the corporate watchdog after failing to file accounts in another blow to Australia's 'selfie' economy.
> 
> The Australian Securities and Investments Commission said in a statement on Tuesday it had struck off 133 SMSF auditors following a series of warnings


----------



## sptrawler (23 August 2016)

Junior said:


> If the government are saying a balance of $1.6mill is reasonable amount to have in super, why not just let everyone contribute until they can get to this level, regardless of their personal circumstances?




That is the only sensible outcome,IMO, if you are going to put a cap on.
Most super accounts are heavily in favour of the male population, why would you cap what people can put in when it will mainly effect women. 
What I mean is 90% of people with $1.6m will be men, so capping contributions to stop people attaining it, will affect mostly women.IMO
God knows where they get their logic from.

What you are suggesting makes far more sense.


----------



## Bill M (24 August 2016)

sptrawler said:


> That is the only sensible outcome,IMO, if you are going to put a cap on.
> Most super accounts are heavily in favour of the male population, why would you cap what people can put in when it will mainly effect women.
> What I mean is 90% of people with $1.6m will be men, so capping contributions to stop people attaining it, will affect mostly women.IMO
> God knows where they get their logic from.
> ...




It is silly policy. Some people did actually plan to wait until final years before loading their super accounts for retirement. A typical example is my wife. Since the super guarantee, she had her employer put in around 100K over the last 26 years (low paid job). If she had savings from other sources like a investment property that she liquidates she can only put in 500K? A 600K super for a 30 year retirement? Not enough for sure, silly policy, should be scrapped or raised to $1.6 M as you suggest.


----------



## SmokeyGhost (24 August 2016)

I still have the view it doesn't matter if retirement income is derived from the superannuation structure or outside of it.

While it may not be concessionaly taxed, at least outside, the assets are not required to be priced once a year and all the other imposts imposed on a SMSF.  Rough calculation is (assuming it's mainly franked dividends) you'd have to have an income of around $60k before any additional tax is paid.

About a third of my income is received in that manner and yet I received a rather substantial (comparatively) tax refund last week over the $5k mark.  Not really fussed if I have to pay tax actually as I'd still keep a whacking great proportion of my income.  Knowing how to budget comes in handy though for me.


----------



## SmokeyGhost (15 September 2016)

Yes, no, yes, no?

Arrrgh, business as usual.  Carry on.

http://sjm.ministers.treasury.gov.au/media-release/096-2016/

http://treasury.gov.au/SuperReforms


----------



## Bill M (15 September 2016)

SmokeyGhost said:


> Yes, no, yes, no?




I think the changes to the 500K lifetime cap is good and fair. It kind of strikes a happy medium between what we now have and what they proposed in May. We can actually get to that $1.6 Million under the new proposal. It is a common sense approach.


----------



## SmokeyGhost (15 September 2016)

Possibly but I tend to muse sometimes about the 95% who, in all likelihood, haven't a hope of getting anywhere near $1.6M.  Where is their share of the superannuation largesse? But who cares about those losers anyway?

Then again, that's just me.


----------



## craft (15 September 2016)

Bill M said:


> I think the changes to the 500K lifetime cap is good and fair. It kind of strikes a happy medium between what we now have and what they proposed in May. We can actually get to that $1.6 Million under the new proposal. It is a common sense approach.




I think it’s unequitable.

Prior to the change My wife and I would both have each had the $500k Un-deductable  life time cap just like everybody else.  Our total Un-deducted contributions ever made = $46,922 and that was prior to 2007.

With the change we cannot put anymore in. 

Where the inequity lies is in how superannuation is taxed on death. Had we retained the 500K lifetime limit we could have withdrawn and re-contributed after preservation age with the corresponding advantages of how un-deducted contributions are taxed on death. 

Those rich outside super and leaving things to the last minute inside super will be able to amass heaps of un-deducted contributions in the system as part of their 1.6M, *whilst those who believed that the government wouldn’t disadvantage those inside super compared to those outside have been screwed.*

I never expected that super wouldn’t be tightened and actively promoted that it be so but never thought those inside super would be treated worse than those outside. McLovin was right – Super is dangerous. If I can be screwed so can you.  My view has changed from being a supporter of super to one of utmost contempt. To the extent I can avoid it I will never put another cent in.  The precedents set – what’s to stop them upping preservation age, only allowing annuities and taxing the crap out of it.   Even if you think your safe because you’re close to preservation age – one sweep of the pen and you are as captive as I am to inequitable decisions.

Much better to build your wealth outside super and take a risk reward gamble as to whether it’s worth exploiting it at the last minute – in reality probably isn’t even worth that risk.


----------



## SmokeyGhost (16 September 2016)

My view is I don't give a toss if my beneficiaries are taxed on assets they inherit.  They didn't contribute one cent of their income in order to accumulate assets I have acquired.  On that basis, so what if they, or my estate, is required to pay tax?  They will receive, say, 85% of the the assets rather than 100% which I don't think is a bad result.  ****, I wouldn't object to receiving $425,000 from somebody else, especially if I didn't pay to obtain it.  The reality is, before my death, they currently have zero so I cannot see justification to whinge about receiving $425k instead of $500k.

Same attitude with the "family" home.  Their names were not on the mortgage or the title deed, they didn't pay off the house, made no payment to rates, insurance, maintenance, etc.  They never owned it, just lived in it for a period.

So as far as I am concerned, I will live in MY home for as long as possible and do what I will with it, use the income from MY assets as I wish and, on my demise, my children will receive whatever assets are left after taxes, if any, are paid.


----------



## Junior (16 September 2016)

craft said:


> I think it’s unequitable.
> 
> Prior to the change My wife and I would both have each had the $500k Un-deductable  life time cap just like everybody else.  Our total Un-deducted contributions ever made = $46,922 and that was prior to 2007.
> 
> ...




The maximum tax rate in super still hasn't changed at 15%.

For a retired couple you can hold $3.2million dollars in super and pay zero earnings tax or CGT.

You would pay death taxes because you obtained a tax deduction for those contributions in the first place, when they were made, right?  The withdrawal and re-contribution strategy is really just a loophole, so these changes go some way to closing that loophole.  

It should be mentioned, that you can still contribute $300k in a lump sum or $600k for a couple - with bring forward provisions.

It's still by far the most tax-effective structure available.


----------



## Ves (16 September 2016)

craft said:


> I think it’s unequitable.
> 
> Prior to the change My wife and I would both have each had the $500k Un-deductable  life time cap just like everybody else.  Our total Un-deducted contributions ever made = $46,922 and that was prior to 2007.





> Those rich outside super and leaving things to the last minute inside super will be able to amass heaps of un-deducted contributions in the system as part of their 1.6M, *whilst those who believed that the government wouldn’t disadvantage those inside super compared to those outside have been screwed.*



Obviously it's pretty hard to nut this out before the final legislation is drafted and passed, but...

Those were my first thoughts when reading the press release yesterday.  It's absolutely bizarre that they have gone away from a flat-cap to a cap that is determined by your balance.

There is also another problem with linking the cap to an account balance. This is because it's a moving target (unless there is some mechanism that sets even this in stone).  Makes it fairly hard to plan a few years ahead.

An account balance is just a representation of the member's share of the current market values of the Fund's assets.  If these assets are not readily traded on a liquid market (ie. property,  unlisted shares) then they are probably open to a degree of manipulation by clever trustees and their accountants.  I've seen this done before for in-house assets thresholds etc.  Maybe it's not really common,  and it's probably situational,  but it's still a loop-hole if they don't cover it.

Interesting times...


----------



## craft (16 September 2016)

Junior said:


> The maximum tax rate in super still hasn't changed at 15%.
> 
> For a retired couple you can hold $3.2million dollars in super and pay zero earnings tax or CGT.
> 
> ...




It's the potential make up of the 3.2m which is my bone of contention. The young craft family, typical workers who sacrificed (and not just in the salary sacrifice meaning of the term) when they had stuff all so that they could eventually self fund retirement, who is pissed. Who would have know what the eventual earnings rate would be, certainly would have been imprudent to plan on it. I seriously doubt we actually got much/any contribution savings, the salaries were crap and there was no LITO back then - I don't mind the death tax on funds from contributions and certainly earnings - but I do mind that the dutiful and diligent craft back then is penalised on the construction of the 3.2 because he can't put in any further un-deducted contributions. where as the non- diligent who never planned for retirement and may receive an inheritance, make a windfall on the tax exempt primary income or whatever lurk they are into can wack in heaps of uneducated contributions late in the piece and not face the same death tax implications.

Any rate craft now is not the craft from back then. I can now just screw them back in so many ways because I now have the wherewithal to do it. Dropping a lazy Mill during the transition with the current 180K limit and bring forward is nothing if I desire and it matches the 500K lifetime cap but that's not the point.

The egalitarian aspirations I thought I shared with the country just took another kick in the **** and most won't even see it.

Hell I bet Smoky who is railing against inheritance doesn't see the improved advantages for the inheritance class that are present in this change over your typical working class.

The original changes proposed and taken to the election as iron clad overall seemed to be a pretty equitable attempt to reign in the system - but this bastardisation by the political class to suit a few who have wealth outside that they want to shield inside without death tax duties....... 

Rant over for it doesn't matter, A contemptuous craft playing by the letter of the law will save millions in tax going forward over a naÃ¯ve craft who played to the spirit of the law. Who really wins who really losses?


----------



## Junior (16 September 2016)

craft said:


> It's the potential make up of the 3.2m which is my bone of contention. The young craft family, typical workers who sacrificed (and not just in the salary sacrifice meaning of the term) when they had stuff all so that they could eventually self fund retirement, who is pissed. Who would have know what the eventual earnings rate would be, certainly would have been imprudent to plan on it. I seriously doubt we actually got much/any contribution savings, the salaries were crap and there was no LITO back then - I don't mind the death tax on funds from contributions and certainly earnings - but I do mind that the dutiful and diligent craft back then is penalised on the construction of the 3.2 because he can't put in any further un-deducted contributions. where as the non- diligent who never planned for retirement and may receive an inheritance, make a windfall on the tax exempt primary income or whatever lurk they are into can wack in heaps of uneducated contributions late in the piece and not face the same death tax implications.
> 
> Any rate craft now is not the craft from back then. I can now just screw them back in so many ways because I now have the wherewithal to do it. Dropping a lazy Mill during the transition with the current 180K limit and bring forward is nothing if I desire and it matches the 500K lifetime cap but that's not the point.
> 
> ...




I agree, that the constant rule changes and lack of grandfathering is not fair on those who have planned ahead and played by the rules of the day.

However, by having $3mill+ in super plus many millions outside of super, you are in the top 1% of Aussies and probably the top 0.1% globally, so I hope you don't lose sleep over the government taking a small slice of your wealth after you are gone from this earth!

The hint at allowing a new breed of annuity style retirement products with favourable tax treatment, means that new strategies and planning opportunities may also present themselves in coming years.  I attended a Challenger Financial event last week, and they were very excited by this prospect.


----------



## craft (16 September 2016)

Junior said:


> I agree, that the constant rule changes and lack of grandfathering is not fair on those who have planned ahead and played by the rules of the day.
> 
> However, by having $3mill+ in super plus many millions outside of super, you are in the top 1% of Aussies and probably the top 0.1% globally, so I hope you don't lose sleep over the government taking a small slice of your wealth after you are gone from this earth!
> 
> The hint at allowing a new breed of annuity style retirement products with favourable tax treatment, means that new strategies and planning opportunities may also present themselves in coming years.  I attended a Challenger Financial event last week, and they were very excited by this prospect.




You still miss the point. Current situation craft will obviously do just fine and so will all the other schmucks like me - didn't you just see us corrupt the political system to further wealth inequality. 

I have no doubt there will be endless planning opportunities - again do you miss the point.

The old craft and the millions of diligent workers/savers like him just got a little more screwed and no planning opportunities are going to help them. If you can't jump the divide, Australia is quickly becoming no better than US for the working class - and god help us, we'll probably end up with our own Trump exploiting the suppression.


----------



## qldfrog (16 September 2016)

craft said:


> A contemptuous craft playing by the letter of the law will save millions in tax going forward over a naÃ¯ve craft who played to the spirit of the law. Who really wins who really losses?



I made sadly the same conclusion after years of being slugged at 45/50% tax rate;
and fed up by both lib.ALP attitude; so now, family trust, etc etc the usual panoply including property investment ; stopped full time work..and same amount of money at the end of the year with so much better life..only so much you can do fighting a system on ideological idea of fairness, right and wrong.
but i still do not touch super beyond mandatory contributions: as people are dis-associated with their super until their later years, i see super as the first target from government ruled disappropriation in case of /when next crisis hits], even before cash or your bank accounts "a la Cyprus" confistication (sp?)


----------



## sptrawler (20 September 2016)

Sadly, I must confess, I thought the Labor idea of taxing the earnings above a certain amount was more flexible and manageable.
Just tax earnings above $x at 15% and if they are earning ridiculous income, tax it at 30%, simple.
Shame politicians haven't got the the brains, to overcome their egos.

The brain fart of a limit you can have in super and anything above that has to be removed, is dumb.IMO

Changing the concept to that degree, undermines the initial sales pitch, where you were encouraged to put away as much as possible.

What about people who squirreled away as much as possible, sold family assets etc, now have to remove the money, bet they can't buy the assets back for what they sold them for.

It will infuriate a lot of people.IMO

Dumb politics, silly Billy will be rubbing his hands with glee.

Labor will hit them over their heads with the policy, why put a cap on now, then what happens if the market or inflation takes off, change the cap? press the panic button? lol

With Labors idea, you just move the thresholds and tax impost, much neater and easier.lol

It's a win, win for Labor. Malcolm shafts his voters, then Bill comes in and adds a bit.lol

Malcolm will look like a goose.IMO


----------



## sptrawler (20 September 2016)

Also, of course, there is the hypocritical aspect of the politicians saying it only affects the top 4% of people.

Well if $1.6 million at 5%, which equates to $80,000/p.a, is the top 4%.

Where does it put their pensions, of between $200,000 and $300,000/p.a, right up there in the trough.

Is there any wonder Pauline and Donald are polling well, voters are pizzed off.


----------



## Vixs (20 September 2016)

sptrawler said:


> Also, of course, there is the hypocritical aspect of the politicians saying it only affects the top 4% of people.
> 
> Well if $1.6 million at 5%, which equates to $80,000/p.a, is the top 4%.




Every time someone talks about rates of return with super without fail they seem fixated on how much income they can get, never any discussion about drawing down capital. At 5% p.a. drawing $80,000 p.a. $1.6m would last 62 YEARS and pay out a total of $4,960,000 in that time before being exhausted. If you wanted to have your funds last say 30 years, you could take a tax free income of $104,000 p.a. from your $1.6m if you are achieving a 5% return. If you are in a position to meet your own financial needs and want to go and leave your kids $1.6m from your pension as well, then I think it's fair to say you can afford to pay some tax.



sptrawler said:


> Where does it put their pensions, of between $200,000 and $300,000/p.a, right up there in the trough.




sptrawler have you read the MP superannuation scheme info? No one elected after 2004 gets anything like you're talking about, they have a defined contribution scheme not a defined benefit. The politicians still serving that were in before 2004 will still get access to a lifetime pension, but unless they were a PM/Deputy/Treasurer they're not going to be entitled to several hundred thousand dollars per year. Members that served 18+ years get 75% of their salaries and those that served shorter terms get as little as 50%, but that is all taxable income. Still generous but hardly to the extent you're talking about.

I'm hardly one to go into bat for politician pay and perks, but the poli's super is very similar to you or I, with their balance determined by fund performance and contributions.



sptrawler said:


> Is there any wonder Pauline and Donald are polling well, voters are pizzed off.




As with much of the outrage these days, unfortunately it is rarely backed by information and understanding. There's more tantrum-throwing than informed decision-making going on.

------------------------

I appreciate the concern of people like you sptrawler that feel like they've been shafted by moving goalposts, but the reality is there is still the potential between a superannuation pension, the tax-free threshold, the Low-Income Tax Offset and the Senior And Pensioners Tax Offset for an individual to receive well over $100,000 in tax free income BEFORE ANY CAPITAL IS SPENT to support themselves in retirement.

With the superannuation changes, I'm disappointed the $500k cap went and the work test for 65-74 year olds got scrapped. Fat cats win, hard working people at the lower end of the scale lose again. If I look at my own mum for example, she doesn't want to sell her house for another few years before downsizing. Unfortunately, unless she wants to go back to work every year after permanently retiring she will now be unable to get that money into superannuation. This is her only meaningful financial asset and will be funding her retirement, yet she will have to invest the money outside super because her ability to put it in was bargained away to ensure the wealthy can still build up multi-million dollar accounts as a tax shelter.

They were originally gutsy changes to reform a system that had previously been too generous, and some of the most important elements were watered down. I still think it will be in a better position than it was previously, but I wonder if there will ever be another opportunity to fix some of the unintended or unforeseen consequences.


----------



## Junior (20 September 2016)

Great post Vixs.  The system still offers very low tax rates for all those over 60.  To say you shouldn't put any money in super because the rules will change is over the top.

As I've said many times, the tax rates are FAR LOWER than any other tax structure available.

Company tax rate 30%, 
individual tax rates up to 49%, 
super (accum) 15%, 
super (pension) 0%


----------



## sptrawler (20 September 2016)

Good post Vix, I guess I just needed a reality check.:1zhelp:


----------



## qldfrog (20 September 2016)

Junior said:


> Great post Vixs.  The system still offers very low tax rates for all those over 60.  To say you shouldn't put any money in super because the rules will change is over the top.



I would argue vehemently on that one when the (current) age for your retirement is 15 or 20y away; what do you think will happen to super at the next GFC/serious crisis?
if you are sixty today, sure put as much as possible, if you are 30 or 40,imho run like hell...


----------



## Junior (20 September 2016)

qldfrog said:


> I would argue vehemently on that one when the (current) age for your retirement is 15 or 20y away; what do you think will happen to super at the next GFC/serious crisis?
> if you are sixty today, sure put as much as possible, if you are 30 or 40,imho run like hell...




Yes, on that kind of timeframe I do agree with you.  Never know who will come into power.


----------



## Vixs (20 September 2016)

sptrawler said:


> Good post Vix, I guess I just needed a reality check.:1zhelp:




The point of a forum is different perspectives. I think about things a lot differently now than I did a few years ago.


----------



## sptrawler (20 September 2016)

Vixs said:


> The point of a forum is different perspectives. I think about things a lot differently now than I did a few years ago.




I haven't got an excuse, just had a really bad week and was bordering on trolling, my apologies. 
Anyway enough crying, let's move on.

I still think the Labor policy,has more underlying merit, easier to control and fine tune.
What happens if after a few years some astute investors, such as ASF members, end up with $5m in super?
Will that cause another upheaval?
With Labors option, you just move the tax thresholds, as per normal.


----------



## DB008 (20 September 2016)

Junior said:


> Great post Vixs.  The system still offers very low tax rates for all those over 60.  To say you shouldn't put any money in super because the rules will change is over the top.
> 
> As I've said many times, the tax rates are FAR LOWER than any other tax structure available.
> 
> ...




All l see is the gray haired army heading into retirement, and then wanting their cake and to eat it too.

From my perspective, the baby boomers have done f**k all and want Gen X/Y to pay for it.

The latest was how much they could contribute into super (cap). Get over it, they need to pay their fair share as well, but don't want to. Super is meant to be a retirement vehicle, not a wealth creating/building vehicle. You can't take your money beyond the grave...


----------



## sptrawler (20 September 2016)

DB008 said:


> All l see is the gray haired army heading into retirement, and then wanting their cake and to eat it too.
> 
> From my perspective, the baby boomers have done f**k all and want Gen X/Y to pay for it.
> 
> The latest was how much they could contribute into super (cap). Get over it, they need to pay their fair share as well, but don't want to. Super is meant to be a retirement vehicle, not a wealth creating/building vehicle. You can't take your money beyond the grave...




Well there is two answers to your statements.

Firstly gen x and y aren't proving to be cash cows.

Secondly, most of the baby boomers, if like me started work on $17/wk and expected $50/wk when they finished their trade.

So in short the population has boomed and property prices have boomed, most baby boomers I know are risk averse and only at best have their own home.

Many are bailing out gen x and y children, that can't find their way.

So in short.
Putting a cap on what can be rolled into super, is cumbersome and flawed, another gfc makes the amount that is rolled in change immensely.
The $1,6m could change to $800k instantly, with minimal dividends, it just doesn't make sense.They could be on a part pension overnight.

Labors idea of just taxing excessive earnings makes sense, then all that needs to be applied is a death tax, to stop the wealth creation or inter generational wealth transfer.

That would mean the people who earned it, get to enjoy it and pay tax if it is deemed as excessive.
Then if there is any left, it is taxed at a rate to compensate the government, for rewarding the workers and savers.

Win Win. IMO

But I have been shot down recently.

P.S

The other thing the baby boomers have done, is pay the taxes for their parents pensions, without bitching about it.lol


----------



## sptrawler (20 September 2016)

Junior said:


> The hint at allowing a new breed of annuity style retirement products with favourable tax treatment, means that new strategies and planning opportunities may also present themselves in coming years.  I attended a Challenger Financial event last week, and they were very excited by this prospect.




I wasn't online when you posted this Junior, but why in gods name, would anyone sign up for that.

The signs on the horizon, are showing any super changes aren't for the benefit of savers, and favourable tax treatments can be unfavourable with the stroke of a pen.


----------



## Vixs (21 September 2016)

sptrawler said:


> Well there is two answers to your statements.
> 
> Firstly gen x and y aren't proving to be cash cows.
> 
> ...




I hope you don't feel like I shot you down, it wasn't personal.

I happen to agree that death taxes are a good solution and feel they are inevitable. I fear they will also come in too late and miss the wealth transfer that is occurring and will accelerate over the next few decades.


----------



## k.smith (21 September 2016)

I haven't read anything about what happens if you lose your investments like so many did during the GFC.
If you do your contribution limit, does that exclude you from re-saving within super?
If that is so it seems to me there would be little incentive to re-save. That is a waste imo...


----------



## sptrawler (21 September 2016)

Vixs said:


> I hope you don't feel like I shot you down, it wasn't personal.
> 
> I happen to agree that death taxes are a good solution and feel they are inevitable. I fear they will also come in too late and miss the wealth transfer that is occurring and will accelerate over the next few decades.




No offence intended or taken, Vixs, I appreciate your posts immensely.


----------



## craft (21 September 2016)

You have to make some assumptions to model things so these are mine:

1.6M cap and wages increase by 3%pa
Compulsory super stays at 9.5%
Earnings achieved are 4% above wage inflation – 7%
Tax bracket creep is kept under control so somebody on the average continues to get the current 19.5c tax saving for each dollar of concession contribution.

A theoretical person works for 45 years (starts at 22 after uni and retires at 67 current preservation age) and earns the average wage their entire working career (currently 80K)

With the above assumptions they will need to sacrifice 15% of there before tax earnings to reach the cap which by their retirement will be approx 5.9M. (still 20 times average earnings) 
 They will sacrifice 1.1Million and save 215K dollars in the difference between marginal tax rates and contribution tax rates.
They will pay 616K in earnings tax out of the super fund over the 45 years. (with a 50:50 mix or income and discount capital Gains)

In their struggle to fund their retirement, meet housing and living costs pay HECS etc there probably will be nothing more left over to make after tax contributions, so if they happen to die early in their retirement their dependents (or charities they bequest to) will pay 15% tax.

One alternative example - somebody that didn’t use the super system to save for retirement could have ploughed the money into their primary residence. Yes they forgo the possible 215K saving on contributions to super but they also will not pay the 615K of earnings tax. The capital gains are exempt. And mean while the poor Muppet who has sacrificed for his retirement probably can’t afford a house and has to pay rent with after tax income.  Sell the house prior to retirement put it into super as Non-concessional contribution (yes that may mean you will have to rent a little earlier while you feed the proceeds in now that the abolishment of work requirements for 65-74 wont get up) But being non-concessional contributions at least there is no 15% tax on it if you happen to die early in retirement.  The up side is also that if leaving your house to your kid’s tax free is more important to you than a self funded retirement you can just go on the pension.

And these seemingly little tweaks that will ultimately keep the working class struggling whilst the inheritance class thrives are ironically done under and lapped up as “fairer super”
I’ve gone full circle on Super – As a retirement savings vehicle for working class I wouldn’t touch it. The precedence is set - it’s being worked into just another tool for the entrapment of the working class. Keep your money outside – Jump the worker/capitalist divide if you can and then exploit it as a tax shelter for wealth and estate planning as late as you can.

There is no doubt that the political power is on the side of capital and capital loves cheap un-empowered labour.

And yes I do have identity crises because I see all this crap from the prospective of a working class background that happens to now have some coin.

And I can clearly tell you that the scales are not in the favour of working class and especially working class young they are politically outnumbered by the boomers and getting screwed big time.

Egalitarian Australia is dead – there will always be people who can jump the divide but for most – what your parents can provide/leave you will define your opportunities and living standards.


----------



## McLovin (21 September 2016)

craft said:


> I’ve gone full circle on Super – As a retirement savings vehicle for working class I wouldn’t touch it. The precedence is set - it’s being worked into just another tool for the entrapment of the working class.




Super went full circle as a legitimate tool to provide for people who would otherwise end up on a state pension years ago. It's been totally debased from its original, noble intention. There are people my age who have no realistic chance of ever owning a home while Baby Boomers can say with a straight face that system is unfair because they want to downsize and put the excess into super at retirement so they can live a tax free existence. All the while taxes on the middle class get ratcheted up and those same Baby Boomers tut tut "middle class welfare". The system lacks equality, is unsustainable and would make a Swiss banker blush.


----------



## qldfrog (21 September 2016)

McLovin said:


> Super went full circle as a legitimate tool to provide for people who would otherwise end up on a state pension years ago. It's been totally debased from its original, noble intention. There are people my age who have no realistic chance of ever owning a home while Baby Boomers can say with a straight face that system is unfair because they want to downsize and put the excess into super at retirement so they can live a tax free existence. All the while taxes on the middle class get ratcheted up and those same Baby Boomers tut tut "middle class welfare". The system lacks equality, is unsustainable and would make a Swiss banker blush.




We can agree McLovin!!
I am especially upset at the fact that the system is already unsustainable, and results in promoting RE against productive investments  for the nation, ending up in a system taxing to death not just *middle *class , but *working for a wage *class be they on 40k or 210k a year . And if you can not climb the ladder by work, then we are back to wealth by birth, may you be parking shopping trolley at the mall or discovering the next antibiotic.
Rant over.I have a deep belief this super system will collapse in a heap at the next GFC.


----------



## Junior (22 September 2016)

craft said:


> One alternative example - somebody that didn’t use the super system to save for retirement could have ploughed the money into their primary residence. Yes they forgo the possible 215K saving on contributions to super but they also will not pay the 615K of earnings tax. The capital gains are exempt. And mean while the poor Muppet who has sacrificed for his retirement probably can’t afford a house and has to pay rent with after tax income.  Sell the house prior to retirement put it into super as Non-concessional contribution (yes that may mean you will have to rent a little earlier while you feed the proceeds in now that the abolishment of work requirements for 65-74 wont get up) But being non-concessional contributions at least there is no 15% tax on it if you happen to die early in retirement.  The up side is also that if leaving your house to your kid’s tax free is more important to you than a self funded retirement you can just go on the pension.




Hi craft,

How would one plough all of their wealth into their primary residence, throughout their working life?

Would this mean upgrading to a larger home, and/or constantly renovating/improving the home?

I'm not having a go, just interested to understand your thoughts on the best way to implement this type of strategy.


----------



## craft (22 September 2016)

Junior said:


> Hi craft,
> 
> How would one plough all of their wealth into their primary residence, throughout their working life?
> 
> ...




In concocting the scenario I imagined taking on a larger mortgage to the extent you would save by not salary sacrificing. But eventually you would pay it down and probably need to upgrade. In reality though it's not an option for this current young generation because property valuation multiples in attractive capital growth areas are too high to start the process. Screeeeewed.

Your not expecting complete objectivity and solutions I a reactionary rant are you


----------



## Junior (22 September 2016)

craft said:


> In concocting the scenario I imagined taking on a larger mortgage to the extent you would save by not salary sacrificing. But eventually you would pay it down and probably need to upgrade. In reality though it's not an option for this current young generation because property valuation multiples in attractive capital growth areas are too high to start the process. Screeeeewed.
> 
> Your not expecting complete objectivity and solutions I a reactionary rant are you




haha, no.

Your comments (rant) just got me thinking.  There is often reference to 'investing in the PPOR'.

I wonder if one could set out, as a first home buyer at 30yo with the intention of building their wealth primarily through their home - to avoid CGT of course.

This might involve living in a far larger or pricier home than is necessary, with the intention of an abrupt downsize at retirement to free up capital.

In reality, it is probably more tax effective to employ the standard Neg Gearing strategy.

Perhaps a combination of the two.


----------



## sptrawler (22 September 2016)

Junior said:


> haha, no.
> 
> Your comments (rant) just got me thinking.  There is often reference to 'investing in the PPOR'.
> 
> ...




The big problem, is the movement of the goal posts, the PPOR will eventually be involved in the equation.IMO

Also I think the death tax and the requirement to spend any transparent asset before qualifying for welfare, will be on the agenda,  globalization the bringing about of a leveling of the playing field.IMO


----------



## Toyota Lexcen (22 September 2016)

Would be interesting to see the stats on the number of super accounts overall, it would have to be decreasing with the introduction of contracting


----------



## sptrawler (22 September 2016)

Toyota Lexcen said:


> Would be interesting to see the stats on the number of super accounts overall, it would have to be decreasing with the introduction of contracting




Also with the introduction of a cap, I think SMSF's will reduce as I feel the requirement to be more proactive, will become onerous. 
Only my opinion, which has been known to be wrong.


----------



## sptrawler (15 November 2016)

Next step,IMO, PPR in asset test.


----------



## Bill M (19 November 2016)

sptrawler said:


> Next step,IMO, PPR in asset test.




It already exists for those that need to go into aged care, but yeah most likely that will be next for everyone else.


----------



## sptrawler (21 November 2016)

Bill M said:


> It already exists for those that need to go into aged care, but yeah most likely that will be next for everyone else.




Yes Bill, it seems to be a bit silly of the Government to drop the asset cap, while not stopping the people from just moving money into the PPR.

Initially it will keep the housing market turning over, but it will pave the way for those with very expensive houses, to be marginalised. IMO

As the saying goes, slowly slowly catch the monkey, the Government seems to trying to pump money into the economy, by forcing retirees to spend their asset base.

Which really isn't a bad thing, too many younger people waiting for their inheritance, rather than forging their own road. Again only my opinion.


----------



## sptrawler (18 January 2017)

Not a post since November, it is a BIG issue, but everyone is scared to say anything, after the latest tsunami.
I think everyone is in a state of "stunned mullet", with the recently enacted and impending rule changes.
Get ready for no pension if you own a brass razoo. lol
The upside is , we won't have to worry about boat people, they will be heading for N.Z, Canada and the U.K that still have the welfare system, that we embezzled.IMO


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## PZ99 (18 January 2017)

The way our budgets are going it won't be long before the Govt tries to confiscate parts of our super playground and/or make it harder to access by increasing the preservation age.
This choice of two evils happened as recently as April 2015 and doesn't inspire much confidence in a system of forced investment with dubious security.
http://www.abc.net.au/news/2015-04-...s-for-high-income-wealthy-australians/6410800
http://www.smh.com.au/federal-polit...nnuation-preservation-age-20140519-38kjj.html


----------



## Bill M (18 January 2017)

sptrawler said:


> Not a post since November, it is a BIG issue, but everyone is scared to say anything, after the latest tsunami.
> I think everyone is in a state of "stunned mullet", with the recently enacted and impending rule changes.
> Get ready for no pension if you own a brass razoo. lol



There is actually quite a bit of noise around because of these changes. But you see those that aren't on pensions (younger people) don't care as it doesn't affect them and those that it does affect amount to about 300,000 pensioners. Some have said things like "I have voted Liberal all my life but now because they have chopped my pension I will not be voting for them next time." Really, who wants a pay cut?

A couple's limit of assets other than the family home is now $816,000. Some people might think wow that's a load of money but at a closer look it is not really. They say that a couple to live a comfortable retirement requires $60,000 per year. That pot of gold would be gone in 16 years (income from that amount not included), it really isn't that much. Seeing that most people live for 30 years or more they will exhaust their savings pretty quickly and end up on a full pension anyway.

Some people with lower amounts of assets have actually gained out of this. But those 300,000 that have lost are not happy. If an election was to be held now, I wonder how many of those affected would actually vote for someone else and if they did would they change anything?

Here's a good article on it:

---
From midnight, the minimum pension will stop for homeowner couples with about $816,000 of assessable assets and for singles with about $542,500.

https://thewest.com.au/business/personal-finance/new-year-bites-into-pensions-ng-b88342986z
---


----------



## Bill M (18 January 2017)

sptrawler said:


> Get ready for no pension if you own a brass razoo



Sometimes I talk about this to my wife. I explain to her that we can buy a fancy apartment (high value not assets tested), new car, clothes, furniture and blow a considerable amount of money on overseas trips and cruises and end up on a full pension or just be tight arses and save our money and be frugal and end up with nothing from the Government. Which would you take?

Those that save get penalised, those that spend it all get a full pension. Fair or not?


----------



## Bill M (18 January 2017)

PZ99 said:


> it won't be long before the Govt tries to confiscate parts of our super playground and/or make it harder to access by increasing the preservation age.



They did it once already. One day Joe Bloggs went to work and a representative from a big Super company was there giving financial advice to the employees. He showed that if you continue to salary sacrifice into super at a high rate you can retire at age 55 and have enough to live off for the rest of your life. 5 years later the same rep was there again but Joe Bloggs wasn't happy to see him this time. The government raised the preservation age from 55 to 60............thanks for nothing, now all of Joe's plans are stuffed up.

Moral of the story is don't trust the government for anything. People should have certainty. Governments and the people they represent have been complaining for 25 years about constant changes to the Super system and yet they are still changing things every year. Doesn't sound to appealing does it?


----------



## sptrawler (18 January 2017)

Yes Julia, would be spinning in her grave, as she always said why did the Australian Government change from the British system.
In Britain, Canada and New Zealand, if you worked until 65 and paid tax, a part of that was set aside for your pension.
When you attained pension age, you get a pension, irrespective of your financial situation.
You do however pay tax on any pension received through superannuation.

Australia, the clever Country, decided to rob the pension scheme and incorporate it into consolidated revenue, from memory during the Menzies years.
Well we all now know how that went, they spent it, then Hawke and Keating scrubbed the tax levy pertaining to it, and introduced compulsory super.
Magic, write it off and reinstall it under another name.
This was introduced under the disguise of improving peoples retirement, but in reality it was a levy on peoples wages to replace the system they had butchered.IMO
Now they are butchering this system, Labor at least had the sense to see that a tax on earnings was reasonable.


----------



## PZ99 (22 February 2017)

The Govt is considering allowing first home buyers to dip into their super to buy a house. But the catch is the only money you can take out is the extra money you had put in voluntarily. The article doesn't say whether the top-up payments were made in the form of salary sacrifice or  after tax top ups.

What do people here think? Will it make housing more affordable or unaffordable by distorting the market? Or is it a waste of time because most struggling first home buyers wouldn't be topping up their super in the first place?

http://www.news.com.au/national/pol...s/news-story/f4e4ad6d3648cdd2e5b347dfbf038329


----------



## Junior (22 February 2017)

PZ99 said:


> The Govt is considering allowing first home buyers to dip into their super to buy a house. But the catch is the only money you can take out is the extra money you had put in voluntarily. The article doesn't say whether the top-up payments were made in the form of salary sacrifice or  after tax top ups.
> 
> What do people here think? Will it make housing more affordable or unaffordable by distorting the market? Or is it a waste of time because most struggling first home buyers wouldn't be topping up their super in the first place?
> 
> http://www.news.com.au/national/pol...s/news-story/f4e4ad6d3648cdd2e5b347dfbf038329



Total waste of time.  Vast majority of FHB would have little to zero voluntary contributions in super.

I have been deep in research in relation to the latest round of super reforms, most of which will come into force on 1st July 2017.

The Government has successfully added another thick layer of complexity on top of an already-complex system.  Crazy stuff.

The assertion that super is a waste of time because the Government will steal your money is b/s.  It's still a very generous tax structure.

Anyone who has spare assets not in the super system, get them in before June 30.

Anyone who already has $1mill in super/pension - seek advice on what the changes mean.  There are planning opportunities as well as traps to be aware of.


----------



## PZ99 (22 February 2017)

@Junior  what happens after June 30 ?


----------



## Junior (22 February 2017)

The changes primarily affect people approaching or already in retirement.  Additionally the changes primarily affect those with a larger balance.  In short, the biggest changes are:

Concessional contributions cap reduced from $30,000 ($35k for those over 50) down to $25,000 for everyone.

Non-concessional cap reduced from $180,000 to $100,000.   (or if using bring-forward rule, reduced from $540k to $300k)

Transfer balance cap of $1,600,000 per person (maximum which can be transferred into a pension).

Below is a list of the key changes taken from eSuperFund.  

There are many underlying complexities associated with each change.


----------



## PZ99 (22 February 2017)

Thanks for that. So on one hand the Govt wants to allow first home buyers to use their concessional contributions to buy a house but on the other hand they want to reduce the cap for concessional contributions. Looks like another conflicting narrative from the Govt. LOL


----------



## Junior (22 February 2017)

Labour's proposals were far simpler (i.e. reduce the caps and tax pension income above $100k), so to differentiate themselves the Coalition decided to go down the complex path.


----------



## Bill M (22 February 2017)

PZ99 said:


> What do people here think? Will it make housing more affordable or unaffordable by distorting the market?



My opinion is that dipping into Super to get a house deposit is not a good idea. It will only drive house prices even higher and we need that like a hole in the head. Not only that, Super should be what it was designed for and that is for retirement. What's to stop someone pulling out a deposit from Super and then selling the house a year later and then spending the $$$ on a car and a holiday around the world? Leave it as it was intended, for retirement only.


----------



## sptrawler (23 February 2017)

PZ99 said:


> The Govt is considering allowing first home buyers to dip into their super to buy a house. But the catch is the only money you can take out is the extra money you had put in voluntarily. The article doesn't say whether the top-up payments were made in the form of salary sacrifice or  after tax top ups.
> 
> What do people here think? Will it make housing more affordable or unaffordable by distorting the market? Or is it a waste of time because most struggling first home buyers wouldn't be topping up their super in the first place?
> 
> http://www.news.com.au/national/pol...s/news-story/f4e4ad6d3648cdd2e5b347dfbf038329




It would be a good opportunity, for the Government to have tax free contributions, removed from super accounts.


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## sptrawler (19 April 2017)

It is getting close to the end of financial year, there are a lot of changes to be enacted on July 1, if you have a SMSF you probably need to start getting everything in order.
A few things that require attention are, the $1.6m cap, last opportunity for the $180k bring forward and updating the trust deed and investment strategy.
I'm sure Craft, Junior, McLovin, Ves and others can add some other ideas.


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## Junior (20 April 2017)

For those using a Transition to Retirement pension, review whether this strategy remains appropriate or not.  It may be beneficial to revert back to accumulation phase.


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## Belli (20 April 2017)

Doesn't affect me but a couple of people I know receive a defined-benefit pension from Commonwealth coffers and also have an SMSF.

Apparently the pension is included in the $1.6M cap by multiplying the pension by a factor of 16 and I understand that as a result, in their case, their SMSF will be taxed on earnings (I think) along with there being some impact of the taxation arrangements of their pension.

A rather nice problem to have, in my view.


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## sptrawler (30 May 2017)

Belli said:


> Doesn't affect me but a couple of people I know receive a defined-benefit pension from Commonwealth coffers and also have an SMSF.
> 
> Apparently the pension is included in the $1.6M cap by multiplying the pension by a factor of 16 and I understand that as a result, in their case, their SMSF will be taxed on earnings (I think) along with there being some impact of the taxation arrangements of their pension.
> 
> A rather nice problem to have, in my view.




Absolutely, I wonder if it includes politicians pensions? 
It would be nice if it did, then it would give a feeling of the politicians being genuine, about the need for fairness.
It always seemed to be lacking in previous legislation, that exempted them and high court judges and senior public servants.
Perverse sense of fairness seemed to rule, one would hope the context has changed.


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## sptrawler (12 June 2017)

Well June 30th is getting really close now, if you have a SMSF really sit back and have a think, it is the last opportunity to balance members accounts.
After July 1 it will be more difficult to balance up account balances, it may not matter to anyone, but it's just a heads up.
All the best hope it works out for everyone, sorry about your situation Craft, but it's been a great ride.
Craft, Junior, Ves and McLovin can probably give some more enlightened sujestions, I'm just muddling along, in my own incompetence.


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## Belli (17 June 2017)

Yep,  I've done all I can.  Made a deductible contribution plus lump sum withdrawals with re-contribution in order to turn most (over 98% I think) of my single member SMSF into after-tax contributions.  Nothing more I can or will do I reckon.  Mind you, as I am no longer in the workforce, my opinion is allowing such arrangements to be permitted in my circumstances, although lawful, is or was rather silly.  Still, we all tend to organise our affairs according to the legislation in place at the time.

Of course, others have more complex situations and I wish them the best in getting the financial matters sorted out.


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## sptrawler (19 June 2017)

Yes belli.
I'm in a similar situation, always stashed as much as the other half would let me, downsized as the Government recomended.
Now have to try and rebalance, wish I hadn't believed them.lol


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## Belli (20 June 2017)

For some reason I've never put all my available money into super. Probably as I've always somewhat sceptical of what seems to me the over emphasis by governments and the financial industry about it. It's as if they consider that income from investments outside super don't count as retirement income and I simply don't get that attitude.

So I also invest outside the super structure. The income is now sufficient to cover the cost of my household overheads, such as rates, insurances and the like while allowing me to plonk some in the sharemarket when the companies I hold (only LIC's both in and outside super) offer a SPP or I have a surplus to my material needs, which are simple. May not be tax "efficient" according to some, including the accountant I use, but then it's about me not them! One cranky curmudgeon I guess.


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## sptrawler (21 June 2017)

Belli said:


> For some reason I've never put all my available money into super. Probably as I've always somewhat sceptical of what seems to me the over emphasis by governments and the financial industry about it. It's as if they consider that income from investments outside super don't count as retirement income and I simply don't get that attitude.
> 
> So I also invest outside the super structure. The income is now sufficient to cover the cost of my household overheads, such as rates, insurances and the like while allowing me to plonk some in the sharemarket when the companies I hold (only LIC's both in and outside super) offer a SPP or I have a surplus to my material needs, which are simple. May not be tax "efficient" according to some, including the accountant I use, but then it's about me not them! One cranky curmudgeon I guess.




Yes I tell my kids to invest outside of super, and only have in super what the employer puts in, it will be well and truly past its use by date when they reach retirement.IMO
My generation placed money in, as it was supposed to enhance your pension, it is now becoming obvious that is is intended to replace your pension.
I used to wonder why my workmates blew all their money, they are now on a full pension, i am now enlightened.


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## PZ99 (21 June 2017)

Years ago I put extra into super from the sale of property, which means a self funded income after 60. Never felt comfortable with getting old and decrepit and relying on the state for food.

But I wouldn't recommend kids doing it now. The Govt says they'll live beyond 100 and therefore have to wait until they're 99 to get there own money back.


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## Belli (21 June 2017)

My kids are doing the same, i.e. only employer contributions and invest outside super.  I get the distinct impression if the matter is raised, they understand the benefits of investing but don't have confidence "sticky fingers" won't get hold of money which has been placed in superannuation.  Plus the brats know they will get whatever I leave after I shuffle off this mortal coil!!  And I'm OK with that.


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## PZ99 (21 June 2017)

Yeah, once the Govt has finished blocking workers from getting their super they'll probably start looking into death taxes again... if they haven't already.


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## sptrawler (22 June 2017)

In W.A they are even talking about taking the seniors card off self funded retirees, why would you bother saving for retirement?
If a blue collar working couple saved and paid of their house, then went without to save $800k, they get no pension. But earn approx $24,000 from interest.
If the same couple pay off their house, then have holidays to Bali, buy the HSV, Ford Ranger and caravan, but only save $300k for their retirement.
That's o.k because they get $9,000 interest and $34,000 pension.
It's a no brainer, unless I've got something wrong.


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## PZ99 (22 June 2017)

No you haven't got it wrong but you've pointed out how unsustainable the system is because Australia's future is one of aged population. Which is why the original plan set up by the Keating Govt was to pay your forcibly invested super as an annuity to prevent the very example you just made.


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## sptrawler (22 June 2017)

PZ99 said:


> No you haven't got it wrong but you've pointed out how unsustainable the system is because Australia's future is one of aged population. Which is why the original plan set up by the Keating Govt was to pay your forcibly invested super as an annuity to prevent the very example you just made.




That's probably why, the taxable and tax free component ratio, is still maintained after a pension is commenced.


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## Belli (22 June 2017)

sptrawler said:


> In W.A they are even talking about taking the seniors card off self funded retirees, why would you bother saving for retirement?
> If a blue collar working couple saved and paid of their house, then went without to save $800k, they get no pension. But earn approx $24,000 from interest.
> If the same couple pay off their house, then have holidays to Bali, buy the HSV, Ford Ranger and caravan, but only save $300k for their retirement.
> *That's o.k because they get $9,000 interest and $34,000 pension.*
> It's a no brainer, unless I've got something wrong.




Those numbers are interesting. I try and avoid doing a comparison between my income and that of others, especially in general conversation, as I can't see the point of it.  However, seeing it in relation to the part of your post which I have bolded, I'm comfortable overall with my position.  Nothing grand but better than nothing.


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## sptrawler (22 June 2017)

Belli said:


> Those numbers are interesting. I try and avoid doing a comparison between my income and that of others, especially in general conversation, as I can't see the point of it.  However, seeing it in relation to the part of your post which I have bolded, I'm comfortable overall with my position.  Nothing grand but better than nothing.




I agree with you, as long as people are aware of what they can achieve, everyone should be fine. 
It is still one of the most generous retirement schemes, in the World.


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## Belli (27 June 2017)

I'm curious about some aspects concerning the legislation from 1 July 2017.  While it does not impact on me, possibly others on this forum with expertise may be able to enlighten me.

Suppose an individual who is 65 yo has, say, a $2m balance in an SMSF on 1 July.  My understanding is $1.6M would be considered in pension account and there is no tax on earnings and the account-based pension is tax free.   The remaining $400k is commuted to accumulation and earnings are taxed at 15% (10% CGT).  So can the individual simply take $100k from the accumulation account in addition to the account-based pension if they wish to do so?  If they can, what is the personal tax situation come tax time? Is there to be a rebate for the tax on earnings in the SMSF?  I am, for simplicity, assuming all the $2M consists of non-deductible contributions following a windfall (tattslotto win, inheritance, etc.)

I'm probably not expressing it very well but it's intriguing to me as to what happens with the $400K if the individual wishes to access it.  Or does it just have to sit there forevermore until after the individual's demise?


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## Junior (27 June 2017)

Belli said:


> My understanding is $1.6M would be considered in pension account and there is no tax on earnings and the account-based pension is tax free.   The remaining $400k is commuted to accumulation and earnings are taxed at 15% (10% CGT).




The member has a ''transfer balance cap'' of $1.6mill.  This is a lifetime limit which dictates how much of their superannuation they can use to commence a pension.  In the instance you have outlined, the member will need to commute AT LEAST $400k of their super back into accumulation phase, or withdraw at least $400k from super prior to 1st July so their total pension balance is under the cap.

Any amount remaining in accumulation phase will be taxed as you have described, 15% on earnings.



Belli said:


> So can the individual simply take $100k from the accumulation account in addition to the account-based pension if they wish to do so?  If they can, what is the personal tax situation come tax time?




Yes.  They can access funds from the accumulation account as per the current rules - by satisfying a condition of release.  Any withdrawal will be treated as a lump sum benefit.  So if the member is over 60 years old and retired, the lump sum should be tax free on withdrawal.  Of course once the funds are paid out, they will no longer benefit from the 15% earnings tax rate.

If anyone disagrees with the above, please note.

DYOR, this is not financial advice etc.


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## sptrawler (27 June 2017)

Belli said:


> I'm curious about some aspects concerning the legislation from 1 July 2017.  While it does not impact on me, possibly others on this forum with expertise may be able to enlighten me.
> 
> Suppose an individual who is 65 yo has, say, a $2m balance in an SMSF on 1 July.  My understanding is $1.6M would be considered in pension account and there is no tax on earnings and the account-based pension is tax free.   The remaining $400k is commuted to accumulation and earnings are taxed at 15% (10% CGT).  So can the individual simply take $100k from the accumulation account in addition to the account-based pension if they wish to do so?  If they can, what is the personal tax situation come tax time? Is there to be a rebate for the tax on earnings in the SMSF?  I am, for simplicity, assuming all the $2M consists of non-deductible contributions following a windfall (tattslotto win, inheritance, etc.)
> 
> I'm probably not expressing it very well but it's intriguing to me as to what happens with the $400K if the individual wishes to access it.  Or does it just have to sit there forevermore until after the individual's demise?




What junior has said is spot on. There is a bit of a honeymoon period (6 months) ,if you are less than $100K over the $1.6M on July 1st, but it must be removed.

Also if the individual who has the $2M, is married, it would be possible in some circumstances to withdraw the $400K and re contribute it as a non concessional contribution in the spouses account.
From my understanding, the $400K would have to be in the account before Saturday July 1. Alternatively contribute $179K, before Saturday and use the bring forward rule next year.
But time is getting short for moving money, it has to be in the account by stumps on Friday.

Well that is my understanding, but I'm only a tradie.
As junior says, do your own research, understand the issues or get advice.


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## Belli (27 June 2017)

Thanks, Junior & sp.

I'm curious about the practicable application of these things even if they don't apply to me.  From what has been said,  I gather there is no 15% tax rebate when funds are withdrawn from the accumulation account. I think that did happen in days gone by in some instances.  I assume both the pension account and accumulation account still get a refund of any franking credits which may have to be apportioned in some manner.

I'm going to be very interested to see how this is all going to actually work. I reckon there may be some hidden wrinkles which will come to light down track.


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## Junior (28 June 2017)

Belli, the practical application is a mess.  The Government has created a thick new layer of complexity, and has basically left a lot of the administration and monitoring in the hands of the ATO.

The ATO are supposedly going to create a Transfer Balance Cap ledger for each individual, which shows debits and credits against the cap, to measure how much of the $1.6mill you have used up.  Any unused amount is still subject to indexation in $100k increments, so it will be a moving target over time.  I heard you will be able to eventually view this ledger online through MyGov.

There are other situations which have become even more complicated: defined benefits pensions, more rules for those who have a mix of DB pensions & account based pensions, 'CGT Rollover Relief', different rules for SMSFs based on whether assets are pooled or segregated etc. etc.  And of course a whole new regime of penalties for those who do not comply.

Great for accountants and financial advisers, but a bit of a mess for everyone else!


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## sptrawler (28 June 2017)

Junior said:


> I heard you will be able to eventually view this ledger online through MyGov.




"Big Brother" is alive and well, also growing every day.


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## Belli (7 July 2017)

I had lunch with a friend of mine who is in financial planning.  He confirmed, not that I doubted Junior, the new superannuation rules have created some additional levels of complexities.

However, some of his experiences makes me wonder if some should ever be allowed near a SMSF.  It seems his organisation contacted every trustee who uses the firm advising they must take certain actions before the end of the financial year, eg, make sure deductible contributions are received by the fund on or before 30 June.

Low and behold, some didn't heed the advice with one character sending off a cheque for $35k on 30 June which was only received by the fund on 5 July.

I am probably being nasty but I have to shake my head where a trustee(s) of SMSF's are oblivious to some very basic aspects and subsequently get themselves in all kinds of hot water.


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## Junior (7 July 2017)

Belli said:


> I am probably being nasty but I have to shake my head where a trustee(s) of SMSF's are oblivious to some very basic aspects and subsequently get themselves in all kinds of hot water.




You are correct on this.  SMSFs are far more common than they should be, and it's because there are many players who benefit by encouraging the uptake of self managed super funds.

*You can invest in direct property*

This means estate agents, developers, mortgage brokers & anyone who flips off-the-plan property all stand to benefit by encouraging anyone and everyone to set up their own fund.  Superannuation is a huge pool of money there to be tapped by the real estate industry.  All of the 'professionals' I have just listed generally have a very poor understanding of the legislation surrounding SMSFs themselves, so it's no wonder that the majority of trustees don't quite understand the risks & responsibilities involved - they just see the opportunity to purchase another investment property without having to reach into their personal cash flow and it's an easy sell.

Setting direct property aside, accountants love SMSFs, as it means they get to set up a trust & trustee company and charge for it, and then charge for an extra tax return and set of financials each year.

SMSFs have their place for sure, but they have become too prevalent in my opinion.


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## sptrawler (10 July 2017)

Junior said:


> You are correct on this.  SMSFs are far more common than they should be, and it's because there are many players who benefit by encouraging the uptake of self managed super funds.
> 
> *You can invest in direct property*
> 
> ...




I absolutely agree with Junior, I run a SMSF, because I like to know where my money is.

If I wasn't this way inclined, I would definitely use a low cost mainstream super fund.

It isn't for the faint hearted and it isn't a sure way of making money, the only thing it does IMO, is reduce costs and increase accountability.

At the end of the day, you are responsible and if you don't understand your obligations, the savings could be easily cancelled out by the penalties.

As Junior alluded to 'real estate', how are SMSF that invested heavily in property, going to reduce their balance to $1.6M and still pay a pension?
IMO they were only in it for capital gain, returns were crap and you weren't allowed to improve the property.
So they were just gambling.

Basically, a SMSF is a passion I've always loved investment, just never had much money.lol


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## Junior (11 July 2017)

sptrawler said:


> I absolutely agree with Junior, I run a SMSF, because I like to know where my money is.
> 
> If I wasn't this way inclined, I would definitely use a low cost mainstream super fund.
> 
> ...




If the SMSF is being run as a 'pooled' fund then they could simply reduce the pension balance to $1.6mill and retain the rest as accumulation, and therefore retain all properties.  If there is more than 1 member, remember it's $1.6mill per person, so $3.2mill in total for a couple.

If the assets are 'segregated', i.e. each asset is assigned to a particular member then it can be more complicated.


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## sptrawler (18 July 2017)

Junior said:


> If the SMSF is being run as a 'pooled' fund then they could simply reduce the pension balance to $1.6mill and retain the rest as accumulation, and therefore retain all properties.  If there is more than 1 member, remember it's $1.6mill per person, so $3.2mill in total for a couple.
> 
> If the assets are 'segregated', i.e. each asset is assigned to a particular member then it can be more complicated.




But retaining the properties in the accumulation phase, means any income is taxed at 15% and you can't improve the property.
Sounds a bit like a hole for money, unless the land value is a raging bull.
In the accumulation phase, all profit is taxed at 15%, from my understanding.


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## Toyota Lexcen (18 July 2017)

sptrawler said:


> In W.A they are even talking about taking the seniors card off self funded retirees, why would you bother saving for retirement?
> If a blue collar working couple saved and paid of their house, then went without to save $800k, they get no pension. But earn approx $24,000 from interest.
> If the same couple pay off their house, then have holidays to Bali, buy the HSV, Ford Ranger and caravan, but only save $300k for their retirement.
> *That's o.k because they get $9,000 interest and $34,000 pension.*
> It's a no brainer, unless I've got something wrong.




hi,

as the pension gets pushed out further and further that model not so applicable?


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## Junior (18 July 2017)

sptrawler said:


> But retaining the properties in the accumulation phase, means any income is taxed at 15% and you can't improve the property.
> Sounds a bit like a hole for money, unless the land value is a raging bull.
> In the accumulation phase, all profit is taxed at 15%, from my understanding.




If the assets of the SMSF are pooled, then the property would be partially in accumulation and partially in pension phase.  The proportion of net rental income and any capital gain deemed to be a part of the accumulation account, would be taxed at 15% earnings rate (for CGT there is a 1/3rd discount, so taxed at 10%).

There are situations where 'CGT Rollover Relief' is available.  This is for some funds that had more than $1.6mill in pension phase at 1/7/2017.  The assets which are rolled back to accumulation phase can opt to have the cost base reset.....so they don't lose the tax benefits of having been in pension phase before the rules changed.

It's complicated.


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## craft (18 July 2017)

Hi Junior

Quick qustion if I could.
I think I read somwhere that they were proposing that if a SMSF had a member with funds above the cap in retirement phase the SMSF would not be able to use segregation method. An integrety measure.

Did that get implemented?


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## Ves (18 July 2017)

craft said:


> Quick qustion if I could.
> I think I read somwhere that they were proposing that if a SMSF had a member with funds above the cap in retirement phase the SMSF would not be able to use segregation method. An integrety measure.
> 
> Did that get implemented?



Yes it did.  If a member in the SMSF has a total superannuation balance over $1.6mil and is receiving a pension in any Fund then the segregated method cannot be used _to calculate the exempt current pension income for any Fund in which they are a member.  _

However,  there is probably an argument that you could still allocate specific assets to each member in order to calculate member earnings in the Fund's accounts if the trust deed allows it. Which would be handy for SMSFs with members that have different investment profiles etc.

Interesting example: If a member has a total superannuation balance exceeding $1.6 million (most of it in his/her own SMSF) _and _is receiving a pension from any Fund,  but they had a nominal accumulation balance of say $1,000 in another family member's SMSF,  then that SMSF would not able to adopt the segregated method to calculate ECPI, even if the pension member's balances were all under $1.6 million in that SMSF.

This is probably academic though,  as in my experience,  most SMSFs just get an actuarial certificate and don't bother with segregation if they have a mix of accumulation and pension, as it is quite complicated and/or expensive to administer.


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## craft (18 July 2017)

Ves said:


> Yes it did.  If a member in the SMSF has a total superannuation balance over $1.6mil and is receiving a pension in any Fund then the segregated method cannot be used _to calculate the exempt current pension income for any Fund in which they are a member.  _
> 
> However,  there is probably an argument that you could still allocate specific assets to each member in order to calculate member earnings in the Fund's accounts if the trust deed allows it. Which would be handy for SMSFs with members that have different investment profiles etc.
> 
> ...




Thanks Ves


As an Integrity measure its quite effective.

Kills any idea of having those assets with large unrealised capital gains make up the assets below the cap.

No transition arrangement to reset cost base for those not of yet of retirement age. So historical capital gains will be taxed under new regime. retrospective?????

The joys of being the wrong demographic.


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## Ves (18 July 2017)

craft said:


> Thanks Ves
> 
> 
> As an Integrity measure its quite effective.
> ...



The only other option to create 'segregation' for tax purposes is to house different assets in multiple SMSFs  (ie.  pension up to cap in one SMSF  and accumulation assets in another).  That option doesn't help those who are only in accumulation phase and are stuck with large unrealised CGT burdens though because any sort of restructuring is most likely going to trigger CGT events.  Although,  if you have a crystal ball,  and are just starting out from a fresh CGT position,  it might work somewhere down the track, but most people won't ever exceed the cap so it's a niche strategy.


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## Belli (18 July 2017)

Maybe the title of this tread should be changed to "the ultimate cash-cow for anybody but you."

I've always been suspicious of claims by the superannuation industry about how much is needed in retirement.

I reckon these articles add to the confusion somewhat.

http://www.smh.com.au/money/super-a...s-comfortable-retirement-20170713-gxawho.html

http://www.smh.com.au/money/plannin...not-as-dire-as-you-think-20170707-gx76ax.html

http://www.smh.com.au/money/super-a...obbys-field-of-straw-men-20170717-gxd2ra.html

So my view is, unless your prepared to sit down and really think about it, attempting to ignore or at least critically assess comments from potentially vested interest groups, you could be forevermore going round in circles and never being able to make a decision which is right for you and no one else.  Or you could easily stuff it all up by following the "experts."

It took me quite a while to decide on a path.  It may not be the one others would say is correct but then my circumstances are different to there's and, as a consequence, their opinions are not necessarily relevant and become part of the white noise which seems to surround financial matters.


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## Junior (19 July 2017)

How much you need for retirement varies greatly between individuals, based on your circumstances, and also with an unknown element (i.e. how long will you live for?).

Some couple only need $375,000 in savings and a debt-free home (income of say $20k from super and $34k age pension = enough to get by).

Other couples will say they need income of $100k per annum to be comfortable, plus want to help out the kids, buy a new car, do home reno's and a big o/s holiday.  In that case they might need $3mill.

Careful planning is key.


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## Belli (19 July 2017)

Junior said:


> How much you need for retirement varies greatly between individuals, based on your circumstances, and also with an unknown element (i.e. how long will you live for?).
> 
> Some couple only need $375,000 in savings and a debt-free home (income of say $20k from super and $34k age pension = enough to get by).
> 
> ...




Therein lies one of the problems, Junior.  Planning by whom?  Merely following a plan devised by the planner or developing at least an outline of a plan first then seeking advice and possible adjustment to achieve the best possible outcome?


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## Junior (19 July 2017)

Yes, a good financial adviser will do this.  

A qualified & competent financial adviser will put together a comprehensive plan which takes all factors into account.  This plan then needs to be monitored and reviewed every year.

Many on this forum would prefer to DIY.

The other alternative is what most aussies do, don't really think about it until it's too late, run out of savings a few years into retirement and then get by on Centrelink Age Pension!


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## sptrawler (20 July 2017)

Junior said:


> Yes, a good financial adviser will do this.
> 
> A qualified & competent financial adviser will put together a comprehensive plan which takes all factors into account.  This plan then needs to be monitored and reviewed every year.
> 
> ...




The underlying problem is, finding a qualified and competent financial adviser, they don't wear a badge.
Therefore it is simpler and less stressfull to do it yourself, I find.
My costs are less than $1,000, which is a lot less than a friend of mine who has a similar size fund and is self managed, his are $5,000.


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## Junior (21 July 2017)

sptrawler, if you have the time, inclination and knowledge to DIY then go for it.  Many aren't capable or would prefer to outsource to a professional and have a 3rd party who they can bounce ideas off of along the way.

You are right in regards to finding the right adviser.  It can be very very costly if you get this wrong!


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## sptrawler (24 July 2017)

Junior said:


> sptrawler, if you have the time, inclination and knowledge to DIY then go for it.  Many aren't capable or would prefer to outsource to a professional and have a 3rd party who they can bounce ideas off of along the way.
> 
> You are right in regards to finding the right adviser.  It can be very very costly if you get this wrong!




Just received my EOFY accounting, thumbs up all good. yeh

Now I read snippets on the net, about Labor re introducing death duties, that will spin out gen x,y and z. lol

They think house prices are a problem, wait till they find out that they will have to pay tax, on what their parents leave them.
If it's like the U.K it is 40% above a certain amount.

https://www.gov.uk/inheritance-tax/overview


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## Wysiwyg (27 July 2017)

Superannuation, the ultimate Fund Manager/Brokerage Firm cash cow.

Just realised after buying some shares in my Super fund that fees and brokerage have gone up > 50%. That is blatant (legal) theft and I am now considering switching funds. Not friggin happy.


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## sptrawler (27 July 2017)

Who is that with Wysiwyg?


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## Belli (27 July 2017)

One slight overlay could also be an additional administrative requirement with some share registries. 

Yesterday I logged in for my smsf to check the tax file number had been recorded for a new holding I had added - I've noticed on previous occasions it doesn't happen automatically.  I was surprised when a notice came up that I was required to self-certify under the foreign account tax compliance tax.

A little more research indicates this will probably flow through to all financial accounts, e.g. bank accounts, and also apply to share holdings including those for individuals, trusts, blah, blah, blah.

So if you weren't aware about it you soon could be.


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## Wysiwyg (27 July 2017)

sptrawler said:


> Who is that with Wysiwyg?



They told me an e-mail was sent regarding the changes. I received no e-mail regarding admin. fee and brokerage increases. I noticed the transaction charges on the last two purchases were higher than usual so I called and they guided me online through some secret doorways to where the information lay in black and white.


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## Belli (30 July 2017)

As my financial arrangements are simple, on Friday I received the details of EOY costs and tax estimate.  Including the super levy, accounting/advice fees, tax payable the overall cost was 0.8% of assets and excluding super levy and tax it was 0.5% of assets.  No much of an idea, and I'm too lazy to find out, how it compares to elsewhere but I'm pretty comfortable with the matter.  It doesn't include any refund of franking.


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## sptrawler (13 October 2017)

Interesting reading today, that there is a suggestion the Government should take over the administration of compulsory super, we talked about this on the forum years ago.
Funny how history repeats, we said it would, RIP Julia.


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## Smurf1976 (14 October 2017)

There does seem to be an emerging trend toward nationalisation of things or at least more direct government involvement than we've seen in recent times.

Tasmania bought back its railway system. Had to spend a fortune fixing it but bought it nonetheless.

SA government building a power station.

Vic and federal government stepped in to keep Alcoa operating at Portland Vic.

Threats of export controls involving gas.

Plus a few others and now it's superannuation.

I'm not arguing for or against but a trend does seem to be developing.


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## Belli (16 October 2017)

sptrawler said:


> Interesting reading today, that there is a suggestion the Government should take over the administration of compulsory super, we talked about this on the forum years ago.
> Funny how history repeats, we said it would, RIP Julia.




Well, nothing like shutting the stable door after the horse has bolted. So many issues with compulsory super, aside from the temptation of Government to get their sticky fingers on the dosh and playing politics with the thing. Yet I can see a rationale for it given many providers (and some employers) don't appear to have the individual's interests at the forefront. High fees, inappropriate insurance or employers not making payments - one acquaintance of mine is furious as the employer hasn't made payment for 18 months dsspite promising to do so.

Of course, should the G'ment take it over, you can bet your bottom (super) dollar it will not be staffed properly in order to operate effectively. Hello CentreLink!


----------



## Belli (16 October 2017)

Phew, took me a bit (about two months) but I finally got the non-lapsing Binding Death Benefit Nomination completed for my SMSF. Plus finalising my Testamentory Will incorporating as a subset a Superannuation Proceeds Trust along with a clause transferring ownership of the shares of the Corporate Trustee which administers the SMSF to the Executor. All fun and games as was the Enduring Power of Attorney.

As exciting as bat poo to many but an essential task I feel. I'll now have a beer on it.


----------



## sptrawler (27 February 2018)

Well the myth that retirees take their super as a lump sum, seems to be blown out of the water, yet again.
When will they realise, the only retirees who have money, are the savers.
Why would they change, the very characteristic, that got them there in the first place?

https://www.theage.com.au/money/sup...en-they-don-t-need-to-be-20180223-p4z1gm.html

Part of the article is below:

_It’s the longevity risk – fear of running out of money - that is the main  driver of retirees becoming scrooges.

Covering unexpected expenses like future medical bills and residential aged care also has them worried and they reluctant to spend their superannuation too quickly.

Other studies have shown that retirees like to have access to a lump sum to pay down their mortgage, to carry out maintenance on the house or to buy new car.

Dr Reeson suspects a lot of retirees are over-estimating the likelihood of these expenses and the scale of the expenses.

He says it seems clear there are many retirees not enjoying the standard of living in retirement that they could afford because of their "perception" of the risks they face._

Maybe if the Government, gave some certainty, self funded retirees may have the confidence to spend their money.
Until then, they will edge their bets, as they have done all their lives.


----------



## sptrawler (13 March 2018)

https://www.theage.com.au/politics/...-59-billion-revenue-grab-20180312-p4z40d.html

Beautifull, just beatifull, Labor out to screw the working man who has scrimped and saved.
Why The fluck wouldn't you just spend it?
Well because then they will make you work till you die, because you won't have any money.LOL
The old adage of the unionist, there is nothing worse than an ex unionist, because their motto is "the working class can kiss my arse I've got the bosses job at last".
It isn't just an attack on retirees, it is an attack on working families that buy shares, in the lower income earners name.
My guess is it is a huge call to try and make the coalition gag, but could backfire hugely.LOL
So Silly Billy wants to get rid of franking credits and negative gearing, WOW, so why does anyone invest?
To give free rent to the homeless, at your own cost? or to gamble on  the stock exchange? Billy has lost the plot.


----------



## Junior (13 March 2018)

This would be a big whack to SMSFs.  And potentially to ALL super funds, including industry funds (I wonder if Bill realises this?).

How would it work for the small business owner, who pay themselves a FF dividend from their own company, and then claim the franking credits personally?  Would you need to distribute a big enough dividend, such that there is no refund due?  

If this plan ever goes ahead, there will be many questions & complexities involved IMO.


----------



## Toyota Lexcen (13 March 2018)

ridiculous situation if goes ahead for shareholders


----------



## tech/a (13 March 2018)

The issue is the rate of tax.
Superfunds are taxed at 15%
Franking credits at 30%
15% difference he wants to reign in thus
saving payouts of Billions from the Coppers.

Sounds fair.

But if the 30% is paid by the Company for the benefit
of investors why shouldn't the investor who has been
given the franked dividend NOT get the full benefit.
Why should the Govt get 15%.
Why would the Govt not be happy that the SMSFs get
richer! After all they wont be claiming a pension.

This is just short sighted.

Why don't they give a further 15% back to the company if
they aren't going to pass the benefit on to the investor.
If its paid in the first place why should the Govt pocket it.


----------



## sptrawler (13 March 2018)

Typical of BS Bill and Labor, using figures from 2014-2015, when the reality is the rules changed last year.
Those in the pension phase no longer have the amounts in their account, that would return a $2.5m dividend. 
They are only allowed $1.6m in total in the pension phase, but why let the truth, get in the way of a$hit butty.
Superfunds will recieve a lot less anyway, due to the changes last year, where excess amounts had to be rolled back into the accumulation phase.
Typical labor, how the hell are working people going to derive a decent return on their savings, in retirement? Risk buying shares for 5% return, or savings at 2.6% return?

From the article.

Some SMSFs received cash refunds of up to $2.5 million in 2014-1


----------



## galumay (13 March 2018)

Meh, seems reasonable to me, its simply returning the system to its original design. There is no logical reason that taxpayers on a rate lower than the corporate rate should receive the difference - its really just a form of welfare.


----------



## sptrawler (13 March 2018)

Well it will certainly cause a rapid decline in the value of super funds, the draw down rates and reduction in earnings, will have a compounding effect on account balances.
Most SMSF people will end up on the pension.IMO


----------



## PZ99 (13 March 2018)

Well to be honest if your super balance is low enough to qualify you as a pensioner then you shouldn't be playing around with an SMSF. The running costs will kill your profits.


----------



## sptrawler (13 March 2018)

PZ99 said:


> Well to be honest if your super balance is low enough to qualify you as a pensioner then you shouldn't be playing around with an SMSF. The running costs will kill your profits.



How do you draw that conclusion?
If a 70 year old has say $1m in super, the charges by an industry fund are say 0.75%, which equates to $7,500 p.a.
I know it only costs me $1,500p.a to run my SMSF, so where do you derive your figures from?


----------



## PZ99 (13 March 2018)

If you have $1m in super you won't qualify for the pension.

You said earlier: "Most SMSF people will end up on the pension"

To be in that position your balance would have to be less than say... $250K yeah? $1,500 p/a is too much when you can simply take the money out tax free and invest outside of super instead.


----------



## sptrawler (13 March 2018)

PZ99 said:


> If you have $1m in super you won't qualify for the pension.
> 
> You said earlier: "Most SMSF people will end up on the pension"
> 
> To be in that position your balance would have to be less than say... $250K yeah? $1,500 p/a is too much when you can simply take the money out tax free and invest outside of super instead.




No, to get a part pension for a married couple it is about $800k, so most will get there.IMO

If you only have $250k, it will be a full pension and yes there is no way I'd be leaving $250k in super.

If it is earning 4%, that's $10k it would be pointless, to have it in super. IMO
As can be seen by the actions of both major parties, it is perilous leaving money in super. 
It is only a matter of time before they confiscate the taxable component.IMO


----------



## Smurf1976 (13 March 2018)

My thought is this makes Australian shares a less attractive asset to hold.

That being so, logical outcome is the ASX ends up lower than it otherwise would have been. That’s an issue for investors no matter what their tax situation.


----------



## poverty (13 March 2018)

Smurf1976 said:


> My thought is this makes Australian shares a less attractive asset to hold.
> 
> That being so, logical outcome is the ASX ends up lower than it otherwise would have been. That’s an issue for investors no matter what their tax situation.




Apparently we have the only fully-refundable dividend imputation system in the world?  If that's all that's holding the ASX up Australian shares are in bigger trouble than I thought.  Maybe without the pressure from retirees to pump out so much fully franked divis Australian companies might be inclined to reinvest more of their profits into growing their business and building infrustructure for the future?


----------



## sptrawler (13 March 2018)

poverty said:


> Apparently we have the only fully-refundable dividend imputation system in the world?  If that's all that's holding the ASX up Australian shares are in bigger trouble than I thought.  Maybe without the pressure from retirees to pump out so much fully franked divis Australian companies might be inclined to reinvest more of their profits into growing their business and building infrustructure for the future?



Do you have any idea, how much pension money is in the market? and how much effect it will have if it's removed?


----------



## poverty (13 March 2018)

sptrawler said:


> Do you have any idea, how much pension money is in the market? and how much effect it will have if it's removed?




No, I gather it's a hell of a lot.  But other countries don't need cash refunds of imputation credits to those paying no tax, so why do we?  Why would the money be removed and if it was removed where would it then be invested?


----------



## sptrawler (13 March 2018)

poverty said:


> No, I gather it's a hell of a lot.  But other countries don't need cash refunds of imputation credits to those paying no tax, so why do we?  Why would the money be removed and if it was removed where would it then be invested?



Well the simple answer is most other countries that have a welfare system like ours, have a funded pension system, which we had before the Government put it into consolidated revenue and spent it.
After they spent it, they started telling everyone that they could improve their retirement, by supplementing via superannuation.
Now it has become obvious, it isn't supplementing but replacing the system they plundered previously, probably doesn't bother younger people who didn't forego pay rises and lifestyle to self fund their retirement.
But it is a bitter pill for those who did.

As for where would it go and where would you put it, easy change from shares to cash, if it is only 1-2%less, with minimal risk to capital.

Your avatar, may well represent a large majority of Australians, in 20 years time.IMO
Increasing population, decrease in job opportunities, lower tax base. It doesn't bode well.IMO


----------



## Cam019 (13 March 2018)

sptrawler said:


> Do you have any idea, how much pension money is in the market? and how much effect it will have if it's removed?



According to this, about 361.1 billion dollars, excluding SMSF and small APRA-regulated funds.


----------



## Smurf1976 (13 March 2018)

poverty said:


> Why would the money be removed and if it was removed where would it then be invested?



I'm not suggesting it would all be removed.

But if Australian shares have attracted x$ of investment under current circumstances then it stands to reason that if policy changes in a way that makes holding shares less attractive, at least some individuals will choose to hold less shares than they otherwise would have.

Same with anything. Make it less attractive and those already in a marginal situation (and there's always someone) will find that enough to tip the balance.

Less demand for shares = lower share prices than would otherwise have been the case.

As for what it would be invested in, the answer is "anything that isn't Australian shares". International shares, real estate, whatever.

Note that I'm not necessarily opposed to the idea, I haven't given it sufficient thought to have a firm view there, but I do have concerns about the impact on the market of such a change. 

Between the various antics of Trump, things like Brexit and now this one could be excused for thinking that the world's governments are actually trying to start a market plunge.


----------



## sptrawler (13 March 2018)

The real problem here is, super when in retirement, makes your money last longer.
The reason is, when you draw a pension from your super, the amount increases as you get older.
At the moment, when most people retire, the draw down is 4%, which at the moment is way above bank interest.
So most retirees have their money in shares, which give about 4-5% + 1.5% franking credit, which in reality covers their minimum draw down and gives a buffer for when the compulsory increased drawdown kicks in.
Then when the drawdown increases, and inflation requires you to pull out more money anyway, you don't take as big a hit on your capital.
With the suggested changes, you may as well have the money outside super, and withdraw as much or as little as you like, to suit your lifestyle.
Rather than pay a superannuation company, to tell you to take out more and have them take out more.
There really isn't any benefit at all. It is dumb $hit.IMO


----------



## sptrawler (13 March 2018)

http://www.abc.net.au/news/2018-03-...money-if-labor-abolishes-cash-refunds/9544960

When you open that link, just look at Chris Bowens face, it tells you he doesn't give a toss. He gets a taxpayer funded, indexed pension, for the rest of his life, so suck it up. What a wanker


----------



## Wysiwyg (13 March 2018)

*Labor will target more than 1 million Australian taxpayers who own shares in a $59 billion revenue push that would take its heaviest toll on retirees*



Smurf1976 said:


> I'm not suggesting it would all be removed.
> But if Australian shares have attracted x$ of investment under current circumstances then it stands to reason that if policy changes in a way that makes holding shares less attractive, at least some individuals will choose to hold less shares than they otherwise would have.




Starting to look like a ploy to force open some piggy banks and loosen the purse strings of savvy retirees that aren't eroding their nest eggs. Coming from someone on $400,000 per year just rolls off the tongue so easy. Lol. Making people worse off financially is bad policy. Spread the word.


----------



## sptrawler (13 March 2018)

Wysiwyg said:


> *Labor will target more than 1 million Australian taxpayers who own shares in a $59 billion revenue push that would take its heaviest toll on retirees*
> 
> 
> 
> Starting to look like a ploy to force open some piggy banks and loosen the purse strings of savvy retirees that aren't eroding their nest eggs. Coming from someone on $400,000 per year just rolls off the tongue so easy. Lol. Making people worse off financially is bad policy. Spread the word.




Jeez you're on $400k a year, well superannuation isn't an issue for you, well done.
I certainly don't have an issue with someone who has achieved a lot and done well, I wish all my kids had.
That is what we should be promoting, rather than failure is o.k, don't worry if you can't find a job, not everyone can. Just don't stress, do you want potato chips, while you play game boy?


----------



## sptrawler (14 March 2018)

I think Labors revelations call into question the purpose of superannuation, is it to supplement and support a better retirement, or to replace the pension?


----------



## Wysiwyg (14 March 2018)

sptrawler said:


> Jeez you're on $400k a year, well superannuation isn't an issue for you, well done.



Lol. Not me, Billy 'Robin Hood' Shorten.


----------



## sptrawler (14 March 2018)

Yes it is funny, they don't don't have any trouble dishing out $hit to the plebs, but rise above it themselves.
I wonder how the fluck they can live with themselves, when they make such nasty decissions, without including themselves in the outcomes.
Maybe they were all just the school yard bullies, that didn't give a fluck about the kids they hurt.
Who knows but I certainly couldn't be a politician, I couldn't make decisions, that I wasn't prepared to wear myself.
So I would have been chucked out straight away.lol

Now if you save like $hit, sell the family home to put the money into super, so you could have a great retirement.
First Liberals come in and say that is capped at $1.6m, hey that's ok, I can work with that.
Now you get told, well get over it, your going to be really screwed over. 
All you can earn is 4%, and you are going to have to draw more than that soon, also inflation will really kick you in the guts. lol
Super sucks.lol


----------



## PZ99 (14 March 2018)

sptrawler said:


> With the suggested changes, you may as well have the money outside super, and withdraw as much or as little as you like, to suit your lifestyle.
> Rather than pay a superannuation company, to tell you to take out more and have them take out more.



That's the thing though. You're better off doing that now anyway if the best you can get is single figure % returns.

That's if you're lucky to even get access to it in the first place. Let's not forget it was the Liberal Party that raised the preservation age under Howard and under Abbott were planning to do it again.

Raising the pension access age to 70 is still Coalition policy today. Could you imagine having to work until 70 to not only get your pension but your super as well?

In addition they've frozen employer contributions to 9.5% which by now would have been 11% under the previous system. So people will now have less super to go on when they retire which means they will be a further burden on the taxpayer.

Super sucks because it was turned to $hit by the conservatives.


----------



## PZ99 (14 March 2018)

sptrawler said:


> No, to get a part pension for a married couple it is about $800k, so most will get there.IMO
> 
> If you only have $250k, it will be a full pension and yes there is no way I'd be leaving $250k in super.
> 
> ...




$800k is it? Well I'll miss out on tax welfare then. Which has always been my goal.

That makes me happy because I can't be shafted if I get nothing in the first place


----------



## sptrawler (14 March 2018)

PZ99 said:


> $800k is it? Well I'll miss out on tax welfare then. Which has always been my goal.
> 
> That makes me happy because I can't be shafted if I get nothing in the first place




Yes, I think that is the best strategy, I adopted the same and it is working o.k.
It is just the constant changes to super, that does your head in.
I'm really thinking of an exit strategy, the only benefit super gives, is tax free earnings.
But this is really starting to become line ball, when you weigh up the risk, of adverse rulings being applied and the constant increase in drawdown regardless of earnings.
This becomes a reverse compounding effect, if the fund has shares and the dividends don't cover the drawdown, then some shares have to be sold.
I guess, it is all designed to close down SMSF, and get the plebs to pay stupid management fees, to retail and industry funds.


----------



## Toyota Lexcen (14 March 2018)

Seems to be a lot of confusion about the proposed Labor policy

Ignoring the pension or smsf

If I get 16k in dividends, i get 4K in frank credits which comes back as cheque as don’t work and never will

4K now just disappears? Anyone know what happens to it (have Labor given any indication on what happens to the credits)

A lot of reporting is talking about not paying tax


----------



## galumay (14 March 2018)

The 4K was company tax, instead of you getting it as a form of welfare, in a rebate, it will now stay with the ATO.


----------



## sptrawler (14 March 2018)

Toyota Lexcen said:


> Seems to be a lot of confusion about the proposed Labor policy
> 
> Ignoring the pension or smsf
> 
> ...




I think Gulamay, is right.
It will effect a lot of working people, who buy shares in the wife's name, which makes the franking credit cover the tax bill.
It will hurt a lot more people, than the media is saying.
It probably will have a flow on effect, with propping up property prices, as younger people decide to negative gear a property rather than buy shares.
The whole thing is a stupid over reaction, as is always the case, it is designed to have the wow and awe effect.
Then they tone it down and shaft you slowly.


----------



## PZ99 (14 March 2018)

Wysiwyg said:


> Lol. Not me, Billy 'Robin Hood' Shorten.



Billy is always robbing hood


----------



## sptrawler (14 March 2018)

PZ99 said:


> Billy is always robbing hood




No, Billy is always looking after Billy, same as the rest of them.


----------



## Smurf1976 (14 March 2018)

sptrawler said:


> the only benefit super gives, is tax free earnings.
> But this is really starting to become line ball, when you weigh up the risk



I’ve always taken an interest in how it’s invested but never added even one cent in voluntary contributions for that reason.

I just don’t trust that government won’t decide that I’ll have to work until I’m 100 etc.

That said, I’ve still ended up with roughly 20% of my total assets in super but that’s ebough for me.


----------



## sptrawler (14 March 2018)

Smurf1976 said:


> I’ve always taken an interest in how it’s invested but never added even one cent in voluntary contributions for that reason.
> 
> I just don’t trust that government won’t decide that I’ll have to work until I’m 100 etc.
> 
> That said, I’ve still ended up with roughly 20% of my total assets in super but that’s ebough for me.




As has been shown by both parties, super is a playpen for them.
Why a younger person would put extra money into super, should qualify them for a brain scan.IMO
The only benefit in the super system, has always been the tax advantage, that is diminishing before our eyes.
I said a zillion years ago on this thread, while talking to Julia (not the red head), the Government will take over the super system to reduce the cost of pensions.

You won't have to work until you're a 100, but you will have to spend all your money in super, before you get any Government assistance.
Which is probably right, whether it is fair is another thing, what about people who come here in their 50's, they will probably qualify for a pension much earlier while putting in much less.
Well as Iuutzu would say, they tried, but unfortunately couldn't get here any earlier.


----------



## sptrawler (14 March 2018)

I've always wondered why, someone in Government, hasn't taken the moral high ground and said "what we are doing is wrong".
"Why should some of us have a lifetime indexed "tax free' pension, while we continually impose punitive measures on everyone else".
Then I wake up, as I've probably fallen out of bed, in shock.


----------



## sptrawler (14 March 2018)

Anyway, I'm over it super IMO, has gone the way of the dinosours .LOL


----------



## Wysiwyg (15 March 2018)

sptrawler said:


> I've always wondered why, someone in Government, hasn't taken the moral high ground and said "what we are doing is wrong".
> "Why should some of us have a lifetime indexed "tax free' pension, while we continually impose punitive measures on everyone else".
> Then I wake up, as I've probably fallen out of bed, in shock.



Like business managers that award themselves bonuses and salary increases. A god given right that just keeps taking and taking.


----------



## sptrawler (21 March 2018)

Do any of our learned members remember the minimum / maximum rules, that applied to allocated pensions pre 2007, before "better super" rules started.
I'm just playing mental games with myself, as usual, and trying to remember what the criteria was.


----------



## PZ99 (21 March 2018)

Does this help ?

http://www.budget.gov.au/2006-07/overview2/html/overview_01.htm


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## sptrawler (21 March 2018)

No that was the proposed changes, I'm trying to find the minimum/maximum draw down rates that applied pre 2007.
I usually have a really good memory for numbers, but can't recall the figures.
I was hoping Junior or Craft might remember, or know an accountant that does


----------



## awg (25 March 2018)

The proposed changes by Labor are one of the most vicious cash grabs I have come across, enough to change my vote, because it will affect me.

Luckily my SMSF only provides a part of my income, but nevertheless, my own situation shows how bad it will be for others less well of than me, and I am not especially wealthy (in an income sense)

I always draw min pension, last year ~27k,  ~$3700 IC

As a result of my other income, I have an annual Personal Income Tax bill

If my understanding of what is proposed is correct, my SMSF, which is in Pension phase, will, instead of having that ~$3700 remitted back to my balance, will be retained by the ATO

If I was reliant upon my SMSF Pension alone, that would be a huge and unsustainable hit, (needing a change in investment strategy)..not so easy for Pensioners with CBA shares etc.

(My SMSF balance is more than twice the average super balance upon retirement for a man)

I believe a "limit" of how much could be claimed would be fairer, possibly with some grandfather provisions


----------



## Bill M (26 March 2018)

awg said:


> The proposed changes by Labor are one of the most vicious cash grabs I have come across, enough to change my vote, because it will affect me.




Absolutely, and the Labor Party is lying saying that it will only affect a minority. It will affect every single person why owns shares. It will indeed be the biggest theft of money from retirees. This next article explains it well, (my bolds):

---
If you are in pension mode, and paying no tax on your income, the whole $300 in franking credits are returned to you as a cash rebate. A person still in superannuation accumulation phase pays tax at 15 per cent, so they would get up to half of franking credit back, or $150.

*If the ALP’s plan comes to fruition, you can kiss those cash refunds goodbye. Which will be a bitter pill to swallow for many retirees who may own a few shares through their pension fund, and who rely on generating some additional income via dividend franking credits to supplement their age pension payment income.

That dividend income is not a handout. It is simply the rebate on the tax that has already been paid by the company.
*
https://www.investsmart.com.au/inve...medium=email&utm_campaign=free-midweek-260318
---


----------



## sptrawler (26 March 2018)

Bill M said:


> Absolutely, and the Labor Party is lying saying that it will only affect a minority. It will affect every single person why owns shares. It will indeed be the biggest theft of money from retirees. This next article explains it well, (my bolds):
> 
> ---
> If you are in pension mode, and paying no tax on your income, the whole $300 in franking credits are returned to you as a cash rebate. A person still in superannuation accumulation phase pays tax at 15 per cent, so they would get up to half of franking credit back, or $150.
> ...



Well Bill I hope you are right, but from the way I have read it if your only income is from shares, you get nothing back.
So that will mean people in pension phase, people in accumulation phase, wife's that have shares in their names, people who own shares out side of super and it is their only income.
The real classic is, retail super funds wont be able to offset their tax liability with the franking credits, so their members will lose.
But apparently Labor is going to exempt industry( union ) funds, and allow them to use the credits, so Billy and the crew should be o.k for jobs post politics. Well that's how I have read it, I may be wrong, but if Im not it will cost a lot of people money.
Someone correct me, if I'm wrong.


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## Toyota Lexcen (26 March 2018)

4 corners tonite show on super I believe


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## Wysiwyg (26 March 2018)

> *Superannuation Statistics*
> Superannuation assets totalled $2.6 trillion at the end of the December 2017 quarter. Over the 12 months from December 2016 there was a 10.1 per cent increase in total superannuation assets.



Compounding, the eighth wonder of the world. Government the only organisation that can walk in and say, give me some of that.


----------



## Bill M (26 March 2018)

Toyota Lexcen said:


> 4 corners tonite show on super I believe



Thanks for the heads up, just watched it. Not a lot of new stuff there, same old rips offs of small businesses ripping off teenagers and not paying their Super, yet some people say we don't need unions or other heavier regulations to pull them into line. Also the fees and charges some Super Companies charge are way over the top. Funny how most average Joes didn't even know what super fund they were in.

What else, we have the 4th largest pool of money set aside for retirement in the world they said. $2.5 Trillion.........Not bad for little old Australia.

We needs to pull up the crooks, and stop thieving peoples money.

No mention about Labors new tax though. But there was some mention on tonight's news that they are already back to the drawing board to talk about exemptions for low income/super balance retirees with that grand new imputation tax refund theft idea. They never seem to think these ideas out properly.


----------



## qldfrog (27 March 2018)

Wysiwyg said:


> Compounding, the eighth wonder of the world. Government the only organisation that can walk in and say, give me some of that.



and I would add mandatory contribution the 9th one!!!


----------



## awg (28 March 2018)

its a s.o.b filthy conniving POLITICAL dog act, because Labor KNOW the vast majority of SMSF owners will be Liberal voters. They would have been LAUGHING GAYLY as they discussed this over the policy table.

predict it will make mess of bank shares..can you say the word SELL

Does the retention of IC apply to super funds, or is it only individual SMSF holders ?


----------



## McLovin (28 March 2018)

And to think the boomers call millenials self-entitled!


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## elbee (28 March 2018)

I am a little disappointed in the way Labor have managed the story around stopping cash refunds of franking credits but fully support that decision (eventhough I am currently a beneficiary).

The concept of paying a tax refund when no tax has been paid is illogical from an economic, taxation or social welfare perspective. Not surprisingly Australia is the only jurisdiction where this occurs.

It is important to realise that because a benefit is currently received it does not mean that the benefit has been earned, deserved or is an entitlement.

The dividend imputation system was designed to prevent double taxation and works by taxing both company profits and the dividends paid out of those profits to shareholders, but allowing a credit to shareholders of the company tax already paid.

Cash refunds of franking credits are a welfare payment. They are not "your money". They are tax the Commonwealth has properly received on company profits. 

When those credits are allowed to shareholders with no taxable income there is effectively no taxation paid by anyone on that part of company profits flowing to those shareholders. The tax collected from the company is refunded by the Commonwealth to the non-taxable shareholder. Whether that revenue should be directed to that group or redirected elsewhere should be a matter for debate.

With an ageing population and an ever increasing pool of superannuation assets the amount of company profits paid out to non-taxable funds, and thus producing no net tax to the Commonwealth, is growing and will soon be unsustainable.

Whilst I agree with the concept that profits should not be taxed twice, the use of the dividend imputation system as the means to achieve this is questionable. I believe only Australia and NZ remain with full-fledged imputation systems with several European countries having experimented with but then abandoning the system in part or full.

The major objection to dividend imputation is that it reduces the effectiveness of taxation incentives, including the lowering of the company tax rate, to capital holders.
Any reduction in tax paid by the company is offset by a reduction in value of the tax credit received by the capital holders on their dividends.

Some jurisdictions achieve the objective of avoiding double taxation by excluding dividends paid out of taxable income from the assessable income of shareholders.


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## awg (29 March 2018)

elbee said:


> Cash refunds of franking credits are a welfare payment. They are not "your money".




agree in part with your statement, but applying that logic, ANY super concession 
is a form of welfare. 

Change is inevitable, but this seems to target a SMSF holders " unfairly"
Its been "my money" for many years, and I hope it continues to be..


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## sptrawler (25 June 2018)

Isn't it funny, labor want to take away the franking credits from SMSF's, and the Royal Commission is finding the superannuation system is ripping members off.

So for the "man on the street", the super funds will screw you, and if you want to run your own, the labor Party will screw you. LOL
Don't you just love it, the age pension is looking better and better.


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## PZ99 (26 June 2018)

The age pension is looking worse and worse. Because the Liberal Party screwed it last year.

Just ask those 200,000 recipients that had their entitlements reduced, and the 100,000 recipients that lost their entitlements altogether.

If you're a worker and you don't have a truckload of money, save your super pennies for a rainy day. The Liberal party want you to work until 70 before you get the age pension.

And don't count on any of the above getting rolled back under any future Govt either.


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## tech/a (26 June 2018)

Neither Govt are serious about Super.
If they were they wouldn't be so stingy with what you could
put into it.
Rich retirees spend. Rich off spring spend if retirees don't live long enough to spend it.


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## HelloU (26 June 2018)

flipside

those changes allowed an additional 50,000 low asset peeps people to get the full pension....payed for by those 100,000 peeps who lost part pension (cos they had over $500,000 in the bank). 

all about moving the deck chairs............when there are not enough chairs, then no matter where u place them, someone is missing out.


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## PZ99 (26 June 2018)

So 50,000 net people have lost out - along with the 200,000 who partly lost out.

Whichever way you arrange it - the age pension is looking more and more like the Titanic, because it's getting overcrowded and running out of steam.

The silver tsunami will sink it eventually.

It's just not a realistic goal to set for a comfortable retirement.


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## Junior (26 June 2018)

Age Pension payment rates are indexed every quarter and have been for a long time, so the actual pay rates aren't bad - assuming you have some savings and a debt-free home you can retire in relative comfort in Australia.

If you don't have a home or savings, you will struggle.

The taper rates are ridiculous and do not incentivise saving for your retirement.


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## HelloU (26 June 2018)

PZ99 said:


> So 50,000 net people have lost out - along with the 200,000 who partly lost out.
> 
> Whichever way you arrange it - the age pension is looking more and more like the Titanic, because it's getting overcrowded and running out of steam.
> 
> ...




Agree totally with what u wrote....(do not know which side of the coin u are betting on and not reading back to find out - so trying not to say something u already know in the following as egg sucking)...
for me, the top end reductions are intended, and will continue in the future as more peeps retire who have super guarantee money.... pension will be a pure safety net and less lifestyle choice...cos peeps will be expected to rely on their SGC.

Not saying good or bad but we are in transition from getting govt pension on retirement normality......to accrued 45 years worth of SGC to pay for own retirement normality.


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## HelloU (26 June 2018)

Junior said:


> Age Pension payment rates are indexed every quarter and have been for a long time, so the actual pay rates aren't bad - assuming you have some savings and a debt-free home you can retire in relative comfort in Australia.
> 
> If you don't have a home or savings, you will struggle.
> 
> The taper rates are ridiculous and do not incentivise saving for your retirement.



my above response is why i think the taper rates have been used...and will get worse in the future.....the incentive is about getting peeps to decide that the future pension will not be enough, so the normal future choice will be between living crook on the pension or get more into super from an earlier age. Not talking about the poor here who cannot save, but about those that have a nice nest egg and then splurge and spend up big, with the sole intent of getting onto the pension - the reason they currently do this is because they can, and the downside is still pretty good (if not better). 

And yes, if you worked for 45 years and do not have a home or savings you will struggle......some had no choice, but others have had a pretty good 45 years.


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## sptrawler (16 July 2018)

At last a sensible move by a Bank, the dumbest thing a Government ever did, was let SMSF borrow to buy residential property. 
It was destined to end in tears, and it will, all in the name of propping up a housing boom.

https://www.theage.com.au/business/...nding-to-diy-super-funds-20180716-p4zrsu.html


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## sptrawler (16 July 2018)

It will be interesting to see, the statistics on voluntary super contributions, since the recent announcements.
With the new caps and silly Billy's brain fart, add to that the Royal Commission and one would think the contributions would dry up.
Time will tell.


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## sptrawler (4 September 2018)

Well the uproar over Banks and super funds having a conflict of interest, duh why wouldn't they put their interests in front of the clients, it is like saying Harvey Norman shouldn't charge what they can get from the customer. 
http://www.abc.net.au/news/2018-09-04/banking-royal-commission-embarassing-apra/10200028


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## willy1111 (4 September 2018)

sptrawler said:


> Well the uproar over Banks and super funds having a conflict of interest, duh why wouldn't they put their interests in front of the clients, it is like saying Harvey Norman shouldn't charge what they can get from the customer.
> http://www.abc.net.au/news/2018-09-04/banking-royal-commission-embarassing-apra/10200028




Conflict of interest, it's everywhere:

pay people an hourly rate - what incentive do they have to actually work efficiently
pay people a commission - oh they will just tell you whatever you want to hear so they get the sale

The 100 page PDS created by banks and super funds, you think they want to create them - they are created to protect their interests from all the laws created by government to protect the people but in the end all it does is confuse most of the people, lol . . .viscous circle.

Whether we like it or not, we all act out of self interest - so you always gotta be asking yourself what's the other guy getting out of the transaction if I proceed.


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## sptrawler (5 September 2018)

PZ99 said:


> The age pension is looking worse and worse. Because the Liberal Party screwed it last year.
> 
> Just ask those 200,000 recipients that had their entitlements reduced, and the 100,000 recipients that lost their entitlements altogether.
> 
> ...




Well the 70 retirement age has been scrapped for now, well by Morrison, not to say Labor won't introduce it. But it has gone for now.
http://www.abc.net.au/news/2018-09-...aps-plans-to-raise-pension-age-to-70/10202678

The new pension rates, for a married couple, from March 2018 are up to $35,568.
https://www.superguide.com.au/accessing-superannuation/age-pension-rates

 The assett limits have been raised, so a married couple who own their home receive full pension if assetts are below $387,500.

https://www.humanservices.gov.au/individuals/enablers/assets/30621

You think the pension is looking worse and worse. 

I think putting money into super is looking worse and worse.


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## PZ99 (5 September 2018)

That's good news and it means the Liberal party are finally waking up.

They could do one better than Labor and roll it back to 65 if they want.

Reverse the penalty rate thing and I'll vote ScoMo Liberal no wukkerz


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## sptrawler (5 September 2018)

PZ99 said:


> That's good news and it means the Liberal party are finally waking up.




Apparently not, the AGE think lifting the pension age to 70 was a great idea, especially if it was the Libs who did it. lol

https://www.theage.com.au/politics/...o-for-australia-s-future-20180905-p501ua.html

It would be funny, if it wasn't so serious, it comes under the heading of social engineering.
ScoMo has wrong footed them, they want all the bad $hit to go down to Libs, while the soft nasty lower/middle class Labor $hit slides through and smells of roses.LOL


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## PZ99 (6 September 2018)

I thought it was rather naive when Joe Hockey announced this policy and then sat outside parliament house choking on a cigar with one of his mates (Mathias Cormann I think it was).

What these limp-wristed pen-pushers don't get... is when it comes to physical work your body has a use-by date regardless of how long you live after that. Additionally, there's only a finite number of jobs available. I don't want some 68 year old blue collar worker struggling with a job that could've been taken by someone younger that might otherwise have been unemployed. 

Michael McCormack summed it up perfectly. "I think if you are a tradie, or a brickie or a shearer in rural and regional Australia you don't want some suit in Canberra telling you you are going to have to work until you're 70" 

If supporting the pension system means we have to pay higher taxes then so be it. IMO.


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## HelloU (6 September 2018)

I do not understand how come access to a tax free super pension at 60 years of age does not get included into any discussions on 'retirement' and government pension access.

The super guarantee payments out of wages has been going for a while now..........why is there no discussion of how they are expected to dovetail into the finances of retirees? What is the point of the super payments if they are not meant to reduce the reliance on the government pension? Or are they just meant to get you from age 60 to age 67? (so we can all retire at 60?)


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## sptrawler (6 September 2018)

HelloU said:


> I do not understand how come access to a tax free super pension at 60 years of age does not get included into any discussions on 'retirement' and government pension access.
> 
> The super guarantee payments out of wages has been going for a while now..........why is there no discussion of how they are expected to dovetail into the finances of retirees? What is the point of the super payments if they are not meant to reduce the reliance on the government pension? Or are they just meant to get you from age 60 to age 67? (so we can all retire at 60?)



It already is dovetailed in, if you have over a certain amount, you start losing pension, once over a higher amount the pension cuts out all together. Read up on it on the ATO website.
In reality you could retire age 60 and spend your money, then get the age pension, but most are reluctant to do so.
People who have saved tend to keep working as long as possible, those who haven't worked or saved, just continue on as normal usually welfare.


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## HelloU (6 September 2018)

(hope we are not talking at cross purposes)
I am familiar with the current systems and thinking but it is the future 'funding' of our retirements that I think is not being discussed and dovetailed into our thinking.

The statement "you don't want some suit in Canberra telling you you are going to have to work until you're 70" from the Deputy Prime Minister is concerning a law change that was to take place in 2035 (it did not hit 70 until 2035).

In 2035, if you were 60 years of age, you have 33 years of SGC to get you to the govt pension age of 70. In future years that same person would have approx 40 years of SGC when they hit the age of 60.

I always thought that SGC existed to offer the possibility of retiring at 60, and then spending that money until you died, or it was exhausted and the govt pension took over at that point. That was why I thought the government pension age was being raised in 2035 to 70 years of age.

(SGC started in 1992 )


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## HelloU (6 September 2018)

what else, by keeping the 70 pension age the govt would have also collected more tax money that currently does not get collected due to sapto, and that would have helped pay for the pensions.


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## PZ99 (6 September 2018)

They could just as easily collect more tax money if they blew the pension age out to 75 or 80.
Not quite sure what the point is?

Some low income workers might need the super lump sum to pay off the mortgage - meaning it's another 3 years they have to stay at work if the pension age is 70. Or alternatively, they have to survive on the dole for 3 years if they're unfit for work.

At the end of the day it doesn't matter how much more money the Govt gets - they'll still blow it


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## HelloU (6 September 2018)

HelloU said:


> what else, by keeping the 70 pension age the govt would have also collected more tax money that currently does not get collected due to sapto, and that would have helped pay for the pensions.




this post is NOT about people going on/or on, the govt pension...this is about the people that will NOT be on the govt pension ..... that is what sapto is about.

My point was about the reason we have SGC ... if the perception is that the same % of retirees will go onto the pension (at the earliest age) in 2034 as the % that go onto the pension in 2108 (at the earliest age) then what is the point of SGC?. I would have thought that the reason for SGC was to reduce the % of the population reliant on the government pension, and that is why we contribute to it for 40 years of our working life.


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## PZ99 (6 September 2018)

The SGC was originally designed to supplement your retirement income as an annuity and when you got to the pension age you would effectively have your annuity + a partial pension and if your super ran out you would go on the full pension. Your overall burden on the budget is less.

I don't see any connection with the SGC and blowing the pension age to 70. Blowing the pension age to 70 is a scabby effort to force people with no money to stay at work for an extra 3 years - whether they physically can or not.


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## HelloU (6 September 2018)

I sorta hoped that SGC would replace the govt pension for most workers ....... i mean in 2035 that 43years worth of contributions (with 43 years of tax advantages) would hopefully be worth something and mean that the govt pension is not required ........ cos that may mean joe average worker no longer has to go to work for the first 2 days of their 5 day week just to pay social security for those that do not work.


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## PZ99 (6 September 2018)

Between now and 2035 the rules will have changed so many times that it's pointless even planning that far. The preservation age will probably go to whatever the pension age is anyway. Another reason to keep it at 65 or less


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## HelloU (6 September 2018)

Strangely I spend a lot of time planning and arranging my finances specifically so that i can pay my own way in the future and not be a burden on some other taxpayer .... I would rather they pay less tax and spend their money on their own families, rather than on me. 

If the rules change, I change ....... that is called money managing.

I often wonder If I am in the minority (even on a share forum).


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## PZ99 (6 September 2018)

I'm the same. But I'm not doing it for future taxpayers. I'm doing it because I don't feel comfortable with relying on the state for income. I'd rather fight my own battles.

Future taxpayers will never pay less tax. There's always a social program or three that have to be created and forcibly sponsored


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## sptrawler (6 September 2018)

PZ99 and HelloU, you are both right IMO, if you save and don't spend, you will have more money later.
Whether that is enough to be self funded, depends on a lot of things, most are out of your control.
When I was in my mid 20's with four kids and a non working wife, I thought $600,000 would be enough to have and retire comfortably, that was in the late 1970's early 1980's.
To achieve that was quite difficult back then, and fortunately I was always interested in finance, so I kept re adjusting the goal.
Now in 2018, I would say you need about 2 -2.5 million, to be comfortable and not have to ever rely on the State for income.This is working on a retirement of 60 - 65 years old.
So in 40 years the funds need IMO, have gone from $600k to say $2.4m that is about 4 times, which is about right if you use the general rule that everything doubles about every 10 years.
So our money will be devalued, and we will have share market crashes, and we will have periods of low growth etc.
But generally, if you are in your 40's you will probably need about 3.5-4m to retire comfortably at 60-65 and never require State assistance.
The rules change all the time, and the system isn't designed for you to pass on your wealth, within the next 10 -15 years my guess is you will have to use your super before you get any pension.
The system as it is heavily rewards, those who don't save, at the expense of those that do.
That is unaffordable and it will be discouraged in the near future, too many welfare people, and fewer jobs will lead to a tightening on welfare. IMO
The cashless society will bring about major changes.


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## Smurf1976 (7 September 2018)

HelloU said:


> I often wonder If I am in the minority (even on a share forum).



I’m pretty much on the same page.

I’m not opposed to welfare for those who, for whatever reason, find themselves in difficult circumstances.

It certainly isn’t my intention to rely on it in retirement however.


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## HelloU (7 September 2018)

Big fan of taxing the behaviour you want to discourage, and subsidizing the behaviour you wish to encourage.

*For Middle Australia*
For the last 5 years ( and looking forwards ) the idea of being self supporting in retirement is being punished/capped -by both sides of government  ............ and this is at the same time as we are living longer.

*For Middle Australia*
Simplistically, the message I get in 2018 is spend/enjoy your super at 60 (~20 years SGC) while you are fit, go onto the pension with some assets at 65/67 and the government will clean your house and mow your lawn whilst you go to the free doctor every day for all your free tests and scans - in taxpayer funded/subsidised transport if you like............... (tongue in cheek and not meant to offend, but it is what I see atm for an increasing demographic that is taxpayer funded - needing tax money paid in 2018, not tax money paid in 1977).

*For Middle Australia*
I am hoping that this message will change by 2035 to reduce the overall burden on taxpayers.


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## luutzu (7 September 2018)

HelloU said:


> Big fan of taxing the behaviour you want to discourage, and subsidizing the behaviour you wish to encourage.
> 
> *For Middle Australia*
> For the last 5 years ( and looking forwards ) the idea of being self supporting in retirement is being punished/capped -by both sides of government  ............ and this is at the same time as we are living longer.
> ...




Subsidise behaviour you want to encourage, tax those you wish to discourage is not the same as rewards and punishment.

You're not using the carrot and stick right if all you do is give money to those that already have it; take more money from those with little of it... then call it "incentive" towards "good" behaviour.

That's just bs talk.

I mean, you don't give kids more lollies because lollies so that they can work towards getting treats and lollies. Do you?

Say the state want to encourage people to do well; be educated and competent. It's idiotic to then give more fund to private schools so they can have a polo ring, a second swimming pool, upgrade their two year old computer lab... while cutting it from public schools where kids get to learn in demountables.

See kids, we want you to be rich and well educated... so if you or your parents are rich and you go to a rich school, you'll get more goodies. Else, well... you really should work on getting the right parent and get rich, then have more riches. Blame that on one or both of your parents for their life/partner choices.


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## HelloU (7 September 2018)

HelloU said:


> Big fan of taxing the behaviour you want to discourage, and subsidizing the behaviour you wish to encourage.
> 
> *For Middle Australia*
> For the last 5 years ( and looking forwards ) the idea of being self supporting in retirement is being punished/capped -by both sides of government  ............ and this is at the same time as we are living longer.
> ...



If *Middle Australia all *end up on the government pension in 2035 then the poor old taxpayer will have to work the first 3 days of the week for tax money, instead of the first 2 days per week they have to work now to pay for social welfare. 

Imagine having to explain to a worker that their first 3 work days of the 5 day week just goes on tax for welfare........


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## PZ99 (7 September 2018)

"Social welfare" overall maybe 2 out of 5 days per week of expenditure.

The age pension is less than a third of that. I don't believe it'll ever be akin to 3 days a week.

It's not even been projected to increase as a % of GDP. NDIS might be different.


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## HelloU (7 September 2018)

https://www.smh.com.au/politics/fed...-too-much-from-taxpayers-20160301-gn7e6g.html

If everyone is on the pension/welfare then there is nobody left to be the taxpayers ..........


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## PZ99 (7 September 2018)

Sorry, I stopped reading when I got to "means testing the family home"

That article is more political than economic. If the age pension blows out as that predicts, the Govt will either increase the super preservation age or limit your drawdown to an annuity instead of a lump sum.

Or they might tax large withdrawals.

Threatening the family home is political oblivion. IMO


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## HelloU (7 September 2018)

Logically correct to me ....... if someone is sitting at home all day then they may as well have a nice view to look at.   Seems pointless for a person to have a nice view if they have to go out to work each day and cannot enjoy it.


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## luutzu (7 September 2018)

HelloU said:


> If *Middle Australia all *end up on the government pension in 2035 then the poor old taxpayer will have to work the first 3 days of the week for tax money, instead of the first 2 days per week they have to work now to pay for social welfare.
> 
> Imagine having to explain to a worker that their first 3 work days of the 5 day week just goes on tax for welfare........




Where did you get those stats from? 

The average tax payer are now paying 2 days of their 5 day work week on (other people's) social welfare?

So 40% of tax dollars are being spent on welfare? Welfare as in CentreLink, not corporate and the likes?

I'm definitely sure the figures aren't correct.


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## luutzu (7 September 2018)

PZ99 said:


> Sorry, I stopped reading when I got to "means testing the family home"
> 
> That article is more political than economic. If the age pension blows out as that predicts, the Govt will either increase the super preservation age or limit your drawdown to an annuity instead of a lump sum.
> 
> ...




That's how it's done. 

Make up some numbers, widen the definition of "pension and welfare" to include everything the gov't "give" back. Then conclude that it's unfair and unaffordable. 

The conclusion, if we just assume the definition they're using is accurate, pain no more than the mere fact that taxpayers' money are being spent on social welfare programmes. You know, looking after our fellow citizens, the old, the sick, the injured veterans, their widows and orphans.

A "large" percentage of spending going towards certain spent category does not make it "big" and "unaffordable". It's fraction - taxpayers are still paying the same tax are they not? Should those tax dollars be spent on social welfare, or should it be spent on corporate tax cuts; military; surveillance; subsidies?

Fairfax, liberal media my azz.


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## HelloU (8 September 2018)

Totally agree, 
too much tax taken and too much spent on welfare for peeps with plenty of assets.

Transition to a cashless society will no doubt contribute more to the tax take as the 'cash economy' (black economy) reduces. Bring it on I say.


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## Wysiwyg (8 September 2018)

HelloU said:


> *For Middle Australia*
> For the last 5 years ( and looking forwards ) the idea of being self supporting in retirement is being punished/capped -by both sides of government  ............ and this is at the same time as we are living longer.



Lost income tax revenue from older workers (mostly in their highest earning years) that used the tax advantaged retirement saving path. The government needs funds now too, hence the cap.

Thoughts?


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## HelloU (8 September 2018)

Wysiwyg said:


> Lost income tax revenue from older workers (mostly in their highest earning years) that used the tax advantaged retirement saving path. The government needs funds now too, hence the cap.
> 
> Thoughts?



totally get that point and see it as a thing .... and that is another issue that does not get explained - the underlying costs. 

Lots of things I do not really get about super/tax/welfare:
Why do we have totally different welfare/taxation rules when a person reaches a particular age. 
If a person is not able to work at 35 years of age I do not totally understand why should they get more/less welfare than someone *under the same circumstances* at 65 years of age who is not able to work? (do they eat more/less food, pay more/less rent, use more/less electricity etc), 
If I sit at home all day and my sole income is $30K from BHP dividends, how come I am taxed differently at age 30 than at age 70 on the dividend,
Why is milk and education is not subject to gst, 
How come a shelf-stacker who works for a charity can get and extra $17K paid to them tax free (on top of the $19K tax free) when a supermarket shelf-stacker cannot do the same thing. 
But I digress ....


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## willy1111 (8 September 2018)

Maybe a better/fairer system would be that earnings on super balances once preservation/access age is reached reverts to individual marginal tax rates.

Earnings during accumulation phase left to be taxed as they are.

Withdrawal of capital untaxed as it is your money.


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## sptrawler (8 September 2018)

PZ99 said:


> Sorry, I stopped reading when I got to "means testing the family home"
> 
> That article is more political than economic. If the age pension blows out as that predicts, the Govt will either increase the super preservation age or limit your drawdown to an annuity instead of a lump sum.
> 
> ...




I think you are pretty well on the ball, they can increase the preservation age in line with pension age, they can up the tax on the accumulation account, they can introduce a tax on the pension drawdown.
They can limit the drawdown on your taxable, but difficult to do so on your tax free.
The family home will eventually be hit, when the money runs out from retirees with cash, untill then it isn't a fight worth fighting.

There will be a lot of self funded pensioners gearing up for silly Billy IMO.
Some grandparents will be taking kids, on the trip of their lives, they would rather the family enjoy it than the Government take it to give it to Muppets.IMO


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## sptrawler (8 September 2018)

I suppose an easy answer to all your questions is.
Why save and not have holiday's, or flip new cars to save $800k and get no pension and earn about $35k of income.
When you could have a great time and spend and all your money, then have $300k in super and get $35k in pension.
It really doesn't make sense.
I'm probably missing something, maybe the great feeling of doing without for the greater good. Then being told your just a selfish fat cat. What a hoot, what a flicked up system.
Is there any wonder we are going down the tube. Lol


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## HelloU (9 September 2018)

willy1111 said:


> Maybe a better/fairer system would be that earnings on super balances once preservation/access age is reached reverts to individual marginal tax rates.
> 
> Earnings during accumulation phase left to be taxed as they are.
> 
> Withdrawal of capital untaxed as it is your money.



when you have forced someone to lock away their money for 40 odd years then it becomes tricky as to how to 'fairly' treat it ....... and part of me wonders if it is all worth it for the country. I have no answers here ...... this is all way above my pay grade.



sptrawler said:


> I suppose an easy answer to all your questions is.
> Why save and not have holiday's, or flip new cars to save $800k and get no pension and earn about $35k of income.
> When you could have a great time and spend and all your money, then have $300k in super and get $35k in pension.
> It really doesn't make sense.
> ...



(not meaning to devalue anybodys life efforts) If I was approaching retirement age right now I would be seriously considering that situation if it was a near thing. That is the bit I do not like ... that the option presented of going on the taxpayers tit should be 'more' attractive than paying for my own retirement ..... that was an earlier point I made.
However, I also struggle with the concept that if I am paying for my own retirement then at 65 I can earn up to about about $120K pa (as a single and way more for couple - super and sapto) and basically pay no tax .... but if I was 35 years of age on the same earnings I would be paying up to 37 cents in every dollar (and I would prolly have kids to feed and a mortgage to pay at the same time). I find the whole thing to be weird, convoluted and disjointed.

BTW, I already know the 'Shorten' position for my projected earnings this fiscal (as a comparison/get ready tool).


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## willy1111 (9 September 2018)

sptrawler said:


> So in 40 years the funds need IMO, have gone from $600k to say $2.4m that is about 4 times, which is about right if you use the general rule that everything doubles about every 10 years




Do you mean doubles every every 20 yrs. $600k doubles to $1.2M and then $1.2M doubles to $2.4M.

Using the rule of 72 for how long things take to double...72 divided by 20 yrs would mean about 3.6%. So that means inflation/cost of living running at about 3.6% for last 40 yrs.

The RBA try to keep inflation between 2-3% so that would mean the cost of living would take between 24 and 36 yrs to double.


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## willy1111 (9 September 2018)

sptrawler said:


> But generally, if you are in your 40's you will probably need about 3.5-4m to retire comfortably at 60-65 and never require State assistance.



Maybe if you adopt the live off dividends and not spend capital approach.

But there are many on here who have been able to generate total returns in excess of 20% per year and for those that can do that...they wouldn't require any where near that amount of capital to generate a good living.


----------



## HelloU (9 September 2018)

willy1111 said:


> Maybe if you adopt the live off dividends and not spend capital approach ......



Hey, numbers confuse me so I will not comment on that .... I do like that you have some skin in the complexity of this.
Shorten is attacking that thought with the shake-up. Quite possible atm to be around cap level and sapto and not burn capital on the yearly churn ....... some spend to maintain cards and broader eligibility such is current thinking ...... it is/was a very attractive target to hit ........ maybe that is sucking eggs to you though. 
(not sure if that means they are funding their own retirement or not - if no burn and no tax - semantics I spose - this is also a previous point on who is actually funding peoples retirement)


----------



## Smurf1976 (9 September 2018)

sptrawler said:


> It really doesn't make sense.



There's some rational logic in investing outside super in order to be able to retire early should you choose or be forced to by whatever circumstances.

The system certainly isn't encouraging people to fund their own retirement as such though, that's for sure.


----------



## Toyota Lexcen (9 September 2018)

living off pension good for couples who own home, completed renovations and had holidays through out life

and with Labour announcing franking credit policy 

bit tougher on single pension though as a friend has discovered. (74yr old, asset rich, income poor)

does income from 300k in assets reduce pension?


----------



## HelloU (9 September 2018)

right now there are 2 tests to do with money:
1. Income (actual income)
2. Deeming on assets (deemed to produce income even if they do not)

You must pass both to get the goods. As to what they are suggest u start here 
https://www.humanservices.gov.au/individuals/enablers/income-test-pensions/30406


----------



## HelloU (9 September 2018)

Smurf1976 said:


> There's some rational logic in investing outside super in order to be able to retire early should you choose or be forced to by whatever circumstances.
> 
> The system certainly isn't encouraging people to fund their own retirement as such though, that's for sure.



first bit yeah
second bit ..... (let me say that high income peeps will normally max out concessional super every year) ...... I must say that it is currently financially beneficial for nearly every worker to max their concessional contributions from a taxation view (and with recent law changes that $25K is available now to everyone). But if franking rebates are removed (Labor proposal) then there will be a gross income figure below which additional concessional contributions will be a waste of time if some of the gross income has franking attached. They will pay hardly any more tax if they just pocket the money and not put it into concessional super to be locked away .... and these are the very borderline tax-payers, that have lowish incomes and some investment income (maybe up to $60K gross DYOR), for whom additional money in super may have kept them OFF the govt pension for longer. 

So back to the problem of not encouraging (lower) middle australia to pay for their own retirement..... whilst the rich will always make full use of the tax discounts attached to concessional super.


----------



## Toyota Lexcen (9 September 2018)

Thanks, that’s a clear layout from government

So you want enough to give you 176/fortnight


----------



## Smurf1976 (9 September 2018)

HelloU said:


> I must say that it is currently financially beneficial for nearly every worker to max their concessional contributions from a taxation view



My concern is that if you factor in losing the pension plus the risk that government changes the rules and has you working until you drop then it doesn't look too good and encourages a "spend today and don't worry about retirement" approach.

That's the exact opposite of what I've been hearing from government for decades but it seems to be where it has ended up.


----------



## sptrawler (10 September 2018)

Smurf1976 said:


> My concern is that if you factor in losing the pension plus the risk that government changes the rules and has you working until you drop then it doesn't look too good and encourages a "spend today and don't worry about retirement" approach.
> 
> That's the exact opposite of what I've been hearing from government for decades but it seems to be where it has ended up.




It is certainly a strange situation, from what I've read after tax contributions have dropped markedly, and I would say they will be nearly nill this year.
Why would someone sacrifice their spending power and lifestyle now, when they know it won't enhance their retirement at all, unless they get to the $1.6m limit.
If they are only able to get to the $800k point, and lose all their pension and entitlements, why wouldn't they just aim for the $300k and $35,500 pension?
That would mean, they don't have to forego any of life's luxuries now and still have a comfortable retirement by supplementing the pension.
These two Governments have certainly stripped the excitement out of super, rather than a pot of gold at the end of the rainbow, it has become a lead goblet. The way they both move the goalposts, makes everyone feel the politicians are the only ones who know what the end game is, there is no trust anymore. IMO


----------



## PZ99 (11 September 2018)

_Part Quote..._

The government-funded pension remains important for older Aussies, with about 66 per cent receiving at least a partial age pension in June 2017.

That proportion is down from 75 per cent in 1997, when 1.7 million older Australians were receiving pensions.

Superannuation has become more vital, with the number of retired Australians aged 45 or older using superannuation as their main source of income up from 12 per cent in 1997 to 25 per cent in 2016/17.

Like the general population, the number of seniors who own their homes without a mortgage has dropped, from 79 per cent in 2003/04 to 76 per cent in 2015/16.

https://www.news.com.au/national/br...g/news-story/02be61411ed9188fd593f121ef9b99ed


----------



## sptrawler (24 September 2018)

The Government funded pension, will have to absorb much more feed in the next 5 years IMO, there is no sense in saving anything other than the super guarantee rate, any extra should be put into the PPR.
To save $1.6m for a blue collar worker, is a lifetime of sacrifice, to get a return of 3-5% is just ludicrous return for the effort. Just my opinion, but if i had my time over, I would not be investing in shares for retirement income.
I would upgrading the house enjoying the ambience, and the free capital gains, then working on pension upgrade facility. lol
Unfortunately I've missed the boat, but others should really take heed. IMO


----------



## PZ99 (25 September 2018)

Whatever it is you're planning - it has to be flexible to cater for rule changes.

Sadly, one fears that free capital gains on the family home has a use-by date.


----------



## willy1111 (25 September 2018)

sptrawler said:


> The Government funded pension, will have to absorb much more feed in the next 5 years IMO, there is no sense in saving anything other than the super guarantee rate, any extra should be put into the PPR.
> To save $1.6m for a blue collar worker, is a lifetime of sacrifice, to get a return of 3-5% is just ludicrous return for the effort. Just my opinion, but if i had my time over, I would not be investing in shares for retirement income.
> I would upgrading the house enjoying the ambience, and the free capital gains, then working on pension upgrade facility. lol
> Unfortunately I've missed the boat, but others should really take heed. IMO




Haven't you read the future of property prices thread or watch the 60 minutes episode the week before last.

Property prices are doomed too


----------



## willy1111 (25 September 2018)

sptrawler said:


> I would upgrading the house enjoying the ambience, and the free capital gains, then working on pension upgrade facility. lol
> Unfortunately I've missed the boat, but others should really take heed. IMO




You still can as far as I understand. Sell your current home and invest your capital in a more expensive PPOR so you can qualify for a pension


----------



## willy1111 (25 September 2018)

sptrawler said:


> .
> To save $1.6m for a blue collar worker, is a lifetime of sacrifice, to get a return of 3-5% is just ludicrous return for the effort. Just my opinion, but if i had my time over, I would not be investing in shares for retirement income.




3-5% return....comeon surely you can do better...@McLovin posted a return north of 30% last year, @Trendnomics would have been north of 30% too, @craft compounded at over 30% p.a for over 10 years, @minwa well north of 30% p.a, I'm sure there are many others as well on here with very decent returns.

30% on 1.6m tax free in retirement is a nice little earn, much bigger than a pension


----------



## sptrawler (25 September 2018)

willy1111 said:


> 30% on 1.6m tax free in retirement is a nice little earn, much bigger than a pension




It's getting the $1.6m together, in the first place, that is difficult.


----------



## willy1111 (25 September 2018)

sptrawler said:


> It's getting the $1.6m together, in the first place, that is difficult.



$40k (no extra contributions) compounded at 20%p.a over 20 yrs will get there. Most 30 year old would have well above $40k especially by the time they reach 40.

Its the rate of return that is the issue for most, but with a bit of interest, passion, dedication one can learn how to outperform the market.


----------



## sptrawler (25 September 2018)

willy1111 said:


> $40k (no extra contributions) compounded at 20%p.a over 20 yrs will get there. Most 30 year old would have well above $40k especially by the time they reach 40.
> 
> Its the rate of return that is the issue for most, but with a bit of interest, passion, dedication one can learn how to outperform the market.



Tell me in five years time, how you are going with that plan.


----------



## Junior (26 September 2018)

willy1111 said:


> $40k (no extra contributions) compounded at 20%p.a over 20 yrs will get there. Most 30 year old would have well above $40k especially by the time they reach 40.
> 
> Its the rate of return that is the issue for most, but with a bit of interest, passion, dedication one can learn how to outperform the market.




Very savvy investors might have been able to achieve these numbers over the past 9.5 years (i.e. capturing the bounce following GFC lows in early 2009), but I don't think you should expect 20% pa over the long term, taking into account complete market cycles.


----------



## Belli (26 September 2018)

And it can be even more difficult than that Junior.

I know of three cases where employers of very small companies had not been making SG payments for a number of quarters despite promising to do so.  Finally the employees made a complaint to the ATO which commenced proceedings with the employers to recover the amounts owed via installments.  Some moneys were paid.

Subsequently the companies when into liquidation.  ATO wrote to those employees advising as a result their cases had been closed and no further action would be taken by the ATO, i.e. take a ticket and stand in line.  To rub salt into the wound in one case, as the amount recovered was not the full amount which should have been paid for a quarter, it's stuck in the ATO and not paid to the person's super fund.

Really great (?) aspect, is for some their long-service entitlement and annual leave (on which SG was payable) disappeared down the tubes as well and now they have to attempt to claw back some dosh and jump through hoops through the Fair Entitlements Guarantee - which doesn't cover or deal with the SG aspect.

Bizzare.  One arm of Gov deals with the SG but not when liquidation occurs and another deals with LSL and leave but not SG aspects.

 To say these people are unhappy is an understatement.  Not even $40 for them!


----------



## HelloU (27 September 2018)

which makes me wonder why we do all those things on an 'extended future' basis (not sure we need all those things anymore but whatevs).
in the age of internet way simpler to me to have all money paid during a, say, fortnightly/monthly pay cycle. Once the fortnight has concluded then all liabilities have concluded - cos the money has been paid (so super paid, wages paid, lsl and whatevs paid). Next fortnight same process again.
Sure, that will need some tweaking but avoids the whole company going bust in 30 years time and lsl 'lost', or 3 months of SGC not being paid then COY bust.
the maximum loss is then limited to 1 week/month/fortnight or whatever


----------



## MarketMatters (27 September 2018)

PZ99 said:


> Sorry, I stopped reading when I got to "means testing the family home"
> 
> That article is more political than economic. If the age pension blows out as that predicts, the Govt will either increase the super preservation age or limit your drawdown to an annuity instead of a lump sum.
> 
> ...




All these points are in the government's think tank. A classic which was raised only a few years ago addressed people who are sitting on multi million dollar homes that recieve the Age Pension. They will some day be subject to having a portion of their house assessed as an asset which will affect their gov pension. Simple answer is to sell your house though this is a major social issue uprooting people from their homes. 

Taxing withdrawals has been done in the past and wouldn't be surprised a limit on withdrawals will be introduced (pa) in the future to force people to manage their funds better or use annuities with no commutations.


----------



## sptrawler (27 September 2018)

MarketMatters said:


> Taxing withdrawals has been done in the past and wouldn't be surprised a limit on withdrawals will be introduced (pa) in the future to force people to manage their funds better or use annuities with no commutations.



I think Morrison alluded to this eventuallity, when he suggested allowing people access to their tax free component, for a housing deposit.
The Government has dropped the non concessional contribution limit, and labor imply they will drop it more, this would indicate a move toward a super system that is composed mainly of taxable(i.e controllable) contributions.


----------



## MarketMatters (29 September 2018)

sptrawler said:


> I think Morrison alluded to this eventuallity, when he suggested allowing people access to their tax free component, for a housing deposit.
> The Government has dropped the non concessional contribution limit, and labor imply they will drop it more, this would indicate a move toward a super system that is composed mainly of taxable(i.e controllable) contributions.




Gone are the days of the $1m non concessional contribution


----------



## willy1111 (1 October 2018)

Junior said:


> Very savvy investors might have been able to achieve these numbers over the past 9.5 years (i.e. capturing the bounce following GFC lows in early 2009), but I don't think you should expect 20% pa over the long term, taking into account complete market cycles.




Yes, expectation is said to be the mother of disappointment.  Past performance is not an indication of future results - no one knows what the future holds.

Out of interest, do you know what is the 'acceptable' rate that is modeled for growth in equities over the long term for financial plans, and why is that rate used?


----------



## sptrawler (1 October 2018)

At last, the reporters are starting to announce the likely future of, retirement and what to expect.
The days of saying "who cares, i'll just go on the pension", are numbered , very numbered.
Then the real nasty fight starts, those who are entitled and those who aren't. 
It hasn't been addressed yet, because most are entitled, those who aren't are low hanging fruit easily picked.

https://thewest.com.au/business/you...eed-more-than-1m-to-retire-well-ng-b88963433z


----------



## MarketMatters (1 October 2018)

willy1111 said:


> Yes, expectation is said to be the mother of disappointment.  Past performance is not an indication of future results - no one knows what the future holds.
> 
> Out of interest, do you know what is the 'acceptable' rate that is modeled for growth in equities over the long term for financial plans, and why is that rate used?




How long is a piece of string one might say. Many consultants eg. Rice Warner, Standard&Poors etc. are consulted for their analysis - inc. long term benchmarks, which Dealer groups will subscribe to and their investment committees employ in setting the framework for advisers. Overall their is no single acceptable rate but rather who you believe most correctly reflects your views (in this case it is who the dealer groups engage).

Here is one worthy of a look from an international perspective https://www.blackrock.com/instituti...nsights/blackrock-capital-markets-assumptions

One simple approach I have come across over the years is to employ the CPI+ methodology although determining the allocations to growth/defensive for each is variable.

High Growth - CPI +4%
Growth - CPI + 3.75%
Balanced Growth - CPI + 2.75%
Conservative Growth - CPI + 1%

If employing the above benchmarks for a pension fund you would, at minimum, add 0.5% to allow for drawdown compensation.


----------



## sptrawler (2 October 2018)

MarketMatters said:


> One simple approach I have come across over the years is to employ the CPI+ methodology although determining the allocations to growth/defensive for each is variable.
> 
> High Growth - CPI +4%
> Growth - CPI + 3.75%
> ...



I like that post MM, it can be applied to just about any super account, at any stage of its life.
Simple, achievable and sensible.


----------



## sptrawler (9 October 2018)

From a post in another thread, Australian super is moving its members out of property, this would indicate that Labor are going to implement the tax rules on property investment.
It could also indicate, maybe industry funds are becoming an extension of the labor Government, interesting times.
Actually I wouldn't be surprised, if Labor get two terms of office, to see super as a section of Government.


----------



## SirRumpole (22 October 2018)

Is the Morrison government good for retirees ?

Not according to some.

https://www.afr.com/personal-financ...ng-out-of-global-top-3-mercer-20181021-h16x5g


----------



## basilio (22 October 2018)

sptrawler said:


> From a post in another thread, Australian super is moving its members out of property, this would indicate that Labor are going to implement the tax rules on property investment.
> It could also indicate, maybe industry funds are becoming an extension of the labor Government, interesting times.
> Actually I wouldn't be surprised, if Labor get two terms of office, to see super as a section of Government.




I wonder how bad this would be ? 

Let's imagine a super scheme with a guaranteed return of 3% real.  Minimal fees.  Funds used, for example, to re engineer our national power grid to a publically owned renewable energy network. 

It doesn't have to replace private super companies but offering a government guaranteed ROI for quality national infrastructure needs seems like a sensible and attractive idea.


----------



## sptrawler (22 October 2018)

basilio said:


> I wonder how bad this would be ?
> 
> Let's imagine a super scheme with a guaranteed return of 3% real.  Minimal fees.  Funds used, for example, to re engineer our national power grid to a publically owned renewable energy network.
> 
> It doesn't have to replace private super companies but offering a government guaranteed ROI for quality national infrastructure needs seems like a sensible and attractive idea.




It wouldn't be bad at all, it has been done before and nobody cared, so why not do it again?
As someone here says wash, rinse, repeat.


----------



## Junior (23 October 2018)

sptrawler said:


> From a post in another thread, Australian super is moving its members out of property, *this would indicate that Labor are going to implement the tax rules on property investment.*
> It could also indicate, maybe industry funds are becoming an extension of the labor Government, interesting times.
> Actually I wouldn't be surprised, if Labor get two terms of office, to see super as a section of Government.




They are simply making sure they don't have members with the majority of the super invested in illiquid assets.  I don't think it has anything to do with tax changes.


----------



## MarketMatters (24 October 2018)

SirRumpole said:


> Is the Morrison government good for retirees ?
> 
> Not according to some.
> 
> https://www.afr.com/personal-financ...ng-out-of-global-top-3-mercer-20181021-h16x5g




Hmmm. I can think of worse rankings Australia has to worry about compared to falling from the top 3 retirement systems globally.


----------



## sptrawler (25 October 2018)

MarketMatters said:


> Hmmm. I can think of worse rankings Australia has to worry about compared to falling from the top 3 retirement systems globally.




That is a very good representation MM, it really does show how expensive it is to do business here.


----------



## sptrawler (1 November 2018)

Well silly Billy is sticking with the ludicrous franking credit stripping of SMSF's.
I just wish someone would do the sums on how much it will save, you would have to be as silly as Billy, to believe it will save $55billion. 

https://www.smh.com.au/politics/fed...r-anger-in-super-inquiry-20181101-p50ddr.html


----------



## sptrawler (7 November 2018)

I was hoping some journalist might do the sums for me, but alas they are too busy with more important stuff.
So it is left to my year 10 maths to have a go.
So apparently there are approx 600,000 SMSF's in Australia, 85% have less than $2m in the fund and 50% of fund members are over 60. Also you can't have more than $1.6M in pension phase, so the rest is being taxed
SMSF's also have about 30% invested in shares.
So if most funds have two members, that would be about 600,000 people and if their average pension is for arguments sake $ 1m, which it wouldn't be it would be a lot less.
We then find that 30% is invested in shares, so again for arguments sake say $300,000 and they all get a fully franked return, that would be $9,000 each.

I hope Junior, Craft or McLovin can unravel it for me.

But my guess is in reality, it will be a saving of $500- $900M, which will be lost quickly as the principal runs down faster.
Just my thoughts.


----------



## sptrawler (7 November 2018)

sptrawler said:


> I was hoping some journalist might do the sums for me, but alas they are too busy with more important stuff.
> So it is left to my year 10 maths to have a go.
> So apparently there are approx 600,000 SMSF's in Australia, 85% have less than $2m in the fund and 50% of fund members are over 60. Also you can't have more than $1.6M in pension phase, so the rest is being taxed
> SMSF's also have about 30% invested in shares.
> ...




I just re read the post, my math's is crap, if the member has $300,000 in shares and they pay 5%.
That would mean they get a dividend of $15,000 and the franking credit would be 30% of that, so $5,000 tax return.
So how with me making high pension assumptions, 600,000 getting $5k works out to $55Billion is really weird.
I wish someone would ask silly Billy and Bowen, to please explain.


----------



## PZ99 (8 November 2018)

sptrawler said:


> I just re read the post, my math's is crap, if the member has $300,000 in shares and they pay 5%.
> That would mean they get a dividend of $15,000 and the franking credit would be 30% of that, so $5,000 tax return.
> So how with me making high pension assumptions, 600,000 getting $5k works out to $55Billion is really weird.
> I wish someone would ask silly Billy and Bowen, to please explain.



Figures like that usually come from treasury and are stated over a long time frame. It's probably $55b over 10 years or something. Or course, if people adjust their portfolio to avoid being overtaxed then the $55b is fake - which is the most likely outcome.

In the above case, I would go for something with a better return than a 5% grossed up divvy.


----------



## willy1111 (8 November 2018)

sptrawler said:


> I just re read the post, my math's is crap, if the member has $300,000 in shares and they pay 5%.
> That would mean they get a dividend of $15,000 and the franking credit would be 30% of that, so $5,000 tax return.
> So how with me making high pension assumptions, 600,000 getting $5k works out to $55Billion is really weird.
> I wish someone would ask silly Billy and Bowen, to please explain.




As PZ99 says, the $55B is over 10 yrs so about $5b a year.

If a dividend is fully franked it represents 70% net cash payment with 30% franking credit. Thus a $15k fully franked dividend divide by 7 times by 3 is approx $6,428 franking credit.

600,000 x 6,428 = 3.8B × 10 years = $38b

There are also quite a few outside SMSF that will be impacted. They have just built up share portfolio's in their individual names over the years and retire on the dividend payments. So they probably make up the difference


----------



## sptrawler (8 November 2018)

willy1111 said:


> As PZ99 says, the $55B is over 10 yrs so about $5b a year.
> 
> If a dividend is fully franked it represents 70% net cash payment with 30% franking credit. Thus a $15k fully franked dividend divide by 7 times by 3 is approx $6,428 franking credit.
> 
> ...




That looks a lot more like it, but we are working on the assumption everyone has $1m in their retirement account, which I would think is highly unlikely.
But it will be interesting to see the actual figures, when they come out, which I'm sure they will.


----------



## willy1111 (8 November 2018)

sptrawler said:


> That looks a lot more like it, but we are working on the assumption everyone has $1m in their retirement account, which I would think is highly unlikely.
> But it will be interesting to see the actual figures, when they come out, which I'm sure they will.




I'm starting  to think it will not get through the senate anyway.


----------



## Bill M (8 November 2018)

willy1111 said:


> I'm starting  to think it will not get through the senate anyway.



You think so? I'm not so sure about that as the Greens would support it and together with Labor would get it over. This should be made as a key election policy. 10's of thousands of seniors depend on it and it should be out there and talked about, people need to be clear as to how it would affect them. I think the whole idea should be dropped to be honest.


----------



## PZ99 (8 November 2018)

Bill M said:


> You think so? I'm not so sure about that as the Greens would support it and together with Labor would get it over. This should be made as a key election policy. 10's of thousands of seniors depend on it and it should be out there and talked about, people need to be clear as to how it would affect them. I think the whole idea should be dropped to be honest.



The Greens were partially against it during the Batman byelection. If they hold the balance of power in the senate I expect they'll carve it up to something a lot less than than a $55b saving.


----------



## luutzu (15 November 2018)

Paul Keating on Super.

Raising Super to 12%? Introduce an longevity  levy?

With all due respect... come on Paul. That's just shifting more wealth from the poor and working class to the upper class, again. 

I mean, he's assuming that every person, across all profession and trades will live the average Australian life expectancy. No they don't. Most blue collar workers wouldn't make it to 85. So a longevity levy on them... unless it kicks in at way above the average wage, will just mean everyone pays but only those lucky few who eat well, had a relatively easier working life, will get to enjoy the insurance benefits.

Then there's the 12% super. That's just more cash for the investment managers. It will mean less wage for new job seekers. To pretend that an increased in super wouldn't affect employer's wage scale is just dreamin'.


----------



## sptrawler (15 November 2018)

luutzu said:


> Paul Keating on Super.
> 
> Raising Super to 12%? Introduce an longevity  levy?
> 
> ...




The really funny thing is, Keating said when he introduced super, it was to add to the pension to give people an enhanced retirement.
In reality it is becoming more obvious, it is to make people forego wages to pay for their own pension, now he is complaining people might live too long and end up on a Government pension.
I wish he was so worried about his Government pension.


----------



## luutzu (15 November 2018)

sptrawler said:


> The really funny thing is, Keating said when he introduced super, it was to add to the pension to give people an enhanced retirement.
> In reality it is becoming more obvious, it is to make people forego wages to pay for their own pension, now he is complaining people might live too long and end up on a Government pension.
> I wish he was so worried about his Government pension.




Yea, the more I hear from him the more he sounds like a typical polly. He sounds genuine enough... so he's a very good polly. 

Imagine asking labourers to chip in for a longevity levy they'll get to see anything of if they live beyond 85. Geezus man, I know plenty of tradies and labourers and most are struggling physically in their late 50s. Lucky if illness doesn't already stop them from living a full life in their 60s. 

To raise the super rate will mean more cash to managed by the banks and "professionals". More fees; higher stock/asset prices. No need to guess who that benefit the most right.


----------



## Humid (15 November 2018)

Saint Nick has the answers....
https://thewest.com.au/business/you...w-to-live-well-on-so-much-less-ng-b881006119z


----------



## sptrawler (17 November 2018)

Humid said:


> Saint Nick has the answers....
> https://thewest.com.au/business/you...w-to-live-well-on-so-much-less-ng-b881006119z



Well we might not like it, but what St Nick is saying is right, why would you scrimp and save to get $1M in super.
When you can have a ball, spend everything have $300k put in to super by your employer and have a better outcome.
At least with the pension it is indexed, with the money you saved and put in your super, it can be lost in a week as is happening now.
The only difference is, if you have spent everything and are on a pension you are the salt of the earth a battler, if you have saved some money you are a capitalist pig that deserves anything the media and Government want to throw at you.


----------



## willy1111 (17 November 2018)

sptrawler said:


> Well we might not like it, but what St Nick is saying is right, why would you scrimp and save to get $1M in super.
> When you can have a ball, spend everything have $300k put in to super by your employer and have a better outcome.




Time...super is accessible at 60 now, whereas age pension is around 67 (they were going to push it out to 70)

Most savers/investors would have assets outside of Super so likely could be self funded way before 60.

I agree the age pension is a great safety net to fall back on though.


----------



## Skate (17 November 2018)

sptrawler said:


> Well we might not like it, but what St Nick is saying is right, why would you scrimp and save to get $1M in super.
> When you can have a ball, spend everything have $300k put in to super by your employer and have a better outcome.
> At least with the pension it is indexed, with the money you saved and put in your super, it can be lost in a week as is happening now.
> The only difference is, if you have spent everything and are on a pension you are the salt of the earth a battler, if you have saved some money you are a capitalist pig that deserves anything the media and Government want to throw at you.




 Hi @sptrawler

What Nick is saying is right, but its not good advice to follow as it plays to confirmation bias. People with low Super balances will find comfort in reading his article. This type of article is trotted out every few weeks as a story filler. I've read it all before.

Let me explain why you should scrimp and save to get $1M into super & why Australians aren’t saving enough money - meaning their savings will inevitably run out.

We should all seek a better tomorrow, have financial independence & not be condemned to the aged pension (The poverty net)

*Financial independence*

Happiness is really about is creating an extraordinary quality of life, life on our terms.

Money and financial independence can have a significant effect on everything from our psychology, to our health, to our relationships.

*Our decisions*

Our decisions ultimately control the quality of our lives.

*Current trends*

Australians who plan & save for their retirement usually die with savings almost as large as when they retired - meaning they lived their life on their terms.

*Your freedom is at Stake (Trading helps)*

Trading isn’t about getting rich, but more about one day having the financial independence of being able to support yourself without an income. The truth is at some point in your life you’re going to have to stop working. The only question is whether you’ll be forced to stop before you’re financially prepared, or whether you’ll be able to choose to end on your terms.

The only person who can make sure you’re able to do it on your terms is you. Nobody is going to give you the money you need to support yourself without an income - it’s all on you to save up as much as you need. Therefore, your financial freedom is at stake here, and there is no better time to start creating it than right now.

Many people never start trading because they’re worried about losing their money. It feels like you have to spend a lot of time and energy to get it right and if you don’t, then you might lose all of your money.

The very act of getting started is much more important than getting it right.

Skate.


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## willy1111 (17 November 2018)

Well said @Skate

I could spend my excess income on nicer cars, a better home, more expensive holidays - but I would prefer to be more conservative on those items and put my excess funds at risk in the share market in an attempt to generate wealth, because wealth buys freedom from being a wage slave meaning I get much more choice in how to spend my limited time on earth.

I'm pretty sure many people on this site would have a similar philosophy, the average person on the street doesn't think like this, they think in terms of what else they could spend that capital on (a nice new shiny sports car, etc) that they could get enjoyment from rather than risk losing it in the share market.


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## Toyota Lexcen (17 November 2018)

"risk losing it in the share market"

rather than losing it in the share market

numerous financial commentators see this as best option for Australians, whats wrong with getting the pension? most have contributed to it

at 67, a couple with mortgage free house, holidays done, small car purchased, small trading account as hobby

great financial advice


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## Triple B (17 November 2018)

Skate said:


> Trading isn’t about getting rich, but more about one day having the financial independence of being able to support yourself without an income.




Exactly . I have a time span of 10 years to learn to Trade . Slowly adding to account when proven consistently profitable. almost 45 now. Would like to be 50/50 income by the time Im 50.and full retirement at 55. $200 per week into a bank account until 1000 trades are made with  smaller account.(aprox 10months)
Then deposit 25% in broker account  no need to put it all in brokers acc an sit the  unused portion at Broker Risk

potentially trading $200,000 to $300,000 with  0.5 % risk at 55. 1200 trades a year at 50% win with 2:1 pay of would be nice. $200000 acc income potential at 0.5%R = $600000 PA not compounded.
Draw down of 5% a 2.0% chance in 50 Trades.  seems crazy but thats the numbers.Costs aprox $8400 at todays commission so say $10000 in 10 years
If we take out 200 trades at BE thats 1000win or loss trades at . so numbers then become 500,000 -costs. I f risk is reduced further $100000 is an acheivable figure.


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## sptrawler (16 January 2019)

Jeez it has been a while since anyone has posted here, just shows how much super has got on the nose, since Labor started their slash and burn who gives a fluck about SMSF's get them to move into union funds campaign. lol

So after that bit of a rant, I wonder if the companies can pay unfranked dividends to SMSF's? That would be interesting.


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## MarketMatters (18 January 2019)

Unfortunately we live in a high consumer discretionary world today with so many shinny new toys being dangled in front of us that the average person struggles to escape the marketing ploys of these giant retailers ...and the usual keeping up with the Jones's. Consequently, superannuation has become the boring lousy long term investment no one wants to look at because they can't touch it! Great tax vehicle though


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## MarketMatters (18 January 2019)

@sptrawler I believe I saw a recent article praising the benefits of industry funds and returns over the Future Fund. Timing is everything!


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## sptrawler (4 February 2019)

Funny how Chris Bowen finds it perverse, that self funded retirees get the franking credit, yet he doesn't see his perks as perverse.
I guess self appraisal, isn't a strong trait for politicians.

https://www.smh.com.au/politics/fed...n-on-labor-s-tax-changes-20190204-p50vjv.html


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## sptrawler (5 February 2019)

The Hayne recommendations, should rationalise the super industry somewhat, I hope they all get enacted.


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## MarketMatters (6 February 2019)

Yes I recall something like 70% of wages paid as a tax free annuity, for life, for politicians? When can we vote on that one?!


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## sptrawler (6 February 2019)

MarketMatters said:


> Yes I recall something like 70% of wages paid as a tax free annuity, for life, for politicians? When can we vote on that one?!



Yes but Billy and Chris don't see that as a ridiculous burden on the taxpayer, just those who save to be self funded, maggots. IMO


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## Humid (7 February 2019)

The mob you vote for cut penalty rates
Welcome to their world Homer


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## Humid (7 February 2019)

sptrawler said:


> Yes but Billy and Chris don't see that as a ridiculous burden on the taxpayer, just those who save to be self funded, maggots. IMO




Self funded my ass whose paying your franking credit return lol


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## sptrawler (7 February 2019)

Humid said:


> Self funded my ass whose paying your franking credit return lol



Firstly the Company is paying the tax on my dividend, so they are paying my franking credit. I'm still a part owner of the company, it is just that the Government wants to keep that tax, rather than refund it to me.
That's only a part, i still had to save my hard earned, to buy the shares in the first place.
I could have pi$$ed it against the wall, or bought a V8 ute, like the bogans who will get a taxpayer funded pension.
The only upside is, the next Billy changes will affect you.lol


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## Humid (7 February 2019)

Welfare for the wealthy set up by Howard’s through boom times
To lose 10k you have half a million $ in shares


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## sptrawler (7 February 2019)

Humid said:


> Self funded my ass whose paying your franking credit return lol



I'll put it in a way you may be able to understand.
How about the Companies pay the dividend, in pretax dollars, and leave the tax liability to the taxpayer? Just as small business does.
This where it becomes out of step, if a super pension is a tax free vehicle, the tax is theirs.
If labor want to change it, they should change the status of the super pension, then it is done correctly. Just my opinion.


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## PZ99 (7 February 2019)

sptrawler said:


> I'll put it in a way you may be able to understand.
> How about the Companies pay the dividend, in pretax dollars, and leave the tax liability to the taxpayer? Just as small business does.



I've wondered that myself. I guess it means the value of your shares would go down by the gross amount when it hits XD which would hit the portfolio a bit ?


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## sptrawler (7 February 2019)

PZ99 said:


> I've wondered that myself. I guess it means the value of your shares would go down by the gross amount when it hits XD which would hit the portfolio a bit ?



The big issue is, would you risk capital for 5% dividend, when you can get 3% interest without risking capital?
Then when the capital drops, pick up part aged pension, most I know around my pay grade are opting for that. If this bounce continues and the Banks recover, many will be off loading. IMO
It saves the retiree from having to worry about investment, shonky managers etc, Just have a constant income, untill centrelink kicks in.
All silly Billy has done, is show everyone, how shaky putting money into super is.


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## sptrawler (7 February 2019)

Humid said:


> Welfare for the wealthy set up by Howard’s through boom times
> To lose 10k you have half a million $ in shares



I think you are missing the point completely, otherwise you are classing yourself as wealthy.

The wealthy don't lose any of the franking credit, if they are on the top tax bracket and have two million shares in CBA, they get their tax reduced by a massive amount.
The only people who will lose out, are those that have low incomes and those who live on a superannuation income. This was reduced to a maximum of $1.6m last year, and since then the shares are down 20%.
The super rich that have a lot in accumulation, still can use the franking credits.
Labor's figures, were worked out before the $1.6m cap was introduced, so the figures will be way out.
Also if workers, who have bought shares in the lowest income earners name have any sense, they will do an off market transfer to the workers name if the changes are enforced.
It will just end up another Labor brain fart, that self implodes or backfires. IMO
Time will tell.
As I said earlier, they would have been much smarter to introduce tax scales to superannuation pensions, much easier to adjust and tailor to the economics of the day. Therefore better for the Country.
But that isn't the prime reason behind the changes. IMO
Just my opinion.


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## Humid (7 February 2019)

https://www.canberratimes.com.au/bu...ml?ref=rss&utm_medium=rss&utm_source=rss_feed


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## sptrawler (7 February 2019)

Humid said:


> https://www.canberratimes.com.au/bu...ml?ref=rss&utm_medium=rss&utm_source=rss_feed



There were several inaccuracies an omissions, in that passage, as usual.
Like I said, you will suffer from it, far more than I. IMO
Time will tell.


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## MarketMatters (7 February 2019)

Gee, might as well bring back RBL's in super whilst we're at it ! Bill can't have it both ways - people trying to self fund for retirement yet disincentive them in ways to build it. End of the day it's all about more revenue!!


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## sptrawler (7 February 2019)

MarketMatters said:


> Gee, might as well bring back RBL's in super whilst we're at it ! Bill can't have it both ways - people trying to self fund for retirement yet disincentive them in ways to build it. End of the day it's all about more revenue!!



That will be the next step, RBL's will have to be re introduced.
IMO at the end of the day, it is to force people into industry funds, then use the super for infrastructure, with fixed rate of return.


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## satanoperca (7 February 2019)

sptrawler said:


> IMO at the end of the day, it is to force people into industry funds, then use the super for infrastructure, with fixed rate of return.



How is this a bad thing?


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## sptrawler (7 February 2019)

satanoperca said:


> How is this a bad thing?



It isn't, it will just be different, to what people expect.


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## satanoperca (7 February 2019)

Agreed,  was just trying to clarify your opinion.


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## Humid (7 February 2019)

sptrawler said:


> There were several inaccuracies an omissions, in that passage, as usual.
> Like I said, you will suffer from it, far more than I. IMO
> Time will tell.




Yeah right
Tell me a bit more about myself and my financial position


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## sptrawler (7 February 2019)

Humid said:


> Yeah right
> Tell me a bit more about myself and my financial position



I know nothing about you, or your financial position and I said nothing about you and your financial position.


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## Humid (7 February 2019)

sptrawler said:


> I know nothing about you, or your financial position and I said nothing about you and your financial position.



Suffering more than you............from what exactly?


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## qldfrog (7 February 2019)

From being younger then sp and having to bear the consequences for much longer i guess.but you will have the pleasure of being a winner


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## sptrawler (7 February 2019)

qldfrog said:


> From being younger then sp and having to bear the consequences for much longer i guess.but you will have the pleasure of being a winner



Exactly frog, I've already retired and availed myself of what many are so willing to forego, I wish those enacting the change were so honourable.


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## Humid (8 February 2019)

Looks like the cheap red has kicked


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## qldfrog (8 February 2019)

Humid said:


> Looks like the cheap red has kicked



Remember, no cheap red for the rich bastards, we go for 10bucks a bottle mclaren vale shiraz.
While poor battlers buy coke and bourbon premixes


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## bigdog (9 February 2019)

https://www.smh.com.au/money/super-...imit-through-inheritance-20190122-p50sva.html

*What to do if your super is pushed over its limit through inheritance*

*By Noel Whittaker*
January 23, 2019 — 12.03am

*Question:* My wife and I are self-funded retirees with both superannuation balances under the $1.6 million cap. If one of us passes away, the surviving partner will be pushed over that limit through the inheritance. Are there any provisions or conditions that accommodate this circumstance? For example, will the surviving partner be given permission to exceed the limit or allowed time to bring their super back under the $1.6 million?

*Answer:* The surviving partner will be able to rearrange their affairs so that $1.6 million ends up in pension mode, and the balance in accumulation mode, and a reasonable time will be allowed to do that. But bear in mind that money in accumulation mode pays tax on its income at a 15 per cent flat rate, whereas money held in a person’s own name has the benefit of an $18, 200 tax-free threshold. This is why the surviving partner should take advice about holding as much of the legacy in their personal name as is appropriate. A further benefit of doing this is that money held outside super is not liable for the death tax of 17% on the taxable component of superannuation left to a non-dependent.


*Question:* I am 67 and still work part time earning a gross income of $1,700 a fortnight. I salary sacrifice $700 a fortnight to meet the $20,000 allowed, plus $5,000 from my employer. Is it worth continuing to salary sacrifice? I have also two rental properties worth $1 million. Last financial year I got a tax bill for $5000. My superannuation balance is $670,000.

*Answer:* Your gross income is $44,200, so salary sacrificed contributions totalling $20,000 a year would still keep you over the tax-free threshold, where you start to pay a marginal rate of 19 per cent. The contributions tax is just 15 per cent, so you are slightly better off by salary sacrificing. It is also a form of compulsory saving, so keep it up.

*Question:* My wife and I are in our mid fifties and would like to retire by 60. We are looking for the best investment options to help achieve our goal but would like to avoid high-risk investments. Our combined annual income is $260,000 before tax. We have a total of $900,000 and are both salary sacrificing the maximum $25,000 per annum. We hold direct shares worth $90,000 and have $300,000 in savings. We have no debt and our home is worth $900,000. We have considered placing the cash into super to minimise tax but are concerned about changes to the rules that may push out the preservation age beyond our planned retirement age. Can you suggest any alternative tax-effective strategies to help us achieve our goal.

*Answer:* You may well have more than 40 years’ investing ahead of you, so you should be prepared to have a hefty percentage of your assets in growth assets. Take advice about low-cost Australian index funds – by definition the index can never go broke and historically it has never failed to reach a new high after a low. Also canvass quality actively managed funds for both the local and international markets.

Shares are highly tax effective, as a large proportion of the returns come from capital gains

You can minimise tax by holding as much is possible in superannuation, but also keep in mind that shares are highly tax effective, as a large proportion of the returns come from capital gains on which there is no tax until the asset is redeemed, which may be years after you retire when your income may be quite low. Returns from franked dividends are highly tax effective as you get a credit for the tax paid by the company.

I wouldn’t be overly concerned about rule changes in view of your age. Probably, your first action should be to talk to a good adviser to work out how much you will need when you retire, and then tailor your strategy around that.

*Question:* I have a question about the death tax on superannuation. I am single and have an adult daughter who is a single stay-at-home mum and a son who works. Neither are dependent on me. My instructions to my super fund are that my super is to be left equally to my two children. The taxable component is $180, 000. Am I right in my assumption that they will pay a 17 per cent death tax?

*Answer:* They will certainly pay the death tax but there is a solution. Make sure you have given an Enduring Power of Attorney to a trusted person and give them instructions to withdraw your entire superannuation balance and deposit the money in your bank account tax-free if your death appears imminent. This will get rid of any possibility of the death tax.


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## sptrawler (9 February 2019)

As the bigdog post says:

If Labor bring in the changes to franking credits, people really need to appreciate that the first $18,200 of EARNINGS outside of super are tax free, don't put all your eggs in one basket.
The only advantage of super for the retiree, will be that the earnings are tax free, but the first $18,000 of earnings outside of super is tax free and the Government can't tell you how to spend the *capital*.
Just do your sums and be very wary. IMO
Definitely get financial advice, before committing to super, just my opinion.


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## HelloU (9 February 2019)

potentially more than that if u r a self funded retiree - SAPTO is $34K threshold equivalent or something like that .......


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## sptrawler (9 February 2019)

HelloU said:


> potentially more than that if u r a self funded retiree - SAPTO is $34K threshold equivalent or something like that .......



Good point HelloU, it really makes super marginal, in a lot of cases. IMO
Also with a SMSF I think unrealised capital gains are included in income, they may not be outside super, advice would be a must.


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## sptrawler (11 February 2019)

Here comes the push, from the union gravy train.lol

https://www.theage.com.au/politics/...mission-finding-on-super-20190210-p50wtx.html


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## Junior (11 February 2019)

HelloU said:


> potentially more than that if u r a self funded retiree - SAPTO is $34K threshold equivalent or something like that .......




Yes, and double that for a couple.


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## sptrawler (11 February 2019)

Funny how the U.K system, is busy looking after people who paid into it.

https://thewest.com.au/business/you...ifetime-you-need-to-know-about-ng-b881097462z

While our politicians are busy trying to screw, the ones who paid their own pension here. LOL
There really is something wrong with us.

Apparently from what I've read, we had a system like the U.K, before the Government appropriated the money.
Now we have our own self funded system, they want to do it all again, but we cheer them on. Weird.


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## Smurf1976 (11 February 2019)

Humid said:


> Self funded my ass whose paying your franking credit return lol



The company is paying (not government).


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## Smurf1976 (11 February 2019)

satanoperca said:


> How is this a bad thing?



It’s always at least risky to be forced to hand your money to someone with no real choice in the matter.

No matter how well or how badly the funds perform, you’re tied to them basically.

That being so, there’s no real incentive for them to make too much effort.


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## Humid (11 February 2019)

Smurf1976 said:


> The company is paying (not government).



Pretty sure the government is refunding it and Labor are going to stop it
If a company was 100% owned by people doing this they would be paying zero on tax on profits
Great for the economy


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## Toyota Lexcen (11 February 2019)

There not stopping it for all Australians though are they


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## qldfrog (11 February 2019)

Humid said:


> Pretty sure the government is refunding it and Labor are going to stop it
> If a company was 100% owned by people doing this they would be paying zero on tax on profits
> Great for the economy



But the shareholders..you assume they are aussies would be taxed as per their income..
But no, not good for Bill and cie
So is labour paradise a place where all citizen are equal and dirt poor but we can still tax big companies.to pay for the ruling mob..

That explains where we are heading


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## MarketMatters (13 February 2019)

If we have to deal with an amendment, I prefer the idea of a cap on f/c so as to appease Billy's attack on the target market of top 3% or "Top end of town" whilst low to middle wealth recipients receive some benefit. 

Low income earners would continue to supplement their incomes (avoiding government benefits) and retirees who are marginally outside the thresholds of the Age Pension (not considered wealthy) would continue to receive benefits to minimise the impact of entering the Age Pension and becoming a drain on the economy.


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## moXJO (14 February 2019)

Humid said:


> Pretty sure the government is refunding it and Labor are going to stop it
> If a company was 100% owned by people doing this they would be paying zero on tax on profits
> Great for the economy



Why is it the governments in the first place? 
The shareholders are part owners of the business and should be taxed according to their rate. It's not the governments in the first place.


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## Humid (14 February 2019)

Company tax and income tax


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## Smurf1976 (14 February 2019)

Humid said:


> Pretty sure the government is refunding it and Labor are going to stop it



Only for low income earners though and that's the real point of the whole debate.

If you're on a high income then you still get full value from your franking credits. It's only lower income earners who are being targeted with this - government will take the money for these people only.

Labor have forgotten who they're representing it seems. Since when was the ALP the rich man's party? In 2019 that's exactly what it seems to have become.


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## Humid (14 February 2019)

They’re only getting taxed once


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## Toyota Lexcen (14 February 2019)

Who?


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## Knobby22 (14 February 2019)

BHP pay 30% tax.
I for instance get a dividend on a 43% tax rate (due to my earnings), so rather than being taxed twice I pay effectively (after the franking credit) 13% tax rate on the shares.

As I said, I don't see why the government, (and no other government in the world does this) would tax BHP 30% and then give it to shareholders on no income, e.g. that guy Wilson who's running the website to click who earns (no gets) $2 million in franking credits. Ridiculous.

And that argument about Labor helping the working man etc. doesn't wash. Howard brought this in to help his mates. Keating brought in the into double tax franking. The savings are in the billions and could be used to give tax cuts to all and pension rises. Of course a few very rich individuals will lose heaps.

The trouble is as Machiavelli said, taking away something no matter how reasonable will give you hate from the ones you remove the perk from and only lukewarm approval from the others who aren't effected.


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## Smurf1976 (14 February 2019)

Humid said:


> They’re only getting taxed once



Then why don't we just move to a minimum 30% tax on all income?

If it's good enough for one group of people to be taxed that way then there's no reason to not hit all low income earners with the same level of tax.


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## Humid (14 February 2019)

I notice you no longer use the term taxpayers


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## Humid (14 February 2019)

Reminds me of global warming to climate change


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## sptrawler (14 February 2019)

Knobby22 said:


> BHP pay 30% tax.
> I for instance get a dividend on a 43% tax rate (due to my earnings), so rather than being taxed twice I pay effectively (after the franking credit) 13% tax rate on the shares.
> 
> As I said, I don't see why the government, (and no other government in the world does this) would tax BHP 30% and then give it to shareholders on no income, e.g. that guy Wilson who's running the website to click who earns (no gets) $2 million in franking credits. Ridiculous.
> ...



Why not just put the top tax rate back up to 60cents, like it was when I started working?


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## Smurf1976 (14 February 2019)

sptrawler said:


> Why not just put the top tax rate back up to 60cents, like it was when I started working?



Or just make those who should be on the top rate actually pay it. Close the loopholes.

Same with companies. If a certain company isn’t making any profit extracting gas or selling phones then they should have no objection to nationalisation of the gas fields or the IP relating to the phones for a token payment of $1. They’re perpetually unprofitable after all so the companies concerned should be glad to be rid of such “assets”.

Government would only need to carry out the threat once and we’d see a flood of tax revenue in no time once business worked out that no tax paid = risk of nationalisation and there’s no valid argument that the assets have value given the company itself has declared them unprofitable.


----------



## sptrawler (14 February 2019)

Knobby22 said:


> BHP pay 30% tax.
> I for instance get a dividend on a 43% tax rate (due to my earnings), so rather than being taxed twice I pay effectively (after the franking credit) 13% tax rate on the shares.



You are getting income *from two sources*, you are paying tax on the income you earn from your employer and you are getting tax back from income you are earning from your investments.

I bought shares to support myself when I stopped work, so I am getting income from one source, and it is paying tax on my behalf, and as I'm supporting myself the Government said all my income is free of tax.

Therefore why are they keeping the tax, the company has paid on my behalf, and giving yours back to you?

If the Government wants to keep that tax, they have to change the tax status of super funds, to taxable.

What's even sillier is, if I get free money from the Government as welfare, I can keep the tax as well. FFS how stupid is that.


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## Smurf1976 (14 February 2019)

Knobby22 said:


> BHP pay 30% tax.
> I for instance get a dividend on a 43% tax rate (due to my earnings), so rather than being taxed twice I pay effectively (after the franking credit) 13% tax rate on the shares.



Why are you not paying 43%, your marginal income rate, on the BHP dividend after Company Tax has been paid?

Why are you, as someone with an above average income, allowed to consider BHP’s payment of Company Tax as a form of taxation paid by yourself but someone with a low or no other income can not use the exact same same argument?

Either a company having paid Company Tax counts as part of an individual’s Income Tax payment or it doesn’t. 

If there were to be any concessions on that then I’d expect them to be for low incomes not high. That’s the aspect which really gets to me.


----------



## sptrawler (14 February 2019)

What I can't understand smurf, is how people don't get it.
If super in pension phase is tax free, then either the dividend gets paid pre tax, or the tax is refunded.

Otherwise the super pension isn't tax free, it is being taxed at company tax rates, where dividends are concerned. 
How these people invest is beyond me.


----------



## Smurf1976 (14 February 2019)

sptrawler said:


> What I can't understand smurf, is how people don't get it.



My thoughts there are more concerning than the issue itself.

Politics seems to have become something much like tech companies particularly Apple and Tesla.

If you love Apple then in your mind everything they do is pure genius. If you're not an Apple fan then it's all pretty crap compared to whatever alternative.

Same with Tesla. If you're in the Tesla camp then everything they touch is worth more than gold. If you're not a Tesla fan then it's all a load of nonsense.

In both cases there's no critical thinking involved. You're on one side or the other about a particular product before it has even been unveiled. If you're an Apple fan then by default all their products are good.

Politics seems to have gone the same way. If you're planning to vote Labor then this policy is just fine and anyone saying otherwise must be a Coalition supporter who is also a climate change denier, wants to scrap penalty rates and so on.

So my perception is certainly that there is very little critical thinking being applied to this debate (I mean that generally not specifically discussion on ASF). That numbers and finance, both of which are subjects the masses seem to struggle with, are central to the issue makes it even worse than it would otherwise be.


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## cynic (14 February 2019)

Shareholders are, in effect, part owners of a business. To tax franked dividends, whilst at the same time denying those taxed, their franking credit, is tantamount to the taxman double dipping.

Those proposing and/or supporting the proposed legislative change, seem to have overlooked the likely reaction to such changes.

Does one truly expect, that those impacted ,won't rearrange their affairs (in respect to superannuation investment allocations) and/or company policies/practices (in respect to the franking of dividends)?


----------



## Zaxon (14 February 2019)

Smurf1976 said:


> If you're planning to vote Labor then this policy is just fine and anyone saying otherwise must be a Coalition supporter who is also a climate change denier, wants to scrap penalty rates and so on.
> 
> So my perception is certainly that there is very little critical thinking being applied to this debate (I mean that generally not specifically discussion on ASF). That numbers and finance, both of which are subjects the masses seem to struggle with, are central to the issue makes it even worse than it would otherwise be.




I agree.  There are clearly people in this debate that sing from their party's hymn sheet, and show no sign of independent thinking.  Personally, I am a swing voter.  I evaluate every policy on its merit, not on which party it's coming from.


----------



## Smurf1976 (15 February 2019)

Zaxon said:


> I agree.  There are clearly people in this debate that sing from their party's hymn sheet, and show no sign of independent thinking.



My political leanings are more toward Labor than the Coalition in recent times but I'm having doubts now with this policy. That's not due to any personal implications but because it shows a government that's incredibly arrogant in being willing to trample over a minority. That's a real worry given they haven't even been elected to government yet and are simply assuming they're a sure thing.


----------



## qldfrog (15 February 2019)

There is polarisation as Smurf noted, probably due to social media and confirmation bias, and a dumming of the population worsened by pathetic media be they abc, guardian or fox.
Australians in general have really no clues on the world we are living in.
Technically, geopolitically..
This is on the left side or even worse our far left greens,  demonstrated by the illegal migrants positions, the arrogance in thinking we and our 26millions can play a role in CC or limiting China's role in the region.
NDIS financing on debt,etc
A population who has no trouble with marginal income tax rate at nearly 50pc for the "rich"
On the right side, some Abbot's like positions  and blind trust in a string of actual monopoly or duopoly businesses screwing us every day, and the same ignorance with f.e. migration for the sake of gdp at the cost of our own nation future and present quality of life.
That disaster waiting to happen could be avoided if the voters had some clues, but with mandatory voting on the top..i lost hope..
Only with serious pain will this country learn and maybe wake up.
Current labour will speed the way in my opinion
But that is ok, i am just an arrogant brat...


----------



## Bill M (15 February 2019)

What are the effects of Labors new franking credits policy on those in super funds where you can pick your own shares? For example, you are in an Industry fund that allows you to choose your own shares in the self invest option. You buy an ETF that currently pays quarterly dividends and you also get the franking credits rebated. It is a pension fund.

Will you get the franking credits or will you lose them? It is still an industry fund after all, just wondering as this hasn't been highlighted or debated anywhere??


----------



## Zaxon (15 February 2019)

Bill M said:


> What are the effects of Labors new franking credits policy on those in super funds where you can pick your own shares? For example, you are in an Industry fund that allows you to choose your own shares in the self invest option.




Your tax rate is 15% or 0%, depending on whether you're retire. My understanding is that because it's within an industry super fund, imputation credits would be refunded as per now. Whether that's from direct share investment, ETF, or a fund such as "balanced super", it will still protected by the umbrella of the super fund.


----------



## Bill M (15 February 2019)

I find this schamozal of franking credits very discriminatory.

Why is someone in a super fund using self invest (buying their own stocks) entitled to franking credit rebates, whilst the person in a SMSF buying the exact shares is not entitled to it? Will the supporters of this dumb policy please explain why one person gets it and the other doesn't?


----------



## Junior (15 February 2019)

Bill M said:


> What are the effects of Labors new franking credits policy on those in super funds where you can pick your own shares? For example, you are in an Industry fund that allows you to choose your own shares in the self invest option. You buy an ETF that currently pays quarterly dividends and you also get the franking credits rebated. It is a pension fund.
> 
> Will you get the franking credits or will you lose them? It is still an industry fund after all, just wondering as this hasn't been highlighted or debated anywhere??




This is the big question in my mind.  If they still allow super funds to rebate franking credits to individual members, then the policy could cause a stampede of partial or full rollovers out of SMSF, and into retail or industry platforms.  You could hold all your direct shares through retail/industry funds, and hold all other asset classes through your SMSF.  This would further create an uneven playing field, as those holding shares through any non-super ownership structure would not have the ability to use this strategy.  It would also mean the alleged savings claimed by Labor would be significantly diluted.

Alternatively, those with SMSF, will need to add Accumulation members to their fund....ie. ensure there are contributing members, so franking credits can still be taken advantage of.

Personally I think if they do manage to kill FC refunds, they will stop industry and retail funds from rebating FCs to pension members, as this would completely undermine the policy.

There are so many problems with this policy.

As stated many times, if they aim is simply to raise more tax revenue from the superannuation system, they should increase earnings tax rates on super and/or pension accounts.  This would be way, way more straightforward and have far less unintended consequences.


----------



## sptrawler (15 February 2019)

Junior said:


> This is the big question in my mind.  If they still allow super funds to rebate franking credits to individual members, then the policy could cause a stampede of partial or full rollovers out of SMSF, and into retail or industry platforms.  You could hold all your direct shares through retail/industry funds, and hold all other asset classes through your SMSF.  This would further create an uneven playing field, as those holding shares through any non-super ownership structure would not have the ability to use this strategy.  It would also mean the alleged savings claimed by Labor would be significantly diluted.
> 
> Alternatively, those with SMSF, will need to add Accumulation members to their fund....ie. ensure there are contributing members, so franking credits can still be taken advantage of.
> 
> ...



I would think it could be challenged, on the grounds of discrimination and unconscionable conduct by the Government against, SMSF's. 
They are treating pensions in an Industry Fund, by different interpretations of the tax laws, I personally don't think they will legally be able to do that.
Like I said before, another brain fart by Labor, time will tell. 
However if it is proven illegal, and has to be enacted across the board, the retail and industry funds will have a huge accounting issue separating pension income from accumulation income.


----------



## Humid (15 February 2019)

Zaxon said:


> I agree.  There are clearly people in this debate that sing from their party's hymn sheet, and show no sign of independent thinking.  Personally, I am a swing voter.  I evaluate every policy on its merit, not on which party it's coming from.



 On its merit or how it effects you personally?
Run me through the merit of trickle down economics and cutting penalty rates


----------



## Bill M (16 February 2019)

Bill M said:


> Why is someone in a super fund using self invest (buying their own stocks) entitled to franking credit rebates, whilst the person in a SMSF buying the exact shares is not entitled to it? *Will the supporters of this dumb policy please explain why one person gets it and the other doesn't?*



So this has been up for over 24 hours and no answers. I am not surprised,.......


----------



## Knobby22 (16 February 2019)

Bill M said:


> So this has been up for over 24 hours and no answers. I am not surprised,.......



There not exempt. If they don't make a profit they lose also can't get franking credits


----------



## Bill M (17 February 2019)

The Self Managed Super Fund Association has done some case studies on the implications of Labor's proposed franking credit policy.

If I could cut and paste it I would but it is in PDF format and won't allow me to do that.

There is one example where one couple owns there own home with 900K in a SMSF. There is also another couple who own their own home but only have 700K in their SMSF. The 700K couple can draw a part pension and therefore are entitled to a full refund of franking credits. Those with the 900K balance lose all their franking credits because they are not on a government pension. Basically the couple on 700K will earn more money each year than the 900K couple.

Here is the link to full correct examples: https://trustees.smsfassociation.co...Franking-Credit-Case-Study-Document-FINAL.pdf


----------



## willy1111 (17 February 2019)

Bill M said:


> The Self Managed Super Fund Association has done some case studies on the implications of Labor's proposed franking credit policy.
> 
> If I could cut and paste it I would but it is in PDF format and won't allow me to do that.
> 
> ...




I certainly don't agree with Labor's Franking Credit Proposal.

However, perhaps an alternate view to the above is that the couple with $900K have $200K more than the couple with $700K.  

The difference in income between the two is about $7K per year.  

It could be suggested that the couple with $200K more, could sell down their assets (eat their capital) by $7K per year and have the same income as the couple with $700K - selling down $7K per year would take 28 odd years assuming no return on the $200K before they were in the same position, ie their capital was down to $700K.

I think someone else mentioned the welfare budget is $175B a year.  It's a scary figure.  I do think people with money (capital) need to be responsible for funding their own retirement - because they can.


----------



## Knobby22 (17 February 2019)

Yea, it's funny. I saw an article that showed most wealthy retirees won't eat into their capital no matter what and are therefore forced into a pretty poor lifestyle.

As the article points out when you reach your 80s you will struggle to spend anyway and also you can't take it with you.


----------



## qldfrog (17 February 2019)

All these matters would be sorted by having a universal pension system, everyone is entitled then taxing any revenue in the same way, pension included but not enough rort in that system for our superannuation funds, too simple for our accountants and not enough us vs them..imagine equality for the left, having savers encouraged.. what's next? Rewarding effort?


----------



## Bill M (17 February 2019)

willy1111 said:


> It could be suggested that the couple with $200K more, could sell down their assets (eat their capital) by $7K per year and have the same income as the couple with $700K - selling down $7K per year would take 28 odd years assuming no return on the $200K before they were in the same position, ie their capital was down to $700K.



If I was faced with this, I would sell down 200K by upgrades to the house, a new car and a round the world cruise for 2 and it would take me less than a year to blow it. Then the Government has to pay me a pension and refund all my imputation credits and I'd be better off. Way to go Labor, it will cost you more in the long run!!!


----------



## sptrawler (17 February 2019)

willy1111 said:


> I certainly don't agree with Labor's Franking Credit Proposal.
> 
> However, perhaps an alternate view to the above is that the couple with $900K have $200K more than the couple with $700K.
> 
> ...



When you are talking about these levels of savings, why do without and save the extra $200K in the first place?


----------



## Zaxon (17 February 2019)

sptrawler said:


> When you are talking about these levels of savings, why do without and save the extra $200K in the first place?




I guess in the back of a lot of people's minds, is what if there's no government pension by the time you're ready to retire? Or what if the retirement age is pushed back so late - let's say 85 to get a government pension, that you're physically not going to be able to work that long? If either of these things happen, you may need to have gone without and saved every cent you could.


----------



## basilio (17 February 2019)

I think one of the  big concerns about retirees is  wondering how they will pay the in going bond for a nursing home or similar institution.  This is particularly significant if it is for only one partner while the other stays in the family home.

From my experience these organizations demand full financial disclosure of all your assets and the bond is nicely sized to take as much of the these as possible. $500, 600, 700k .

In theory this is not supposed to be the case. In practice  - another story.


----------



## willy1111 (17 February 2019)

Bill M said:


> If I was faced with this, I would sell down 200K by upgrades to the house, a new car and a round the world cruise for 2 and it would take me less than a year to blow it. Then the Government has to pay me a pension and refund all my imputation credits and I'd be better off. Way to go Labor, it will cost you more in the long run!!!




And therein lies the difficulties of means testing.

What if in 2 years they tighten the means testing again down to $500k...would you spend the extra $200k again.

And then a further 2 years down the track they tighten it further again down to $300k. 

Now you would be getting really low on capital and be very reliant on the government pension.

An alternative could be to possibly try to hone your skills in trading like Skate has shown in the dump it here thread. Started learning about trading when he was very close to 60, has developed a weekly method by which he buys and sells a few stocks each week to generate a 20% plus return per year on average. 

20% of $900k = generating an income over $180k on average...tax free if in pension phase. 

Food for thought.

I hope this doesn't come across as an attack on you @Bill M. I'm there would be a lot of people thinking the exact same way as you. And it won't be good for the country, it will just push more people on to the pension and increase the welfare budget. 

Then the question becomes do they increase taxes or try to limit the welfare or a combination of both.


----------



## willy1111 (17 February 2019)

sptrawler said:


> When you are talking about these levels of savings, why do without and save the extra $200K in the first place?




I can see where you are coming from.

But at least you now have the option to spend it all now or perhaps find ways to make it work harder. 

Pretty sure you've been following skates dump it here thread.


----------



## Toyota Lexcen (17 February 2019)

Several high profile financial advisers once labor announced their policy recommended selling right down to be eligible for the pension.

Upgrade car, mortgage free, have holidays, renovate house for old age living, keep assets low and income low to receive aged pension.

For a couple at home chillin' out its easy money, why bother, there 158 Billion going to others doing it. You have paid taxes all your life.

And the Libs maintaining 67yrs old for pension.


----------



## basilio (17 February 2019)

Toyota Lexcen said:


> Upgrade car, mortgage free, have holidays, renovate house for old age living, keep assets low and income low to receive aged pension.




Much of this makes sense. First priority is having a bathroom with non slip floors and open shower recess.  Exactly like the ones in modern  nursing homes.  The first reason you or  a partner will have to move out of a house will be incapacity to shower or bathe.

Ramps,  solar panels to save ongoing power bills, a self contained studio for flexible living opportunities. A small but productive garden. In a couple of years time  an electric car. A decent paint and maintenance program.

Regardless of whether one is on a gov pension or private pension trying to ensure a lifestyle that is comfortable but sustainable  just makes sense.
_____________________________
What I do wonder about are the people who lived with incomes and lifestyles of $400-500k plus a year and then then want to continue such living when they arn't making this cash.


----------



## sptrawler (17 February 2019)

Zaxon said:


> I guess in the back of a lot of people's minds, is what if there's no government pension by the time you're ready to retire? Or what if the retirement age is pushed back so late - let's say 85 to get a government pension, that you're physically not going to be able to work that long? If either of these things happen, you may need to have gone without and saved every cent you could.



The only possibility IMO, is that they will make you spend everything, before you get any pension. Really all Labor have shown, is your a dick, if you are a blue collar worker and save anything.


----------



## sptrawler (17 February 2019)

willy1111 said:


> And therein lies the difficulties of means testing.
> 
> What if in 2 years they tighten the means testing again down to $500k...would you spend the extra $200k again.
> 
> ...



Problem is, they will just keep changing the rules, to force you into the industry funds.
What have Labor suggested over the last few elections?
Tax earnings above a certain threshold.
Tax the Family Home.
Tax the franking credits.
It's pretty easy, just keep taxing untill you roll over into a union fund.


----------



## sptrawler (17 February 2019)

basilio said:


> Much of this makes sense. First priority is having a bathroom with non slip floors and open shower recess.  Exactly like the ones in modern  nursing homes.  The first reason you or  a partner will have to move out of a house will be incapacity to shower or bathe.
> 
> Ramps,  solar panels to save ongoing power bills, a self contained studio for flexible living opportunities. A small but productive garden. In a couple of years time  an electric car. A decent paint and maintenance program.
> 
> ...



Those on that sort of money, will still be on it when they retire, they will be on boards of companies or own small companies.
To think that they are the ones Labor are targeting, is way off the mark.IMO


----------



## Knobby22 (17 February 2019)

sptrawler said:


> Problem is, they will just keep changing the rules, to force you into the industry funds.
> What have Labor suggested over the last few elections?
> Tax earnings above a certain threshold.
> Tax the Family Home.
> ...



Not Union fund. Half employer half union controlled, non profit.
Why would you put your super in AMP or the banks and get 40% less in retirement ? 
Why would you pay accountants and set your up own fund with big costs when Industry Super give excellent returns with no effort?
I found out that one of the main anti Industry Super commentator on Macquarie Radio network actually has his money in an Industry Super Scheme, after all he is not thick.


----------



## sptrawler (17 February 2019)

Knobby22 said:


> Not Union fund. Half employer half union controlled, non profit.
> Why would you put your super in AMP or the banks and get 40% less in retirement ?
> Why would you pay accountants and set your up own fund with big costs when Industry Super give excellent returns with no effort?
> I found out that one of the main anti Industry Super commentator on Macquarie Radio network actually has his money in an Industry Super Scheme, after all he is not thick.



That's exactly why me and a lot of others started SMSF, and it costs me $850/PA, retail or industry are going to charge $5K.
Why should I have to be forced into that, flick them  I'll spend it.
I left school nearly 50 years ago, never been on welfare, saved to be self funded.
All Bill has done, is show me the error of my ways, I am a quick learner so I will avail myself of his charity.


----------



## Smurf1976 (17 February 2019)

willy1111 said:


> I hope this doesn't come across as an attack on you @Bill M. I'm there would be a lot of people thinking the exact same way as you. And it won't be good for the country, it will just push more people on to the pension and increase the welfare budget.



Central to all this is the problem of static accounting. That is, the assumption that each variable exists in isolation and that changing taxation policy won't result in changing anything else.

For a simple example to make the point, suppose that a hefty tax is introduced on the sale of lawnmowers if they are blue or green in colour, there's a moderate rate of tax applied to those coloured red, orange or yellow and no tax on any other colour. Someone has done their research into mower sales and worked out that the tax will collect quite a bit of revenue.

I'll give you a guarantee. Within months after such a policy coming into effect you won't be able to buy a blue, gree, red, orange or yellow coloured mower. The market for them will disappear overnight and manufacturers will respond by making them a different colour whilst unsold stock of the taxed colours will be sent straight to landfill. 

End result = a lot of brand new mowers dumped at the tip, no tax actually collected and we live in a world where mowers are always painted grey.

My hypothetical mower tax has a lot in common with Labor's proposal. Retirement savings will be centered around avoiding the tax rather than paying it.


----------



## Smurf1976 (17 February 2019)

Zaxon said:


> I guess in the back of a lot of people's minds, is what if there's no government pension by the time you're ready to retire? Or what if the retirement age is pushed back so late - let's say 85 to get a government pension, that you're physically not going to be able to work that long?



Already an issue for a lot of those in manual labour type jobs who will be retired in practice in their 50's.

Labor's policy seems primarily aimed at giving these people a kick in the guts really. Sad thing is, they're the absolute core of those who would have traditionally voted Labor.


----------



## Smurf1976 (17 February 2019)

There's also another side to this and that is the non-financial risk.

Delayed gratification today so you'll be better off tomorrow sounds great in theory but what if tomorrow doesn't come?

This time last week I was sitting exactly where I'm sitting right now. Neither myself nor my pet cat who I'd had for 11 years had at that point any reason to think that her life would end just hours later as it sadly did.

For humans, well I know two in their 40's who've died in the past year or so. Cancer in both cases and neither were smokers or unfit.

Not taking that overseas holiday this year or spending your weekend working overtime instead of watching football or whatever does come with the risk that you'll never end up getting to do what you missed out on. You'll have the money but it's of no use once you're dead or in poor health.

Nobody's rationally going to save and invest just to break even over the course of their life. They'll only do it if doing so makes a substantially bigger improvement to their latter years than the sacrifice made in their younger years to achieve it so as to justify the risk of ending up dead before you see the benefits.

To that I will further add that, considering health, you'd be very wise to make sure you've obtained those benefits by your early 70's at the latest. Beyond that you're dealing with luck really and the risk that you don't get to do things due to health very rapidly increases.


----------



## Zaxon (17 February 2019)

willy1111 said:


> What if in 2 years they tighten the means testing again down to $500k...would you spend the extra $200k again.
> 
> And then a further 2 years down the track they tighten it further again down to $300k.




Short of spending your money and making yourself poor, as you've alluded to, about the only available method of retaining the pension right now is to buy a house in the most expensive suburb your savings can afford.  And then should the pension gets decimated, move back to a cheaper suburb. Of course, once your PPOR gets means tested, that's all over.


----------



## Zaxon (17 February 2019)

sptrawler said:


> The only possibility IMO, is that they will make you spend everything, before you get any pension.




And possibly decrease the rate.  If the pension was the same amount as Newstart, that would take pensioners so far below the poverty line.



sptrawler said:


> Really all Labor have shown, is your a dick, if you are a blue collar worker and save anything.




And given that their traditional base is blue collar, it's a very "Liberal" policy to be putting through.


----------



## sptrawler (17 February 2019)

Smurf1976 said:


> There's also another side to this and that is the non-financial risk.
> 
> Delayed gratification today so you'll be better off tomorrow sounds great in theory but what if tomorrow doesn't come?
> 
> ...



Absolutely smurf, on a cruise next Thursday, back for a month then another cruise, back from that pick up my next bike.lol
I'm over this do the right thing $hit,


----------



## sptrawler (17 February 2019)

Zaxon said:


> Short of spending your money and making yourself poor, as you've alluded to, about the only available method of retaining the pension right now is to buy a house in the most expensive suburb your savings can afford.  And then should the pension gets decimated, move back to a cheaper suburb. Of course, once your PPOR gets means tested, that's all over.



Bill has let the cat out of the bag IMO, the illusion that super will give you a better retirement, is a myth.
All it is going to do, is reduce how long they have to give you welfare.IMO


----------



## Zaxon (17 February 2019)

Smurf1976 said:


> Already an issue for a lot of those in manual labour type jobs who will be retired in practice in their 50's.




That's a very good point.  I guess that's why I see a lot of ex-tradies working at Bunnings.


----------



## sptrawler (17 February 2019)

Zaxon said:


> And possibly decrease the rate.  If the pension was the same amount as Newstart, that would take pensioners so far below the poverty line.



They wont do that, newstart is for people who are able to work, the pension is where everyone ends up who is too old to work.




Zaxon said:


> And given that their traditional base is blue collar, it's a very "Liberal" policy to be putting through.



The Liberals would never get away with putting forward these policies, Labor and the press, would shout them down.
Not only the attack on franking credits, but the fact that only rich people will be able to negative gear (as in only new builds) and Government subsidies for renting them.
It has all become very weird. IMO
I never expected anything like this, obviously polling has given labor free reign, to run amok.


----------



## Smurf1976 (18 February 2019)

sptrawler said:


> I never expected anything like this



Something I've learned in life and I expect you and others have too is that just because something "shouldn't" happen doesn't mean it won't and vice versa.

There are many examples of that. It's another subject but one we've discussed many times. Australia has an abundance of coal, gas, uranium, sunlight, wind and other energy resources. As such one problem we should never have is power supply. And yet that very issue has been a factor in the demise of the last four Prime Ministers and among the most consistently present issues in political debate over the past decade.

That's just one example but there are many more where things that should rationally never be an issue most certainly are in practice.


----------



## sptrawler (18 February 2019)

Smurf1976 said:


> Something I've learned in life and I expect you and others have too is that just because something "shouldn't" happen doesn't mean it won't and vice versa.
> 
> There are many examples of that. It's another subject but one we've discussed many times. Australia has an abundance of coal, gas, uranium, sunlight, wind and other energy resources. As such one problem we should never have is power supply. And yet that very issue has been a factor in the demise of the last four Prime Ministers and among the most consistently present issues in political debate over the past decade.
> 
> That's just one example but there are many more where things that should rationally never be an issue most certainly are in practice.



This is where the taxable and tax free components become important. IMO


----------



## Bill M (18 February 2019)

Knobby22 said:


> Yea, it's funny. I saw an article that showed most wealthy retirees won't eat into their capital no matter what and are therefore forced into a pretty poor lifestyle.
> 
> As the article points out when you reach your 80s you will struggle to spend anyway and also you can't take it with you.






basilio said:


> I think one of the  big concerns about retirees is  wondering how they will pay the in going bond for a nursing home or similar institution.  This is particularly significant if it is for only one partner while the other stays in the family home.
> 
> From my experience these organizations demand full financial disclosure of all your assets and the bond is nicely sized to take as much of the these as possible. $500, 600, 700k .
> 
> In theory this is not supposed to be the case. In practice  - another story.




These 2 posts go hand in hand. Yes some older folk don't spend money and it is true that they live in run down houses so they don't spend their capital but the time will come when they will have to move into a nursing home, in other words there is no other choice.

As basillo pointed out, this isn't cheap. My Mother had to sell her house and pay $500,000 for a refundable accommodation deposit and that was 4 years ago. These days it can over $1 Million. Think that can't happen? It can, we never thought our tough Mum would end up like that. You think your kids want to put you in a spare room and shower you and wipe your ar$e for you? Think again, no one wants to do this. The message here is you will need every bit of cash you have when you have to go into a nursing. This could be part of the reason why some older Australians are reluctant to spend their capital. Nursing homes are not free anymore.


----------



## Bill M (18 February 2019)

willy1111 said:


> I hope this doesn't come across as an attack on you @Bill M. I'm there would be a lot of people thinking the exact same way as you. And it won't be good for the country, it will just push more people on to the pension and increase the welfare budget.



Nah, no attack, it's all good. Put it this way, whatever they do I will reorganise myself and my funds to maximise my returns for my wife and myself so we can live a good retirement for the next 20 years or so. I will adapt and I will survive.

As for skates dump it thread, good on him for doing what he does, way smarter than me. I don't do trading, never really have and I don't understand it anyway nor do I have any interest in it. I'm about preserving what I have and hopefully making it last until we check out.

I still think it is dumb policy where a someone receiving a $5 pension from the government is entitled to all of their franking credits back whilst the person with a couple of grand extra in super with no government pension gets it all ripped off of him. This is totally unfair and I will never vote for such a proposal.


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## Humid (18 February 2019)

How have these high yield dividend companies that people use performed against the asx in the last 5 years?


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## Humid (18 February 2019)

sptrawler said:


> That's exactly why me and a lot of others started SMSF, and it costs me $850/PA, retail or industry are going to charge $5K.
> Why should I have to be forced into that, flick them  I'll spend it.
> I left school nearly 50 years ago, never been on welfare, saved to be self funded.
> All Bill has done, is show me the error of my ways, I am a quick learner so I will avail myself of his charity.




Any of that money you saved and constantly rave on about derived from penalty rates
I would guess most comes from Union rates and conditions in your line of work


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## basilio (18 February 2019)

One of the overwhelming issues regarding the creative use of dividend imputation credits is the effect on our tax base and the fact that they are overwhelmingly used by the very wealthy.

I appreciate that posters point to the more frugal end of superannuates as examples of who is going to lose. No one yet  wants to look at how this lurk has been used to enable the very wealthy to grab a few more billion from the public purse.

I just saw a story on how some of very wealthy in England intend to reduce their tax and stiff the rest of the countries tax payers. Can't help feeling this is happening here as well.
* UK's richest man moves to Monaco to 'save £4bn in tax' *
Brexiter Sir Jim Ratcliffe’s company Ineos is reportedly working with PricewaterhouseCoopers to reduce bill
Sarah Butler
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Mon 18 Feb 2019 05.57 AEDT   Last modified on Mon 18 Feb 2019 06.55 AEDT

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2,000



The shadow chancellor John McDonnell said he was ‘really disappointed’ by the decision of Ratcliffe, pictured in 2015, to move to Monaco. Photograph: Christopher Thomond/The Guardian
Britain’s richest man, the Brexit supporter Sir Jim Ratcliffe, and two of his key lieutenants at chemicals firm Ineos have reportedly been planning to save up to £4bn in tax after moving to Monaco.

The company, which is valued at about £35bn, is working with tax experts at PricewaterhouseCoopers (PwC) to create a new structure for the business to dramatically reduce the tax paid on its global revenues, according to the Sunday Times.

Ratcliffe, who has lobbied to weaken green taxes and reduce restrictions on fracking, owns 60% of Ineos, which made profits of more than £2.2bn last year and employs 18,500 people. His top two lieutenants at Ineos, Andy Currie and John Reece, each own 20% of the company worth £7bn and were also reported to be moving to Monaco and involved in the tax avoidance plan.
It emerged last year that Ratcliffe, the founder and chief executive of Ineos, was preparing to move to the tax-free principality on the Côte d’Azur, but the latest reports indicate exactly how much the three could save – putting the minimum at £440m.
https://www.theguardian.com/busines...est-man-plans-save-4bn-pounds-tax-monaco-move


----------



## sptrawler (18 February 2019)

Humid said:


> Any of that money you saved and constantly rave on about derived from penalty rates
> I would guess most comes from Union rates and conditions in your line of work



I've done my share of picket line work and extended strikes.
Just because I saved it, instead of blowing it, shouldn't mean I get stiffed now. IMO


----------



## Junior (18 February 2019)

Humid said:


> How have these high yield dividend companies that people use performed against the asx in the last 5 years?




Under-performed.  These type of funds, typically have overweight holdings in Bank stocks & Telstra. 

"Growth stocks" have been the best part of the market over the past few years, and these typically pay zero/low dividends.


----------



## Humid (18 February 2019)

Best you buy some lube


----------



## Humid (18 February 2019)

Junior said:


> Under-performed.  These type of funds, typically have overweight holdings in Bank stocks & Telstra.
> 
> "Growth stocks" have been the best part of the market over the past few years, and these typically pay zero/low dividends.





Junior said:


> Under-performed.  These type of funds, typically have overweight holdings in Bank stocks & Telstra.
> 
> "Growth stocks" have been the best part of the market over the past few years, and these typically pay zero/low dividends.




Is it poor,lazy or safe investment or all of the above
Seems either way your initial investment is going backwards


----------



## HelloU (18 February 2019)

to measure another's foot .....
will the real messiah please step forward.


----------



## Knobby22 (18 February 2019)

Worth reading.
https://www.abc.net.au/news/2019-02...rorted-on-industrial-scale-economist/10811876


----------



## sptrawler (18 February 2019)

Knobby22 said:


> Worth reading.
> https://www.abc.net.au/news/2019-02...rorted-on-industrial-scale-economist/10811876



The last line sums it up.

"I think the best way to fix it would actually be proper reform of the superannuation system," he said.

Like I've said, if they want to tax the super pension, do it in a sensible manner.
Not this half ar$ed botch up, last election Labor were going to tax pensions above $100k, this election stop franking credits.
They haven't got a clue, that is the problem and why they end up shooting themselves in the foot every time, they couldn't organise a piss up in a brewery. 
Brain Farts.


----------



## Knobby22 (19 February 2019)

sptrawler said:


> The last line sums it up.
> 
> "I think the best way to fix it would actually be proper reform of the superannuation system," he said.
> 
> ...




Libs got a report done in 2016 (David Murray)on how to fix the Super system, when it came out ScoMo said they would do it. What happened? If they actually had a plan it would help them get re-elected.

Another article on the ABC, the second guy Steve Taylor isn't you is it sptrawler?
https://www.abc.net.au/news/2019-02...the-end-of-franking/10815854?section=business


----------



## sptrawler (19 February 2019)

Knobby22 said:


> Another article on the ABC, the second guy Steve Taylor isn't you is it sptrawler?
> https://www.abc.net.au/news/2019-02...the-end-of-franking/10815854?section=business



No it isn't me Knobby, but I agree with him, it just doesn't make sense what is being proposed.
Super does need changing, it will become unaffordable, especially when the younger group come through with a lot more funds in super.
So it needs to be looked at holistically, so that the changes make it sustainable and people can have confidence in the system being fundamentally the same when they get to retirement.

What Labor are doing, is cherry picking bits and pieces ad lib to facilitate their budget, as can be seen by the different proposals every election. It isn't as though they have thought it through, or the suggested changes would stand the test of time.

The only logical system, is to have a progressive tax scale for super pension incomes, which at high incomes then aligns with the working persons tax scale, to discourage saving excess amounts as there would be no advantage.
Anyway Labor are looking as though they will implode, before the election, too many tax grab policies on a falling economy. IMO
I think Bill will be doing more back flips, than a circus tumbler, soon.
Time will tell, at least it wont be boring.


----------



## basilio (19 February 2019)

Knobby22 said:


> Worth reading.
> https://www.abc.net.au/news/2019-02...rorted-on-industrial-scale-economist/10811876




Yeah quite interesting.
The key point about industrial scale rorting of the franking credits scheme doesn't ever seem to be fully explained.  Has anyway identified the spread of people/companies using franking credits and who is behind them? If one could identify particular companies or persons  claiming a taxable income of < $18k PA but receiving  $300k in franking credits refunds it would be a compelling argument.

I can see the point of a more thoughtful overhaul of the super scheme to fix the problems in a better way. 
*BUT *given the lies and screams coming from the  creatives in finance and the trotting out of the lower end of retirees as victims of the current proposal,  what would be the response to an even broader review ? 
Nuclear would be the best word.

As I see it  ending the franking credits rort is a single clear action that will have a major impact on the use of questionable processes to generate billions of dollars of  tax payers refunds to those astute enough to take advantage them. After that perhaps those in the industry would be interested in a broader review. It could help those at the lower end of the self funded retirees scale. Whatever.


----------



## willy1111 (19 February 2019)

basilio said:


> Yeah quite interesting.
> The key point about industrial scale rorting of the franking credits scheme doesn't ever seem to be fully explained.  Has anyway identified the spread of people/companies using franking credits and who is behind them? If one could identify particular companies or persons  claiming a taxable income of < $18k PA but receiving  $300k in franking credits refunds it would be a compelling argument.




Can you please explain to me with a worked example that contains actual numbers how this is possible?


----------



## Knobby22 (19 February 2019)

willy1111 said:


> Can you please explain to me with a worked example that contains actual numbers how this is possible?



The government knows. They have to pay the millions of dollars to certain individuals.


----------



## Toyota Lexcen (19 February 2019)

How could that happen? So the dividend not income


----------



## sptrawler (19 February 2019)

basilio said:


> As I see it  ending the franking credits rort is a single clear action that will have a major impact on the use of questionable processes to generate billions of dollars of  tax payers refunds to those astute enough to take advantage them. After that perhaps those in the industry would be interested in a broader review. It could help those at the lower end of the self funded retirees scale. Whatever.




Maybe you could suggest how that would work?
Take 30% of their income off them, then come up with a way to help them, maybe welfare. lol


----------



## sptrawler (19 February 2019)

Knobby22 said:


> The government knows. They have to pay the millions of dollars to certain individuals.



When I filled in a tax return, I had to add my dividends and franking credit to my taxable income, then the tax payable is worked out on that sum.
Then the franking credit is removed, well that is my memory of it.
So how someone can get millions back, is weird to me.


----------



## willy1111 (19 February 2019)

sptrawler said:


> The last line sums it up.
> 
> "I think the best way to fix it would actually be proper reform of the superannuation system," he said.
> 
> ...




A pension is not income, it should not be taxed. 

A pension is a withdrawal from ones Superfund account.

Taxing a pension would be like taxing individuals everytime they make a withdrawal from their bank account. 

It is only the interest that is taxed and likewise only the earnings of the Superfund perhaps should be taxed in pension phase rather than the current 0% tax.


----------



## willy1111 (19 February 2019)

Knobby22 said:


> The government knows. They have to pay the millions of dollars to certain individuals.




Is it going to the individuals? Or to the Superfund?

I agree with the view of Chris Richardson, the taxation of Super earnings once preservation age is reached would be a better way of addressing this issue.


----------



## sptrawler (19 February 2019)

willy1111 said:


> A pension is not income, it should not be taxed.
> 
> A pension is a withdrawal from ones Superfund account.
> 
> ...




Yes my bad, I was meaning earnings, not withdrawals. 
The problem with taxing withdrawals would be, the tax would increase as the minimum drawdown increased with age.
It would have to be on what the fund is earning, of course.


----------



## Humid (19 February 2019)

https://independentaustralia.net/bu...uperannuation-and-other-legal-tax-rorts,12362


----------



## Knobby22 (19 February 2019)

willy1111 said:


> Is it going to the individuals? Or to the Superfund?
> 
> I agree with the view of Chris Richardson, the taxation of Super earnings once preservation age is reached would be a better way of addressing this issue.



To superfunds in an individuals name.
They have tightened the laws now (bad luck gen x and y) but there are individuals with tens of  million dollars worth of shares in superfunds getting the 30% franking return on top of the dividend.


----------



## Toyota Lexcen (19 February 2019)

Industrial scale, companies doing it. Isn’t there caps on super balances or something,

If you getting 300k in credits, thats like 700k in dividends?


----------



## Toyota Lexcen (19 February 2019)

Humid said:


> https://independentaustralia.net/bu...uperannuation-and-other-legal-tax-rorts,12362




Rolled a bit of bank bashing into that one.

Really the mining tax is the best bet for raising tax money.


----------



## sptrawler (19 February 2019)

From 2017, worth a read, see how you are travelling.

https://www.news.com.au/finance/sup...y/news-story/ba09fe5f47f69202aa53deeb279b01d6


----------



## willy1111 (19 February 2019)

Knobby22 said:


> To superfunds in an individuals name.
> They have tightened the laws now (bad luck gen x and y) but there are individuals with tens of  million dollars worth of shares in superfunds getting the 30% franking return on top of the dividend.




And this is because of the way Superannuation is taxed. 

Change the Superannuation tax rates once preservation age is reached - make the earnings taxable at the same progressive tax rates as the individual marginal rates. 

No need to fiddle with franking credit refunds and create carve outs for these people and those people but not those people.


----------



## Knobby22 (20 February 2019)

sptrawler said:


> From 2017, worth a read, see how you are travelling.
> 
> https://www.news.com.au/finance/sup...y/news-story/ba09fe5f47f69202aa53deeb279b01d6



Not true! Only need about 350k from memory. 
Get part pension, health card, live on $1000 per week for the rest of your life indexed. Self interest makes the super industry want to scare people. 
There's plenty of info out there and books supporting this.
Latest book is called Don't Panic.
by Nick Bruining.

Seriously for people still working...
Don't be conned into living a miserable or miserly life. Don't be conned into dodgy or risky financial decisions by these sharks.

Also another common lie, the government can't afford the rising cost of pensions. In fact as a percentage of GDP the cost is reducing. Don't believe News Corp. They serve other interests not yours.


----------



## basilio (20 February 2019)

I thought this was particularly good summation of the current hubris over tax refunds for superannuates.

*"....the one issue to arouse any passion is the spectacle of the most well-off among our retired screaming to high heaven over the proposal that, though granted the concession of paying no tax on income from superannuation, they should no longer receive tax refunds as though they were paying it. " Ross Gittins*


----------



## willy1111 (20 February 2019)

basilio said:


> I thought this was particularly good summation of the current hubris over tax refunds for superannuates.
> 
> *"....the one issue to arouse any passion is the spectacle of the most well-off among our retired screaming to high heaven over the proposal that, though granted the concession of paying no tax on income from superannuation, they should no longer receive tax refunds as though they were paying it. " Ross Gittins*




But as the beneficial owners of the companies, they are paying it.

Why is the franking credit included in their taxable income if they are not paying it?

I imagine there would be quite an uproar from the low to middle income earners if a minimum  30% tax was applied to all income sources from the first $1 like what is being proposed with dividend income.


----------



## Smurf1976 (20 February 2019)

basilio said:


> *"....the one issue to arouse any passion is the spectacle of the most well-off among our retired*



The big lie in this whole debate is Labor presenting it as something which only affects the most well off in society.

They fail to mention that high income earners retain full benefits, zero change, and it's those on lower incomes plus those who use creative tricks to avoid tax which are about to be hit rather hard.

Nobody's going to argue about those using clever tricks being hit but I fail to see a valid argument for removing a benefit paid to lower income earners whilst retaining it in full for those on a higher income. Doing so is just an incredibly lazy way of fixing one problem whilst ignoring the consequences of doing so. It's akin to cutting the road toll by simply banning cars.

The media is much to blame here. If we had any decent journalists these days then we'd be having a "GST birthday cake" moment over that point. At least John Hewson had enough integrity to admit he couldn't answer the question when that one came up rather than fumbling something or changing the subject - credit where it's due, both sides had more integrity back then.


----------



## SirRumpole (20 February 2019)

Smurf1976 said:


> Nobody's going to argue about those using clever tricks being hit but I fail to see a valid argument for removing a benefit paid to lower income earners whilst retaining it in full for those on a higher income. Doing so is just an incredibly lazy way of fixing one problem whilst ignoring the consequences of doing so. It's akin to cutting the road toll by simply banning cars.




What Labor should say is this

"if you want to claim a franking credit rebate, then tell the ATO what your real income is (inclusive of tax exempt income), and if it's greater than $80k (say) then you don't get a rebate, otherwise you will".


----------



## Smurf1976 (20 February 2019)

SirRumpole said:


> What Labor should say is this
> 
> "if you want to claim a franking credit rebate, then tell the ATO what your real income is (inclusive of tax exempt income), and if it's greater than $80k (say) then you don't get a rebate, otherwise you will".



Seems perfectly reasonable to me and I wouldn't be complaining.

Only thing I'd add is the $80K should be set with reference to something (eg average wages etc or something like that) and adjusted automatically so as go avoid "bracket creep" over time.


----------



## sptrawler (20 February 2019)

Smurf1976 said:


> The big lie in this whole debate is Labor presenting it as something which only affects the most well off in society.
> 
> They fail to mention that high income earners retain full benefits, zero change, and it's those on lower incomes plus those who use creative tricks to avoid tax which are about to be hit rather hard.
> 
> ...




The problem is smurph, you will only convince those who aspire to become self funded, the unfairness of the policy.
The majority will never become self funded, therefore they just see it, as more money to fund their welfare.


----------



## willy1111 (21 February 2019)

SirRumpole said:


> What Labor should say is this
> 
> "if you want to claim a franking credit rebate, then tell the ATO what your real income is (inclusive of tax exempt income), and if it's greater than $80k (say) then you don't get a rebate, otherwise you will".




And what labour are really saying is

"If you have investments in shares, we think you are rich and therefore you should pay a minimum 30% tax on any income you derive from that investment so we can give it to those that don't have investments, actually no we need it to pay for schools and hospitals that sounds better."


----------



## Humid (21 February 2019)

Smurf1976 said:


> The big lie in this whole debate is Labor presenting it as something which only affects the most well off in society.
> 
> They fail to mention that high income earners retain full benefits, zero change, and it's those on lower incomes plus those who use creative tricks to avoid tax which are about to be hit rather hard.
> 
> ...




I wonder how many people who are affected by this actually voted for Labor in the last election?
I would suggest not many and the same again this election.......see how it works


----------



## sptrawler (21 February 2019)

Humid said:


> I wonder how many people who are affected by this actually voted for Labor in the last election?
> I would suggest not many and the same again this election.......see how it works



Like I said a while ago Humid, it will keep the working man in his box, just like the U.K.
have a think how you will generate enough investment income, to become self funded when you stop work, you either generate it from shares or from property.
Labor is shutting both doors for the blue collar worker, you may think it is great, I think it is sad for the working person.
Time will tell, but as has been proven time and time again, there is no one better at keeping the working man down than himself.
That is why Labor get away with it, they know from experience, how gullible and apathetic the worker is from experience as union organisers.


----------



## qldfrog (21 February 2019)

So back to my 50pc idea.once 50pc of society is on welfare, the left is ensured of perpetual power by taxing to death the 49pc minority and" redistributing" the proceeds..
I think we can all agree that for people who have paid super but not yet accessing it, the title of this thread is quite accurate, and it becomes clearer year after year


----------



## sptrawler (21 February 2019)

qldfrog said:


> So back to my 50pc idea.once 50pc of society is on welfare, the left is ensured of perpetual power by taxing to death the 49pc minority and" redistributing" the proceeds..




They will sit and tell you how unfair it all is, while scratching their ar$e, then putting their hand out. Is there any wonder Australia's going down the chute.


----------



## Smurf1976 (21 February 2019)

sptrawler said:


> Like I said a while ago Humid, it will keep the working man in his box, just like the U.K.
> 
> .......
> 
> Labor is shutting both doors for the blue collar worker, you may think it is great, I think it is sad for the working person.




You've hit the nail on the head. Everyone, blue collar and lower level white collar workers* in particular, kept in their place.

Lower level white collar - that's anyone in an office who isn't an actual lawyer, doctor, executive or otherwise earning substantially over $100K or in other words it's most white collar workers.

Add them to the blue collar workers and that's most of the Australian workforce - the ordinary people who leave home in the morning and walk to the train station to head into the CBD or who get in their ute / truck / van and drive to the job site. Everyone from nurses to bus drivers to tradies to administrative workers are affected.

Those for whom it's not a problem = highly paid professions, executives, celebrities, senior politicians, anyone else with an unusually high income.


----------



## Humid (21 February 2019)

sptrawler said:


> Like I said a while ago Humid, it will keep the working man in his box, just like the U.K.
> have a think how you will generate enough investment income, to become self funded when you stop work, you either generate it from shares or from property.
> Labor is shutting both doors for the blue collar worker, you may think it is great, I think it is sad for the working person.
> Time will tell, but as has been proven time and time again, there is no one better at keeping the working man down than himself.
> That is why Labor get away with it, they know from experience, how gullible and apathetic the worker is from experience as union organisers.




Remember penalty rates
The liberal con is getting people to believe their something their not
Sound familiar 
Bloody unions like at wheatstone 235k a year and barrow 250+ pa lol
I did 3 at barrow 2 at wheatstone
Not bad for a tradie


----------



## sptrawler (21 February 2019)

Humid said:


> Remember penalty rates
> The liberal con is getting people to believe their something their not
> Sound familiar
> Bloody unions like at wheatstone 235k a year and barrow 250+ pa lol
> ...



Unfortunately there isn't a job for everyone there, but if you're in the loop good for you, use the money wisely.
I think it is great when a blue collar worker, breaks through the glass ceiling, just don't blindly follow what your told, think things through.


----------



## sptrawler (13 March 2019)

*AustralianSuper declares war on SMSFs*
_
AustralianSuper chief executive Silk will today call for a clampdown on self-managed super in response to the Productivity Commission's finding that SMSFs with less than $500,000 tend to perform "significantly worse" than regular super funds.

Mr Silk, who runs the nation's biggest super fund with $145 billion under management, will tell the Conference of Major Super Funds on the Gold Coast that an inquiry is needed into SMSF performance, and that the probe should lead to a "revamped and smaller SMSF sector" with tighter regulatory safeguards.
I re posted one of Ann's posts here.

It will be hard for any SMSF to perform better than a retail or industry fund, if Labor give the SMSF a 30% handicap, therefore all SMSF would be forced over.
One of my mates has a SMSF, he sold a block of land and put the money into his fund, he only puts it in term deposit and draws the minimum. He isn't beating anyone, but he sleeps well, he has plenty of holidays and it is his money.
Why should he be forced to give his money to someone else?
This will all end badly for people. IMO
My guess is the middle class will vanish, there will be the rich and the poor, like most places. 
What makes Australia unique is about to disappear.IMO time will tell.
Dramatic? Maybe, but let's wait and see._


----------



## HelloU (13 March 2019)

??
i did not talk to silk bloke so not sure  .................. but the recent prod comm review was about apra regulated stuff (industry and retail fee paying stuff), not smsf ato stuff. i dunno if they even mentioned it but not gunna check.

my gut feel is silk would not talk like this.


----------



## Bill M (13 March 2019)

sptrawler said:


> Mr Silk, who runs the nation's biggest super fund with $145 billion under management, will tell the Conference of Major Super Funds on the Gold Coast that an inquiry is needed into SMSF performance, and that the probe should lead to a "revamped and smaller SMSF sector" with tighter regulatory safeguards.



Now why on earth would he say that? It has nothing to do with his Industry Super Fund style. Like you said SP, some people choose to have a SMSF because they would rather pay $1,000 a year in fees for a portfolio full of term deposits and they know and are happy with earning less. Some people don't want any risk.

The thing Mr. Silk (if he said that) needs to realise is that Industry Super funds charge much higher fees for large accounts and pay way less for cash deposits. So why should anyone be happy with 1.5 to 2% for cash when they can get 2.6% with term deposits in a SMSF with much less fees?


----------



## sptrawler (13 March 2019)

Bill M said:


> Now why on earth would he say that? It has nothing to do with his Industry Super Fund style. Like you said SP, some people choose to have a SMSF because they would rather pay $1,000 a year in fees for a portfolio full of term deposits and they know and are happy with earning less. Some people don't want any risk.
> 
> The thing Mr. Silk (if he said that) needs to realise is that Industry Super funds charge much higher fees for large accounts and pay way less for cash deposits. So why should anyone be happy with 1.5 to 2% for cash when they can get 2.6% with term deposits in a SMSF with much less fees?



I think we are just at the beginning, of the long road, that ends with the Government taking over our super and giving it back to us as a pension.


----------



## Zaxon (14 March 2019)

sptrawler said:


> I think we are just at the beginning, of the long road, that ends with the Government taking over our super and giving it back to us as a pension.




And then means testing it, so if you've got any money outside of super, then you're not eligible for your new government/super pension.


----------



## Belli (14 March 2019)

Totally disillusioned with super. It's been a political football ever since it came into being.  Rather regret having an SMSF now.  Was great at the time and extremely useful in our circumstances then but not now.  Probably I got sucked in through all the wonderful tax breaks and all that crap.  If you've got enough outside super you probably don't actually need it.

I'm fining it very tedious to deal with it now.


----------



## HelloU (14 March 2019)

Nothing really has changed over the last few years with the exception of actually defining what this money is for - and so limits have been prescribed on retained amounts. A good thing in my opinion.

I think some of the "outrage" and "concern" has arisen because many had forgotten that they actually have a Self Managed Superannuation Fund ........ because for 20 years all they had was a Self Superannuation Fund. Sure, they had to decide between WBC or CBA shares but it has been a pretty standard playbook.

There is a reason they are called "Managed".


----------



## Knobby22 (14 March 2019)

I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds. 
Better to get a life and let them do it for you.
Obviously if you were with AMP or the banks it is a different story. Lousy returns and high fees may make it worthwhile. Honestly though I know someone who ruined their super returns and I am sure there are many out there.
I'm really happy with Australian Super and Ian Silk.


----------



## Darc Knight (14 March 2019)

Knobby22 said:


> I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
> Better to get a life and let them do it for you.
> .




The Accounting profession for one promoted it. More fees for them.


----------



## sptrawler (14 March 2019)

Zaxon said:


> And then means testing it, so if you've got any money outside of super, then you're not eligible for your new government/super pension.



Then we will have gone full circle, again.


----------



## Ferret (15 March 2019)

Knobby22 said:


> I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
> Better to get a life and let them do it for you.
> Obviously if you were with AMP or the banks it is a different story. Lousy returns and high fees may make it worthwhile. Honestly though I know someone who ruined their super returns and I am sure there are many out there.
> I'm really happy with Australian Super and Ian Silk.




Agree 100%. 

Industry funds cop a bit of a bagging here on ASF, maybe because of peoples political leanings.  I have much of my retirement savings in an industry fund balanced option and it's performed really well over the long term.  And they do all of the book keeping for me.

I also have some of the industry fund in the "Direct Investment Option" where I can do my stock picking.  I find the stock picking a bit of fun, but I think the balanced fund has out performed me over the years!


----------



## willy1111 (15 March 2019)

Knobby22 said:


> I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
> Better to get a life and let them do it for you.
> Obviously if you were with AMP or the banks it is a different story. Lousy returns and high fees may make it worthwhile. Honestly though I know someone who ruined their super returns and I am sure there are many out there.
> I'm really happy with Australian Super and Ian Silk.




I guess it depends on your point of view and willingness to learn new skills.

I don't think it is hard work, nor  do I think it is more fees, nor do I think it is hard to outperform Industry Funds.

We are all different and I am glad I have the option of having an smsf.


----------



## sptrawler (15 March 2019)

willy1111 said:


> I guess it depends on your point of view and willingness to learn new skills.
> 
> I don't think it is hard work, nor  do I think it is more fees, nor do I think it is hard to outperform Industry Funds.
> 
> We are all different and I am glad I have the option of having an smsf.



I agree with you, my fees are $850 per annum, it is just a case of downloading my comsec and bank statements then emailing them.
If that is hard and complicated, people shouldn't bother investing in the first place.


----------



## IFocus (15 March 2019)

Knobby are there not industry funds and then industry funds?

As they are not all equal

My SMSF fees are $800 / year


----------



## Knobby22 (16 March 2019)

IFocus said:


> Knobby are there not industry funds and then industry funds?
> 
> As they are not all equal
> 
> My SMSF fees are $800 / year



Who are you with or how did you work it out IFocus?
My administration fee is $1.50 per week.
There is also the insurance that covers for death, disability and income protection of $21 per month. 
Last year's return was 11.08% which I think is pretty good. This gives me a mix of assets. I went partly international shares during that time as well as balanced.
I know there are hidden fees e.g to the management of International Shares.

I invest personally outside super but for my piece of mind, less stress, and for my family's sake I keep my super fairly conservative and I have to say it's really built up.  I only started adding additional contributions this month.


----------



## IFocus (16 March 2019)

I am with Esuper fees are actually $900 per year includes audit etc.

I asked as a bloke I know in the industry told me industry funds are excellent but don't assume they are all excellent some are not.

Check the funds that you have parked your money in they all charge management fees that don't show up on statements you need to read the actual prospectus  to find out, any thing over 1% is to much a lot charge 2.5% which is scandalous.

BTW good work on adding more.


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## Bill M (21 March 2019)

A very good read. I've only shown 3 paragraphs. The full story is here:

https://www.superguide.com.au/retirement-planning/stop-political-bullying-retirees-fair-go

---
*Stop political bullying: Retirees deserve respect and a ‘fair go’*
Many of our current Australian retirees paid taxes (higher than what we pay today) for up to 50 years (and some still pay tax), and those taxes helped build the infrastructure and community services that we all enjoy today. Hopefully, the efforts of each successive generation will add to the experience and lifestyle of the generations following.

Merely cutting retirement incentives is not robust, strategic long-term retirement policy. We want older Australians to have accumulated assets to support their retirement. Suggesting that because they have done what they were expected to do, they should then be punished with retrospective Age Pension and superannuation policies, and selective franking credits policy, is, in my opinion, lazy policy, advised by out-of-touch advisers and egged on by a group of Australians who believe that the younger generations are immediately entitled to a lifestyle that the older generations took 30 to 40 years to create.

If a retired Australian has superannuation savings or non-superannuation savings, and they rely mainly on those savings (super pension, interest, dividends, franking credits) to live, then they did what they were asked to do. Such Australians heeded the key message of successive governments. The key message was you need to save for your retirement rather than relying solely on the Age Pension.
---


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## sptrawler (21 March 2019)

The problem is Bill, no one gives a $hit, as you get older you become an easy target, the politicians care more about overseas issues than pensioners.
The young are just looking for what they can buy next and the middle aged are just hoping you move on as soon as possible.
With the latest changes, you will be just as well off on the pension Bill, so get out there and enjoy mate.
Give everyone the 'bird' and tick off your bucket list. 
It is only a matter of time, before they limit how much you can withdraw from your super, because the penny will drop and people will start spending their nest egg.

I have been doing some sums, since yesterday, as this subject was on another thread.
The reality is if they take the franking credit off, and you have $1m in super, you are no better off than someone with $200-300k in super.
With $1m in super, you would probably have half in shares and half in cash, so at 4.2% overall return that is *$42,000 income without franking credits*.

On a pension asset test $387k and income test $7,900p.a, then lose 50c for every dollar above that.

So if a couple had $300k of shares, giving 4.2% dividend, that would be $12,600 + $3780 franking = $16,380
By the income test 16,380- 7900 = $8480/2 = $4240 off the pension.
So $36,301.20 - $4,240 + $16380 = *$48,441.20 + cheap drugs on the pension*.

This is only my working out, but if it is correct it certainly highlights that it is a waste of energy, saving to self fund.IMO If it is incorrect can someone correct me please.
You have to forego a lot of life's pleasures along the way, to build up a nest egg, only to have the politicians spit in your face.
The really galling thing, is the muppet's who cheer them on, not realising it will affect them in the not too distant future.
All we can hope, is the dumbar$es wake up, and realise how stupid Labors plan is.


----------



## Junior (21 March 2019)

sptrawler said:


> I have been doing some sums, since yesterday, as this subject was on another thread.
> The reality is if they take the franking credit off, and you have $1m in super, you are no better off than someone with $200-300k in super.
> With $1m in super, you would probably have half in shares and half in cash, so at 4.2% overall return that is *$42,000 income without franking credits*.




I think you are much better off with $1mill, as you have access to an additional $700,000 to $800,000 in capital.  This is very valuable....you could use this capital:

* to slowly draw down on to top up your income in retirement, and achieve a better standard of living.
* Gifts or loans to children & grandchildren.
* take a lump sum to fund major home repairs/renovations, an overseas holiday, a new car or caravan.
* fund a deposit to enter an Aged Care facility, and to fund daily fees.

An individual or couple on full Age Pension generally cannot afford any of the above luxuries.


----------



## sptrawler (21 March 2019)

Junior said:


> I think you are much better off with $1mill, as you have access to an additional $700,000 to $800,000 in capital.  This is very valuable....you could use this capital:
> 
> * to slowly draw down on to top up your income in retirement, and achieve a better standard of living.
> * Gifts or loans to children & grandchildren.
> ...



I don't disagree with you, but I'm saying there is no point in keeping the million, you will be better off divesting as you say above, rather than keeping it and being penalised.
It is very difficult for a person, who is a saver and an accumulator, to change into a spender and consumer. But I think it would be very unwise not to do so, because things could change very quickly.

IMO it will only be a matter of time, before the Government brings in rules that wil restrict your options, blind Freddy can see that.
The pension and $300k is as good if not better outcome, than $1m and the loss of lifestyle to accumulate it, it is a no brainer.
Yet as has been shown on here, most have no sympathy for the SMSF pensioner, they are all thought of as fat cats and the pensioners as poor people that need more.
Don't forget the pension is indexed every six months, there are a lot of perks and you could top up the pension from $300k for a long time.
You can also have a lot of fun spending down to $300k, and the pension contribution keeps going up.
10 years ago I would never have said this, but watching the smirk on silly Billy's face tells me anything is possible, nasty things coming. IMO


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## Humid (21 March 2019)

Buying high yielding stocks by definition means buying mature companies with limited growth opportunities who can find nothing better to do with their money than return it to shareholders. In general, these stocks are by their nature, dull under-performing stocks. As such, in pursuit of franking credits, many investors have committed themselves to a lower total return because the share prices of mature stocks don’t grow as much as stocks that are in growth industries and don’t pay high dividends but reinvest returns. This franking “shock” might just shock some investors out of this rather mediocre game of buying low growth stocks with high yields which have for years distracted them from the growth available in the stock market generally. Ask any American and they will tell you that bonds are for income and equities are for growth. This is why so many American companies continue to pay no dividends despite sitting on mountains of cash because they know their job is to achieve a high return on equity and use their profits to fund that growth. American companies know the folly of chasing income, because it is in the US investment culture, to grow earnings not to return capital to shareholders so that they can earn 2.8% in bonds. It has always rather amazed me, the Australian appetite for income stocks, and it is because of franking, and the companies have pandered to that demand. That’s why the Australian market yields 4 ½% against the US market on just over 2%. Because we have a population of investors seduced by a tax fiddle rather than the main game of trying to make money out of capital gains.


----------



## sptrawler (21 March 2019)

Humid said:


> Buying high yielding stocks by definition means buying mature companies with limited growth opportunities who can find nothing better to do with their money than return it to shareholders. In general, these stocks are by their nature, dull under-performing stocks. As such, in pursuit of franking credits, many investors have committed themselves to a lower total return because the share prices of mature stocks don’t grow as much as stocks that are in growth industries and don’t pay high dividends but reinvest returns. This franking “shock” might just shock some investors out of this rather mediocre game of buying low growth stocks with high yields which have for years distracted them from the growth available in the stock market generally. Ask any American and they will tell you that bonds are for income and equities are for growth. This is why so many American companies continue to pay no dividends despite sitting on mountains of cash because they know their job is to achieve a high return on equity and use their profits to fund that growth. American companies know the folly of chasing income, because it is in the US investment culture, to grow earnings not to return capital to shareholders so that they can earn 2.8% in bonds. It has always rather amazed me, the Australian appetite for income stocks, and it is because of franking, and the companies have pandered to that demand. That’s why the Australian market yields 4 ½% against the US market on just over 2%. Because we have a population of investors seduced by a tax fiddle rather than the main game of trying to make money out of capital gains.




Sounds like someone who hasn't done a lot of investing, the worker needs to buy an income that replaces the wages, when they stop working.
Most as I did, initially buy amazing growth potential stocks and after a period of time find they are no further ahead, some go up, some go down, some go broke.
Also they notice that there is very little, if any income coming in, to replace that pay packet.
Then it dawns on them, jeez I'm running out of time, I had better buy some income producing stocks.
Then after another period of time with dividend re investment, they think hell this is going o.k, I should add to them.
Now silly Billy and don't care Chris, are saying "well that was stupid, you would have been better off taking that cruise when you were younger" . 

All that crap, Bowen says to justify his disgracefull behaviour is nonesense, buying Australian mature businesses and re investing the dividend is called compounding, buying new start ups with a blue sky prospectus is called gambling. He is just a dick.
Also the 1987 stock market crash, was caused because of lack of savings in Australia, the banks nearly went belly up and it was the reason behind Keating starting super in the first place. Bowen is a wally, with all the rubbish he says.


----------



## Humid (21 March 2019)

Written by a broker lol


----------



## sptrawler (21 March 2019)

Humid said:


> Written by a broker lol



Well it certainly didn't sound, like it came from you Humid. 
Buying blue sky stocks, unless you are a seasoned trader, is nothing short of lunacy.
You will do your dough in no time.
I have heard Bowen say, Australians shouldn't concentrate their investments in Australia, well he is making sure most wont, but then again if he forces everyone into his super he can invest where ever he likes.
For Bowen to come out with that sort of nonsense, is only feeding the chook's, that don't know any better.
IMO he is shooting himself in the foot and when the left wake up to it, there will be hell to pay.lol

Same as when Keating sold super, as a way to improve your retirement and supplement the pension, so we went without pay rises.
It would have been much harder to sell it, if he said you are going to put away money to pay for your own pension. All it has done, is become another tax, on the worker.
Not only that, but if you put away more than we think you need, we will take it off you. lol
The whole super system has become a Government scam, that is bordering on a indirect tax system. IMO


----------



## Humid (21 March 2019)

sptrawler said:


> Well it certainly didn't sound, like it came from you Humid.
> Buying blue sky stocks, unless you are a seasoned trader, is nothing short of lunacy.
> You will do your dough in no time.
> I have heard Bowen say, Australians shouldn't concentrate their investments in Australia, well he is making sure most wont, but then again if he forces everyone into his super he can invest where ever he likes.
> ...




Yeah a bit high brow for me
I think I’m starting to understand your fetish with cruises................captive audience


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## sptrawler (21 March 2019)

Humid said:


> Yeah a bit high brow for me
> I think I’m starting to understand your fetish with cruises................captive audience



No actually it is because there is no computer, t.v or politics, untill you get in Port, away again in 3 weeks. Yeh


----------



## Humid (21 March 2019)

sptrawler said:


> No actually it is because there is no computer, t.v or politics, untill you get in Port, away again in 3 weeks. Yeh




Hence the franking credits
Set and forget


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## sptrawler (21 March 2019)

Humid said:


> Hence the franking credits
> Set and forget



Now I have moved on to plan B.

I was always worried, about getting to 80 and ending up on a pension.
Silly Billy and don't care Chris have cured me of that.


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## Smurf1976 (21 March 2019)

Humid said:


> Because we have a population of investors seduced by a tax fiddle rather than the main game of trying to make money out of capital gains.



The only time that is true is at the end of a major bull market / imminent start of a major bear market.

Under normal circumstances income accounts for a major portion of returns over time both in the US and Australia.  If yield is just over 2%, well that tells you rather a lot about what's likely to come next and it's not good news for investors seeking capital gains.


----------



## Humid (21 March 2019)

sptrawler said:


> Now I have moved on to plan B.
> 
> I was always worried, about getting to 80 and ending up on a pension.
> Silly Billy and don't care Chris have cured me of that.



What are we talking  6k pa?


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## sptrawler (21 March 2019)

Humid said:


> What are we talking  6k pa?



It's the principal that matters, if Chris doesn't give a $hit, neither do I.
I had four kids, never traveled, always had older cars that I did up. Well now at 63 it is obviously time to get out and do it.
Next April Japan, Canada, U.S, Canada east coast, U.K, cruise back to Sydney through the Panama all up 4-5 months. Just do it.


----------



## Humid (21 March 2019)

sptrawler said:


> It's the principal that matters, if Chris doesn't give a $hit, neither do I.
> I had four kids, never traveled, always had older cars that I did up. Well now at 63 it is obviously time to get out and do it.
> Next April Japan, Canada, U.S, Canada east coast, U.K, cruise back to Sydney through the Panama all up 4-5 months. Just do it.




Now your talkin .....make a posit outa a negative 
Honestly I spend that much time at airports and travelling I’m happy to stay home.

I’m thinking your doing the reverse bogan


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## awg (21 May 2019)

I virulently objected to the Labor Party about the Dividend Imputation policy the instant I heard about it, due to being a SMSF in pension phase, aged between 55-60..I still pay tax mate!

I retired primarily due to a medical condition..so not by choice

The idiots I spoke to, including Chris Bowens spokeswoman on the matter, were ignorant & defensive

Not one of them could understand my marginal tax situation.

so in the instance of a $25k pension, credits were ~$3500..that is pretty brutal !

If someone wants to slap me in the face, put their hand in my pocket, demean & lie to me,
they should not expect my vote. I almost always vote Labor.

Chris Bowen you f***wit, its not a gift..it was called "double taxation" before, and in *my *case, it would have been again...I did take notice when you said if I didnt like your policy, dont vote for us

Clearly no one was old enough to remember what happened to Dr Hewson when he upset the pensioners, students & unemployed all at once

Having said all that, I do support some reform in the areas they proposed..a cap would have been suitable. 

Note the idiots initially imposed it on pensioners!!..then decided to drop it!!..do ya reckon they noticed it getting dropped..they did not.

I did not meet one person affected who was not livid. 

imo, many people who were not affected at all, including most shareholders, and non-smsf
I suspect they believed all imputation credits would no longer be applied against any income

cannot imagine any of the 4% affected would have voted yes, and many others not even affected!

they did a terrible job of explaining a lame policy!

on the ABC radio, I still heard a commentator saying only 10,000 people were affected..bloke rang up and said check yr maths 4% of 25million = (1m)...she came back on and said "No..its only 10,000"...I screamed


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## sptrawler (21 May 2019)

awg said:


> I virulently objected to the Labor Party about the Dividend Imputation policy the instant I heard about it, due to being a SMSF in pension phase, aged between 55-60..I still pay tax mate!
> 
> I retired primarily due to a medical condition..so not by choice
> 
> ...



How are you going AWG, long time no hear.
There is a couple of threads on the issue, in general chat section, smurph brought up about your situation, Bill M and I are in the same predicament as you. Quite a few were unsympathetic to our situation, we would have received more sympathy if we had arrived by leaky boat wearing a Rolex.
Thankfully the silent majority saw through Labor


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## Bill M (21 May 2019)

awg said:


> so in the instance of a $25k pension, credits were ~$3500..that is pretty brutal !



One of best posts I've read in a long time. I'm almost exactly as the above. It just meant a salary drop of 15 to 20%. I wonder how everyone would have voted if they were facing that? No one would vote for that, I bet! Like you say, they are still in denial.


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## awg (21 May 2019)

my rant isnt over...

So if you have between 500k and 1M in SMSF are you supposed to be considered rich ?

I thought the Govt did not want me to draw on an Age Pension ?

@4% = 20-40k per year (and I pay some tax), its not exactly living high on the hog

So 80/20 rule..20% drew 80% of "refund"...the remaining 80% drew only 20%,
therefore a cap on maximum refund would be much fairer, and I would support the idea

I also support some reform in property taxes, even though I have an investment property.

As youse would all know though, until they are paid off, they dont make +cashflow, 
and you cant eat an unrealised capital gain

strongly suspect aspiring younger property investors would not have been happy about the negative gearing changes either, and not sure whether Chris & his mates fully remember what happened when Paul Keating did the same thing, had to pull it 12mths later..but they would have been in diapers then

and yes, think i copped a forum flogging last time,

but whats the difference between a super rebate, dividend imputation credit, diesel rebate, or any other form of redistribution of wealth via Govt concession ?


----------



## sptrawler (21 May 2019)

awg said:


> but whats the difference between a super rebate, dividend imputation credit, diesel rebate, or any other form of redistribution of wealth via Govt concession ?




The difference is, Labor thought it would kill two birds with one stone, hit the super wealthy SMSF's and get the smaller ones to roll over into Industry Funds.
There was no down side and when it was so well received by the press, then they thought this is easy, the press is also hammering property investors skewing the market so we will fix that too.
IMO what Labor didn't factor in is the younger generation are savy, don't read the papers and don't watch the news. So all the media becomes, is an echo chamber for presenters and those left leaning ones who love hearing themselves. Just my opinion.
The whole thing has a Keating flavour to it, way too smart for Billy and the boys, well it may be the end of an era. IMO
The other thing is, if Labor had really cared who the franking credit removal would hit, exempting welfare recipients wouldn't have been an after thought, in reality they didn't care who it hit. The same goes for the NG and CGT changes, they would have built in some form of progressiveness in all the changes, if the actually cared.
So the silent majority spoke, that's why the polls didn't pick it up. IMO


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## sptrawler (10 July 2019)

The Government is getting into the reverse mortgage field.

https://www.smh.com.au/money/super-...heme-poised-for-take-off-20190702-p523bq.html

I like this part, from the article:
“Retirees can be averse to downsizing from the family home because it impacts on the age pension,* but income from the pension loan scheme is free of the pension asset tes*t,” Henschke says.

Until a change of Government decides to include it in the asset test. Just my opinion.


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## sptrawler (12 July 2019)

Interesting situation that went to the supreme court, Bluescope only paid super on normal working hours, not on O/T hours. From memory I think that is all that was required by law.

https://www.abc.net.au/news/2019-07...rkers-miss-back-pay/11298700?section=business

_The part that I find funny, is what the senior vice president of the NSW branch of the AWU said.
"Superannuation was established by the labour movement precisely so that workers like those at BlueScope could retire comfortably," he said.

"This decision pushes against that objective and that should be rectified through legislation._"

Where has he been living? Over recent history, there has been a push for everyone to accept, that super is to replace your pension not enhance it. That was made blatantly obvious, last election.


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## sptrawler (17 July 2019)

Here is a more accurate assessment of SMSF's and their balances, for people who are actually interested in the facts.
https://smsmagazine.com.au/news/2018/07/24/statistics-show-smsfs-not-just-for-the-rich/

From the article:
_The most recent figures pertaining to the sector reveal there are currently 592,658 SMSFs servicing 1.12 million members. The average assets per member stand at $599,265, with the average assets per fund being $1.12 million.

However, the median statistics reflect a slightly different picture, with the median assets per member standing at $362,280 and the median assets per SMSF currently coming in at $641,983_.


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## sptrawler (22 July 2019)

At last a glimmer of hope for workers, there is a groundswell in the coalitions ranks, to let workers chose if they want more super or pay rises.
https://www.smh.com.au/politics/fed...reases-to-superannuation-20190722-p529j8.html


----------



## sptrawler (23 July 2019)

First State and Vic Super, to merge.

https://www.financialstandard.com.au/news/first-state-super-vicsuper-merger-talks-progress-139479609

From the article:
_The similarities are also reflected in the numbers.

As at May 31, the average accumulation balance at VicSuper is $97,618 while First State's is $93,996. In pensions phase, the average VicSuper member has $334,177 compared to First State's $289,537.

VicSuper's membership comprises 65% women which is virtually on par with First State's 67%. From an age perspective, VicSuper's average member is 45, while First State's is 46.

In terms of investment returns, MySuper investment returns from June 30 show VicSuper has achieved a five-year return of 8.23%, close to First State's 8.3%. Over a 10-year period, VicSuper has outperformed First State, achieving 9.17% and 8.77% respectivel_y.


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## sptrawler (23 July 2019)

I certainly hope this doesn't end in tears, Australian Super direct lending to corporate and commercial businesses, it will be interesting to see how it unfolds.
https://www.theage.com.au/business/...g-to-property-developers-20190723-p529rt.html


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## sptrawler (2 August 2019)

I love all this media uproar about the suggestion, that low income earners should be able to take a pay rise rather than a super contribution, as though they will be able to access the money later and it wont cost them part of their pension.


----------



## sptrawler (17 September 2019)

Identity theft and loss of super, how easy it is apparently, this is a must read. IMO

https://www.smh.com.au/business/com...ver-5-million-share-scam-20190917-p52s46.html

From the article:
_A young Melbourne woman has been charged following an investigation by the Australian Federal Police and the corporate regulator into a major fraud and identity theft syndicate involving some of the country's biggest superannuation funds_.


_Federal police Acting Commander Chris Goldsmith has asked Australians to check their super balances as quickly as possible as it wrestles to stamp out an alleged fraud it has described as being run by a global network.

"We allege the woman attempted to steal $1.5 million as part of a sophisticated global network," he told a press conference on Tuesday. Acting Commander Goldsmith said the total fraud could be as high as $10 million_.


----------



## sptrawler (27 September 2019)

Interesting observation:
https://www.smh.com.au/politics/fed...ine-of-retirement-review-20190927-p52vkf.html

From the article:
_National Seniors' chief advocate Ian Henschke said past changes to the age pension taper rate meant people with $800,000 in savings were now up to $12,000 a year worse off than people who had savings of $400,000_ .

If as expected the low interest, low inflation climate is going to persist for an extended period, there is very little point in saving for your retirement. IMO


----------



## Knobby22 (28 September 2019)

It was the Libs who brought in that taper rate.
It's all about taxing into a surplus as I can attest with my wage.

Can this government look at fairer taxing and ensure forein companies that are ripping millions out of our economy to tax havens pay their share? After all they enjoy Australia's infrastructure and laws.

They had an episode of Utopia loosely based on this issue and it didn't end well for the citizens.


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## sptrawler (28 September 2019)

Knobby22 said:


> It was the Libs who brought in that taper rate.
> It's all about taxing into a surplus as I can attest with my wage.
> .



It sounds as though there will be a review into the super system, I guess there will be lots of reviews and modifications as the system matures.
In reality it is really just doing a full circle, where a percentage of your tax pays for your pension, as it was originally. 
The only obvious difference, is the managing of the money has been privatised.


----------



## Knobby22 (28 September 2019)

sptrawler said:


> It sounds as though there will be a review into the super system, I guess there will be lots of reviews and modifications as the system matures.
> In reality it is really just doing a full circle, where a percentage of your tax pays for your pension, as it was originally.
> The only obvious difference, is the managing of the money has been privatised.



A proper review is a good chance to set the future direction and achieve something in government. Hopefully not have it end up as just a privatised pension.


----------



## sptrawler (30 September 2019)

Early stages of the review, but Labor and the Industry funds aren't happy that a critic of labors franking credit changes, is on the review panel.
https://www.smh.com.au/politics/fed...anking-credit-campaigner-20190930-p52w6x.html

From the article:
_They knew when they appointed Professor Ralston it would be hard for Labor to sign up to conclusions reached by the panel when she has been such a prominent, well-known and dedicated campaigner against the Labor Party," he said.

Professor Ralston told The Sydney Morning Herald and The Age that she was not a "political person" but found Labor's franking credit policy to be "pretty inequitable"_.
_"People in large funds with pension accounts were largely unaffected, while self-managed super funds in pension mode and older people with no super and a few shares would have been badly affected," she said. "The numbers clearly demonstrated that. I was very careful throughout to steer clear of politicians and remain as apolitical as possible_".

The good thing to take from their opposition, is that obviously Labor and the Industry funds are still after SMSF franking credits and their members.


----------



## sptrawler (28 December 2019)

Interesting article on the state of super.

https://thenewdaily.com.au/finance/superannuation/2019/12/20/retiring-boomers-super-funds/

from the article:
 The above chart, from Household, Income and Labour Dynamics in Australia (HILDA) at Melbourne University, shows the reliance on the age pension for over 50 per cent of income has declined significantly in recent years for all but the over-80 group, despite population ageing.
That means the budget will not be hit dramatically by population ageing, and projections from the Australian Taxation Office show the move away from pension-funded retirements will grow significantly.



Source: ATO
By 2023, 43 per cent of retirees will be self-funded when they leave the workforce, compared to only 22 per cent at the turn of the century.
APRA also found that super members are getting cannier and will move their money out of funds they no longer like or trust. Over the past five years there have been times when outward rollover flows from the system have spiked. But they have usually been quickly caught up by the overall growth in the super system.

It is important to note these rollovers are mainly not removals from the super pool, except for cases when the money was placed in self-managed funds. SMSFs, while they amount to one quarter of total super assets at $746 billion, only account for some 9 per cent of members and their growth has slowed in recent years.


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## sptrawler (30 December 2019)

Another article explaining the plight of self funded retirees.
https://www.abc.net.au/news/2019-12...n-retiree-savings/11829548?WT.ac=statenews_wa
Fom the article, I think this is an important issue, for those going for a part pension:
*Call for lower deeming rate*
_With interest rates forecast to remain at, or exceed, record lows, self-funded retirees are looking for financial protection through other sources, including government policy.

Last month, WA Self Funded Retirees Incorporated (WASFR) made a pre-budget submission to the Federal Government outlining nine recommendations to improve the financial position of its members.

Among the recommendations was a call to lower the deeming rate — the assumed return on a person's financial assets, which is used by the Government to determine pension eligibility — to 2 per cent.

Currently, single retirees are presumed to earn 3 per cent per year on financial assets of more than $51,800 (a rate of 1 per cent applies on savings up to the threshold).

For couples, the 3 per cent rate applies to combined financial assets worth more than $86,200_.


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## Humid (30 December 2019)

Retirement sounds harder than working 
You can all the cheap money you like but without the income security to pay it back who wants it


----------



## sptrawler (30 December 2019)

Humid said:


> Retirement sounds harder than working
> You can all the cheap money you like but without the income security to pay it back who wants it



It is a lot different now, than it was when term deposits were getting 8-12%, now they are getting 1.5-1.7%.
So $1m is getting $15-17k, so people have to take on more risk or run down the principle and access a pension.
The problem a lot find, it is hard to change their personal characteristics, once a saver always a saver. Therefore they find they are stressed, unhappy and feel they are somewhat failing, if their capital is running down fast.

When you are working, there is always the knowledge the money is coming into the bank, whether you need it or not.
You make a bad decision, uh who cares, I will just wait a couple of months and the money is back up.
That is the first thing that hits you when you retire, if you lose some money or make a bad investment, it ain't coming back unless you make a good investment or tighten the belt.


----------



## Belli (30 December 2019)

Oh well, they seem to have fallen for the siren call of yield and perceived safety of cash rather than a growing income stream from shares of which LICs and two ETFs are my poison of choice.

My dividend income for the calendar year has increased and it has also increased so far this FY due to owning more of the things.  Maybe they also tend to look or hear about day-to-day fluctuations in shares and forget about time.  If my aged memory is correct the ASX Accumulation index 10 years ago was close to 40,000 and now it is over 75,000.

That and knowing how to budget, ie expenditure v income but they no longer appear to have sufficient income.  Bad side of the equation.


----------



## qldfrog (30 December 2019)

I think they remember when they last invested their savings in 2007 and are still well below after inflation now...


----------



## Belli (30 December 2019)

qldfrog said:


> I think they remember when they last invested their savings in 2007 and are still well below after inflation now...




Well remember a few who ran scared and went to cash.  I'm not overly sympathetic as some threw a few comments if I mentioned I was still in shares and poo pooed me for my approach.

From the couple of people I still contact from time to time, they are still in cash but I don't appreciate the view held by one (who I no longer have any association with) who was somewhat derisory of my lifestyle, i.e. Only the well off can put solar on, install double glazing etc.

And yet he was formerly bragging how much he made per week which was more than my late wife and I were getting in a month.

Two households on the same income levels can end up with different result.  Depends on what they do with their income during their working lives.  As I said to one accountant, others can shop at DJ's while we shop at Target and when retired we can choose to shop at DJs while they will be obliged to shop at Target.


----------



## sptrawler (30 December 2019)

Belli said:


> Oh well, they seem to have fallen for the siren call of yield and perceived safety of cash rather than a growing income stream from shares of which LICs and two ETFs are my poison of choice.
> 
> My dividend income for the calendar year has increased and it has also increased so far this FY due to owning more of the things.  Maybe they also tend to look or hear about day-to-day fluctuations in shares and forget about time.  If my aged memory is correct the ASX Accumulation index 10 years ago was close to 40,000 and now it is over 75,000.
> 
> That and knowing how to budget, ie expenditure v income but they no longer appear to have sufficient income.  Bad side of the equation.



A lot of older people have only accumulated by saving and never invested, also interest rates have never been this low, long term average is about 7%.
Add to this the memory of the 1987 stock market crash and other events like 'storm' financial collapse and understandably some are scared.
I feel sorry for anyone who has saved for their retirement and now they get there it isn't as rosy as they hoped, be that for poor investment choices, investments gone bad or not investing at all.
Retirement for people who have worked and paid tax for 50 years, should be pleasurable. IMO


----------



## Belli (30 December 2019)

sptrawler said:


> A lot of older people have only accumulated by saving and never invested, also interest rates have never been this low, long term average is about 7%.
> Add to this the memory of the 1987 stock market crash and other events like 'storm' financial collapse and understandably some are scared.
> I feel sorry for anyone who has saved for their retirement and now they get there it isn't as rosy as they hoped, be that for poor investment choices, investments gone bad or not investing at all.
> Retirement for people who have worked and paid tax for 50 years, should be pleasurable. IMO




Fair points.

However, I guess what irks me is when I mix with others I sometimes get a feeling a few view it is unfair I am able able to do stuff they cannot. Not a lot but enough of them.  Well there ain't no contract with life so the It ain't fair clause doesn't exist.  Like others I went through 1987 and 2000 and 2007 as they did but I hung in there whereas they bailed at various stages. The result for me has been good but by some it's considered unfair.  No it isn't.  They made choices as did I.  They should (but probably won't or cannot) accept responsibility for the outcome of their choice.

As for Storm I did hear about it obviously and read some of the submissions made to the Review.  While I will not excuse any malpractice by the financial institutions those submissions revealed a lot about people.  Some too scared to insist they get their money out, to outright greed by others with a smattering of everything else in between.

No matter what the situation if people don't have a great outcome they rarely express a view that the cause may partially be their fault to various degrees.  It's people.


----------



## sptrawler (30 December 2019)

Belli said:


> Fair points.
> 
> However, I guess what irks me is when I mix with others I sometimes get a feeling a few view it is unfair I am able able to do stuff they cannot. Not a lot but enough of them.  Well there ain't no contract with life so the It ain't fair clause doesn't exist.  Like others I went through 1987 and 2000 and 2007 as they did but I hung in there whereas they bailed at various stages. The result for me has been good but by some it's considered unfair.  No it isn't.  They made choices as did I.  They should (but probably won't or cannot) accept responsibility for the outcome of their choice.
> 
> ...




I agree with your points and they are right, I have friends who have been workmates right through my career, they enjoyed themselves spent everything they earned + some.
Now they are retired they are on a full pension, with about $250k in super and to tell you the truth they are in a pretty good position.
Some other friends are on public service pensions, they are really happy they stayed in the old Government pension schemes, but tend to be the smuggest of all which isn't a good look.
What irks me is those that want to trash people like you and me and others, that saved and are self funded, I always thought the sacrifices would have been respected. 
Well that has been proven wrong, as now we are held up for ridicule and scorn, by those who want to blame us for any misfortune they find themselves in.
Which in reality probably has always been the case, all that has changed is social media and the media in general gives them the platform to vent their hate. 

So I have more time, for those that


----------



## Triple B (30 December 2019)

sptrawler said:


> So I have more time, for those that




Did the power go out SPT?


----------



## sptrawler (30 December 2019)

Triple B said:


> Did the power go out SPT?



My apologies, I was dragged off at a moments notice, grandchildren misbehaving. 
So as I was saying, I have more time for those that have tried and failed, than for those who have never tried at all, but criticise those that did.
Too many today are looking for someone to blame for failure, rather than aspiring to overcome adversity. IMO
By the way I'm becoming a convert to Belli's LIC, ETF pathway, I think as I get older it will suit our travelling lifestyle, that is if the money holds out.


----------



## Belli (30 December 2019)

Be so easy to have a rant so I'll have a small one.

Gets up my nose when a number of commentators consider I and a number of my peers have been very naughty and stuff money away in super and elsewhere.  Well, it is a view but mine is I have not done anything which was not legal at the time.

While I may personally disagree it was done, it was Parliament which passed legislation to refund excess franking credits - and I might add the proposal was supported by Labor if people bothered to search Hansard for Simon Crean's speech on the subject.  It was also Howard/Costello which turned superannuation into the second biggest tax rort by allowing tax-free pensions for those over 60.  Absolutely no logic to that in my mind (why not 59 years and 2 days or 63 year and five and half months?)

But the legislation was passed and I abide by the law as should every other person who used or may use those laws, both past and present, to assist them reach their financial aspirations.

As an aside I threw that issue about refund franking being initially supported by Labor to one candidate and he looked, um, somewhat uncomfortable.

Anyways I think, although the matter is now closed, it was so poorly sold and many people were insulted, especially those who held only a few shares, to be in effect called thieves.  Didn't go down well.  No matter which way the election went it wouldn't have stopped me investing.  I was investing before those refunds were introduced so why would I stop?

Now this country has a problem.  Like many I want people to receive subsidised pharmaceuticals (prepared to pay $2k per month for MS medication are we rather than $40?), our youth to receive funding for their education, public hospital care, publicly funded research, welfare for those in need.  However, where are teh funds because it's out 'tradition" to whinge about being taxed yet attempt to suck up any freebies as it's our right ya know.

It's all part of the reason why I am increasing my international allocation both personally and in the SMSF.  My assessment is this country is in danger of loosing its spark and becoming complacent.  We no longer seem eager to embrace change.  Because do do so is uncomfortable.

So ends the rant of this old fart who is close to 70 years of age.


----------



## sptrawler (30 December 2019)

Belli said:


> Now this country has a problem.  Like many I want people to receive subsidised pharmaceuticals (prepared to pay $2k per month for MS medication are we rather than $40?), our youth to receive funding for their education, public hospital care, publicly funded research, welfare for those in need.  However, where are teh funds because it's out 'tradition" to whinge about being taxed yet attempt to suck up any freebies as it's our right ya know..



With regard all of the above, people are dropping out of private health in huge numbers, our education system gets more money now than it ever has and the results are going backwards, welfare is a luxury that will be hard to fund for the healthy going forward IMO.



Belli said:


> It's all part of the reason why I am increasing my international allocation both personally and in the SMSF.  My assessment is this country is in danger of loosing its spark and becoming complacent.  We no longer seem eager to embrace change.  Because do do so is uncomfortable.
> .



We seem to no longer embrace much, including hard work, adversity and change. IMO
I fully understand why you are increasing your international allocation, as I will, the writing is on the wall for Australia.
When the high paying mining and associated shut down jobs go, so will a lot of political leverage, unfortunately.
The disconnect between the media and the workforce, will become a chasm and then the reality wont be pretty.
We tend to lag behind the U.K by about 5-7 years and I think that will be proven correct again.
Taking franking credits off people who have relatively little and giving them to people who earn millions, in the name of fairness, is always going to be a hard sell.
It would have been easier to say, everyone gets the pension and super is taxable, same as the U.K, Canada and N.Z apparently.
Then those that saved get the benefit and those that chose not to save are no worse off. Those with large super accounts would pay enough tax, to more than cover the pension they would get anyway.
But there probably isn't enough money in super yet to roll that out, the super system is still building up from the last time it was robbed, in the 1950's.
My rant for the day.


----------



## qldfrog (30 December 2019)

I 


Belli said:


> Well remember a few who ran scared and went to cash.  I'm not overly sympathetic as some threw a few comments if I mentioned I was still in shares and poo pooed me for my approach.
> 
> From the couple of people I still contact from time to time, they are still in cash but I don't appreciate the view held by one (who I no longer have any association with) who was somewhat derisory of my lifestyle, i.e. Only the well off can put solar on, install double glazing etc.
> 
> ...



No problem there, i shopped at aldi when  earning in the very very top bracket, now i earn not much, just investment and carry on my good habits


----------



## qldfrog (30 December 2019)

Belli said:


> Fair points.
> 
> 
> No matter what the situation if people don't have a great outcome they rarely express a view that the cause may partially be their fault to various degrees.  It's people.



Well, when a party representing around 50% of the electorate is behind this view, how can you blame them?
They will win ultimately


----------



## Humid (31 December 2019)

sptrawler said:


> With regard all of the above, people are dropping out of private health in huge numbers, our education system gets more money now than it ever has and the results are going backwards, welfare is a luxury that will be hard to fund for the healthy going forward IMO.
> 
> 
> We seem to no longer embrace much, including hard work, adversity and change. IMO
> ...




Trouble is if mining jobs dry up there’s a good chance your international allocation will suffer too


----------



## sptrawler (31 December 2019)

Humid said:


> Trouble is if mining jobs dry up there’s a good chance your international allocation will suffer too



Everything dries up if the mining jobs dry up IMO, the way they are introducing automation into ore recovery is only being held up by speed of deployment.
The technology is improving very rapidly, the Government needs to introduce a tax on volume to offset the loss in income tax as jobs reduce, or beef up the royalties system.
The top 10% of wage earners pay the biggest chunk of tax, a lot of them work in mining and associated industries, when they are put out of work the gig economy jobs wont pick up the slack.


----------



## sptrawler (13 January 2020)

The suggestion the PPR be included in the pension asset test, raises its head again, sooner or later it will be implemented IMO.

https://www.macrobusiness.com.au/2020/01/wealthy-home-owners-devour-aged-pension-welfare/

Currently there is no incentive, other than pride, to downsize the PPR to become self funded. It is actually more beneficial, to purchase a more expensive PPR, and qualify for a part pension at the moment.


----------



## Junior (13 January 2020)

sptrawler said:


> The suggestion the PPR be included in the pension asset test, raises its head again, sooner or later it will be implemented IMO.
> 
> https://www.macrobusiness.com.au/2020/01/wealthy-home-owners-devour-aged-pension-welfare/
> 
> Currently there is no incentive, other than pride, to downsize the PPR to become self funded. It is actually more beneficial, to purchase a more expensive PPR, and qualify for a part pension at the moment.




A relative of mine passed away recently.  Her PPR sold for nearly $4 million.  Tired old house but large, valuable piece of land.  She purchased it for $30,000 in the 1970s.  She was on part-age pension and very frugal!

I agree with creating an incentive to downsize, but it shouldn't be imposed on those already on pension IMO, it needs to be phased in for new entrants....once you're passed a certain age the concept of moving house can be terrifying.  In the case of my relative, she happily would have downsized or subdivided back when she was 65, if it made sense to do so for her retirement planning, but at 80 or 90 years old....it's a different story.


----------



## sptrawler (13 January 2020)

Junior said:


> A relative of mine passed away recently.  Her PPR sold for nearly $4 million.  Tired old house but large, valuable piece of land.  She purchased it for $30,000 in the 1970s.  She was on part-age pension and very frugal!
> 
> I agree with creating an incentive to downsize, but it shouldn't be imposed on those already on pension IMO, it needs to be phased in for new entrants....once you're passed a certain age the concept of moving house can be terrifying.  In the case of my relative, she happily would have downsized or subdivided back when she was 65, if it made sense to do so for her retirement planning, but at 80 or 90 years old....it's a different story.



It would have to be a well thought out policy.
Shooting from the hip wouldn't work.


----------



## qldfrog (13 January 2020)

Indeed it has been a while since the last government attempt to steal from the honeypot


----------



## Junior (13 January 2020)

qldfrog said:


> Indeed it has been a while since the last government attempt to steal from the honeypot




Yep only a year or two.  Time for more 'reform'!


----------



## Smurf1976 (13 January 2020)

Junior said:


> Yep only a year or two.  Time for more 'reform'!




Part of the reason we've come to a point where sensible change is virtually impossible in Australia is because the average person has correctly come to associate anything being "reformed" with meaning that the average middle class person is about to be considerably worse off.


----------



## Junior (15 January 2020)

Smurf1976 said:


> Part of the reason we've come to a point where sensible change is virtually impossible in Australia is because the average person has correctly come to associate anything being "reformed" with meaning that the average middle class person is about to be considerably worse off.




The last round of reform has resulted in unprecedented levels of complexity, in my opinion.  Transfer Balance Caps, Total Super Balances, Defined Benefits.  They keep introducing NEW ways to contribute (Downsizer Cont, Catch-Up contributions etc.)  Don't get me started on First Home Super Saver Scheme.  The rules around super now are absolute madness.  They impose a $1.6mill cap, but then try and make it really hard to get there.  If the limit is $1.6mill just let people whack it in there one day before retirement!!  Furthermore, if you have a balance in excess of the cap, make people take it out!!  You have this ridiculous legacy issue where some people still have many millions in Super accumulation, as they managed to get assets in there before the rules tightened up.

It's still by far the most tax effective way to accumulate wealth as you lead into retirement, but the completely unnecessary levels of complexity mean a very inefficient system.  Great for accountants, lawyers and the ATO.

They should either completely leave it alone, or embark on ACTUAL reform with the priority being to reduce complexity.


----------



## Belli (15 January 2020)

Junior said:


> if you have a balance in excess of the cap, make people take it out




This applies to me.  Over 65 years of age and no longer in the workforce.  On one hand I'm using it as a wealth creation exercise (sort of) and yet it does not make any sense to me.  If there is a limit then apply it across the board.  Nothing to say the $1.6m cannot grow organically either indexation aside.  Mine has.

At the moment a large proportion of the SMSF is back in accumulation phase so it's paying 15% tax on earnings.  Yet if a limit was imposed and I was required to withdraw it, it is more than likely I'd place it back in the share market, increase my income and the amount of tax I pay above the 15% level and the Government would receive greater tax revenue as a result.

Then let us stop talking about and giving the buggers any such ideas!  However, I am sure it is being considered.  Those dudes at Treasury are not dumb by any stretch of the imagination.


----------



## sptrawler (15 January 2020)

Belli said:


> At the moment a large proportion of the SMSF is back in accumulation phase so it's paying 15% tax on earnings.  Yet if a limit was imposed and I was required to withdraw it, it is more than likely I'd place it back in the share market, increase my income and the amount of tax I pay above the 15% level and the Government would receive greater tax revenue as a result.



One thing to remember is in accumulation, the fund is paying 15% tax on all earnings, outside the first $18k is tax free, just a point to mention.


----------



## Belli (15 January 2020)

sptrawler said:


> One thing to remember is in accumulation, the fund is paying 15% tax on all earnings, outside the first $18k is tax free, just a point to mention.




Good point.

Usual crunching of numbers needs to be applied.  You can get a reasonable level of income from shares before you have to pay additional tax as a consequence of the franking credit.  Many haven't fully understood that aspect and I'm over trying to educate them.  Too tiring.


----------



## Belli (16 January 2020)

Junior said:


> Great for ..........the ATO




An unsubstantiated observation on this aspect.

I suspect the ATO would not be overjoyed to an extent.  In days gone by when the Retirement Benefit Limit was around it was from memory costing $10m per year in system maintenance costs.  Bear in mind an arrangement such as that required *every *superannuation account for each member to be monitored from commencement to closure.  It was dragging only around $2m pa in tax revenue.  One of the reasons the RBL was abandoned.

So then the Government goes "I've got a bright idea. Let's reintroduce the RBL in another format.  We'll call it a Balance Cap." So what does the ATO have to do?  See comment regarding the previous RBL.  And apart from accountants, lawyers consider what the superannuation providers, including SMSFs, also need to do.  That is not entirely free of costs which are hidden to some degree and rolled up into administrative charges.


----------



## Junior (16 January 2020)

Belli said:


> An unsubstantiated observation on this aspect.




What I'm getting at, is that the complexity of the system consumes ATO & Government resources.  So perhaps not 'good' for them as such.  It all contributes towards a bloated, inefficient system which consumes more in government resources than is necessary.  Check out this madness, as another example:  *APRA's plan to assess 40,000 super fund options too ambitious*


----------



## Belli (17 January 2020)

Junior said:


> What I'm getting at, is that the complexity of the system consumes ATO & Government resources.  So perhaps not 'good' for them as such.  It all contributes towards a bloated, inefficient system which consumes more in government resources than is necessary.  Check out this madness, as another example:  *APRA's plan to assess 40,000 super fund options too ambitious*




Too ambitious understates it.  When the ATO contacted a number of SMSFs with property in them, it didn't come close to cracking all of the SMSFs involved.


----------



## sptrawler (3 February 2020)

At last people are starting to cotton on.

https://www.macrobusiness.com.au/2020/02/proof-superannuation-robs-workers-of-wages/


----------



## sptrawler (3 February 2020)

Belli said:


> Too ambitious understates it.  When the ATO contacted a number of SMSFs with property in them, it didn't come close to cracking all of the SMSFs involved.



When they let SMSF's borrow to buy property it was stupidity, all in the name of pumping the housing market.


----------



## BlindSquirrel (7 February 2020)

sptrawler said:


> The technology is improving very rapidly, the Government needs to introduce a tax on volume to offset the loss in income tax as jobs reduce, or beef up the royalties system.




You will recall that Brendan Grylls had a crack at that in the 2017 WA state election. The chamber of Minerals & Energy (Mining company lobbying group) spent $2 million on advertising to oust him from office.
https://www.abc.net.au/news/2017-03...der-brendon-grylls-and-his-mining-tax/8367508 
I daresay they won't be trying that again.


----------



## sptrawler (7 February 2020)

BlindSquirrel said:


> You will recall that Brendan Grylls had a crack at that in the 2017 WA state election. The chamber of Minerals & Energy (Mining company lobbying group) spent $2 million on advertising to oust him from office.
> https://www.abc.net.au/news/2017-03...der-brendon-grylls-and-his-mining-tax/8367508
> I daresay they won't be trying that again.



He made a brave call, which was right, but as usual he was shouted down by the media charged morons.


----------



## Humid (7 February 2020)

Considering his electorate
Pretty dumb really
After all the good work he did for royalties for the region
Political suicide in one horse towns
Big miners start talking layoffs bingo
Job security big mortgage
Bye bye Brendan


----------



## sptrawler (10 February 2020)

At last, even Ross Gittins has the penny drop, I've been saying this since this thread started. The first time Gittins has talked sense IMO. The super compulsory contribution is becoming just another indirect tax on workers IMO. Why low paid workers should have their contributions lifted to 12%, when they are struggling ATM, why the hell not give them a 3% pay rise? 
https://www.theage.com.au/business/...-make-you-pay-more-super-20200209-p53z31.html
From the article:
_The main reason compulsory super isn’t a particularly good deal for most union members is that when forced to pay super contributions, employers reduce their workers’ pay rises to fit. This has been understood from the outset, but last week’s report from the Grattan Institute convincingly demonstrates its truth.

*The second reason is that, by design and above certain limits, super savings reduce workers’ eligibility for the age pension*. Treasury and independent analysts have repeatedly discredited the industry’s claims that the present contribution rate is insufficient to provide workers with a reasonably comfortable retirement_.

_The present legislated plan to raise the contribution rate to 12 per cent represents the industry funds’ gift to the army of ticket-clippers making their living off the super industry. It’s origins lie in the Rudd government yielding to industry fund pressure because it believed the huge cost to the budget would be more than covered by its wonderful new mining tax.

But, as an earlier Grattan report has shown, raising the contribution rate as planned would force many workers to accept a lower-than-otherwise standard of living during their working lives so their living standard in retirement could be higher than they ever were used to when working.

This is the union movement protecting its members’ interests? Sounds to me more like union officials expanding the union institution at the expense of their members – and delivering for the banks’ "retail" super funds while they’re at it_.


----------



## sptrawler (10 February 2020)

This week Treasury closed submissions to the 'retirement income review', now we just have to wait for the next round of changes.

https://www.smh.com.au/politics/federal/what-is-the-future-of-superannuation-20200205-p53xxv.html


----------



## dyna (10 February 2020)

Hiddens and the Gratten institute have made a good case in their submissions to the Treasury's review into the adequacy of current retirement incomes,but I can't see the feds  Not going ahead increasing the SG to 10% just after the next election,then up to 12% by 2026. Even former Labor PM Keating seems to be in favour.So that's something.Remember,Paulie's compulsory saving for retirement scheme  started off at just 3% and only really got started10 years later at 9%.The present cohort of retirees just haven't had enough time in the super system,so are feeling the full brunt of the limited value in the government pension.If future generations start early enough,take full advantage of gov. co-contributions, spouse contributions, home deposit off-sets,tax tricks(let's not forget them) etc,they should get to that magical $1.6 Mill TBC.Sadly,probably not much can be done now, for those destined to miss out.It's going to be tough for them,no doubt about it.


----------



## BlindSquirrel (10 February 2020)

It'd be nice to hold it at 10% for simplicity's sake...


----------



## Knobby22 (10 February 2020)

I think 10% is enough.
You don't need to be better off when you retire than when you are working.
When you are saving to buy a house, got kids etc. That is when you really need the money.


----------



## sptrawler (12 February 2020)

Knobby22 said:


> I think 10% is enough.
> You don't need to be better off when you retire than when you are working.
> When you are saving to buy a house, got kids etc. That is when you really need the money.



The other thing is low income earners, don't get much of a tax break on their contributions anyway, so it may be more beneficial to leave theirs at 9% and give them a 3% pay rise.


----------



## sptrawler (12 February 2020)

A small article on super and interviews with three baby boomers, in the SMH.
https://www.smh.com.au/money/saving...0-p53zbx.html?js-chunk-not-found-refresh=true


----------



## sptrawler (13 February 2020)

An interesting take on the gig economy, employers don't have to pay super if wages are below $450/wk.

https://www.smh.com.au/politics/fed...ll-for-retirement-system-20200211-p53zpy.html


----------



## sptrawler (14 February 2020)

At last some commentators are starting to see sense regarding super, they are saying what has been said on ASF for years.

https://www.macrobusiness.com.au/2020/02/forget-superannuation-lift-the-aged-pension/
From the article:
_In its submission to Treasury for the Retirement Income Review, Mercer has called for a universal non-means tested Age Pension to be considered in place of raising the superannuation guarantee:
The submission said the universal Age Pension would:
_

_Ensure financial decisions made by retirees were not informed by how to best maximise their access to the Age Pension;_
_Provide retirees with greater security of income with the knowledge of longevity protection, leading to a better quality of life;_
_Provide stronger incentives to downsize from the family home, improving housing affordability for younger families; and_
_Enable a simpler, more efficient system with reduced administration costs incurred by the Government from the means-tested Age Pension._
_“While the universal Age Pension may not be a viable option in the current political environment, it is a compelling proposition for a simpler, more effective system with a clear objective that delivers stronger long-term retirement outcomes for older Australians,” Knox said_.

Jeez at last Hooray.


----------



## sptrawler (18 February 2020)

Another article questioning the superannuation system, at least it is being challenged, rather than telling everyone it is the best thing since sliced bread.
Not that I'm against it, just that I think it all needs to be kept in perspective, it was initially introduced to give people a better retirement, I think that idea has been long forgotten.
https://www.macrobusiness.com.au/2020/02/compulsory-superannuation-is-fueling-household-debt/


----------



## Junior (18 February 2020)

sptrawler said:


> At last some commentators are starting to see sense regarding super, they are saying what has been said on ASF for years.
> 
> https://www.macrobusiness.com.au/2020/02/forget-superannuation-lift-the-aged-pension/
> From the article:
> ...




This is far too intelligent to ever become a reality.  You can see the sob stories now, about how a handful of wealthy individuals receive Age Pension, and how that's unfair....then we revert back to a horribly inefficient means-tested system.


----------



## sptrawler (18 February 2020)

Junior said:


> This is far too intelligent to ever become a reality.  You can see the sob stories now, about how a handful of wealthy individuals receive Age Pension, and how that's unfair....then we revert back to a horribly inefficient means-tested system.



It just makes absolute sense doesn't it Junior, everyone gets the pension and if people wish to save for a better retirement they can, but the super is treated as income and taxed.
It would give some confidence that the money being taken off the workers, is actually for their benefit, not just another Government tax.


----------



## Junior (19 February 2020)

sptrawler said:


> It just makes absolute sense doesn't it Junior, everyone gets the pension and if people wish to save for a better retirement they can, but the super is treated as income and taxed.
> It would give some confidence that the money being taken off the workers, is actually for their benefit, not just another Government tax.




Yes.  Furthermore, age pension is taxable income.  So those wealthier individuals will end up giving 30% + back to the Government in income tax anyway.

You could have the same payment to everyone, and then have a separate supplement for those who really need it, that kicks in when your assets fall below $100k or $200k or so.  That way you're only means testing those who need the extra payment to get by.


----------



## PZ99 (20 March 2020)

I said in another thread the Govt might release some superannuation to keep things going. 

*Superannuation raid to help jobless survive*

https://www.afr.com/policy/economy/superannuation-raid-to-help-jobless-survive-20200318-p54b8d


----------



## Bill M (20 March 2020)

PZ99 said:


> I said in another thread the Govt might release some superannuation to keep things going.
> 
> *Superannuation raid to help jobless survive*
> 
> https://www.afr.com/policy/economy/superannuation-raid-to-help-jobless-survive-20200318-p54b8d



Whilst I may have said before that this might be a bad move I have now changed my mind due to the severe change of events. This is a crisis we have never seen before, people need to pay their mortgages and put the food on the table and we have to allow all means for them to be able to survive. Who would have ever thought that there would be 100's of thousands of people being stood down with no pay. A very sad situation beyond any individuals control, we need to do/allow anything to get us all through it.


----------



## qldfrog (20 March 2020)

I am not a fan of mandatory super but the timing for taking money out of super can not be worse after a 30pc market fall..sure it could fall more but hopefully people are now in safe options;
I yesterday requested my fund to move 10% into growth option..very small move back in.
Have been 100% in capital guarantee since january and saved buckets


----------



## PZ99 (20 March 2020)

I was 100% cash until the XAO hit 5700.. but having said that I missed out on some of the market gain prior to that. Still saved a truckload here though.

It's now 70% cash and it'll drop to 20% if the XAO drops below 4k (I don't think it will)

I think it's better to allow people to access their super during times like this rather than cash handouts.

It becomes their own debt to repay rather than the country paying it (we are already in record debt)


----------



## qldfrog (20 March 2020)

PZ99 said:


> I was 100% cash until the XAO hit 5700.. but having said that I missed out on some of the market gain prior to that. Still saved a truckload here though.
> 
> It's now 70% cash and it'll drop to 20% if the XAO drops below 4k (I don't think it will)
> 
> ...



Better for the country, not the indviduals..moreover we might need both...


----------



## PZ99 (20 March 2020)

qldfrog said:


> Better for the country, not the indviduals..moreover we might need both...



Well I guess anything that's good for the country is good for the individuals when it comes to Govt debt. At the moment we're all paying interest on half a billion and that will stretch out .

The age of entitlement is almost over


----------



## qldfrog (20 March 2020)

Half a trillion you mean..i know
So big figures we lose count
 the interest alone are over a billion a month....or one thousand millions a month..just interest not capital repayment...imagine the hospital ICUs you can build for that...thanks to Rudd and then all governments since
Just splash money, get elected rince and play again..and here we are...


----------



## Humid (20 March 2020)

qldfrog said:


> Half a trillion you mean..i know
> So big figures we lose count
> the interest alone are over a billion a month....or one thousand millions a month..just interest not capital repayment...imagine the hospital ICUs you can build for that...thanks to Rudd and then all governments since
> Just splash money, get elected rince and play again..and here we are...




If you reckon that started with Rudd your kidding yourself


----------



## qldfrog (20 March 2020)

Humid said:


> If you reckon that started with Rudd your kidding yourself



Here comes the labour fanatics
If you remember, under Costello, funds were complaining there was no more bond issued.as such there was a push to artificially create some....
In the circumstances, at the time, yes Sir, there was No debt and A balanced budget...
Obviously a balanced budget in 2005 does not mean you can offer the same services in 2009 and be balanced.
Rewritting history again, next Australia was saved by Swan and the Rudd stimulus, not China etc etc?
The worst is that you probably even believe your fake facts
Education has failed this country.

And in case you were even a bit attentive, i mentionned *since* Rudd. Which includes many liberal governments inc the current one


----------



## Humid (20 March 2020)

qldfrog said:


> Here comes the labour fanatics
> If you remember, under Costello, funds were complaining there was no more bond issued.as such there was a push to artificially create some....
> In the circumstances, at the time, yes Sir, there was No debt and A balanced budget...
> Obviously a balanced budget in 2005 does not mean you can offer the same services in 2009 and be balanced.
> ...




You obviously don't count little Johnnies middle class welfare splurge to get re elected


----------



## Humid (20 March 2020)

Considering Labor have been in power for 6 of the last 20 odd years who is the fanatic


----------



## Humid (20 March 2020)

Humid said:


> If you reckon that started with Rudd your kidding yourself




In case you were even a bit attentive
That's it in black and white ffs


----------



## PZ99 (22 March 2020)

Here we go... https://www.theguardian.com/austral...worst-hit-by-coronavirus-but-can-we-afford-it

Australians who are laid off as a result of the coronavirus outbreak will be allowed to pull money out of their superannuation, Scott Morrison announced on Sunday.

Withdrawals will be capped at $10,000 this financial year, and a further $10,000 next financial year, and will be tax-free, the prime minister and his treasurer, Josh Frydenberg, said.

The withdrawals will be available from April to those eligible for the coronavirus supplement as well as sole traders whose hours or income has fallen 20% or more as a result of coronavirus.


----------



## Belli (28 March 2020)

Belli said:


> (make sure you check your Trust Deed to ensure this is permitted as some Deeds only allow payment of a pension)




A thought just came to mind.  The Government is permitting people to withdraw $10k this and next year from super.  Guessing it also applies to SMSFs.  People may need to check the SMSF Trust Deed allows for that whether it is in accumulation phase, pension phase or both.

May be wise to get some legal/financial advice before you do anything.  Of course if the Deed does require amendment that $10k is initially going to cost $10.5k or thereabouts as a result of obtaining the advice.


----------



## Dona Ferentes (28 March 2020)

PZ99 said:


> I said in another thread the Govt might release some superannuation to keep things going.
> 
> *Superannuation raid to help jobless survive*
> 
> https://www.afr.com/policy/economy/superannuation-raid-to-help-jobless-survive-20200318-p54b8d



I just wish emotive language _(raid_) wasn't used. ...but they can't help themselves


----------



## sptrawler (30 March 2020)

An interesting article, about whether the super funds have enough in cash, I know if a SMSF doesn't have enough to cover their obligations they can be in trouble with the ATO.
This issue presenting itself, is the very reason I started a SMSF, as I have always said, it is a worry when someone else has control of  your nest egg. 
https://www.smh.com.au/business/ban...tep-up-for-their-members-20200329-p54f0e.html
From the article:
_Funds are expected to have more than adequate liquidity to endure even the harshest downturn in markets and customers switching between funds and investment options.

Retirement savings are the private nest eggs of Australian workers. Those who are facing financial hardship in the current crisis need access to their money now.

It should not be forgotten that hardship grounds already exist for early access to super.

The new measures streamline those requirements to make sure Australians get access to their funds without having to wait until they are at risk of losing their home.

Many people are losing their livelihoods and are struggling to buy the essentials. It is time for super funds to step up and help their members.


What the government is asking the industry to do is modest, reasonable and necessary. Treasury estimates the policy will result in about $27 billion being withdrawn from the $3 trillion superannuation system – less than 1 per cent of total super savings.

Reports that some super funds are liquidity constrained must therefore stem from issues pre-dating notification of the government’s stimulus package, and even the outbreak of the pandemic itself.
Superannuation funds which may have overextended into illiquid assets, such as infrastructure and property and who did not retain adequate cash and other liquid holdings, did so knowing the risks they were adopting.
The strong investment returns on illiquid assets is, in fact, referred to as the ‘illiquidity premium’, a reward for the risk funds are willing to adopt when they buy these lumpy assets that are hard to sell.


To tout strong investment returns off the back of illiquid assets in the good years, only to come to the government cap in hand when markets inevitably turn, is simply a sign of bad management and poor investment governance.
The opening paragraph of APRA’s Prudential Standard for Investment Governance requires a superannuation fund “to have in place a sound investment governance framework for the selection, management and monitoring of investments... including investment risk.”

The standard requires regular stress testing which reflects the underlying assets the fund owns, and board oversight of the results of stress tests_.


----------



## PZ99 (30 March 2020)

I wouldn't pay too much attention to anything regarding super at present.

When this destruction of wealth has run its course and we have more than a trillion in govt debt the first thing a future govt will target is your super and how much, or when, or even if you can get your money out.

This thread will probably become a sticky before Christmas (if it isn't abolished by then)


----------



## InsvestoBoy (30 March 2020)

sptrawler said:


> _The strong investment returns on illiquid assets is, in fact, referred to as the ‘illiquidity premium’, a reward for the risk funds are willing to adopt when they buy these lumpy assets that are hard to sell._




While I believe there is a real illiquidity premium, I also think it's arguable whether these assets have even actually outperformed or are simply marked to fantasy values because they are unlisted the fund managers can get away with dodginess. Same problem in Private Equity.

Look at this 

https://www.smh.com.au/business/ban...value-of-unlisted-assets-20200324-p54des.html



> _The Age_ and _The Sydney Morning Herald_ can confirm Unisuper, the $85 billion fund for university workers, has cut the value of its holdings in unlisted infrastructure by 6 per cent, and its unlisted property holdings by 10 per cent.
> 
> Unisuper's unlisted infrastructure investments include the Brisbane and Adelaide airports. Among its property holdings are the Marrickville Metro Shopping Centre in Sydney and Malvern Central Shopping Centre in Melbourne.
> 
> It comes after AustralianSuper, the nation's biggest super fund, told members it had cut the value of the unlisted assets on its books by 7.5 per cent




See, a complete mark to fantasy joke.

Listed infra funds dropped by a lot more than 6 - 10%. Sydney Airport certainly dropped by a lot more than 6%, so how can they justify marking Brisbane and Adelaide airports only down -6%?

I am sure plenty of listed fund managers would have liked to mark their assets down only 7.5% in March


----------



## sptrawler (30 March 2020)

InsvestoBoy said:


> While I believe there is a real illiquidity premium, I also think it's arguable whether these assets have even actually outperformed or are simply marked to fantasy values because they are unlisted the fund managers can get away with dodginess. Same problem in Private Equity.
> 
> Look at this
> 
> ...




In reality it isn't much different than what the Banks were done for, "fees for no service", if a fund is illiquid with regard to its minimum cash requirement, it isn't providing the service it is being paid for. IMO
If a SMSF hasn't got sufficient liquid funds., to meet its cash flow requirements, the ATO will come down heavy on them.
A friend and I were talking on the weekend, he is 64 and still working, changed his super balance to cash a few weeks ago.
He is thinking of transferring the balance to another, larger fund.


----------



## Dona Ferentes (30 March 2020)

From a weekend media report







> "The structure of many funds will now be put to the blowtorch: the definition of “balanced” funds, which includes a large portion of growth assets, will be tested, the poor transparency of unlisted assets in global infrastructure will be tested, the skewed demographics where some funds have too many young workers (Cbus, Hostplus, REST) or some have too many older members (UniSuper) will be tested.





> Publicly, big funds have already dismissed notions that liquidity will be tested, just as they have presented a face of unity on the government’s economic crisis package. But divisions will reach breaking point if the government does not do more to ensure the smooth functioning of the scheme. Indeed, industry analysts already warn that industry funds would be among the first to “freeze” withdrawals if the situation deteriorates."




The retail and industry funds will find a way to cope with withdrawals. It's just that the returns will be fudged = be diminished (implying those continuing to stay in will subsidise the nimble.)


----------



## Dona Ferentes (30 March 2020)

Above quote was from 
https://www.theaustralian.com.au/bu...s/news-story/79fe278c666572f6a47979a3b7f6297f

PS. News Ltd has lifted paywall.


----------



## sptrawler (3 April 2020)

I see some people are starting to say the super system is just a big Ponzi scheme, what some on here have been saying for years.


----------



## Humid (3 April 2020)

sptrawler said:


> I see some people are starting to say the super system is just a big Ponzi scheme, what some on here have been saying for years.




Just funds or Self managed as well?


----------



## sptrawler (3 April 2020)

Humid said:


> Just funds or Self managed as well?



SMSFs are closely watched by the ATO, I dont know about anyone else, but my fund is always 40% cash at worst.
The problem with large super funds IMO, is the fact that for the last 20years money has been pouring in every payday and not many have been pulling a sizable pension.
Now all of a sudden there is a call for some serious money and many are found wanting.
This is the very reason I started my SMSF, how many times in the past, have people lost their life savings through some dodgy financial institution the latest was Storm from memory.
I dont think I can do a better job of investing than mainstream super funds, but at least I know exactly where my money is and Im the only one who can do anything with it.
If I lose it, it is my fault, not some third party who doesnt give a ratz ar$e about me.


----------



## Humid (3 April 2020)

I imagine certain section of the work force may draw on their super more than others
Like hospitality more so than construction but then it depends on how deep this $hitstorm goes


----------



## sptrawler (3 April 2020)

Humid said:


> I imagine certain section of the work force may draw on their super more than others
> Like hospitality more so than construction but then it depends on how deep this $hitstorm goes



The one thing from all this that is certain, is that it is like musical chairs, when the music stops there will be a lot less chairs to sit on.
I think tradies are fine Humid, you guys like my son are always required, even engineers can't do the hands on stuff.
Well most can't, I know a couple who started as apprentices, became engineers and ended up CEO's.
Amasing guys who ended up hard arsed bosses, but never forgot where they came from and didn't take BS from the floor level at meetings well.


----------



## Humid (3 April 2020)

sptrawler said:


> The one thing from all this that is certain, is that it is like musical chairs, when the music stops there will be a lot less chairs to sit on.
> I think tradies are fine Humid, you guys like my son are always required, even engineers can't do the hands on stuff.
> Well most can't, I know a couple who started as apprentices, became engineers and ended up CEO's.
> Amasing guys who ended up hard arsed bosses, but never forgot where they came from and didn't take BS from the floor level at meetings well.




I think the whole affair is a wake up call for the world....particularly the west


----------



## sptrawler (3 April 2020)

Humid said:


> I think the whole affair is a wake up call for the world....particularly the west



It certainly is, IMO Trump lit the fuse on the Lima Agreement, where the first World countries agreed to send a lot of manufacturing to the third World Countries so they could lift out of poverty and pay their way.
The problem was China being a 'regulated' Country, saw the opportunity and grabbed it,"we will do it for FA just build your factories here.
Well that has got completely out of control, reverse engineer everything, don't respect any intellectual knowledge or patents.
The problem with Trump is, he hasn't played the game, doesn't need the money so has given the multi nationals and China the 'bird'. lol
If the first World Countries don't get their $hit together, we will all work for China and they think we all look the same.


----------



## Humid (3 April 2020)

Australia is a Ferrari driven by Mr Magog unfortunately 
We need major changes


----------



## sptrawler (3 April 2020)

Humid said:


> Australia is a Ferrari driven by Mr Magog unfortunately
> We need major changes



You really do need to take the blinkers of IMO, neither party are bad, it is just a decission on which has the best policies at the time. Then vote accordingly.
It is a bit like investing in shares, just because a company did well under certain management, doesnt mean it will perform as well under a different management.


----------



## Humid (4 April 2020)

sptrawler said:


> You really do need to take the blinkers of IMO, neither party are bad, it is just a decission on which has the best policies at the time. Then vote accordingly.
> It is a bit like investing in shares, just because a company did well under certain management, doesnt mean it will perform as well under a different management.



No one in particular attacks working people
Constantly
The integrity bill is the latest attack
The one and only reason I vote labor


sptrawler said:


> You really do need to take the blinkers of IMO, neither party are bad, it is just a decission on which has the best policies at the time. Then vote accordingly.
> It is a bit like investing in shares, just because a company did well under certain management, doesnt mean it will perform as well under a different management.



No one in particular constantly attacks blue collar workers
Integrity bill ring a bell


----------



## Humid (4 April 2020)

https://amp.macrobusiness.com.au/?u...au/2020/04/a-new-superannuation-rort-emerges/


----------



## sptrawler (4 April 2020)

Humid said:


> https://amp.macrobusiness.com.au/?u...au/2020/04/a-new-superannuation-rort-emerges/



Good article Humid, the only thing it forgot to mention about the Costello TTR so called rort, that was stopped in 2017. Was that in that period of time Labor had two terms in office and didnt change it, macro business has some good articles, but it is a shame they have to bias everything.
By the way I retired too young, to be able to use a TTR, not that I liked the idea anyway.
The idea of putting in $10k and withdrawing it, I think it would be more trouble than it was worth.
Just my opinion.


----------



## Humid (5 April 2020)

sptrawler said:


> Good article Humid, the only thing it forgot to mention about the Costello TTR so called rort, that was stopped in 2017. Was that in that period of time Labor had two terms in office and didnt change it, macro business has some good articles, but it is a shame they have to bias everything.
> By the way I retired too young, to be able to use a TTR, not that I liked the idea anyway.
> The idea of putting in $10k and withdrawing it, I think it would be more trouble than it was worth.
> Just my opinion.




In them 2terms the same could be said about franking credits which your still frothing at the mouth about


----------



## sptrawler (5 April 2020)

Humid said:


> In them 2terms the same could be said about franking credits which your still frothing at the mouth about



Like I said several times, but you seem to ignore, if you take them of me take them off everyone.
But obviously you will only understand if and when it affects you.
Here is me and probably many others,64 living off my savings and franking credits being criticized, when if I had pissed it against a wall, my handouts would be doubling and you would be praising me.
Australia, you know your standing in it.


----------



## Humid (5 April 2020)

If it affects me


----------



## sptrawler (7 April 2020)

Here is another reason I started my own SMSF, it is o.k for political parties to try and force you into retail or industry funds, but that doesn't make it right. This article shows, it isn't really your money, you just think it is IMO. Well worth reading the whole article IMO.
Maybe a look into the infra structure exposure and why the high exposure, is warranted? Maybe a tip of the iceberg moment unfolding?

https://www.smh.com.au/business/ban...suspend-cash-withdrawals-20200407-p54hqc.html
From the article:
_The $44 billion superannuation fund representing the hospitality industry has updated its product disclosure statement to highlight its "absolute discretion" to "suspend or restrict" applications for cash withdrawals, despite defending its ability to pay out the government's emergency early access scheme.

Hostplus has altered a clause in its PDS that will be relevant to a large portion of its members without any warning. Previously, the clause had told members they can switch between investment options and it would be processed within two days. The amended clause reveals the fund has total power to halt payouts at its discretion.

"The trustee may suspend or restrict applications, switches, redemptions and withdrawal requests for all or a particular investment option at its absolute discretion. In such circumstances, transactions may not be processed or may be processed with significant delay," the updated clause on page 62 of the 215 fund's product disclosure document said.

"The trustee may also decide to process a transaction request for a particular type of benefit from a suspended, restricted or closed option on a case by case basis. Any decision about whether to process transactions from such an option will be made in the best interests of investors as a whole.
"All impacted transaction requests will be processed using the effective unit price applicable on the date the suspension is lifted, or the date special approval is granted if earlier."

Hostplus says the trust deed – a legal document setting out the terms and conditions for managing a trust – had always enabled the fund to suspend redemptions_.



Hostplus is the industry superannuation fund for employees in hospitality, tourism, recreation and sport. Join now and get super informed.


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## Dona Ferentes (7 April 2020)

There's an article about some SMSFs calling out "What_ about me?".._ along the lines of (only) having properties in their fund and now tenants can't pay the rent.. Suddenly retirement income has evaporated.

What do we have here? A lack of a *diversified* income stream comes back to bite; all's great until it's not.. Poor risk management. (And even worse if there was LRB borrowing)


----------



## Bill M (7 April 2020)

sptrawler said:


> Maybe a tip of the iceberg moment unfolding?



This is a big, BIG problem, red flag for sure. If I had an account with any super fund that thinks they can restrict my cash withdrawals (above and beyond government restrictions) during my retirement then I would flick them in a minutes flash. This is so wrong on all levels. Sending the WRONG message in my opinion. This reset will test them all.


----------



## InsvestoBoy (7 April 2020)

sptrawler said:


> _"The trustee may suspend or restrict applications, switches, redemptions and withdrawal requests for all or a particular investment option at its absolute discretion. In such circumstances, transactions may not be processed or may be processed with significant delay," the updated clause on page 62 of the 215 fund's product disclosure document said._




I guess it must be because otherwise they wouldn't do it, but I thought Super funds had to legally provide ability to switch to cash?


----------



## sptrawler (7 April 2020)

Dona Ferentes said:


> There's an article about some SMSFs calling out "What_ about me?".._ along the lines of (only) having properties in their fund and now tenants can't pay the rent.. Suddenly retirement income has evaporated.
> 
> What do we have here? A lack of a *diversified* income stream comes back to bite; all's great until it's not.. Poor risk management. (And even worse if there was LRB borrowing)



When we discussed the LRB borrowing by SMSF on this thread, when it first was introduced to pump the property bubble in about 2010, we said it was a recipe for disaster.


----------



## sptrawler (7 April 2020)

Bill M said:


> This is a big, BIG problem, red flag for sure. If I had an account with any super fund that thinks they can restrict my cash withdrawals (above and beyond government restrictions) during my retirement then I would flick them in a minutes flash. This is so wrong on all levels. Sending the WRONG message in my opinion. This reset will test them all.



Absolutely Bill and as we have always been saying, no one looks after your money better than you, they don't have any skin in the game.


----------



## Dona Ferentes (7 April 2020)

sptrawler said:


> When we discussed the LRB borrowing by SMSF on this thread, when it first was introduced to pump the property bubble in about 2010, we said it was a recipe for disaster.



Article is here:
https://www.afr.com/wealth/superann...s-call-on-government-for-help-20200407-p54hue


----------



## sptrawler (7 April 2020)

Dona Ferentes said:


> Article is here:
> https://www.afr.com/wealth/superann...s-call-on-government-for-help-20200407-p54hue



It was diabolical to let SMSF's borrow to buy rental property, let alone encourage it, this was always going to happen IMO.
If not the virus, anything that adversely effected rent, when it would be such a big component of the SMSF account. This will be more widespread, since the $1.6m cap was introduced IMO.
*Those who are caught, really deserve to be caught IMO, blind Freddy could see the problems.*
Here is an excerpt from an article, highlighting the problem a while back:

_That’s interesting, because it was the ATO that allowed banks to have recourse to personal assets in regards to SMSF loans, back in about 2012. Prior to that, they were essentially non-recourse lending arrangements – the banks were only able to access the asset itself (not assets owned by the SMSF trustees in their personal names).

The ATO wrote the rules. The first, second and third iterations of them.

Biggest threat … and easiest solution

There is a genuine concern that newby SMSF trustees are being stripped of their super savings by property developers. I’ve said countless times in the past that one-stop property development shops are the single biggest threat to new, or wannabe, SMSF trustees_.

https://brucebrammallfinancial.com.au/blog/what-will-happen-with-lrbas/


----------



## Dona Ferentes (7 April 2020)

sptrawler said:


> It was diabolical to let SMSF's borrow to buy rental property, let alone encourage it, this was always going to happen IMO.



The issue is bigger than that (nasty as LRB was, is and increasingly will be)

A good Risk Profile and attentive Investment Strategy addressing liquidity, cash flow, ability to meet uncertain future events is essential. Sadly, it can be glibly 'flick-passed' by finding a compliant auditor and advisor (if so utilised). Chickens are coming home to roost.

Diversification is the only free lunch. And mark-to-market may come to be your long-term friend.


----------



## sptrawler (7 April 2020)

Dona Ferentes said:


> The issue is bigger than that (nasty as LRB was, is and increasingly will be)
> 
> A good Risk Profile and attentive Investment Strategy addressing liquidity, cash flow, ability to meet uncertain future events is essential. Sadly, it can be glibly 'flick-passed' by finding a compliant auditor and advisor (if so utilised). Chickens are coming home to roost.
> 
> Diversification is the only free lunch. And mark-to-market may be your long-term friend.



I run the SMSF, as if it is the only income that I will ever get, that is why it is conservative.
I know there is a pension there if I fail, but that is the issue for me, I have been poor and promised myself I wont go back there.
So high flying isn't for me and I will never be rich, but I will never be poor again either.
Here is an article from those that were selling it.
https://smsfcoach.com.au/tag/smsf-borrowing/


----------



## Dona Ferentes (7 April 2020)

+ 

Moi, aussi


----------



## sptrawler (7 April 2020)

IMO the super funds that can't meet their cash obligations, are no better than the Banks and financial institutions that were done for charging when no service was provided, the trustee's are there to ensure that the worst case scenario is covered.
They aren't there just to pull a cosy pay cheque, for rubber stamping and outsourcing all their responsibilities, then when it falls in a hole say well tough $hit we aren't accountable.
Just my opinion.


----------



## Humid (7 April 2020)

Humid said:


> I imagine certain section of the work force may draw on their super more than others
> Like hospitality more so than construction but then it depends on how deep this $hitstorm goes[/QUOTE





sptrawler said:


> Here is another reason I started my own SMSF, it is o.k for political parties to try and force you into retail or industry funds, but that doesn't make it right. This article shows, it isn't really your money, you just think it is IMO. Well worth reading the whole article IMO.
> Maybe a look into the infra structure exposure and why the high exposure, is warranted? Maybe a tip of the iceberg moment unfolding?
> 
> https://www.smh.com.au/business/ban...suspend-cash-withdrawals-20200407-p54hqc.html
> ...




From memory it wasn’t hard to change funds
Might be a good  time to


----------



## sptrawler (7 April 2020)

Humid said:


> From memory it wasn’t hard to change funds
> Might be a good  time to



Who would you recommend?


----------



## PZ99 (7 April 2020)

sptrawler said:


> IMO the super funds that can't meet their cash obligations, are no better than the Banks and financial institutions that were done for charging when no service was provided, the trustee's are there to ensure that the worst case scenario is covered.
> They aren't there just to pull a cosy pay cheque, for rubber stamping and outsourcing all their responsibilities, then when it falls in a hole say well tough $hit we aren't accountable.
> Just my opinion.



It seems to me the fund in question _can_ meet its cash obligations - but blatantly refuses to pay.

They should be prosecuted, have members' money transferred elsewhere, and then deregistered.


----------



## Dona Ferentes (7 April 2020)

Humid said:


> ...
> it wasn’t hard to change funds ...
> Might be a good  time to



in this day and age, with high volatility, days of 10%+ swings in the share markets, somewhat non functioning bond and credit markets, I'd be wary of switching. Get out on a bad day, and miss the up day (can U guarantee same day processing? <answer is NO, by the way>) and there could easily be a large dollar deficit in the investment balance.


----------



## sptrawler (7 April 2020)

PZ99 said:


> It seems to me the fund in question _can_ meet its cash obligations - but blatantly refuses to pay.
> 
> They should be prosecuted, have members' money transferred elsewhere, and then deregistered.



It will be interesting to see how this plays out, most people would have thought this hickup with their jobs will last a month or two then it is all back to normal, when it keeps going on people are going to start demanding answers of their super funds.
There is no point having $250k in the super and having a mortagee sale on your house IMO.
I'm all for super, but it is important people own their home first IMO.


----------



## sptrawler (7 April 2020)

Dona Ferentes said:


> in this day and age, with high volatility, days of 10%+ swings in the share markets, somewhat non functioning bond and credit markets, I'd be wary of switching. Get out on a bad day, and miss the up day (can U guarantee same day processing? <answer is NO, by the way>) and there could easily be a large dollar deficit in the investment balance.



Most of the funds don't report daily, from my understanding, monthly at best.


----------



## Humid (7 April 2020)

Humid said:


> I imagine certain section of the work force may draw on their super more than others
> Like hospitality more so than construction but then it depends on how deep this $hitstorm goes




As I said Friday


----------



## sptrawler (7 April 2020)

Humid said:


> As I said Friday



Congratulations one right.


----------



## Humid (7 April 2020)

Dona Ferentes said:


> in this day and age, with high volatility, days of 10%+ swings in the share markets, somewhat non functioning bond and credit markets, I'd be wary of switching. Get out on a bad day, and miss the up day (can U guarantee same day processing? <answer is NO, by the way>) and there could easily be a large dollar deficit in the investment balance.




It’s not like everyone is retiring next year


----------



## Humid (7 April 2020)

sptrawler said:


> Congratulations one right.




Short term....


----------



## sptrawler (7 April 2020)

Humid said:


> Short term....



I'm hoping you can kick on and build on it.


----------



## PZ99 (7 April 2020)

sptrawler said:


> It will be interesting to see how this plays out, most people would have thought this hickup with their jobs will last a month or two then it is all back to normal, when it keeps going on people are going to start demanding answers of their super funds.
> There is no point having $250k in the super and having a mortagee sale on your house IMO.
> I'm all for super, but it is important people own their home first IMO.



Agreed. There's no tax penalty for mitigating mortgage debt so it will usually outperform a super fund dollar for dollar and it's a more secure investment.

But when you have a super fund like this that blocks your ability to alter your asset allocation you know you're dealing with something really dodgy. If this is legal then whoever legalised it should be given a brain scan.


----------



## Humid (7 April 2020)

sptrawler said:


> I'm hoping you can kick on and build on it.




I was talking about your memory loss


----------



## Dona Ferentes (7 April 2020)

sptrawler said:


> Most of the funds don't report daily, from my understanding, monthly at best.



They price daily.


----------



## Dona Ferentes (7 April 2020)

PZ99 said:


> But when you have a super fund like this that blocks your ability to alter your asset allocation you know you're dealing with something really dodgy.



it's not altering asset allocation, the issue is the government's allowing access to super for people who've lost jobs. $10k now and same next FY, Times a million. Do the maths.


----------



## sptrawler (7 April 2020)

Dona Ferentes said:


> They price daily.



They may price daily, but what that price is you wont find out untill end of month, I know this because a mate just did it.


----------



## sptrawler (7 April 2020)

Dona Ferentes said:


> it's not altering asset allocation, the issue is the government's allowing access to super for people who've lost jobs. $10k now and same next FY, Times a million. Do the maths.



The access to $10k has always been there for financial difficulty claims as far as I know, mainly because my lost son, has claimed it before.
It is still the responsibility of the trustees to account for it IMO, or they haven't been doing their job, these were the same same people pushing for SMSF's to have to transfer their money to them, because they can look after it better. FFS
From my point of view, if you are going to throw it, expect it back, when your backyard is full of it.


----------



## qldfrog (7 April 2020)

Dona Ferentes said:


> it's not altering asset allocation, the issue is the government's allowing access to super for people who've lost jobs. $10k now and same next FY, Times a million. Do the maths.



Yes. Then you sell should not be a problem should it? unless you value that building at 60millions and it os worth 6....
Most publicly listed asset can be swapped to cash in a matter of days
The problem is that hospitality people will empty their account hostsuper will have no more business and so no fee to feed itself
Super funds are scams, nothing new, just surprised the hit comes from the fund, not a new government ruling


----------



## sptrawler (7 April 2020)

qldfrog said:


> Yes. Then you sell should not be a problem should it? unless you value that building at 60millions and it os worth 6....
> Most publicly listed asset can be swapped to cash in a matter of days
> The problem is that hospitality people will empty their account hostsuper will have no more business and so no fee to feed itself
> Super funds are scams, nothing new, just surprised the hit comes from the fund, not a new government ruling



I wonder how many of the infrastructure trusts, have had some good times, it is great while everything is bubbling along.
Not so good when there is requirement to substantiate the cost.
It reminds me of the mate who wholesales furniture, a couple of weeks back he wasn't allowed into a couple of major retailers, I asked why not? He said well you take the manager out to lunch and they order $40k worth instead of $20k.
Well everything comes home to roost eventually.


----------



## InsvestoBoy (7 April 2020)

sptrawler said:


> I wonder how many of the infrastructure trusts, have had some good times, it is great while everything is bubbling along.
> Not so good when there is requirement to substantiate the cost.
> It reminds me of the mate who wholesales furniture, a couple of weeks back he wasn't allowed into a couple of major retailers, I asked why not? He said well you take the manager out to lunch and they order $40k worth instead of $20k.
> Well everything comes home to roost eventually.




Well, what can you say, the illiquidity premium they were trying to capture is what's on sale right now, born out of moments just like this, when you can provide liquidity to those trying to get out of illiquid assets at any price!


----------



## PZ99 (7 April 2020)

Dona Ferentes said:


> it's not altering asset allocation, the issue is the government's allowing access to super for people who've lost jobs. $10k now and same next FY, Times a million. Do the maths.



Read the fine print... it says:
_
"The trustee may suspend or restrict applications, *switches*, redemptions and withdrawal requests for all or a particular investment option at its absolute discretion. In such circumstances, transactions may not be processed or may be processed with significant delay," 
_
They are dictating what you can and can't do with your money - that's undefendable.


----------



## sptrawler (7 April 2020)

InsvestoBoy said:


> Well, what can you say, the illiquidity premium they were trying to capture is what's on sale right now, born out of moments just like this, when you can provide liquidity to those trying to get out of illiquid assets at any price!



Very true, but that is the responsibility of the trustees, it all come back to exposure.
It doesn't bother you, untill it bothers you.


----------



## Cam019 (7 April 2020)

Does anyone hold their superannuation with Hostplus? Disclosure, I do.


----------



## sptrawler (7 April 2020)

InsvestoBoy said:


> Well, what can you say, the illiquidity premium they were trying to capture is what's on sale right now, born out of moments just like this, when you can provide liquidity to those trying to get out of illiquid assets at any price!



It isn't that simple, there is only so much liquidity required, that is to support those on a pension and those who may require emergency funds as is required by law.
Everyones cool, untill they aren't, then it is a please explain.
As the Banks found out.


----------



## PZ99 (7 April 2020)

Cam019 said:


> Does anyone hold their superannuation with Hostplus? Disclosure, I do.



Not me - if I did I'd be outta there quicker than a rat up an aquaduct.


----------



## sptrawler (7 April 2020)

I wonder if there will be a call for a commission into the risk analysis and liquidity of super funds?
It would probably be pertinent under the circumstances.
After all, it is the basis on what people are building their retirement funding on.
This is probably the most important financial implication in working peoples lives, if the funds are all held in a cavalier fashion, none are really safe IMO.
There is nothing wrong with pouring money into long term infra structure projects, as long as there is a sound business case for it and a sensible amount in relation to the size and liquidity of the fund.
Otherwise it is just a nose in a trough IMO.
Just my opinion.


----------



## Cam019 (7 April 2020)

PZ99 said:


> Not me - if I did I'd be outta there quicker than a rat up an aquaduct.



A bit late now, if I do say so myself, considering Hostplus now have the power to suspend or restrict withdrawals. I don't need to withdraw my super and my asset allocation is in an index option, not a premixed option with unlisted assets.


----------



## Kryzz (7 April 2020)

qldfrog said:


> Yes. Then you sell should not be a problem should it? unless you value that building at 60millions and it os worth 6....
> Most publicly listed asset can be swapped to cash in a matter of days
> The problem is that hospitality people will empty their account hostsuper will have no more business and so no fee to feed itself
> Super funds are scams, nothing new, just surprised the hit comes from the fund, not a new government ruling




Always going to be a risk with funds when the majority of their membership base is exposed to the one industry. Not only will many of their members be looking to access their super with the recent measures, but future contributions are drying up quick smart which is cashflow and impacts future projections. 

I work for an industry fund, our unlisted assets are being revalued and will be interesting to see the quarterly numbers when produced. Prudent funds should be stress testing their AUM for falls of between 30-50%.

How assets are classed is another question all together...still some out there who deem property to be more conservative than growth..

Wouldn't be surprised to see mergers sped along once the pandemic is over (enough are getting a tap on the shoulder from ASIC already).


----------



## qldfrog (8 April 2020)

Kryzz said:


> Always going to be a risk with funds when the majority of their membership base is exposed to the one industry. Not only will many of their members be looking to access their super with the recent measures, but future contributions are drying up quick smart which is cashflow and impacts future projections.
> 
> I work for an industry fund, our unlisted assets are being revalued and will be interesting to see the quarterly numbers when produced. Prudent funds should be stress testing their AUM for falls of between 30-50%.
> 
> ...





Kryzz said:


> I work for an industry fund, our unlisted assets are being revalued and will be interesting to see the quarterly numbers when produced.



We are a finances oriented site, and should care about our member finances well being
With this specific value point in mind,we looked at my wife's fund and trigerred on monday a switch to cash for a portion of units which in our opinion might not have reflected a lack of liquidity and fall in value...
I invite non SMSF people to do the.same before getting hit and while they can


----------



## qldfrog (8 April 2020)

qldfrog said:


> We are a finances oriented site, and should care about our member finances well being
> With this specific value point in mind,we looked at my wife's fund and trigerred on monday a switch to cash for a portion of units which in our opinion might not have reflected a lack of liquidity and fall in value...
> I invite non SMSF people to do the.same before getting hit and while they can



If you go in the detail, you will soon find very vague quotes about the composition of the Balanced..in our case option
A mix of bonds, properties,etc etc
Property as in REIT or next door city office..no details, bonds as junk corporate bonds or gov bonds..no details
I am afraid people are going to wake up to a lot of surprises in this area


----------



## fiftyeight (13 April 2020)

With so many people registering to withdraw their super, will large funds be selling now to free up cash or are they required hold off until actually instructed there is a withdrawal from the ATO?


----------



## qldfrog (13 April 2020)

Cam019 said:


> A bit late now, if I do say so myself, considering Hostplus now have the power to suspend or restrict withdrawals. I don't need to withdraw my super and my asset allocation is in an index option, not a premixed option with unlisted assets.



The fact they can does not mean they will, what about applying for a fund transfer tomorrow
Either via fees or underperformance, you will end up paying for their problem, and you noted they can switch your funds..
GTFO as soon as you can


----------



## Junior (13 April 2020)

sptrawler said:


> The access to $10k has always been there for financial difficulty claims as far as I know, mainly because my lost son, has claimed it before.




The difference with this measure is there will be a massive number of individuals who are eligible, far far more than the standard Hardship provisions which are difficult to satisfy.  They are saying at this stage you don't even need to submit evidence that you are eligible, you just have to 'self-certify'.  It's this fact, compounded by a sudden fall in prices, further compounded by these funds holding illiquid assets, which will need to be written down.  And, further compounded for those industry funds with low average balances, with many members who will take advantage of the $20k w/d.

I hope these arrogant industry funds will quit with their 'compare the pair' marketing campaign.  We are seeing the real truth come out now.  They took excessive risk with their members money, and at the same time used member funds to pay for huge marketing campaigns bragging about their performance.


----------



## Humid (13 April 2020)

Arrogant is what I’d call the banks and AMP version of super

https://ministers.treasury.gov.au/m...6/transcripts/interview-david-speers-sky-news


----------



## sptrawler (13 April 2020)

Junior said:


> The difference with this measure is there will be a massive number of individuals who are eligible, far far more than the standard Hardship provisions which are difficult to satisfy.  They are saying at this stage you don't even need to submit evidence that you are eligible, you just have to 'self-certify'.  It's this fact, compounded by a sudden fall in prices, further compounded by these funds holding illiquid assets, which will need to be written down.  And, further compounded for those industry funds with low average balances, with many members who will take advantage of the $20k w/d.
> 
> I hope these arrogant industry funds will quit with their 'compare the pair' marketing campaign.  We are seeing the real truth come out now.  They took excessive risk with their members money, and at the same time used member funds to pay for huge marketing campaigns bragging about their performance.



To me the issue is, the super funds have never before been placed in this position, where a large number of members require a relatively small amount of money.
It is usually the other way around, with a very small number of retirees wanting a very small amount and a very large number of younger people are putting more money in every week.
Yet when called upon they are suggesting they may struggle to find the cash, well then isn't that a fees for no service situation? They are paid management fees to ensure there is enough liquidity, after all a 20% cash withdrawal isn't huge and it isn't all the members that will be accessing it.
Even the most volatile growth product offering, from the super fund, would be expected to have 20% cash exposure surely.
What it has highlighted IMO, is that the industry actually in all reality probably doesn't have a clue as to its solvency and as has been proven many times in history they are all winners in a rising market.
The next 12 months will be very interesting IMO, as the super funds have to report actual performance and some may have very interesting results.
Also I bet the regulator, is watching very carefully.


----------



## Humid (13 April 2020)

sptrawler said:


> To me the issue is, the super funds have never before been placed in this position, where a large number of members require a relatively small amount of money.
> It is usually the other way around, with a very small number of retirees wanting a very small amount and a very large number of younger people are putting more money in every week.
> Yet when called upon they are suggesting they may struggle to find the cash, well then isn't that a fees for no service situation? They are paid management fees to ensure there is enough liquidity, after all a 20% cash withdrawal isn't huge and it isn't all the members that will be accessing it.
> Even the most volatile growth product offering, from the super fund, would be expected to have 20% cash exposure surely.
> ...




Yeah placed in that position by a liberal government that hates union backed funds
Still licking their wounds from the RC


----------



## sptrawler (13 April 2020)

Humid said:


> Yeah placed in that position by a liberal government that hates union backed funds
> Still licking their wounds from the RC



Yeah I know what you mean, after the demonising SMSF's copped before the last election, talking about licking wounds nothing wrong with a bit of Karma.


----------



## Humid (13 April 2020)

The dumb libs with their royal commission sent more people to industry funds lol


----------



## PZ99 (13 April 2020)

qldfrog said:


> The fact they can does not mean they will, what about applying for a fund transfer tomorrow
> Either via fees or underperformance, you will end up paying for their problem, and you noted they can switch your funds..
> GTFO as soon as you can



I'm with you on the GTFO. Over the next few decades Govts will be looking everywhere for money to pay for this near universal handout.

My long term view is when you reach your preservation age a future Govt will restrict your withdrawals to a certain % every year and that will the annuity that partially or totally replaces your age pension.

No more retiring at 60 / 65, buying a boat with your super, and then going on the pension


----------



## sptrawler (13 April 2020)

PZ99 said:


> My long term view is when you reach your preservation age a future Govt will restrict your withdrawals to a certain % every year and that will the annuity that partially or totally replaces your age pension.
> 
> No more retiring at 60 / 65, buying a boat with your super, and then going on the pension



I think that is a certainty.


----------



## sptrawler (13 April 2020)

Humid said:


> The dumb libs with their royal commission sent more people to industry funds lol



Agree with that, now people are $hiting themselves over the issue, my MIL is cashing out her industry fund.
I think this issue is well overdue, to get an airing, it will be better all round for everyone.
Way too many people wanting to look after your money, with bugger all accountability IMO.


----------



## Humid (13 April 2020)

PZ99 said:


> I'm with you on the GTFO. Over the next few decades Govts will be looking everywhere for money to pay for this near universal handout.
> 
> My long term view is when you reach your preservation age a future Govt will restrict your withdrawals to a certain % every year and that will the annuity that partially or totally replaces your age pension.
> 
> No more retiring at 60 / 65, buying a boat with your super, and then going on the pension




Unless they withdraw it now for the  emergency
I wouldn't imagine people looking to cash in now would have too much in super anyway from the hospitality industry


----------



## sptrawler (13 April 2020)

sptrawler said:


> Agree with that, now people are $hiting themselves over the issue, my MIL is cashing out her industry fund.
> I think this issue is well overdue, to get an airing, it will be better all round for everyone.
> Way too many people wanting to look after your money, with bugger all accountability IMO.



Here is an interesting article explaining the problem.
But this is the issue  we have brought up several times over the years.
https://www.macrobusiness.com.au/2020/04/labor-admits-superannuation-is-a-ponzi-scheme/
From the article:
Labor’s shadow Treasurer, Jim Chalmers, has penned a letter calling on the Reserve Bank of Australia (RBA) to provide a liquidity backstop for cash-strapped superannuation funds so that they can meet member’s redemption requests. Chalmers’ request has arisen following the Morrison Government’s announcement that it would permit Australians to access up to $20,000 in savings from their superannuation so that they can weather the coronavirus storm:

“Labor is committed to continuing to work with the government so that this scheme is a success, but we fear that the government’s decision to drastically expand the conditions for early release of superannuation could cause liquidity issues that threaten the integrity of our super system for all Australians if they are not addressed”… “While some self-managed super funds may have large cash holdings, many other funds do not have large cash holdings”… As millions of Australians lose their job or a portion of their income, super funds would be receiving less incoming cash and this could leave them having to sell equity holdings to pay for the scheme, they warn, saying a “wait and see approach” was not appropriate as funds need to act immediately.

Labor has tacitly admitted that Australia’s superannuation system is a giant Ponzi scheme whose “integrity” is reliant on ever growing fund inflows via the mandated 9.5% superannuation guarantee. Unless the amount of money coming in from new investors is enough to cover the redemptions of previous investors, Australia’s superannuation system will implode. This is because the level of one’s retirement income is dependent not just on the performance of the superannuation fund’s underlying investments, but also on whether they withdraw their savings while the “bubble” is still inflating with net inflows of new money. These ponzi dynamics help to explain why Labor so strongly supports lifting the superannuation guarantee to 12%, since this will ensure that net superannuation inflows continue to rise even as more baby boomers retire and withdraw their savings. Without the increase in the superannuation guarantee to 12%, fund outflows could exceed inflows, pulling money out of the system, deflating the bubble, and lowering everyone’s retirement nest eggs.


----------



## Humid (13 April 2020)

sptrawler said:


> Here is an interesting article explaining the problem.
> But this is the issue  we have brought up several times over the years.
> https://www.macrobusiness.com.au/2020/04/labor-admits-superannuation-is-a-ponzi-scheme/
> From the article:
> ...



You didn't copy and paste the apologies for the fake news which was getting a run here?


----------



## sptrawler (13 April 2020)

Humid said:


> You didn't copy and paste the apologies for the fake news which was getting a run here?



Yes that was at the end of the article and was about an earlier article, not about the content of the posted article, they were actually naming a specific fund for with holding payouts apparently.
It had no bearing on what was posted.


----------



## Humid (14 April 2020)

sptrawler said:


> Here is another reason I started my own SMSF, it is o.k for political parties to try and force you into retail or industry funds, but that doesn't make it right. This article shows, it isn't really your money, you just think it is IMO. Well worth reading the whole article IMO.
> Maybe a look into the infra structure exposure and why the high exposure, is warranted? Maybe a tip of the iceberg moment unfolding?
> 
> https://www.smh.com.au/business/ban...suspend-cash-withdrawals-20200407-p54hqc.html
> ...




So did you


----------



## sptrawler (14 April 2020)

Humid said:


> So did you



Actually I didn't, I posted an article written by a journalist and made the comment that they can actually do with your money, what they see fit.
What Macro business had to apologies about, was it apparently stated that Hostplus had changed their PDS, which is completely different from what I stated.
Macro business didn't have to retract any of the statement about super being a ponzi scheme, which is the thrust of the issue, we are discussing.


----------



## Junior (14 April 2020)

Humid said:


> Arrogant is what I’d call the banks and AMP version of super
> 
> https://ministers.treasury.gov.au/m...6/transcripts/interview-david-speers-sky-news




Arrogance all round.  The banks and retail super funds copped their whack last year.  I'm not defending AMP.

What really bothered me however, were the industry funds sailing through with no scrutiny whatsoever.  HOSTPLUS, amongst a few others, were whacking the majority of their members in a High Growth, illiquid portfolio, labelling it as 'Balanced' and then spending member funds telling the world how great their returns are, and how you'll end up with more money in retirement if you choose them.  Comparing their twisted version of 'Balanced', with a retail fund version of Balanced, two very different portfolios.  

Many financial advisers tried to raise some of these issues last year, and Hayne ignored them.


----------



## Junior (14 April 2020)

sptrawler said:


> To me the issue is, the super funds have never before been placed in this position, where a large number of members require a relatively small amount of money.
> It is usually the other way around, with a very small number of retirees wanting a very small amount and a very large number of younger people are putting more money in every week.
> Yet when called upon they are suggesting they may struggle to find the cash, well then isn't that a fees for no service situation? They are paid management fees to ensure there is enough liquidity, after all a 20% cash withdrawal isn't huge and it isn't all the members that will be accessing it.
> Even the most volatile growth product offering, from the super fund, would be expected to have 20% cash exposure surely.
> ...




Yeah, I mean they have a very valid point here, it is highly unprecedented to suddenly open the floodgates to early withdrawals for so many people.  And at the same time, the market has fallen 25%, and unemployment is headed towards 10%+.  

However, if you have a huge number of members with small balances, you'd think you'd be running a highly liquid portfolio, primarily consisting shares and bonds.  If they have to write-down and sell off part of their Property and Infra assets, I can't fathom how that equates to needing a Government bailout.  There's little to no gearing there, they don't have debt issues.  They took the strong returns in the good times, now they're going to have to book some losses.  Bad luck, that's the game they're in!!


----------



## Humid (14 April 2020)

sptrawler said:


> Actually I didn't, I posted an article written by a journalist and made the comment that they can actually do with your money, what they see fit.
> What Macro business had to apologies about, was it apparently stated that Hostplus had changed their PDS, which is completely different from what I stated.
> Macro business didn't have to retract any of the statement about super being a ponzi scheme, which is the thrust of the issue, we are discussing.




Its what you posted earlier ....When you were spreading fake news


----------



## sptrawler (14 April 2020)

Junior said:


> Yeah, I mean they have a very valid point here, it is highly unprecedented to suddenly open the floodgates to early withdrawals for so many people.  And at the same time, the market has fallen 25%, and unemployment is headed towards 10%+.
> 
> However, if you have a huge number of members with small balances, you'd think you'd be running a highly liquid portfolio, primarily consisting shares and bonds.  If they have to write-down and sell off part of their Property and Infra assets, I can't fathom how that equates to needing a Government bailout.  There's little to no gearing there, they don't have debt issues.  They took the strong returns in the good times, now they're going to have to book some losses.  Bad luck, that's the game they're in!!



Spot on Junior, as the article I posted re the 'Ponzi" scheme said, SMSF's carry a large cash component, which is probably the reason the push was on to get it rolled over into Industry Funds.
There is a reason people such as myself carry a high proportion of cash, of it all goes to crap, you still have something left with which to enjoy your retirement.
How many times in the past have retirees, who diligently saved a nest egg, lost it all to some investment company that went belly up?


----------



## sptrawler (14 April 2020)

Humid said:


> Its what you posted earlier ....When you were spreading fake news



I know, that is what I just answered, re read it your post #2170, I made a comment and posted an article from the SMH.
Wasn't it macro business that appologised? I thought i posted an article from the SMH and didn't comment directly to it? Just said it indicated why I started a SMSF, which I stand by.


----------



## Humid (14 April 2020)

Junior said:


> Yeah, I mean they have a very valid point here, it is highly unprecedented to suddenly open the floodgates to early withdrawals for so many people.  And at the same time, the market has fallen 25%, and unemployment is headed towards 10%+.
> 
> However, if you have a huge number of members with small balances, you'd think you'd be running a highly liquid portfolio, primarily consisting shares and bonds.  If they have to write-down and sell off part of their Property and Infra assets, I can't fathom how that equates to needing a Government bailout.  There's little to no gearing there, they don't have debt issues.  They took the strong returns in the good times, now they're going to have to book some losses.  Bad luck, that's the game they're in!!




So if the industry funds are so illiquid why have they outperformed the retail funds who should of been creaming it with the stock market run of the last few years?


----------



## Humid (14 April 2020)

sptrawler said:


> Spot on Junior, as the article I posted re the 'Ponzi" scheme said, SMSF's carry a large cash component, which is probably the reason the push was on to get it rolled over into Industry Funds.
> There is a reason people such as myself carry a high proportion of cash, of it all goes to crap, you still have something left with which to enjoy your retirement.
> How many times in the past have retirees, who diligently saved a nest egg, lost it all to some investment company that went belly up?



How many industry funds have gone belly up


----------



## sptrawler (14 April 2020)

Humid said:


> How many industry funds have gone belly up



And, that doesn't mean they are all being run diligently.
That is the issue we are discussing, they approached the RBA for with liquidity issues.


----------



## Dona Ferentes (14 April 2020)

Lots of _straw man _arguments in this thread


----------



## Betavegeta (14 April 2020)

When we apply for early release of our super, does our super fund obtain our bank details automatically from the ATO or will we have to manually provide it to them, assuming they don't have our bank details yet?


----------



## Humid (14 April 2020)

sptrawler said:


> I know, that is what I just answered, re read it your post #2170, I made a comment and posted an article from the SMH.
> Wasn't it macro business that appologised? I thought i posted an article from the SMH and didn't comment directly to it? Just said it indicated why I started a SMSF, which I stand by.




So you started your SMSF on fake news?


----------



## sptrawler (14 April 2020)

Humid said:


> So you started your SMSF on fake news?



You really do struggle with debate, don't you.
I actually started my SMSF in 2007, after the last fiasco. 
Retired in 2011 at 55, how are your plans going?


----------



## Humid (14 April 2020)

sptrawler said:


> You really do struggle with debate, don't you.
> I actually started my SMSF in 2007, after the last fiasco.




It’s not easy when your working


----------



## sptrawler (14 April 2020)

Humid said:


> It’s not easy when your working



Been there, done that.


----------



## PZ99 (14 April 2020)

Betavegeta said:


> When we apply for early release of our super, does our super fund obtain our bank details automatically from the ATO or will we have to manually provide it to them, assuming they don't have our bank details yet?




Applications for early release of superannuation will be accepted through ATO online services via myGov from 20 April 2020.

You can only submit one application in each financial year:


year one, between 20 April and 30 June 2020
year two, between 1 July and 24 September 2020.
This is even if the total amount released is less than $10,000.

The online form on myGov will display all your superannuation accounts, as reported to us by your funds. You can request the release of your super from multiple super accounts. For example, if you want to receive a total of $10,000 you can request $5,000 from one fund and a second $5,000 from another fund. This must be done within one application form.

We encourage you to check your fund's online portal to confirm that there is sufficient money in your account for you to claim.

Make sure you provide your correct bank account details in the application.
https://www.ato.gov.au/Individuals/...rly-release-of-super/#Submittinganapplication


----------



## Junior (14 April 2020)

Humid said:


> So if the industry funds are so illiquid why have they outperformed the retail funds who should of been creaming it with the stock market run of the last few years?




I can't speak for each individual investment decision made by these funds.  But my basic understanding is they invest in large commercial property/infrastructure projects in Australia, which have clearly performed very strongly for many years.  Primarily due to high immigration and consistently falling interest rates, in my opinion.  

As these investments are not listed, they have these re-valued just once or twice a year (rather than daily for listed assets).  This may mean there can be some manipulation around the timing of these valuations to make sure their annual performance figures are impressive.  With the relentless boom in property and construction in Australia, they've been able to show consistent growth in the value of these assets/investments.  They are able to use their size and consistent inflows to access these big projects, and up until now it has paid off.

However, we are now seeing the downside of over-allocating member funds into these assets.  They are illiquid, and we could see big write-downs as Australia enters it's first real recession in 30 years and we see an end to new construction activity and potentially low/no immigration in the short/medium term.


----------



## sptrawler (14 April 2020)

Humid said:


> How many industry funds have gone belly up



There have been non that I know of and as you say, they have performed extremely well over recent years and may well do into the future.
All I am saying is, I'm old enough to have been through times, where older mates lost a lot of their retirement money due to adverse market conditions.
Below I have extracted an article that explains a lot of the issues faced in the 1990's, things were going extremely well, untill it fell in a hole.
I'm not saying this reflects any of the situation happening now, but it was this and more recent catastrophes that made me chose to run my own fund.
If history repeats it will be hugely disappointing IMO. But as you say look at the mismanagement by the Banks and AMP, the temptation is always there especially after a long bull run in property and stocks, to take on riskier investment chasing higher returns.
Just my opinion.
https://www.moneymanagement.com.au/features/editorial/funds-management-graveyard:
_According to Power, who is a former BT Funds Management director: “It was really a case of a rising tide lifting all ships up until 1987. Property trusts were also very strong, though you had front-end fees as high as 8 per cent and planners, or sales people as they were known in those days, were getting 7 per cent of that.”

AustWide, Armstrong Jones and Growth Equities Mutual (GEM) were the three main listed property players, Power says.

“GEM was successful. However, AustWide and to a lesser extent Armstrong Jones, were disasters and suffered in the property trust collapse.”

The property trust collapse in the 90s hurt a lot of investors and at one stage the Federal Government had to intervene and freeze all assets in the sector.

Estate Mortgages, an aggressive mortgage loan operator, according to Power, is another corporate collapse of note over the past 20 years.

“I think they were running television ads claiming to be safer than banks, so a lot of people put their money into mortgages. But they were lending money for development and when the market fell over they were left fully exposed.”

Some other groups to be found in the industry graveyard include OST Friendly Society — whose investorsIOOFsaved with a bailout deal — and Pyramid — a Geelong-based building society that collapsed and was tied into the collapse of the State Bank of Victoria-owned merchant bank, Tri-Continental, which ultimately fuelled the sale of the State Bank of Victoria to the Commonwealth Bank.

“There has been enormous change in the industry and that change has been precipitated by falls in equity markets and collapses in the listed property market. You then get a shakedown of players, as consolidation sees the weaker players get taken over by stronger ones,” Power says_.

One hopes the current situation doesn't precipitate any major financial collapses, as happened in the past and hopefully the Governments huge handouts to workers help avert any issues.
Here is another old article that covers past collapses all good food for debate IMO.
https://www.afr.com/property/the-au...ssons-from-a-life-in-property-20161114-gsowu5


----------



## Humid (16 April 2020)

https://theconversation.com/the-las...be-doing-right-now-is-paying-dividends-135928


----------



## sptrawler (16 April 2020)

Humid said:


> https://theconversation.com/the-las...be-doing-right-now-is-paying-dividends-135928



Good article Humid, everyone's going to take a haircut, just different barbers. Mine is the dividend trim.
I have already taken my pension for next year, luckily they have reduced the minimum drawdown to 2%, so it will be a tight year.
The second bit of luck for me is, there is no cruises going and they aren't likely to start for a long time, so the wife can't book one.


----------



## Humid (16 April 2020)

Two weeks ago, Scott Morrison and Josh Frydenberg told Australians that they had formed a committee to save the world.

Their JobKeeper policy (a surprisingly good policy given the circumstances) sounded like an act of charity.

It is anything but.

Like any government spending, JobKeeper is another transfer of wealth from one part of society to another. Like the aged pension, the policy is highly unfair and arbitrary — some people get it, others, like foreign workers, casuals or large companies may not.

However, given the likelihood of businesses and goodwill being destroyed, and the possibility that the epidemic doesn’t actually last that long, providing businesses with bridge cash is a reasonably smart policy. 

To really determine the winners and losers it’s not just a question of who gets the cash, but rather: who’s paying the bill?

The immediate costs of the government’s various stimuli (and it isn’t just JobKeeper) is more than $130 billion. This is around a quarter of our annual GDP. There are two ways the government could force Australians to pay for this.

An increase in revenue through higher taxes/levies (or similarly a reduction in exemptions) for the next few years, or it can essentially print money to pay for higher debt/interest payments. This makes everyone poorer but they don’t realise it.

The first option is politically more difficult, the second option is incredibly unfair on younger generations.

*How should we pay for this?*
Given the stimulus is largely targeted as businesses (which tend to be owned by those who are older and wealthier), it seems fair that they should pay the costs (that is, a targeted option one).

Here is where we can start:

*Negative gearing*: a classic rort which essentially acts to allow those who own investment properties to reduce immediate income and instead create a deferred capital gain which is taxed at half the level. This costs around $1.6 billion annually and generally benefits the relatively wealthy.

*Super concessions*: this tax loophole is so large and ingrained that most don’t even think about it. Super allows you to move into a “retirement phase” when you turn 65. This means you pay zero tax on earnings from investments (in the accumulation which comes just before the retirement phases, tax is a still very low 15%).

Meanwhile, the 21-year-old barista who is making your latte each morning is paying a chunk of their tiny income in tax. The original rationale of not taxing super earnings was to ease pressure on the pension. However, super concessions now cost upwards of $40 billion a year. Almost all the benefit goes to the richest quartile of old people.

Get rid of it all and tax superannuation earnings at the marginal rate. Many pensioners would still pay zero tax but very wealth pensioners may, heaven forbid, need to pay something.

*Dividend imputation credits*: somehow Labor botched the communication of fixing Australia’s most revolting tax policy. In really simple terms, the dividend credit scheme supercharges the superannuation loophole (above) to give old rich people actual cash refunds when they invest in businesses that pay some company tax.

UTS professor Elizabeth Savage determined “the largest average benefits are paid to the wealthiest group. Their wealth measured by superannuation account balance is 20 times that of the group that receives no cash refund. Their superannuation wealth is 76 times their taxable income.”

The cost of this policy is around $5 billion. Even Geoff Wilson, who doggedly fought to retain the loophole for his well-healed clients conceded this disgrace has gotta go.

*Principal residence exemption*: another forgotten but massively inequitable tax law that has been politically poisonous (largely because so many Australians own their own home). This policy is naturally, hugely favourable to the wealthy.

Case study: _The Age_ recently noted that the Algama family is selling their Kew mansion Ross House with expectations of $25 million (having paid $4.7 million in 2003). A $20 million-plus windfall gain would be taxable at precisely zero.

This exemption costs taxpayers more than $70 billion a year. A middle ground could be to index the cost base of the property to inflation, and then tax any windfall profit at, say, 15% — this could raise around $10 billion. A fairer solution would be to tax the gain like any other capital profit which could raise upwards of $30 billion.

The government needs to urgently find more than $100 billion a year. The above measures might cover 50%-70% of that cost, and create a much fairer tax system going forward.

Sadly, it’s far more likely the Liberal government will make the inequities worse by increasing debt levels and printing money (so the cost is shifted to the young and those not yet born) or by using progressive taxes (such as increasing the GST level or creating an emergency levy) which leaves the poor and middle class to pay a far higher proportion of the bill.

_Adam Schwab is a company director and angel investor, and the author of the best-selling _Pigs at the Trough: Lessons


----------



## sptrawler (16 April 2020)

Well we have been through that one a million times Humid.
As per usual all good ideas, and then fall down on the implementation.

Negative gearing- yep get rid of it completely.
Super concessions- yep get rid of them, give everyone the age pension, if you want better than the age pension save for it.
Dividend imputation credits- yep get rid of them completely, don't give them to millionaires and take them of SMSF's, take them off all.
Principal Residence exemption- yep take it off, your PPR is taken into account for any welfare.

There you go Humid, I will vote for that, I bet neither Party will put it up, people are so full of it.
Why do young left wing reporters always want it to be about retirees?,
Why not include them in the mix, they probably get franking credits, own a PPR, get a tax break on their super contributions let them join in and help pay for it now.

As you know my pet hate, taking franking credits off SMSF's but not off millionaires, no one has justified to me why.
If Twiggy Forrest can claim $x off his tax payable for owning shares in FMG, why can't I claim the $ back, we both own the same shares?
He pays a lot less tax because of the credits, so it is money in his pocket from FMG's tax that doesn't go to the ATO.
Well I have FMG shares and I hold it in a SMSF that doesn't have to pay tax by legislation, so why shouldn't the FMG tax go into my pocket instead of the ATO's?
Also no one has explained why Industry super funds should retain the franking credits, while the SMSF's should lose them, take them off everyone problem solved.


----------



## sptrawler (16 April 2020)

Another overdue change to tax on super is the 15% tax on contributions, why not make it a 15% reduction on your marginal rate?

If someone is on the 19% tax bracket, they pay no tax on contributions, if they are in the 30% tax bracket they pay 15%, if they are on the $45% tax bracket they pay 30% tax on contributions.

At the moment those on higher tax brackets, are getting an unfair tax advantage than those in lower tax brackets? Wow is that middle class welfare OMG.
I'm sure that would save the Government a lot of money.
Why should the Barista pay the same tax as the FIFO or indeed as much as Adam Schwab?

(tax brackets rounded for simplicity).


----------



## Humid (16 April 2020)

I don't know to many baristas who pay 80k tax


----------



## sptrawler (16 April 2020)

Humid said:


> I don't know to many baristas who pay 80k tax



I don't know why someone on a full government pension should get the franking credits and someone who has saved harder done without more should lose them, life is full of the inexplicable.
Or why I could have my franking credits back if I change to an industry fund, it sounds like blackmail, strange indeed.
I guess it is similar to why the barista has to pay the same contributions tax as someone who is on the highest tax rate.
Life is indeed stage grasshopper.


----------



## InsvestoBoy (16 April 2020)

sptrawler said:


> Why do young left wing reporters always want it to be about retirees?




lol as if the only person who could make those statements is a young left reporter? Adam Schwab is not young, left or a reporter. He's a corporate lawyer and CEO, with a long history of capitalist pursuit. 

Maybe he is making these statements "about retirees" not because he wants to but simply that is because what the data shows all the Government subsidy has gone to?


----------



## sptrawler (16 April 2020)

InsvestoBoy said:


> lol as if the only person who could make those statements is a young left reporter? Adam Schwab is not young, left or a reporter. He's a corporate lawyer and CEO, with a long history of capitalist pursuit.
> 
> Maybe he is making these statements "about retirees" not because he wants to but simply that is because what the data shows all the Government subsidy has gone to?



Well then he could quite easily do away with all the suggestions he put forward, i didn't see him mention that prospect or putting his hand up for it.
Also I wonder if he accepts the 15% contribution rate to super, or just doesn't put anything in for ethical reasons.


----------



## fiftyeight (2 May 2020)

Asking for a friend, haha but actually I am, my wife runs an online business and we have been surprisingly busy, no gov hand out for us.

2 guys at work have claimed the $10k as our over time has been cut, not sure that will equal 20% or even if that counts. But more worryingly, they have claimed the $10k for their wives. The wives are stay at home mums who receive no Centerlink payments as we earn to much, but they have claimed the $10k thinking they qualify as 'unemployed'.

Pretty sure they have it wrong but I cannot find anything to confirm, can someone point me in the right direction?


----------



## Belli (2 May 2020)

fiftyeight said:


> Asking for a friend, haha but actually I am, my wife runs an online business and we have been surprisingly busy, no gov hand out for us.
> 
> 2 guys at work have claimed the $10k as our over time has been cut, not sure that will equal 20% or even if that counts. But more worryingly, they have claimed the $10k for their wives. The wives are stay at home mums who receive no Centerlink payments as we earn to much, but they have claimed the $10k thinking they qualify as 'unemployed'.
> 
> Pretty sure they have it wrong but I cannot find anything to confirm, can someone point me in the right direction?




The legislation relating to the Coronavirus Economic Package does not contain any definition of unemployment.  It does not reference the ABS or Centerlink definitions and would if it was specifically intended to do so.

https://www.ato.gov.au/law/view/document?src=rs&pit=99991231235958&arc=false&start=1&pageSize=10&total=2&num=0&docid=PAC/20200022/Sch13-Cl6&dc=false&stype=find&tm=phrase-basic-covid&tm=sis-basic-unemployed

Would seem the two guys you refer to are in the clear with their actions for their wives.  Check with the ATO which is administering the package if you are unsure.

Forgot to mention I am not quibbling about the ethics of it.  If it's lawful, it's lawful.


----------



## fiftyeight (2 May 2020)

Belli said:


> The legislation relating to the Coronavirus Economic Package does not contain any definition of unemployment.  It does not reference the ABS or Centerlink definitions and would if it was specifically intended to do so.
> 
> https://www.ato.gov.au/law/view/document?src=rs&pit=99991231235958&arc=false&start=1&pageSize=10&total=2&num=0&docid=PAC/20200022/Sch13-Cl6&dc=false&stype=find&tm=phrase-basic-covid&tm=sis-basic-unemployed
> 
> ...




Well that is unexpected.

The restrictions are so loose, why not just say everyone can cash out if they feel they choose to


----------



## Junior (2 May 2020)

fiftyeight said:


> Well that is unexpected.
> 
> The restrictions are so loose, why not just say everyone can cash out if they feel they choose to




I agree.  They've left it too open to interpretation.  

They should just let everybody do it.  

OR make the eligibility criteria tight and require you to upload evidence with your application.  One or the other!


----------



## qldfrog (2 May 2020)

fiftyeight said:


> Well that is unexpected.
> 
> The restrictions are so loose, why not just say everyone can cash out if they feel they choose to



You can only get the 10k per business(cash flow boost)+ 10 k split in the coming months if you were paying payg tax as an entity in the previous quarter
This is unrelated to loss of turnover vs last year then there is jobkeeper
Which you can claim for anyone on the payroll if you have turnover down  there are restrictions etc
People can claim as they want,bit does not mean the ATO will not come back with a revenge in 6 months


----------



## Belli (2 May 2020)

qldfrog said:


> You can only get the 10k per business(cash flow boost)+ 10 k split in the coming months if you were paying payg tax as an entity in the previous quarter
> This is unrelated to loss of turnover vs last year then there is jobkeeper
> Which you can claim for anyone on the payroll if you have turnover down  there are restrictions etc
> People can claim as they want,bit does not mean the ATO will not come back with a revenge in 6 months




I tend to disagree given the first eligibility requirement "if it is required to assist the person to deal with the adverse economic effects of the coronavirus  known as Covid-19 if: (a) the person is unemployed." Each definition is separate and not dependent on other definitions.


----------



## qldfrog (2 May 2020)

Belli said:


> I tend to disagree given the first eligibility requirement "if it is required to assist the person to deal with the adverse economic effects of the coronavirus  known as Covid-19 if: (a) the person is unemployed." Each definition is separate and not dependent on other definitions.



You have 2 schemes: cash boosthttps://www.ato.gov.au/Business/Bus...Boosting-cash-flow-for-employers/#Eligibility
There a a few eligibility check but that is basically anti rort ones.
ATO pay back your PAYG tax withdrawn up to a level and at least 20k 
This is NOT linked to turnover reducing etc .Just helicopter money
Then there is the jobKeeper scheme which is different and far more complex
Feel free to discuss with your accountant
Basically if your mate was already paying wages (aka income splitting) with his wife for let's say accounting task: the lady might do a few hours per week doing invoicing etc.
or was paying himself from his own company as a payg employee, this is all legal and unrelated to reduced activity

JobKeeper is a different type of fish and you should see reduced activity to qualify
Talk to your accountant if you think you qualify.


----------



## Belli (25 May 2020)

qldfrog said:


> You have 2 schemes: cash boosthttps://www.ato.gov.au/Business/Bus...Boosting-cash-flow-for-employers/#Eligibility
> There a a few eligibility check but that is basically anti rort ones.
> ATO pay back your PAYG tax withdrawn up to a level and at least 20k
> This is NOT linked to turnover reducing etc .Just helicopter money
> ...





I missed this.  You're correct about different schemes.

And I found out it doesn't matter if you are not in the workforce or never have been.  According to the information on the ATO web-site someone who receives investment income may also contribute to superannuation.  Sooo, if you have been a canny investor and never have even seen the inside of a factory but have been contributing to super and effectively unemployed being an investor only then here's $10k now and $10k later if you want it.


----------



## qldfrog (25 May 2020)

You still need to have a business and fill bas etc but yes, any business should get it


----------



## Belli (25 May 2020)

qldfrog said:


> You still need to have a business and fill bas etc but yes, any business should get it




Possibly.  However, it doesn't seem one needs to actually be operating a business or have an ABN.

According to this:

https://www.ato.gov.au/Individuals/...-deductions-for-personal-super-contributions/

a plain vanilla investor isn't required to be a business but still may contribute to superannuation.  Could be someone who early on came into a large windfall (inheritance, tattslotto) and did the plonk it into VAS sort of thing.  In that case, in conjunction with the ability to extract $10k + $10k from super being considered unemployed (no specific definition in the relevant legislation) easy as to take it out and then re-contribute provided it's within the $25k concessional or even as a non-concessional and so convert tax-taxable to tax free.

Some absorbing scenarios abound.


----------



## qldfrog (26 May 2020)

Unclear where you link it to superannuation, the cash flow boost is linked to payg payment as shown in bas/ias, i assumed on salary.
But if you invest as a business, yes you could qualify
Probably the wrong thread to discuss these items


----------



## Belli (30 June 2020)

fiftyeight said:


> Well that is unexpected.
> 
> The restrictions are so loose, why not just say everyone can cash out if they feel they choose to






Junior said:


> I agree.  They've left it too open to interpretation.
> 
> They should just let everybody do it.
> 
> OR make the eligibility criteria tight and require you to upload evidence with your application.  One or the other!




Loose but not too loose it seems.

https://www.ato.gov.au/Media-centre...sf_news_73&utm_source=atogov&utm_medium=email

And there is this oddity.  It isn't necessarily a monetary reduction in salary but working hours is part of the criteria for access.  You may have a 20% pay cut but if your working hours are the same????



> on or after 1 January 2020 either:
> 
> you were made redundant
> your *working hours were reduced by 20%* or more (including to zero)
> you were a sole trader and your business was suspended or there was a reduction in turnover of 20% or more (partners in a partnership are not eligible unless the partner satisfies any other of the eligibility).





Could be be some interesting questions posed to a number of tax payers after they have submitted their tax returns.  Good fun and times ahead.


----------



## sptrawler (7 July 2020)

Belli said:


> And there is this oddity.  It isn't necessarily a monetary reduction in salary but working hours is part of the criteria for access.  You may have a 20% pay cut but if your working hours are the same????
> 
> Could be be some interesting questions posed to a number of tax payers after they have submitted their tax returns.  Good fun and times ahead.



I'll give you an update, someone who works with a mate did it, so we should get live feed.


----------



## Belli (9 July 2020)

sptrawler said:


> I'll give you an update, someone who works with a mate did it, so we should get live feed.




Yes, I'll be sitting back watching with interest to hear about the outcomes.

It doesn't impact me directly but the long-term aspect on some could be intriguing such as I don't have enough super to retire.  And why?  Pretty expensive car you may have bought there Sunny Jim ($20k @ 7.5% over 30 years) and now cautious ones may be required to dig into the back pocket to help you.

However, it's nice to know my belief in people seeking what is apparently easy money has been reaffirmed.


----------



## sptrawler (22 July 2020)

Apparently the banking regulator, is going to relax the dividend restrictions, it imposed on the financial sector.

I wonder if this has been brought about, by the amount of self funded retirees, who now qualify for a government pension and are lined up at centerlink?

Their dividends have been stripped, the value of their investments has dropped and they no doubt are eating their capital which in every probability they can't replenish.
I guess the only upside is, it is only the kids inheritance, after this hit the only thing to be sorted will be the PPR.


----------



## sptrawler (9 August 2020)

In todays Sunday paper a reader asks the question, why contribute more to super, when even if you have a lot in super it wont earn anywhere near as much as the age pension.
The answer from the expert, was the theory is correct, but the age pension will change in the future.
I agree it will change, the age pension will go up and the amount of money you are allowed to have to qualify will go down.


----------



## sptrawler (26 August 2020)

This is a timely reminder for people who are think about starting a SMSF, if you are going to leave the investing and control of your money to a third party, you may be better off just having your money in a recognised industry or retail super fund. 
Just my opinion.
https://www.abc.net.au/news/2020-08...rannuation-through-financial-adviser/12594060


----------



## Skate (26 August 2020)

*This will be important to a few*
Amendments to the Income Tax Assessment Act 1997 enables individuals aged 65 and 66 to make non-concessional superannuation contributions. So good so far, but the proposed changes to the Bill to enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule is NOT legislated yet. 

*You can check the progress of this proposed bill change via the official treasury website *https://www.aph.gov.au/Parliamentar...slation/Bills_Search_Results/Result?bId=r6538. 

*The Bill progress in the House of Representatives*
1. Introduced & read a first time on the 13th May 2020
2. Second reading moved 13th May 2020
3. Second reading debate 25th Aug 2020

*Third reading*
Prepared if the bill is amended by the house in which it was introduced. This version of the bill is then considered by the second house.

*As passed by both houses *
Final text of bill agreed to by both the House of Representatives and the Senate which is presented to the Governor-General for assent.

Skate.


----------



## Belli (27 August 2020)

sptrawler said:


> This is a timely reminder for people who are think about starting a SMSF, if you are going to leave the investing and control of your money to a third party, you may be better off just having your money in a recognised industry or retail super fund.
> Just my opinion.
> https://www.abc.net.au/news/2020-08...rannuation-through-financial-adviser/12594060




A sad tale and yes it may be they were not suited to be Trustees of a superannuation fund.

So many do not understand the implications of the requirement of a being a Trustee and I suspect the majority do not even refer to the fund's Trust Deed once the fund is established.  A short synopsis of the many clauses in the Deed is "You're on your own, Sunshine" when it comes to investing matters.


----------



## SirRumpole (27 August 2020)

sptrawler said:


> In todays Sunday paper a reader asks the question, why contribute more to super, when even if you have a lot in super it wont earn anywhere near as much as the age pension.
> The answer from the expert, was the theory is correct, but the age pension will change in the future.
> I agree it will change, the age pension will go up and the amount of money you are allowed to have to qualify will go down.




The age pension will never go down, but the qualifying age is going to rise.

It will be 70 by 2025.

https://www.aph.gov.au/about_parlia...pubs/rp/budgetreview201415/pensioners?print=1


----------



## PZ99 (27 August 2020)

SirRumpole said:


> The age pension will never go down, but the qualifying age is going to rise.
> 
> It will be 70 by 2025.
> 
> https://www.aph.gov.au/about_parlia...pubs/rp/budgetreview201415/pensioners?print=1



Not anymore. To his credit, Scomo dropped this Abbott policy because he saw it for what it was... putrid.

If you're retrenched at 60 and the pension age is 70 you have to live on your super for 10 years so it would only be a matter of time before the super preservation age would be raised as well.

Any attempts to do either should be resisted and will be.


----------



## sptrawler (27 August 2020)

PZ99 said:


> Not anymore. To his credit, Scomo dropped this Abbott policy because he saw it for what it was... putrid.
> 
> If you're retrenched at 60 and the pension age is 70 you have to live on your super for 10 years so it would only be a matter of time before the super preservation age would be raised as well.
> 
> Any attempts to do either should be resisted and will be.



The only ones with any chance of getting it through would be Labor, but even then they would have to have the unions on side, which is becoming more and more difficult.
I was made redundant at 55(9 years ago) and am still living off super, ATM it is a real pinch, with returns as low as they are.


----------



## PZ99 (27 August 2020)

sptrawler said:


> The only ones with any chance of getting it through would be Labor, but even then they would have to have the unions on side, which is becoming more and more difficult.
> I was made redundant at 55(9 years ago) and am still living off super, ATM it is a real pinch, with returns as low as they are.



Not much fun. So thanks to Labor you have to wait another year and a half before getting the pension if my maths is correct? I was against that KRudd policy as well even if it meant a rise of some 30 a week.

Politicians need to get it. Move the pension age back to 65 but offer tax incentives to work beyond that if you want / need to 

Unions are now as we speak publicly divorcing Labor in QLD citing a disconnect from working people - much like the voters are


----------



## sptrawler (27 August 2020)

PZ99 said:


> Not much fun. So thanks to Labor you have to wait another year and a half before getting the pension if my maths is correct? I was against that KRudd policy as well even if it meant a rise of some 30 a week.
> 
> Politicians need to get it. Move the pension age back to 65 but offer tax incentives to work beyond that if you want / need to
> 
> Unions are now as we speak publicly divorcing Labor in QLD citing a disconnect from working people - much like the voters are



The whole problem revolves around encouraging people to work, not encouraging them to chase welfare, as can be seen with jobkeeper it is a recipe for disaster.
I could have gone onto disability and my wife could have received carers allowance, but i wouldn't have the amount in super I have, if I was that sort of person.
Not blowing my own trumpet, just explaining my frustration when people like myself are demonised and made out to be lucky and selfish.
The unions are made up of workers who are trying to become self funded, Labor are trying to paint self funded as rich people and those on welfare as those most needy and special, I know with my kids they have had a gut full of it.
IMO unless Labor gets its $hit together they will lose the support of all workers, you can't keep demonising and penalising the very ones you are representing, while at the same time taking more off them to support those who have no intention of working.
Super has to be for the workers benefit, not just another indirect tax on those who have worked all their lives and paid taxes.


----------



## SirRumpole (27 August 2020)

sptrawler said:


> IMO unless Labor gets its $hit together they will lose the support of all workers, you can't keep demonising and penalising the very ones you are representing, while at the same time taking more off them to support those who have no intention of working.




Yes, well said.

Welfare for those who need it , but someone has to pay for it.

I think Joel Fitzgibbon is right.

Labor has to speak more to the aspirationals, and give them cause to believe that they may get reward for effort in studying and working hard and improving their lot in life.

I'd hate to see Albo making the same mistake as Shorten did in ignoring the centre ground. That doesn't mean that Labor shouldn't do anything about the disaffected when in government, just that they should appeal to a wider group of voters otherwise they won't get into government in the first place.


----------



## sptrawler (27 August 2020)

SirRumpole said:


> I'd hate to see Albo making the same mistake as Shorten did in ignoring the centre ground. That doesn't mean that Labor shouldn't do anything about the disaffected when in government, just that they should appeal to a wider group of voters otherwise they won't get into government in the first place.



Just be realistic IMO, you can't just say anyone not on welfare is rich and anyone on welfare is there because of circumstances outside their control.
It is fast approaching the point where it is detrimental for workers to put extra into super, it may well financially be more sensible to pay down debt and aim for maximum pension.
The problem with that is, the lack of incentive causes a lack of endeavour which results in a huge drop in productivity. Having welfare as a lifestyle choice, which isn't much different to a working lifestyle, will end up with one outcome.
Just my opinion.


----------



## Skate (31 August 2020)

Skate said:


> *This will be important to a few*
> Amendments to the Income Tax Assessment Act 1997 enables individuals aged 65 and 66 to make non-concessional superannuation contributions. So good so far, but the proposed changes to the Bill to enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule is NOT legislated yet.
> 
> *You can check the progress of this proposed bill change via the official treasury website *https://www.aph.gov.au/Parliamentar...slation/Bills_Search_Results/Result?bId=r6538.
> ...




*Amendments to the Income Tax Assessment Act 1997*
When this Bill is finally passed it will enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the "bring-forward rule".

*The Bill PREVIOUS progress in the House of Representatives*
1. Introduced & read a first time on the 13th May 2020
2. Second reading moved 13th May 2020
3. Second reading debate 25th Aug 2020

*The Bill UPDATED progress in the House of Representatives*
4. Second reading debate 27 Aug 2020
5. Second reading debate 31 Aug 2020
6. Second reading agreed to 31 Aug 2020
7. Third reading agreed to 31 Aug 2020

*Summary*
The amendment to the Bill is one step closer. The passing of this Bill may be trivial to some but not to others.

Skate.


----------



## macca (31 August 2020)

I have not drilled right down into it but in NZ everyone gets the aged pension but it is added to any other income.

Seems reasonable, live on the pension or work a bit, whatever the personal choice.

If people save any cash for their old age or blow the lot, they still get the same pension


----------



## sptrawler (9 September 2020)

sptrawler said:


> I guess the only upside is, it is only the kids inheritance, after this hit the only thing to be sorted will be the PPR.



I think this is the first steps along the PPR asset test road, time will tell, but tying the PPR to any super concession is opening the door to future changes IMO. 

https://www.smh.com.au/money/super-...8-p55tl2.html?js-chunk-not-found-refresh=true


----------



## PZ99 (9 September 2020)

macca said:


> I have not drilled right down into it but in NZ everyone gets the aged pension but it is added to any other income.
> 
> Seems reasonable, live on the pension or work a bit, whatever the personal choice.
> 
> If people save any cash for their old age or blow the lot, they still get the same pension



It sounds like a better system. Retire at 65 and earn around $25k a year for singles + your other income and pay the relevant income tax.

https://www.enz.org/new-zealand-pension.html


----------



## sptrawler (9 September 2020)

PZ99 said:


> It sounds like a better system. Retire at 65 and earn around $25k a year for singles + your other income and pay the relevant income tax.
> 
> https://www.enz.org/new-zealand-pension.html



The NZ, U.K and Canada have a similar system.
Australia had the same or similar pension system, before it was raided and put into consolidated revenue.
Then means tested, then disbanded and super started, from what I have read.
The whole history of Australia's pension and super system is posted in the thread a few years ago, it would take some finding, with the search function.


----------



## Belli (8 October 2020)

Belli said:


> Yes, I'll be sitting back watching with interest to hear about the outcomes.




Ha ha.  It was bound to happen.









						ATO cracks down on early release super applicants who do not qualify
					

A survey of members of a large industry fund indicates some of those who are applying for early release of their super do not meet the ATO criteria.




					www.theage.com.au
				




Many people are apparently impetuous and don't even bother to think of possible adverse outcomes of their decisions when they see what they believe is easily available cash.

I have not one whit of sympathy for them.


----------



## sptrawler (20 October 2020)

Belli said:


> Ha ha.  It was bound to happen.
> 
> 
> 
> ...



Yes, a mate of mine was shaking his head when a lot of his workmates were pulling out super, he told them not to, but you can't put an old head on young shoulders.


----------



## Belli (21 October 2020)

sptrawler said:


> Yes, a mate of mine was shaking his head when a lot of his workmates were pulling out super, he told them not to, but you can't put an old head on young shoulders.




Very true.  Some don't seem to realise that ATO has heaps of data and is going to use it.  Transactions through your bank accounts.  Emploeerys now having to provide real time data on salaries, including superannuation payments.  So the ATO can analyses s if your income has or hasn't gone down, if the employer is making SG payments.  And so on.  If SG payments are still being made and you withdraw funds form super, it may be prudent to prepare yourself for a "Please explain..." from the ATO.

Can get such a query if you did qualify.  Made redundant due to Covid 19, took funds out, lucky enough to jag another job in the interim and decided to place the funds back into super.  ATO may view it as an arrangement to receive a tax benefit and apply Part iVA.

A lot to still play out I feel.


----------



## Belli (21 October 2020)

As an aside I do shake my head in wonder what some trustees of SMSF's do and whether they should even be trustees.  Came across one drongo who took out the account-based pension early in the 2019-202 FY at 5%.  Doesn't meet the work or any other test test.  After the Government announced the halving of the minimum amount, you can guess what this character did assuming the Government decision was retrospective.


----------



## Belli (21 October 2020)

I wonder how many SMSFs are involved in this little number?



> ASIC has today commenced proceedings in the Federal Court of Australia against Dixon Advisory and Superannuation Services Limited (Dixon Advisory), a subsidiary of ASX-listed Evans Dixon Limited (Evans Dixon).
> 
> ASIC alleges that Dixon Advisory representatives failed to act in their clients’ best interests and to provide advice that was appropriate to the clients’ circumstances.








__





						20-207MR ASIC commences civil penalty proceedings against Dixon Advisory for alleged conflicts, best interest failures and inappropriate advice  | ASIC - Australian Securities and Investments Commission
					






					asic.gov.au
				




Assuming the Trust Deed includes a similarly worded clause, which I have extracted from a generic Deed, I have always been somewhat perplexed where the line should or can be drawn between the provision of poor advice and the responsibility of the Trustee in deciding not to act on advice.


----------



## Dona Ferentes (21 October 2020)

Super is a graveyard for sunken intentions

Try to do it yourself, and mistakes/ brazen cowboy behaviour is observed

Go with a platform/ an administrator and the fees pile up.
Below is a list, taken from slide 24 of Netwealth 2020 Results Presentation 18 Aug. That is some serious clipping along the way.

Most ouftits are the same. Of course, their website has a "Look beyond fees" article extolling the benefits


----------



## sptrawler (23 November 2020)

Could be an interesting time on the 'superannuation front', very soon,  with the release of a long-awaited review of retirement incomes. The review, chaired by former Treasury official Mike Callaghan.









						Government to assess superannuation, housing policy after Retirement Income Review
					

The wide-ranging Retirement Income Review suggests Australians draw down on their superannuation balances and use equity in the family home to fund their retirement.




					www.abc.net.au


----------



## Iggy_Pop (23 November 2020)

sptrawler said:


> Could be an interesting time on the 'superannuation front', very soon,  with the release of a long-awaited review of retirement incomes. The review, chaired by former Treasury official Mike Callaghan.
> 
> 
> 
> ...



Yes looks like we are moving to a user pays system with little government support.  Does disappoint me as after working and saving in superannuation and other investments, now retired, I can live comfortably on a 4% drawdown. But then I an criticized for not spending enough and I should not be leaving any inheritance to my family. The biggest risk I have is I am likely to be around another 30 years and health costs will rise, and if aged care is needed, it is very expensive.  So I do want to have a nest egg to cover the potential health costs and/or aged care costs. If there is some left over, the kids get their bit. 

It seems to me, the government plan is to include the value of the house in any means test for a pension, arguing a reverse mortgage will keep you going. If they try to do this, it will be like the very unpopular Labor Party Franking Credit Policy and will guarantee they will lose the next election. 

Iggy


----------



## sptrawler (23 November 2020)

Iggy_Pop said:


> Yes looks like we are moving to a user pays system with little government support.  Does disappoint me as after working and saving in superannuation and other investments, now retired, I can live comfortably on a 4% drawdown. But then I an criticized for not spending enough and I should not be leaving any inheritance to my family. The biggest risk I have is I am likely to be around another 30 years and health costs will rise, and if aged care is needed, it is very expensive.  So I do want to have a nest egg to cover the potential health costs and/or aged care costs. If there is some left over, the kids get their bit.
> 
> It seems to me, the government plan is to include the value of the house in any means test for a pension, arguing a reverse mortgage will keep you going. If they try to do this, it will be like the very unpopular Labor Party Franking Credit Policy and will guarantee they will lose the next election.
> 
> Iggy



I agree with you and am in the same situation regarding being self funded, I'm yet to get to pension age, but doubt I will qualify anyway.
I personally don't think it will matter which party gets into office, it is only a matter of time before the PPR is included in the asset test and is why I downsized when I left work and put the money in super.
Labor were calling for it years ago, the mega rich overlooking Sydney harbour and pulling an aged pension, so in reality they would have difficulty arguing against it, when it has been on their platform for a long time. 
The house becomes a tax free tax haven for intergenerational wealth transfer, so both parties will want to close the loop hole IMO.
I personally think, using the the money to help your kids while they are still in the financial growth phase, is far more beneficial than leaving them an inheritance when they are elderly.
Just my thoughts


----------



## BlindSquirrel (23 November 2020)

Why not simply set the super contribution rate at 10% as a nice round number and then leave it for a bit? 9.5% is so cumbersome.


----------



## Ferret (23 November 2020)

BlindSquirrel said:


> Why not simply set the super contribution rate at 10% as a nice round number and then leave it for a bit? 9.5% is so cumbersome.



The thing is, so much faith in the super system has already been eroded by governments' constant changes to the Rules.

I understand the argument for delaying the next super rate increase and I can see the sense in it.  Nevertheless, my view is that they should just leave things alone and stick with the already legislated increases.


----------



## sptrawler (23 November 2020)

The problem with the super system IMO is, the Government has just as much if not more say in how your money is spent, as has been proven over and over the thing that improves a persons retirement is owning their home.
There is no point in having a lot of money when you retire, if most of it will be eaten up by rent.


----------



## Ferret (23 November 2020)

sptrawler said:


> The problem with the super system IMO is, the Government has just as much if not more say in how your money is spent



I'm not sure what you mean there SP.  

I agree 100% though that owning your own home in retirement is a big advantage.


----------



## Warr87 (23 November 2020)

Ferret said:


> The thing is, so much faith in the super system has already been eroded by governments' constant changes to the Rules.
> 
> I understand the argument for delaying the next super rate increase and I can see the sense in it.  Nevertheless, my view is that they should just leave things alone and stick with the already legislated increases.




I can kinda see it too, but businesses are under no obligation to increase wages. i don't think increasing super will some how cause wage growth to stop, at least not in a meaningful way. will wages actually increase if super isn't increased? not necessarily. at least with the increase businesses are forced to add more value to someones pay.

I also don't like the proposal of having to draw on equity in your house. What is the point in buying a house if you spend 20-30years paying it off, only to have to essentially mortgage it out again to draw on the equity? Makes no sense to me. Doesn't give an incentive to buy a house IMO as you will spend money on the interest of the loan during the intial mortgage and then interest on the loan against the house when you reverse mortgage it. may as well stay a renter and keep your cash. I want a house for retirement so I have a place to call my own and not have to worry about rent.


----------



## sptrawler (23 November 2020)

Ferret said:


> I'm not sure what you mean there SP.
> 
> I agree 100% though that owning your own home in retirement is a big advantage.



What I mean by the Government has just as much if not more say in how your money is spent, history is littered with changes since super's inception and you or I had no say in it.
In all probability there will be a myriad of future changes, which will dictate how you can spend it and you wont have any say in that either.
I think it is pretty straight forward, the original format for super in pension phase was RBL's, that entailed a formulae that dictated the minimum amount of pension you could withdraw and the the maximum amount of pension you could withdraw in any given year, this was proportional to your age and life expectancy.
Then Costello simplified it to what it is now, but as was shown at the last election any treatment of super and how it is treated is at the whim of the government in office and you have to live with those rules if you break them you are fined.
So as I said the Government has as much, if not more say in how your money is spent.


----------



## sptrawler (23 November 2020)

Warr87 said:


> I also don't like the proposal of having to draw on equity in your house. What is the point in buying a house if you spend 20-30years paying it off, only to have to essentially mortgage it out again to draw on the equity? Makes no sense to me. Doesn't give an incentive to buy a house IMO as you will spend money on the interest of the loan during the intial mortgage and then interest on the loan against the house when you reverse mortgage it. may as well stay a renter and keep your cash. I want a house for retirement so I have a place to call my own and not have to worry about rent.



In reality it is no difference to the way the super system is at the moment, why put money away all your working career when it could be paying down a house, only to find that when you reach pension age you have to spend it to pay rent?
Or others that downsize and put their money into super, have to use that money to fund their pension, when in reality they could have stayed in the McMansion kept $500-600K and received a pension. Obviously the house would be valued and under a certain value, it wouldn't be classed as an assset, over that it would be.
The whole super/retirement/aged pension system needs to be overhauled, to make it fit for purpose, it has been butchered to the point none of it works as intended.
The age pension, owning your house and the maximum allowed in investments, is by far the best outcome financially, but it does nothing for building a country of endeavour, creativeness and hard work, it fosters and breeds mediocrity and laziness .
Just my opinion.
Just found this article on the very same issue.








						Empty nesters rule the roost as retired tenants fall behind
					

The problem with Australia's retirement system is neither the golden egg nor the goose laying it.




					www.smh.com.au
				



At last an opinion piece, about the subject that isn't leaning one way or the other, hopefully Ross Gittens can stay on leave.


----------



## Ferret (23 November 2020)

sptrawler said:


> In all probability there will be a myriad of future changes, which will dictate how you can spend it and you wont have any say in that either.



Yes, unfortunately the tinkering isn't going to stop.  

Dictating how you can spend your super would be a very big step.  I'd hope the push back against that would be strong enough to prevent it, but nothing is certain.


----------



## sptrawler (23 November 2020)

Ferret said:


> Yes, unfortunately the tinkering isn't going to stop.
> 
> Dictating how you can spend your super would be a very big step.  I'd hope the push back against that would be strong enough to prevent it, but nothing is certain.



Like I said, that is how it was when it started, I would be surprised if it didn't go back to that. 
The biggest folly, is thinking the underlying driver of super, is for the recipients benefit IMO.


----------



## Iggy_Pop (23 November 2020)

sptrawler said:


> I agree with you and am in the same situation regarding being self funded, I'm yet to get to pension age, but doubt I will qualify anyway.
> I personally don't think it will matter which party gets into office, it is only a matter of time before the PPR is included in the asset test and is why I downsized when I left work and put the money in super.
> Labor were calling for it years ago, the mega rich overlooking Sydney harbour and pulling an aged pension, so in reality they would have difficulty arguing against it, when it has been on their platform for a long time.
> The house becomes a tax free tax haven for intergenerational wealth transfer, so both parties will want to close the loop hole IMO.
> ...



Yes both political parties seem to be creating a stigma against people with Harbour side property and self funded retirees in general.  I have family in Sydney and it is a challenge to get property there and just because you work hard, buy a property which then appreciates to 2 to 3 million dollars over your life time does not mean you are wealthy and have money to live on. Rates and house insurance go through the roof in line with property values.
For elderly person in Sydney with an expensive property and not much superannuation, it is a dilemma for them to either downsize or reverse mortgage their property. Either approach when you are forced into it is distressing. Why would we want to do this to the elderly, and it guarantees they will spend minimally in their later years.
We should be following the approach of other countries that give all retirees the pension and get rid of the pension assets test. The money would be spent and we can leave the elderly in their homes. 
The bizarre thing is that both political parties want  retirees owning their homes and then offering home assist so they can live there lives out to take pressure off the aged care system.  But they both create stigmas around franking credit, harbor side mansions etc. 
The aged pension for all resolves it. 

Iggy


----------



## sptrawler (23 November 2020)

Iggy_Pop said:


> Yes both political parties seem to be creating a stigma against people with Harbour side property and self funded retirees in general.  I have family in Sydney and it is a challenge to get property there and just because you work hard, buy a property which then appreciates to 2 to 3 million dollars over your life time does not mean you are wealthy and have money to live on. Rates and house insurance go through the roof in line with property values.
> For elderly person in Sydney with an expensive property and not much superannuation, it is a dilemma for them to either downsize or reverse mortgage their property. Either approach when you are forced into it is distressing. Why would we want to do this to the elderly, and it guarantees they will spend minimally in their later years.
> We should be following the approach of other countries that give all retirees the pension and get rid of the pension assets test. The money would be spent and we can leave the elderly in their homes.
> The bizarre thing is that both political parties want  retirees owning their homes and then offering home assist so they can live there lives out to take pressure off the aged care system.  But they both create stigmas around franking credit, harbor side mansions etc.
> ...



I agree with you and we have suggested it on here for years, give everyone an aged pension and tax the superannuation pension as income.

That has the two fold effect, one it encourages people to work to add to their retirement nest egg and secondly adds a fairness to the system where those who have worked get penalised and are likely to be penalised more as they get older.

As more and more young people get bigger super balances, something like that will probably happen, at the moment the Government irrespective of party is getting a smaller income tax receipt and a bigger and bigger welfare bill.

The problem with that is someone has to foot the bill, so if the government hit business that hits employment, if they hit workers they spend less so less gst etc, that really only leaves two groups, welfare and older people.
So you know who is going to get hit, funny they are worried about them catching the virus, but I suppose you lose that tax base if they die.  
Just my opinion.


----------



## qldfrog (23 November 2020)

Warr87 said:


> I can kinda see it too, but businesses are under no obligation to increase wages. i don't think increasing super will some how cause wage growth to stop, at least not in a meaningful way. will wages actually increase if super isn't increased? not necessarily. at least with the increase businesses are forced to add more value to someones pay.



sorry but not true at all, super is NOT paid by your employer for you, it is substracted from your package and paid to the super fund ; an increase of 1% of super means your pay amount will be cut by 1%;
now you may have had great employers who took it on themselves to effectively give you a pay rise; they do happen but this is not the law nor true for many; 
As employee, I always worked for a given package, and this included super;
if mandatory super increases, your pay packet decreases...


----------



## qldfrog (23 November 2020)

please note this misconception is widely shared in Australia, probably the results of public servants whose pay is: xxx + super, often with above mandatory rate super.


----------



## Warr87 (23 November 2020)

qldfrog said:


> sorry but not true at all, super is NOT paid by your employer for you, it is substracted from your package and paid to the super fund ; an increase of 1% of super means your pay amount will be cut by 1%;
> now you may have had great employers who took it on themselves to effectively give you a pay rise; they do happen but this is not the law nor true for many;
> As employee, I always worked for a given package, and this included super;
> if mandatory super increases, your pay packet decreases...




are you saying that if super is increased by 1.5% your employer is now going to subtract 1.5% from your hourly rate? I agree that it is a package, but I disagree that super isnt paid for by your employer. Plenty of cases where employers *dont* pay your super as *they* are the ones who deposit it into your super account.


----------



## sptrawler (23 November 2020)

Warr87 said:


> are you saying that if super is increased by 1.5% your employer is now going to subtract 1.5% from your hourly rate? I agree that it is a package, but I disagree that super isnt paid for by your employer. Plenty of cases where employers *dont* pay your super as *they* are the ones who deposit it into your super account.



I think what frog was meaning was, if as usual you go for a pay rise and expect 3%, the employer will give 1.5% and the rest is made up with super.
Alternatively if you go for a job, the company usually includes super in the wage package, they don't usually say your salary is say $80k plus super. So if the super contribution rate is increased, the next time you have a performance appraisal, there is every likely hood if any payrise is offered the super increase will be factored in. 
Very few employers, other than government, will not include super in the calculation of a pay rise.


----------



## Warr87 (23 November 2020)

sptrawler said:


> I think what frog was meaning was, if as usual you go for a pay rise and expect 3%, the employer will give 1.5% and the rest is made up with super.
> Alternatively if you go for a job, the company usually includes super in the wage package, they don't usually say your salary is say $80k plus super. So if the super contribution rate is increased, the next time you have a performance appraisal, there is every likely hood if any payrise is offered the super increase will be factored in.
> Very few employers, other than government, will not include super in the calculation of a pay rise.




I don't think I've ever had an employment contract whose pay package was presented as the rate including super. Just different experiences I guess.


----------



## sptrawler (23 November 2020)

I think this article actually gives both sides of the argument and I think K Rudd actually dropped a clanger, just my opinion.








						Withdrawing super for first home a very good investment, says Bernie Fraser
					

The former RBA governor says low-income workers should be allowed to withdraw some of their super early to buy a first home, while former PM Kevin Rudd, super funds and Labor warn such a scheme would push up property prices.




					www.theage.com.au
				



From the article:
_Former Reserve Bank governor Bernie Fraser says low-income workers should be allowed to withdraw some of their superannuation early to buy a first home, while former prime minister Kevin Rudd, super funds and Labor warn such a scheme would push property prices higher. 


Mr Fraser said he saw a good case for enabling people to draw upon part of their super to buy a home when they might otherwise not be able to afford a deposit.
"In my view ... the long-term return of owning a house rather than having to be renting one would outweigh the return of even a good performing super fund," he said. Mr Fraser has fronted advertisements for Industry Super Australia in the past and is a former director of several large industry super funds. 
He said there should be limits on the amount that could be withdrawn for a deposit but was not convinced there would be so much demand it would lead to a surge in property prices. 
"I just think, particularly as house prices are going up and rent prices are going up, the opportunity for some modest-income people to have a house would be a very good investment."

But Mr Rudd criticised proponents of such a scheme as "right-wing ideologues" who wanted to hollow out retirement savings, not make housing more affordable. He said withdrawing $30,000 at age 35 for a home could leave a worker $400,000 worse off in retirement.

"It's also fiscally reckless. This would push up house prices, drain national savings, put pressure on Australia's credit rating and force more Australians onto the age pension," Mr Rudd said_.


----------



## Warr87 (23 November 2020)

good article and nice exerts. In this particular case I would agree with Rudd. I do think its fiscally irresponsible, reckless, and would also drive house prices up. The point about withdrawing 30k and being 400k worse off is a good point. I also thought of the fact, what if it is used and interest rates go through the roof or loss of job means a default on the loan. I would foresee a lot of lost super for people far worse off in retirement. The culture of also having the smallest amount of deposit possible for a house (on the premise that house prices always go up  and increase in value) is also setting people up for disaster. not the mention the predators and banks that would love to take up the opportunity to have people take money from super and put into a high LVR loan. i imagine loop holes as well as putting money into super as a pre-tax deducation and then withdrawing it for a deposit as a way to take a good chunk of money at a lower rate to buy a house.


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## sptrawler (23 November 2020)

Warr87 said:


> good article and nice exerts. In this particular case I would agree with Rudd. I do think its fiscally irresponsible, reckless, and would also drive house prices up. The point about withdrawing 30k and being 400k worse off is a good point.



What I thought was really pertinent was, it would drain national savings, it would put pressure on Australia's credit rating and it would force people onto the pension.
All those issues are a fiscal problem for the Government, superannuation was meant to improve a workers retirement, not keep them off a pension or part pension.

Like the report said over and over, the best result for the worker is home ownership in retirement, $400,000 in 30 years time might not buy you a caravan. As for driving up house prices just stop negative gearing and capital gains tax write off, but allow first home buyers who use super as a deposit,  to claim their interest as a tax deduction.
Also limit the value of the house allowed to be purchased, so it can't be rorted buying $1m houses.
Also he didn't say taking out $30k at 35, would cost someone $400k at retirement, he said it could. I think someone not buying a house at 35, wont find it any easier to buy a house with $400k at retirement. 

The other thing is, a person is either paying for a house while they are working, or they are renting, so the chances of a lower income person saving a deposit while renting is unlikely so the chances of owning a house is nil..

I think K Rudd nailed the heading of this thread.
"Superannuation, the ultimate Government cash cow".


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## Warr87 (23 November 2020)

I 100% agree with you.


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## qldfrog (24 November 2020)

Warr87 said:


> are you saying that if super is increased by 1.5% your employer is now going to subtract 1.5% from your hourly rate? I agree that it is a package, but I disagree that super isnt paid for by your employer. Plenty of cases where employers *dont* pay your super as *they* are the ones who deposit it into your super account.



The employer does not pay for you, but on behalf of you
And yes, if tomorrow super is increased by 1.5%, you will receive 1.5% less..before tax next month.
This is the case for all people who are not on awards/ minimum wages etc.
After for awards and similarly imposed pay rates, that is part of the negotiations etc
Nowadays, in the real economy but for minimal wages, you apply for a job and a package
This package includes super at a given rate, maybe FB, other extras.
That's the deal for the trainload of workers you could see commuting to the cbd in the morning
But super is definitively not an employer paid 'tax' and should not be seen like that..
That a country's workers are able to celebrate the fact they are receiving less because it is subtracted before the pay slip is a miracle of coms by unions and financial sectors.whether you see that as good or bad😊


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## PZ99 (24 November 2020)

sptrawler said:


> I agree with you and am in the same situation regarding being self funded, I'm yet to get to pension age, but doubt I will qualify anyway.




M-a-a-a-t-e... the system has loopholes big enough to drive a Dodge Ram though.

Just pay all your non discretionarys 20 years in advance - that should keep you on the red side of the barrier 

Party on !


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## Junior (24 November 2020)

sptrawler said:


> I think this article actually gives both sides of the argument and I think K Rudd actually dropped a clanger, just my opinion.
> 
> 
> 
> ...




Mr Rudd has not factored in the significant financial & lifestyle benefit, of having purchased a home years earlier than would otherwise be possible.


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## sptrawler (24 November 2020)

Junior said:


> Mr Rudd has not factored in the significant financial & lifestyle benefit, of having purchased a home years earlier than would otherwise be possible.



I suppose, when your missus is worth $100million, you don't think about. 
Also as Bernie Fraser said the house would in all probability outperform the super return. I know who's advice I would take.


----------



## boofhead (24 November 2020)

While home ownership makes for potentially better retirement, withdrawing some money from super reduces the super balance long term, will push prices of housing up. Australia needs a property pricing reset. Increasing demand will increase pricing. The various grants only provide short term relief then pricing adjusts to factor in the grants. Using super will be a short term help then property pricing will increase to factor in people using super so because less affordable.

While longer term in the major cities property shows it probably will outperform super, property locks up wealth and less liquid. All it takes is under-insurance and some disaster and wealth is lost.

Pausing super increases previously hasn't led to wage growth accommodating the delayed super increase.

Most people I know that earn less than the national average will would not use any delayed super increases to better their own financial future. Any potential increase in wages would be a part of their regular disposable income spent on various vices or increased subscription services.

I would love to see Keating vs Frydenberg live debate.


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## sptrawler (24 November 2020)

boofhead said:


> While home ownership makes for potentially better retirement, withdrawing some money from super reduces the super balance long term, will push prices of housing up. Australia needs a property pricing reset. Increasing demand will increase pricing. The various grants only provide short term relief then pricing adjusts to factor in the grants. Using super will be a short term help then property pricing will increase to factor in people using super so because less affordable.
> 
> While longer term in the major cities property shows it probably will outperform super, property locks up wealth and less liquid. All it takes is under-insurance and some disaster and wealth is lost.
> 
> ...



The elephant in the room that no one is talking about is, who is to say in 40 years time the pension isn't like jobstart now and you have to spend nearly all your money before you qualify for any government assistance.
At least if you have a home you have a roof over your head and aren't paying rent, with super and the aged pension who knows what the qualification criteria will be in 40 years?
As K Rudd said if some money is withdrawn it will force more onto the pension, so the expectation is most will be funding themselves from their super, I personally would rather have a house and less super than vice versa.
Also all the reports have confirmed that is the preferred model, locking money away for 40 years on the hope it will be there and available when and if I get there, as opposed to having my own home is a no brainer IMO.
I have very little confidence in the statement that super is for an improved outcome for the individual, I believe as K Rudd said  it builds national savings, it improves Australia's credit rating and it would keep people off the aged pension.
Just my opinion.
On the subject of house prices as I said in the earlier post, that is easily fixed, if the Governments wish to fix it.


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## Warr87 (24 November 2020)

sptrawler said:


> I suppose, when your missus is worth $100million, you don't think about.
> Also as Bernie Fraser said the house would in all probability outperform the super return. I know who's advice I would take.




I'm not so sure about that tbh. It may, if you happen to choose a location that in 10-20years time becomes the next hot area to be in.



sptrawler said:


> The elephant in the room that no one is talking about is, who is to say in 40 years time the pension isn't like jobstart now and you have to spend nearly all your money before you qualify for any government assistance.
> At least if you have a home you have a roof over your head and aren't paying rent, with super and the aged pension who knows what the qualification criteria will be in 40 years?
> As K Rudd said if some money is withdrawn it will force more onto the pension, so the expectation is most will be funding themselves from their super, I personally would rather have a house and less super than vice versa.
> Also all the reports have confirmed that is the preferred model, locking money away for 40 years on the hope it will be there and available when and if I get there, as opposed to having my own home is a no brainer IMO.
> ...




I would suspect what you mention, that you will have to exhaust all of your retirement before you qualify for assistance.

I would also prefer, as opposed to you, to have the money locked away and compound. Why would you think the money will disappear? Average returns from super are around 8-10% from what I've seen. owning your own house is great, but australia seems to have a fetish about it being the be-all-end-all. There is no guarantee that the house will be worth what you paid for it when you retire, or if you will even want to still live in the same area for your retirement. Not everyone plans to spend there 20years paying off their house + 30 years retirement living in the same house and area.

And the government could fix it, but too much income comes into various coffers with houses.


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## sptrawler (24 November 2020)

Warr87 said:


> I would suspect what you mention, that you will have to exhaust all of your retirement before you qualify for assistance.



I really can't see how that wont be the case, as with most things Government assistance is only given to those who have nothing or have spent everything along the way.


Warr87 said:


> *I would also prefer, as opposed to you, to have the money locked away and compound. Why would you think the money will disappear? Average returns from super are around 8-10% from what I've seen. owning your own house is great, but australia seems to have a fetish about it being the be-all-end-all. *There is no guarantee that the house will be worth what you paid for it when you retire, or if you will even want to still live in the same area for your retirement. *Not everyone plans to spend there 20years paying off their house + 30 years retirement living in the same house and area.



*There is a possibility the money could disappear, there has been many financial institutions gone under over the years.
*Even if the house doesn't go up in value, it saves you having to rent something similar, which in effect is a dividend and return on capital.
*History shows very few people take the full term of their mortgage to pay for the house, inflation usually diminishes the house payment as a percentage of the persons wage.



Warr87 said:


> And the government could fix it, but too much income comes into various coffers with houses.



I think that will be changed, the problem is Sydney and Melbourne have become a ponzi scheme and skewed the relativity between house prices and median wages, while in most parts of Australia that relativity still exists.
If negative gearing and capital gains offsets are withdrawn for a period of time, those who are relying on them will be financially exposed and will cause a rest in those markets.
All it takes is the Government to skew interest based tax deductions, to first home buyers, rather than investors and mega rich property owners.
Just my opinion.


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## sptrawler (24 November 2020)

Well at least the retirement income review, has given rise to debate on the various issues surrounding super and whether it is actually providing a better retirement. 
I do know a 65 year old friend of mine, who is retiring very soon has worked and contributed to super since its inception, he will have $230k.









						Dipping into super for first-home deposit gains crossbench support
					

Three crossbenchers have backed calls to let first-home buyers tap their superannuation for a deposit amid an ongoing debate about whether the nation's $3 trillion retirement savings pool should be used to bolster home ownership.




					www.smh.com.au


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## sptrawler (29 November 2020)

IMO this is worth a read, for anyone who thinks at all, about what their retirement will look like. Also it re enforces what we have been saying on ASF, to think retirement with a smallish super balance is a terrible thing, think again. A friend of mine turns 65 next month and is still working, he has $250k in super, we talked through a budget after he pays for his house and car, he will have more disposable income, than he has now. 








						Do you have enough super? The answer might surprise you
					

The fact that so many Australians die with unused assets suggests many are scrimping too much or working too hard.




					www.smh.com.au
				



From the article:

_Well, everyone who supposedly knows anything about retirement believes that the age pension will eventually cease to exist – exploded by a combined weight of the ageing baby boomer generation – and every Australian needs $1 million in super before they can retire. Even then, you run the risk of eating baked beans out of a tin while shivering under a blanket during your final days on earth.
Right?

Wrong. And don't just take my word for it. The government's Retirement Income Review, released last week, found these and other myths about retirement are "not supported by evidence".
Most heartening for those with low super balances, the review concludes that the cost of our age pension is sustainable and will even shrink a bit as a proportion of the economy in coming decades.
"Given the current level of uncertainty, Australians should be reassured that the retirement income system is effective, sound and its costs are broadly sustainable," it finds.
Phew!

Indeed, the review finds that the generosity of the age pension compared to some working-aged support payments means many retirees would enjoy a higher standard of living in retirement than they did during their working lives. And others, of course, would have considerable super savings with which to supplement the age pension.

On the review's numbers, everyone in the bottom 60 per cent of the income distribution today is on course to enjoy a retirement income worth 65 to 75 per cent of their current annual disposable income – the review's threshold for an adequate retirement income – or more.


"Such high replacement rates suggest that some people may be saving 'too much' for their retirement," the review finds.

Wow! Of course, that is not what the super industry, which incidentally reaps $30 billion in fees each year, would have you believe.

But according to the review: "The [super industry's] comfortable retirement standard would deliver a middle-income earner a higher standard of living in retirement than in their working life and would require a significant sacrifice in their working life to achieve this retirement standard."

It's a point Brendan Coates, from the Grattan Institute, has been making for years. Coates backs the review's finding that the compulsory super guarantee rate of 9.5 per cent does not need to rise to ensure adequate retirement income for most Australians.


More broadly, the whole idea that young people must strive for a life of complete self-sufficiency in retirement is a furphy, he says.

"There's this idea that you'll have failed if you're still getting the pension in retirement," Coates says. "The review makes clear that the age pension is here to stay. People are going to keep getting it and that's actually a good thing."
Importantly, however, the review highlights the perilous position of renters in retirement. Renting households are more likely to struggle financially in retirement because they still face high housing costs, rather than living in a home they own outright.

For home owners, however, they can reasonably expect to have much lower living costs in retirement. "People generally have lower expenses in retirement, such as having paid off their home, not facing the cost of raising and educating children, and no longer needing to save for retirement," the review finds.
Retirees also enjoy a host of other benefits, such as concession cards for health and transport.

In fact, retiree costs are so manageable that: "Most people die with the bulk of the wealth they had at retirement intact."
That's not what the system is designed to do and the review suggests several policies to try to get retirees to unlock their assets to spend in retirement_.

AS we have said on here, what any Government doesn't want, is intergenerational wealth transfer. There is two options IMO, get the retirees who earned it to spend it, or take it off them.


----------



## sptrawler (2 December 2020)

Another person who agrees that the current contribution rate on super should be maintained, Ross Gittens, you can't get more left than Ross IMO, so there must be something right about the retirement income review.








						The bottom line with super: you risk being poorer today so you can live like a king tomorrow
					

Scott Morrison was dreading the release of the Callaghan report into super because he knew it would spark a fight about super contributions.




					www.smh.com.au
				



From the article:
_The findings of the Callaghan review also cast doubt on the need for an increased rate of contributions. So why do the experts disagree with the supposed champions of the workers? 
Two main reasons. First, because of convincing empirical evidence that, over time, about 80 per cent of the cost of increased rates of contribution by employers is passed on to their workers in the form of pay rises that are lower than otherwise. 

So employer contributions are no free gift. They involve forcing workers to spend less and save more today, so they can have more to spend in retirement. But for many middle-income workers, the more super savings they amass, the more their entitlement to a full age pension is reduced.

Second, in its long-running campaign to persuade governments to force workers to hand over more of their wages to super funds, the fee-hungry superannuation industry has played on people’s instinctive fears they aren’t saving enough.
But careful calculations by the Callaghan review – coming on top of those by the independent Grattan Institute – have found that, on the present contribution rate, most workers will retire with disposable incomes at least equal to the widely accepted benchmark of 65 to 75 per cent of their pre-retirement disposable income.
If so, why deny yourself more than you need to in your working years, so you can have more than you need in retirement?_
*Ross Gittins is the economics editor.*
Imo if you have more than you need in retirement, the Government will find a way of removing it from you.


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## PZ99 (2 December 2020)

You're better off just making it zero.

Because if you're young you'll have to be as old as Biden before you can get your shakin hands on your money


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## Belli (3 December 2020)

sptrawler said:


> There is two options IMO, get the retirees who earned it to spend it, or take it off them.




The Government had that option in the May 2016 Budget when the TBC was announced.

As has been indicated by me and yourself, it could have introduced a measure to require those who had funds in superannuation above the TBC to withdraw that amount or impose a greater level of tax.

That is still a possibility and I would not discount it occurring.


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## sptrawler (3 December 2020)

Belli said:


> The Government had that option in the May 2016 Budget when the TBC was announced.
> 
> As has been indicated by me and yourself, it could have introduced a measure to require those who had funds in superannuation above the TBC to withdraw that amount or impose a greater level of tax.
> 
> That is still a possibility and I would not discount it occurring.



It is easier to introduce a death duty.


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## dyna (21 December 2020)

Last Weekend Afr's "Chanticleer " reports,$2.7Billion of the high performing $90Billion Uni Super was switched(by its supposedly highly educated members) into the cash option at the worst possible time, the bottom of the market in March.Same deal for Australian Super,$65 Billion from the $200 Billion fund switched into cash.Talk about bad timing!Equity markets were to then rebound 35-40% in just the following 3 months.


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## Mrmagoo (9 January 2021)

boofhead said:


> While home ownership makes for potentially better retirement, withdrawing some money from super reduces the super balance long term, will push prices of housing up. Australia needs a property pricing reset. Increasing demand will increase pricing. The various grants only provide short term relief then pricing adjusts to factor in the grants. Using super will be a short term help then property pricing will increase to factor in people using super so because less affordable.
> 
> While longer term in the major cities property shows it probably will outperform super, property locks up wealth and less liquid. All it takes is under-insurance and some disaster and wealth is lost.
> 
> ...




THis is a very silly argument. Since when has anyone cared about property prices increasing ? They will increase anyway with or without super. WHat people are worried about is a dwindling supply of tenants.


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## sptrawler (9 January 2021)

Mrmagoo said:


> THis is a very silly argument. Since when has anyone cared about property prices increasing ? They will increase anyway with or without super. WHat people are worried about is a dwindling supply of tenants.



That is very true, Australia has doubled its population in the last 50 years mainly by immigration, with that being stalled due to the corona virus there will be a lot of excess capacity in the pipeline IMO.


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## sptrawler (9 January 2021)

dyna said:


> Last Weekend Afr's "Chanticleer " reports,$2.7Billion of the high performing $90Billion Uni Super was switched(by its supposedly highly educated members) into the cash option at the worst possible time, the bottom of the market in March.Same deal for Australian Super,$65 Billion from the $200 Billion fund switched into cash.Talk about bad timing!Equity markets were to then rebound 35-40% in just the following 3 months.



Statistics don't account for much, a 65 year old friend who still works changed to cash in March, he lost $5k on a $230k balance, he is now well in positive territory because of contributions since.
Would he have been better leaving the money in the market? Risk and reward is just that IMO.
Equity markets have rebounded, but aren't back to what they were, so it is all subjective IMO.


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## Warr87 (9 January 2021)

Mrmagoo said:


> Since when has anyone cared about property prices increasing ?




I would think a lot of people.


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## qldfrog (9 January 2021)

sptrawler said:


> Statistics don't account for much, a 65 year old friend who still works changed to cash in March, he lost $5k on a $230k balance, he is now well in positive territory because of contributions since.
> Would he have been better leaving the money in the market? Risk and reward is just that IMO.
> Equity markets have rebounded, but aren't back to what they were, so it is all subjective IMO.



isn't your friend not telling you the full story, unless he was already nearly fully in cash during the feb march period, he would have been hit by the full crash, nowhere near as low as a5% loss.....unless the super fund really screwed up and exchanged his units at an non updated price??


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## qldfrog (9 January 2021)

Warr87 said:


> I would think a lot of people.



here in the sunshine coast, with people moving in from Brisbane and the southern states, there is a real tenancy issue: no rental available anywhere and the RE market is booming. Families are living in tents or sheds.
After years of landlord bashing, freeze unpaid rent with the covid measure and pathetic returns on rentals plus worries, people just sell to cashed up southerners and get out of property for renting.Did the same a couple of years ago and just did the same for industrial rentals as well for the same reasons.


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## sptrawler (9 January 2021)

qldfrog said:


> isn't your friend not telling you the full story, unless he was already nearly fully in cash during the feb march period, he would have been hit by the full crash, nowhere near as low as a5% loss.....unless the super fund really screwed up and exchanged his units at an non updated price??



No, they are exact figures, we talked about the virus as soon as it was common knowledge and we on the forum were discussing it I had just read your post of the virus analysis.
He has been my best mate for 50 years, all true figures, we talked he jumped to cash, that was the loss.
I doubt very much he would be in the same position, if he had riden it through, but  I could be wrong.
Just gave him a quick call and he is up $2k on where he was, he said a mate at the same workplace is still down on where he was, so might not be apples for apples, but a big loss at 65 takes a lot of recovery.


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## qldfrog (9 January 2021)

sptrawler said:


> No, they are exact figures, we talked about the virus as soon as it was common knowledge and we on the forum were discussing it I had just read your post of the virus analysis.
> He has been my best mate for 50 years, all true figures, we talked he jumped to cash, that was the loss.
> I doubt very much he would be in the same position, if he had riden it through, but  I could be wrong.
> Just gave him a quick call and he is up $2k on where he was, he said a mate at the same workplace is still down on where he was, so might not be apples for apples, but a big loss at 65 takes a lot of recovery.



Ok, i thought jump to cash at the low....
If he jumped to cash before the crash he won imho as he broke even with zero Risk


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## sptrawler (9 January 2021)

qldfrog said:


> Ok, i thought jump to cash at the low....
> If he jumped to cash before the crash he won imho as he broke even with zero Risk



The other thing that comes into the equation is, the snapshot on my SMSF, was taken at 30/6/2020.
That is a pretty $hit time in relation to the virus, my fund was down 12%, since then the banks have recovered and many other purchases have more than doubled, so on 30/6/2021 my fund may well show an improvement of 20%.
But in reality I am still not back to where I was pre the virus, but I can claim it had a profit of 20% this year.
Statistics don't you love them lol.


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## Belli (10 January 2021)

As an adjunct to super being a cash cow got government, some may be interested in the indexation arrangements applying to the balance cap.









						Indexation of Transfer balance cap
					

From 1 July 2021, the general transfer balance cap will be indexed from $1.6 to $1.7 million.




					www.ato.gov.au
				




It will of course depend on the CPI variations applicable.

Note if you have already reached the balance cap and it is increased that does not mean you can add more because of it as your personal balance cap is calculated at a particular point in time. And if you have reached the cap but it's gone down since then, you're out of luck.

For those in pension phase, a proportional aspect will apply but if you're already at the $1.6m tax free, zero will apply.


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## sptrawler (13 January 2021)

Something we mentioned years ago in this very thread, why should low income earners who get minimal benefit from contributions, be forced to put lock it away fro years. When in reality they have enough already in super.








						Take home pay or put it in super: Government considers opt-in super model
					

Workers could be able to choose to take home more pay or put it into superannuation as part of a proposal the federal government is considering ahead of a coming rise in the super guarantee.




					www.smh.com.au


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## sptrawler (21 January 2021)

Interesting article by a left leaning publication, a very interesting last paragraph.









						Superannuation steals from the pension
					

Industry Super Australia (ISA) continues to lobby the federal government to increase the superannuation guarantee (SG), arguing that if the super rate increase was abandoned, it would “heap pressure on the pension”: ISA said it was vital the legislated increases in the superannuation guarantee –...




					www.macrobusiness.com.au
				



From the article:

The already excessive cost of superannuation concessions necessarily means there are less funds available in the federal budget to lift the Aged Pension.

If budget sustainability and equity in retirement outcomes was the true goal, there is a strong case to abolish superannuation altogether and to channel the immense budget savings into lifting the Aged Pension.

Because it is the high cost of superannuation concessions that is preventing the pension from being lifted. Lifting the SG to 12% would only make the situation worse.


----------



## sptrawler (27 January 2021)

At last the sensible way to go forward with super gets some air.








						Scrap superannuation for a universal basic pension
					

National Seniors Australia (NSA) has called on the federal government to implement a universal pension scheme that isn’t means tested: National Seniors Australia chief advocate Ian Henschke wants a universal pension scheme that isn’t means tested. “Review after review complains about older...




					www.macrobusiness.com.au
				



From the article:
_National Seniors Australia chief advocate Ian Henschke wants a universal pension scheme that isn’t means tested.
“By setting income and asset limits which restrict you from, first, getting a pension, and second, limiting your entitlement, it punishes you for having more.”
A universal basic income could, over time, also be good for the government’s bottom line, as it would eliminate the need for massive administration costs.

“It would get rid of the pension assets and income tests, doing away with the need for unfair taper rates, deeming rates and work restrictions, and end the need to engage with Centrelink,” Mr Henschke said in May last year.

“If everyone of pension age received a pension, retirees could just add this to their other income and pay tax. Means testing is costly to administer and leads to perverse outcomes, which are more apparent in the current crisis.

“Asset taper rates unfairly penalise those who save more for their retirement. Income tests undermine ongoing workforce participation and lead to ongoing anger over deeming rates.”_



NSA’s proposal makes a lot of sense and could easily be funded by abolishing the compulsory superannuation system, which is overly costly, inefficient and inequitable.

Compulsory superannuation acts like a tax and forces people to forgo current consumption, which is especially pernicious for lower-income earners.

Moreover, because superannuation balances at retirement depend on how long one works and how much they earn, the system inevitably misses lower income earners and those with broken work patterns like mothers.

Compulsory superannuation has also created a massive trough, worth some $30 billion a year, that has attracted snouts across the financial services industry like the big four banks. Australian management fees are among the highest in the world with Australian households spending twice as much each year on superannuation fees as they do on electricity.

Superannuation concessions already cost the federal budget around $43 billion a year and are very poorly targeted to high income earners, who receive the overwhelming majority of taxpayer assistance through the retirement system:
By extension, the massive costs and inefficiency surrounding compulsory superannuation means there are less funds available in the federal budget to lift the Aged Pension – Australia’s genuine retirement pillar.

Given the obscene cost, inefficiency and poor targeting of superannuation concessions, optimal public policy dictates unwinding these concessions and using the money saved to boost the Aged Pension.

Abolishing the compulsory superannuation system in favour of a universal aged pension has merit and should be given detailed consideration.


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## Belli (27 January 2021)

Belli said:


> As an adjunct to super being a cash cow got government, some may be interested in the indexation arrangements applying to the balance cap.
> 
> 
> 
> ...




The cap will be increased to $1.7m from 1 July 2021 as the December CPI was 117.2.

It's going to be a dog's breakfast in my view with the arrangements for accumulation balances before and after that date as well as income stream where the cap was or is less than $1.6m.

Even a cursory reading of the ATO web-site on the issue will indicate that.









						Indexation of Transfer balance cap
					

From 1 July 2021, the general transfer balance cap will be indexed from $1.6 to $1.7 million.




					www.ato.gov.au


----------



## sptrawler (27 January 2021)

Belli said:


> The cap will be increased to $1.7m from 1 July 2021 as the December CPI was 117.2.
> 
> It's going to be a dog's breakfast in my view with the arrangements for accumulation balances before and after that date as well as income stream where the cap was or is less than $1.6m.
> 
> Even a cursory reading of the ATO web-site on the issue will indicate that.



The whole thing is going to become a dog's breakfast, as you say Belli.
I have been saying for years the only way you can fix super and the pension, is to make it a universal pension.

It still rewards people who work and contribute to super, but they are taxed on it when it is withdrawn, so people can put away extra for a better retirement. But it doesn't overly reward the super rich and doesn't punish those who work hard and save for a better retirement.
The way it is at the moment, as happened last election, they are only looking at hitting the middle income earner who saves hard all their working lives and actually get less that the pension.
Trying to fiddle away at the edges with more complexity, just stuffs it all up more, super was introduced on a promise of a better retirement.
Now that has changed to super is there to replace your pension, that isn't going to work ever, why would people want to lose wages to save up so that they can lose the pension. Blind Freddy can see that wont work.
All that will happen will be less and less people will want to work, welfare for life will become rampant. IMO


----------



## qldfrog (27 January 2021)

sptrawler said:


> The whole thing is going to become a dog's breakfast, as you say Belli.
> I have been saying for years the only way you can fix super and the pension, is to make it a universal pension.
> 
> It still rewards people who work and contribute to super, but they are taxed on it when it is withdrawn, so people can put away extra for a better retirement. But it doesn't overly reward the super rich and doesn't punish those who work hard and save for a better retirement.
> ...



Just remember universal income is in the Reset program. Everyone receive a fixed set amount, be free to work if you want and can, but you will be taxed on the whole.a program wider than super in utsreach


----------



## sptrawler (27 January 2021)

qldfrog said:


> Just remember universal income is in the Reset program. Everyone receive a fixed set amount, be free to work if you want and can, but you will be taxed on the whole.a program wider than super in utsreach



Very true, but the present program is, work if you like we will just tax you more for those who can't or don't want to work, so tell me the difference?
Other than at the moment as a self funded retiree, you are spending what you saved, as a pensioner you are earning twice as much, for saving nothing. 😜
By the way I'm still just over a year away from a pension, so getting zip from the Government, getting minimal from dividends and interest, so just spending money I saved by not buying expensive cars and not having overseas holidays when I was working.


----------



## sptrawler (27 January 2021)

qldfrog said:


> Just remember universal income is in the Reset program. Everyone receive a fixed set amount, be free to work if you want and can, but you will be taxed on the whole.a program wider than super in utsreach



I'll put it another way, the pension and superannuation system, as they currently are set up, aren't fit for purpose.

Let's take a simple example using round figures, for ease of working out, rather than for precision.

1. At the moment, someone on $300k who puts money into super, gets a 35% reduction on tax, because instead of paying 50% tax they pay 15%.
Whereas someone on $40K gets no tax break, because instead of paying 15% tax on their income, they paid 15% tax on their contributions.

Wouldn't it be better to just give everyone the pension, give a 15% tax reduction on the *marginal tax rate* for contributions and tax the earnings at 15%, then tax the pension as normal income or at flat rate e.g 15,20 even 30%.
It has to be easier than what both parties are trying to do at the moment.
Super shouldn't be seen as a rich persons perk, just the same as the pension shouldn't be seen as a lazy persons perk.
Super should be there as it was intended, to enhance a workers retirement not as another indirect tax on workers, to prop up a pizz poor pension system.
Just my opinion.


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## qldfrog (27 January 2021)

sptrawler said:


> I'll put it another way, the pension and superannuation system, as they currently are set up, aren't fit for purpose.
> 
> Let's take a simple example using round figures, for ease of working out, rather than for precision.
> 
> ...



fully agree, the NZ system: a minimum pension, taxable for everyone is the way to go, in time of low return, and I do not mention risk, seeing people on the pension getting so much is absolutely gutting, but in a way, I am all for this universal income, it is timed well, I have stopped working and so will we all until the stupidity in the very idea makes it all collapse in a big mess with an economy a la venuzuela and big mining and China holding our corrupt puppet leaders .
I would not push anyone to put money into our kind of super, never have, never will as is


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## sptrawler (27 January 2021)

There is always the option for the Government to nationalise the Industry Funds I would think, as they are not for profit there are no shareholders. I'm guessing it wouldn't be too hard @qldfrog . 

Just make them roll it over into the future fund.


----------



## qldfrog (27 January 2021)

sptrawler said:


> There is always the option for the Government to nationalise the Industry Funds I would think, as they are not for profit there are no shareholders. I'm guessing it wouldn't be too hard @qldfrog .
> 
> Just make them roll it over into the future fund.



And fair, all these bastards not paying tax and being richer than the labour electorate...just paroding the news ltd and abc headlines in a couple of years


----------



## Ferret (27 January 2021)

sptrawler said:


> 1. At the moment, someone on $300k who puts money into super, gets a 35% reduction on tax, because instead of paying 50% tax they pay 15%.



I take your point SP, but this isn't right.  Anyone earning more than 250k pays 30% contributions tax, so they get 47 - 30 = 17% reduction in tax.

Personally, I'm fed up with changes to the super system.  What you are suggesting would make sense if we were starting from scratch, but no way would I want a total reset on a system that I have spent much of my working life planning around.


----------



## sptrawler (27 January 2021)

Ferret said:


> I take your point SP, but this isn't right.  Anyone earning more than 250k pays 30% contributions tax, so they get 47 - 30 = 17% reduction in tax.
> 
> Personally, I'm fed up with changes to the super system.  What you are suggesting would make sense if we were starting from scratch, but no way would I want a total reset on a system that I have spent much of my working life planning around.



Good point I forgot about the 250k cap.
I just think they need to sort it out once and for all, it will never stop changing otherwise. 
If they had a system similar to the U.K, N.Z and Canada, it is much simpler to administer, the one we have is just a variable pot of money that they will keep changing as needs demand.


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## Belli (28 January 2021)

sptrawler said:


> Good point I forgot about the 250k cap.
> I just think they need to sort it out once and for all, it will never stop changing otherwise.
> If they had a system similar to the U.K, N.Z and Canada, it is much simpler to administer, the one we have is just a variable pot of money that they will keep changing as needs demand.




$250,000 pa income, married, 2 children

Taxable Income: $250,000
Superannuation Guarantee: $23,750
Tax: $88,167 (Income Tax $83,167, Medicare Levy $5,000)
Refund - last year's PAYG credits $1,861

Income: $250,000
Superannuation Guarantee: $23,750
Voluntary Superannuation Contribution: $100,000
Taxable Income: $346,250
Tax: $131,480 (Income Tax $126,480, Medicare Levy $5,000)
Amount Payable net of last year's PAYG credits: $41,427


Following year will be worse when $44,975 will be payable.


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## dyna (6 March 2021)

Belli said:


> The cap will be increased to $1.7m from 1 July 2021 as the December CPI was 117.2.
> 
> It's going to be a dog's breakfast in my view with the arrangements for accumulation balances before and after that date as well as income stream where the cap was or is less than $1.6m.
> 
> ...



On Feb 25th,A.W.OT.earnings figures were released,so the $25,000 concessional/pre-tax contribution cap will increase to $27,500p.a. from Ist July 2021.Non-concessional cap goes up from$100,000 this fiscal year to $110,000.If you're  aged 65 to 67, or already started a pension,it get's a bit tricky,(like everything else to to with this great gamble,since Malcolm's big reset, on 1st July 2017) Best to read it(a few times), on the gov's website.


----------



## Belli (6 March 2021)

Yeah and as a result some made need to take care with the bring forward arrangements for the concessional and non-concessional contributions.


----------



## sptrawler (10 March 2021)

This sounds very interesting, Vanguard to release a superannuation style product, I guess companies like IOOF will be watching nervously as well as the super funds.








						Vanguard hatches bold plan to crash the super party
					

US investment giant aims to disrupt Australia’s superannuation industry by offering a low-cost, digital-first alternative.




					www.theage.com.au
				



From the article:
Only a year ago, Vanguard launched a “self-invested pension product” in the UK where customers need to contribute just £100 ($179) a month to access 77 ETFs. Members can pick and chose the ETFs in which they invest, with fees of just 0.15 per cent, capped annually at £375.

Vanguard’s Europe head Sean Hagerty told reporters at the time the pension product was “designed to reduce the cost and complexity of saving for retirement”.
A Vanguard spokeswoman confirmed that these ideals will be replicated in Australia.
“Our aim is to launch a plan that combines simplicity, transparency and smart investment to deliver low-cost, high-quality super that can move with members right through life.”

These words would be music to the ears of Assistant Minister for Superannuation Jane Hume. The federal government has launched an ambitious reform agenda to improve transparency, bring down costs and maximise returns for members. Vanguard is well placed to hit on all of those points.

Arian Neiron, managing director of VanEck’s Asia Pacific business, another major provider of ETFs, says: “What Vanguard are doing is going to give the industry funds a run for their money. It’s going to give a low-cost super platform with ETFs,” Neiron says. “ETFs mitigate stock risk.”

Industry expert and independent retirement consultant Amara Haqqani says Vanguard’s super product “makes sense,” especially for young people.

“Particularly for younger cohorts, it’s a compound interest game. The lower fees you pay, the higher your super in the end,” she says.


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## dyna (20 April 2021)

Opposition Treasurer,Jim Chalmers says the pandemic should never have been used as an excuse to enable people(misguided by the Libs?) to withdraw up to $20,000 out of their super.The unit prices of nearly all of the big Industry funds and the not for profits have now recovered from the March 2020 Covid crash. Those lunatic  liberal back benchers were no doubt pleased to see the 20 grand ploughed back into the struggling economy,but the hapless punter is never going to catch up on their lost investment.


----------



## Belli (21 April 2021)

Broadly I agree with the point you have made @dyna.  While some made have had to withdraw funds in order to survive, I have the feeling, but not proof, a lot just saw it as easy money to buy a new set of expensive wheels for their SUV or some other similar flimsy excuse.

Now it will be intriguing to see if, in the future,  some complain their super "isn't enough."  I strongly doubt any will acknowledge that could  have been the result of their previous decisions.

Also have heard of a number who freaked out, went to cash (because it's safe which it isn't) and now wondering if they should go back into shares with their super.  Um, sure but you're still likely to be behind because you are not going to get that 30% or whatever it was/is back.

I sometimes wonder if it would be better to remove superannuation members ability to choose in times such as March/April last year.  Many don't seem to be very good at making two decisions; when to get out and when to get back in.  They get both wrong a lot (all?) of the time.

Had cafe meetings with couple of acquaintances lately who had done the bailing out approach and they assumed I did the same.  Told them bluntly Nup, bought as much as I could both personally and in the SMSF.  There was an awkward momentary hiatus in the conversation but they did ask.


----------



## monkton (21 April 2021)

Belli said:


> I sometimes wonder if it would be better to remove superannuation members ability to choose in times such as March/April last year. Many don't seem to be very good at making two decisions; when to get out and when to get back in. They get both wrong a lot (all?) of the time



I hear you here, but if we go down this road of removing members ability to choose then perhaps next it could be 'have to stay in balanced fund or growth or more bonds depending what 'they' think is appropriate at the time.
While many put in time & research when buying a house or new car, educating themselves about money & markets is a low priority leading to decisions as you described. Media hype & 'gurus' don't help either. Interesting the 'awkard hiatus' you can get when mentioning something along those lines & talk of I'm not interested or too hard. Ummm, okay then.


----------



## BlindSquirrel (21 April 2021)

I wish I'd just taken the 10k and bought some BTC with it... but I wasn't eligible so I didn't try.
Following rules is for chumps!


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## over9k (21 April 2021)

I know this is U.S based, but here's some data on just how much money has been flowing out of active funds and into passive ones of late: 




And I linked this video in another thread: 

 

Long term, if stonks always go up, you have a roughly 8.5% increase per year with mutual funds and 7% with an ETF, so running a leveraged ETF gives you 14% or 21% per year (long term). 

I wonder if the money managers are being restricted at a legislative/regulatory level or they're just incompetent. We know that the overwhelming majority of traders don't even beat the market so something tells me it isn't a regulatory rule tying their hands.


----------



## Belli (21 April 2021)

BlindSquirrel said:


> I wish I'd just taken the 10k and bought some BTC with it... but I wasn't eligible so I didn't try.
> Following rules is for chumps!




Yes, but you seem to know what you are doing.  Most of the chumps who followed the rules in place most likely don't and in all probability are going to end up worse for wear.

It's what happens and not much can be done to prevent it completely in my view.


----------



## qldfrog (21 April 2021)

Belli said:


> Yes, but you seem to know what you are doing.  Most of the chumps who followed the rules in place most likely don't and in all probability are going to end up worse for wear.
> 
> It's what happens and not much can be done to prevent it completely in my view.



Anything becoming mandatory create rort, 
already as is, tell anyone who could not enter the RE escalator as 10% of his/her salary was diverted to super that he is better off paying his rent and have super fund sucking his money ...


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## dyna (24 April 2021)

This from Treasury's "Retirement Income Review". Super's rise to 12% will generate an extra 1/2 a $ Billion ($500 Mill.) in fees by 2025. That's a hefty whack, considering  not even half the population is in paid work.


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## dyna (30 April 2021)

The Liberal government allowed the early release of up to $20,000 from individual superannuation accounts. So, 3 million Aussies  pulled well over $36 Billion out of the $3Trillion system.
ASIC reckons a $20,000 withdrawal could lose $43,032 further down the track.Industry Super Australia's best guess was more than twice that amount.Treasury and the regulator queried the $97,214,so ISA reduced it to $79,393...not good at numbers where there's a vested interest,eh? Gratten Institute came up with a $58,000 number and Choice said $49,823.
How many of those 3 million workers will ever make the effort to rebuild their ravaged super accounts? Was that, all they ever had in the savings kitty? A lousy 20 grand.Maybe this is not a rich country,after all.


----------



## Humid (30 April 2021)

3 million and take off retirees and kids and makes you think how many live week to week but thats what you get in this b/s gig economy where everyones a casual with no benefits whatsover.
Great for big business but the rest are still waiting for the trickle down.

I read somewhere recently that the way countries treat refugees is the way the government would treat you if they thought they could get away with it!


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## Gunnerguy (30 April 2021)

dyna said:


> The Liberal government allowed the early release of up to $20,000 from individual superannuation accounts. So, 3 million Aussies  pulled well over $36 Billion out of the $3Trillion system.
> ASIC reckons a $20,000 withdrawal could lose $43,032 further down the track.Industry Super Australia's best guess was more than twice that amount.Treasury and the regulator queried the $97,214,so ISA reduced it to $79,393...not good at numbers where there's a vested interest,eh? Gratten Institute came up with a $58,000 number and Choice said $49,823.
> How many of those 3 million workers will ever make the effort to rebuild their ravaged super accounts? Was that, all they ever had in the savings kitty? A lousy 20 grand.Maybe this is not a rich country,after all.



A 25 year old taking out $20,000, if they have it (maybe some NCC's from an inheritance)
Average annual return on ASX200 is about 9%. Using an ETF and assuming minimal costs.
35 years to preservation (60), but it will change.
$20,000 x (1.09^35) = $408,000.

More modest numbers .... 25 years to go, Annual return 6% will give you ....
$20,000 x (1.05^25) = 67,000.

Irrespective of what numbers you use, one would be missing out on a lot of potential growth.

Gunnerguy


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## qldfrog (30 April 2021)

Gunnerguy said:


> A 25 year old taking out $20,000, if they have it (maybe some NCC's from an inheritance)
> Average annual return on ASX200 is about 9%. Using an ETF and assuming minimal costs.
> 35 years to preservation (60), but it will change.
> $20,000 x (1.09^35) = $408,000.
> ...



Guy get $20k out and can afford to buy a house instead of renting, get surgery on that knee or get that degree to a better income....
No "one fits all "case.
And if these guys are loosers, well 20k will not make a difference as on the day of retirement, they will be straight to pension:  super or not .
And remember
My first super account as a younger me during the first 5y did just break even at a time when term deposits were at 8% a year.....
Thanks suncorp and myriads of useless covers


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## Gunnerguy (30 April 2021)

qldfrog said:


> Guy get $20k out and can afford to buy a house instead of renting, get surgery on that knee or get that degree to a better income....
> No "one fits all "case.
> And if these guys are loosers, well 20k will not make a difference as on the day of retirement, they will be straight to pension:  super or not .
> And remember
> ...



True, everyone’s different with different needs. Just looking at the numbers in super. Obviously if there’s a pressing need then one would take the money out. However one persons want is another’s want.
Fortunately my younger 23 year old realised not to trust fund managers, advisors and super funds, and did it all myself. Several mistakes, but more good choices than bad.


----------



## Gunnerguy (30 April 2021)

Gunnerguy said:


> True, everyone’s different with different needs. Just looking at the numbers in super. Obviously if there’s a pressing need then one would take the money out. However one persons want is another’s want.
> Fortunately my younger 23 year old realised not to trust fund managers, advisors and super funds, and did it all myself. Several mistakes, but more good choices than bad.



I meant to say ‘one persons want is another’s need’
😞


----------



## qldfrog (1 May 2021)

Gunnerguy said:


> I meant to say ‘one persons want is another’s need’
> 😞



Ok,true but there are also basic needs.

For the people who need a flashy car , bigger screen etc super at retirement is the least of their or the gov problem and on retirement day super will never be enough to cover the various debts and pay the balance on the camping car or round the world trip...
And that's if they even reach it.was even tempted to withdrawn mine but could not qualify..and i stick to rules/laws


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## dyna (16 May 2021)

Aussies' $3 Trillion wealth tied up in superannuation is about equal to what they have in the sharemarket.
Another $ 1 Trillion is invested in commercial real estate and for the big one,residential real estate,the magic number ,dwarfing everything else is... $8 Trillion.
Let's hope they all never need liquidity in a hurry.


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## over9k (16 May 2021)

Liquidity for what? 

It's a tangible asset, just borrow against it.


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## Gunnerguy (16 May 2021)

over9k said:


> Liquidity for what?
> 
> It's a tangible asset, just borrow against it.



You can only borrow against it if you have ‘income’, unfortunately.
GG


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## over9k (16 May 2021)

Not necessarily - depends on who you borrow from, the loan conditions etc etc. What is a bridging loan if not a loan you couldn't cover with income but possible because it's secured against some form of equity you have in something? They're expensive precisely for that reason, but they exist. 

You also don't need to borrow against the whole thing either - you might only need to borrow a tenth of your equity, which would make the lender much more comfortable/willing to loan the money.


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## Gunnerguy (16 May 2021)

over9k said:


> Not necessarily - depends on who you borrow from, the loan conditions etc etc. What is a bridging loan if not a loan you couldn't cover with income but possible because it's secured against some form of equity you have in something? They're expensive precisely for that reason, but they exist.
> 
> You also don't need to borrow against the whole thing either - you might only need to borrow a tenth of your equity, which would make the lender much more comfortable/willing to loan the money.



Over9k
I would be very interested in knowing what lenders you know that will allow borrowing against no wage income.
I have only looked at about 10 in the last 6 months and none have been interested in lending to someone with no ‘wage’ income. As an aside, I’m not looking for margin lending against a portfolio of assets.
Feel free to message me directly.
GG


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## over9k (16 May 2021)

I guess it depends on your circumstances gunner, I mean, reverse mortgages are a loan against an asset no?

What would you describe a bridging loan or a reverse mortgage as if not a loan that cannot be paid off by wage income but secured against an asset?


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## Gunnerguy (16 May 2021)

over9k said:


> I guess it depends on your circumstances gunner, I mean, reverse mortgages are a loan against an asset no?
> 
> What would you describe a bridging loan or a reverse mortgage as if not a loan that cannot be paid off by wage income but secured against an asset?



Over9k
Yes I agree, reverse mortgages are available. I stand corrected, however I don’t want to contractually reduce my equity in my assets to a bank upon my demise/death.
For me, however, at my young age, and retired, I prefer to take a loan on my propert(ies) (LVR at 20%)and use the cash for something more profitable, investing for example, and not turning over my propertie(s) future to the bank.

I have been lucky/fortunate that over the past 30 years my portfolio has performed better than the FTSE/ASX/Mortgage rates and am just looking for some cream on the cake.

Currently looking at options trading but really looking for a company that will provide a loan to someone without a ‘wage’.

GG




GG


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## over9k (16 May 2021)

So if I've understood you correctly gunner, you want to borrow against your assets at X% interest rate, invest the money, and hopefully make >X% return investing it, repaying the loan and then pocketing or reinvesting the difference?


----------



## Gunnerguy (17 May 2021)

over9k said:


> So if I've understood you correctly gunner, you want to borrow against your assets at X% interest rate, invest the money, and hopefully make >X% return investing it, repaying the loan and then pocketing or reinvesting the difference?



Over9k
Yep that’s correct.
For example, if I had  $5M in debt free assets and wages can I get a loan?
GG


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## over9k (17 May 2021)

It's really hard to make a suggestion as to what to look into without knowing your personal circumstances (and I understand if you don't want to post them on a public forum). 

With that being said: 

I don't know what assets you own but it sounds like you're effectively looking for an unwindable reverse-mortgage - one where you can keep the house/asset if you repay them whatever outstanding principle you borrowed but at X% interest and/or with Y fees. These DO exist. In fact I think most of them have some kind of unwinding clause where if a normal person were to for argument's sake win the lottery they can pay everything back (with interest and fees obviously) and close the whole thing out/keep their house. 

But the thing is dude, lenders are not stupid. They are going to get their pound of flesh off you somehow. The interest rate(s), conditions etc are NOT going to be favourable. Even regular loans often have absurd fees for early closeout to make up some of the difference in interest the bank doesn't make off you if you pay it off earlier, hence why you hear about all those examples of people gaming systems by putting hundreds of thousands of dollars in offset accounts but not closing the loan out etc etc. Some of them just flatly do not allow you to make extra repayments at ALL. 

So, well, like I said, these are not stupid people. The loan conditions will ensure that they get their pound of flesh no matter what you do. Reverse mortgage interest rates are already quite high and if the (in this case) reverse mortgage is unwindable it will NOT be cheap to do so (think FEES) as allowing you to do so means they forfeit the large amount of interest they would have otherwise made off you. 

Point is, you're not going to just borrow money at rock bottom rates/for almost nothing, pump it into the stock market, and skim the difference. They are NOT going to let you do that. You'll be able to borrow money, but it'll come at a pretty serious cost/with some pretty nasty conditions and thus risk for you and even if you manage to eliminate your risk in one part of the loan structure then they'll just get you in a different bit. They WILL rinse you one way or another. 

I'm not trying to dissuade you, but I'm trying to dissuade you. I don't know your personal circumstances but it sounds like you're really playing with fire here man.


----------



## Knobby22 (17 May 2021)

dyna said:


> Opposition Treasurer,Jim Chalmers says the pandemic should never have been used as an excuse to enable people(misguided by the Libs?) to withdraw up to $20,000 out of their super.The unit prices of nearly all of the big Industry funds and the not for profits have now recovered from the March 2020 Covid crash. Those lunatic  liberal back benchers were no doubt pleased to see the 20 grand ploughed back into the struggling economy,but the hapless punter is never going to catch up on their lost investment.



Some people really needed it though! Maybe better rules before access though....but it was a panic.
You have to assume a certain amount of caveat emptor, people shouldn't be treated as pre-schoolers (though I admit some act like they are).


----------



## qldfrog (17 May 2021)

the government should be reminded from time to time that super is actually owned by the workers and is fully paid by the workers even  if many people still believe after all these years it is paid by the employers.That money is paid to you by the employer then redirected to feed the pigs in the trough and this whatever your situation.
People doing part time jobs and taking personal loan to repair a car or pay an electricity bill, or just drawing on their credit card for these purposes are still giving away 10% [or nearly] of their income :as tax would not be relevant in this situation.
Mandatory super is a shame
I wish the left was not so in bed with the unions and the cash flow from the super funds to actually wake people up;
Pension should be universal, taxable (so if you are (really) rich, you would probably not gain much and everyone should be free to be responsible for their actiosn.but hey that is a far right naughty capitalistic thought it seems,


----------



## Knobby22 (17 May 2021)

qldfrog said:


> the government should be reminded from time to time that super is actually owned by the workers and is fully paid by the workers even  if many people still believe after all these years it is paid by the employers.That money is paid to you by the employer then redirected to feed the pigs in the trough and this whatever your situation.
> People doing part time jobs and taking personal loan to repair a car or pay an electricity bill, or just drawing on their credit card for these purposes are still giving away 10% [or nearly] of their income :as tax would not be relevant in this situation.
> Mandatory super is a shame
> I wish the left was not so in bed with the unions and the cash flow from the super funds to actually wake people up;
> Pension should be universal, taxable (so if you are (really) rich, you would probably not gain much and everyone should be free to be responsible for their actiosn.but hey that is a far right naughty capitalistic thought it seems,



It has some good capitalistic effects though. Forced investment allows the funds to invest in long term infrastructure here and abroad, improving the state of the nation.
But yea, generally agree.


----------



## qldfrog (18 May 2021)

Knobby22 said:


> It has some good capitalistic effects though. Forced investment allows the funds to invest in long term infrastructure here and abroad, improving the state of the nation.
> But yea, generally agree.



Yes, stability of capital, private investment funds, etc but  I believe you could get a better outcome by creating kind of infrastructures bonds with a slight tax advantage or just proper returns.
Forcing a 25y old waiter to put nearly 10pc of their income into what will be a so called growth fund, subject to the next crash while paying credit cards debt is in my opinion criminal.
Yet seems accepted  with the leftist idea undertone: let the employer pay for the waiter retirement, and obviously the nanny state ideal.we care for you,do not think,just watch TV/FB.
Anyway, i would not be a popular PM: like truth too much


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## dyna (18 May 2021)

The 3 million workers who partook of the Liberal government's "Early Access To Your Super" scheme, sadly sold out at the worst possible time ,from the 20th April,last year,with the ASX trading 25%  below its pre pandemic peak.
According to (left-leaning) Mckell Institute, that $36.4 Billion would now be worth $41.1 Billion."And that loss only compounds over time" says Mckell's executive director.


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## sptrawler (18 May 2021)

dyna said:


> The 3 million workers who partook of the Liberal government's "Early Access To Your Super" scheme, sadly sold out at the worst possible time ,from the 20th April,last year,with the ASX trading 25%  below its pre pandemic peak.
> According to (left-leaning) Mckell Institute, that $36.4 Billion would now be worth $41.1 Billion."And that loss only compounds over time" says Mckell's executive director.



I guess for those, who it saved from losing their house or car, the fact they might have less when they finally can get their super, didn't come into it. 
That $36.4 billion would now be worth $41.1 billion, that the person still can't get hold of, meanwhile houses still outstrip wages.
Luckily the person who didn't withdraw any money, in all likely hood will have more money than those who did, therefore can probably have a better chance of funding their own retirement with the extra savings. 
Just saying, it isn't as black and white as some would like to paint it, if super and the rules around super were cast in stone super is a no brainer.
But they aren't and as the saying goes, don't use historical data, as a guide to what you will be entitled to in the end. 😂


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## Dona Ferentes (18 May 2021)

qldfrog said:


> Forcing a 25y old waiter to put nearly 10pc of their income into what will be a so called growth fund, subject to the next crash while paying credit cards debt is in my opinion criminal.



and yet... from 16 to 23 years old, my daughter worked at a waitress. These SG slips started turning up; dribbles of $20 here, $30 there.. So what did we do?

Apart from the obvious one of consolidating accounts, because there was no default apart from the whim of the owner, every year I dropped $1000 in her fund as a co-contribution. Government matched it, $1500 for a few years, then $1000 then (too good to be true) dropping to $500. When she finished uni and entered the fulltime workforce, she had a balance of $56K for the 8 years of effort (and my 8 Grand). And now, she's still under 35, the balance is close to $300K.

(no she doesn't have a credit card debt; just bought a house to follow from the modest apartment she initially purchased)


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## Beaches (18 May 2021)

dyna said:


> The 3 million workers who partook of the Liberal government's "Early Access To Your Super" scheme, sadly sold out at the worst possible time ,from the 20th April,last year,with the ASX trading 25%  below its pre pandemic peak.
> According to (left-leaning) Mckell Institute, that $36.4 Billion would now be worth $41.1 Billion."And that loss only compounds over time" says Mckell's executive director.




Not entirely true.
A friend of mine took out the maximum $20k allowed and used it to trade the market. Current balance is $26k. That is a 30% return in 11 months, far better than the super fund would have provided.


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## sptrawler (18 May 2021)

Beaches said:


> Not entirely true.
> A friend of mine took out the maximum $20k allowed and used it to trade the market. Current balance is $26k. That is a 30% return in 11 months, far better than the super fund would have provided.



Same happened with a friend her niece who is in her 20's pulled out some super and bought NAB at around $15, so it isn't all doom and gloom.


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## qldfrog (18 May 2021)

Dona Ferentes said:


> and yet... from 16 to 23 years old, my daughter worked at a waitress. These SG slips started turning up; dribbles of $20 here, $30 there.. So what did we do?
> 
> Apart from the obvious one of consolidating accounts, because there was no default apart from the whim of the owner, every year I dropped $1000 in her fund as a co-contribution. Government matched it, $1500 for a few years, then $1000 then (too good to be true) dropping to $500. When she finished uni and entered the fulltime workforce, she had a balance of $56K for the 8 years of effort (and my 8 Grand). And now, she's still under 35, the balance is close to $300K.
> 
> (no she doesn't have a credit card debt; just bought a house to follow from the modest apartment she initially purchased)



Just a guess, you were providing your daughter food and accomodation, maybe even a car, paying her internet and power and maybe even uni fees.
Not a criticism, did / doing exactly the same for my son, but not exactly a 25y old living pay check to pay check i was talking about is it?
You see my point.


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## sptrawler (18 May 2021)

Dona Ferentes said:


> and yet... from 16 to 23 years old, my daughter worked at a waitress. These SG slips started turning up; dribbles of $20 here, $30 there.. So what did we do?
> 
> Apart from the obvious one of consolidating accounts, because there was no default apart from the whim of the owner, every year I dropped $1000 in her fund as a co-contribution. Government matched it, $1500 for a few years, then $1000 then (too good to be true) dropping to $500. When she finished uni and entered the fulltime workforce, she had a balance of $56K for the 8 years of effort (and my 8 Grand). And now, she's still under 35, the balance is close to $300K.
> 
> (no she doesn't have a credit card debt; just bought a house to follow from the modest apartment she initially purchased)



Wouldn't it be great if she could take the $300k, pay the house off and then contribute some of the house payment into her super?
Then she could look at the next move up the housing ladder.


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## Belli (31 May 2021)

What the...?

Must be kind to those who went to cash and only realising they may have goofed it and now, re-entering after reasonable gains have occurred and having consumed a portion of investible capital, can buy less than previously held so need to eek out a meager existence.  Sarcasm, roll of eyes and all the rest.





__





						Supporting retirees with extension of the temporary reduction in superannuation minimum drawdown rates | Prime Minister of Australia
					






					www.pm.gov.au


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## Belli (3 July 2021)

Belli said:


> Must be kind to those who went to cash




While many probably had to do that and some who didn't need to did, they must be gnashing their teeth at the returns from last FY.  The FP sent me a quick snap shot at EoFY for the SMSF and it returned 36% (I'm sure other funds did better than that but I'm OK with it.)  The best performers were MLT (no surprise there) at 54% and MIR at 62%.  Even sleepy WHF cracked 44%.  Having said that this FY it'll all be reversed of course!


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## Dona Ferentes (3 July 2021)

Belli said:


> While many probably had to do that and some who didn't need to did, they must be gnashing their teeth at the returns from last FY.  The FP sent me a quick snap shot at EoFY for the SMSF and it returned 36% (I'm sure other funds did better than that but I'm OK with it.)  The best performers were MLT (no surprise there) at 54% and MIR at 62%.  Even sleepy WHF cracked 44%.  Having said that this FY it'll all be reversed of course!



if not _reversed_, then _reversion to the mean_?

Assume your return calculation is Internal Rate of Return? XPlan can crank out those numbers pretty easily. It has been a good year, but they always say it is in for the long term. I also have a SMSF, (barbell of LICs and speccies, plus IABs) and got the following numbers :
12 mths ... 40.4% incl franking or 39.1% without; 
3 years ..... 16.2%pa, 
5 years ..... 11.9%pa,
10 years ... 13.6%pa,
Since inception... 9.8%pa (set up 2006 so that includes the GFC)


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## Belli (3 July 2021)

I honestly don't know what product the firm uses.  You've done well with those numbers.

My late wife and I set up our SMSF in 1998 and transferred in specie a bunch of share holdings plus cash to use as much as we could of the concessional and non-consessional limits available at the time (very generous ones too I thought.)   I just had a glance at the end of the report and it is indicated a return of 13% pa over that period.  Not sure how that is calculated but now my curiosity it piqued I'll make further inquiries later this month at a meet up.


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## dyna (10 July 2021)

Our biggest Industry fund, the $200 Billion AustralianSuper returned a record 20.4% to its members for 2020-21.
Its flagship fund, the "Balanced" option , has now returned 9.73% p.a. over 10 years, roughly the same return as the similar sized Sunsuper's "Balanced" fund.
AustralianSuper's CIO says it's looking to reduce its fixed income exposure for the coming fiscal year.
Listed equities comprise 58% of its asset mix. International equities 32% .The rest is in infrastructure, fixed income, property and private equity.


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## Dona Ferentes (10 July 2021)

Now, it is the definition of Balanced that will determine actual numbers for different funds


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## dyna (11 July 2021)

Sunsuper's so called "balanced" fund has been queried for that very reason. More growth stocks in it, than is usual for a more neutral investing approach. Not the only super fund stretching the term a fair bit, either!
Some thing else. Almost 10% of complaints to the Australian Financial Complaints Authority in the past year, relate to super funds (Four times as many as the life insurers ) ,regarding delays in handling life insurance claims, followed by  outright denial of the claim ! Industry Funds, even the big ones, aren't pure, either. ASIC has taken AWARE SUPER to court over its $ 100 million fees for no service; REST SUPER for trying to stop members transferring to a better performing fund and STATEMENT SUPER was sued for charging members life insurance premiums despite saying it would not.
The corporate cop is even looking further into the Industry Funds big, AustralianSuper automatically signing up members to its on-line, leftie, news-rag "The News Daily".


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## dyna (16 July 2021)

Astonishing figures in today's AFR for the top SMSF's. From  the ATO's files, there are currently 6,000 of them with more than $5 Million in assets. 500 of those  are over this threshold. Way over! The numero uno SMSF, had a 30th June 2019 valuation of more than $1/2 Billion.
This big daddy only has to compound at a modest 8% p.a. for it to be  worth $ 1 TRILLION, just before the end of this decade. Perhaps the only consolation for poor folks on welfare or workers, suddenly back on Jobseeker, is that  these worthy individuals will  be dead in 20-30 years and their lightly taxed savings will  have to come out of the superannuation system. It will then get to be (properly) taxed at the heirs' marginal rate.
One of the unspoken reasons for the demise of Malcom Turnbull, within his eastern suburbs constituency, was his successful pursuit of super rorts from the Howard-Costello era. From 1st July 2017, it was deemed $ 1.6 Mill (now 1.7) tax free super ought to be enough for most fair minded Australians for their retirement.....It seems there's still more work to be done.


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## mullokintyre (16 July 2021)

dyna said:


> Astonishing figures in today's AFR for the top SMSF's. From  the ATO's files, there are currently 6,000 of them with more than $5 Million in assets. 500 of those  are over this threshold. Way over! The numero uno SMSF, had a 30th June 2019 valuation of more than $1/2 Billion.
> This big daddy only has to compound at a modest 8% p.a. for it to be  worth $ 1 TRILLION, just before the end of this decade. Perhaps the only consolation for poor folks on welfare or workers, suddenly back on Jobseeker, is that  these worthy individuals will  be dead in 20-30 years and their lightly taxed savings will  have to come out of the superannuation system. It will then get to be (properly) taxed at the heirs' marginal rate.
> One of the unspoken reasons for the demise of Malcom Turnbull, within his eastern suburbs constituency, was his successful pursuit of super rorts from the Howard-Costello era. From 1st July 2017, it was deemed $ 1.6 Mill (now 1.7) tax free super ought to be enough for most fair minded Australians for their retirement.....It seems there's still more work to be done.



One of the misunderstandings about SMSF is the taxation regime.
I have been managing our family SMSF for over 25 years, but unfortunately  do not figure in any of the tables for the biggest funds. 
Under current rules, an SMSF can have a max of 6 family members, and all members contributions, earnings distributions, pensions etc will be taxed differently.
Once a member of an SMSF reaches 65 or whatever the deemed  age is for younger people,  a minimum of 5% of the super fund must be taken in a pension. As the member ages, this percentage increases every 5 years up to a maximum of 14% if the lucky bugger manages to reach 95!.
So, at some point in time, the beneficiary has to start taking out a minimum pension. In the case of the person with the half bill fund (assuming it is a single member), they would have to take out 25 million pension on reaching 65, and 25 mill next year etc etc. These triggering events create issues for cash flow, as sometimes hard assets need to be sold out to provide the cash for a large pension payout.
What they then do with the money will of course most likely attract some sort of tax, either  as CGT, stamp duty, GST etc depending on how they invest it. Even just letting sit in the back would attract considerable income and thus likely maximum tax rate.
Given that there is a limit of 1.8 mill on concessional member contributions, it is unlikely that really large  SMSF's will continue to be created, apart from the ones already in existence.
Mick


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## sptrawler (16 July 2021)

dyna said:


> Astonishing figures in today's AFR for the top SMSF's. From  the ATO's files, there are currently 6,000 of them with more than $5 Million in assets. 500 of those  are over this threshold. Way over! The numero uno SMSF, had a 30th June 2019 valuation of more than $1/2 Billion.
> This big daddy only has to compound at a modest 8% p.a. for it to be  worth $ 1 TRILLION, just before the end of this decade. Perhaps the only consolation for poor folks on welfare or workers, suddenly back on Jobseeker, is that  these worthy individuals will  be dead in 20-30 years and their lightly taxed savings will  have to come out of the superannuation system. It will then get to be (properly) taxed at the heirs' marginal rate.
> One of the unspoken reasons for the demise of Malcom Turnbull, within his eastern suburbs constituency, was his successful pursuit of super rorts from the Howard-Costello era. From 1st July 2017, it was deemed $ 1.6 Mill (now 1.7) tax free super ought to be enough for most fair minded Australians for their retirement.....It seems there's still more work to be done.



That is all a bit vague, from my understanding the only amount that is tax free, is the component that is in pension phase. 
That amount is capped initially at $1.6m, anything above that has to be left in the accumulation phase, where it is taxed at 15%.

I'm not sure the 500 will get away with having excessive amounts in super, it is constantly getting tweaked as more people get larger sums in there, initially it had to be made attractive so that the plebs accepted saving to pay their own pensions.

As for super rorts, one of the biggest was the pollies super, which gave them an indexed tax free pension for life, that could be accessed as soon as they quit politics.

The real consolation for the poor folks on welfare IMO, is they aren't taxed on it, except for gst and smoking, alcohol  and petrol excise .
https://www.news.com.au/finance/wor...t/news-story/bd7255c7ea86b9497046372bdffb9c80
From the article:
However, we do know Mr Turnbull’s annual pension will not be as hefty as his predecessors’, thanks to a change to the superannuation scheme for members of parliament introduced under the Howard Government.

In 2004, John Howard created the Parliamentary Superannuation Bill, which stipulated that those who entered after that year would be subjected to a standard superannuation scheme.

Those who entered parliament before 2004 would still receive the six-figure pension sum of the old model upon retiring.

In 2015 following his ousting, Fairfax determined Tony Abbott would slide away with an annual pension of $307,542.

_The Daily Telegraph_ reported Mr Howard, Julia Gillard and Kevin Rudd are enjoying more than $200,000 a year in pensions and perks, while Paul Keating is pocketing around $140,000 a year — not including their estimated extra $300,000 to maintain a staffed office and travel costs.


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## over9k (16 July 2021)

mullokintyre said:


> One of the misunderstandings about SMSF is the taxation regime.
> I have been managing our family SMSF for over 25 years, but unfortunately  do not figure in any of the tables for the biggest funds.
> Under current rules, an SMSF can have a max of 6 family members, and all members contributions, earnings distributions, pensions etc will be taxed differently.
> Once a member of an SMSF reaches 65 or whatever the deemed  age is for younger people,  a minimum of 5% of the super fund must be taken in a pension. As the member ages, this percentage increases every 5 years up to a maximum of 14% if the lucky bugger manages to reach 95!.
> ...



I'm no finance/tax lawyer but I bet they've got it pretty well figured out, even if it's just running on grandfathered rules.


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## Belli (16 July 2021)

dyna said:


> Astonishing figures in today's AFR for the top SMSF's. From  the ATO's files, there are currently 6,000 of them with more than $5 Million in assets. 500 of those  are over this threshold. Way over! The numero uno SMSF, had a 30th June 2019 valuation of more than $1/2 Billion.
> This big daddy only has to compound at a modest 8% p.a. for it to be  worth $ 1 TRILLION, just before the end of this decade. Perhaps the only consolation for poor folks on welfare or workers, suddenly back on Jobseeker, is that  these worthy individuals will  be dead in 20-30 years and their lightly taxed savings will  have to come out of the superannuation system. *It will then get to be (properly) taxed at the heirs' marginal rate.*
> One of the unspoken reasons for the demise of Malcom Turnbull, within his eastern suburbs constituency, was his successful pursuit of super rorts from the Howard-Costello era. From 1st July 2017, it was deemed $ 1.6 Mill (now 1.7) tax free super ought to be enough for most fair minded Australians for their retirement.....It seems there's still more work to be done.




Not all of it.  Depends on how much was contributed tax free, including the generous $1m contribution (each) allowable in 2007 I think, and the $148k pa (each).  While the  earnings above the $1.6m balance cap (each) or so may be taxed those amounts are still tax free when withdrawn.  That's my understanding anyway.


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## Belli (16 July 2021)

Belli said:


> Not all of it.  Depends on how much was contributed tax free, including the generous $1m contribution (each) allowable in 2007 I think, and the $148k pa (each).  While the  earnings above the $1.6m balance cap (each) or so may be taxed those amounts are still tax free when withdrawn.  That's my understanding anyway.




Forgot to say that superannuation does not form part of your estate.  You can arrange for it, via a BDBN, to be payable to your Executor and there will be a superannuation death benefits proceeds sub-trusts in wills.  This means the funds can be directed to those accordingly to minimze their after-tax bill.  Even smaller amounts can be achieve a saving.  Seen a couple of cases, based on $300k or so each where a beneficiary has saved, for want of a better word, over $36k in tax.  Then there are establishing Trusts, bucket companies, etc.

All quite legal.  Hey, it may not seem great but like most who take advantage of tax breaks, offesting interest against income and stuff like that, these bigger dudes are in general doing exactly the same.  Just the amounts involved seem to upset some.


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## over9k (16 July 2021)

There's also testamentary trusts to throw another factor in. 


Like I said, they'll have it figured out.


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## Belli (17 July 2021)

over9k said:


> There's also testamentary trusts to throw another factor in.
> 
> 
> Like I said, they'll have it figured out.




Yeah.  And, especially where a TT is in place, a clause can be inserted to gift the share held by a Corporate trustee for fixed and non-fixed trusts to the executor.  That effectively hand control over to the executor.

I've used tax breaks, where allowed, all my investing life (refund of excess franking credits is a tax break).  After my wife's death her superanuation was paid out to me as required.  I immeadiately, on advice, used the three year bring forward rule to recontribute $540k as a tax free non-concessional contribution.  That tax free component is still in the SMSF.  And what is sometimes forgotton is if you have qualified under the preservation rules, you can take as much as you like out of the fund, say a $1m.  In your hands it's tax free and there is no requirement for it to be included in your personal tax return.  Sure there is some numbers necessary within the funds but that's the fund not you.


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## dyna (18 July 2021)

dyna said:


> Astonishing figures in today's AFR for the top SMSF's. From  the ATO's files, there are currently 6,000 of them with more than $5 Million in assets. 500 of those  are over this threshold. Way over! The numero uno SMSF, had a 30th June 2019 valuation of more than $1/2 Billion.
> This big daddy only has to compound at a modest 8% p.a. for it to be  worth $ 1 TRILLION, just before the end of this decade. Perhaps the only consolation for poor folks on welfare or workers, suddenly back on Jobseeker, is that  these worthy individuals will  be dead in 20-30 years and their lightly taxed savings will  have to come out of the superannuation system. It will then get to be (properly) taxed at the heirs' marginal rate.
> One of the unspoken reasons for the demise of Malcom Turnbull, within his eastern suburbs constituency, was his successful pursuit of super rorts from the Howard-Costello era. From 1st July 2017, it was deemed $ 1.6 Mill (now 1.7) tax free super ought to be enough for most fair minded Australians for their retirement.....It seems there's still more work to be done.



Oops, got the facts wrong, again . Blinded by too many zeros. Should read half a million, not Billion ($ 544 Million to be precise ). A lot of dosh there, for just 2 people, possibly 4 under the old rules up to the start of July, this year.
 Following on; Liberal MP Jason Falinski recons there should be MORE  $ 100 Million SMSF's than the current 27 ! And the rules should not now be changed retrospectively .
Not much noise from Labor, yet, but the Gratten Institute is livid and shadow treasury spokesman, Jim Chalmers commented that tax concessions should be "sustainable and equitable". Fair enough. There won't be any more of these biggies, so.........


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## over9k (18 July 2021)

dyna said:


> Oops, got the facts wrong, again . Blinded by too many zeros. Should read half a million, not Billion ($ 544 Million to be precise ). A lot of dosh there, for just 2 people, possibly 4 under the old rules up to the start of July, this year.
> Following on; Liberal MP Jason Falinski recons there should be MORE  $ 100 Million SMSF's than the current 27 ! And the rules should not now be changed retrospectively .
> Not much noise from Labor, yet, but the Gratten Institute is livid and shadow treasury spokesman, Jim Chalmers commented that tax concessions should be "sustainable and equitable". Fair enough. There won't be any more of these biggies, so.........



Nothing will happen. The political left is unelectable and the libs know it.


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## Knobby22 (19 July 2021)

over9k said:


> Nothing will happen. The political left is unelectable and the libs know it.



And the political right are too scared.
Superanuation Tax breaks to a few extremely wealthy and connected families that matches the total pension bill. Nothing to see hear.
They know they will eventually lose it but not till our budget situation is desperate.


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## Knobby22 (19 July 2021)

Should point out it was the Libs under Turnbull who removed the loophole.
At the time they said if they left it in that the amount would equal the defence budget within a few number of years.


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## Belli (19 July 2021)

Even now there is a slight tweak favouring some.  The temporary halving of the required drawdown rate.  I fully admit I have, and will, take advantage of that.  I've sufficient investment income outside of the superannuation structure to be able to do it.  Plus with the cracker of a year last FY, the $1.6m component (I no longer qualify to contribute to superannuation) of the SMSF is way above that.  The accumulation component is also very heathy.


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## dyna (22 July 2021)

Jeremy Cooper, now Challenger's chairman of retirement, makes an interesting point in today's AFR. Research shows a retiree with a $million in super, owed a 1/3 rd  of this balance to tax concessions. Outside of super, he would only get $ 650,000.
The Grattan Institute is screaming about superannuation tax breaks costing the budget $35 Billion in lost revenue, with 1/2 of the benefits going to the top 1/5 th  of income earners who already have income to fund their own retirement.
Challenger and Mercer's research suggests retirees drawing down an extra 1.5% each year ( just $4,300 ) would help the economy with a $9 Billion increase in GDP .


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## mullokintyre (22 July 2021)

dyna said:


> Jeremy Cooper, now Challenger's chairman of retirement, makes an interesting point in today's AFR. Research shows a retiree with a $million in super, owed a 1/3 rd  of this balance to tax concessions. Outside of super, he would only get $ 650,000.
> The Grattan Institute is screaming about superannuation tax breaks costing the budget $35 Billion in lost revenue, with 1/2 of the benefits going to the top 1/5 th  of income earners who already have income to fund their own retirement.
> Challenger and Mercer's research suggests retirees drawing down an extra 1.5% each year ( just $4,300 ) would help the economy with a $9 Billion increase in GDP .



Statistics, as one of our resident data experts here points out, not many people understand data analysis.
I presume that the $9bill increase in GDP is because of the multiplier effect, because there is no guarantee that
(a) The retirees would spend the extra, 
(b) they would invest into something that generates income and thus attract some taxation.
I presume they mean all retirees drawing down extra,  but they obviously don't understand the thinking of so many retirees. 
They will not spend the extra just because they have to take it out, in fact because so many  want to preserve their capital, they may actually reduce some spending.. and keep it in a non interest bearing check account. (My mother in law did just that - gifted the ANZ bank over a million bucks for 15 years because she did not want to pay extra tax on the earnings which she could not spend anyway living in a nursing home).
The top 1/5th would most likely have their affairs setup in trusts, companies and whatever other tax minimalisation  vehicles their accountants and lawyers set up for them. 
Someone who has a million bucks in Super and takes out 5% per year as pension , assuming a paltry return of 2% p.a has over 20 years before there is nothing left.  For most retirees, thats probably enough, as retiring at 65,  you will not need a lot of spending money at 85, assume you are lucky enough to live that long. But self funded retirees (I am one of them, and so many of my contemporaries er also) don't think like that.


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## divs4ever (22 July 2021)

Knobby22 said:


> And the political right are too scared.
> Superanuation Tax breaks to a few extremely wealthy and connected families that matches the total pension bill. Nothing to see hear.
> They know they will eventually lose it but not till our budget situation is desperate.




 it is a well-known fact that

 governments LOSE elections ,

 however the LNP may easily become too egotistical  and ignore the minor parties or a coalition of them , the ALP is not the only game in town 

 and veteran Albo might actually have a winning strategy .. let the LNP irritate everyone 

 ( i prefer Katter ,  but unless a miracle happens ... )


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## divs4ever (22 July 2021)

mullokintyre said:


> Statistics, as one of our resident data experts here points out, not many people understand data analysis.
> I presume that the $9bill increase in GDP is because of the multiplier effect, because there is no guarantee that
> (a) The retirees would spend the extra,
> (b) they would invest into something that generates income and thus attract some taxation.
> ...




 yes i agree with your logic

 i was planning NOT to  draw-down ( unless desperate )  and HOPING that stocks DRPed ( not everything  is geared to give cash divs )  will grow and help resist inflation 

 that was the plan right back in 2010 , given recent twists and turns  , all i can do is sit and watch if i get close ( to correct strategy )

 yes my plan seems complex but that is the joy  of self-managing your retirement plan


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## Dona Ferentes (22 July 2021)

dyna said:


> Astonishing figures in today's AFR for the top SMSF's.



I'm not astonished. If you look at the disclosed top 20 holders of any IPO, there are a mix of custodians (for institutions/ fund managers), SMSFs, trusts and individuals.

If the IPO does well, and share price increases, then the early investors will be sitting on a tidy sum. If it slumps, then it's a tiny sum. I would suspect the really big SMSFs are the likes of APT or a mining speccie like CHN. 

Until bits of the holding are sold, then there is little tax (only envy). IPOs generally don't usually pay dividends for a while, and if sold, CGT will apply, at a lower rate as the assets would mainly, overwhelmingly, be in an Accumulation account.


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## divs4ever (22 July 2021)

Dona Ferentes said:


> I'm not astonished. If you look at the disclosed top 20 holders of any IPO, there are a mix of custodians (for institutions/ fund managers), SMSFs, trusts and individuals.
> 
> If the IPO does well, and share price increases, then the early investors will be sitting on a tidy sum. If it slumps, then it's a tiny sum. I would suspect the really big SMSFs are the likes of APT or a mining speccie like CHN.
> 
> Until bits of the holding are sold, then there is little tax (only envy). IPOs generally don't usually pay dividends for a while, and if sold, CGT will apply, at a lower rate as the assets would mainly, overwhelmingly, be in an Accumulation account.



 well IF you have a full service broker ( and an 'institutional account ) your broker rings YOU really  early  so you can buy some of that pre-IPO action ( and he/she gets a nice commission  , maybe even from both ends of the trade )
 BECAUSE if there isn't enough interest at the big end of town the IPO goes nowhere ( not even close to listing )

 however getting to be important enough for your broker to ring you ( when you don't owe money ) is the difficult bit  ( i only got mine because of a super helpful BSL employee  on that SPP at 40c ( pre-consolidation, )


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## Dona Ferentes (22 July 2021)

divs4ever said:


> well IF you have a full service broker ( and an 'institutional account ) your broker rings YOU really  early  so you can buy some of that pre-IPO action ( and he/she gets a nice commission  , maybe even from both ends of the trade )
> BECAUSE if there isn't enough interest at the big end of town the IPO goes nowhere ( not even close to listing )



I suggest you read the Top 20 holdings more closely. They are the entrepreneurs, the directors and senior management (and family)

Serious wealth needs an good accountant/ private wealth adviser, but it is a well trodden path..


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## divs4ever (22 July 2021)

nearly all of them  with a higher nett worth than me  , and that was my point , if you pay the bucks you get the service ( sometimes )

 i NORMALLY don't pay the bucks because i rarley take big positions in one bite  ( the BSL SPP was the exception )

 i am very happy to carefully accumulate  , even if the brokerage looks forbidding ( over time )

 nibbling small lets me sample illiquid shares without dstorting the market 

 now if others use different strategies , that is fine by me , less competition , where i want to play ( i am quite happy to be the only frog in the puddle , as long as there is something in there i desire )


----------



## qldfrog (22 July 2021)

divs4ever said:


> nearly all of them  with a higher nett worth than me  , and that was my point , if you pay the bucks you get the service ( sometimes )
> 
> i NORMALLY don't pay the bucks because i rarley take big positions in one bite  ( the BSL SPP was the exception )
> 
> ...



I know of another frog in that muddy puddle 😁


----------



## divs4ever (22 July 2021)

qldfrog said:


> I know of another frog in that muddy puddle 😁



 WHAT ?? do you hold ATM , TRA and MPP  also  ???


----------



## qldfrog (22 July 2021)

divs4ever said:


> WHAT ?? do you hold ATM , TRA and MPP  also  ???



Not at all, just a frog..


----------



## divs4ever (22 July 2021)

am just cold to touch now ( heart/circulation issues )  but still don't mind being someplace ( or stock ) all alone for years 

 i should check  some  of the 'bottom drawer stocks  , sometimes i am half the yearly trading volume  ( and i normally buy small  )

 it looks funny to fill an order  in three part-filled orders spread over several months   all for $10 or $15 brokerage total


----------



## dyna (4 September 2021)

This week, APRA's spokesperson said the 13 superannuation funds that failed its performance test, should consider exiting our $ 3.3 Trillion superannuation sector. A couple of those duds happen to be Industry funds ( the 40,000 member  Electrical Workers and the Transport Workers Union Super ) with a combined $ 12 Billion under management.
APRA thinks these funds need at least $ 30 Bill to be competitive.
One of the Corporate no-hoper superannuation funds was CBA Bank's own  employer fund.
Industry fund REST ( 1.8 million mainly young, hospitality workers ) barely made it  over the acceptability line.


----------



## divs4ever (4 September 2021)

i wonder if the tests will still apply when the market REALLY melts  down  and much bigger funds  drift into negative yields as well 

 just asking


----------



## qldfrog (4 September 2021)

divs4ever said:


> i wonder if the tests will still apply when the market REALLY melts  down  and much bigger funds  drift into negative yields as well
> 
> just asking



Indeed, to pass the bar, a fund can just invest in vangard etf and that is ok


----------



## divs4ever (4 September 2021)

NOT so OK if you don't subscribe to their ESG agenda 

 but of course the peasants are always expected to 'take one for the team '


----------



## dyna (5 September 2021)

$450 Billion was contributed to the $3.35 Trillion superannuation giant for fiscal year 30 June 2021.
28% of it has already found a home in overseas equities .Foreign assets to domestic ones now sit at about 20%. For the past 3 years, the dividend flow back to OZ has far exceeded the payout to foreigners who have shares in our stock market.
Downside to this though, is the interest paid out by government and aussie banks to foreign bond holders. Still, that overseas savings pot is only gonna get bigger over time and is sure to eventually give some heft to the $A .


----------



## divs4ever (5 September 2021)

dyna said:


> $450 Billion was contributed to the $3.35 Trillion superannuation giant for fiscal year 30 June 2021.
> 28% of it has already found a home in overseas equities .Foreign assets to domestic ones now sit at about 20%. For the past 3 years, the dividend flow back to OZ has far exceeded the payout to foreigners who have shares in our stock market.
> Downside to this though, is the interest paid out by government and aussie banks to foreign bond holders. Still, that overseas savings pot is only gonna get bigger over time and is sure to eventually give some heft to the $A .



 you would think so ,  but currency rates are totally manipulated  ,  and currencies  backed by promises from an untrustworthy entity are essentially worthless 

 technically  a currency  is a monetized unit of productivity (  work done ) ... anyone see the problem now in the last year ( more currency issued  but reduced productivity  )


----------



## Belli (1 October 2021)

Not exactly about superannuation but the cash cow aspect is from an income insurance perspective in superannuation.  This applies from today in super funds it seems.

Policies are subject to reassessment after 5 years. These changes will allow insurers to alter terms or decline cover after 5 years.

So it appears if a member is unable to work from, say, age 40, your income is for five years not until you reach 65, there is no automatic renewal after five years and the insurance company can change the T&C's.









						Significant changes to Income Protection policies come into place from Friday, 1 October 2021 - Pitcher Partners
					

In the face of increasing losses and concerns of the financial sustainability of insurers, the Australian Prudential Regulation Authority (APRA) has required insurers to commit to several changes to income protection products as of October 1st, 2021.




					www.pitcher.com.au


----------



## qldfrog (1 October 2021)

Belli said:


> Not exactly about superannuation but the cash cow aspect is from an income insurance perspective in superannuation.  This applies from today in super funds it seems.
> 
> Policies are subject to reassessment after 5 years. These changes will allow insurers to alter terms or decline cover after 5 years.
> 
> ...



You will notice recently a strong set of changes in life policies access, terms of those and limited payments..
Even big banks getting out of the life and disability insurance business
Obviously NOT related to the mass injections of millions with untested for long term effect of genetic modification product..
No omg in my food, just straight into my body..
We can applaud insurance companies to do their homework , can not say the same for our government..
Just saying..feel free to look yourself
Which is all good news for super funds..less withdrawers ahead


----------



## Belli (1 October 2021)

If your post made even the slightest bit of sense I may have thought more deeply about whatever it is you're trying to convey.


----------



## Miner (1 October 2021)

drsmith said:


> Soon after coming to office in 1996, the Howard Government introduced a superannuation surcharge for contributions from higher income earners. It's reintroduction is currently off the agenda (according to The Australian), but Labor is currently considering the following measures (below, again from The Australian).
> 
> Linking the contributions tax to a worker's marginal income tax rate would, in effect, be the same as the Coalition's surcharge, but Labor may go further, hitting income from super as well.



How about revisiting what said in 2012 ?


----------



## sptrawler (1 October 2021)

Miner said:


> How about revisiting what said in 2012 ?



The Government of the day IMO will have three options regarding the tax on super in the pension phase, as it is interconnected with the old age pension.
The super system still has to be attractive to maintain people's enthusiasm for it.
1. Tax the funds earnings, as it does in the accumulation phase.
2. Increase the tax on the discharging of the funds at death.(currently 16.5% on the untaxed portion)
3. Add the PPR to the asset test

There are a whole heap of other options, but in reality the Government wants two things, people to self fund and stop intergenerational wealth transfer.
The second one is becoming a bigger issue than the first, as the baby boomers pass away, it wont be long before no one wants to take the rubbish out. 🤣
Imagine, we will end up with a whole FIFO workforce from Indonesia and the South Pacific, while the Aussie's sip latte's and take in the sun.


----------



## divs4ever (1 October 2021)

more likely we will still be in lock-down , and the FIFO workers will be doing all the work while the locals  will be sitting in front of the Tube ( TV or U-Tube ) slurping on a tinnie ( 'cos the wine will all be exported to the Northern Hemisphere )

 found a reason to liquidate my super in 2010  and haven't regretted it for a second


----------



## sptrawler (1 October 2021)

divs4ever said:


> more likely we will still be in lock-down , and the FIFO workers will be doing all the work while the locals  will be sitting in front of the Tube ( TV or U-Tube ) slurping on a tinnie ( 'cos the wine will all be exported to the Northern Hemisphere )
> 
> found a reason to liquidate my super in 2010  and haven't regretted it for a second



Yes if it was only me, I would cash in and buy the McMansion and enjoy the perks of life, the other half would rather live in a cave and eat road kill, than go to centrelink. 🤣


----------



## divs4ever (1 October 2021)

put my payout into AMP until 2018 , luckily jumping before the Hayne Royal commission  and the proceeds are  still sloshing around in the market   , am a person of simple needs  , i laugh at all the things a vaccine passport will allow me to do ( that i had done until boredom decades ago )

 interesting times  , indeed


----------



## dyna (6 October 2021)

Union-aligned super funds got $ 4.5 Billion worth of inflows for the June 1/4. ( plus $ 18 Bill. member contributions )
Industry funds now hold $ 872 Billion in assets, up 23% over the year.
For the first time since September 2,016, the Retail super sector enjoyed a net $0.3 Bill. inflow as more members joined up than exited for other ( probably Union and Not-for-profits ) sectors.
The  3.3Trillion savings pool appears to be outgrowing the local sharemarket. Just 37% of it is now local, down from 45% , 8 years ago.
The 10 biggest super funds could hold 80% of superannuation assets by 2,025. Rainmaker predicts the the 5 biggest will all be Industry funds by then, too: Australian Super , Aware Super, Uni Super , Host Plus , and Q Super/ SunSuper .


----------



## mullokintyre (6 October 2021)

dyna said:


> Union-aligned super funds got $ 4.5 Billion worth of inflows for the June 1/4. ( plus $ 18 Bill. member contributions )
> Industry funds now hold $ 872 Billion in assets, up 23% over the year.
> For the first time since September 2,016, the Retail super sector enjoyed a net $0.3 Bill. inflow as more members joined up than exited for other ( probably Union and Not-for-profits ) sectors.
> The  3.3Trillion savings pool appears to be outgrowing the local sharemarket. Just 37% of it is now local, down from 45% , 8 years ago.
> The 10 biggest super funds could hold 80% of superannuation assets by 2,025. Rainmaker predicts the the 5 biggest will all be Industry funds by then, too: Australian Super , Aware Super, Uni Super , Host Plus , and Q Super/ SunSuper .



3.3 trillion is a fair slice of money looking for a home.
 How long will it be before the Super funds start to turn the tables on the banks and swallow one of them up?
BOQ and BEN are capitalised at 5 and 6 billion respectively.
Pocket money for the Union funds.
Housing mortgages would be a very nice substitute for the superfunds to have funds invested in.
Mick


----------



## over9k (6 October 2021)

mullokintyre said:


> 3.3 trillion is a fair slice of money looking for a home.
> How long will it be before the Super funds start to turn the tables on the banks and swallow one of them up?
> BOQ and BEN are capitalised at 5 and 6 billion respectively.
> Pocket money for the Union funds.
> ...



Depends on which politicians are in power/who's donating to the liberal party. 

Wayne swan wanted a 5th big bank for a long time, hence the torpedoing of what I think was the NAB takeover of AXA so that AMP could merge with them instead and get some kind of AMP/AXA new retail bank going and that never happened so I can't help but think this is a bit of a pipe dream


----------



## mullokintyre (6 October 2021)

My thinking is that in 3 years time, there will be federal labour Government , a NSW labour Government, and Coalition in Victoria and Queensland. the rest stay the same or don't count.
So in theory at leat, Labour will be able to walk the walk instead of Talk the talk.
I expect to see the removal of negative gearing on houses, removal of at least some of the generous  tax concessions for super,  a commitment to zero carbon emissions by 2050, or maybe earlier,  a federal  anti corruption body, a bill of human rights, a first nations alternate parliament  and a treaty between first nations and the Australian government, and allowance of anybody who comes to the country to stay here and gain citizenship should they wish. And to top it off, they will allow members of the various unions to negotiate mortgages on property  with the super funds the unions control.
And thats just in the first term.
Mick


----------



## over9k (6 October 2021)

Dunno about that. I reckon we might have the whole "We need the coalition's superior economic management to get us out of this thing and start rebuilding the economy" or some such drivel. 

Too many boomers with too much in their super funds and investment properties.


----------



## sptrawler (6 October 2021)

over9k said:


> Dunno about that. I reckon we might have the whole "We need the coalition's superior economic management to get us out of this thing and start rebuilding the economy" or some such drivel.
> 
> Too many boomers with too much in their super funds and investment properties.



Boomers are getting old, I think you are right about them having too much money, the last thing that the Country needs is all that money transferred to the next generation, the whole workforce will have to be brought in from overseas.
I think we will definitely get a labor Government in and they will implement the changes required, to stop the inter generational wealth transfer.
When you think about the amount of citizen conditioning that has been done, in the name of covid control, there really shouldn't be any problem bring in a lot of structural change, so it should be interesting IMO.
Whether they take it off the boomers, or somehow stop the transfer to their children, will be worth keeping an eye on.
If they take it off those who have saved it, that may have a negative effect on the next generation saving and investing, more likely to introduce some form of death duty IMO.
Also the some of the changes Mick suggested, will be implemented IMO.


----------



## over9k (6 October 2021)

sptrawler said:


> Boomers are getting old, I think you are right about them having too much money, the last thing that the Country needs is all that money transferred to the next generation, the whole workforce will have to be brought in from overseas.
> I think we will definitely get a labor Government in and they will implement the changes required, to stop the inter generational wealth transfer.
> When you think about the amount of citizen conditioning that has been done, in the name of covid control, there really shouldn't be any problem bring in a lot of structural change, so it should be interesting IMO.
> Whether they take it off the boomers, or somehow stop the transfer to their children, will be worth keeping an eye on.
> ...



Yeah, inheritance tax is one of the very few things that they won't have a hope of passing on account of housing costs etc. 

So gen X's income taxes are going to be it.


----------



## dyna (6 October 2021)

Over the next 20 years that intergenerational wealth transfer is estimated to be about what's currently in super . $ 3.5 Trillion....taxed at just 15% + the medicare levy in the well-deserving hands of the rising generation.
Unless of course, if a modest, say 10% death duty were to be brought in, on top of that, by either party's proper tax reform. It's still possible that Ken Henry's Report of so long ago, could be dusted off for another look!


----------



## over9k (6 October 2021)

dyna said:


> Over the next 20 years that intergenerational wealth transfer is estimated to be about what's currently in super . $ 3.5 Trillion....taxed at just 15% + the medicare levy in the well-deserving hands of the rising generation.
> Unless of course, if a modest, say 10% death duty were to be brought in, on top of that, by either party's proper tax reform. It's still possible that Ken Henry's Report of so long ago, could be dusted off for another look!



No chance. Just think about the uproar: 

"Inheriting a place is the only hope we ever had of owning a home and now you're taking that from us too". 


Like I said, gen X are the ones that are going to get squeezed.


----------



## sptrawler (6 October 2021)

over9k said:


> No chance. Just think about the uproar:
> 
> "Inheriting a place is the only hope we ever had of owning a home and now you're taking that from us too".
> 
> ...



I agree they will be squeezed, but I disagree with how it will be done, the trajectory of income tax and business tax is down, not up.
So how they get the money from the boomers without just taking it off them is limited, much more difficult to tell people work your ar$e off for a better retirement, then when they stop working take that retirement off them.
Much easier to say, you enjoy that retirement and we will take a piece of your estate when you pass away, to help cover the cost.
That is why the Government is starting to make reverse mortgages more attractive, they don't want people inheriting a house, they want people gagging for a job, so they don't have to keep importing labour.
Even the ACTU mentioned the re introduction of death duties, when Labor were floating all the super changes and franking credit changes, one thing for sure something is going to happen.


----------



## over9k (6 October 2021)

sptrawler said:


> I agree they will be squeezed, but I disagree with how it will be done, the trajectory of income tax and business tax is down, not up.
> So how they get the money from the boomers without just taking it off them is limited, much more difficult to tell people work your ar$e off for a better retirement, then when they stop working take that retirement off them.
> Much easier to say, you enjoy that retirement and we will take a piece of your estate when you pass away, to help cover the cost.
> That is why the Government is starting to make reverse mortgages more attractive, they don't want people inheriting a house, they want people gagging for a job, so they don't have to keep importing labour.
> Even the ACTU mentioned the re introduction of death duties, when Labor were floating all the super changes and franking credit changes, one thing for sure something is going to happen.



Spending taxes most likely. They've been calling for a GST increase for years.


----------



## Belli (29 October 2021)

My, my.  Are some going to be in for a surprise.  Hope all their personal tax returns are up to date as well as being true and correct. Commences 1 November 2021.

"A director identification number (director ID) is a unique identifier you need to apply for once and will keep forever. It will help prevent the use of false or fraudulent director identities."





__





						About director ID | Australian Business Registry Services (ABRS)
					

A director identification number (director ID) is a unique identifier you will keep forever. It will help to prevent the use of false or fraudulent director identities.




					www.abrs.gov.au
				




And not only covering Corporate Trustees but other companies such as those involving Testamentary Trusts, and the list goes on.

PS: The ATO will be taking over this role.


----------



## dyna (23 November 2021)

From today's AFR.

Challenger's chairman Jeremy Cooper says the $ 3.3 Trillion in superannuation is set to grow to $ 34 Trillion in 40 years....twice the size of the ASX.
By 2061 Australians' super would be a comparable size to Norway's sovereign wealth fund which at nearly 3 times the country's economy, is banned from further investing in the Scandinavian economy as it may risk overheating.


----------



## qldfrog (24 November 2021)

But also:
https://finance.yahoo.com/news/global-managers-circle-retiring-boomers-190000418.html


----------



## mullokintyre (24 November 2021)

Belli said:


> My, my.  Are some going to be in for a surprise.  Hope all their personal tax returns are up to date as well as being true and correct. Commences 1 November 2021.
> 
> "A director identification number (director ID) is a unique identifier you need to apply for once and will keep forever. It will help prevent the use of false or fraudulent director identities."
> 
> ...



And as usual, where the ATO is involved its a complex difficult pain in the arse project.
So to get a  Director Identification number, firstly , you have to download an app.
I have no idea why it needs an Ap, I see no reason  the application could not be made online as so many others are.
Unless of course its another way to track your every movement.
The reviews of the Android version are most unflattering.
A standard ATO balls up. 
I think I will submit a paper version of the application and wait for them to screw that up as well.
Mick


----------



## Belli (24 November 2021)

It is highly likely myGovID will eventually replace myGov.  See the hint in the reference to myGovID in this link.









						Create a myGov account and link it to the ATO
					

How to create a myGov account and link to the ATO as an individual or sole trader.




					www.ato.gov.au
				




Should that occur, people will have great difficulties (if not impossibilities) in accessing these services which will expand over time.









						About myGov - Services Australia
					

myGov is a simple and secure way to access government services online in one place.




					www.servicesaustralia.gov.au


----------



## mullokintyre (24 November 2021)

Belli said:


> It is highly likely myGovID will eventually replace myGov.  See the hint in the reference to myGovID in this link.
> 
> 
> 
> Should that occur, people will have great difficulties (if not impossibilities) in accessing these services which will expand over time.



Services, a great con job like military intelligence or criminal Justice.
I never asked for,  nor required,  any of these so called services, they are impositions by  the plutocrats.
Mick


----------



## sptrawler (24 November 2021)

qldfrog said:


> But also:
> https://finance.yahoo.com/news/global-managers-circle-retiring-boomers-190000418.html



Earlier in this thread we talked about the super ponzi scheme, where more are putting into super, than are taking out, when that point is reversed then we will really see how well your super is really going.
The super funds will be pushing for the re introduction of RBL's and min-max drawdowns, watch this space, that is why the percentage of your balance that is taxable and tax free is so critical IMO.


----------



## qldfrog (24 November 2021)

it is funny as australian super is actually checking all the boxes of a Ponzy scheme, just a bit of creative accounting with private assets valuation: a city office tower empty after covid but valued increased by RE index "Et voila"
We will soon see where are the emperors with no clothes


----------



## dyna (24 November 2021)

Despite market volatility, savers in for the long haul, allocated another $ 100 billion into the (now) $ 3.4 Trillion superannuation pot in the September 1/4, up 17 % over the year.
Local equities allocation of 21 % has not changed much over the past 6 years, but the international investment has gone up from 24 % of the total to 30 % now.
AustralianSuper had 1/3 rd of its assets, $ 80 Billion invested in better performing growth stocks off-shore. Over 10 years the average international equities super fund investment option delivered 11 % p.a. after all fees and taxes.
Industry super funds are now at almost $ 1 Trillion in the September 1/4, 23 % higher over the year.


----------



## dyna (5 February 2022)

Oh boy, it had to happen. Even with an election looming, calls to limit large super balances to just $ 5 million came last week from the Australian Institute of Superannuation Trustees and this week it's the turn of the peak lobby group for SMSF's.
Treasury figures show about 11,000 Australians would be affected, were the government ( Labor, maybe ? ) to wind back generous tax concessions.
Labor financial services spokesman, Steven Jones is keeping quiet ( so far ) but last election, his party proposed to raise $ 30+ Billion over a decade, by limiting contributions into superannuation.
Sooo...the writing looks to be on the wall, folks.
Still, $ 5 Mill will be alright.
Albo ?... mate, can that be five mill each ?


----------



## mullokintyre (5 February 2022)

Like most politicians and public servants, there is no understanding how the rich work.
If they take away the generous super concessions, people will shift into other tax advantageous positions.
To get the 30+billion over a decade assumes that the wealthy will not change their behaviour, something that is fraught with danger.
Trouble is, they usually frame their budgets on the assumption that they will get the 30Bill and complain when the takings a re somewhat less.
Mick


----------



## divs4ever (5 February 2022)

dyna said:


> Oh boy, it had to happen. Even with an election looming, calls to limit large super balances to just $ 5 million came last week from the Australian Institute of Superannuation Trustees and this week it's the turn of the peak lobby group for SMSF's.
> Treasury figures show about 11,000 Australians would be affected, were the government ( Labor, maybe ? ) to wind back generous tax concessions.
> Labor financial services spokesman, Steven Jones is keeping quiet ( so far ) but last election, his party proposed to raise $ 30+ Billion over a decade, by limiting contributions into superannuation.
> Sooo...the writing looks to be on the wall, folks.
> ...



 $5 million  ??  not for long ... inflation is coming  ( and it isn't using a walking frame )


----------



## divs4ever (5 February 2022)

mullokintyre said:


> Like most politicians and public servants, there is no understanding how the rich work.
> If they take away the generous super concessions, people will shift into other tax advantageous positions.
> To get the 30+billion over a decade assumes that the wealthy will not change their behaviour, something that is fraught with danger.
> Trouble is, they usually frame their budgets on the assumption that they will get the 30Bill and complain when the takings a re somewhat less.
> Mick



 OR  the super-rich  will slow down the earnings/spending 

 i once worked  for a bloke that limited  his income to  $1 million  ( after tax ) it paid his bills , put his children through Uni. ( without burdening them with HECS  debt  , bought a new car as needed 

 yes he was unusual in 1990  , but his wasn't secretive about  the strategy  ( the Japanese were desperate to loan him money to expand the  business  at the time, so he could go international  ) , maybe that strategy was a little ahead of his time


----------



## qldfrog (5 February 2022)

dyna said:


> Oh boy, it had to happen. Even with an election looming, calls to limit large super balances to just $ 5 million came last week from the Australian Institute of Superannuation Trustees and this week it's the turn of the peak lobby group for SMSF's.
> Treasury figures show about 11,000 Australians would be affected, were the government ( Labor, maybe ? ) to wind back generous tax concessions.
> Labor financial services spokesman, Steven Jones is keeping quiet ( so far ) but last election, his party proposed to raise $ 30+ Billion over a decade, by limiting contributions into superannuation.
> Sooo...the writing looks to be on the wall, folks.
> ...



As it will be unindexed.. my bet,  with a 15% inflation for a couple of years, your 5 millions or 3 millions with labour might not that big....


----------



## divs4ever (5 February 2022)

remember the subtle push to get retirees to get a reverse mortgage on their home  , to fund the retirement spending  , that could be a very slippery slope  if interest rates  were to rise  ,  ( you can bet some taxes will increase as well  , they won't just rely on indexation and bracket creep )


----------



## Belli (10 February 2022)

Had a long chat with an FP.  Seems actuaries are having conniptions with the indexation matters involved with the balance cap.

It is due to there being no single cap which applies to all individuals. Every individual will have their own personal transfer balance cap, somewhere between $1.6 and $1.7m, depending on their circumstances.

Not a personal concern for me as it was set at $1.6m back in 2017 as I was already drawing a pension from the SMSF, although the $1.6m is now way higher as a result of investment returns.


----------



## sptrawler (20 February 2022)

Article on SMSF results.








						DIY super dilemma; why you need $200,000 to beat the professionals
					

Self-managed super funds are popular, with more than 1.2 million members holding about a quarter of all retirement savings. However, new research shows that those with less than $200,000 in retirement savings struggle to beat the returns of large super funds.




					www.smh.com.au
				



From the article:

Self-managed superannuation funds (SMSFs) with balances of less than $200,000 and those with big cash allocations tend to underperform other DIY funds and large industry and retail super funds.

However, after DIY funds with less than $200,000 and those with big allocations to cash were removed, the typical return of the remaining SMSFs outperformed a typical large fund’s return in two of the three financial years.

Financial authorities, including the Australian Securities and Investments Commission, recommend that SMSFs should have a balance of at least $500,000 to have competitive returns.

However, the research found that the way the ATO calculates SMSF returns produces lower estimates than when the researchers applied the same methodology they apply to large super funds to the returns of DIY funds.


----------



## sptrawler (21 February 2022)

I wouldn't mind a dollar for the times this has been suggested in this thread. It still is a good read and makes a lot of sense.









						Scrap superannuation for a universal basic pension
					

National Seniors Australia (NSA) has called on the federal government to implement a universal pension scheme that isn’t means tested: National Seniors Australia chief advocate Ian Henschke wants a universal pension scheme that isn’t means tested. “Review after review complains about older...




					www.macrobusiness.com.au
				



From the article:
Australia’s refusal to implement such a scheme hampers retiree confidence to go out and spend, instead of hoarding cash and assets, says Mr Henschke.

“That’s the beauty of a properly designed universal pension. It takes away the year-on-year risk, but ensures it is fiscally sustainable and fair,” he said.

A universal basic income could, over time, also be good for the government’s bottom line, as it would eliminate the need for massive administration costs.

“It would get rid of the pension assets and income tests, doing away with the need for unfair taper rates, deeming rates and work restrictions, and end the need to engage with Centrelink,” Mr Henschke said in May last year.

“If everyone of pension age received a pension, retirees could just add this to their other income and pay tax. Means testing is costly to administer and leads to perverse outcomes, which are more apparent in the current crisis.
Compulsory superannuation acts like a tax and forces people to forgo current consumption, which is especially pernicious for lower-income earners.

Moreover, because superannuation balances at retirement depend on how long one works and how much they earn, the system inevitably misses lower income earners and those with broken work patterns like mothers.

Compulsory superannuation has also created a massive trough, worth some $30 billion a year, that has attracted snouts across the financial services industry like the big four banks. Australian management fees are among the highest in the world with Australian households spending twice as much each year on superannuation fees as they do on electricity.

Superannuation concessions already cost the federal budget around $43 billion a year and are very poorly targeted to high income earners, who receive the overwhelming majority of taxpayer assistance through the retirement system:

By extension, the massive costs and inefficiency surrounding compulsory superannuation means there are less funds available in the federal budget to lift the Aged Pension – Australia’s genuine retirement pillar.

Given the obscene cost, inefficiency and poor targeting of superannuation concessions, optimal public policy dictates unwinding these concessions and using the money saved to boost the Aged Pension.

Abolishing the compulsory superannuation system in favour of a universal aged pension has merit and should be given detailed consideration.


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## Belli (22 February 2022)

sptrawler said:


> Australia’s refusal to implement such a scheme hampers retiree confidence to go out and spend, instead of hoarding cash and assets, says Mr Henschke.




While Mr Henschke may have a point, he does seem to overlook the wish to leave a nest egg for their beneficiaries, hence the tendency to frugality by many retirees. A trait which has been ingrained for many centuries.

I've said it a few times here and in discussion with a number on the financial industry, having an pension based on the value of an asset which fluctuates from minute-to-minute let alone year-to-year was one of the dumbest concepts for a retirement income I could ever think of.

Anyway, what does he think is on the back burner by many industry funds at least?  They have been slowly cooking that issue for a number of years.  A few actuaries have been having some sleepless nights especially working within the transfer balance caps.  

Now whether it could be implemented for an SMSF is an entirely different matter unless there is an approach of allowing via the Trust Deed the ability to purchase an annuity including where the provision of a reversionary pension benefit.  However, would any of it be attractive given the rubbish conversion rate for the purchase of currently available annuities from a number of providers.

Some SMSF Trust Deeds already provide for a Reversionay pension but as usual it's only payable to someone classed as your death benefit dependant under superannuation law.



sptrawler said:


> By extension, the massive costs and inefficiency surrounding compulsory superannuation means there are less funds available in the federal budget to lift the Aged Pension – Australia’s genuine retirement pillar.




That'll be a goer politically for a section of the population.  Just as much as Labor's previous election bid of doing away with the refund of excess franking credits.  So ya propose to effectively close down SMSFs.  See how well that would be as a conversation starter at the next SMSF dinner party gathering.

With removing all the concessions for superannuation can the good man explain what he expects what will happen with the present $3.4 trillion in superannuation?  Just pay it out to the members?  Industry funds will most certainly be eager for that to happen.  And if it did happen can the author of the article ensure this:

the wish to leave a nest egg for their beneficiaries, hence the tendency to frugality by many retirees. A trait which has been ingrained for many centuries;
will not apply?


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## Belli (22 February 2022)

Some may find this informative.  A long read but the tables display revenue forgone due to various tax concessions.  A screen shot of part of one table.



			https://treasury.gov.au/sites/default/files/2022-01/p2022-244177_0.pdf


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## divs4ever (22 February 2022)

sptrawler said:


> I wouldn't mind a dollar for the times this has been suggested in this thread. It still is a good read and makes a lot of sense.
> 
> 
> 
> ...



 we HAD a universal pension  but the government can't live within it's means  , don't be fooled by superannuation they are WORKER'S wages saved( by choice or regulation  or both )  the employer just gets entangled with extra regulation and paperwork ( so it costs them as well )

 you cannot have a universal pension administered by the government  they have proven they cannot resist meddling and dipping into the till  ( that does not dismiss the possibility of a universal pension administered by an ACTUALLY independent body )


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## Humid (22 February 2022)

Is there an overseas model that works better than ours?


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## divs4ever (22 February 2022)

sorry i don't know  but MAYBE some of the Scandinavian nations might be an early place to look


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## Humid (22 February 2022)

divs4ever said:


> sorry i don't know  but MAYBE some of the Scandinavian nations might be an early place to look



I know some happy Canadians!


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## sptrawler (22 February 2022)

Humid said:


> Is there an overseas model that works better than ours?



We used to have the same model as the U.K, Canada and NZ, set up by John Curtin and Ben Chifley after the war , a percentage of income tax was set aside for pensions, then Menzies incorporated it into consolidated revenue. Everyone received a pension and they could have private super if they wished, which was taxed.
Then we introduced means testing and the saving helped the Government bottom line, so the rot began.
A brief summary below.


1923Bruce Government established a Royal Commission to examine the possibility of having a comprehensive national insurance scheme for retirement, sickness or disability._Royal Commission on National Insurance_ (7 Sept 1923-5 Oct 1927).1928_National Insurance Bill_ introduced. It lapsed in 1929 when the Government was defeated.1938_National Health and Pensions Bill_ passed, but its introduction was delayed, then abandoned because of World War 2.1945Chifley Government introduced an additional levy on personal income tax which, along with a payroll tax from employers, was credited to the National Welfare Fund. There was, however, no direct link between contributions and benefits and the pension. The National Welfare Fund, whilst set up as a means of establishing a base from which a national superannuation fund could be operated, was in practice merely an accounting device until its abolition in 1985.1961Superannuation funds exempt from tax if they held required amounts of Commonwealth Bonds. Commonwealth control of superannuation funds by use of taxation power firmly established._Income Tax and Social Services Contribution Assessment Act 1961_1965High Court upholds Commonwealth s ability to control superannuation fund investment by use of taxation power._Fairfax v Commissioner of Taxation 114 CLR 1_By late 1960sMeans assessed on basis of income plus a proportion of countable assets except for the family home (which has always been assets-test-exempt.) About 70% of people qualifying on grounds of age received the pension.1972Only 32% of workers covered by superannuation.1973Whitlam Labor Government established the _National Superannuation_ _Committee of Inquiry_. Chairman Keith Hancock.1973Means test for pensioners 75 years of age and over abolished.1974Australian Bureau of Statistics conducted the first national survey of superannuation coverage. 32% of the workforce was covered by superannuation 36% male; 15% females.
24% of people in the private sector had super cover compared with 58% in the public sector.Year Book Australia 19741975Means test removed for persons aged 70 to 74 inclusive._Social Services Act 1975, no. 34_1975Pensions linked to 25% of average weekly earnings, to be indexed annually._Social Services Act (no 3) 1975, no. 110_1976Pensions became subject to automatic increases twice yearly.
Age pension assets test abolished._Social Services Amendment Act (No 3) 1976,no. 111_1976The Hancock Inquiry recommended a partially contributory, universal pension system with an earnings-related supplement. A minority recommendation suggested a non-contributory flat rate universal pension, a means tested supplement, and encouragement of voluntary savings through expanding occupational superannuation._National Superannuation Committee of Inquiry. Final Report. Parts 1 (1976) and 2 (1977)_20 June 1977Fraser government decides not to establish a contributory national superannuation scheme.Cabinet Decision 3435 of
20 July 1977 in response to Cabinet Submission No. 1394 of 19771978Pension increases to be adjusted only once a year (in November). Future increases in the _Age_ Pension for those aged 70 or over made subject to an income test._Social Services Amendment Act 1978, no. 128_1979Fraser Government rejected the recommendations of the Hancock Inquiry.
Pension increases subject to twice yearly increases, in May and November._Social Services Amendment Act 1979, no. 121_May 1983_Base_ pension for those aged 70 and over subject to an incomes test._Social Security and Repatriation Legislation Amendment Act 1983, no. 36_1983The _Statement of Accord_ (_Prices and Incomes_ _Accord_) between the ALP and the ACTU was endorsed in February, shortly before the federal election. Claims for wage increases were to be restricted to movements in the CPI.1983Hawke Labor Government expressed support for the principles of employee superannuation.
The May Economic Statement began the process of reform of the taxation of superannuation. For lump sums at age 55 or later, the first $50,000 would be taxed at 15%; the remainder at 30%. Lump sums taken below age 55 would be taxed at 30%. These thresholds indexed to AWOTE._Economy Ministerial statement ,_ _P._ _Keating,_ _19 May 1983.._1984CBUSS - Superannuation for the building industry created, from an idea shared by building union leaders and ACTU officials. Regarded as a world first. (funds owned and controlled by a board comprising equal numbers of employer and employee or union representatives.) A number of other similar funds established in the following years- These funds are called Industry Funds._ACTU website_1984Age pension assets test reintroduced. Family home excluded._Social Security and Repatriation (Budget Measures and Assets Test) Act 1984, no. 93_1985Renegotiation of the Accord identified superannuation as a key issue.1986Labor joined with the ACTU in seeking a universal 3% superannuation contribution by employers to be paid into an industry fund, in lieu of a wage rise._National Wage Case June 1986_1986Accord Mk II between the Government and the unions stipulated that compensation to employees should be 6% (to keep pace with inflation). This was to be 3% employer superannuation contribution, a 2% wage rise, and tax cuts.
Agreement endorsed by the Conciliation and Arbitration Commission February 1986.

21 December 1987The Government introduced the _Occupational Superannuation Standards Act 1987_ (OSSA).
Operating standards were prescribed for the vesting of benefits from employer and employee contribution; preservation of benefits until age 55; more member involvement in the control of superannuation funds; security of members benefits.[2]_Occupational Superannuation Standards Act 1987_May 1988Hawke Government statement _Reform of the Taxation of Superannuation_ contained measures to bring forward payment of superannuation taxation liabilities by introducing a tax on contributions and reducing tax on benefits. Reasonable Benefits Limits introduced.
Hawke and Keating actually removed the Chifley tax  from the statutes and then started the superannuation system we now have, which started by workers foregoing a pay rise in lie of a super contribution.
So a tax was levied on workers to pay for pensions, that tax was absorbed into consolidated revenue and a new tax called super started to pay for pensions. Personal tax rates in the 1980's were much higher than they currently are.
Wash, rinse repeat, nothing works better than that.


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## divs4ever (22 February 2022)

Humid said:


> I know some happy Canadians!



 and some less than happy former company share-holders  ( as Canadian Pension Funds  buy up assets )


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## sptrawler (22 February 2022)

As a bit of further info, tax rates back when super was introduced were very high, so take home money wasn't brilliant, a lot of workers spat the chewy because they needed the income, not money put away so that they could lose a pension their tax was paying for.
A lot saw it as the Government double dipping.




1985–86​Resident tax rates for 1985–86

Taxable incomeTax on this income$0 – $4,594Nil$4,595 – $12,49925 cents for each $1 over $4,595$12,500 – $19,499$1,976.26 plus 30 cents for each $1 over $12,500$19,500 – $27,999$4,076.25 plus 46 cents for each $1 over $19,500$28,000 – $34,999$7,986.25 plus 48 cents for each $1 over $28,000$35,000 and over$11,346.25 plus 60 cents for each $1 over $35,00


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## dyna (25 February 2022)

From today's AFR : Now RETAIL super fund managers have come out swinging to ban superannuation balances of more than  $ 5 Million. Mercer's report further proposes the 15 % tax rate to apply on pensions ( currently tax free ) up to the TBC ( Transfer Balance Cap ) of $1.7  Million and to force retirees to draw down the excess instead of being allowed to leave it in the accumulation account.


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## divs4ever (25 February 2022)

dyna said:


> From today's AFR : Now RETAIL super fund managers have come out swinging to ban superannuation balances of more than  $ 5 Million. Mercer's report further proposes the 15 % tax rate to apply on pensions ( currently tax free ) up to the TBC ( Transfer Balance Cap ) of $1.7  Million and to force retirees to draw down the excess instead of being allowed to leave it in the accumulation account.



LOL

 looks like they are desperate for 'churn fees '  , 

 however i am not sure that will instill faith in the retail customers either ( but the government will LOVE the 15% extra tax idea , i bet )


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## sptrawler (25 February 2022)

dyna said:


> From today's AFR : Now RETAIL super fund managers have come out swinging to ban superannuation balances of more than  $ 5 Million. Mercer's report further proposes the 15 % tax rate to apply on pensions ( currently tax free ) up to the TBC ( Transfer Balance Cap ) of $1.7  Million and to force retirees to draw down the excess instead of being allowed to leave it in the accumulation account.



More complexity, smoke and mirrors, so no one can follow their money, magic.

So people have their money put away for them at 15% tax, its earnings pay 15% tax and when you finally get old enough to get it, if your still alive, you pay 15% on withdrawing it.
Or if the money you put in was in after tax dollars, you pay 15% tax while it is in there and you pay 15% when you withdraw it, sounds like someone has been talking to silly Billie and barmy Bowen. 🤪
Why would people put money in super? Oh I forgot they don't have a choice.
IMO easier just to give everyone the pension and add the super then apply normal income tax rates to it.
It would stop people putting stupid amounts in and those with big super balances from high paying jobs, pay big taxes, simple.

So contribution tax 15%, accumulation 15%, when pension starts $960/fortnight pension, for argument sake $24k/ year + say the allocated pension is $50k= $74k, first $17k tax free and so on.
As the person gets older the allocated draw down is higher, so the income is higher, therefore  the tax is higher.


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## dyna (20 March 2022)

From this weekend's AFR.

Here's another lot gunning for a $ 5 Million limit on super accounts.
 The Association Of  Superannuation Funds Of Australia ( ASFA) has found :

 80,000 Aussies have more than $2 Million in their super accounts, including 370 under the age of thirty !
That's got the lefties at the Gratten Institute up on their high horse. Seems to be a bit of shrewd tax planning  from the oldies at work, there.

Of the 320,000 people with over a $ Million in super, 229,000 of those had about $ 1 million, 80,000 have $ 2 million and 1,100  have over $ 5 million.

Shadow Treasurer, Jim Charmers said last week, reforming superannuation tax was not a priority for Labor . ( Well, not just yet, eh Jimbo ? )


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## divs4ever (20 March 2022)

dyna said:


> From this weekend's AFR.
> 
> Here's another lot gunning for a $ 5 Million limit on super accounts.
> The Association Of  Superannuation Funds Of Australia ( ASFA) has found :
> ...



 not a priority  , just a perpetual fixation it seems  ( i suspect the first priority is to actually get elected )

 BTW $1 million doesn't go far these days ( and is liable to be much less brag-worthy in say 5 years time )


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## Warr87 (20 March 2022)

divs4ever said:


> not a priority  , just a perpetual fixation it seems  ( i suspect the first priority is to actually get elected )
> 
> BTW $1 million doesn't go far these days ( and is liable to be much less brag-worthy in say 5 years time )




Isn't the average house price $920k ? 1mil really doesn't go far, particularly if you intend on buying a place when you retire with your super lol.


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## Humid (6 April 2022)

The budget super giveaway that allows the already wealthy to amass even more tax-free
					

Australian retirees die with most of the super they had when they finished work. There’s a measure in the budget that threatens to entrench that.




					theconversation.com
				




here’s how it works: there was a 2020’s-market-crisis-erarelaxation of the rules which required retirees to withdraw from 5% to 14% from their super each year. They can put it in the bank — it’s just to make sure super isn’t used for tax-free savings (which are often inherited by the kids). But markets have recovered, and Martin suggests its extension is just another way the government quietly works to keep the wealthy, wealthy.


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## Junior (6 April 2022)

Humid said:


> The budget super giveaway that allows the already wealthy to amass even more tax-free
> 
> 
> Australian retirees die with most of the super they had when they finished work. There’s a measure in the budget that threatens to entrench that.
> ...




Clickbait, in my view.

It's the less wealthy retirees who tend to be really stressed out, about being forced to take a higher withdrawal than they need to, whilst markets are down or volatile.  Yes, theoretically they can just hoard the extra payment in cash, but in reality that doesn't always happen.  It's psychological.  That extra money is now 'gone' from their retirement savings and they'll see the balance of their super reduce accordingly.

Particularly when you consider, for the average retiree, it's within their super where they have money invested in markets.  Most retirees won't have any investments outside of super, and so when they get their pension payments, they are either spending it or holding it in cash, earning bugger all.

In terms of 'the wealthy' benefitting, it's very very small numbers.  Take an individual with the maximum you can hold in Account Based Pension; $1.7mill.  In that scenario they would be drawing down only 2.5% compared with the standard 5% in 2022/23.  That's allowing them to effectively retain an extra $42,500 in super.  

What is the tax saving on the earning of $42,500?  ....A few hundred dollars at most.

It also means that when drawdown rates revert to normal in the following year, they'll have to take a bigger payment due to having a higher balance.

I don't think the intention of this rule change is to benefit 'the wealthy'.  Most retirees will be happy with this policy as it means their super will last a little longer.


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## Belli (7 April 2022)

To my mind it's a distraction @Junior.  I cannot see given the current contribution limits many superannuation accounts in accumulation phase reaching the giddy heights of $5m or more.  Those which are will eventually have to pay out death benefits and so, over time, they will gradually diminish.  The very well off will invest elsewhere and employ advisers to make sure it is as tax-effective ("I don't want to pay tax!") as possible.

The other aspect not mentioned often is it is assumed all retirees want to splash their money around.  Maybe some do or maybe they give some to their children (who are going to get it anyway usually.)  Or maybe they consider they have enough cash-flow and as their needs are relatively simple have no need or wish to undertake international travel, $1,000 per night hotels, new cars or purchase white-goods and the latest and largest TV.  I am in that category by the way.

I find it offensive and insulting being told what I should do with my funds.  They are my assets and I'll determine how the income from those assets will be spent or not.


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## Dona Ferentes (7 April 2022)

_Death Benefits ...._ 
Now there's an oxymoron .

The other thing about large amounts in Super, and almost universally in SMSFs because it possible/ optimal to do so, is that the large balances, the gains, have been generated *inside* the fund. Often by directors and management, or entrepreneurs, loading up in a company's early days  when valuations are low (and risk is high) then enjoying the SP appreciation. Usually this compounding is happening in Accumulation phase, so there is a bit of tax applicable if corporate actions happen. 

There's a whole industry out there advising exactly this pathway.


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## divs4ever (7 April 2022)

Warr87 said:


> Isn't the average house price $920k ? 1mil really doesn't go far, particularly if you intend on buying a place when you retire with your super lol.



depending on where you buy  ( naturally ) $900,00 doesn't buy you much of a house 

 take where i grew up in Brisbane  , multiple properties  have been sold  in the last year ( in THAT street ) and $900,000 or less basically gets you a 'fixer-upper ' ( but more likely  it will be demolished and units/townhouses  replacing them )

 now sure  train/bus/shops are reasonably close , but if you need to DRIVE to work traffic is rather snarly ( and has been for 30 plus years )


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## Belli (7 April 2022)

Dona Ferentes said:


> _Death Benefits ...._
> Now there's an oxymoron .
> 
> The other thing about large amounts in Super, and almost universally in SMSFs because it possible/ optimal to do so, is that the large balances, the gains, have been generated *inside* the fund. Often by directors and management, or entrepreneurs, loading up in a company's early days  when valuations are low (and risk is high) then enjoying the SP appreciation. Usually this compounding is happening in Accumulation phase, so there is a bit of tax applicable if corporate actions happen.
> ...




While probably true, it isn't necessary to have the smarts (that's me) for that to occur to a some extent.  Compounding and reinvestment can have an impact.  In my case the balance cap is set at $1.6m yet it is now well above that and the mandated draw down of account-based pension is larger on a relative basis.


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## sptrawler (7 April 2022)

I have found, even though the drawdown is halved, our spending hasn't changed, so we still withdraw more than the minimum drawdown anyway. 
Like @Junior said it is just clickbait, to keep the hate for the boomers festering, so that when the floods etc abate, the media can get back to their staple diet of the boomers and the banks.


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## divs4ever (7 April 2022)

yep my hate for the media still festers  after  working on and off with them for 45 years 

 i think i have achieved balance ( they hate me as much as i despise them )

 what i am appalled at , is the hare-brained schemes several government approved entities  espouse to get the retirees to eat into the nest-egg  ( when the retiree doesn't need too )


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## sptrawler (16 May 2022)

Interesting and current opinion piece, I'm sure there would be just as many against the idea as for it, there probably is no right or wrong it will depend on the individuals circumstances.








						House now, super later: Life is too short to delay purchase
					

I’ve been on a decade-long journey that transformed me from a super fan to super’s biggest critic.




					www.theage.com.au
				



In 2010, financial analyst Chris Joye proposed that superannuation funds should consider investing in housing equity. I opposed Joye’s idea because I was a fan of the super system and thought it would undermine super and increase house prices.

But it got me thinking more deeply about super and started my decade-long intellectual and personal journey that transformed me from a super fan to super’s biggest critic.
In 2010, I was 28 years old and had two children aged under three. I was just embarking on the parenting journey.
What I came to realise was that raising a family was expensive. Paying rent, paying super and saving for a home deposit all at the same time seemed totally ridiculous.

I needed money then, not later.
Worse, I had just seen my measly super lose 20 per cent of its value in the global financial crisis years. When I needed it most, my money was tied up in risky financial assets instead of being in my bank account.
As my kids have grown, I can now see the other side of parenting. I can see that when they finish high school in a few years our expenses will plummet. Yet our household income will be at its highest point ever.
The super system attempts to solve a lifecycle income problem – in retirement we need to spend but don’t work, and not everyone has non-work income sources like financial assets. But we already solved this problem with a new non-work source of income, the age pension. In fact, for the bottom quarter of households, when they go on the age pension they get a pay rise!
The bigger income problem is that young families have their highest expenses in their lowest income years. We help solve this with parenting payments and child allowances. But compulsory super works against this, reducing incomes in those years while also reducing the gains to working.

In 2020, 4.5 million people took nearly $40 billion out of their super in the early release scheme. It was clear to these millions of people that having their own money today was better for them. And
I was one of them. That money helped me buy my own home and spend more on my family. If the opportunity came up again, I would repeat the exercise. As I suspect millions of others would.
My parents’ generation has had access to their super for a decade. I watched many of that generation take huge losses on their super right before retirement.
I’ve seen others take their super as a lump sum and lose it all in financial scams, including honey traps. I’ve seen many spend big to qualify for the age pension.

Having super seemed to offer no protection for them from reliance on the age pension. Indeed, no one who has studied the super system thinks it will change reliance on the age pension much at all.
I’ve also seen many use their super to repay their mortgage or help their kids buy homes, or buy another investment property.
When you take a closer look, you see that super is already used to buy homes in a variety of ways. I had always had concerns that using super for housing would push up prices. But I came to see the reality is this is already happening.
In 2020, I had a health scare with suspected bowel cancer. I was only 38, but it is genetic. My father had a similar scare in his early 50s. What’s that got to do with super? Dead people don’t need super. One in 11 men don’t make it to age 60, and one in seven don’t make 66.

A happy life is not one where you can’t enjoy your money while you are young. It is a life in which you create great memories and social connections in your youth that stick with you when you are old, one in which you raise great children.
Luckily, I had my bowel partially removed and I am fine. But now more than ever I see that the best years of my life are this one and the next. My kids are only young once and if I die sooner rather than later, I want to have used my money to enjoy our time together to create the best childhood memories for them.
My personal experience motivated my economic research, which resulted in a report in 2020 arguing that we should scrap super, pay it as wages, and let everyone take their money out of their fund gradually to spend as they please.
Everyone who has looked closely and objectively at the super system finds that it doesn’t make the age pension more sustainable. In fact, it makes the situation worse. The tax breaks to super are nearly $40 billion a year, and nearly $30 billion a year is paid in fees. The whole age pension system costs only $45 billion per year. Without super and its associated tax breaks, the federal government could afford higher pensions.

Super also amplifies every financial inequality that exists, whether that is a gender pay gap, or any pay gap between workers and cities and towns. The age pension remedies all these gaps.
Loading
Even better than the Morrison government’s proposal of super-for-housing is super-for-anything — unwinding the super system altogether.
That wouldn’t mean people couldn’t save. They could. Just as they did before super.
It would just improve the budget, improve choice, improve fairness and improve the lifecycle of Australian families who need their money when they are young, not when they are old.

The only mystery is why our apparently left political party seems so intent on a high-fee privatised retirement system rather than boosting the only retirement system that actually works — the age pension.


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## divs4ever (17 May 2022)

in my early  teens  a politician   ( and neighbour )  the ALP state member  ,imparted a seemingly timeless pearl of wisdom 

 'never get between a politician and a pot of money '

 now while Paul Keating's idea of compulsory super  made SOME sense  ( compulsory saving of wage rises  during heavy inflation ) it had dangers which we now see clearly 

 super funds using investment money to promote political agendas ( and in cases worming their way onto the board of directors )

 BTW it was at one stage that compulsory super was considered as a REPLACEMENT for the age pension ( except for politicians and high-ranking government officials ) but of course  politicians meddling in super regulations ( and the economy ) made sure that most super funds would NEVER fund much of a retirement to surviving seniors 

 the politicians ( and union officials ) spotted a pot of money 


sptrawler said:


> The only mystery is why our apparently left political party seems so intent on a high-fee privatised retirement system rather than boosting the only retirement system that actually works — the age pension.




 no mystery to me , i remember  who were slithering in the union senior ranks in early years  and now  see the same people  on boards of directors INCLUDING as  directors of investment fund companies  and these people were creating their own retirement nest-egg ( by grabbing seats in that highly privatized system )

 sadly i have had a long awareness of the Left  ceasing to be radical when  offered a piece of the cream pie

 now using saved money ( Super ) to invest in your housing needs  , has the potential to be absolutely nuts , consider now we are no longer in an era  of 'a job for life ' ( and maybe not even  ' a career for life ' )

 a house should be an anchoring point for your ( family ) life  , but there is a trend towards being economic nomads  ( which i embraced way back in the early '80s  , where 'home ' was anywhere with a hot shower , a change of clothes and food and coffee  to consume on the way to work  effectively i could have 'lived ' at the Roma Street transit centre  if i was working near the Brisbane CBD at the time )

 given the current trend of shorter working histories at each job , is buying a house  with the compulsory savings a good idea  , the only reason it would make sense currently  , is if the property was bought as a 'future rental property ' ( either as a 100% renter  , or some sort of 'share house arrangement ' )

 but here we are and the current government is DESPERATE to prop up the housing market


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## dyna (4 June 2022)

From today's Weekend AFR:
Borrowing by SMSF's to buy property , both for residential (15%) and for commercial ( 85% ) , is up by 22% last year. That's $ 66 Billion worth.

Super's smarties are getting set before Labor's sword of Damocles puts an end to borrowing for real estate within super . lt probably will not happen in this first 3 year parliamentary term . Albo and Jimbo may have to take it to the next election , I suppose.

The end of this fiscal year is coming up , folks, so if  your TSB ( Total Superannuation Balance) at 30 th June last year was below $ 500,000 , you can play catch-up with Concessional/ pre - tax , $ 27,500 p.a. contributions for the previous five years, if you've not used your full cap amounts over that time. If you miss the deadline/go over that limit, that opportunity is gone for good.
If your TBC ( Total Balance Cap ) at 30 th June last year was already over the new $1.7 Mill limit , then you are not allowed to stuff any more Non Concessional / after- tax, $ 110,000 p.a. contribs into it. Again, the trick is : ( like every thing else to do with this super caper) ,  get it done before it's too late.


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## sptrawler (4 June 2022)

divs4ever said:


> in my early  teens  a politician   ( and neighbour )  the ALP state member  ,imparted a seemingly timeless pearl of wisdom
> 
> 'never get between a politician and a pot of money '
> 
> ...



I think along the same lines, the problem with putting all you eggs in super, just means that your future is up to the Governments whim on how you can spend it.


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## divs4ever (4 June 2022)

sptrawler said:


> I think along the same lines, the problem with putting all you eggs in super, just means that your future is up to the Governments whim on how you can spend it.



 which is why i liquidated  my super in 2010  , now sure all my employment  between 2010 and 2016 was  temporary , casual , etc.  , but in hindsight i don't regret the choice .

 good luck trying to work out what is a tangible asset ( currently ) and what is worth on the open market


----------



## Ferret (5 June 2022)

Like it or loathe it, it's a legal tax dodge.  That's why I've tried to get as much into super as I can.

Labor lost the 2019 election in part because they tried to take away franking credits.  That change wouldn't have affected that may in the community.  Good luck to any government that tries to pinch your super savings!


----------



## divs4ever (5 June 2022)

Ferret said:


> Like it or loathe it, it's a legal tax dodge.  That's why I've tried to get as much into super as I can.
> 
> Labor lost the 2019 election in part because they tried to take away franking credits.  That change wouldn't have affected that may in the community.  Good luck to any government that tries to pinch your super savings!



 the truth is they can't afford the pensions ( even their own which are vouch-safed by the Future Fund )

 BTW it isn't a tax dodge ( for the public ) it is a back-door cash-injection scam  to prop up the economy ( and the big corporations .. like the banks )

 that super will disappear when the markets crash  because the fund-managers and government will continue looting 

 if it was a genuine legal tax dodge it wouldn't need to be compulsory and heavily regulated , the workers would be RUSHING to put in all the spare cash they have


----------



## mullokintyre (5 June 2022)

divs4ever said:


> the truth is they can't afford the pensions ( even their own which are vouch-safed by the Future Fund )
> 
> BTW it isn't a tax dodge ( for the public ) it is a back-door cash-injection scam  to prop up the economy ( and the big corporations .. like the banks )
> 
> ...



Its only a tax dodge for the top 20% of the  workers.
The rest are more concerned about living from day to day to worry about their tax position.
Mick


----------



## sptrawler (5 June 2022)

Ferret said:


> Labor lost the 2019 election in part because they tried to take away franking credits.  That change wouldn't have affected that may in the community.  Good luck to any government that tries to pinch your super savings!



They were only going to take the franking credits of the self managed super funds, not the mainstream super funds.
They want all the super money under their control, they dont want you looking after your money, because they dont see it as your money, they see it as their money that you are holding for them.


----------



## divs4ever (5 June 2022)

sptrawler said:


> They were only going to take the franking credits of the self managed super funds, not the mainstream super funds.
> They want all the super money under their control, they dont want you looking after your money, because they dont see it as your money, they see it as their money that you are holding for them.



 BRUTAL , but sadly true  ,
 i can't vouch that it was Keating's initial aim for that to happen , but once the government gets a couple of chances to meddle  , the result becomes highly likely  

 look at how often Costello has had to smack hands away from the Future Fund ( with the pollies  dreaming they can plunder general revenue later , after their pension fund has been wasted on crazy schemes )


----------



## Ferret (5 June 2022)

divs4ever said:


> BTW it isn't a tax dodge ( for the public )



If you hold a portfolio of shares and cash outside of super, you will pay tax on its earnings at your marginal tax rate + the medicare levy.  This could be up to 47%. 

If you hold the exact same shares and cash in super, you will pay zero tax on earnings for a pension account or 15% tax for an accumulation account.

That is a tax dodge.


divs4ever said:


> that super will disappear when the markets crash because the fund-managers and government will continue looting



Many people don't understand that super is a vehicle for holding investments with tax concessions.  It is not an asset class.  

When markets crash a portfolio of shares and cash held outside super will suffer the same fate as those same assets held inside super.


divs4ever said:


> if it was a genuine legal tax dodge it wouldn't need to be compulsory and heavily regulated , the workers would be RUSHING to put in all the spare cash they have



This isn't right.  Workers aren't rushing to out their spare cash into super because they are generally not able to access it until they are 60 to 65 years old.  It's a legitimate reason not to put spare cash into super in your younger years when you are saving for a house, putting money aside for kid's education etc.   

The tax dodge is still there, but having the cash accessible may be more important.


----------



## sptrawler (5 June 2022)

divs4ever said:


> BRUTAL , but sadly true  ,
> i can't vouch that it was Keating's initial aim for that to happen , but once the government gets a couple of chances to meddle  , the result becomes highly likely
> 
> look at how often Costello has had to smack hands away from the Future Fund ( with the pollies  dreaming they can plunder general revenue later , after their pension fund has been wasted on crazy schemes )



Absolutely, if you go back to the beginning of this thread, I said the only reason I started a SMSF was because I can accept losing the money myself, I couldn't live with giving my money to someone else and then lose it.
The last 30 years is littered with retirees who have lost everything, by trusting someone else to invest their money, it isn't my bag.
I would simply pull the money out of super, but that is just my opinion, I make the decisions I live with the outcomes.
Many don't like making decisions or the responsibility and that is fine, mainstream super is their for them.
IMO it's a bit like religion, if someone finds comfort and security in it, that's fine and it should be respected, it isn't my bag but so what? Who am I but just another person battling through life.


----------



## sptrawler (5 June 2022)

Ferret said:


> If you hold a portfolio of shares and cash outside of super, you will pay tax on its earnings at *your marginal tax rate + the medicare levy*.  *This could be up to 47%.*
> 
> If you hold the exact same shares and cash in super, you will pay zero tax on earnings for a pension account or 15% tax for an accumulation account.
> 
> That is a tax dodge.



That is comparing someone working and contributing to super, with someone who has retired and is no longer contributing, but is receiving the benefit for not being able to access their money for up to 40 years.
That's fine as long as when you retire you don't start crying. 🤣 



Ferret said:


> Many people don't understand that super is a vehicle for holding investments with tax concessions.  It is not an asset class.



Many people don't understand, that super is wages they are not getting.


Ferret said:


> When markets crash a portfolio of shares and cash held outside super will suffer the same fate as those same assets held inside super.



Absolutely, but the portfolio outside of super is usually in your control, the portfolio in super suffers the fate of rebalancing and smoothing.


Ferret said:


> This isn't right.  Workers aren't rushing to out their spare cash into super because they are generally not able to access it until they are 60 to 65 years old.  It's a legitimate reason not to put spare cash into super in your younger years when you are saving for a house, putting money aside for kid's education etc.
> 
> The tax dodge is still there, but having the cash accessible may be more important.



Good point IMO.


----------



## Ferret (5 June 2022)

sptrawler said:


> They were only going to take the franking credits of the self managed super funds, not the mainstream super funds.



That's not quite right.  They were going to stop the cash refunding of franking credits, whether inside or outside super.

Water under the bridge now, but larger funds probably would have continued to be able to pass excess franking credits on to individual account holders because they would still have had tax to pay on the sum of all their investments.

It is possible that a self managed fund with more than one member could have continued paying cash for franking credits to a member for the same reason.


----------



## sptrawler (5 June 2022)

Ferret said:


> That's not quite right.  They were going to stop the cash refunding of franking credits, whether inside or outside super.



That is right, because this is the superannuation thread, not the Labor Party thread, or the franking credit thread, the issue of people earning under the tax threshold or being in a tax free vehicle are two separate issues.
They were going to take the franking credits off SMSF's and not off mainstream or to be more accurate to intent IMO, union industry funds.
The rest was a smoke screen to cover the the scam.


Ferret said:


> Water under the bridge now, but larger funds probably would have continued to be able to pass excess franking credits on to individual account holders because they would still have had tax to pay on the sum of all their investments.
> 
> It is possible that a self managed fund with more than one member could have continued paying cash for franking credits to a member for the same reason.



That is correct IMO.


----------



## Ferret (5 June 2022)

sptrawler said:


> That is comparing someone working and contributing to super, with someone who has retired and is no longer contributing, but is receiving the benefit for not being able to access their money for up to 40 years.



Not following you here SP.  The tax dodge is there for those who are retired and those who are still working.


sptrawler said:


> Many people don't understand, that super is wages they are not getting.



That's true.


sptrawler said:


> Absolutely, but the portfolio outside of super is usually in your control, the portfolio in super suffers the fate of rebalancing and smoothing.



Let's not confuse "super" the investment vehicle with industry super funds or retail super funds.  

You don't have control of the rebalancing and smoothing of super investments in an industry or retail fund, but you do over super investments in an SMSF.


----------



## sptrawler (5 June 2022)

Ferret said:


> Not following you here SP.  The tax dodge is there for those who are retired and those who are still working.



Re read what you said, I commented that it wasn't a tax dodge, you were comparing someone still working with someone in the pension phase, it isn't a tax dodge it is the laws as they stand.
You give some of your pay to support the fiscal system and you get rewarded if you live long enough to collect, that is fair IMO.
Your quote:
If you hold a portfolio of shares and cash outside of super,* you will pay tax on its earnings at your marginal tax rate + the medicare levy. This could be up to 47%.*

If you hold the exact same shares and cash in super, *you will pay zero tax on earnings for a pension account* or 15% tax for an accumulation account.

That is a tax dodge.


Ferret said:


> That's true.
> 
> Let's not confuse "super" the investment vehicle with industry super funds or retail super funds.



I wasn't, I was comparing money outside of super, with money inside super, I don't know what you are talking about.


Ferret said:


> You don't have control of the rebalancing and smoothing of super investments in an industry or retail fund, but you do over super investments in an SMSF.



Which is exactly what I said.


----------



## Belli (6 June 2022)

For those who bailed out of superannuation "because I know how it works, ya know" have you bettered these numbers on a total return basis or don't you even know that?


----------



## Gunnerguy (6 June 2022)

Yep I have since 1993, and it’s updated more than weekly. 
Gunnerguy


----------



## Belli (6 June 2022)

Gunnerguy said:


> Yep I have since 1993, and it’s updated more than weekly.
> Gunnerguy




That's awesome.


----------



## divs4ever (6 June 2022)

Belli said:


> For those who bailed out of superannuation "because I know how it works, ya know" have you bettered these numbers on a total return basis or don't you even know that?
> 
> View attachment 142595



well  when i was in a super fund  ( an employer-managed super fund )   it was getting between minus 2% to positive 2% per year BEFORE fees charges and insurance  , when i left that job it defaulted to AMP who managed to only ever send me on update  which  inspired me to liquidate it and buy AMP shares ( via Comsec ) with the proceeds ( which i DRPed ) so roughly 8 years  later   i sensed AMP was losing it's way  shortly before the Hayne Royal Commission 

 but maybe i am biased because at one stage my employer's super fund had a very large holding in the company's own shares ( and the company  wasn't  scoring a lot at that time ) 

 when they finally reduced the holding to 6%, APRA sent them a memo recommending a 5% holding as more appropriate  ( i noticed not a peep about the previously large holding  which attracted the fees and charges  just the same as a 5% holding )

 BTW the company never quite made in clear if the company shares were voting or non-voting ones 

 so maybe other folks have had better experiences with their super  , but i arrogantly felt i could do better myself ... and after a buddy's experience on claiming the insurance ( from AMP ) i am now much happier about the choice to abandon them


----------



## dyna (12 June 2022)

This weekend's AFR hints that Labor could be limited this term , to just raising tax revenue  from the afore-mentioned multi- nationals.
However, Treasury 's getting the wind up already, about the $ 80 Billion budget deficit and  the $ 1+ Trillion debt. They say it should be fixed by looking into the local players, hard at it, with " tax planning". And not just Superannuation, either. Although that's draining Treasury's coffers to the tune of $ 45 Billion p.a. ( Concessional earnings $ 22.6 Billion + Contributions $ 20.5 Billion and Capital Gains of $ 2.6 Billion ) .
What else in on the fiscal fiend's hit list ?
                                                                     Housing. ( Not the sacred P.P.O.R ?......Yep. )
                                                                     Trusts
                                                                      Stocks ( That' us I suppose )
                                                                      Private Health Insurance ( That'll be health rebates )
Anything left out of that lot? We'll know soon enough by the next election, I guess.


----------



## sptrawler (12 June 2022)

dyna said:


> This weekend's AFR hints that Labor could be limited this term , to just raising tax revenue  from the afore-mentioned multi- nationals.
> However, Treasury 's getting the wind up already, about the $ 80 Billion budget deficit and  the $ 1+ Trillion debt. They say it should be fixed by looking into the local players, hard at it, with " tax planning". And not just Superannuation, either. Although that's draining Treasury's coffers to the tune of $ 45 Billion p.a. ( Concessional earnings $ 22.6 Billion + Contributions $ 20.5 Billion and Capital Gains of $ 2.6 Billion ) .
> What else in on the fiscal fiend's hit list ?
> Housing. ( Not the sacred P.P.O.R ?......Yep. )
> ...



As long as any changes are done across the board in a 'fair' and open way, it shouldn't be a problem, the debt has to be fixed one way or another.


----------



## divs4ever (12 June 2022)

sptrawler said:


> As long as any changes are done across the board in a 'fair' and open way, it shouldn't be a problem, the debt has to be fixed one way or another.



 well we could slash the defense bill and stop buying war-toys we hardly ever use  , and cut the rent-a-thug  operations overseas 

 but 'fair and open' from a politician  ??  you must be dreaming   ( well maybe a rare one or two , but not enough to bring in a real audit team )


----------



## dyna (14 June 2022)

AustralianSuper's $260 Billion Balanced Fund is likely  to post its first loss in 13 years. The year to date ( 9 th June ) return is down to just 0.83 % .
C.I.O. Mark Delaney predicts the 13 year bull market to end , but the ex- Treasury official does not see the R B A  raising rates to 4 % .


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## Garpal Gumnut (14 June 2022)

dyna said:


> AustralianSuper's $260 Billion Balanced Fund is likely  to post its first loss in 13 years. The year to date ( 9 th June ) return is down to just 0.83 % .
> C.I.O. Mark Delaney predicts the 13 year bull market to end , but the ex- Treasury official does not see the R B A  raising rates to 4 % .



With Delaney's track record my prediction of rates at 10-12% would now seem more likely. 

A bull market is now guaranteed. 

Does he belong to one of the outfits with that annoying advertisement on the televisions about escalators?

gg


----------



## Dona Ferentes (30 June 2022)

Noel Whittiker writes well about the subject









						Superannuation: a 30+ year journey but now stop fiddling
					

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.




					www.firstlinks.com.au
				




and of course there is the Hon PJK having the usual slash









						Paul Keating's long-term plans for super and imputation
					

Paul Keating not only designed compulsory superannuation but in the 30 years since its introduction, he has maintained the rage. Here are highlights of three articles on SG's origins and two more recent interviews.




					www.firstlinks.com.au


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## redsmartie (26 July 2022)

Let's hope the government doesn't get funny ideas about changes. Won't affect me however, in the last 2 years I've moved my benefit into a rollover after taking a below low cap threshold where I will manage my own for awhile. Now 59 years of age, looking at the job market, it's never been better.


----------



## sptrawler (27 July 2022)

It sounds as though the rules governing super funds are to be checked out, I wonder if changes will help the members?

https://www.abc.net.au/news/2022-07-27/labor-winding-back-superannuation-reforms/101271562


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## divs4ever (27 July 2022)

fiddle , fiddle , fiddle 

 sadly  governments  just can't help themselves


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## mullokintyre (3 August 2022)

sptrawler said:


> It sounds as though the rules governing super funds are to be checked out, I wonder if changes will help the members?
> 
> https://www.abc.net.au/news/2022-07-27/labor-winding-back-superannuation-reforms/101271562



Sometimes ideology just takes precedence over the common good.  
Uber the orignal legislation , Super funds were required to disclose  itemised details of political donations made by funds; itemised details of payments that funds frequently pay to a web of associated bodies; and itemised details of marketing and sponsorship expenses that funds, again frequently, outlay to various bodies using members’ money.
Is hard to see what is wrong with this idea, except for the fact that it was introduced by the coalition.
The industry funds in particular campaigned vehemently against this legislation (using members money of course), so obviously  thy were not all that keen on transparency, full disclosure etc etc that people rave on about so much these days.
By various means, money from many of the funds inds its way back into the Labor funds machine.
How is that not something that people jare not jumping up in arms over?
Wheres ASIC, APRA,  IBAC, ICAC or any of the other Alphabet mixes?
All MIA.
Mick


----------



## sptrawler (3 August 2022)

mullokintyre said:


> Sometimes ideology just takes precedence over the common good.
> Uber the orignal legislation , Super funds were required to disclose  itemised details of political donations made by funds; itemised details of payments that funds frequently pay to a web of associated bodies; and itemised details of marketing and sponsorship expenses that funds, again frequently, outlay to various bodies using members’ money.
> Is hard to see what is wrong with this idea, except for the fact that it was introduced by the coalition.
> The industry funds in particular campaigned vehemently against this legislation (using members money of course), so obviously  thy were not all that keen on transparency, full disclosure etc etc that people rave on about so much these days.
> ...



Also I thought part of the legislation was to stop Governments through linked super funds, using members money, to finance Government/private infrastructure projects that would give very little if any financial gain to the members. It should be remembered that the industry funds are heavily loaded with ex politicians.
I find it interesting there isn't a lot of questions being asked, especially as this is the very early stages of this term of Government and there seems to be far more pressing issues, obviously not for the industry funds.
I'm surprised the members on here aren't going off about it, but Australia is known for its apathy, unless the media is leading the charge. Like I said before the election, people need a change of Government, to get some things done, that the coalition can't.

From the article I posted:
The Coalition strengthened the requirement a year ago as part of a suite of reforms called "Your Future, Your Super", changing it from a duty to act in the "best interests" of members to the best "financial" interests of members.

The difference between the two is that whereas spending members' funds on things such as corporate hospitality or wellbeing services or news websites might arguably be in the best interests of members, it need not be in the best financial interests of members.

And that's what superannuation funds are meant to be for — to grow rather than spend the trillions entrusted with them for workers' retirements.

To make sure the funds do it, the Coalition reversed the onus of proof. If questioned, fund directors needed to be able to demonstrate that their spending was in the best financial interests of their members, or at least in what they thought at the time would be their members' best financial interests.
'Best financial interests' up for review​That might be the "regulatory complexity" the assistant treasurer is referring to — a requirement that directors use their members' funds to grow their members' funds, and be able to demonstrate that's what they were attempting if asked.

The Coalition's regulations require funds to itemise their spending on political donations and payments to related parties and industrial bodies, as well as their spending on marketing, in a statement to members before each annual meeting.

Transparency up for review​Jones has drafted regulations that remove the requirement for itemisation while leaving in place the requirement for funds to report the totals to members.

It won't save the funds work (they still have to itemise each payment in order to prepare the totals), but it will save them embarrassment.

And he is tampering with perhaps the most important super reform of them all.

Last year, for the first time, each of the 80 MySuper funds (the funds into which new employees can be defaulted) was graded on its performance.

Performance test up for review​Thirteen failed. They weren't being graded on absolute returns. That would have been unfair. They were graded on returns over the past seven years given their stated investment strategy.

If their strategy had been to, say, invest all of their members' funds in shares, and shares did badly, that would be fine so long as the fund's shares didn't do significantly worse than the share market as a whole over seven years — which is a way of saying it is a hard test to fail.

Under the Your Future, Your Super rules the 13 funds that failed were required to write to their members telling them they had performed badly and suggesting they switch to a better-performing product.

The second test will be this year. Any funds that fail two years in a row get banned from accepting new members.

Not that it's likely to come to that. Eleven of the 13 have merged or are in the process of merging with better funds, which is how the system is supposed to work. It is weeding out dud funds, and advancing members' interests.


----------



## mullokintyre (3 August 2022)

sptrawler said:


> Also I thought part of the legislation was to stop Governments through linked super funds, using members money, to finance Government/private infrastructure projects that would give very little if any financial gain to the members. It should be remembered that the industry funds are heavily loaded with ex politicians.
> I find it interesting there isn't a lot of questions being asked, especially as this is the very early stages of this term of Government and there seems to be far more pressing issues, obviously not for the industry funds.
> I'm surprised the members on here aren't going off about it, but Australia is known for its apathy, unless the media is leading the charge. Like I said before the election, people need a change of Government, to get some things done, that the coalition can't.
> 
> ...



Why the haste?
I do not recall it being a major problem during the election runup.
It should not be a priority of the government to save the super funds from embarrasment.
Unless of course it might also save the government or some of its closer minions from embarrassment.
Mick


----------



## sptrawler (3 August 2022)

mullokintyre said:


> Why the haste?
> I do not recall it being a major problem during the election runup.
> It should not be a priority of the government to save the super funds from embarrasment.
> Unless of course it might also save the government or some of its closer minions from embarrassment.
> Mick



Yes, I'm just surprised how few people are concerned, the rules were put in place to ensure the super funds were doing there best for their members.
Funny how no one is worried that the changes may cost them a lot of money over their lifetime, maybe all the media have their own SMSF's and aren't worried, they should be that will be the next cab off the rank IMO.

Everyone worries about where Albo or Morrison are flying to, but no one gives a rats where there super money is flying off to.
Keep the plebs wearing their mushroom hats and feeding them nonsense, while their house gets robbed.🤣


----------



## divs4ever (3 August 2022)

mullokintyre said:


> Sometimes ideology just takes precedence over the common good.
> Uber the orignal legislation , Super funds were required to disclose  itemised details of political donations made by funds; itemised details of payments that funds frequently pay to a web of associated bodies; and itemised details of marketing and sponsorship expenses that funds, again frequently, outlay to various bodies using members’ money.
> Is hard to see what is wrong with this idea, except for the fact that it was introduced by the coalition.
> The industry funds in particular campaigned vehemently against this legislation (using members money of course), so obviously  thy were not all that keen on transparency, full disclosure etc etc that people rave on about so much these days.
> ...



 ... some of those super funds  are union-run funds  , and those union-run funds often put directors on company boards 

 since many of those four-letter agencies are full of unionists ( as is the ABC ) ( and the unions fund the current government's election campaigns ) how could there possibly be a conflict of agendas 

 the agenda is claw as much cash out of the poor bloody worker  as you can ( the more different ways the better )


----------



## mullokintyre (3 August 2022)

Just to keep the ledger square, the  new government looks like it is going to fix a problem that has existed for many years, but probably because of their close ties to the big business cocktail set,  never had the balls to fix.
From The evil Murdoch press


> Many of Australia’s largest enterprises are set to be brought into the 21st century as the new ALP government vows to finally end the barbaric “unfair contracts” that have dominated dealings between large and small enterprises for two centuries. I have battled to end these contracts for more than 10 years.
> The Liberal party in government knew these contracts were wrong but could not separate itself from the cocktail set and refused to honour its undertakings to ban the contracts.
> 
> New opposition leader Peter Dutton has to hope that the ALP does not use the banning of “unfair contracts” as a base to establish the ALP as the party of family business. If it does then Dutton is unlikely to ever be Prime Minister.
> ...



However, in reference to the previpous posts, the article goes on to say


> In office, the Liberals major small business achievement was to successfully speed payment to small enterprises. Part of that faster payment thrust was an arm of the Australian Building and Construction Commission which transformed payment speed on large building contracts. It is now in danger of being scrapped when the ABCC is dismantled.



It remains to be seen as to whether the abolition of the ABCC will indeed kill of those  faster payments processes.
It could well be included in the legislation re the unfair contracts that would also account for extended payment conditions.
Mick


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## divs4ever (3 August 2022)

mullokintyre said:


> From The evil Murdoch press



 as a former employee of NWS  and therefore a member of News-Super  it might take me months to undouble myself from laughter remembering the various super sagas  , therein  .. and that was during both LNP and ALP regimes and despite some workplaces being a 'closed shop '  ( while the union willing agreed  to a 'enterprise agreement ' which they chose to not give a copy of .. to inquiring union members  ... including the pay-master !! )


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## Belli (17 August 2022)

Got the SMSF return back from teh accountants today.  Much to my surprise it was down only c 4.5% compared with the previous year. Don't know how that happened but I'll take it - not that I have any ability to change those numbers.  The pension component is still well above my Balance Cap which is set at $1.6m.

Heard an odd one from a friend.  He wasn't complaining just pointing something out which others in his sutuation may not be alert to.  He left the good ol' public service a few years before I bailed out.  Is in the CSS and receives a substantial life-time DB pension.   At the time the Balance Caps were set his pension was greater than $100k pa.  Before the 2016 Budget he would at a 10% rebate of the entire amount e.g. $103k would be a $10,300 non-refundable tax offset.  However after the Budget the amount was set at $10k and it isn't indexed which means the greater the pension, the greater amount which is taxed at marginal rates.

Took me a bit to understand what he was getting at but it went like this in a very simple form.

Pre-Balance Cap.  Income $103,000 taxed at marginal rates a subtract $10,300
Post-Balance Cap: Income now $120,000 taxed at marginal rates and subtract $10,000 rather than $12,000 as per Pre-Balance Cap.

He wasn't whinging about it just mulling over how many of his peers are in a similar situation but don't realise it.  The Balance Cap process also meant his SMSF wholly reverted to accumulation phase.  He couldn't give a toss reasoning if the Government decided to turn the SMSF into a wealth creation exercise, so be it.  Means a greater amount his kids will get.


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## sptrawler (22 August 2022)

Belli said:


> Got the SMSF return back from teh accountants today.  Much to my surprise it was down only c 4.5% compared with the previous year.



I'm up 1.82%, but I have taken out the pension payment, so pretty happy.

Just read this on the internet news, I'm in the SMSF same as yourself, so doesn't affect us but might be of interest to some.

Industry super wants clearer rules to unleash investment​The sector is pressuring the Albanese government to make changes, and in a new paper lays out the case for more unlisted infrastructure investments.


----------



## sptrawler (27 August 2022)

People are starting to cotton on.








						The great superannuation lie
					

Here’s a look at my super balance from a month back. In the past couple of years, next to nothing but fees and losses. I could have used the extra money in the two years, with a young family and a mortgage. I am in my peak spending years, but not yet in my peak




					www.macrobusiness.com.au
				




Why would she want to be poorer now so she can be richer later? Even for households like Jessica’s and mine, who have good working life incomes, super makes little sense in terms of smoothing your lifecycle spending power.


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## Belli (27 August 2022)

sptrawler said:


> Why would she want to be poorer now so she can be richer later? Even for households like Jessica’s and mine, who have good working life incomes, super makes little sense in terms of smoothing your lifecycle spending power.




And view the article in the light of median incomes as per the chart below and realise the $65.5k (tax free) from the ASFA actually equates to $84k before tax and looking at the data provided by the ABS the XLSX for Table 4 shows the median income for persons aged 55-64 is $62k.  I've always viewed the ASFA suggested retirement income level as crap as it is based on a best-case scenario and few would even have that net amount pa in their working lives anyway.









						Personal Income in Australia, 2015-16 to 2019-20
					

Regional data on the number of income earners, amounts received, and the distribution of income for the 2015-16 to 2019-20 financial years




					www.abs.gov.au


----------



## Belli (28 August 2022)

Belli said:


> median income for persons aged 55-64 is $62k




Did some basic crunching based on this where super is involved and when it isn't (Medicare levy included in tax)

Income: $62,000
Super: $6,510
Tax: $11,787
Net: $50,213

Super included in Income.

Income: $68,510
Tax: $14,102
Net: $54.408

Differences:

Increase in tax: $2,315
Increase in net: $4,195


----------



## sptrawler (28 August 2022)

Belli said:


> Did some basic crunching based on this where super is involved and when it isn't (Medicare levy included in tax)
> 
> Income: $62,000
> Super: $6,510
> ...



I was wondering, did you take the 15% contribution tax off the money going into super?


----------



## Belli (28 August 2022)

sptrawler said:


> I was wondering, did you take the 15% contribution tax off the money going into super?




No.

I was working only on the basis of net cash in hand which is how many who would prefer not to contribute to super would look at it.

There is a potential danger with median incomes as it covers a range of individual incomes; some high and some low.  Very high incomes in a particular bracket can distort it.  Simple example.  Two individuals.  One on $60k and the other on $120k and you get $90k and that describes neither income earner.  Plus, depending on their specific lifestyle, the higher earner has a greater opportunity with their savings rate which has the potential for them to have a better outcome no matter which investment they use.  Ignoring tax aspects, consider the result if the person on $120k can live off $80k.  Maybe the person on $60k can live off $20k but I suspect not.


----------



## sptrawler (28 August 2022)

So forgetting medicare

Super included in income
Income $62,000
tax on $62,000 = $5092 + .325 for each $1 above $45k
Tax $10,617
*Net $51,383*.

Super not included in income.

Income $62,000
Super $6,510 - 15% contributions tax = $976.50 Net $5,533.50
Income less super contribution = $55,490
Tax on $55,490 = $8501.25
Net  $46,988.75 + net super $5,533.50 =* $52,522.25*

Back of the napkin, the person is about $1,200 a year better off for locking the $6,500 up until they are at least 60 years old.
What if that person could choose between super or to salary sacrifice that $6,500, into a Govt approved and co owned PPR? Would they have a better retirement by owning a house?

A close friend recently retired at 67, he worked from 15 years old mainly as a plant operator for local councils, at retirement he was on around $80k. Super at retirement approx $220k.
Would he be better off owning his house, or renting at $400/wk, hard call really IMO, everyone to their own.
He received an inheritance about 5 years ago and bought a house with it, so he is living the dream, full pension, super top up and a house.
Otherwise his super would have only pre paid his rent in retirement, just my thoughts.


----------



## Belli (28 August 2022)

sptrawler said:


> Would they have a better retirement by owning a house?




My view is Yes.  A lower end, two-bedroom apartment in Wright (Canberra) would rent around $550 per week at present.  So if a retiree is happy and can afford close to $30k pa in rent at today's prices, good on them.    Gees, public housing is probably rented to tenants for more than $6.5k pa and $6.5k for 30 years is less than $200k anyway.  Nothing more than a good deposit on a $600k property - if you can find one in a major capital city which I've been told is pushing it.  And moving to regional?  Good luck getting medical care.

And in regard to super, we should also keep in mind a number who have super are also receiving a part-pension so there is that to consider.

But if a retiree does have a home and is receiving the age pension, which quite a number are, be very careful of doing the grey nomad thing and renting the house to supplement the Winnebago's running costs.  Many will have, or already have gotten, the shock of their lives when they are told their "home" is subject to CGT.


----------



## Belli (28 August 2022)

Belli said:


> median incomes as per the chart below




Ha ha.  So glad journalists have been reading this forum to get an idea for their next article!  Nah, merely serendipity I think.









						What's the typical income in Australia? This list shows the incomes of hundreds of occupations
					

If you want to compare your income to your neighbour's, the average taxable income is not the whole story, writes Gareth Hutchens.




					www.abc.net.au


----------



## sptrawler (28 August 2022)

Belli said:


> And in regard to super, we should also keep in mind a number who have super are also receiving a part-pension so there is that to consider.



To me that is the crux of the matter, a stroke of the pen can change that.
If the person owns there residence, they are saving the cost of rent for life, super was originally meant to improve a persons retirement by supplementing the pension.
Now it is there to supplement or replace the pension.
What is the next step?
If it was designed to improve a persons retirement, the options should be greater and the Government should get back into building social housing that low income earners can purchase, that would help people and provide jobs and training.
Politicians are full of BS IMO.
Articles from Google:
Does Super replace pension?

In the beginning:
*In the late 1980s, superannuation was sold as a supplement to the aged pension*. In 1989, the prime minister Mr Hawke said: "The pension will always be there for those who need it, but it will be supplemented by a range of superannuation options."









						Fact check: Was superannuation designed to get people off the pension?
					

Assistant Treasurer Kelly O'Dwyer says that Australia's superannuation system was established as an alternative to the pension. ABC Fact Check takes a look at the history of super.




					www.abc.net.au
				




Now:
To enhance stability in the superannuation system, the Government will legislate that the primary objective of the superannuation system is “*to provide income in retirement to substitute or supplement the Age Pension*”.


----------



## Belli (28 August 2022)

It's complex isn't it?

Taken at face value, as at now and its the median, how flash a retirement life-style do you reckon will be achieved on these balances?  Jesus, one of my kids (Thanks, Dad) who is not yet 30 has more than 2x in their personal holdings than a current 70 yo has in super.












						Superannuation statistics 2022 | Finder
					

There are 23.2 million super accounts in Australia with assets totalling $3.4 trillion. Find out the latest superannuation statistics.




					www.finder.com.au
				




And APRA has recently release some gorgeous numbers wrapped up in complications.






						APRA releases superannuation statistics for June 2022 | APRA
					

The Australian Prudential Regulation Authority (APRA) has released its Quarterly Superannuation Performance publication for the June 2022 quarter. Key statistics for the superannuation industry as at 30 June 2022:   June 2021 June 2022 Change




					www.apra.gov.au
				




It can do your head in going through some of the Excel attachments.


----------



## sptrawler (28 August 2022)

I just think low income earners are getting marginal monetary benefit with super and it ties up their money until later in life, where it will no doubt be required to pay the bills they couldn't afford when younger. High income earners get a huge tax relief on money they put into super.
If the purpose of super is to give people a better retirement, the Governments (State and Federal) would help the low income earners far more, by helping them buy their own house.
This would have a many fold benefit, if the buildings were built by the Government it would add housing to the stock that would not otherwise be built, which in turn would reduce the drag of rent and bond assistance and slow the price increases on private dwellings.
It would also reduce the need for negative gearing tax breaks, as fewer low income earners would need to rent .

It just appears to me that the low incomer earners are being scammed with super.
As with unemployment benefits, who is to say in 20 years time if a person has super, it wont become a requirement that is spent before they can access the pension.
All it takes is tough times, an uncompassionate government and the stroke of a pen.


----------



## Belli (28 August 2022)

sptrawler said:


> It just appears to me that the low incomer earners are being scammed with super.




Not disagreeing with you but there is or was the factor of tax scales.

My late wife and I commenced salary sacrificing when the SMSF was established before 2000.  At that time anything over $50k pa was taxed at 48.5% (including the Medicare Levy.)  We had paid off our home and salary sacrificed the pre-tax equivalent of the mortgage.  The difference in the take-home pay?  It was around $10 per fortnight less each and we were receiving a 33.5% tax benefit too.

Inflation adjusted that $50k pa is now $88.6k pa and if a person could salary-sacrifice the equivalent now (let's say it's $1,000 per fortnight although they couldn't as it would result in exceeding the $27.5k pa concessional limit) their take-home pay would be $1,886 compared with $2,522.  So a reduction of $636 per fortnight for a tax benefit of 19.5%.

Basically the change in tax scales back in 2000 and the reduction in concessional contribution limit is a big factor inhibiting people from placing more in super on a concessional basis unless they wish to do it on an after-tax basis.

My opinion is, despite all the Gov/Super industry waffle and the increase to 12% SG, a heck of a lot of people, especially those on lower pay scales or in casual employment will not end up with a heap in super and the present $1.7m balance cap will be but a pipe dream for them.  It's with that in mind why I have been assisting one of my kids to a greater extent than the others - and the others are aware of it and why.

PS: Also when the change in the tax scales were introduced in 2000, it resulted in our tax going down by over $200 per fortnight each.  We salary sacrificed the pre-tax equivalent of that.  It's what you could do then without any hardship - on our lives at least.  Now it is a case of forgoing quite an amount of bill paying capacity in my view.


----------



## sptrawler (28 August 2022)

Belli said:


> Not disagreeing with you but there is or was the factor of tax scales.
> 
> My opinion is, despite all the Gov/Super industry waffle and the increase to 12% SG, a heck of a lot of people, especially those on lower pay scales or in casual employment will not end up with a heap in super and the present $1.7m balance cap will be but a pipe dream for them.  It's with that in mind why I have been assisting one of my kids to a greater extent than the others - and the others are aware of it and why.
> 
> PS: Also when the change in the tax scales were introduced in 2000, it resulted in our tax going down by over $200 per fortnight each.  We salary sacrificed the pre-tax equivalent of that.  It's what you could do then without any hardship - on our lives at least.  Now it is a case of forgoing quite an amount of bill paying capacity in my view.



The wife and I are in a similar position.
I'm not saying super isn't any good, I'm saying for those on a low income it is next to useless, it would be far more beneficial to them IMO, to have a co ownership agreement with the Government, whereby they could own a home.
The chances of them saving enough in super over their working lives, to buy a home at retirement, IMO is doubtful. Meanwhile they spend their lives working to pay super and rent, just seems counter productive to me, if the objective is to give someone a better life.
Just a thought.
By the way when I started work, earnings over about $35k were taxed at 60%, the father in law never stopped ranting about it.


----------



## qldfrog (28 August 2022)

Belli said:


> My view is Yes.  A lower end, two-bedroom apartment in Wright (Canberra) would rent around $550 per week at present.  So if a retiree is happy and can afford close to $30k pa in rent at today's prices, good on them.    Gees, public housing is probably rented to tenants for more than $6.5k pa and $6.5k for 30 years is less than $200k anyway.  Nothing more than a good deposit on a $600k property - if you can find one in a major capital city which I've been told is pushing it.  And moving to regional?  Good luck getting medical care.
> 
> And in regard to super, we should also keep in mind a number who have super are also receiving a part-pension so there is that to consider.
> 
> But if a retiree does have a home and is receiving the age pension, which quite a number are, be very careful of doing the grey nomad thing and renting the house to supplement the Winnebago's running costs.  Many will have, or already have gotten, the shock of their lives when they are told their "home" is subject to CGT.



But only when you sell so ....


----------



## Belli (28 August 2022)

sptrawler said:


> The wife and I are in a similar position.
> I'm not saying super isn't any good, I'm saying for those on a low income it is next to useless, it would be far more beneficial to them IMO, to have a co ownership agreement with the Government, whereby they could own a home.
> The chances of them saving enough in super over their working lives, to buy a home at retirement, IMO is doubtful. Meanwhile they spend their lives working to pay super and rent, just seems counter productive to me, if the objective is to give someone a better life.
> Just a thought.
> By the way when I started work, earnings over about $35k were taxed at 60%, the father in law never stopped ranting about it.




Yeah unless they encounter Div 293 issues, high income get a better deal.  I came to the conclusion quite some time ago when looking at my kids situation one was not going to get much from super.

Actually I recall doing some numbers a few years ago and they indicated a person getting $36k pa ff dividends, will still get a tax refund of around $7k.


----------



## Dona Ferentes (27 September 2022)

was going to jump up and down, and squawk away about the injustice of it all, because retrospectivity is generally not to be endorsed on principle, then I see that Gerry Harvey has come out and lambasted the govt for wanting to push through changes to the rules. *LoL*. seems like a fair thing.



> Westpac and Harvey Norman shareholders could receive shock tax bills due to the government’s proposed retrospective crackdown on franked dividends funded by capital raisings



_too clever by half...
....and did Jobkeeper get paid back? Hmmm_


----------



## Belli (27 September 2022)

Dona Ferentes said:


> was going to jump up and down, and squawk away about the injustice of it all, because retrospectivity is generally not to be endorsed on principle, then I see that Gerry Harvey has come out and lambasted the govt for wanting to push through changes to the rules. *LoL*. seems like a fair thing.
> 
> 
> _too clever by half...
> ....and did Jobkeeper get paid back? Hmmm_




I posted this with the relevant link yesterday.  The proposal was already on the books but the previous Government simply didn't bring the proposed legislation to Parliament.  Did the dudes jump up and down (publicly) about it at that time?



Belli said:


> Speaking of which this has resurfaced.
> 
> "As part of the 2016‑17 Mid‑Year Economic and Fiscal Outlook, an integrity measure was announced to prevent the distribution of franking credits where a distribution to shareholders is funded by particular capital raising activities.
> 
> ...


----------



## divs4ever (27 September 2022)

Dona Ferentes said:


> was going to jump up and down, and squawk away about the injustice of it all, because retrospectivity is generally not to be endorsed on principle, then I see that Gerry Harvey has come out and lambasted the govt for wanting to push through changes to the rules. *LoL*. seems like a fair thing.
> 
> 
> _too clever by half...
> ....and did Jobkeeper get paid back? Hmmm_



 SOME companies repaid Job-Keeper ,  but then if the workers stayed employed when there was a real chance they  would have been cut ( due to lack of company revenue ) was Job-Keeper a bad thing  ( and YES there will always be some that will rort the system )

 in my opinion  retrospective application of laws is always a bad thing  if the government is incapable of creating rules to mitigate current problems  , why are they in government ( the citizens can not live in a society  by trying to pre-guess future laws  but be punished for what is currently legal  , in the near future )


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## Belli (29 September 2022)

In the light of the decision in Munro v Munro:









						Munro v Munro [2015] QSC 61 - Supreme Court of Queensland - Trial Division Caselaw
					

Munro v Munro [2015] QSC 61 | Supreme Court of Queensland - Trial Division Caselaw. DIVISION: Trial Division, PROCEEDING: Application, ORIGINATING COURT: Supreme Court at Brisbane, DELIVERED ON: 6 June 2011, JUDGE: Ann Lyons J




					www.queenslandjudgments.com.au
				




I am having both the Trust Deed of the SMSF and the Binding Death Benefit Nomination form reviewed to ensure it complies with legal requirements.


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## sptrawler (29 September 2022)

Further to the @Belli excellent post, I have found a plain english summary of the Munro Vs Munro case, well worth a read for those with a SMSF.
Below is a summary from the article:






						Munro v Munro: the importance of a valid binding death benefit nomination
					






					www.cleardocs.com
				



The facts of the case​The Death Benefit Nomination​Mr Munro signed a binding death benefit nomination in September 2009 specifying the beneficiary to receive his superannuation benefits as:


PersonProportionRelationshipTrustee of Deceased Estate100%Trustee
The Fund​Mr Munro, a solicitor, was the trustee and member of an SMSF with his wife (Mrs Munro).

Mr Munro died in August 2011.

The executors of Mr Munro's will were Mr Munro's two daughters from a previous marriage and Mrs Munro.

After Mr Munro's death, Mrs Munro's daughter (who was not related to Mr Munro) was appointed as an additional trustee of the SMSF.

The Trust Deed​The SMSF's trust deed required the trustee to pay any benefits in accordance with a binding nomination provided that the nomination, amongst other things:


specified that the benefits were to be paid to (as nominated by the member):
one or more of the member's 'dependants'; or
the member's 'legal personal representative',
which reflects the requirements of superannuation law;[2] and
complied with any requirements which the trustee must comply with to avoid a contravention of the requirements or in order for the SMSF to qualify for concessional taxation treatment as a complying superannuation fund.
The SMSF's trust deed provided that if these requirements were not satisfied, then the trustees were not bound by the nomination and could pay the benefits at their discretion (subject to the trust deed and superannuation law, which limited payment of the benefits to 'dependants' or the 'legal personal representative' as above)
The Dispute​The trustees (being Mrs Munro and her daughter) gave notice to the two executors (being Mr Munro's two daughters) that they intended to exercise their discretion as trustees in paying Mr Munro's superannuation benefits, on the basis that they considered the death benefit nomination invalid for the purposes of the trust deed.

Mr Munro's daughters (two of the three executors of his will) sought a court order that the nomination was binding on the trustees.

The outcome​The court held that the death benefit nomination was not a binding nomination as was required by superannuation law and the SMSF's trust deed — and so the trustees were not bound by it.

The issue with the nomination was that the nominated beneficiary of 'Trustee of Deceased Estate' did not comply with superannuation law and the trust deed — which required payments to 'dependants' or a 'legal personal representative'.

The definition of 'legal personal representative' in superannuation law means, relevantly in this situation, the executor of the will of a deceased person.

Mr Munro's daughters argued that 'Trustee of Deceased Estate' meant Mr Munro's executors.

The judge noted that while the terms 'executor' and 'trustee' may be used interchangeably colloquially, the terms are distinct. This is generally an issue of timing. The 'executor' holds the property of a deceased person for the purpose of carrying out the administration duties of the estate (for example, collecting the assets, paying the debts of the deceased and administration expenses, and selling the assets to give effects to the gifts in the will). The 'trustee' then applies the assets to the trusts under the will.

As a result, the nomination of 'Trustee of Deceased Estate' was insufficient to direct the trustee to pay the benefits to Mr Munro's 'legal personal representative', being his executors. As a result, the nomination was not binding.

Who should have been nominated as the beneficiary?​It appears that Mr Munro's intention was that his superannuation benefits be paid to his estate.

If Mr Munro intended to nominate his 'legal personal representative' (that is, his executors), then his binding death benefit nomination should have specified either:


that it was nominating the 'legal personal representative' (this is preferable) or the executor of the will; or
the name of the executor of the will (if that coincided with the executor named in the last will), but identified that the named person was the legal personal representative.
In our view 'legal personal representative' is preferable because this reflects the wording in the superannuation law.[3]

What does the case mean for SMSFs?​Members will need to check any death benefit nominations they have entered into to ensure that that the nomination will in fact bind the trustee.

This is particularly important for members who intend their superannuation benefits to be paid to their estate. If a member has signed a death benefit nomination specifying payments to a 'trustee', this may be ineffective and the SMSF trustees may not be bound by it.

Members should be mindful of situations such as _Munro v Munro_, where the remaining trustees (or directors of the trustee) wish to distribute the benefits otherwise than in accordance with the nomination — and may look for reasons not to be bound by the nomination.

If members are unsure about their death benefit nominations, they should obtain legal advice.


----------



## Junior (29 September 2022)

Super can be very valuable for low income earners, to top up Age Pension.  It is a huge difference retiring with Age Pension income only, versus having an additional income stream from super.

Those average balances will obviously climb, as we start to see retirees who have benefitted from mandatory super contributions for their entire working lives.

Take this example.  A 30 year old earning $50k per annum (and assuming that only increases with CPI), retiring at 67 years old, SG Contributions only.  Age pension for a single person is $27k per annum.  This retiree would be able to take a lump sum out of super at retirement.  Fix the house up, clear the last bit of mortgage, buy a caravan, and then have a much better lifestyle through retirement.

The idea that low income earners should forgo super altogether is not the answer in my view.  You are just making them 100% on Government support at retirement, in most cases.


----------



## Belli (29 September 2022)

sptrawler said:


> I have found a plain english summary of the Munro Vs Munro case, well worth a read for those with a SMSF.
> Below is a summary from the article:




Nice find @sptrawler.

Although the Munro decision was in 2015, I posted it as a result of discussions I had yesterday.  A number of SMSF Trusts Deed variations may have been made after 2015 and incorporated the Munro decision.  However, we looked at a few BDBN's and they were signed before the SMSF TD variation date and so could be invalid.  Best to check out any deed and BDBN  made before 2015 and even after just in case.  Sure it'll cost a few $$ but in comparison to your SMSF and your wishes are invalid, it's chump change really.

Alternatively, wind up the SMSF and make sure you die both broke and bankrupt.


----------



## Belli (20 October 2022)

Bloody heck.  Trustees of SMSF should read this High Court decision very carefully, think deeply of the consequences and seek a professional opinion in regard to the Trust Deed and any BDBN currently in place.



			Hill v Zuda Pty Ltd [2022] HCA 21 (15 June 2022)


----------



## sptrawler (20 October 2022)

We don't have a BDBN in place, so must check out the value of one, I would guess the standard regulations would apply to a SMSF which consists of two members, when one member dies.


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## Belli (20 October 2022)

sptrawler said:


> We don't have a BDBN in place, so must check out the value of one, I would guess the standard regulations would apply to a SMSF which consists of two members, when one member dies.




A short summary of the decision from what I understand.  It was remiss of me not to do that in my previous post so apologies to all.

High Court decided that effectively SIS Regulation 6.17A does not apply to SMSFs.

As a result it means non-lapsing BDBNs are indefinite.  That's something we assumed but the High Court has confirmed it.  Also a BDBN by a member of an SMSF does not require two witnesses and there is no requirement to provide such a notice to the Trustee - those are provisions in the Regulation.  There are other aspects as a consequence of the decision.

Having said that however, the BDBN must comply with the Trust Deed.

One aspect I have found over the years of being a Trustee of an SMSF, it isn't just "Buy this, Sell that" approach.  There is a need to keep up to date with any case law or court decisions which may impact.  That requires the Trust Deed to be reviewed on occasions.  It doesn't happen often but it does happen.

I suspect there are many Trust Deeds out there which have never been updated since the time the SMSF was established either through ignorance or not wanting to spend a few $$ to update the Deed.  Probably most will go through probate and all that without an issue but you never know.  It's the "you never know" which you try to address by having the Deed reviewed every so often.

As an aside never have your kids as members of the SMSF.  That can be a whole world of pain.  Also if one of your relatives is to become the Trustee of your SMSF, try and ensure if they have a partner they are not also made a Trustee (unless the wording is as tight as a duck's a**) as it is possible, given you cannot fetter the discretion of a Trustee, the funds in the SMSF will not end up where you would have preferred but in their pocket.  Yes, it has happened.


----------



## Dona Ferentes (20 October 2022)

all too true, @Belli . 

And particularly apposite is your comment:


> One aspect I have found over the years of being a Trustee of an SMSF, it isn't just "Buy this, Sell that" approach.  There is a need to keep up to date with any case law or court decisions which may impact.  That requires the Trust Deed to be reviewed on occasions.  It doesn't happen often but it does happen.



Sadly, for investors and especially SMSF, most measures, and sales pitches, are in terms of "returns" (including the egregious "compared to an index" ones). I have found from experience there are much better outcomes from strategy than investment decisions.


----------



## dyna (20 October 2022)

Belli said:


> As an aside never have your kids as members of the SMSF



Amen to that, alright.
Another thing  I've just thought of  : pay for professional advice when it comes to borrowing for real estate .
Non- recourse loans can be really tricky to get right. There is so much to be careful about , here. Don't try to do it on your own.
All this, from some one who has no probs doing his own tax return.


----------



## Belli (20 October 2022)

@sptrawler I found a pretty good article which you may want to read.  Here is the link.






						How long can an SMSF BDBN last for? The High Court answers in Hill v Zuda | Leading SMSF Law Firm %
					

The High Court of Australia has settled the debate on how long an SMSF BDBN can last for. Implicitly this judgement also provides support in answering other critical SMSF succession planning questions, such as: • Can a BDBN make a pension reversion mid-stream?• Can a BDBN override pension...




					www.dbalawyers.com.au


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## Belli (20 October 2022)

dyna said:


> Amen to that, alright.
> Another thing  I've just thought of  : pay for professional advice when it comes to borrowing for real estate .
> Non- recourse loans can be really tricky to get right. There is so much to be careful about , here. Don't try to do it on your own.
> All this, from some one who has no probs doing his own tax return.




Yeah, some think it's a great idea and it can work in some cases but there is the issue of voting power on decisions.  Really want someone who has contributed say $50k having decision over your $1.6m?  What about if they want crypto and others don't?  If things go sour how do you remove them as Trustee?  What are your audit procedures to stop them accessing the funds to feed the personal party animal or illicit substances?  All of these issues and more have occurred.

Many, many matters to consider even before your start to think about going down that path of having anyone other than yourself and significant other as members of the SMSF.


----------



## Belli (20 October 2022)

sptrawler said:


> We don't have a BDBN in place, so must check out the value of one, I would guess the standard regulations would apply to a SMSF which consists of two members, when one member dies.




I intended to address this in a previous post but I forgot.  Sorry about that @sptrawler.

Essentially it is the trustee of the super fund who decides who gets what once a member shuffles off this mortal coil.  Doesn't matter what your Will may say as superannuation does not form part of a deceased estate.  The trust deed prevails.  That's where the BDBN comes into play to bypass trustee consideration and impose an obligation on the trustee.  If a BDBN is worded incorrectly it may be disregarded by the trustee as being defective.

I'm no expert so don't take that as gospel.  It's best to get professional advice.


----------



## rcw1 (20 October 2022)

Belli said:


> I intended to address this in a previous post but I forgot.  Sorry about that @sptrawler.
> 
> Essentially it is the trustee of the super fund who decides who gets what once a member shuffles off this mortal coil.  Doesn't matter what your Will may say as superannuation does not form part of a deceased estate.  The trust deed prevails.  That's where the BDBN comes into play to bypass trustee consideration and impose an obligation on the trustee.  If a BDBN is worded incorrectly it may be disregarded by the trustee as being defective.
> 
> I'm no expert so don't take that as gospel.  It's best to get professional advice.



Good evening
It is rcw1's understanding that a Binding Death Benefit Nomination form is required to be renewed every two years otherwise it will be null and voided. 

Have a very night night.

Kind regards
rcw1


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## Belli (21 October 2022)

rcw1 said:


> Good evening
> It is rcw1's understanding that a Binding Death Benefit Nomination form is required to be renewed every two years otherwise it will be null and voided.
> 
> Have a very night night.
> ...




Good morning.

It's every three years for industry funds.  The High Court decision in Hill v Zuda in June 2022 confirmed it is indefinite for SMSFs since SIS Regulation 6.17A does not apply to an SMSF.






						SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 - REG 6.17A Payment of benefit on or after death of member (Act, s 59(1A))
					






					classic.austlii.edu.au
				




Cheers


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## Belli (22 October 2022)

Got word back yesterday arvo.  No need for amendment; all good with Deed and BDBN.  While SIS Reg 6.17A not being applicable, the Deed itself stipulates the form of the BDBN to be served on the Trustee and also requires two witnesses.

Best of all there was no charge for that info.


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## sptrawler (24 October 2022)

I always wonder why these retirees, who feel guilty that they get a tax advantage from being retired on a superannuation pension, why dont they just remove their money from super and invest outside of super? No one forces anyone to keep their money in super after they have retired.
They come across as not being very aware of what they are saying, or maybe the ABC hit them with selective reporting to suit the narrative, it certainly comes across to me that someone is a sandwich short of a picnic.
They earn $65k and feel guilty, they would be given nearly $40k if they had saved nothing and been on a pension, weird IMO?
Super tax concessions are costing the government billions. Should they be wound back?








						'Why should we get a free run?': Retirees and experts call for super tax reform
					

Super tax concessions have encouraged Australians to save for their own retirement. But have they become too generous?




					www.abc.net.au


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## qldfrog (24 October 2022)

sptrawler said:


> I always wonder why these retirees, who feel guilty that they get a tax advantage from being retired on a superannuation pension, why dont they just remove their money from super and invest outside of super? No one forces anyone to keep their money in super after they have retired.
> Super tax concessions are costing the government billions. Should they be wound back?
> 
> 
> ...



just their ABC brainwash and manipulation; 
even better get your tax savings  and donate them to a cause your really support, not the travel expenses of Peter Dutton or Adam Bandt..your pick..I am open...
Moreover, these donations are deductible so you could even donate more than these "tax savings" amount.


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## Belli (24 October 2022)

sptrawler said:


> I always wonder why these retirees, who feel guilty that they get a tax advantage from being retired on a superannuation pension, why dont they just remove their money from super and invest outside of super? No one forces anyone to keep their money in super after they have retired.
> They come across as not being very aware of what they are saying, or maybe the ABC hit them with selective reporting to suit the narrative, it certainly comes across to me that someone is a sandwich short of a picnic.
> Super tax concessions are costing the government billions. Should they be wound back?
> 
> ...




It is two-faced to a degree.  If they don't like it either cash in the SMSF and invest outside superannuation or roll the funds over to an industry fund.  Just an article to show how caring and sharing some are ("Aren't I a sweetie saying how unfair things are?") and naught much else.

If you are getting $60k pa (assuming franking is included in that @ 30%) outside superannuation then your taxable income would be $42k cash plus $18k franking.  Tax for 2023FY would be:

Taxable Income: $60k
Income Tax: $9,967
LITO: ($100)
Medicare: $1,200
Tax Credit: ($18k)

Tax Refund: $6,933

If able to split 50/50 for a couple, basically halve the numbers but each would then receive a tax refund of $6,858.*

* Reason for this is both get the tax-free threshold.  Single income households and single person households have always been shafted as a consequence of that.


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## qldfrog (24 October 2022)

Belli said:


> It is two-faced to a degree.  If they don't like it either cash in the SMSF and invest outside superannuation or roll the funds over to an industry fund.  Just an article to show how caring and sharing some are ("Aren't I a sweetie saying how unfair things are?") and naught much else.
> 
> If you are getting $60k pa (assuming franking is included in that @ 30%) outside superannuation then your taxable income would be $42k cash plus $18k franking.  Tax for 2023FY would be:
> 
> ...



Be careful Mr @Belli, you are using numbers, real facts and intelligence against narratives.It is a very dangerous stand you are taking ;-)


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## Dona Ferentes (24 October 2022)

Just a pre-Budget warm-up/ soften up/ see what will fly.


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## Belli (4 November 2022)

I am more bemused than anything else with proposals by a number in the industry for superannuation funds to consider automatically moving members in retirement into products which pay an income stream (a form of annuity but not quite rather than account-based pensions.)

I suspect this concept, if adopted, with gradually move to SMSF's being required to consider the same along with the present obligatory investment strategy.

Inward groan on my part at the thought of having to comply with this.  What to say?  Maybe:

Hey Government, there was a budget decision which imposed a balance cap on my fund of $1.6m, which currently is above that by a substantial margin, and reverted the rest of the funds in the SMSF to accumulation phase thereby by obviating the mandatory draw down of the total amount in the fund and subsequently turning that portion into nothing more than a wealth accumulation exercise.  In addition, as I was required to provided the SMSF with my personal TFN, surely the ATO is able to match that with my income tax returns together with the total fund balance at which point the light bulb should turn on and authorities will realise there is no point to the exercise for some fund members.

Won't happen of course as there is a need to tick the boxes.  We got a form and we're not afraid to use it.


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## dyna (4 November 2022)

Further to the Hill v Zuda High Court judgement which was reported in the Weekend AFR 8-9 th October 2022 :

The executor of the person's will can be nominated as the beneficiary of  the deceased's SMSF ( or any other fund) superannuation benefits , allowing the will to then determine what is to happen to the money.


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## Belli (4 November 2022)

dyna said:


> Further to the Hill v Zuda High Court judgement which was reported in the Weekend AFR 8-9 th October 2022 :
> 
> The executor of the person's will can be nominated as the beneficiary of  the deceased's SMSF ( or any other fund) superannuation benefits , allowing the will to then determine what is to happen to the money.




Yes, the BDBN can nominate the legal personal representative rather than dependants as defined in section 309-19 of the ITA.

Will makers may wish to consider, after receiving legal advice, including a clause establishing a superannuation death benefits proceeds sub-trust to receive superannuation death benefits of the will maker following their death. Generally, the trust is similar to a testamentary discretionary trust, however, beneficiaries are limited to people who are death benefit dependants.

Ideally drafting of the Will should take into account the provisions of the SMSF Trust Deed/BDBN and maybe consider gifting the shares in the Corporate Trustee of the SMSF to the LPR.  That provides to the LPR the power to hire and fire the trustee of the SMSF.

I've seen clauses along these lines




In order to become a Director, I think the Executor will probably need to apply for a DirectorID is they haven't already got one.

PS: I believe people need to bear in mind while the High Court decision means the relevant regulation does not apply to SMSF's, it is the provisions in Trust Deed which are paramount.  A badly drafted Deed if defective can cause a whole world of pain.  Should the funds involved be substantial, lots of litigation may be flung about.


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## dyna (4 November 2022)

Yeah, reading through those court cases makes you wonder, eh?
Rich people are supposed to be smart, right?
Umm...not always, it seems.
legend has it, that the late Robert Holmes-a - Court was walking around for months before the grim reaper got him, with an unsigned will inside his jacket pocket.


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## Value Collector (4 November 2022)

What do you guys think of a rule that meant that the super left when some one dies has to be put into the super account of the beneficiaries of the will.

Eg, if your mum dies leaving super behind it gets added to your super, not paid out in cash?


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## Belli (4 November 2022)

Value Collector said:


> What do you guys think of a rule that meant that the super left when some one dies has to be put into the super account of the beneficiaries of the will.
> 
> Eg, if your mum dies leaving super behind it gets added to your super, not paid out in cash?




If you are a dependant (as defined*) the death benefit can be as either a lump sum or as an income stream (Trust Deed again).  If you are not a dependant, the death benefit must be paid as a lump sum.

Definition: 

your spouse
your child (under 18 years of age)
any other person you are in an interdependent relationship with
a person who is substantially financially dependent on you.
It's pretty tight.  Some widow(er)s have lost either a large portion or the lot of the age pension when the funds were paid out.  Being now single and having a load of dosh can do that!


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## Belli (4 November 2022)

dyna said:


> Rich people are supposed to be smart, right?




LOL.  If you read the Monroe v Monroe decision of 2015 (Queensland courts) you will notice the dude who signed the BDBN was a solicitor.  The BDBN was deemed defective.


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## Value Collector (4 November 2022)

Belli said:


> If you are a dependant (as defined*) the death benefit can be as either a lump sum or as an income stream (Trust Deed again).  If you are not a dependant, the death benefit must be paid as a lump sum.
> 
> Definition:
> 
> ...



Yeah, I have been thinking that keeping inheritances from super in super is probably a good rule to have.


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## Belli (4 November 2022)

Value Collector said:


> Yeah, I have been thinking that keeping inheritances from super in super is probably a good rule to have.




The funny thing, or maybe not so funny, is how many people think super forms part of their estate.  It doesn't.  So the Executor of the deceased estate is not automatically the Trustee of the SMSF from what I have been informed.  And it is only the Trustee who can payout the benefit.  Some find it very difficult to grasp the separate functions which is totally understandable.

Things can get very weird at times.


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## Belli (4 November 2022)

May as well throw these thoughtd in for what they are worth.

Many will have their BDBN as payable to their beneficiaries on a equal split as that's fair right?

However, consider the situation where there are two beneficiaries and each receive say, $200k and it is all taxed-taxable (concessional contributions) which attracts 15% tax plus Medicare levy.

Ben A has an income of $100k, has a large HELP debt and no health insurance.
Ben B also has an income of $100k, no HELP debt and has private health insurance.

Guess which beneficiary probably pays a larger amount in tax?

If fed through a Will which has a super proceeds trust , it is likely possible for the number crunchers to massage the figures so each receives a proportional amount and the overall tax out come for each is approximately the same.  Some may view that as being even fairer.

Alternatively, if you are unfortunate enough to know of your imminent demise, arrange for an in specie transfer of the assets (shares are much easier for this) to your personal name and should your Will establish a testamentary trust for your assets, your beneficiaries may be eternally grateful for your foresight in the face of adversity - or not depending how much they liked you.

These are random thoughts on these issues which have come to me over the years so always get professional advice.


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## dyna (4 November 2022)

Value Collector said:


> Yeah, I have been thinking that keeping inheritances from super in super is probably a good rule to have.



And above all else, to paraphrase Noel Whittacker : if you see the Grim Reaper a' comin for you ,down the garden path , give notice to the superfund and get the cash into your bank account. A.S.A.P.

Saves you ( well not you, the corpse ) ...your besties...( saves them, 15% tax plus 2% medicare levy)


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## Value Collector (4 November 2022)

dyna said:


> And above all else, to paraphrase Noel Whittacker : if you see the Grim Reaper a' comin for you ,down the garden path , give notice to the superfund and get the cash into your bank account. A.S.A.P.
> 
> Saves you ( well not you, the corpse ) ...your besties...( saves them, 15% tax plus 2% medicare levy)



Yeah, unless your besties are spend thrifts, and are going to waste the money, part of me wishes that the pay out just went straight into their super.


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## Belli (4 November 2022)

Value Collector said:


> Yeah, unless your besties are spend thrifts, and are going to waste the money, part of me wishes that the pay out just went straight into their super.




Went through the same thought issues but finally decided it was best to put those aspects aside, set things up to provide as much asset protection as possible for my beneficiaries in a tax effective way and be done with it.  It's then entirely up to them.  Any s&*t fight after my demise ain't going to be my problem.


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## sptrawler (11 November 2022)

Vanguard super up and running at last, should put downward pressure on fee gouging by funds IMO.








						Vanguard looks to shake up Australia’s $3.3 trillion super sector with low-fee products
					

US investment giant Vanguard has launched a suite of low-cost super products aimed at disrupting the $3.3 trillion sector.




					www.smh.com.au
				



From the article:
Vanguard is best known for its low-cost index investing, expertise which they plan to use in the superannuation space. As well as the default super option, it is launching index-based diversified and single sector investment options. The yearly fees range from 0.39 per cent to 0.58 per cent.
He said Vanguard’s fees would be disruptive and the products aimed to spur innovation and drive down fees for members across the sector. Treasury analysis in 2020 found $30 billion is paid in super fees each year, more than households pay on their energy or water bills. By 2034, it is estimated Australians could be paying $45 billion in super fees.

The Your Future Your Super reforms, introduced by the former government, aimed to reduce fees and included a performance test that bans underperforming funds from accepting new members and a “stapling” measure that ties workers to one fund for life. The Albanese government is reviewing the laws after feedback from the sector.


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## Belli (12 November 2022)

I suspect it is for those who have no interest in superannuation and simply look at percentages without going much further.

I did some quick numbers against my SMSF and Vanguard's offering is way, way more expensive.


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## Dona Ferentes (12 November 2022)

Belli said:


> I did some quick numbers against my SMSF and Vanguard's offering is way, way more expensive.



Ditto. 

The only attraction is for very low balances, for newcomers to the workforce. And for whom any 'discount' would be minimal. Then to make their money, Vanguard, like them all, will rely on apathy and lack of engagement as balances increase.


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## Belli (12 November 2022)

I noticed from the article @sptrawler posted that:

"Vanguard’s default option will adjust 36 times over the course of a member’s life so the asset allocation and investment strategy within the fund is age-appropriate, with young members given higher exposure to growth assets, and those nearing retirement adjusted to more conservative asset classes."

Not a fan of lifestyle funds but others may prefer them.  Also, it seems it is pooled funds.  So when another investor sells or moves to some other product those remaining get hit with a capital gain if my understanding is correct.

Not going to look at it any more as I have no further interest in it.


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## Belli (29 November 2022)

For those who may be considering downsizing, the legislation reducing the eligibility age from 60 to 55 (as well as other matters) has been passed by Parliament.

"Income Tax Assessment Act 1997 to enable individuals aged 55 and above to make downsizer contributions to their superannuation plan from the proceeds of selling their main residence."






						Bill Details - ParlWork | Parliament of Australia
					






					parlwork.aph.gov.au
				




Don't overlook any bring forward contributions in conjunction with this. There are many twists to this legislation e.g. your spouce can use it even if never the owner, so best to study it carefully and seek professional advice if necessary

However, given the murmurings to limit the amount in superannuation, including from Australian Super I believe, it could get tricky.


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## dyna (29 November 2022)

Those " murmurings" will become bellowing, come the next election, people. Could even be a few tweaks to SMSF's by the next budget, too.
Remember it was the Grattan Institute that first began calling for a reduction in concessional superannuation contributions to just 15 grand a year way back , in about 2018.
The writing's on the wall ,folks.
Get the planning stuff done now while the opportunity is still there.


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## Belli (29 November 2022)

As I'm retired, over the age of 70 and the only member of the SMSF, I've decided it is best for me to wind it up.

So arrangements are being made to transfer the pension account to an industry fund.  Simply get a monthly pension deposited to my account.  In conjunction with the investment income from my present personal holdings outside of super, I'm of the opinion I am very well off.

The amount over the balance cap will be be realised.  I'll transfer those proceeds to my kids in equal proportion.  They can do what they wish with the funds.  And it'll be tax-free in their hands.


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## Junior (29 November 2022)

Vanguard Super offering is a disappointment.

Having 36 adjustments...I mean it's OK if you intend to take no interest in your super, and plan to retire at 65 years old and just want the super fund to handle everything for you.  If you aren't John Citizen however, then it may not be the best alternative.

In terms of fees.  It's cheaper to use a Retail fund and choose Vanguard investment options from the menu.

Hopefully they slash fees and bring in a bigger menu/more features over time.


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## Belli (5 January 2023)

A hard lesson learned it would appear.

"Last winter, a friend passed away suddenly. A few weeks later, her physically abusive boyfriend, whom she had been living with, made a claim for all her assets. He also wanted all her superannuation benefits.

Since she hadn’t nominated anyone for her super, he was deemed the rightful beneficiary by law, despite her family’s objections.

Among my friends, word then went round fast on how imperative it is to nominate a beneficiary for your super, in case of an untimely death. As we mourned our friend, the importance of getting our superannuation affairs in order dawned on us. Most of us were keen and ready to include families of origin on our super, only to be surprised. You can’t nominate parents and siblings as super beneficiaries. We called each other upset – *how could this be possible*?"

Lack of education on superannuation issues and/or interest in them is how.









						Why can’t we leave our superannuation to our parents?
					

When a friend died last year and her abusive boyfriend claimed her super despite her family’s objections, we all realised the system isn’t looking out for us.




					www.theage.com.au


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## dyna (5 January 2023)

With an estimated 30 % of our population  effectively , financially illiterate , it's inevitable , those disadvantaged folks will continue to suffer needlessly , throughout their lives.
A left-leaning education system is sure not helping, here. Just keep filling kids heads  with loads of rubbish that's got sweet  effay  to do with , how things work in the real world .
The sad truth is : there is a fair bit of somewhat, boring stuff that they really have to know.
They won't find it on Netflix or  social media or on drugs for that matter.
The lucky few will find a forum such as this: a gold mine of  useful info....All of it , free.


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## Value Collector (5 January 2023)

dyna said:


> The sad truth is : there is a fair bit of somewhat, boring stuff that they really have to know.
> They won't find it on Netflix or  social media



I don’t know about that, this show on Netflix is pretty good to get average people thinking about improving their financial situation, Also there is some great people on social media too.


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## divs4ever (5 January 2023)

Belli said:


> Most of us were keen and ready to include families of origin on our super, only to be surprised. You can’t nominate parents and siblings as super beneficiaries.



i suppose 'consolidated revenue '  is the default  option ( and THAT wouldn't surprise me at all )

 given many  superannuants   are likely  to die childless  in they pass fairly young  ( under 30 it seems  , in recent years ) this is a nice cash cow for the government 

 it also looks like a bonanza for lawyers and accountants to set up trusts  ( for handling estates  as needed )


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## Belli (5 January 2023)

@dyna & @Value Collector I think you are both correct to some degree.

Then again, it's a bit much to expect people to get their collective heads around this (Vic only but there is similar legislation in each State - no national one to my understanding) to appreciate to powers of a Trustee.






						TRUSTEE ACT 1958
					






					classic.austlii.edu.au
				




as well as these



			https://www.legislation.gov.au/Details/C2022C00271
		



			https://www.legislation.gov.au/Details/C2022C00307
		


due to the nuances involved in superannuation before they even get to consulting a legal beak about this






						Testamentary Trust - State Trustees VIC
					

A testamentary trust is set up in a person’s will and starts upon their death. It holds and protects all, or some, of the person’s assets. Learn more.




					www.statetrustees.com.au
				




Then there is the issue of "Are they willing/able to pay for one?"  A few people I know, despite being well off, baulk at the thought of forking out in the vicinity of $2.5k for a properly drafted TT Will.

No matter what, it still doesn't prevent a challenge being able to be made against the Will or making a claim on superannuation benefits though.  Whether that challenge is successful is another issue and generally one for the Courts.  Sorry pps, we cannot avoid the law and changing various bits of legislation can raise a whole lot of other issues which results in "Hello Courts" again.

While the Good Lord can walk on water, we peons wade through very thick treacle in attempts to direct our assets after we shuffle off this mortal coil to where we prefer.


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