# How do we make Super fairer?



## sydboy007 (6 January 2013)

Current superannuation tax concessions are enormous. There are $30 billion worth of superannuation tax concessions per year. Almost half those tax breaks go to the wealthiest 12% and almost a fifth go to the wealthiest 2% of Australians.

My understanding is that by 2015 the tax breaks on super will be higher than what the Govt is paying in age pensions - for the life of me I can't find the current annual cost for pensions so wont claim my memory is totally correct.

Add in the TRP, which is generally used as a tax minimisation method rather than it's intended purpose of allowing people over 55 to start part time work.  Being able to take the pension and then salary sacrifice a far larger amount back into super seems wrong to me.

I think we need to start looking at limiting the tax benefits on Super to higher income earners.  I know the current Govt has started this process with a 300K annual salary limit on employer concessional payments, but really this seems too high to me.  Possibly lowering it to 100K would greatly reduce the cost - hopefully resulting in personal tax cuts - and it would only affect a small % of people.

I doubt that reducing the tax effectiveness of super for the very wealthy - I include myself in this since I earn over 100K a year - would stop us from saving for our retirement.

To me a tax break is the same as spending.  We are currently spending $30 billion a year - nearly an NBN every year - on super tax concessions.  Australia provides the highest tax concessions for super in the world.  We are the only country to provide confessional treatment on the way in, on the earnings inside the fund, and on the way out.  In 15 years there will be double the number of people getting tax free super pensions.  How will those left paying taxes afford to pay them?

Have a look at the below 2 charts.  They show how biased the tax concessions are with super.

_Over to you_


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## Bill M (6 January 2013)

No one will put into super if the tax regime is too high. It didn't work in the past and that is why previous governments abolished a lot of the taxes. One of the best things John Howard and Co. ever did was make super all tax free for the over 60's. That encourages people to save more for their retirement. More self funded retirees mean less drain on government coffers for a pension and less taxes on the rest of the working people.

If I had to pay more tax on my super than what I am now then I probably wouldn't put anymore in. I think that right now the balance is about right.


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## Bill M (6 January 2013)

sydboy007 said:


> Add in the TRP, which is generally used as a tax minimisation method rather than it's intended purpose of allowing people over 55 to start part time work.  Being able to take the pension and then salary sacrifice a far larger amount back into super seems wrong to me.




What was happening in the past was people were turning 55 and chucking the job in. They would go out and blow all their super and end up on a government pension in the end. To discourage them from doing this they brought in the TRP. It is a good idea, rather than throwing in the job how about just working 2 or 3 days a week and getting the TRP. It stops the irresponsible from blowing the lot early on and they are encouraged to stay in employment. I think it is a good system. If it was not in place then we would be back to square one where people were retiring at 55 and blowing the lot by 65.

I will give you an example. Next year my wife turns 55 and she will be entitled to retire and pull out all her super. She doesn't want to do this now because we have planed for her to go on a TRP. She will get a small retirement pension and continue to work part time. If she was not allowed to do this she would probably pull the pin and draw a pension anyway. The Governments view is that it is probably better to give her a little bit of what is hers anyway and continue working rather than she give up her job and blow the lot by 65 and then have to pay her a tax payer funded pension. I might add that because of this policy we are now putting in extra cash into her super policy to maximise the pension. I hope that explains it a bit.


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## medicowallet (6 January 2013)

A couple of things

1. 100k is not much, and I would argue, that unless the person is paying the highest marginal rate, they are not high income earners.

2. The "high" income earners pay way more tax than the average person, and hence can enjoy the fruits of their labours.

3. Last time I checked, most people in this country can choose to further their earning prospects (which is good for the country).

4. Why not target property if you are worried about the country wasting lots of $$$$... the obscene amounts of geared "mining boom time" royalities put into unproductive assets would dwarf an NBN every year... oh, that is right, that would be a tough political decision..

MW


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## sptrawler (6 January 2013)

sydboy007 said:


> Current superannuation tax concessions are enormous. There are $30 billion worth of superannuation tax concessions per year. Almost half those tax breaks go to the wealthiest 12% and almost a fifth go to the wealthiest 2% of Australians.
> 
> My understanding is that by 2015 the tax breaks on super will be higher than what the Govt is paying in age pensions - for the life of me I can't find the current annual cost for pensions so wont claim my memory is totally correct.
> 
> ...




Hey Sydboy, could you throw up the politicians, superannution outcomes also.
Just to give us a base line.

Mate, you are really getting out there, the current super scheme is designed to encourage people to save.
It was first introduced after a financial crisis, which exposed Australias dependence on overseas lending and its lack of savings.
The failing 'wages accord' was then superceded by the super guarentee, which directed wage rises to national savings.
This has been scaled back(the levy has remained constant) for a long period.
I personaly would love to see some FACTS to substantiate the claim pensioners are spending their money to obtain pensions.
All the pensioners I know are trying, like hell to maintain their capital.


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## sydboy007 (6 January 2013)

Bill M said:


> No one will put into super if the tax regime is too high. It didn't work in the past and that is why previous governments abolished a lot of the taxes. One of the best things John Howard and Co. ever did was make super all tax free for the over 60's. That encourages people to save more for their retirement. More self funded retirees mean less drain on government coffers for a pension and less taxes on the rest of the working people.
> 
> If I had to pay more tax on my super than what I am now then I probably wouldn't put any more in. I think that right now the balance is about right.




Dr Richard Denniss, from the Australia Institute, says his analysis shows that tax concessions to self-funded retirees will cost the Federal Government $45 billion in 2015, almost twice as much as the aged pension. 

If you didn't put extra money into super, what would you do with it?  I dobut you'd spend it all?  Wouldn't you save it via other means - shares, property, bonds??

The way I see it, currently the tax forgone with super is far higher than the pension savings it makes.

What is your definition of a self funded retiree?  Is it someone who receive's no pension, or just someone who gets both a super and govt pension?  If the former then there's not really many of them, and any financial planner worth their fees will do everything they can to get you $1 in pension so you're entitled to the thousands of $ of other benefits that come with it.

I suppose the point I'm trying to make is that once you get into the top 20% of income earners you will save for you retirement in super and out of super.  For the rest i would say super will be the main way for saving for retirement, so wouldn't it be better to move policy in the direction of minimising the costs of providing a reasonable retirement income for the maximum number of people?

Dr Richard Dennis also says " We estimate, for high income earners, up to 60 per cent of their lump sum is actually the contribution of the taxpayer."  How is that an equitable expenditure by the Govt?

Some questions raised by Dr Dennis (from his report Can the taxpayer afford ‘self-funded retirement’ 2012?)

* If the objective of the subsidies for superannuation is to reduce the cost of the age pension why can people access their super at 55 when they cannot access the age pension until they are 65?

* If the objective of the subsidies for superannuation is to reduce the cost of the age pension why can people who already hold more assets than the amount prescribed in the assets test continue to make concessional contributions?

* If the cost of providing tax concessions for superannuation are greater than the cost of providing the cost of providing the age pension how could substituting the former for the latter save the government money?

* Of all the ways to boost retirement incomes, are tax concessions the most effective?

_Treasury’s forecast suggests that there will be a slow but steady rise in the number of people receiving a part pension and a very small (around 3 per cent) increase in the number of people receiving no pension. As the following calculations show, it follows that a very small increase in the number of people who do not receive the age pension and a small increase in the proportion of the population who receive a part pension can only save the Commonwealth a relatively small amount of money.

If we assume that the population in 2047 is 32 million and that 24 per cent of that population is aged over 65 14 then the population of retirees will be 7.6 million. Taking the Treasury estimate of a three per cent increase in the proportion of retirees receiving no age pension (230,000 people) and a 15 per cent increase in the proportion of retirees receiving a part pension (1,152,000 people) it can be estimated that the reduction in the age pension bill, compared to today, would be equivalent to 10.5 per cent of the retiree population (15/2+ 3) multiplied by the age pension15.  

That is, the projected reduction in the age pension bill in 2047 can be estimated as 806,000 people multiplied by the current single age pension rate of $695.30 per fortnight equates to a saving of around $14 billion per year in 35 years’ time. Given that this year’s tax concessions cost more than twice that amount, and that the future
benefits need to be discounted to today’s dollars, the Treasury projections included in the figure above make clear that the impact of the large, and rapidly growing, cost of tax concessions for superannuation do not provide a net benefit to the Commonwealth budget._


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## medicowallet (6 January 2013)

sydboy007 said:


> I suppose the point I'm trying to make is that once you get into the top 20% of income earners you will save for you retirement in super and out of super.  For the rest i would say super will be the main way for saving for retirement, so wouldn't it be better to move policy in the direction of minimising the costs of providing a reasonable retirement income for the maximum number of people?




No, the high income earners will organise affairs and tax deductions not allowed in super to lower their tax anyway.

Super is guaranteed, stable revenue for the government, whereas negative gearing in property for example might mean I could have $10 million tied up in residential property, and earn $1 million per year salary, and effectively pay zero tax at all.

I think that the current situation is relatively well balanced, however the government is getting desperate for $$ so will continue to rape super.

MW


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## Julia (6 January 2013)

Bill M said:


> No one will put into super if the tax regime is too high. It didn't work in the past and that is why previous governments abolished a lot of the taxes. One of the best things John Howard and Co. ever did was make super all tax free for the over 60's. That encourages people to save more for their retirement. More self funded retirees mean less drain on government coffers for a pension and less taxes on the rest of the working people.
> 
> If I had to pay more tax on my super than what I am now then I probably wouldn't put anymore in. I think that right now the balance is about right.



Agree.  Even now, as a fully self funded retiree, I am sufficiently irritated that I have worked hard, invested carefully, and saved, rather than fritter away income over the years, yet do not get e.g. concession on council rates, whilst others have given scant regard to their financial future and are drawing maximum benefits from the fellow taxpayer.  I always held strong to the belief of not expecting anyone to support me, but am definitely having second thoughts about this.  It seems to me that simple pride is a poor substitute for reality.




Bill M said:


> What was happening in the past was people were turning 55 and chucking the job in. They would go out and blow all their super and end up on a government pension in the end. To discourage them from doing this they brought in the TRP. It is a good idea, rather than throwing in the job how about just working 2 or 3 days a week and getting the TRP. It stops the irresponsible from blowing the lot early on and they are encouraged to stay in employment. I think it is a good system. If it was not in place then we would be back to square one where people were retiring at 55 and blowing the lot by 65.



+1.





sydboy007 said:


> Dr Richard Denniss, from the Australia Institute, says his analysis shows that tax concessions to self-funded retirees will cost the Federal Government $45 billion in 2015, almost twice as much as the aged pension.



So would Dr Dennis prefer that self funded retirees relinquish any notion of getting themselves into that category and simply spend as they earn, knowing their fellow taxpayers (never mind from an ever reducing base) will be forced to support them?
Give me a break!!

What is your own situation, sydboy?  Are you or will you be self funded in retirement?  Do you expect the ever shrinking tax base to care for you as you age?



> What is your definition of a self funded retiree?  Is it someone who receive's no pension, or just someone who gets both a super and govt pension?



Someone who receives no pension at all, obviously.
(And "receive's" as you write it above should be simply "receives".  The apostrophe is wrong.



> If the former then there's not really many of them, and any financial planner worth their fees will do everything they can to get you $1 in pension so you're entitled to the thousands of $ of other benefits that come with it.



You seem to have a distorted view of what can actually be achieved by financial planners.  There is a limit to how much asset value and income they can manipulate.  The self funded retirees I know, including myself, have no interest in trying to fiddle figures.


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## sptrawler (6 January 2013)

Julia said:


> Agree.  Even now, as a fully self funded retiree, I am sufficiently irritated that I have worked hard, invested carefully, and saved, rather than fritter away income over the years, yet do not get e.g. concession on council rates, whilst others have given scant regard to their financial future and are drawing maximum benefits from the fellow taxpayer.  I always held strong to the belief of not expecting anyone to support me, but am definitely having second thoughts about this.  It seems to me that simple pride is a poor substitute for reality.
> So would Dr Dennis prefer that self funded retirees relinquish any notion of getting themselves into that category and simply spend as they earn, knowing their fellow taxpayers (never mind from an ever reducing base) will be forced to support them?
> Give me a break!




Obviously Syd, by his questions, is running a poll.IMO

Julia has encapsulated the issue well, only someone digging for info would dispute the answer.

The frightening thing is, Labor can get in measures that Liberals never could, it is really frightening when you consider the pay rises they have given themselves.
Maybe they know something we don't.LOL Strap yourself in.:1zhelp:


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## sptrawler (6 January 2013)

sydboy007 said:


> Some questions raised by Dr Dennis (from his report Can the taxpayer afford ‘self-funded retirement’ 2012?)
> 
> * If the objective of the subsidies for superannuation is to reduce the cost of the age pension why can people access their super at 55 when they cannot access the age pension until they are 65?
> 
> ...




You really need to get a grip, the rich don't need super, everything is in trusts and companies. 
Most SFSF members are like you and me, plebs. In super you can only put $25k a year before tax, that doesn't cover inflation on the capital required to support the pension. You are only allowed to put in $150k a year of your own money. By doing so the government has say in, how you use it withdraw it etc. 
Super is becomming marginal as an investment anyway, its earnings are taxed at 15%, whereas the tax free threshold is $18,000. 
You have lost me.
Also read your questions, why can you access super at 55 when pensions aren't paid till 65. Well duh, It's your money.
You still can't get money untill pension age other than your money.
You said what would people do if they couldn't put it in super. They spent it, that is why the 87 crash was so bad. All the corporateborrowing was from overseas, because we didn't have any savings. Jeez:1zhelp:


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## sydboy007 (7 January 2013)

medico

1. 100k is not much, and I would argue, that unless the person is paying the highest marginal rate, they are not high income earners.
Incorrect.  In the scheme of things you are in the top 15-20% of income earners in Australia

2. The "high" income earners pay way more tax than the average person, and hence can enjoy the fruits of their labours.
True, but should the tax system benefit the rich to a far larger extend than the poor?
See below chart - someone on 500K is getting support that is equivalent to 75% of the current age pension.  How is that an efficient use of punblic funds??

3. Last time I checked, most people in this country can choose to further their earning prospects (which is good for the country).
True.  But is it good pubic policy to provie 50% of super tax benefits to just 12% of the population, generally the ones who have the greatest ability to save for their retirement?

4. Why not target property if you are worried about the country wasting lots of $$$$... the obscene amounts of geared "mining boom time" royalities put into unproductive assets would dwarf an NBN every year... oh, that is right, that would be a tough political decision..
We would be the white trash of Asia and still no political party would touch the sacred cow of the primary residence.
pwersonally I'd like to see a land tax brought in to replace inefficient state taxes that would also help to even the playing field.  The rich benefit the most by having the primary residence as a tax free asset.
------------------------------
BillM
_What was happening in the past was people were turning 55 and chucking the job in. _
Easy solution to this.  Make access to super from age 65.  Also stop lump sums over 20% of the balance.  I don't see why someone should be able to take all their super, pay off loans, buy a new car, head off overseas, then expect the tax payer to give them a full pension.

As for the example of your wife, I have no problem with shat she is doing as it's what the TRP is designed for.  I do have a problem with it being used as a tax avoidance (legally minimisation I know) that is to the letter, not the spirit or the law.
-----------------------------
SPtrawler
I didn't say they were spending all their super, just that with some careful shuffling of assets you just need to get $1 of pension to access a lot more benefits eg pharmaceuticals, cheap train travel, discounted rates etc.

-----------------------------
Julia
_So would Dr Dennis prefer that self funded retirees relinquish any notion of getting themselves into that _
If the cost of tax forgone for super is higher than what would be paid for the pension, then isn't it cheaper to just pay the pension?

_You seem to have a distorted view of what can actually be achieved by financial planners. _
I would argue that you are in the minority.  I would also argue that if the goal is to be able to receive $1 in pension that it can be achieved by most.

To Quote Garpul Gumnit "As a boomer I will maximise my entitlement."

-------------------------------
Sptrawler

_Obviously Syd, by his questions, is running a poll.IMO_
Please don't question my ethics.  I put this question out there because it's something I've been thinking about for quite some time.  I think it's good to bounce ideas around.

If Gillard was proposing to spend twice the amount of money that an event costs the public, I'm sure you would be all over it.  But with super costing more than the pension this is somehow OK?

_In super you can only put $25k a year before tax, that doesn't cover inflation on the capital required to support the pension._
This is so incorrect.  If you have 500K in your balance and inflation was 4% then you would need 20K to cover its effect.  Considering inflation is 2% at present then 25K is 15K over the effects of inflation.  If your not able to earn 6% on that money then you need to put your money with a more competent manager!


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## Uncle Festivus (7 January 2013)

sydboy007 said:


> BillM
> _What was happening in the past was people were turning 55 and chucking the job in. _
> Easy solution to this.  Make access to super from age 65.  Also stop lump sums over 20% of the balance.  I don't see why someone should be able to take all their super, pay off loans, buy a new car, head off overseas, then expect the tax payer to give them a full pension.




This 'concept' really irks me! It's my money so I should be able to do with it as I please, even taking a lump sum. The problem is that the government then gives those who have blown the lot a pension, not the fact that they can get a lump sum. Some people are responsible so don't penalise them for the wrongs of others or government. It should be implicit that if you take a lump sum and booze it up the wall then theres not going to be a pension at the end of it - you'll have to make do, as Jenny does, on $35 a day dole?


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## sydboy007 (7 January 2013)

Uncle Festivus said:


> This 'concept' really irks me! It's my money so I should be able to do with it as I please, even taking a lump sum. The problem is that the government then gives those who have blown the lot a pension, not the fact that they can get a lump sum. Some people are responsible so don't penalise them for the wrongs of others or government. It should be implicit that if you take a lump sum and booze it up the wall then theres not going to be a pension at the end of it - you'll have to make do, as Jenny does, on $35 a day dole?




Great in theory

But when dear old Granny Smith ins on Today Tonight explaining how she's dumpster diving to get food, I can't see that policy working.

Far better to stop people from being able to blow their super in the first place.

The fact remains the current super system is costing the budget more than if the Government was paying full pensions.

To me spending more on solving a problem than the problem costs is not good policy.

The way I see it is:

In the magical land of Oztralia the Government has set up a retirement fund for everyone.

All are compelled to put 9% of their income into this fund.

The Government then will contribute into those accounts as well.  A poor person on $30K a year will get around $600 a year, while someone on $500K gets around $13,700 a year.

So someone who is likely to be able to fund their retirement, and would have the kind of assets that will stop them receiving a pension in their old age, is paid 75% of the pension each year to not receive it.

I really do scratch my head as to how this is money well spent.


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## McLovin (7 January 2013)

sptrawler said:


> You really need to get a grip, the rich don't need super, everything is in trusts and companies.




That's not true at all...



> Just under a quarter (23.6%) of SMSFs hold between $500,000 and $1 million in assets.
> 
> The remaining quarter-plus (28.9%) have more than $1 million in fund assets with just over 11% of all SMSFs holding more than $2 million in assets. Interestingly, 1.8% of all SMSFs (around 8,600 SMSFs) have fund balances worth $5 million or more.




SMSF's are the greatest tax shield available in Australia. Just look at the top 20 shareholders in any small/mid cap company and there's usually at least a couple of SMSF's.


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## Julia (7 January 2013)

sydboy, have a look at this thread:
https://www.aussiestockforums.com/forums/showthread.php?t=2737&highlight=tags

It explains how to use the quote tags to easily differentiate your remarks from those of others whom you are quoting.  Simpler for you with your extremely long posts and easier for those of us who are prepared to at least skim over these long missives.

Most members will recall a member, no longer with us for some months, with an excessively long multisyllabic nic who had a style and political philosophy pretty much identical to that of sydboy., together with the dogmatic attitude and very long posts.  Can someone remember his name?


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## sydboy007 (7 January 2013)

Julia said:


> sydboy, have a look at this thread:
> https://www.aussiestockforums.com/forums/showthread.php?t=2737&highlight=tags
> 
> It explains how to use the quote tags to easily differentiate your remarks from those of others whom you are quoting.  Simpler for you with your extremely long posts and easier for those of us who are prepared to at least skim over these long missives.
> ...




How am I being dogmatic?

My posts are generally long because I actually provide a reasonable amount of information to back up my position.  I take more notice of someone who's willing provide evidence for their position.

I suppose I could follow some others on here and just say "your wrong", "must be on the grog", "must be a green supporting lefty".

Does the Tea Party actually drink tea??

Could you do me the courtesy of answering this question:

If it's cheaper to pay the pension to everyone than provide super tax concessions, then which is the better policy?


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## sydboy007 (7 January 2013)

for anyone who's interested Rumplestatskin at macrobusiness has an interesting article titled The pre-saving myth of superannuation.

Quite informative.

Hopefully I wont be shot down for a < 30 word post.


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## sptrawler (7 January 2013)

sydboy007 said:


> How am I being dogmatic?
> 
> 
> Could you do me the courtesy of answering this question:
> ...




If that were true, the government would tell everyone to pull their money out and pay a pension.


By providing a concession people keep it in super, otherwise like I've said before why bother?

In super all earnings are taxed at 15%(in the accumulation phase), outside of super a couple can earn almost $40k before paying any tax.

Also with regard your suggestion of capping withdrawls at 20%, that could only be done logically on the concessionally treated component. People would pull the after tax component out., it is their money.


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## DocK (7 January 2013)

I'm no expert - but in my simplistic reasoning a lot of it comes down to incentives.  If there is no incentive for me to put money aside into super, for instance if I knew I was going to get a pension anyway, then why would I do so?  I might as well do like large segments of the community do and blow the lot on travel and luxuries with no care for the future - why worry if I'm guaranteed a pension.  Maybe I'd decide the pension may not be enough, and I'd save a litte to supplement it - but the reason I, and a lot of people around my age, put money aside for our retirements is the lack of confidence that a pension will exist and the unwillingness to live on a pittance if it does.  If I'm therefore spending all my excess income, rather than putting some into my smsf, then the ATO gets a little more tax from my gross income, but does without the 15% contributions tax and the ongoing tax on the earnings my smsf makes on it (hopefully) for several years until I can retire and withdraw it.  I'd much rather see incentives to contribute to super enhanced and the automatic entitlement to an aged pension made tougher - maybe that would encourage more people to take on some responsibility for their own retirement years.  

We're still at a point where the older portion of the workforce did not benefit from compulsory super from the beginning of their working lives.  I can't recall when it was introduced, but eventually almost everyone in the workforce will have super funds with at least the bare minimum contributed by their employers - wouldn't it then make sense to start cutting back on the aged pension or making the eligibility criteria tougher?  Wasn't that the point of the compulsory superannuation guarantee?


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## medicowallet (7 January 2013)

Sorry syd,  I guess have to disagree on our definitions of "very high" income earners, of which imo someone on $100k-$180k per year is not....


Also, I think that you misunderstand the barriers to putting extra into super as outlined above quite well by another poster.   I would LOVE to put lots more into super, but cannot without penalty, therefore there is only limited benefit available to the individual.

You also fail to understand that to receive benefit, you need to be paying higher marginal rates, so I am not feeling very sorry for the people on lower marginal tax rates if they do not earn as much, as they have opportunities to make sacrifices in the effort to do so.

The socialists have to balance the fact that very high income earners can use the stupid tax deductions elsewhere, whereas super has a longer term benefit.

MW


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## white_goodman (7 January 2013)

define fairness... what a loaded term.. they think they have struck fairness in France recently... the 'rich' have judged with their feet how 'fair' it is..

tax concession or subsidy implies that all money is govts and by letting us have more of our own money is immoral or 'unfair'...

its simple you cant change the 'concessions' to super without affecting the 'pool' of super available... simialr to if you raised tax rates too high it would reduce taxable income, it isnt a straight linear relationship, people have incentives and disincentives and react accordingly


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## Bill M (7 January 2013)

sydboy007 said:


> Easy solution to this.  Make access to super from age 65.  Also stop lump sums over 20% of the balance.  I don't see why someone should be able to take all their super, pay off loans, buy a new car, head off overseas, then expect the tax payer to give them a full pension.




They have already cheated us once. When the Super Guarantee came in it was 55 y/o minimum age to access it. Many people were sold to the "put in extra" now and retire with a nice pool of funds at 55. Then along came a change to minimum age. It virtually changed overnight from 55 to 60 and now anyone born after 1962 must wait until 60 before they can draw on their super. All those that signed up to putting in extra with the idea of retiring early were conned. Do you know what happened? People thought stuff it, why should I put in if I can't get it until 60. Can you imagine what would happen if they changed it to 65?

I personally wouldn't put any more in if they tried that on. Why should I be forced to wait another 10 years to get my own money?

I really think that the whole superannuation system in Australia is very good. The current rules are good and encourages people to save for their retirement. I use to think the super system was cr@p years ago, there wasn't much incentive to put in and then the Howard government reformed it and reformed it well. With the co contribution scheme and tax free super after 60 I think it's a great system as is. It all about getting people to save.

Tax them more or make them wait longer and they won't put in and then they will be in the Centrelink queue when they turn 65. That isn't the way to go.


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## banco (7 January 2013)

Bill M said:


> What was happening in the past was people were turning 55 and chucking the job in. They would go out and blow all their super and end up on a government pension in the end. To discourage them from doing this they brought in the TRP. It is a good idea, rather than throwing in the job how about just working 2 or 3 days a week and getting the TRP. It stops the irresponsible from blowing the lot early on and they are encouraged to stay in employment. I think it is a good system. If it was not in place then we would be back to square one where people were retiring at 55 and blowing the lot by 65.
> 
> I will give you an example. Next year my wife turns 55 and she will be entitled to retire and pull out all her super. She doesn't want to do this now because we have planed for her to go on a TRP. She will get a small retirement pension and continue to work part time. If she was not allowed to do this she would probably pull the pin and draw a pension anyway. The Governments view is that it is probably better to give her a little bit of what is hers anyway and continue working rather than she give up her job and blow the lot by 65 and then have to pay her a tax payer funded pension. I might add that because of this policy we are now putting in extra cash into her super policy to maximise the pension. I hope that explains it a bit.




It seems like an easy solution to this would be to make it so you can't access your super until age 65 and have rules about how you can deal with it when you turn 65.  Singapore I believe has pretty strict rules that prevent people from pissing away their retirement accounts.


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## medicowallet (7 January 2013)

banco said:


> It seems like an easy solution to this would be to make it so you can't access your super until age 65 and have rules about how you can deal with it when you turn 65.  Singapore I believe has pretty strict rules that prevent people from pissing away their retirement accounts.




Perhaps this would be a good idea if it only applies to the employer compulsory contribution amount only.

Stop people blowing it all, and stop morons like Storm financial decimating people's retirements by drawing down their super at age 55 and gearing it to the hilt etc.

MW


----------



## Garpal Gumnut (7 January 2013)

I would question the original premise of the thread.

Why should Super be Fair?

Some folk bludge all their lives, spend unwisely, have multiple relationships and **** up their kids.

Why should these pissants have access to a "Fair Super"

gg


----------



## IFocus (7 January 2013)

Julia said:


> sydboy, have a look at this thread:
> https://www.aussiestockforums.com/forums/showthread.php?t=2737&highlight=tags
> 
> 
> ...





How incredibly pompous and personally offensive you can be, Sydboy has turned up here and has some thing to say with facts and credible argument.

If you don't agree debate the issue don't denigrate the person because they don't hold or support your opinion.

Your behaviour likely inhibits others from comment that in turn will affect Joes bottom line.


----------



## white_goodman (7 January 2013)

Garpal Gumnut said:


> I would question the original premise of the thread.
> 
> Why should Super be Fair?
> 
> ...




and what is fair, what is fair for you isnt fair for me vice versa


----------



## Garpal Gumnut (7 January 2013)

white_goodman said:


> and what is fair, what is fair for you isnt fair for me vice versa




Agree.

So why bother to try and make it fair.

gg


----------



## white_goodman (7 January 2013)

sydboy007 said:


> If it's cheaper to pay the pension to everyone than provide super tax concessions, then which is the better policy?




stage 1 thinking once again... imagine how an economy would work under both scenarios


----------



## Garpal Gumnut (7 January 2013)

white_goodman said:


> stage 1 thinking once again... imagine how an economy would work under both scenarios




Sorry I'm a worker.

What is stage 1 thinking?

gg


----------



## banco (7 January 2013)

Bill M said:


> They have already cheated us once. When the Super Guarantee came in it was 55 y/o minimum age to access it. Many people were sold to the "put in extra" now and retire with a nice pool of funds at 55. Then along came a change to minimum age. It virtually changed overnight from 55 to 60 and now anyone born after 1962 must wait until 60 before they can draw on their super. All those that signed up to putting in extra with the idea of retiring early were conned. Do you know what happened? People thought stuff it, why should I put in if I can't get it until 60. Can you imagine what would happen if they changed it to 65?
> 
> I personally wouldn't put any more in if they tried that on. Why should I be forced to wait another 10 years to get my own money?
> 
> ...




Howard's promises were unsustainable (well unless you wanted to see an even bigger transfer of wealth from the younger generation to the baby boomer generations then is already going to occur).


----------



## Garpal Gumnut (7 January 2013)

banco said:


> Howard's promises were unsustainable (well unless you wanted to see an even bigger transfer of wealth from the younger generation to the baby boomer generations then is already going to occur).




I fail to see why you people are so against us boomers.

We had to fight people who were born as far back as the 1880's. 

I have been battoned, arrested, injured and perjorified fighting for the freedoms you now enjoy.

Against racism, apartheid and disadvantage.

Some of my mates fought and died in unjust wars such as Vietnam and were spat upon by the Australian public on their return.

Then I worked.

Unfortunately the social workers and the professional left outflanked us in the 70's and 80's, and since.

Life is tough.

I will fight for my "unfair" super, and spend it all before I die.

Super should not be fair.

Fatarses who did nothing for fifty years should not enjoy the fruits of a golden age, where opportunity was unlimited for those who worked.

gg


----------



## banco (7 January 2013)

Garpal Gumnut said:


> I fail to see why you people are so against us boomers.
> 
> We had to fight people who were born as far back as the 1880's.
> 
> ...




I just think there has to be a recognition that there's a limited pie and we aren't going to be able to keep the baby boomer generation in the manner they are accustomed to without shifting a very large share of government spending to health care for the elderly, aged care and the aged pension.


----------



## Julia (7 January 2013)

banco said:


> It seems like an easy solution to this would be to make it so you can't access your super until age 65 and have rules about how you can deal with it when you turn 65.  Singapore I believe has pretty strict rules that prevent people from pissing away their retirement accounts.






medicowallet said:


> Perhaps this would be a good idea if it only applies to the employer compulsory contribution amount only.



Agree.  But it would be very unreasonable to apply that to the portion of Super contributed by the individual.



Garpal Gumnut said:


> I would question the original premise of the thread.
> 
> Why should Super be Fair?
> 
> ...



Yep, goes to the fundamental concept of whether it actually makes sense to provide for one's own retirement.
We will, however, keep on wanting to be self funded in the knowledge that the government pension will become less and less adequate over time.


----------



## Garpal Gumnut (7 January 2013)

banco said:


> I just think there has to be a recognition that there's a limited pie and we aren't going to be able to keep the baby boomer generation in the manner they are accustomed to without shifting a very large share of government spending to health care for the elderly, aged care and the aged pension.




I'm an existentialist, and would prefer the dosh to go to babies, pregnant girls, and partners.

Just my thoughts.

The elderly should provide for themselves, otherwise they become a chain around the necks of youth.

Look at Japan, a nation of old farts with zero growth.

We have lost this concept since Whitlam and his acolytes decided that social workers were more important in policy planning than workers.

Then maybe I'm a misogynist.

gg


----------



## banco (7 January 2013)

Garpal Gumnut said:


> I'm an existentialist, and would prefer the dosh to go to babies, pregnant girls, and partners.
> 
> Just my thoughts.
> 
> ...




Yes I think we may well end up a giant retirement home.  

This is the way the world ends This is the way the world ends Not with a bang but a whimper


----------



## sydboy007 (7 January 2013)

white_goodman said:


> stage 1 thinking once again... imagine how an economy would work under both scenarios




Could you explain what you mean by stage 1 thinking?

Do you dispute the figures I've quoted?


----------



## sydboy007 (7 January 2013)

Garpal Gumnut said:


> I would question the original premise of the thread.
> 
> Why should Super be Fair?
> 
> ...




If there was no Govt subsidy for super I would agree with you.

But why do 12% of super account holders get 50% of the tax breaks?

If the policy is to maximise the number of people with reasonable savings for retirement, then I think it's logical to stop providing such a big subsidy to those who will have a reasonable retirement anyway.

Do you think it's an efficient use of public funds to provide someone on 500K annual salary (historically at least) 75% of the current pension to enoucrage them to save for their retirement.  Where's the cost savings in that?


----------



## sydboy007 (7 January 2013)

medicowallet said:


> Perhaps this would be a good idea if it only applies to the employer compulsory contribution amount only.
> 
> Stop people blowing it all, and stop morons like Storm financial decimating people's retirements by drawing down their super at age 55 and gearing it to the hilt etc.
> 
> MW




Just as we don't follow the Singaporeans and allow people to use their Super to buy their primary residence.

I'd love to see the Govt allow me to make say up to 5K a year of undeducted contributions to my super with the ability to take it back out if required - the earnings would stay in the fund till age 65

At 40 I'm reluctant to lock my money away that long as it makes achieving my semi retirement goal by age 50 rather difficult.


----------



## sydboy007 (7 January 2013)

white_goodman said:


> define fairness... what a loaded term.. they think they have struck fairness in France recently... the 'rich' have judged with their feet how 'fair' it is..
> 
> tax concession or subsidy implies that all money is govts and by letting us have more of our own money is immoral or 'unfair'...
> 
> its simple you cant change the 'concessions' to super without affecting the 'pool' of super available... simialr to if you raised tax rates too high it would reduce taxable income, it isnt a straight linear relationship, people have incentives and disincentives and react accordingly




Then how about I say that everyone shoudl get exactly the same level of subsidy for their retirement.

Currently those most able to save for it are given the biggest subsidy.

Where is the fairness in giving the top 12% of income earners 50% of the super subsidies??


----------



## So_Cynical (7 January 2013)

white_goodman said:


> and what is fair, what is fair for you isnt fair for me vice versa




That's a bit silly.

There is a concept of universal fairness, 6 people in a life boat and 3 bananas...please give us your spin on what's fair, im thinking half a banana for everyone.


----------



## Garpal Gumnut (7 January 2013)

Garpal Gumnut said:


> Sorry I'm a worker.
> 
> What is stage 1 thinking?
> 
> gg




No answer.



Julia said:


> Agree.  But it would be very unreasonable to apply that to the portion of Super contributed by the individual.
> 
> 
> Yep, goes to the fundamental concept of whether it actually makes sense to provide for one's own retirement.
> We will, however, keep on wanting to be self funded in the knowledge that the government pension will become less and less adequate over time.




+1



Garpal Gumnut said:


> I'm an existentialist, and would prefer the dosh to go to babies, pregnant girls, and partners.
> 
> Just my thoughts.
> 
> ...






sydboy007 said:


> Could you explain what you mean by stage 1 thinking?
> 
> Do you dispute the figures I've quoted?




Still no answer.



sydboy007 said:


> If there was no Govt subsidy for super I would agree with you.
> 
> But why do 12% of super account holders get 50% of the tax breaks?
> 
> ...




Yes.

Because they have supported people, who pay bugger all tax, in a lifestyle of sloth, with their taxes, over many years.

gg


----------



## medicowallet (8 January 2013)

So_Cynical said:


> That's a bit silly.
> 
> There is a concept of universal fairness, 6 people in a boat and 3 bananas...please give us your spin on what's fair, im thinking half a banana for everyone.




I fixed your quote by deleting "life"

That is a bit bloody harsh to the three who actually built the boat while the other 3 were canoodling in a cave nearby.

MW


----------



## sydboy007 (8 January 2013)

Garpal Gumnut said:


> No answer.
> 
> 
> 
> ...




So you're saying everyone who earns under 80K a year is slothful?

You're saying a partner in a marriage decides to work part-time so they spend more time with their children is slothful?

There are many reasons why people are not on high incomes, and from my experiences in life few of them are due to sloth.

The rich already get the lions share of capital gains tax relief, tax effective trusts.

I would say I have a higher average tax rate than most of them.


----------



## Garpal Gumnut (8 January 2013)

So_Cynical said:


> That's a bit silly.
> 
> There is a concept of universal fairness, 6 people in a life boat and 3 bananas...please give us your spin on what's fair, im thinking half a banana for everyone.




Typical socialist.

What about pairing off .

1 banana each for 3 couples.

Make bikinis and budgie smugglers out of the skins.

You socialists are so .... I won't say it.

That is why your ideology sucks.

Say 2 bastards don't want to row.

It is stuck.

Universal distribution is a way to degeneration.

gg


----------



## sydboy007 (8 January 2013)

Garpal Gumnut said:


> Typical socialist.
> 
> What about pairing off .
> 
> ...




How about sticking to the topic rather than slinging insults at strangers.

Better yet, say high to Mrs Pailin next time you're having a Tea Party.


----------



## Garpal Gumnut (8 January 2013)

sydboy007 said:


> How about sticking to the topic rather than slinging insults at strangers.
> 
> Better yet, say high to Mrs Pailin next time you're having a Tea Party.




Sad Syd.

Post the whole post and reply in context, and do not cherry pick.

It was on this thread.

I merely replied to it.

And.

I don't want what you are having at the moment.

We are enjoying a family re-union here and having a ball.

Bugger off you sad sack.

gg


----------



## burglar (8 January 2013)

Garpal Gumnut said:


> Sad Syd.
> 
> ...
> 
> gg




I believe the topic is super!


----------



## Garpal Gumnut (8 January 2013)

burglar said:


> I believe the topic is super!




Agree ,  lets get back to it.

Some silly bastards just post stuff on threads and I reply and then I get done.

It's pure misogyny according to the Macquarie Dictionary and the PM's head honcho McTernan.

I'm a victim.

I'm being bullied.

It's worse than 50 shades of red.

Do you have the Workcover phone number by any chance?

gg


----------



## Bill M (8 January 2013)

sydboy007 said:


> At 40 I'm reluctant to lock my money away that long as it makes achieving my semi retirement goal by age 50 rather difficult.




Then don't put into it, make investments outside of it. That's what I have been doing the last 15 years. It is only now that I am selling off some assets and putting it into super, reason being it's close to cash in time and we both want to draw a pension. If I had to wait 20 years I wouldn't be loading my super right now either. The guarantee money you get is untouchable but everything else is entirely up to you.


----------



## Julia (8 January 2013)

sydboy007 said:


> How about sticking to the topic rather than slinging insults at strangers.
> 
> Better yet, say high to Mrs Pailin next time you're having a Tea Party.






Garpal Gumnut said:


> Agree ,  lets get back to it.
> 
> Some silly bastards just post stuff on threads and I reply and then I get done.
> 
> ...



You will, of course, now have to endure Post Traumatic Stress Disorder as a result of the unkindness shown to you on this forum.
In the meantime, I've at least had a laugh.


----------



## drsmith (8 January 2013)

Like much of our tax stystem, superannuation has become so complex that it is now severly compromised by conflicting interests. Governments either want to tax it more or abuse it through vote buying concessions. Fund managers just simply want to clip the ticket and for the vast majority of workers, it's just to complex.

I would like to see a back to basics approach. It obviously can't happen overnight, but as economic policy, it should be where we are aiming.

1) Abolish all superannuation tax concessions.
2) Provide a non means-tested basic government pension upon reaching retirement age. This retirement age should be flexible depending on overall population longevity and useful working life.

Depending on where the retirement age is set, the result would be a tax savings which could be passed on as lower marginal income tax rates. If people wish to retire early and/or supplement their pension income upon reaching retirement age, then they can provide for it through saving during their working life.


----------



## banco (8 January 2013)

drsmith said:


> Like much of our tax stystem, superannuation has become so complex that it is now severly compromised by conflicting interests. Governments either want to tax it more or abuse it through vote buying concessions. Fund managers just simply want to clip the ticket and for the vast majority of workers, it's just to complex.
> 
> I would like to see a back to basics approach. It obviously can't happen overnight, but as economic policy, it should be where we are aiming.
> 
> ...




I think problem with 2) is if you don't means test it the amount of money you can provide as a result isn't enough for the seniors with nothing to live on while it's a nice bonus for the richer retirees.


----------



## drsmith (8 January 2013)

banco said:


> I think problem with 2) is if you don't means test it the amount of money you can provide as a result isn't enough for the seniors with nothing to live on while it's a nice bonus for the richer retirees.



2) is what provides the incentive to save during your working life to suppliment the basic pension as you are not hit with high EMTR's on other income in retirement that generally result from means tests.

In a broader context, neither measure cannot be looked at in isolation. They together would deliver post retirement income support system in a much simpler way. Aslo, by removing middlemen and crude political incentives, it would be much more efficient.


----------



## Julia (8 January 2013)

banco said:


> I think problem with 2) is if you don't means test it the amount of money you can provide as a result isn't enough for the seniors with nothing to live on while it's a nice bonus for the richer retirees.




New Zealand have a non-means tested age pension.  But it's included in one's taxable income and there is no tax free threshold as there is here.  It seems to work pretty well and has been thus for many years so I presume it's economically viable.


----------



## Judd (8 January 2013)

I've solved any angst over superannuation.  I don't have any.  All my investments are directly in the sharemarket, I don't give a rats about tax and I am close on a six figure income from dividends.  Since I am now a single person without any dependents, I need no more.


----------



## sydboy007 (8 January 2013)

I'm starting to think I should have made this thread title "How do we achieve the goal of retirement income with the greatest efficiency and lowest cost to Government revenue"

I suppose the term fairness can be misconstrued.

The point I'm trying to make is that I think we can agree that current superannuation policy was set up to help us all save for an adequate income in retirement.

I would argue we are now costing the budget more in tax foregone than the aged pension costs.

I would also argue that for the next 20-30 years the majority of people retiring will be receiving at least a part pension, and forecast indicate the number of true self funded retirees is only going to increase by a few percent at best.

So my question is how do we make the saving for retirement as efficient as possible ie the highest retirement income at the lowest possible price.

i would argue the current policy and system is certainly not cost effective, and is going to become a considerable burden to gen x and y as they are funding both the old and new systems with little of the benefits.

Lets not forget the financial industry itself is making close to $30 billion a year out of it - once again a figure pretty close to the current cost of the pension.


----------



## Garpal Gumnut (8 January 2013)

sydboy007 said:


> I'm starting to think I should have made this thread title "How do we achieve the goal of retirement income with the greatest efficiency and lowest cost to Government revenue"
> 
> I suppose the term fairness can be misconstrued.
> 
> ...




Just post a new thread mate.

Fairer to me = sharing it with crusties and lazy bastards, and I'm buggered if I'll ever do that.

The day I have to share my super or a mini van on a guided trip to a shopping centre via a disabled parking spot with a bloody social worker is probably the day I'll take the Socratic option. 

That to me would be hell.

gg


----------



## sydboy007 (8 January 2013)

Garpal Gumnut said:


> Just post a new thread mate.
> 
> Fairer to me = sharing it with crusties and lazy bastards, and I'm buggered if I'll ever do that.
> 
> ...




I may end up doing that.

I will ask these questions though

If someone chooses to retire early - at 55 or 60 if you are entitled to - should they feel they can access the same level of pension as someone who works all the way through to 65 and has save a lot more?

If someone still has a mortgage and rather than taking a super pension uses their super to pay off the mortgage and then gets a full pension - is this fair on those who were more frugal and paid off the mortgage and use their super as a retirement income?

The present system allows people to build up massive wealth within super, while accumulating large private debts and then to turn what should be retirement income into a payment for those debts.  These same people then feel entitled to a full or part pension.  Why should I have to pay that for them?

For a smart person who wants to own their own property, it seems you can salary sacrifice the maximum into super, pay interest only on the home loan, and then use funds that have been significantly paid for by other tax payers who don't milk the system.

i see it as no different to someone loosing their job, selling all their shares and assets to pay off the mortgage then expect to get the dole because they have nothing else to provide and income.

I don't care if some people don't do this, others do.  These kinds of loopholes in the system need to be closed.  Rules are generally not for the honest, rather for the ones who wont play with a reasonable level of decency.


----------



## FlyingFox (9 January 2013)

Can't comment on the fairness. 

The reason it may not change is that it is in the governments best interests to offer these concessions. 

1) Since the higher income earners are significantly increasing their super balances, more money stays in Oz super funds that is invested back into oz stocks and bonds. This goes back to the reasons mentioned before why compulsory super was created in the first place.

2) The high income earners are also more likely to employ tax reduction strategies as mentioned earlier. Better to get at least 15% ....?

3) I guess most importantly, the money stays in OZ and is at least taxed at 15%. So easy to "invest" overseas and in tax havens.

So while you are right about the cost to the economy, the measured cost is relative to full tax received from this super. This will certainly not happen so it would be good to see how much the cost is when discounting for some of the above points.


----------



## sptrawler (9 January 2013)

sydboy007 said:


> So you're saying everyone who earns under 80K a year is slothful?
> 
> You're saying a partner in a marriage decides to work part-time so they spend more time with their children is slothful?
> 
> ...




Well Syd, from someone who grew up in a poor familly to another.
You get out what you put in.


----------



## sydboy007 (9 January 2013)

FlyingFox said:


> Can't comment on the fairness.
> 
> The reason it may not change is that it is in the governments best interests to offer these concessions.
> 
> ...




1 - I don't see buying shares as an investment per se.  Buying new issues of shares, like the recapitalisation of some companies during the GFC, is what I would call an investment, or buying into an IPO, or buying corporate debt used to invest in the company's growth.

2 - This is true.  How effective it would be, and how much risk they were willing to take is the question.  A bit more might be spent on consumption, which would increase economic growth.  A bigger economy would be able to fund pensions easier, at least in theory.

Still, I would like to see some form of financial penalty to stop people accessing their money early.  If I understand it correctly working 2 years longer will extend your super for 5 years, and that's after age 60.  If your hand's in the cookie jar at age 55 then the reduction in the amount of super you will accumulate would be quite large - compound interest means the last few years of earnings should generally be your largest.

I'm sure there would be some way to come up with a discounted cash flow model for the difference in super balance if you access it early, and then come up with a suitable % reduction in the maximum Govt pension you can receive.  that way those willing to maximise their super balances aren't subsidising those that do.

I'd also love some legislation enacted so that fees need to be itemised on semi annual fund statements.  At the moment there is little to no transparency.  The ticket clippers would hate it, but I reckon if people saw $800-1000 in fees being ripped out of their fund they would question why and hopefully look around for a better deal.


----------



## Bill M (9 January 2013)

sydboy007 said:


> Still, I would like to see some form of financial penalty to stop people accessing their money early.  If I understand it correctly working 2 years longer will extend your super for 5 years, and that's after age 60.  If your hand's in the cookie jar at age 55 then the reduction in the amount of super you will accumulate would be quite large - compound interest means the last few years of earnings should generally be your largest.




You do realise there is already a taxation penalty for drawing out super before age 60 don't you? It really is starting to get on my goat that people/governments think they have the right to dictate when I can and can not have access to my own money. I have been working on a plan for the last 20 years to access my super at age 55. I abided by the rules set out 20 years ago, why should I be forced to wait longer now?

Just remember it is my cookie jar, I paid for it, I baked the cookies and I will eat them whenever I feel like it.

By the way a true Self Funded Retiree is someone who is totally reliant on ones self financially. In other words, not draw a government pension of any kind.


----------



## sydboy007 (9 January 2013)

Bill M said:


> You do realise there is already a taxation penalty for drawing out super before age 60 don't you? It really is starting to get on my goat that people/governments think they have the right to dictate when I can and can not have access to my own money. I have been working on a plan for the last 20 years to access my super at age 55. I abided by the rules set out 20 years ago, why should I be forced to wait longer now?
> 
> Just remember it is my cookie jar, I paid for it, I baked the cookies and I will eat them whenever I feel like it.
> 
> By the way a true Self Funded Retiree is someone who is totally reliant on ones self financially. In other words, not draw a government pension of any kind.




No penalty if you do a TRP

No problem with you accessing your own money, just don't feel entitled to my taxes when your money's run out.


----------



## Bill M (9 January 2013)

sydboy007 said:


> No penalty if you do a TRP




You are wrong. Your withdrawals from a TRP are taxable at your marginal rate, however they give you a 15% tax offset on taxed sources.

ATO Source: 
---
if you've reached your preservation age and are less than 60 years old,* the taxable part of your income stream will be taxed at your marginal tax rate*. If your income stream is paid from a taxed source, you will also receive a tax offset equal to 15% of the taxable part of the income stream

link: http://www.ato.gov.au/individuals/content.aspx?doc=/content/74219.htm&pc=001/002/064/007/007&mnu=0&mfp=&st=&cy=
---

So sydboy, how much more do you want to penalise the saver? They will already be paying the same taxes as those on salary.


----------



## Julia (9 January 2013)

Bill M said:


> You do realise there is already a taxation penalty for drawing out super before age 60 don't you? It really is starting to get on my goat that people/governments think they have the right to dictate when I can and can not have access to my own money. I have been working on a plan for the last 20 years to access my super at age 55. I abided by the rules set out 20 years ago, why should I be forced to wait longer now?
> 
> Just remember it is my cookie jar, I paid for it, I baked the cookies and I will eat them whenever I feel like it.
> 
> By the way a true Self Funded Retiree is someone who is totally reliant on ones self financially. In other words, not draw a government pension of any kind.



+1.


----------



## Ves (9 January 2013)

Bill M said:


> You are wrong. Your withdrawals from a TRP are taxable at your marginal rate, however they give you a 15% tax offset on taxed sources.
> 
> ATO Source:
> ---
> ...



Just remember there are two sides to this.

You are correct about the tax coming out - but it is worth mentioning that if you have a TRIS (or as you called it TRP) you are also paying no tax inside the fund on the investment earnings that are applicable to the pension.

Some people start a TRIS / TRP for the sole purpose of tax minimisation. Of course this doesn't work under all scenarios, but it commonly does.

My post is intended to be completely objective - I am not taking sides in this debate as I am really unsure of my own thoughts at this point in time.


----------



## FlyingFox (9 January 2013)

sydboy007 said:


> 1 - I don't see buying shares as an investment per se.  Buying new issues of shares, like the recapitalisation of some companies during the GFC, is what I would call an investment, or buying into an IPO, or buying corporate debt used to invest in the company's growth.
> 
> 2 - This is true.  How effective it would be, and how much risk they were willing to take is the question.  A bit more might be spent on consumption, which would increase economic growth.  A bigger economy would be able to fund pensions easier, at least in theory.
> 
> ...




1) Well I was thinking more along the lines of corporate and government bonds. While it is true that a lot of money in super is in equities, people at the higher end of balances are also more likely to be looking at capital preservation strategies rather than earning capacity. Heck it might also be the best ways to do estate planning etc.


----------



## Garpal Gumnut (9 January 2013)

Bill M said:


> You are wrong. Your withdrawals from a TRP are taxable at your marginal rate, however they give you a 15% tax offset on taxed sources.
> 
> ATO Source:
> ---
> ...




Well said Bill.

Taxation and Super cannot be compared to Social Welfare.

The last is given as a safety net.

gg


----------



## sptrawler (9 January 2013)

Bill M said:


> You do realise there is already a taxation penalty for drawing out super before age 60 don't you? It really is starting to get on my goat that people/governments think they have the right to dictate when I can and can not have access to my own money. I have been working on a plan for the last 20 years to access my super at age 55. I abided by the rules set out 20 years ago, why should I be forced to wait longer now?
> 
> Just remember it is my cookie jar, I paid for it, I baked the cookies and I will eat them whenever I feel like it.
> 
> By the way a true Self Funded Retiree is someone who is totally reliant on ones self financially. In other words, not draw a government pension of any kind.




This is to answer Sydboy, not a response but in support of Bill

I am under 60, retired and am living on savings, it makes more sense than drawing a pension at this stage.
I also have a friend who retired 5 years ago at 55, he has only just commenced an account based pension at 60.
I tend to think your assumptions are somewhat flawed, changing your fund from accumulation to pension has ramifications.
For a smart young 40year old, you really do need to make sure you are not burning a bridge you may have to cross.
Just because someone is trying to manipulate outcomes, by throwing around numbers doesn't mean it is to improve your situation.
Maybe the outcome they want, you haven't even dreamed of.

By the way I think superannuation was the best thing Labor has ever done for the 'average working class person'


----------



## Garpal Gumnut (9 January 2013)

sptrawler said:


> This is to answer Sydboy, not a response but in support of Bill
> 
> 
> By the way I think superannuation was the best thing Labor has ever done for the 'average working class person'




good post trawler. Agree.

gg


----------



## Bill M (9 January 2013)

sptrawler said:


> By the way I think superannuation was the best thing Labor has ever done for the 'average working class person'




+1 in a big way.


----------



## sptrawler (9 January 2013)

Sydboy, just a PS to the previous post.
ALL the people I personaly know who are self funded or expect to be self funded, without exception expect to never recieve a government pension.
The only people I know who talk about the government pension, are the ones that have not had a plan in place and are now hitting 50 and realisation hits.
Maybe you should be pushing for "anyone who hasn't enough capital cannot withdraw amounts over x% "
However this leads to the problem 'Joe average' has. One of my nearest and dearest friends is going through a marriage break up, he is 57.
During our chat he mentioned he hopes she doesn't take some of his super as it is nearly $100k. So are you saying a normal guy, can't withdraw that to possibly pay off a mortgage, because he might get a pension.
No he should be able to draw 4% that is $4000 plus full pension, plus rent assistance, plus welfare housing.
Seems like trying to fit a square peg in a round hole to me.
However Labor recently have been very adept at trying to do this.


----------



## sydboy007 (10 January 2013)

Bill M said:


> You are wrong. Your withdrawals from a TRP are taxable at your marginal rate, however they give you a 15% tax offset on taxed sources.
> 
> ATO Source:
> ---
> ...




I stand corrected 

Was thinking of those who are 60+


----------



## sydboy007 (10 January 2013)

sptrawler said:


> This is to answer Sydboy, not a response but in support of Bill
> 
> I am under 60, retired and am living on savings, it makes more sense than drawing a pension at this stage.
> I also have a friend who retired 5 years ago at 55, he has only just commenced an account based pension at 60.
> ...




Glad you've been able to get your finances sorted to allow you do have an early retirement.

I suppose my main argument is superannuation was set up to help with the looming crunch from the bulge of boomers retiring and the dependency ratio sky rocketing over a short period of time.

Most people who make it to age 65 have a good chance of making it past 85.  The avg life expectancy rates are skewed to the low side - infant mortality and death in teen years are what brings it down.  If you make it to 25 then ya looking at least 3 years over the avg, at 65 it's around 5 years.

So if the majority of people at age 65 have a good 20 years ahead of them, and at half will make it past it, then somehow the Govt needs to come up with a solution that stops people taping into it too early, without unduly restricting those who are in the position to not need to draw a Govt funded pension for their retirement.

Being some years away from retirement I have found it interesting with some of the issues and ideas people have brought up.

While I agree the concept of super and forcing people to save for their retirement was a great idea, I now question if we are making the solution more expensive than the problem.

Seems like at least for the last decade the tax foregone on super is more than the cost of the pension.  If anything the difference between the two is widening.  How long will it take before the balance swings to a cost saving?

maybe my argument would be easier to push if instead of tax breaks it was an easier to see Govt deposit into accounts on an annual basis.

There does need to be incentive for people to top up the base employer rate of super for those on lower incomes, but the fact is if 50% of the super tax benefits benefit just 12% of account holders, then I just don't see super being particularly effective at minimising the costs of retirement for all tax payers.


----------



## sydboy007 (10 January 2013)

sptrawler said:


> Sydboy, just a PS to the previous post.
> ALL the people I personaly know who are self funded or expect to be self funded, without exception expect to never recieve a government pension.
> The only people I know who talk about the government pension, are the ones that have not had a plan in place and are now hitting 50 and realisation hits.
> Maybe you should be pushing for "anyone who hasn't enough capital cannot withdraw amounts over x% "
> ...




Your friend is at least lucky they changed the law to allow the splitting of super.  Before that the man was usually left destitute with his super while the wife got pretty much all the other assets outside of it.

At what point is the tax payer meant to be there to help in retirement?  As the buddhists say s*&t happens.  Do we need a 5 page retirement survey to determine if you don't have adequate savings due to misfortune or poor planning?

The money in your super account is your money, but it is also has a large chunk of tax payer funded subsidy thrown in.  If someone uses their super as a lump sum to pay off personal debt, should they then be entitled to a bigger Govt funded pension?  IF someone takes a lump sum to buy a new car and has a holiday, should they be entitled to a higher Govt funded pension?

Where does personal responsibility end and tax payer begin?

I would also argue that for a lot of Gen X, super is not a priority because the mortgages are so much bigger than anything the boomers generally had to worry about.  I do wonder how they will cope when they get into their 60s.  I suppose upping the retirement age to 67 will help to a degree.


----------



## sptrawler (10 January 2013)

sydboy007 said:


> Glad you've been able to get your finances sorted to allow you do have an early retirement.
> 
> There does need to be incentive for people to top up the base employer rate of super for those on lower incomes, but the fact is if 50% of the super tax benefits benefit just 12% of account holders, then I just don't see super being particularly effective at minimising the costs of retirement for all tax payers.




What I think Sydboy is the crunch isn't going to come from my generation, but from yours.
My generation knows how to do without, knows how to sacrifice.
It wasn't luck that has placed me in a position of being self funded. It was seeing how hard life was for my parents with nothing, renting fridges and furniture etc.
Mate I left school at 15, had three kids by 25, four by 30. Never had handouts or won lotto.
No my first house was one I bought as a demolition job, they chopped it in half, threw it on a truck and re stumped it on my block.
I've never looked for government handouts andI'm sure I'll be funding your retirement before your funding mine.lol


----------



## sydboy007 (10 January 2013)

sptrawler said:


> What I think Sydboy is the crunch isn't going to come from my generation, but from yours.
> My generation knows how to do without, knows how to sacrifice.
> It wasn't luck that has placed me in a position of being self funded. It was seeing how hard life was for my parents with nothing, renting fridges and furniture etc.
> Mate I left school at 15, had three kids by 25, four by 30. Never had handouts or won lotto.
> ...




Considering I've paid at least 400K in taxes so far during my limited working life I doubt you'll need to fund my retirement.

Somehow I fear the discussion has moved off course a bit.

Or maybe I'm just speaking to the very small minority who've taken the tough decisions to fund themselves in retirement.

The truth is few are or will do that over the next couple of decades.

i just wonder how long we can afford to give out more in tax cuts on super than we save on pension payments.

The logic just isn't there for me to spend more on fixing a problem than the problem costs.


----------



## medicowallet (10 January 2013)

sydboy007 said:


> Considering I've paid at least 400K in taxes so far during my limited working life I doubt you'll need to fund my retirement.




So you are pretty much on par now for what you have consumed for your lifetime on this planet?  (actually probably not at around $20k per year of working life, and $10k per year actual life)


Wait until the oldies start demanding better services with their voting power, and then you will see what real taxes are (and bracket creep will demolish any payrises the workers of the day gain)...  time will tell.

MW


----------



## sptrawler (10 January 2013)

sydboy007 said:


> The money in your super account is your money, but it is also has a large chunk of tax payer funded subsidy thrown in.  If someone uses their super as a lump sum to pay off personal debt, should they then be entitled to a bigger Govt funded pension?  IF someone takes a lump sum to buy a new car and has a holiday, should they be entitled to a higher Govt funded pension?
> 
> Where does personal responsibility end and tax payer begin?
> 
> I would also argue that for a lot of Gen X, super is not a priority because the mortgages are so much bigger than anything the boomers generally had to worry about.  I do wonder how they will cope when they get into their 60s.  I suppose upping the retirement age to 67 will help to a degree.




Well lets look at that statement. My friend has $100k in super which is made up of his contributions over 20years.
If we ignore the fact its earnings are taxed at 15%, because due to the gfc the earnings are probably cancelled out.
Therefore on the $100k he has paid $15k contribution tax, then one could assume the tax payer has lost out on approx $15k income tax revenue (as most average income earners pay approx 30% tax overall).
Therefore you are making a case, that the employee foregoes income, that is used to improve the countries fiscal position. 
The trade off for the $15k tax concession is he has no right to any or a minimal amount of the $100k?
Can't wait to see how it works out for you Syd.
Here's a tip, to have a comfortable, I'm talking $50k a year retirement. 
You need about $2m, to allow for the ups and downs and the losses. That's to be self funded and not require government assistance and using conservative, capital secure investment, that allows for inflation.
There isn't many people with that amount, so they will at some time require government support.
However berating the ones that are savers doesn't help, they at least tried.
Best bet mate, get parachuted in to a safe seat and strap yourself in, never to be moved.
Indexed tax free pension for life yeh. Great if you can get it.

Otherwise, if you're 40 and want to retire self funded at 55 without needing a pension.
You will need about $4m returning 4-5% and own your house.
See how that works out for you.

The above assumptions are on an underlying inflation rate of 4-5%.
These are my thoughts only.


----------



## Julia (10 January 2013)

sydboy, you have written now hundreds of words about how inequitable the Super system is.
I have asked the question before, and you've not responded - as is your right, of course.

But one has to wonder whether you are or will be taking advantage of the available tax concessions for Super in order to fund your own retirement?

Just curious about how much you apply in your own life what you espouse for the general population.


----------



## sptrawler (10 January 2013)

Julia said:


> sydboy, you have written now hundreds of words about how inequitable the Super system is.
> I have asked the question before, and you've not responded - as is your right, of course.
> 
> But one has to wonder whether you are or will be taking advantage of the available tax concessions for Super in order to fund your own retirement?
> ...




That is a great question, Julia.
 I've been a bit fixated on trying to explain the reasoning behind encouraging people to become self funded, it is difficult, but with sacrifice can be achieved.
It will be interesting to hear Syd's resolve.
Maybe he can look for a parachute and a safe seat, then it's our problem.
Nothing like standing in the ivory tower telling the plebs to suck it up.lol


----------



## sydboy007 (11 January 2013)

Julia said:


> sydboy, you have written now hundreds of words about how inequitable the Super system is.
> I have asked the question before, and you've not responded - as is your right, of course.
> 
> But one has to wonder whether you are or will be taking advantage of the available tax concessions for Super in order to fund your own retirement?
> ...




I suppose all I can say is I don't make any voluntary contributions to Super.

As it stands there's no legal way to reduce the amount of tax subsidy I get.  I'm getting the minimum level.

My question still stands - if it's going to cost twice the cost of the pension in 2015-16, then is the current super system the most efficient way to fund retirement income?

Is it efficient to spend 50% of 35B on just 12% of super account holders?

I would love to be able to change fairer to efficient for this thread title.  That is the crux of my argument.


----------



## sptrawler (11 January 2013)

sydboy007 said:


> I suppose all I can say is I don't make any voluntary contributions to Super.
> 
> As it stands there's no legal way to reduce the amount of tax subsidy I get.  I'm getting the minimum level.
> 
> ...




Well Sydboy, you are the sort of person, the government doesn't want.

1. You don't make any voluntary contributions to super, therefore the government don't get any say in it and the banks don't get to control it for the next 20years.

2. You will probably get a loan to negative gear a house or shares, that you will get a tax deduction on, which will drive already high house prices higher. Also reduce your taxable income, therefore the people in super paying 15% on their earnings are subsisising your wealth creation and tax minimisation.

3. You will probably be in a situation in 20years where you have paid off one maybe two properties as well as your own. If you have sacrificed and been discilplined. Two houses in todays $ will return you approx $800/wk after costs. Which isn't much better than the pension, so you will probably qualify for part pension.

4 So is it better for the country to have people employing tax minimisation wealth creation, with borrowed funds sourced overseas? 
Or have a system where you are incouraged to put your after tax money away so it can be used to fund productive growth.
 For the use of that money, which you paid tax on when you earn it and while it is earning in the fund. You get what is left tax free.
As I said earlier if there is no tax break why would you do it? You would just gear up and cost the tax system while you create wealth with non productive debt.

Sometimes it is worth looking past the blurb the papers are feeding out and read who is driving the push. Then think about the ulterior motive.


----------



## sptrawler (12 January 2013)

So getting back to super, can someone like Sydboy, who actually started the thread, address why super is unfair.
When compared to tax minimisation stratergies, like negative gearing. This effectivelly takes the tax payer down several tax brackets.
At least with super the government have some control on the outcomes, by legislating limits on contributions.
So how much tax is lost through unlimited negative gearing.LOL 
Which if you aren't putting after tax contributions into super, is the most effective vehicle for wealth creation.
Maybe we should make a thread how do we make negative gearing fairer? On the same basis.


----------



## sydboy007 (12 January 2013)

sptrawler said:


> Well Sydboy, you are the sort of person, the government doesn't want.
> 
> 1. You don't make any voluntary contributions to super, therefore the government don't get any say in it and the banks don't get to control it for the next 20years.
> 
> ...




1 - i do now run my own SMSF and intend to grow the largest balance I can.  I als want to retired before I can access my super so don't plan to make an extra contributions.

2 - I've never negatively geared a property or shares.  If I had my way I would see that negative gearing was quarantined to the asset it is used to fund.  Am sure that would stop the tax arbitrage that goes on now.  Would also cause people to seriously reconsider investments that loose as much money as most IPs do these days.  Should also put a dampener on asset price inflation.

3 - Pretty much all of us will end up on a part pension.  Few of us have the incomes or the luck to invest in FMG at 13c a share.

4 - To me it is not rational to spend more on solving a problem than the problem costs.  Put it into perspective - in 2015-16 we will spend around 80B on retirement income - aged pension + tax forgone on super.  seems like a lot of money to me.

I think for the majority we'd have been better off putting the money into a SWF similar to what the Singapore Govt does, and then have a goal of providing a pension of say 35K in todays $.  Govt could then focus the limited resources available to achieve this.

Those who's incomes will allow them to provide a much higher level of income in retirement can do so outside of super.  If they want to risk gearing up their investments, then that's their choice.  I would argue the lower loses on super tax would be available to fund income tax cuts, making it easier to build wealth outside super as well.


----------



## sptrawler (12 January 2013)

I agree with a lot of your sentiments, however I feel the demonising of super is being driven by super funds that for all intents and purposes may be insolvent.
I feel this is the main driver behind the push to limit peoples withdrawls. 
My guess is many are run as a ponzi scheme, where there are few people drawing out, the members work on a trust me sytem and it relys on more people putting in than taking out.
As the baby boomers come through and expect to be able to access their super. There will be a bigger push by those with a vested interest in the flaws not showing through, pushing harder to restrict access.
Like I have said there is much more tax effective ways of making money than super.
The tax break when you retire is the only upside for super, take that away and it is a waste of time.
Why the hell would you give your money to someone else, lock it away for your working life, without some end benefit?
I see you said you have started a SMSF, well smarten up. The latest one is the unionrun funds want the government to tax your SMSF on unrealised capital gains.
There is nothing more bendable than statistics, they are put out there to make the unreasonable, palatable.
These are only my feelings and in no way should be taken as fact.


----------



## Julia (12 January 2013)

sptrawler said:


> The latest one is the unionrun funds want the government to tax your SMSF on unrealised capital gains.



What??  Where did you get that from?  Link?


----------



## sptrawler (12 January 2013)

Julia said:


> What??  Where did you get that from?  Link?




Here you go Julia.

Wrong link, I will locate it and post it.lol
http://www.eurekareport.com.au/article/2012/9/25/superannuation-and-tax/smsfs-firing-line
there you go phew.

Like I said Sydboy think about why you are being fed the garbage before you eat it.IMO

Otherwise you will forever be in the pit.

Why you started a SMSF is beyond me, seems the tax breaks can be chucked out in an instant and your money's  tied up for life.
 Hey, but you reckon it's a rort.

Put another way you and the girlfriend can have $400k each earning 5% outside super and pay no tax on $40k income. Then go on a pension, why bother with super?


----------



## Julia (12 January 2013)

Thanks sptrawler.  From the article


> The most disturbing of the ACTU’s proposals is that SMSFs should be taxed on “unrealised capital gains”, to bring them into line with what happens to APRA-regulated funds.
> 
> That is, if a SMSF owned assets that appreciated during the year, then it would have to pay tax on the gains up to June 30 each year.
> 
> ...




That's just a ridiculous idea.  I can't believe they would ever get that through.  It could easily happen that there had been a big run up prior to end of June, SMSFs had no interest in selling the share, they get taxed on that gain, and then in July, whacko, there's a huge fall.  
Just don't think it would ever happen.  Do you?


----------



## sails (12 January 2013)

Julia said:


> Thanks sptrawler.  From the article
> 
> 
> That's just a ridiculous idea.  I can't believe they would ever get that through.  It could easily happen that there had been a big run up prior to end of June, SMSFs had no interest in selling the share, they get taxed on that gain, and then in July, whacko, there's a huge fall.
> Just don't think it would ever happen.  Do you?





Anything is possible with labor/greens having control of both houses.


----------



## sptrawler (13 January 2013)

Julia said:


> Thanks sptrawler.  From the article
> 
> 
> That's just a ridiculous idea.  I can't believe they would ever get that through.  It could easily happen that there had been a big run up prior to end of June, SMSFs had no interest in selling the share, they get taxed on that gain, and then in July, whacko, there's a huge fall.
> Just don't think it would ever happen.  Do you?




Ask Sydboy he seems to have all the answers.LOL

Well o.k I suppose it does beg the question, why have super if people aren't meant to make money from a lifetime investment.
With the above rules and a stock market correction or a real estate revalution. Most off your money would be gone, maybe that's the idea.
Read what is at the bottom of my posts.lol


----------



## Ves (13 January 2013)

Julia said:


> Thanks sptrawler.  From the article
> 
> 
> That's just a ridiculous idea.  I can't believe they would ever get that through.  It could easily happen that there had been a big run up prior to end of June, SMSFs had no interest in selling the share, they get taxed on that gain, and then in July, whacko, there's a huge fall.
> Just don't think it would ever happen.  Do you?



Won't happen because it would be an administrative nightmare.  Could you imagine what happens with illiquid and unique assets like property, collectibles and the like?   The market value of these is fairly arbitrary and easily manipulated!  Why should people who invest in assets with readily available valuations like shares and managed funds be disadvantaged?


----------



## sptrawler (13 January 2013)

The other thing in the SMSF favour is, the labor government represents those who endeavour to look after themselves.
Encourage those who want to get off the welfare treadmill.
But they and the union run super funds want your money.lol
Talk about a conflict of interest.
I think the next 10 years are going to be very interesting, regards super funds.


----------



## sydboy007 (13 January 2013)

sptrawler said:


> Here you go Julia.
> 
> Wrong link, I will locate it and post it.lol
> http://www.eurekareport.com.au/article/2012/9/25/superannuation-and-tax/smsfs-firing-line
> ...




i started my own SMSF because:

* I want to OWN the assets that are going to fund my retirement

* I was sick of getting nothing for money in cash

* I wanted to be able to increase the allocation to fixed interest, but not be forced into pathetic yielding Govt bonds eg I get a 3.4% real yield with my 2025 Envestra ILB, and if I hold to maturity this will add around 0.8% pa to the yield as I bought at a significant discount to the inflation adjusted capital value.

* I was sick of paying fees on a % of assets basis.  I now pretty much have a fixed cost base so over time the % value of my fees will fall.

* I can now see exactly where the growth /decrease of my fund comes from.  An SMSF is the only way to have total visibility of your super assets.

* I decided the only party I can trust to have my best interest as the primary focus, is myself.


----------



## Julia (13 January 2013)

Ves said:


> Won't happen because it would be an administrative nightmare.  Could you imagine what happens with illiquid and unique assets like property, collectibles and the like?   The market value of these is fairly arbitrary and easily manipulated!  Why should people who invest in assets with readily available valuations like shares and managed funds be disadvantaged?



Yes, good point, Ves.


----------



## sptrawler (13 January 2013)

sydboy007 said:


> i started my own SMSF because:
> 
> * I want to OWN the assets that are going to fund my retirement
> 
> ...




You don't own the assetts in your super fund, as you have pointed out the government can change the rules for you to access the investment. In effect you co own the assetts with the government.

As you draw on your funds in retirement, the non concessional component is eroded as you are not contributing. Therefore any money being generated in the fund is classed as concessional. This is then taxed at 16.5% when the recipient and their dependents pass away. Which in effect is a death duty.

To a certain degree you have control over the investments, within the guidelines, however as I have said you can invest outside of super and achieve as good or possibly better outcome.

The only real benefit of super is the tax free status after 60, that is why they don't need to place caps on withdrawls. People are trying to get money into the super, once they have taken it out is is difficult for them to get it back in, especially as they get older.

How do we make super fairer, well if the tax breaks are so good, give the money back to the members and shut super down. Just make the money taxed as normal savings, see how that works.
From your initial statements the government will save a fortune as apparently it is costing them more than they're saving.


----------



## sptrawler (13 January 2013)

Julia said:


> Yes, good point, Ves.




They would just make it so a fund couldn't hold an assett that can't be readily valued. Easy.
Stroke of a pen, you get 12 months or even 24 months to remove it from your fund.


----------



## Garpal Gumnut (13 January 2013)

My advice to anyone over 60, even over 55, with a SMSF is to spend and withdraw as much super in a tax efficient manner as you can, as quickly as you can, and then plan to get government benefits, prescription cards, cheap old folk's home when needed, free public transport, a Gold Camry etc.

In 8 or 10 years time, another ALP Government will be back, people's memories are short, and then they will get rid of SMSF's.

Super is not meant to be fairer.

It was an alternate savings method for working people to provide for their retirement. 

The ALP now see it as a honey pot, for their spendthrift policies, not as a retirement vehicle for independent people.

gg


----------



## sptrawler (13 January 2013)

Garpal Gumnut said:


> My advice to anyone over 60, even over 55, with a SMSF is to spend and withdraw as much super in a tax efficient manner as you can, as quickly as you can, and then plan to get government benefits, prescription cards, cheap old folk's home when needed, free public transport, a Gold Camry etc.
> 
> In 8 or 10 years time, another ALP Government will be back, people's memories are short, and then they will get rid of SMSF's.
> 
> ...




Why don't you say what you really mean GG. 

You certainly have a way of capturing the essence of the thread.


----------



## Ves (13 January 2013)

sptrawler said:


> They would just make it so a fund couldn't hold an assett that can't be readily valued. Easy.
> Stroke of a pen, you get 12 months or even 24 months to remove it from your fund.



They're actually already doing that by really tightening the rules on things like collectibles  (insurance, market valuation each year, additional documentation, blah blah).

It really, really annoys me, because it needlessly makes my job harder. And if my job becomes harder you can gaurantee that you guys with SMSF will be paying me more to do your tax return each year!

Sorry for ranting a bit, but I hate red tape.


----------



## Ves (13 January 2013)

sptrawler said:


> As you draw on your funds in retirement, the non concessional component is eroded as you are not contributing.



Just wanted to comment quickly - I don't think this is the case.  As soon as you hit "pension mode" the percentage of your taxable and non-taxable components crystalise.   These are then set in stone, no matter what you earn or withdraw within your pension account - unless of course you commute (stop) the pension and go back to accumulation mode.

Is this what you meant, sptrawler?


----------



## sptrawler (13 January 2013)

Ves said:


> Just wanted to comment quickly - I don't think this is the case.  As soon as you hit "pension mode" the percentage of your taxable and non-taxable components crystalise.   These are then set in stone, no matter what you earn or withdraw within your pension account - unless of course you commute (stop) the pension and go back to accumulation mode.
> 
> Is this what you meant, sptrawler?




No, you are correct Vespuria, I was thinking more on the 16.5% exit tax on closing and didn't consider the proportioning rule. The ability to commute the pension is a real bonus, rather than having to start another accumulation account.


----------



## sydboy007 (13 January 2013)

Will be interesting to see if the ATO thought bubble on providing a loan to your SMSF as sub economic rates will pass muster.

I can see this being a very effective way of gearing up the fund and bypassing the contribution limits.  Could be an interesting idea if you are aged 55 to provide a 5 year loan to your SMSF on a no interest payments basis for 5 years and then start to make payments to yourself once it's possible to take it back tax free.  Heck it even seems like you could just write off the interest and leave it within the SMSF


----------



## Ves (13 January 2013)

sptrawler said:


> No, you are correct Vespuria, I was thinking more on the 16.5% exit tax on closing and didn't consider the proportioning rule. The ability to commute the pension is a real bonus, rather than having to start another accumulation account.



It's pretty flexible.  You can have as many pensions as you want - but only ever one accumulation account.   If you like you could commute a pension and combine it with your accumulation account to make a new pension that includes both balances too.   There is no penalty for doing this (other than perhaps mixing a high-tax free proportion with a lower tax free proportion if the accounts are different).


----------



## Ves (13 January 2013)

sydboy007 said:


> Will be interesting to see if the ATO thought bubble on providing a loan to your SMSF as sub economic rates will pass muster.



Sub-economic - and even NIL interest according to a recent ATO press release.

Lend your Fund money from a personal stash (no limit) and use it to buy a property using a bare trust arrangement.  Meanwhile you don't have to charge your Fund interest.

I think they will change this pretty soon though - it seems to be at odds with everything else the ATO is doing.


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## sptrawler (13 January 2013)

Ves said:


> It's pretty flexible.  You can have as many pensions as you want - but only ever one accumulation account.   If you like you could commute a pension and combine it with your accumulation account to make a new pension that includes both balances too.   There is no penalty for doing this (other than perhaps mixing a high-tax free proportion with a lower tax free proportion if the accounts are different).




The only down side is government seeing a pool of money. 
They would love to be able to spend it on infrastructure.


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## sptrawler (13 January 2013)

Ves said:


> Sub-economic - and even NIL interest according to a recent ATO press release.
> 
> Lend your Fund money from a personal stash (no limit) and use it to buy a property using a bare trust arrangement.  Meanwhile you don't have to charge your Fund interest.
> 
> I think they will change this pretty soon though - it seems to be at odds with everything else the ATO is doing.




But it certainly stimulates a sluggish housing sector. Hang a carrot out to the smsf to purchase rentals while interest rates are low and rental yields are relatively high.

I think it will be a nightmare when the property is valued for pension purposes. Also the gov may think it better to have smsf as investment property owners, than high income earners negative gearing.


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