How do we make Super fairer?

[Julia]

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]

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.

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]

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.

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]

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.

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]

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]

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.

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]

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]

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]

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]

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.

For example, you own $500,000 worth of shares in your SMSF. They appreciate in value to $540,000 over the course of the year. You have to pay tax on $40,000. That’s potentially $4000 in CGT if the assets were held for longer than a year.

APRA-regulated funds must do this already. They need to because they have got tens of thousands, often hundreds of thousands of members, with members coming and going by the thousands each year. The funds themselves need to pay tax to be able to attribute money to members on an after-tax basis.

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]

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]

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]

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]

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]

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?

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]

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]

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.

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]

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]

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]

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

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

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