Superannuation, the ultimate government cash cow?

[sptrawler]

There is always the option for the Government to nationalise the Industry Funds I would think, as they are not for profit there are no shareholders. I'm guessing it wouldn't be too hard @qldfrog .

Just make them roll it over into the future fund.

 

[qldfrog]

There is always the option for the Government to nationalise the Industry Funds I would think, as they are not for profit there are no shareholders. I'm guessing it wouldn't be too hard @qldfrog .

Just make them roll it over into the future fund.

And fair, all these bastards not paying tax and being richer than the labour electorate...just paroding the news ltd and abc headlines in a couple of years

 

[Ferret]

1. At the moment, someone on $300k who puts money into super, gets a 35% reduction on tax, because instead of paying 50% tax they pay 15%.

I take your point SP, but this isn't right. Anyone earning more than 250k pays 30% contributions tax, so they get 47 - 30 = 17% reduction in tax.

Personally, I'm fed up with changes to the super system. What you are suggesting would make sense if we were starting from scratch, but no way would I want a total reset on a system that I have spent much of my working life planning around.

 

[sptrawler]

I take your point SP, but this isn't right. Anyone earning more than 250k pays 30% contributions tax, so they get 47 - 30 = 17% reduction in tax.

Personally, I'm fed up with changes to the super system. What you are suggesting would make sense if we were starting from scratch, but no way would I want a total reset on a system that I have spent much of my working life planning around.

Good point I forgot about the 250k cap.
I just think they need to sort it out once and for all, it will never stop changing otherwise.
If they had a system similar to the U.K, N.Z and Canada, it is much simpler to administer, the one we have is just a variable pot of money that they will keep changing as needs demand.

 

[Belli]

Good point I forgot about the 250k cap.
I just think they need to sort it out once and for all, it will never stop changing otherwise.
If they had a system similar to the U.K, N.Z and Canada, it is much simpler to administer, the one we have is just a variable pot of money that they will keep changing as needs demand.

$250,000 pa income, married, 2 children

Taxable Income: $250,000
Superannuation Guarantee: $23,750
Tax: $88,167 (Income Tax $83,167, Medicare Levy $5,000)
Refund - last year's PAYG credits $1,861

Income: $250,000
Superannuation Guarantee: $23,750
Voluntary Superannuation Contribution: $100,000
Taxable Income: $346,250
Tax: $131,480 (Income Tax $126,480, Medicare Levy $5,000)
Amount Payable net of last year's PAYG credits: $41,427


Following year will be worse when $44,975 will be payable.

 

[dyna]

The cap will be increased to $1.7m from 1 July 2021 as the December CPI was 117.2.

It's going to be a dog's breakfast in my view with the arrangements for accumulation balances before and after that date as well as income stream where the cap was or is less than $1.6m.

Even a cursory reading of the ATO web-site on the issue will indicate that.

Indexation of Transfer balance cap

How indexation of the general transfer balance cap impacts your personal transfer balance cap.

www.ato.gov.au

On Feb 25th,A.W.OT.earnings figures were released,so the $25,000 concessional/pre-tax contribution cap will increase to $27,500p.a. from Ist July 2021.Non-concessional cap goes up from$100,000 this fiscal year to $110,000.If you're aged 65 to 67, or already started a pension,it get's a bit tricky,(like everything else to to with this great gamble,since Malcolm's big reset, on 1st July 2017) Best to read it(a few times), on the gov's website.

 

[Belli]

Yeah and as a result some made need to take care with the bring forward arrangements for the concessional and non-concessional contributions.

 

[sptrawler]

This sounds very interesting, Vanguard to release a superannuation style product, I guess companies like IOOF will be watching nervously as well as the super funds.

Vanguard hatches bold plan to crash the super party

US investment giant aims to disrupt Australia’s superannuation industry by offering a low-cost, digital-first alternative.

www.theage.com.au

From the article:
Only a year ago, Vanguard launched a “self-invested pension product” in the UK where customers need to contribute just £100 ($179) a month to access 77 ETFs. Members can pick and chose the ETFs in which they invest, with fees of just 0.15 per cent, capped annually at £375.

Vanguard’s Europe head Sean Hagerty told reporters at the time the pension product was “designed to reduce the cost and complexity of saving for retirement”.
A Vanguard spokeswoman confirmed that these ideals will be replicated in Australia.
“Our aim is to launch a plan that combines simplicity, transparency and smart investment to deliver low-cost, high-quality super that can move with members right through life.”

These words would be music to the ears of Assistant Minister for Superannuation Jane Hume. The federal government has launched an ambitious reform agenda to improve transparency, bring down costs and maximise returns for members. Vanguard is well placed to hit on all of those points.

Arian Neiron, managing director of VanEck’s Asia Pacific business, another major provider of ETFs, says: “What Vanguard are doing is going to give the industry funds a run for their money. It’s going to give a low-cost super platform with ETFs,” Neiron says. “ETFs mitigate stock risk.”

Industry expert and independent retirement consultant Amara Haqqani says Vanguard’s super product “makes sense,” especially for young people.

“Particularly for younger cohorts, it’s a compound interest game. The lower fees you pay, the higher your super in the end,” she says.

 

[dyna]

Opposition Treasurer,Jim Chalmers says the pandemic should never have been used as an excuse to enable people(misguided by the Libs?) to withdraw up to $20,000 out of their super.The unit prices of nearly all of the big Industry funds and the not for profits have now recovered from the March 2020 Covid crash. Those lunatic liberal back benchers were no doubt pleased to see the 20 grand ploughed back into the struggling economy,but the hapless punter is never going to catch up on their lost investment.

 

[Belli]

Broadly I agree with the point you have made @dyna. While some made have had to withdraw funds in order to survive, I have the feeling, but not proof, a lot just saw it as easy money to buy a new set of expensive wheels for their SUV or some other similar flimsy excuse.

Now it will be intriguing to see if, in the future, some complain their super "isn't enough." I strongly doubt any will acknowledge that could have been the result of their previous decisions.

Also have heard of a number who freaked out, went to cash (because it's safe which it isn't) and now wondering if they should go back into shares with their super. Um, sure but you're still likely to be behind because you are not going to get that 30% or whatever it was/is back.

I sometimes wonder if it would be better to remove superannuation members ability to choose in times such as March/April last year. Many don't seem to be very good at making two decisions; when to get out and when to get back in. They get both wrong a lot (all?) of the time.

Had cafe meetings with couple of acquaintances lately who had done the bailing out approach and they assumed I did the same. Told them bluntly Nup, bought as much as I could both personally and in the SMSF. There was an awkward momentary hiatus in the conversation but they did ask.

 

[monkton]

I sometimes wonder if it would be better to remove superannuation members ability to choose in times such as March/April last year. Many don't seem to be very good at making two decisions; when to get out and when to get back in. They get both wrong a lot (all?) of the time

I hear you here, but if we go down this road of removing members ability to choose then perhaps next it could be 'have to stay in balanced fund or growth or more bonds depending what 'they' think is appropriate at the time.
While many put in time & research when buying a house or new car, educating themselves about money & markets is a low priority leading to decisions as you described. Media hype & 'gurus' don't help either. Interesting the 'awkard hiatus' you can get when mentioning something along those lines & talk of I'm not interested or too hard. Ummm, okay then.

 

[BlindSquirrel]

I wish I'd just taken the 10k and bought some BTC with it... but I wasn't eligible so I didn't try.
Following rules is for chumps!

 

[over9k]

I know this is U.S based, but here's some data on just how much money has been flowing out of active funds and into passive ones of late:



And I linked this video in another thread:



Long term, if stonks always go up, you have a roughly 8.5% increase per year with mutual funds and 7% with an ETF, so running a leveraged ETF gives you 14% or 21% per year (long term).

I wonder if the money managers are being restricted at a legislative/regulatory level or they're just incompetent. We know that the overwhelming majority of traders don't even beat the market so something tells me it isn't a regulatory rule tying their hands.

 

[Belli]

I wish I'd just taken the 10k and bought some BTC with it... but I wasn't eligible so I didn't try.
Following rules is for chumps!

Yes, but you seem to know what you are doing. Most of the chumps who followed the rules in place most likely don't and in all probability are going to end up worse for wear.

It's what happens and not much can be done to prevent it completely in my view.

 

[qldfrog]

Yes, but you seem to know what you are doing. Most of the chumps who followed the rules in place most likely don't and in all probability are going to end up worse for wear.

It's what happens and not much can be done to prevent it completely in my view.

Anything becoming mandatory create rort,
already as is, tell anyone who could not enter the RE escalator as 10% of his/her salary was diverted to super that he is better off paying his rent and have super fund sucking his money ...

 

[dyna]

This from Treasury's "Retirement Income Review". Super's rise to 12% will generate an extra 1/2 a $ Billion ($500 Mill.) in fees by 2025. That's a hefty whack, considering not even half the population is in paid work.

 

[dyna]

The Liberal government allowed the early release of up to $20,000 from individual superannuation accounts. So, 3 million Aussies pulled well over $36 Billion out of the $3Trillion system.
ASIC reckons a $20,000 withdrawal could lose $43,032 further down the track.Industry Super Australia's best guess was more than twice that amount.Treasury and the regulator queried the $97,214,so ISA reduced it to $79,393...not good at numbers where there's a vested interest,eh? Gratten Institute came up with a $58,000 number and Choice said $49,823.
How many of those 3 million workers will ever make the effort to rebuild their ravaged super accounts? Was that, all they ever had in the savings kitty? A lousy 20 grand.Maybe this is not a rich country,after all.

 

[Humid]

3 million and take off retirees and kids and makes you think how many live week to week but thats what you get in this b/s gig economy where everyones a casual with no benefits whatsover.
Great for big business but the rest are still waiting for the trickle down.

I read somewhere recently that the way countries treat refugees is the way the government would treat you if they thought they could get away with it!

 

[Gunnerguy]

The Liberal government allowed the early release of up to $20,000 from individual superannuation accounts. So, 3 million Aussies pulled well over $36 Billion out of the $3Trillion system.
ASIC reckons a $20,000 withdrawal could lose $43,032 further down the track.Industry Super Australia's best guess was more than twice that amount.Treasury and the regulator queried the $97,214,so ISA reduced it to $79,393...not good at numbers where there's a vested interest,eh? Gratten Institute came up with a $58,000 number and Choice said $49,823.
How many of those 3 million workers will ever make the effort to rebuild their ravaged super accounts? Was that, all they ever had in the savings kitty? A lousy 20 grand.Maybe this is not a rich country,after all.

A 25 year old taking out $20,000, if they have it (maybe some NCC's from an inheritance)
Average annual return on ASX200 is about 9%. Using an ETF and assuming minimal costs.
35 years to preservation (60), but it will change.
$20,000 x (1.09^35) = $408,000.

More modest numbers .... 25 years to go, Annual return 6% will give you ....
$20,000 x (1.05^25) = 67,000.

Irrespective of what numbers you use, one would be missing out on a lot of potential growth.

Gunnerguy

 

[qldfrog]

A 25 year old taking out $20,000, if they have it (maybe some NCC's from an inheritance)
Average annual return on ASX200 is about 9%. Using an ETF and assuming minimal costs.
35 years to preservation (60), but it will change.
$20,000 x (1.09^35) = $408,000.

More modest numbers .... 25 years to go, Annual return 6% will give you ....
$20,000 x (1.05^25) = 67,000.

Irrespective of what numbers you use, one would be missing out on a lot of potential growth.

Gunnerguy

Guy get $20k out and can afford to buy a house instead of renting, get surgery on that knee or get that degree to a better income....
No "one fits all "case.
And if these guys are loosers, well 20k will not make a difference as on the day of retirement, they will be straight to pension: super or not .
And remember
My first super account as a younger me during the first 5y did just break even at a time when term deposits were at 8% a year.....
Thanks suncorp and myriads of useless covers