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Superannuation, the ultimate government cash cow?

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Belli said:
Got the SMSF return back from teh accountants today. Much to my surprise it was down only c 4.5% compared with the previous year.
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I'm up 1.82%, but I have taken out the pension payment, so pretty happy.

Just read this on the internet news, I'm in the SMSF same as yourself, so doesn't affect us but might be of interest to some.

Industry super wants clearer rules to unleash investment​

The sector is pressuring the Albanese government to make changes, and in a new paper lays out the case for more unlisted infrastructure investments.
 
People are starting to cotton on.

The great superannuation lie

Here’s a look at my super balance from a month back. In the past couple of years, next to nothing but fees and losses. I could have used the extra money in the two years, with a young family and a mortgage. I am in my peak spending years, but not yet in my peak
www.macrobusiness.com.au

Why would she want to be poorer now so she can be richer later? Even for households like Jessica’s and mine, who have good working life incomes, super makes little sense in terms of smoothing your lifecycle spending power.
 
sptrawler said:
Why would she want to be poorer now so she can be richer later? Even for households like Jessica’s and mine, who have good working life incomes, super makes little sense in terms of smoothing your lifecycle spending power.
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And view the article in the light of median incomes as per the chart below and realise the $65.5k (tax free) from the ASFA actually equates to $84k before tax and looking at the data provided by the ABS the XLSX for Table 4 shows the median income for persons aged 55-64 is $62k. I've always viewed the ASFA suggested retirement income level as crap as it is based on a best-case scenario and few would even have that net amount pa in their working lives anyway.

Personal Income in Australia, 2021-22 financial year

Regional data on the number of income earners, amounts received, and the distribution of income
www.abs.gov.au

 
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Belli said:
median income for persons aged 55-64 is $62k
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Did some basic crunching based on this where super is involved and when it isn't (Medicare levy included in tax)

Income: $62,000
Super: $6,510
Tax: $11,787
Net: $50,213

Super included in Income.

Income: $68,510
Tax: $14,102
Net: $54.408

Differences:

Increase in tax: $2,315
Increase in net: $4,195
 
I was wondering, did you take the 15% contribution tax off the money going into super?
 
sptrawler said:
I was wondering, did you take the 15% contribution tax off the money going into super?
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No.

I was working only on the basis of net cash in hand which is how many who would prefer not to contribute to super would look at it.

There is a potential danger with median incomes as it covers a range of individual incomes; some high and some low. Very high incomes in a particular bracket can distort it. Simple example. Two individuals. One on $60k and the other on $120k and you get $90k and that describes neither income earner. Plus, depending on their specific lifestyle, the higher earner has a greater opportunity with their savings rate which has the potential for them to have a better outcome no matter which investment they use. Ignoring tax aspects, consider the result if the person on $120k can live off $80k. Maybe the person on $60k can live off $20k but I suspect not.
 
So forgetting medicare

Super included in income
Income $62,000
tax on $62,000 = $5092 + .325 for each $1 above $45k
Tax $10,617
Net $51,383.

Super not included in income.

Income $62,000
Super $6,510 - 15% contributions tax = $976.50 Net $5,533.50
Income less super contribution = $55,490
Tax on $55,490 = $8501.25
Net $46,988.75 + net super $5,533.50 = $52,522.25

Back of the napkin, the person is about $1,200 a year better off for locking the $6,500 up until they are at least 60 years old.
What if that person could choose between super or to salary sacrifice that $6,500, into a Govt approved and co owned PPR? Would they have a better retirement by owning a house?

A close friend recently retired at 67, he worked from 15 years old mainly as a plant operator for local councils, at retirement he was on around $80k. Super at retirement approx $220k.
Would he be better off owning his house, or renting at $400/wk, hard call really IMO, everyone to their own.
He received an inheritance about 5 years ago and bought a house with it, so he is living the dream, full pension, super top up and a house.
Otherwise his super would have only pre paid his rent in retirement, just my thoughts.
 
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sptrawler said:
Would they have a better retirement by owning a house?
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My view is Yes. A lower end, two-bedroom apartment in Wright (Canberra) would rent around $550 per week at present. So if a retiree is happy and can afford close to $30k pa in rent at today's prices, good on them. Gees, public housing is probably rented to tenants for more than $6.5k pa and $6.5k for 30 years is less than $200k anyway. Nothing more than a good deposit on a $600k property - if you can find one in a major capital city which I've been told is pushing it. And moving to regional? Good luck getting medical care.

And in regard to super, we should also keep in mind a number who have super are also receiving a part-pension so there is that to consider.

But if a retiree does have a home and is receiving the age pension, which quite a number are, be very careful of doing the grey nomad thing and renting the house to supplement the Winnebago's running costs. Many will have, or already have gotten, the shock of their lives when they are told their "home" is subject to CGT.
 
Belli said:
And in regard to super, we should also keep in mind a number who have super are also receiving a part-pension so there is that to consider.
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To me that is the crux of the matter, a stroke of the pen can change that.
If the person owns there residence, they are saving the cost of rent for life, super was originally meant to improve a persons retirement by supplementing the pension.
Now it is there to supplement or replace the pension.
What is the next step?
If it was designed to improve a persons retirement, the options should be greater and the Government should get back into building social housing that low income earners can purchase, that would help people and provide jobs and training.
Politicians are full of BS IMO.
Articles from Google:
Does Super replace pension?

In the beginning:
In the late 1980s, superannuation was sold as a supplement to the aged pension. In 1989, the prime minister Mr Hawke said: "The pension will always be there for those who need it, but it will be supplemented by a range of superannuation options."

Fact check: Was superannuation designed to get people off the pension?

Assistant Treasurer Kelly O'Dwyer says that Australia's superannuation system was established as an alternative to the pension. ABC Fact Check takes a look at the history of super.
www.abc.net.au

Now:
To enhance stability in the superannuation system, the Government will legislate that the primary objective of the superannuation system is “to provide income in retirement to substitute or supplement the Age Pension”.
 
It's complex isn't it?

Taken at face value, as at now and its the median, how flash a retirement life-style do you reckon will be achieved on these balances? Jesus, one of my kids (Thanks, Dad) who is not yet 30 has more than 2x in their personal holdings than a current 70 yo has in super.



Superannuation statistics 2022 | Finder

There are 23.2 million super accounts in Australia with assets totalling $3.4 trillion. Find out the latest superannuation statistics.
www.finder.com.au

And APRA has recently release some gorgeous numbers wrapped up in complications.

APRA releases superannuation statistics for June 2022 | APRA

The Australian Prudential Regulation Authority (APRA) has released its Quarterly Superannuation Performance publication for the June 2022 quarter. Key statistics for the superannuation industry as at 30 June 2022: June 2021 June 2022 Change
www.apra.gov.au

It can do your head in going through some of the Excel attachments.
 
I just think low income earners are getting marginal monetary benefit with super and it ties up their money until later in life, where it will no doubt be required to pay the bills they couldn't afford when younger. High income earners get a huge tax relief on money they put into super.
If the purpose of super is to give people a better retirement, the Governments (State and Federal) would help the low income earners far more, by helping them buy their own house.
This would have a many fold benefit, if the buildings were built by the Government it would add housing to the stock that would not otherwise be built, which in turn would reduce the drag of rent and bond assistance and slow the price increases on private dwellings.
It would also reduce the need for negative gearing tax breaks, as fewer low income earners would need to rent .

It just appears to me that the low incomer earners are being scammed with super.
As with unemployment benefits, who is to say in 20 years time if a person has super, it wont become a requirement that is spent before they can access the pension.
All it takes is tough times, an uncompassionate government and the stroke of a pen.
 
sptrawler said:
It just appears to me that the low incomer earners are being scammed with super.
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Not disagreeing with you but there is or was the factor of tax scales.

My late wife and I commenced salary sacrificing when the SMSF was established before 2000. At that time anything over $50k pa was taxed at 48.5% (including the Medicare Levy.) We had paid off our home and salary sacrificed the pre-tax equivalent of the mortgage. The difference in the take-home pay? It was around $10 per fortnight less each and we were receiving a 33.5% tax benefit too.

Inflation adjusted that $50k pa is now $88.6k pa and if a person could salary-sacrifice the equivalent now (let's say it's $1,000 per fortnight although they couldn't as it would result in exceeding the $27.5k pa concessional limit) their take-home pay would be $1,886 compared with $2,522. So a reduction of $636 per fortnight for a tax benefit of 19.5%.

Basically the change in tax scales back in 2000 and the reduction in concessional contribution limit is a big factor inhibiting people from placing more in super on a concessional basis unless they wish to do it on an after-tax basis.

My opinion is, despite all the Gov/Super industry waffle and the increase to 12% SG, a heck of a lot of people, especially those on lower pay scales or in casual employment will not end up with a heap in super and the present $1.7m balance cap will be but a pipe dream for them. It's with that in mind why I have been assisting one of my kids to a greater extent than the others - and the others are aware of it and why.

PS: Also when the change in the tax scales were introduced in 2000, it resulted in our tax going down by over $200 per fortnight each. We salary sacrificed the pre-tax equivalent of that. It's what you could do then without any hardship - on our lives at least. Now it is a case of forgoing quite an amount of bill paying capacity in my view.
 
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The wife and I are in a similar position.
I'm not saying super isn't any good, I'm saying for those on a low income it is next to useless, it would be far more beneficial to them IMO, to have a co ownership agreement with the Government, whereby they could own a home.
The chances of them saving enough in super over their working lives, to buy a home at retirement, IMO is doubtful. Meanwhile they spend their lives working to pay super and rent, just seems counter productive to me, if the objective is to give someone a better life.
Just a thought.
By the way when I started work, earnings over about $35k were taxed at 60%, the father in law never stopped ranting about it.
 
But only when you sell so ....
 

Yeah unless they encounter Div 293 issues, high income get a better deal. I came to the conclusion quite some time ago when looking at my kids situation one was not going to get much from super.

Actually I recall doing some numbers a few years ago and they indicated a person getting $36k pa ff dividends, will still get a tax refund of around $7k.
 
was going to jump up and down, and squawk away about the injustice of it all, because retrospectivity is generally not to be endorsed on principle, then I see that Gerry Harvey has come out and lambasted the govt for wanting to push through changes to the rules. LoL. seems like a fair thing.

Westpac and Harvey Norman shareholders could receive shock tax bills due to the government’s proposed retrospective crackdown on franked dividends funded by capital raisings
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too clever by half...
....and did Jobkeeper get paid back? Hmmm
 
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I posted this with the relevant link yesterday. The proposal was already on the books but the previous Government simply didn't bring the proposed legislation to Parliament. Did the dudes jump up and down (publicly) about it at that time?

 
SOME companies repaid Job-Keeper , but then if the workers stayed employed when there was a real chance they would have been cut ( due to lack of company revenue ) was Job-Keeper a bad thing ( and YES there will always be some that will rort the system )

in my opinion retrospective application of laws is always a bad thing if the government is incapable of creating rules to mitigate current problems , why are they in government ( the citizens can not live in a society by trying to pre-guess future laws but be punished for what is currently legal , in the near future )
 
In the light of the decision in Munro v Munro:

Munro v Munro [2015] QSC 61 - Supreme Court of Queensland - Trial Division Caselaw

Munro v Munro [2015] QSC 61 | Supreme Court of Queensland - Trial Division Caselaw. DIVISION: Trial Division, PROCEEDING: Application, ORIGINATING COURT: Supreme Court at Brisbane, DELIVERED ON: 6 June 2011, JUDGE: Ann Lyons J
www.queenslandjudgments.com.au

I am having both the Trust Deed of the SMSF and the Binding Death Benefit Nomination form reviewed to ensure it complies with legal requirements.
 
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