Superannuation, the ultimate government cash cow?

[Belli]

A hard lesson learned it would appear.

"Last winter, a friend passed away suddenly. A few weeks later, her physically abusive boyfriend, whom she had been living with, made a claim for all her assets. He also wanted all her superannuation benefits.

Since she hadn’t nominated anyone for her super, he was deemed the rightful beneficiary by law, despite her family’s objections.

Among my friends, word then went round fast on how imperative it is to nominate a beneficiary for your super, in case of an untimely death. As we mourned our friend, the importance of getting our superannuation affairs in order dawned on us. Most of us were keen and ready to include families of origin on our super, only to be surprised. You can’t nominate parents and siblings as super beneficiaries. We called each other upset – how could this be possible?"

Lack of education on superannuation issues and/or interest in them is how.

Why can’t we leave our superannuation to our parents?

When a friend died last year and her abusive boyfriend claimed her super despite her family’s objections, we all realised the system isn’t looking out for us.

www.theage.com.au

 

[dyna]

With an estimated 30 % of our population effectively , financially illiterate , it's inevitable , those disadvantaged folks will continue to suffer needlessly , throughout their lives.
A left-leaning education system is sure not helping, here. Just keep filling kids heads with loads of rubbish that's got sweet effay to do with , how things work in the real world .
The sad truth is : there is a fair bit of somewhat, boring stuff that they really have to know.
They won't find it on Netflix or social media or on drugs for that matter.
The lucky few will find a forum such as this: a gold mine of useful info....All of it , free.

 

[Value Collector]

The sad truth is : there is a fair bit of somewhat, boring stuff that they really have to know.
They won't find it on Netflix or social media

I don’t know about that, this show on Netflix is pretty good to get average people thinking about improving their financial situation, Also there is some great people on social media too.

 

[divs4ever]

Most of us were keen and ready to include families of origin on our super, only to be surprised. You can’t nominate parents and siblings as super beneficiaries.

i suppose 'consolidated revenue ' is the default option ( and THAT wouldn't surprise me at all )

given many superannuants are likely to die childless in they pass fairly young ( under 30 it seems , in recent years ) this is a nice cash cow for the government

it also looks like a bonanza for lawyers and accountants to set up trusts ( for handling estates as needed )

 

[Belli]

@dyna & @Value Collector I think you are both correct to some degree.

Then again, it's a bit much to expect people to get their collective heads around this (Vic only but there is similar legislation in each State - no national one to my understanding) to appreciate to powers of a Trustee.

TRUSTEE ACT 1958

classic.austlii.edu.au

as well as these

https://www.legislation.gov.au/Details/C2022C00271

https://www.legislation.gov.au/Details/C2022C00307

due to the nuances involved in superannuation before they even get to consulting a legal beak about this

Testamentary Trust - State Trustees VIC

A testamentary trust is set up in a person’s will and starts upon their death. It holds and protects all, or some, of the person’s assets. Learn more.

www.statetrustees.com.au

Then there is the issue of "Are they willing/able to pay for one?" A few people I know, despite being well off, baulk at the thought of forking out in the vicinity of $2.5k for a properly drafted TT Will.

No matter what, it still doesn't prevent a challenge being able to be made against the Will or making a claim on superannuation benefits though. Whether that challenge is successful is another issue and generally one for the Courts. Sorry pps, we cannot avoid the law and changing various bits of legislation can raise a whole lot of other issues which results in "Hello Courts" again.

While the Good Lord can walk on water, we peons wade through very thick treacle in attempts to direct our assets after we shuffle off this mortal coil to where we prefer.

 

[Belli]

Those " murmurings" will become bellowing, come the next election, people. Could even be a few tweaks to SMSF's by the next budget, too.
Remember it was the Grattan Institute that first began calling for a reduction in concessional superannuation contributions to just 15 grand a year way back , in about 2018.
The writing's on the wall ,folks.
Get the planning stuff done now while the opportunity is still there.

Yep, the murmurings are getting louder.

"The chief executive of $70 billion fund HESTA says there is deep inequality in the superannuation system, calling on the government to use this year to introduce measures such as super on paid parental leave and a cap on balances to curtail generous tax concessions for the wealthy."

The ‘uncomfortable topic’ that worries $70 billion super fund boss

HESTA chief Debby Blakey says this is the year to make the system fairer, including introducing super on paid parental leave.

www.theage.com.au

Of course, Government decisions in regard to balance caps had nothing to do with being part of that problem. Like really, folks, because before the caps were introduced, members in pension phase were obligated to drawn down based on the total value of the assets but after the introduction of the balance cap they weren't and so because a portion was now back in accumulation phase it became a wealth creation exercise. And guess what? Balances grew to $5m and beyond.

Being fed up with super, especially SMSF, I am gradually realising the amounts above my balance cap which will be then given to my children. Once that has been completed, the funds in pension phase will be rolled over to an industry fund. And that also avoids the pooled fund impact for those who are still in accumulation phase.

The next cause for the "Oh you have too much" brigade will be those who have a extensive investible assets in personal names and that is just so unfair.

 

[Belli]

Further to the previous post, here is the current data the ATO provides on taxation matters (obviously).

Taxation Statistics 2019-20 - Detailed table Index - data.gov.au

The table index lists the different items shown in the detailed tables and specifies in which table they appear. To access the spreadsheet, click on the ‘Go to resource’ button.

data.gov.au

I am attaching the excel spreadsheet (Snapshot Table 5) which includes data on superannuation.

Such a fuss over 11k people because they, or rather the fund, have over $5m in it. No worries dears, they will die eventually and those funds will need to be withdrawn so time will actually take care of the "now" problem.

It's natural to be annoyed at these articles if you are one of those who are considered to be wealthy. I guess what does get up my nose, and I may be too sensitive about it, is there is an underlying implication there is something untoward about it or it was done unlawfully which is far from the case. At all stages, I - and I will assume others - have adhered to the legislation on amounts which can be contributed and in regard to the operation of the SMSF. That legislation was passed by Parliament. I didn't draft the bloody stuff. So how about the evangelists sheet home the blame to where it lies rather than pillory those who have abided by the legislation?

 

[mullokintyre]

Further to the previous post, here is the current data the ATO provides on taxation matters (obviously).

Taxation Statistics 2019-20 - Detailed table Index - data.gov.au

The table index lists the different items shown in the detailed tables and specifies in which table they appear. To access the spreadsheet, click on the ‘Go to resource’ button.

data.gov.au

I am attaching the excel spreadsheet (Snapshot Table 5) which includes data on superannuation.

Such a fuss over 11k people because they, or rather the fund, have over $5m in it. No worries dears, they will die eventually and those funds will need to be withdrawn so time will actually take care of the "now" problem.

It's natural to be annoyed at these articles if you are one of those who are considered to be wealthy. I guess what does get up my nose, and I may be too sensitive about it, is there is an underlying implication there is something untoward about it or it was done unlawfully which is far from the case. At all stages, I - and I will assume others - have adhered to the legislation on amounts which can be contributed and in regard to the operation of the SMSF. That legislation was passed by Parliament. I didn't draft the bloody stuff. So how about the evangelists sheet home the blame to where it lies rather than pillory those who have abided by the legislation?

if any of those members of the funds have reached the retiremnt age, then they are required to take a minimum of 5% (but can take more) out of the fund as a pension.
From then on, any earnings that these amounts then make will be subject to the tax regime of the day.
Given that the rule changes have made it so much less attractive to put more than the 1.6 mill per person into super, the funds with 5 million or more will become less and less, as each of the members reach the compulsory extraction pension phase.
But then again, its the optics that count for politicians.
Mick

 

[Belli]

Certainly is the optics as far as I'm concerned @mullokintyre.

By the way, the balance cap increased from 1 July 2021 to $1.7m due to CPI application. Mine is still $1.6m as it applies as a one-time thing to each individual at a point in time. I doubt an increase to the balance cap will occur this year despite the apparently high inflation rate. However, the contribution caps may as it increases as a result of indexation in line with average weekly ordinary time earnings. Depends on the outcome of the calcs at the end of this FY for that.

 

[Belli]

My opinion is superannuation is not the be all and end all. Investors shouldn't ignore having investments outside of that structure.

Consider if you received $70,000 fully franked dividends.

The tax position would be:

Taxable income: $100,000
Income tax: $22,967
Medicare: $2,000

Less tax credit: $30,000

Refund: $5,033

Now if that $70,000 was split 50/50 between a couple each would receive a refund of $7,463 due to the application of two tax-free thresholds.

A wage earner on $100,000 ends up with $75,033 in take home pay and the poor blighter has to work for it. Single income households and single persons get the dirty end of the Government policy stick I think. And lone person households are about 25% of the Australian population. The group is largely ignored.

Household and Family Projections, Australia, 2016 - 2041

Household and family projections (based on different assumptions of living arrangements) for Australia, states and territories and capital cities

www.abs.gov.au

"Lone-person households​

Lone-person households are projected to:

• make up 24% to 27% of all Australian households in 2041 (compared to 25% in 2016).
• increase by between 0.7 and 1.2 million (32% to 53%) from 2016 to 2041.
• increase to between 3.0 and 3.5 million households by 2041 – up from 2.3 million in 2016."

 

[mullokintyre]

Lone-person households are projected to:

• make up 24% to 27% of all Australian households in 2041 (compared to 25% in 2016).
• increase by between 0.7 and 1.2 million (32% to 53%) from 2016 to 2041.
• increase to between 3.0 and 3.5 million households by 2041 – up from 2.3 million in 2016."

How is it that we get so many lone person households?
Obviously there are the older person who has lost their life partner.
Then there are the single ones who, for a multitude of reasons, chose top live by themselves rather than in shared accomodation.
Then there are the less well off.
In my capacity as a volunteer financial counsellor, I see the result of relationship breakups from the pointy end.
Very rarely is one party completely to blame, both parties tend to contribute to varying degrees.
Many women in particular, stay in an unhappy relationship, purely because they could not sustain themselves and sometimes their kids, on their own.
Those that do escape, often end up in financial difficulties because of the cost of being a lone -person household, hence my involvement.
On the other side, men who walk away or are kicked out, leaving their former partner in the house, often end up in a similar situation.
They still have to pay the mortgage, the house outgoings and sometimes maintenance, and then try to maintain another household for themselves. its an impossible situation.
Mick

 

[Warr87]

My opinion is superannuation is not the be all and end all. Investors shouldn't ignore having investments outside of that structure.

I do like the idea of super, but I also agree with you that people should have investments outside of it. I think those that do will be far better off come retirement.

 

[Belli]

How is it that we get so many lone person households?

Good question.

Some stuff.

Lone Person households in 2021: 2.4m. Broken down by:



I account for 1 of the Older Lone Persons.

Household type | Australia | Community profile

profile.id.com.au

Table 5 of this data set may give a hint.

Household and families: Census, 2021

Includes information on relationships in household and family

www.abs.gov.au

 

[Belli]

I doubt an increase to the balance cap will occur this year despite the apparently high inflation rate

I am likely to be wrong on this. With the December index weighted average coming in at 130.8, there is an outside shot at $1.9m and $1.8m is distinctly possible. Those who contribute to super would be wise to start planning now.

 

[Belli]

An article regarding the caps from the SMSF Association. As is usual with imposed caps, it becomes messy for some.

"From 1 July 2023, the General TBC will increase from $1.7 Million to $1.9 Million.

However, due to the proportional indexation approach that is used to calculate an individual’s Personal TBC, the amount that some individuals can transfer into retirement phase pensions will increase substantially, while for others there may be no change at all."

Transfer Balance Cap set to increase – and benefits for Non-concessional contributions - SMSF Association

The General Transfer Balance Cap (TBC) is set to increase from $1.7 Million to $1.9 Million, from 1 July 2023 – with flow-on impacts to the ability to make Non-Concessional contributions (NCCs).

www.smsfassociation.com

 

[Dona Ferentes]

And another tale of woe from a person dealing with the labyrinth that is an estate. As executor, he thought it would be straightforward. Dealing with the trustee of the superfund, and then the banks, was convoluted.

Watch out, it's not easy being the executor of an estate

An actuary warns of the frustrations he experienced as executor of his brother's will, a role he expected to be straightforward. He knew super does not automatically form part of an estate but there are traps for all to learn.

www.firstlinks.com.au

 

[Belli]

Convoluted indeed @Dona Ferentes.

At one level, it could be argued that as the Munro v Munro decision regarding BDBNs was made in 2015, it would be incumbent on the Trustee of the superannuation funds, to review not only its Trust Deed but also BDBNs held to determine they were consistent with that decision. If not, then contacting the members to advise them of the requirements.

It would appear from the article, despite having had several years to do so, they have done zilch in the interests of their members in that regard. To me that is contrary to what a Trustee is required to do. And they are collecting administration fees (weekly). If that fee doesn't cover ensuring administrative aspects are correct, and a legally valid BDBN is part administration in my view, what does it actually cover?

Just my two cents.

 

[sptrawler]

And they are collecting administration fees (weekly). If that fee doesn't cover ensuring administrative aspects are correct, and a legally valid BDBN is part administration in my view, what does it actually cover?

Don't ask silly questions, it covers the managements costs and outgoings which can be huge. ?

 

[sptrawler]

Interesting article on superannuation.

Hands off our super! There are better ways to make housing affordable

On the surface, funnelling some of our combined $3.3 trillion in super savings towards affordable housing for low-income Australians sounds reasonable. But let’s scratch the surface.

www.smh.com.au

 

[dyna]

Good article. It's criminal that most Aussies are STILL paying over 100 basis points ( 1.0 % ) in fees when good performing , low fee superfunds are readily available ( such as industry superannuation funds and the not- for- profits ) charging less than 10 basis points ( 0.1 % ) .
This all adds up to over $ 30 Billion going into the pockets of these grubs , every year.
No wonder the Cyber criminals of this world see Australia as a soft touch.
The punters here , aren't even aware they're getting scammed by their own country's finance industry.
Sitting ducks. That's us. What hope for the next generation ? You don't want to think about it , eh?