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Superannuation, the ultimate government cash cow?

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Pollies are good at that. If a bit short there is a ocean full of cash from the poor over taxed taxpayer.
 
sptrawler said:
A bit like those on welfare saying they deserve a rise and criticising workers for getting a tax break, life's full of contradictions.
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The one that irks me is the seeming expectation that those on a pension ought get a discount.

See it all the time on another site, people posting "I need a quote for x done and I AM A PENSIONER" as though they're expecting a discount.

Yep, they're on a pension. Meanwhile there are self-funded retirees, disabled, terminally ill, unemployed, minimum wage workers, students and so on none of whom routinely get discounts for, well, anything really apart maybe bus fares.

The lack of such discounts being another tax of sorts on the self-funded ones. It's another thing that tilts the balance toward welfare being the better option for many.
 
some businesses give a senior's ( or pensioner ) discount , now in some businesses that is a good lure for .customers
 
I'm simply grateful that I got in early, albeit for different reasons, to dispose of the amounts in accumulation phase and soon to close the SMSF after shifting the pension-account to an industry fund.
 
Definitely, if I had my time over I certainly wouldn't have lived the frugal life we did, in order to get to where we are, there certainly is no credit or appreciation. Society is a lot more respectful, civil and understanding of those who didn't save than those who did.
 
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To be clear, it's not individuals with super over $3 million that will have all earnings taxed at 30%. The earnings on the first $3 million will remain taxed at the current 15% (or 0% in pension mode) and only the earnings on the amount over $3 million will be taxed at 30%.

We decided to wait until we knew more and Treasury issued a Fact Sheet the following day, with a surprise in the way earnings will be calculated. Not only will the Australian Taxation Office issue tax liability notices to individuals in the 2026-27 financial year, but earnings will include unrealised capital gains. This will have significant consequences...
.

How the new super tax will hit large balances

The Government rushed a decision to increase tax on super balances above $3 million. Although the effective date is after the next election, the big surprise is including unrealised capital gains in earnings.
www.firstlinks.com.au
 
Dona Ferentes said:
but earnings will include unrealised capital gains. This will have significant consequences...
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indeed it will , would there then be a legal challenges on subsequent Capital Gains Taxes on realized gains ( claiming 'double taxation' )

one might also wonder if an 'inflation' factor would be added to tax deductions
 

Yeah, it was also covered in my post #2,672 from the Treasurer's web-site.

Now also consider a number of the very large SMSF's have a high proportion invested in Commercial Property, which may not be able to be sold quickly, and those could have a large tax problem at some point.

What is also a consideration is a number of SMSFs are in pension phase which can exceed the $3m - yes, there are some in that situation where they are drawing down on $3m or more presently tax-free - which may not necessarily be tax-free in a couple of year's time. A nice problem to have.

Now, if I had an unstated strategy of gradually eliminating SMSF's, how would I go about doing that?
 
A lot of those with balances over $3m will have share holdings in super and also outside of super.

Perhaps the changes encourage reviewing the shares in each. It may now be better to hold high yield shares in super and high growth shares outside of super.

While you can still get the 50% discount on capital gains, someone on the top tax rate would pay 47/2 = 23.5% tax and medicare levy on the realised capital gains for shares held >12 months outside super. This is less than the 30% tax to be paid on realised AND unrealised capital gains for shares held within super.

Something to ponder.
 
How will the administrative side of it affect retail and industry super funds. keeping track of all members at or about the $3m will be a nightmare for accounting, as to tax and earnings obligations..
Unless they allow some sort of fudge factor for large funds, they certainly wouldn't want to score an own goal.
 
sptrawler said:
How will the administrative side of it affect retail and industry super funds. keeping track of all members at or about the $3m will be a nightmare for accounting, as to tax and earnings obligations.
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I read the treasury note that Belli posted the link to earlier. What is proposed is actually quite workable.

The ATO is already tracking your total super balance at the end of each financial year. You can log into MyGov and check it.
 
Ferret said:
I read the treasury note that Belli posted the link to earlier. What is proposed is actually quite workable.

The ATO is already tracking your total super balance at the end of each financial year. You can log into MyGov and check it.
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The method was chosen I believe because that is how it is presently done as industry funds do not currently calculate taxable earnings at an individual member level (the pooled fund impact.)

Although it's in the distant future, while the $3m cap isn't proposed to be indexed, the balance cap is. From next FY it will be $1.9m. Assuming indexation of it continues, the question downstream is what occurs when the balance cap reaches $3m? Will indexation of it continue beyond then? It isn't a matter which will impact me but will for those who are contributing to superannuation for the next few decades.

There are a number of hints in the examples and wording of that Treasury document. For example, should you already have more than $3m and have yet to meet a condition of release, it does not appear the person will be able to withdraw any amount above the $3m so they could soon have a tax issue. It also makes reference to further consultation regarding defined benefit interests - a matter there of watch this space.
 
Ferret said:
I read the treasury note that Belli posted the link to earlier. What is proposed is actually quite workable.

The ATO is already tracking your total super balance at the end of each financial year. You can log into MyGov and check it.
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Thanks for that, I will have to go back through the posts, been a bit busy lately.

Another issue that was brought up earlier.

Super tax on defined benefit pensions puzzles experts​

The government will have to go back to the drawing board to figure out how to apply the 30 per cent super tax on retired public servants, politicians and ABC executives.
 
Belli said:
The method was chosen I believe because that is how it is presently done as industry funds do not currently calculate taxable earnings at an individual member level (the pooled fund impact.)
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The proposal is actually a tax on unrealised gains and it's an additional tax. Draconian really.

Briefly, in pooled funds there is a provisioning arrangement for capital gains which is segregated if/when members sell their units. When you convert to an account-based pension the member is effectively selling and paying out capital gains which have already have provisioning. It's more complicated than that but Christ I am really too tired to go deep into detail.

The calculation proposed in the paper - which isn't on Treasury's web-site by the way but is on the Treasurer's - is slamming possibly years of unrealised gains in SMSFs which may never had to be paid if converting to an account-based pension.

Best wishes to those who may have amounts in super above $3m in a few year's time. Looks like you are going need that in spades. If close to retirement, better get professional advice. Possibly an in-specie transfer to personal names where you could invest and get a few additional scheckles without paying much, if any, tax all the while ensuring what is left in super is below $3m.

With that not-so-cheerful news I'll leave you to it.

Thank the Good Lord my involvement with superannuation will soon only be with the monthly amount which hits my bank account.

PS: If I were still contributing to superannuation, I'd be monitoring the balance cap and keep close to or below that. That's only my personal opinion but going without in order to increase superannuation does not appear an attractive proposition to me now.
 
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Yup. I know of a few former public servants who had DB pensions above $100k as well as an SMSF. As the DB pension counted to the balance cap by multiplying it by 16, their SMSF then had to be converted to accumulation. Would not surprise me if some of these SMSFs are above $3m. However, they are retired so have a couple of years to restructure. It may be, and I don't know if this is how it is going to work, if their balance cap is $1.6m, they could pull out funds from the SMSF so $1.4m or less remains in the SMSF. At the moment, CGT for them would be 10% on the realised gain.

Pity poor Doris though if hubby is on say $120k and departs this planet and she also has a relatively large DB pension of $70k (and a $1.12m balance cap) - there are probably some couples in that situation. With the 2/3 reversionary benefit she now has a total DB income of $150k and blows her balance cap out of the water. Shame she also has some $2.5m in the SMSF. I think you get my drift. It's going to get really, really messy for a number of individuals.
 
Oh yes , indeed! Well said , sir.
Only a mug would put more into super if this unindexed cap idea, passes into law. I reckon, Jimbo's got what he wanted all along . He's driven a stake through the heart of national savings via superannuation, for good. Unless the members of the larger SMSF's are very close to retirement over the next 3 years , they are toast.
Don't count on any significant legislative changes from the Libs ,either. After this week , no one will ever trust any government with its grubby hands on our super , ever again .
Overseas investment , especially in the biggest sharemarket in the world , is looking like a far better proposition, to me.
 
The housing ponzi will get another shot in the arm, now that super is capped, that will have to be the next cab off the rank. Or the backlash will hurt them.
 
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