Superannuation, the ultimate government cash cow?

[farmerge]

Thanks to those contributors taking this along. Belli drills deep, and others of course.

I'm glad I'm not being targeted! And as mentioned, don't have all your eggs in the same basket, otherwise the ducks, all in a row, get taken out.

Shooting gallery bang, bang, bang

 

[farmerge]

I fear that is the case.

As I have said previously, I feel it isn't worth the pain to have more than the balance cap in superannuation but if you do it may be better to make sure it doesn't get close to the $3m which, for the purposes of this proposed taxation arrangements, will include adding back any withdrawals during the year. $2.5m max seems safer to me.

Also, even those in full account-based pension based on $3m or above region are going to cop it by the feel of it. The focus is on the total balance whether it is in pension phase or not is my reading of the situation.

But understand I know less than SFA.

Well Belli if your knowledge is SFA, mine is that minus 10

 

[Belli]

Maybe this will be true some people who hold assets in super that will generate high unrealised capital gains and have limited income outside of super.

However, many with high super balances will be generating income inside super and have income outside of super that takes them into the top tax bracket.

Surely they are still better off keeping income producing assets inside super and paying up to 30% tax if the balance exceeds $3m, rather than move them outside super and pay 45% tax + medicare levy?

As is normal with these matters, it will depend of the individuals personal tax situation. Lots of variables (Div 293, etc). That's one difficulty with broad statements as ideally you would model by tax brackets. It takes a degree of effort to model by tax brackets - at least it would for me.

If someone would like to crunch scenarios, feel free to do so using this pay calculator. Even accommodates the Stage 3 tax cuts.

pay calculator

Simple calculator for Australian income tax

paycalculator.com.au

For interest, the median personal income for the 2020FY was $52,338 according to ABS data, which includes income from all sources. I'm guessing it wouldn't have changed dramatically since then.

Personal Income in Australia, 2015-16 to 2019-20

Regional data on the number of income earners, amounts received, and the distribution of income for the 2015-16 to 2019-20 financial years

www.abs.gov.au

A sizeable portion of the population will look at a $3m cap and go "Gee, I wish..." so any guesses why the cap is looked on favourably by many?

 

[sptrawler]

A couple of posts from the Albanese Government thread, that pertain to super.

The proposal is also applying slightly different philosophy.

Outside of superannuation an individual is taxed on income and CGT applies only should you sell. The proposal, as it is written, taxes unrealised gains. You'd really have to crunch the numbers to see if being taxed on an additional $50k of investment income outside superannuation is better or worse than being taxed on say $500k or more of unrealised gains within superannuation.

That really does nail it, considering the first $50k of income outside of super attracts minimal tax, whereas in super it attracts a minimum of 15-30% on even the first $18,000 of earnings.
In a lot of ways they seem to be heading toward, only allowing a narrow band of personal savings in super e.g those with under $300k and retired are probably better off outside super, those with over $3m they don't want in super.
Which would end up with a system that those who work fund their own retirement, those who don't, get the pension and the rich well they just keep doing what they always do try and minimise tax.
I wonder when the super lobby will start and kick up, also when those on higher super balances pressure the Govt to allow them to have the money as salary, rather than as a super contribution. Especially when they are near the top limit.
Unintended consequences on the horizon.

 

[Belli]

I sometimes wonder if journalists actually read the proposal and base their calculations on that rather than assume the meaning of "earnings" is what it normally means to most people.

"Your super balance is not being taxed, nor will it be. It is the earnings or the income derived from it that will be taxed at a higher rate. [my emphasis] But that will only happen if you are extraordinarily wealthy and have managed to squirrel away more than $3 million in retirement savings."

What the super tax debate means for government budget repair

The uncomfortable truth is that the super concessions — costing a monumental $48 billion a year — are social welfare payments the nation can no longer afford, writes business editor Ian Verrender.

www.abc.net.au

Of course, I may have misread the media release on Treasury letterhead from the Treasurer's office (a strange breach of protocol I think) detailing the proposed method of how superannuation funds over $3m are to be taxed.

 

[qldfrog]

I sometimes wonder if journalists actually read the proposal and base their calculations on that rather than assume the meaning of "earnings" is what it normally means to most people.

"Your super balance is not being taxed, nor will it be. It is the earnings or the income derived from it that will be taxed at a higher rate. [my emphasis] But that will only happen if you are extraordinarily wealthy and have managed to squirrel away more than $3 million in retirement savings."

What the super tax debate means for government budget repair

The uncomfortable truth is that the super concessions — costing a monumental $48 billion a year — are social welfare payments the nation can no longer afford, writes business editor Ian Verrender.

www.abc.net.au

Of course, I may have misread the media release on Treasury letterhead from the Treasurer's office (a strange breach of protocol I think) detailing the proposed method of how superannuation funds over $3m are to be taxed.

not surprised:
as much trust in their ABC as I had in the Pravda in the 1980s, as should anyone with a bit of brain left unwashed imho

 

[farmerge]

I sometimes wonder if journalists actually read the proposal and base their calculations on that rather than assume the meaning of "earnings" is what it normally means to most people.

"Your super balance is not being taxed, nor will it be. It is the earnings or the income derived from it that will be taxed at a higher rate. [my emphasis] But that will only happen if you are extraordinarily wealthy and have managed to squirrel away more than $3 million in retirement savings."

What the super tax debate means for government budget repair

The uncomfortable truth is that the super concessions — costing a monumental $48 billion a year — are social welfare payments the nation can no longer afford, writes business editor Ian Verrender.

www.abc.net.au

Of course, I may have misread the media release on Treasury letterhead from the Treasurer's office (a strange breach of protocol I think) detailing the proposed method of how superannuation funds over $3m are to be taxed.

As we well know, changes can happen if the wind is blowing and in any direction. Have never trusted bean counters, let alone the Govt of the day.

 

[Belli]

"Australians drained $38 billion of their super in the pandemic​

By Shane Wright​

More than 2.6 million Australians raced to drain their superannuation accounts under the Morrison government’s $38 billion COVID early release stimulus program, using the money to gamble and buy furniture and takeaway meals.

Up to a quarter of applicants emptied their accounts within days of the program’s start.

The first study of the COVID-era scheme found spending on gambling alone jumped by almost $300 among those who accessed it.

Users of the scheme withdrew more than $1000 from ATMs, despite the use of cash crashing during early lockdowns."

Why am I not surprised by this. Allow people easy access to money and, given the apparent attitude of a large portion of the population where restraint and caution is necessary, the outcome isn't a shock. That said, there would have been a number where it was essential in order to merely survive.

 

[farmerge]

"Australians drained $38 billion of their super in the pandemic​

By Shane Wright​

More than 2.6 million Australians raced to drain their superannuation accounts under the Morrison government’s $38 billion COVID early release stimulus program, using the money to gamble and buy furniture and takeaway meals.

Up to a quarter of applicants emptied their accounts within days of the program’s start.

The first study of the COVID-era scheme found spending on gambling alone jumped by almost $300 among those who accessed it.

Users of the scheme withdrew more than $1000 from ATMs, despite the use of cash crashing during early lockdowns."

Why am I not surprised by this. Allow people easy access to money and, given the apparent attitude of a large portion of the population where restraint and caution is necessary, the outcome isn't a shock. That said, there would have been a number where it was essential in order to merely survive.

There should hve been some sort of accountability to ensure what it was going to be used for me thinks.

 

[sptrawler]

"Australians drained $38 billion of their super in the pandemic​

By Shane Wright​

More than 2.6 million Australians raced to drain their superannuation accounts under the Morrison government’s $38 billion COVID early release stimulus program, using the money to gamble and buy furniture and takeaway meals.

Up to a quarter of applicants emptied their accounts within days of the program’s start.

The first study of the COVID-era scheme found spending on gambling alone jumped by almost $300 among those who accessed it.

Users of the scheme withdrew more than $1000 from ATMs, despite the use of cash crashing during early lockdowns."

Why am I not surprised by this. Allow people easy access to money and, given the apparent attitude of a large portion of the population where restraint and caution is necessary, the outcome isn't a shock. That said, there would have been a number where it was essential in order to merely survive.

Don't worry, they are just greasing the rails, to stop lump sums being withdrawn ever IMO.

Then it will be that it can only be taken as a pension, age dependent drawdown limits e.g minimum / maximums, remember how it used to be, an age factor x the life expectancy and the reasonable benefit limit.
So if you had $x and were 67 years old you could draw out a maximum of e.g 6.3 - 7.8% and it increased every year.
I can't remember the exact formulae, you might remember @Belli

Then in reality it is similar to the original concept that the U.K, NZ and Canada have, where a certain percentage eg a certain percentage of income tax is set aside for welfare.
We had the same, but Menzies decided to just run it out of consolidated revenue, then at a later date means testing was introduced, because it was unfunded. ?
Now we go full circle, a percentage of income tax is set aside, unlike the U.K, Canada and NZ though, the means testing has remained and no doubt will become more onerous over time, as is happening currently.

 

[Warr87]

"Australians drained $38 billion of their super in the pandemic​

By Shane Wright​

More than 2.6 million Australians raced to drain their superannuation accounts under the Morrison government’s $38 billion COVID early release stimulus program, using the money to gamble and buy furniture and takeaway meals.

Up to a quarter of applicants emptied their accounts within days of the program’s start.

The first study of the COVID-era scheme found spending on gambling alone jumped by almost $300 among those who accessed it.

Users of the scheme withdrew more than $1000 from ATMs, despite the use of cash crashing during early lockdowns."

Why am I not surprised by this. Allow people easy access to money and, given the apparent attitude of a large portion of the population where restraint and caution is necessary, the outcome isn't a shock. That said, there would have been a number where it was essential in order to merely survive.

Well it's not just that, I think it was probably seen as 'free money'. You don't see your money before it makes it to super (in most cases). If you were using it to get yourself out of a debt-spiral, great use of it. For takeout or gambling ... probably not so much.

 

[barney]

Hi chaps. After some opinions/points of view etc Obviously financial advice is not allowed but any thoughts appreciated.

1. I am self employed and have never had any Super.
2. Sale of property this FY means I have a fair amount of potential capital gains tax to deal with
3. It has been suggested to me that I can legally put $75,000 into a Super fund at 15% tax rather than possibly up to 50% normal tax rates
4. Saw this ad for e-Super on line to set up a SMSF. They offer 1 year of fees discount as long as you stay with them for at least 2 years
5. I was thinking paying 15% + I imagine around $1500 fees? for the first 2 years is a lot better than say 40-50% tax
6. I know nothing about the Company or setting up a SMSF, but was thinking I could invest the money in a term deposit (safer given the current market conditions), and at least lessen the up front tax?

Any thoughts on the above greatly appreciated.

(link to e-super site)

SMSF - Self Managed Superannuation Funds | ESUPERFUND

Setup a Self Managed Super Fund and take back control of your Super. Learn how a SMSF can benefit you today.

www.esuperfund.com.au

 

[Belli]

an age factor x the life expectancy and the reasonable benefit limit.

Forgotten most of the issues with the RBL. It was introduced to limit the amount which could be in superannuation (gee, ahead of its time given the current brouhaha.) It was indexed to AWOTE and there were two parts. An amount which could be taken as a lump sum or as an account-based pension. The other which was double that amount where a minimum of 50% was to be taken as a pension. Anything in superannuation above these limits were pretty heavily taxed if I recall correctly.

I read an article a few years ago where actuaries considered it should be reintroduced.

Here is a link to the ATO which provides the tables up until the RBL was abolished. Well done Howard/Costello.

Key superannuation rates and thresholds

Rates and thresholds apply to contributions, employment termination payments, super guarantee and co-contributions.

www.ato.gov.au

 

[Belli]

Well it's not just that, I think it was probably seen as 'free money'. You don't see your money before it makes it to super (in most cases). If you were using it to get yourself out of a debt-spiral, great use of it. For takeout or gambling ... probably not so much.

Good points.

 

[qldfrog]

Well it's not just that, I think it was probably seen as 'free money'. You don't see your money before it makes it to super (in most cases). If you were using it to get yourself out of a debt-spiral, great use of it. For takeout or gambling ... probably not so much.

That is true, either burn in a year ago and enjoy it in alcohol, purchased sex, smoke of various types..or keep it in super where it will be blown away..like now !!!!!!
with a trader in Sydney..or just your retired Union rep enjoying the same amount in alcohol, purchased sex, smoke of various types..
am I just cynical?' cause we are not talking millions, probably thousands which is the amount of fees and various losses there same people will see gone at the end of the FY.
Obviously these traders and Union reps are not happy

 

[sptrawler]

Hi chaps. After some opinions/points of view etc Obviously financial advice is not allowed but any thoughts appreciated.

1. I am self employed and have never had any Super.
2. Sale of property this FY means I have a fair amount of potential capital gains tax to deal with
3. It has been suggested to me that I can legally put $75,000 into a Super fund at 15% tax rather than possibly up to 50% normal tax rates
4. Saw this ad for e-Super on line to set up a SMSF. They offer 1 year of fees discount as long as you stay with them for at least 2 years
5. I was thinking paying 15% + I imagine around $1500 fees? for the first 2 years is a lot better than say 40-50% tax
6. I know nothing about the Company or setting up a SMSF, but was thinking I could invest the money in a term deposit (safer given the current market conditions), and at least lessen the up front tax?

Any thoughts on the above greatly appreciated.

(link to e-super site)

SMSF - Self Managed Superannuation Funds | ESUPERFUND

Setup a Self Managed Super Fund and take back control of your Super. Learn how a SMSF can benefit you today.

www.esuperfund.com.au

I have run my SMSF since 2007, I don't use esuper, I use another online super accountant and have found them great and cost about $1k/pa including audit.
A few mates use esuper and I haven't heard a complaint, the other thing with esuper from memory they allow real estate investment, some don't like the paperwork involved.
My online super admin doesn't and they also don't like overseas shares, but that works for me, but it is something to be aware of.
The rules on tax offsets for contributions change all the time, so I would check it out carefully if I was making a claim, penalties are high.
We don't find running the fund any issue at all, but mine is mainly set for income, not trading. Term deposit/ dividend shares and small trading amount. It suits us fine, but everyone's risk tolerance is different, mine is very low. ?

No one can really give you advice, it really is a personal thing, some don't want the responsibility etc.

Just my thoughts and I'm sure you will work out what suits you.

 

[barney]

I have run my SMSF since 2007, I don't use esuper, I use another online super accountant and have found them great and cost about $1k/pa including audit.
A few mates use esuper and I haven't heard a complaint, the other thing with esuper from memory they allow real estate investment, some don't like the paperwork involved.
My online super admin doesn't and they also don't like overseas shares, but that works for me, but it is something to be aware of.
The rules on tax offsets for contributions change all the time, so I would check it out carefully if I was making a claim, penalties are high.
We don't find running the fund any issue at all, but mine is mainly set for income, not trading. Term deposit/ dividend shares and small trading amount. It suits us fine, but everyone's risk tolerance is different, mine is very low. ?

No one can really give you advice, it really is a personal thing, some don't want the responsibility etc.

Just my thoughts and I'm sure you will work out what suits you.

Thanks for that Homer. It was helpful for sure. Im getting close to retirement age but never had super so its a total unknown for me. Curiously are you able to say who you use for your Super. If you'd rather not I totally understand.

Cheers M8.

 

[dyna]

To learn a lot about superannuation in a short amount of time , have a listen to the Radio 2GB weekly podcasts .
The latest one ( 14 th march 2023 ) is up on the Jacaranda Financial Planning website. Your query about eliminating a looming capital gains tax liability by making non- concessional/ after tax contributions ( $ 110,000 p.a.) comes up all the time. Using the bring -forward rule you can contribute 3yrs worth or $ 330,000. Just scroll back through past episodes .
This outfit also runs seminars ,quite frequently , in all the state capitals.
Well worth attending , I reckon. I've leaned heaps over the years listening to these experts. Naturally it's free. ( I'm too cheap to actually pay for sound financial advice )

 

[Knobby22]

Hi chaps. After some opinions/points of view etc Obviously financial advice is not allowed but any thoughts appreciated.

1. I am self employed and have never had any Super.
2. Sale of property this FY means I have a fair amount of potential capital gains tax to deal with
3. It has been suggested to me that I can legally put $75,000 into a Super fund at 15% tax rather than possibly up to 50% normal tax rates
4. Saw this ad for e-Super on line to set up a SMSF. They offer 1 year of fees discount as long as you stay with them for at least 2 years
5. I was thinking paying 15% + I imagine around $1500 fees? for the first 2 years is a lot better than say 40-50% tax
6. I know nothing about the Company or setting up a SMSF, but was thinking I could invest the money in a term deposit (safer given the current market conditions), and at least lessen the up front tax?

Any thoughts on the above greatly appreciated.

(link to e-super site)

SMSF - Self Managed Superannuation Funds | ESUPERFUND

Setup a Self Managed Super Fund and take back control of your Super. Learn how a SMSF can benefit you today.

www.esuperfund.com.au

Join an industry fund, get free advice, low fees and they manage it for you or do it the hard way and set it an SMSF and with the small amount you have watch the set up fees, annual fees and management fees take a lot of it away plus get lousy returns.

It's a no brainer.
All I can say is at least look into it and do a bit of a comparison.

 

[Belli]

Join an industry fund,

Yes, especially if you are retired and in pension phase. That is the path I am going down and winding up the SMSF.