Superannuation, the ultimate government cash cow?

[Bill M]

What I allude to is, if a major change is made to the tax treatment of the funds in the pension phase.

The government would have to include in that tax change, the option for retirees to withdraw that taxed component, which is the funds that they have contributed after tax.
Therefore as per a lot of the thread this is just my speculation as to what would have to be included in the changes if they were ever to be implemented

This is all just my thoughts, as I've said I have no formal accounting experience, just interested in the subject.

Me neither mate, thanks for your thoughts and to drsmith for the thread, very interesting. There is one free site I have found very valuable to the Superannuation situation in Australia. A lot of questions are answered there and they keep up to date with the latest changes. If anyone is interested it is here: http://www.superguide.com.au/

 

[Ves]

You guys are right about the crystalisation of components when a pension starts. Cheers.

 

[sptrawler]

You guys are right about the crystalisation of components when a pension starts. Cheers.

From a pleb to someone who knows the facts, thanks for you input, it's much appreciated.

I can't get over the amount of views this thread gets, it's obviously a popular subject. Also I think topical subjects, as this one broaden the appeal, therefore the audience of the forum.

 

[Garpal Gumnut]

This site seems to have many of the answers sought on this thread.


http://www.smh.com.au/money/tools-and-guides/superannuation-guide--withdrawing-your-superannuation-20100531-wp51.html


gg

 

[sptrawler]

This site seems to have many of the answers sought on this thread.


http://www.smh.com.au/money/tools-and-guides/superannuation-guide--withdrawing-your-superannuation-20100531-wp51.html

gg

Good link GG, I hadn't seen that one.

So does this mean I can't sell you a chainsaw?

 

[Garpal Gumnut]

Good link GG, I hadn't seen that one.

So does this mean I can't sell you a chainsaw?

Only Eddie.

gg

 

[Julia]

perhaps that person shouldn't be managing their money if they are going to take fright at every twist and turn.

Which makes me think - what is going to happen when a lot of the SMSF trustees start to go a bit senile. Seriously. People often develop a heubris when the early stages of dementia set in. A classic example is Philip Fisher, author of "Common Stocks and Uncommon Profits". His son writes in the foreword of the edition I have of how his father made dreadful decisions at a senior age after having been a stock market genius for most of his life.

This is another area no one likes to consider. It's perhaps a tick for government regulation that part of Super should be required, at retirement, to be set up as an annuity.

If there are more than one trustee, then presumably the non-senile members should be able to sort it out.
Much more of a problem, though, for those who are sole director /corporate trustee.

It's a good point to raise. I wonder if any research or provision for this exists?

 

[sptrawler]

This is another area no one likes to consider. It's perhaps a tick for government regulation that part of Super should be required, at retirement, to be set up as an annuity.

If there are more than one trustee, then presumably the non-senile members should be able to sort it out.
Much more of a problem, though, for those who are sole director /corporate trustee.

It's a good point to raise. I wonder if any research or provision for this exists?

That is an interesting proposition, especially if the fund has a single member and is using his/her accountant as the other trustee.

 

[DocK]

This site seems to have many of the answers sought on this thread.


http://www.smh.com.au/money/tools-and-guides/superannuation-guide--withdrawing-your-superannuation-20100531-wp51.html


gg

Thanks to Bill M & GG for those links. I note this, from the smh article:

So, for tax purposes:
•super benefits paid to dependants are tax-free;
•benefits paid to “non-dependents” are taxed.

Yes, this is confusing, but the crucial issue is this – although the superannuation laws allow you to make a binding nomination to any dependent, if that recipient is not also a dependent for tax purposes, their payout may well be taxed. Still confused? Remember this - if you have adult children who are no longer financially dependent on you, make sure you discuss with your accountant the tax implications of a binding nomination in their favour. Some in the superannuation industry describe this tax as a de facto death duty – this is a fair description given that a significant percentage of superannuation beneficiaries will be financially independent adult children of the deceased member

Read more: http://www.smh.com.au/money/tools-a...perannuation-20100531-wp51.html#ixzz2L0ozg6y6

Does this in effect mean that if my spouse and I were both to die at some point in the future when our sons are adults, that if the bulk of our wealth is held within our SMSF that they'll pay tax on their inheritance, but if it were money in a bank account they would not? How is property held within a SMSF dealt with upon the death of the retiree - does CGT become payable only upon sale of the asset, or is it payable upon transfer out of the super fund? These are matters that my generation are going to have to give a good amount of thought to (professional advice also) in order to walk the fine line between giving ourselves the best retirement years possible, whilst also being cognizant of the most advantageous method of passing on whatever's left to our adult children.

 

[DocK]

Originally Posted by tinhat

perhaps that person shouldn't be managing their money if they are going to take fright at every twist and turn.

Which makes me think - what is going to happen when a lot of the SMSF trustees start to go a bit senile. Seriously. People often develop a heubris when the early stages of dementia set in. A classic example is Philip Fisher, author of "Common Stocks and Uncommon Profits". His son writes in the foreword of the edition I have of how his father made dreadful decisions at a senior age after having been a stock market genius for most of his life.

This is another area no one likes to consider. It's perhaps a tick for government regulation that part of Super should be required, at retirement, to be set up as an annuity.

If there are more than one trustee, then presumably the non-senile members should be able to sort it out.
Much more of a problem, though, for those who are sole director /corporate trustee.

It's a good point to raise. I wonder if any research or provision for this exists?

This problem isn't unique to those running their own smsf, unfortunatley. I have an elderly relative, who is single and childless, who is starting to become a little muddled and confused. She has been fiercely independant all of her life, made an excellent career for herself from modest beginnings, and retired with a modest nest-egg as well as her own home etc. She was never the type to discuss her private affairs, and any questions regarding how well she was set up for the future were met with a degree of cynicism as to whether we (her neice and nephew) were concerned for her welfare or our future possible inheritance. We do know that she purchased an annuity which was not a life-time benefit, and has had the same financial planner looking after her affairs for the past 30 years or so. She seemed quite worried during the GFC and has made the odd comment since that indicates she may have suffered substantial losses. It's becoming evident that her mental capacity may be deteriorating, but it's not an easy matter to simply step in and tell a loved and respected relative that you think they're "losing the plot" without coming across as a self-serving money-grabbing opportunist.

 

[Julia]

It's becoming evident that her mental capacity may be deteriorating, but it's not an easy matter to simply step in and tell a loved and respected relative that you think they're "losing the plot" without coming across as a self-serving money-grabbing opportunist.

That's a touchy and difficult situation. Does she have an accountant? Would it be interference if you were to discuss your concerns with her financial planner? Do you know if she has arranged POA for anyone in the event she were to lose capacity?

Does anyone know if a charity has to pay tax on a bequest from a SMSF?

 

[DocK]

That's a touchy and difficult situation. Does she have an accountant? Would it be interference if you were to discuss your concerns with her financial planner? Do you know if she has arranged POA for anyone in the event she were to lose capacity?

Does anyone know if a charity has to pay tax on a bequest from a SMSF?

Unfortunately nobody else in the family has a clue who her financial planner is or whether she even has an accountant, or just used a tax agent. She has mentioned that her solicitor is the executor of her will, and hopefully also holds a POA for her. My brother and I find it both amusing and insulting at once, that she's often made a point of mentioning at family occasions that she'd never give a relative control of her health or finances in case they should be tempted to shunt her off to an old age home in order to get their hands on her money. Unfortunately, if her mental faculties continue to deteriorate we're going to be put in a position where we may have to do just that. At present, we're in the almost ridiculous situation where my 83 year-old mother (who fortunately is as sharp as a pin) is gently trying to convince her younger sister to mention her periods of confusion to her GP - without much success as my aunt is adamant that she's fine. If it becomes necessary we'll perhaps have to contact her GP ourselves and express our concerns - at least then her GP can do whatever tests she feels are appropriate without necessarily letting my aunt know we've asked her to. I assume she'd need to be assessed in some way for entry into a retirement village or the like. She has recently also developed respiratory problems and sounds depressed - I think she's finding life just too difficult and is inclined to "stick her head in the sand" rather than think of how she's going to cope in the future.

I'm extrememly thankful that my mother, although 5 years older than my aunt, is in better health mentally and physically and is doing her best to monitor the situation. Unfortunately, her sister has never taken kindly to any offers of assistance in the past and the entire situation is stressful for Mum - which frustrates me. Although my aunt has friends, they're not close enough friends to have the type of conversation that might be needed, and she has no children of her own. She started working as a nurse's aide at the age of 14, worked her way up to registered nurse, then midwife, then studied while working in order to get the uni degree necessary to be the head midwife at the hospital she worked at. I've admired and respected her enormously since I was a child, but the same independant streak that has worked for her in her career is now making life very difficult for her family. Aging in today's society can be a real b!tch.

Anway, that's all off topic so enough rambling from me. Apologies for getting off track.

 

[McLovin]

Sounds like a tough spot to be in DocK. Can't offer any insight or experience but I hope it works out for you and your family.

 

[sptrawler]

A friend of mine is in a similar situation.
He is in his late 50's, he has his mother of 95 living with him, now his wife has left for greener pastures.
his Aunt (mothers sister) is 97 lives alone, but he is the only relative that looks after her, does her shopping, goes to her place 60k's each way twice a week.
By the way he is an only child and his aunt has no children.

What he did was get power of attorny along with his cousin. It seems to be working, I think he`said she was much happier to agree when there were two involved.

I'm just gratefull I'm not in the same position.

Best of luck.

 

[Julia]

Anway, that's all off topic so enough rambling from me. Apologies for getting off track.

Not rambling at all and more relevant to the topic than we might wish.

Approaching your aunt's vagueness etc via her GP sounds sensible. I don't know what the situation is if the GP were to do tests and find her cognitive function diminished. Presume he'd then ask for an ACAT assessment.
At best that's going to see her persuaded into some form of assisted living which she might resent. The fine line your family seems to be treading is one of maintaining her limited confidence whilst having her understand that you are primarily concerned for her welfare. To put that to a very independent, strong minded person is not easy.
I wish you all the best and hope you might let us know how it goes, as many people will be in a similar situation.

At the risk of derailing the thread, I'd like to sound a note of caution to family members accepting the role of Enduring POA for an elderly parent or other relative. After a sudden illness, surgery, and subsequent loss of capacity with my father, the EPOA I had for him came into effect on medical direction that he could not look after his own affairs.

Going through his financial records, I discovered significant assets which had not been reported to Centrelink (he was receiving a government pension at the time and these assets would have definitely resulted in much less pension had he divulged them).

I didn't feel I could act in continuing the deception so wrote to Centrelink advising that my father must have overlooked these assets, set them out clearly, and asked them to understand that it was an oversight due to ill health etc. They took no action against him and simply adjusted his pension accordingly.

A month or two later he recovered somewhat and said he wanted to take back charge of his own affairs. Fine. I handed over all the records including my letter to Centrelink and their response. He went nuts about this and accused me of gross disloyalty etc etc.

When he died, I found a copy of a letter he had written to Centrelink, saying that he had been temporarily unwell, that his daughter had unnecessarily taken over his affairs during this time, and to his absolute shock and horror he had discovered that I had failed to report essential assets while having POA and then subsequently tried to blame it on him. He asserted that he had always been absolutely truthful and careful to report all assets and was devastated that his deceitful daughter had marred his record.
There was no record of any response from Centrelink.

So while we might think we're doing our best for someone, it can well and truly backfire into a very stressful experience.

 

[qldfrog]

wow Julia,
that must be hard, and sadly I see some trouble coming in that way with my dad.
Add the complexity of a different country, stubbornness and two different tax systems and you have a nasty cooking pot....
All this is a bit off subject but we should all remember that our sharpness of mind may fade one day and we always leave the mess behind while gliding into senility.And SMSF will not ease the problem

 

[FlyingFox]

Sorry to derail this discussion but hopefully some find this useful.

Some of the issues raised lately in this thread will cause some big legal problems as the population ages. I used to do research into dementia, mainly Alzheimer's disease. Currently the established criteria for impairment etc are based on clinical evaluation. Unfortunately by the time someone is clinically diagnosed with dementia, they are generally in no state to look after themselves or their financial affairs.

This in itself is a problem because they could have been in decline for quite some time and had they not made the right provisions earlier on, it is easy for them to be coerced into changes they did not intend to make or not agreeable to changes that need to be made.

The other problem will be the emergence of new techniques of predicting dementia. You can now fairly accurately predict the onset of AD at least 18-24 months prior to clinical diagnosis. Now the subject may already have some impairment but does not have dementia. What happens in this case? Legally I don't think you can get a POA. Moreover subsequently, any changes to wills etc during this period maybe challenged due to the fact that they may have had impairment.

A lot of these issues have been black and white in the past. However with a large ageing population and their large asset pools there could be a lot of legal wrangling going on that did not happen in the past. I am sure some of the policy around this will need to be looked at.

 

[FlyingFox]

wow Julia,
that must be hard, and sadly I see some trouble coming in that way with my dad.
Add the complexity of a different country, stubbornness and two different tax systems and you have a nasty cooking pot....

While I hope this is a long way away for me, my brother and I are unfortunately in the same boat as you.....

 

[Julia]

While I hope this is a long way away for me, my brother and I are unfortunately in the same boat as you.....

Good luck. It's not a responsibility we can in all conscience refuse to take on. You're right in suggesting the problems will be compounded in the future.

What I did learn from that upsetting experience was the importance of documenting everything, not just the records if you have to take over a relative's affairs, but also noting unusual or irrational behaviour as it occurs.
eg my father at one stage accused me of stealing a plastic bowl from him. (the ones available in a set of three from the $2 shops for about $3.) It had gone missing, he said, and he therefore concluded I must have stolen it.
This went on for months, with him demanding a confession from me.
Eventually he wrote me out of his Will because he didn't get the confession.

Apologies to those who consider this sort of discussion outside the scope of the thread. As Flying Fox has suggested, it's likely to become more and more relevant.

 

[sptrawler]

We will see what happens now that it is out in the open. I don't think I've ever heard them say 'the baby boomers can't retire' before.
They usually, skirt around the issue and talk about defering and encourage more participation, the tone is changing.

http://www.heraldsun.com.au/news/na...ster-mark-butler/story-fndo471r-1226579826498