Superannuation, the ultimate government cash cow?

[Value Collector]

There are concessional and non concessional contributions, each are treated differently and both are subject to different treatment.
It probably is nothing, just a thought bubble.

Yeah I understand that, the concessional ones are the ones you get the tax deduction on. Eg, I save my self 15% tax by making a concessional contribution, I am just saying I don't know why you would want to avoid those contributions.
Am I missing something?

 

[sptrawler]

Yeah I understand that, the concessional ones are the ones you get the tax deduction on. Eg, I save my self 15% tax by making a concessional contribution, I am just saying I don't know why you would want to avoid those contributions.
Am I missing something?

No

 

[qldfrog]

A discretionary trust with income streamed to a bucket company could also be a good option.

When you own a company and are no salary man, your annual income is something you control more than the average wage person.
I paid too much taxes but had control and even the choice of not working if it was not worth my time...
I would never advice someone below 50y old to put money in super if he she has choices

 

[Value Collector]

I would never advice someone below 50y old to put money in super if he she has choices

for a lot of people it’s the only savings of any size they are likely to generate.

for others it’s the only legal tax haven they are likely to get.

there is nothing wrong with super, it’s just a tax structure at the end of the day, any problems you have with it are mostly going to to come down to how you have it setup, or not understanding the system.

I think it’s it’s a great place to store value for later in life.

 

[dyna]

there is nothing wrong with super,

The only thing " wrong " with super is the necessity for every young worker to do some research right from the first pay slip , to not get caught in a dud fund where you could be paying more in fees and charges and unnecessary insurance than other cheaper , Industry and Not-for Profit Superannuation Funds .

 

[Value Collector]

The only thing " wrong " with super is the necessity for every young worker to do some research right from the first pay slip , to not get caught in a dud fund where you could be paying more in fees and charges and unnecessary insurance than other cheaper , Industry and Not-for Profit Superannuation Funds .

I little bit of research is necessary for just about everything we do in life. Everyone ones personal finances are their own responsibility.

if you don’t care enough about your money or your retirement to commit spending 5 hours or so learning the basics of super and making sure your account is set up right. Then you probably deserve the mediocre return you are going to get.

 

[IFocus]

I little bit of research is necessary for just about everything we do in life. Everyone ones personal finances are their own responsibility.

if you don’t care enough about your money or your retirement to commit spending 5 hours or so learning the basics of super and making sure your account is set up right. Then you probably deserve the mediocre return you are going to get.

It is a problem, I get asked often about super by people who are either losing money or going nowhere with their funds and yet highly educated.

I know its a dummer and dummer situation for anyone not doing the basics but anyone could just open a E-Super SMSF put the whole lot into VAS and beat a lot of superfunds, there is something not right with the system when that happens.

Super being a tax haven pays big time particularly in my retirement all earnings tax free I feel guilty that being the case.

 

[macca]

It is a problem, I get asked often about super by people who are either losing money or going nowhere with their funds and yet highly educated.

I know its a dummer and dummer situation for anyone not doing the basics but anyone could just open a E-Super SMSF put the whole lot into VAS and beat a lot of superfunds, there is something not right with the system when that happens.

Super being a tax haven pays big time particularly in my retirement all earnings tax free I feel guilty that being the case.

Warren Buffet has been saying that for 20 years, just get into a variety of Index funds and forget about it.

The alternative requires a lot of time and effort which most aren't prepared or are not able to do

 

[sptrawler]

Super being a tax haven pays big time particularly in my retirement all earnings tax free I feel guilty that being the case.

As I said to a rich mate, who said exactly the same thing.
"You can always do the honourable thing and take it out of super, if you feel bad about it".

Funnily enough he was a strong Labor voter and a strong climate champion, yet he drove a LandRover Disco4 diesel twin turbo and lived in a three story McMansion, with undercroft parking for 6 cars.

There was only he and his wife living there, but a great bloke and started as an apprentice fitter, I didn't begrudge his attidute just thought it a bit smug and hypocritical. RIP.

 

[Value Collector]

It is a problem, I get asked often about super by people who are either losing money or going nowhere with their funds and yet highly educated.

I know its a dummer and dummer situation for anyone not doing the basics but anyone could just open a E-Super SMSF put the whole lot into VAS and beat a lot of superfunds, there is something not right with the system when that happens.

Super being a tax haven pays big time particularly in my retirement all earnings tax free I feel guilty that being the case.

Don’t feel guilty about your super being tax free in the pension phase, remember the altrnative is the government having to actually fund your pension.

its much better for the government to let you have your earnings tax free, for you to be be drawing a full pension at their expense.

 

[IFocus]

Don’t feel guilty about your super being tax free in the pension phase, remember the altrnative is the government having to actually fund your pension.

its much better for the government to let you have your earnings tax free, for you to be be drawing a full pension at their expense.

Yes agree plus I had high earning most of my life that put me in the higher tax brackets (which I paid) until I got a little relief from neg gearing in property.

You can always justify your position so I do try and keep an open mind FWIW.

 

[Value Collector]

Yes agree plus I had high earning most of my life that put me in the higher tax brackets (which I paid) until I got a little relief from neg gearing in property.

You can always justify your position so I do try and keep an open mind FWIW.

Also remember your super paid taxes over the years as well and when you spend your dollars you still pay gst.

Most of the dollars your draw out of super are after tax dollars anyway, either dollars you put in yourself and were taxed at 15% on the way in, or earnings that accumulated over the years and were taxed at 15%.

 

[Dona Ferentes]

Also remember your super paid taxes over the years as well and when you spend your dollars you still pay gst.

Most of the dollars your draw out of super are after tax dollars anyway, either dollars you put in yourself and were taxed at 15% on the way in, or earnings that accumulated over the years and were taxed at 15%.

fascinating. Who'd have thought?

 

[sptrawler]

Also remember your super paid taxes over the years as well and when you spend your dollars you still pay gst.

Most of the dollars your draw out of super are after tax dollars anyway, either dollars you put in yourself and were taxed at 15% on the way in, or earnings that accumulated over the years and were taxed at 15%.

Do you have any recollection of the super rules pre Howard/Costello?

You know, the rules that applied when the mystro Uncle Paul brought them in and those the current Government kept referring to, before the 2019 election and the franking credit debacle?

Obviously not.

 

[Value Collector]

Do you have any recollection of the super rules pre Howard/Costello?

You know, the rules that applied when the mystro Uncle Paul brought them in and those the current Government kept referring to, before the 2019 election and the franking credit debacle?

Obviously not.

I was more interested in Ninja Turtles and goosebump books then.

But that was 30 years ago the majority of super balances would have been built since then. That’s how compounding works.

But, feel free to fill me in.

 

[sptrawler]

I was more interested in Ninja Turtles and goosebump books then.

But that was 30 years ago the majority of super balances would have been built since then. That’s how compounding works.

But, feel free to fill me in.

I would have to find them, but in genereral terms from memeory, there was a RBL wherby the amount you could have in super was limited (that is being re introduced with the caps).
There was also a formulae, that was determined by your age and you were only allowed to withdraw amounts between the age specific range. For example and this is just for demonstartion purposes, at 65 years of age you could draw down a min of 5% and a max of 6.5%, at 66 years old it went from5.02% and a max of 6.7% and so on.
That was changed by Costello, when they made it so that the min drawdown stayed, but if someone wished they could withdraw the lot out.
If the Govt wish to use the super as a sovereign wealth fund it, would make sense to limit the amounts that can be withdrawn , so that the super funds have a more accurate measure of its solvency in the case of an economic shock.
Contributions that have been put in after tax, are in essence your money, from the Govt perspective.
That isn't so for contributions that have been concessionally treated.
It is just a point that many younger people aren't aware of and should be IMO, if they are making decisions.
These are only my recollections and I may well be wrong, I'm sure there are people like @Belli who have a far greater understanding than I do and they may be able to correct me if I'm off track.
As always do your own research, this is just a forum where people are only floating ideas and discussions.

 

[Belli]

The good ol' RBL. A pain if you got it wrong.

Designed to limit the amount of retirement benefit and termination of employment benefit you could get.

There were two types of RBLs. A lump sum RBL and a higher pension RBL. Both were indexed to the AWOTE. The higher RBL was for people who took at least 50% or more as a pension. It could not be commuted back to a lump sum. It was a bugger of a thing apparently with the pension as two could be taken, called excessive savings and taxed at the max and the first received a rebate (from memory 15%). Abolished in 2007. Funny thing when you look back is that the pension RBL was not too far short of the then $1.6m balance cap when that was introduced.

Read somewhere the ATO gave a sigh of relief when it was abolished as the cost of maintaining the system to monitor the RBLs was costing around $10m annually and the ATO recouped hardly anything from those who had breached the limits.

 

[sptrawler]

The good ol' RBL. A pain if you got it wrong.

Designed to limit the amount of retirement benefit and termination of employment benefit you could get.

There were two types of RBLs. A lump sum RBL and a higher pension RBL. Both were indexed to the AWOTE. The higher RBL was for people who took at least 50% or more as a pension. It could not be commuted back to a lump sum. It was a bugger of a thing apparently with the pension as two could be taken, called excessive savings and taxed at the max and the first received a rebate (from memory 15%). Abolished in 2007. Funny thing when you look back is that the pension RBL was not too far short of the then $1.6m balance cap when that was introduced.

Read somewhere the ATO gave a sigh of relief when it was abolished as the cost of maintaining the system to monitor the RBLs was costing around $10m annually and the ATO recouped hardly anything from those who had breached the limits.

That's good recall Belli, can you remember how the min max age related drawdowns worked, it was designed to stop people just pulling their money out ad lib and then running out.
The 2007 changes worked on the fact if you drew it out, it was impossible to get it back in the tax free super system and people tended to draw the minimum anyway.

 

[Belli]

That's good recall Belli, can you remember how the min max age related drawdowns worked, it was designed to stop people just pulling their money out ad lib and then running out.
The 2007 changes worked on the fact if you drew it out, it was impossible to get it back in the tax free super system and people tended to draw the minimum anyway.

My brain is too tired to bother even trying to remember.

If someone is sufficiently bored with life, please go though this and provide us lazy sods with a summary.

https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr2681_ems_da01c219-2d50-4d11-88e5-f89c17884da2%22

 

[sptrawler]

My brain is too tired to bother even trying to remember.

If someone is sufficiently bored with life, please go though this and provide us lazy sods with a summary.

https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr2681_ems_da01c219-2d50-4d11-88e5-f89c17884da2%22

Thanks Belli, that's great, I have taken some screen shots of the relevant parts where the old and new schemes are compared, it really was ridiculously complex and stupid.
I have taken the relevant comparisons between the old scheme and the new scheme in section 2.24, I had to screen print and post them separately as the chart wouldn't fit on one screen.
But it does show how crazy it was trying to work out how much you were allowed and how much tax you owed, it was mental.