Superannuation, the ultimate government cash cow?

[craft]

I've gone back to Wayne Swan's and Bill Shorten's media release from Friday,





http://resources.news.com.au/files/2013/04/05/1226613/049704-aus-na-file-superannuation.pdf

I'm in the PSS which shows earnings and tax as follows,

Change in market value of investments: $228.7m
Other income: $2.1m

Income tax Expense: $34.2m

$34.2m is 15% of $228m.

http://pss.gov.au/storage/1-PSS 2011-2012 Annual Report to Members.pdf

My bolds.

Your situation is a government defined benefit superannuation fund.

I don’t understand the accounting for it– it’s different from everything else I am familiar with.

Everything relating to deferred tax obligations seems to be handled through the revenue line ‘Appropriation from Consolidated Revenue Fund’ which seems like a netting of deferred tax assets and liabilities for the Government.

 

[drsmith]

Your situation is a government defined benefit superannuation fund.

I don’t understand the accounting for it– it’s different from everything else I am familiar with.

Everything relating to deferred tax obligations seems to be handled through the revenue line ‘Appropriation from Consolidated Revenue Fund’ which seems like a netting of deferred tax assets and liabilities for the Government.

Beyond the detail outlined in the operating statement, I don't know either, but the income tax is 15% of the change in market value of the investments.

Regardless of it being a defined benefit fund supported by government appropriations, there's an implication that the 15% tax on earnings includes unrealised capital gains. It's either that or if more complicated, simply a coincidence between the income tax and the change in market value of investments.

 

[drsmith]

If your assumptions are correct doc, it could quite concievably hit a lot of people in a year of surging assett prices. One would hope all this would be thrashed out during the formulation process.

The public released of this policy was rushed.

It wouldn't surprise me if at a government level it hasn't yet been considered. they're not exactly rushing to legislate. The revenue saving projections may be based on 5% earnings each and every year. Who knows.

 

[craft]

Beyond the detail outlined in the operating statement, I don't know either, but the income tax is 15% of the change in market value of the investments.

Regardless of it being a defined benefit fund supported by government appropriations, there's an implication that the 15% tax on earnings includes unrealised capital gains. It's either that or if more complicated, simply a coincidence between the income tax and the change in market value of investments.

Like I say I don’t know much about government or defined benefit schemes. – It seems a pretty unlikely co-incidence though.

What I do know is that Non Government defined contribution funds which cover most people don’t pay tax on unrealised gains – although a provision is made for them.

My speculation is that it’s very unlikely that it will be applied on un-realised gains – If it is that makes it a huge change and a major departure from current for most people. Until we get the legislation which is not likely to occur there’s only enough info for futile speculation - so I'm not going to argue the toss.

 

[sptrawler]

Like I say I don’t know much about government or defined benefit schemes. – It seems a pretty unlikely co-incidence though.

What I do know is that Non Government defined contribution funds which cover most people don’t pay tax on unrealised gains – although a provision is made for them.

My speculation is that it’s very unlikely that it will be applied on un-realised gains – If it is that makes it a huge change and a major departure from current for most people. Until we get the legislation which is not likely to occur there’s only enough info for futile speculation - so I'm not going to argue the toss.

I'm happy with that, but if it goes pear shaped, me and doc will be kicking your @rse. lol

 

[prawn_86]

National Press CLub address on now about the recent changes if anyone is interested

 

[ASICK]

http://poorrichardsnews.com/post/47244056666/obama-seeks-to-cap-retirement-accounts-so-that-no

What is "too much"? Still, it's nice to see that we're not alone.

 

[drsmith]

National Press CLub address on now about the recent changes if anyone is interested

I saw a couple of questions at the end, but missed most of it. Is the video made publically available after the event ?

Laura Tingle did a piece on it,

Brogden opened by arguing that the proof of the success of the super system “is in the Budget”.

“Superannuation is already saving taxpayers billions in age pension payments,” he claimed, arguing the pension bill would increase by “$7 billion in the absence of superannuation”.

Well that makes tax concessions worth $32 billion (according to Treasury’s tax expenditure statement) good value for money, don’t they?

The difference of course is $25bn.

http://www.afr.com/p/opinion/on_slippery_slope_there_is_only_HI98SSvDxPJeQKOsN4IanL

In 2011, the number of people aged over 65 was approximately 3.1 million.

http://www.abs.gov.au/ausstats/abs@.nsf/0/AE3CAF747F4751CDCA2579CF000F9ABC?OpenDocument

If we assume this is currently 3.25 million, the $25bn difference between pension savings from super and super concessions would fund a non-means test annual payment of $7692 for every person aged 65 and over.

It would be interesting to know what the total government outlay is for the age pension and add it to the above figures and then take into account the distribution between singles and couples relative to current pension rates.

The superannuation investment industry that clips its $20bn in fees every year I think would prefer not to know.

 

[drsmith]

Does anyone know how much we pay out annually for the age pension or where I could find it ?

Digging into the budget papers, the closest I could get to was Income For Seniors, but at $36.76bn for 2012/13, that must include more than the age pension. On 3.25 million people being 65 or over, that equates to $11310 per person.

http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst6-03.htm

 

[McLovin]

Does anyone know how much we pay out annually for the age pension or where I could find it ?

Digging into the budget papers, the closest I could get to was Income For Seniors, but at $36.76bn for 2012/13, that must include more than the age pension. On 3.25 million people being 65 or over, that equates to $11310 per person.

http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst6-03.htm

There's a pretty good breakdown here...

http://www.google.com.au/url?sa=t&r...=Dzj8ZJovuMXW6JnMOIy-qg&bvm=bv.45175338,d.cGE

 

[sydboy007]

There's a pretty good breakdown here...

http://www.google.com.au/url?sa=t&r...=Dzj8ZJovuMXW6JnMOIy-qg&bvm=bv.45175338,d.cGE

Well worth a read.

A few things I was surprised by

A partial Age Pension is payable for home owning couples with earnings up to close to $2,500 per fortnight and
with over $1,000,000 in non-housing assets.

For example, a couple who are homeowners with non-housing assessable assets of $750,000 and assessable
income of $45,000, are eligible for a considerable part Age Pension payment of over $10,000 per annum, and
those with even higher income and $1 million in non-housing assets are still eligible for a partial pension.

We estimate that the cost of administering the Age Pension by Centrelink could be as high as $1 billion a year

Second, although the eligibility for the Age Pension is 65 and increasing to 67, retirees can access their
superannuation at age 60. This allows early retirees to spend some or all of their superannuation and fall back on
the Age Pension at a relatively young age.

It appears incongruous that people cannot claim a Newstart allowance until they have used up their own money
first, while there is a generous asset test for the Age Pension. Further, Newstart has no partial payment – you
either qualify or you don’t.

I like the proposals they have to simplify access to the aged pension. Would in many ways stop the double dipping that can occur now.

 

[Julia]

It appears incongruous that people cannot claim a Newstart allowance until they have used up their own money
first, while there is a generous asset test for the Age Pension. Further, Newstart has no partial payment – you
either qualify or you don’t.

Requiring all savings to be used before Newstart is accessible has always seemed unreasonably harsh to me.
People can, of course, quarantine saved funds into Super, but we all know the restrictions that then involves.

Surely unemployed people should be able to receive assistance for, say, a few months while they look for a job, then if still unemployed, then have to access their savings before receiving any more government benefit.
It's reasonable enough that a high earner with a decent asset base doesn't receive taxpayer funded assistance, but someone on the average wage with only a few thousand saved as an 'emergency backstop' should be allowed to keep that imo. Can't see why it couldn't be worked on a graduated scale.

 

[craft]

I saw a couple of questions at the end, but missed most of it. Is the video made publically available after the event ?

Was worth a watch - pretty civil both extremes argued.

http://www.abc.net.au/news/programs/national-press-club/

 

[craft]

Requiring all savings to be used before Newstart is accessible has always seemed unreasonably harsh to me.
People can, of course, quarantine saved funds into Super, but we all know the restrictions that then involves.

Surely unemployed people should be able to receive assistance for, say, a few months while they look for a job, then if still unemployed, then have to access their savings before receiving any more government benefit.
It's reasonable enough that a high earner with a decent asset base doesn't receive taxpayer funded assistance, but someone on the average wage with only a few thousand saved as an 'emergency backstop' should be allowed to keep that imo. Can't see why it couldn't be worked on a graduated scale.

Pretty sure there is a liquidity waiting period of upto thirteen weeks after that is served the assets test to cut out (no phase out) the payment is the same as when the pension starts to reduce. ie around 200K for a single non-home owner and up from there depending on your circumstamces - so not that mean really.

 

[drsmith]

There's a pretty good breakdown here...

http://www.google.com.au/url?sa=t&r...=Dzj8ZJovuMXW6JnMOIy-qg&bvm=bv.45175338,d.cGE

Thanks.

With some simple assumptions, I calculated that in 2011 that the net cost of super concessions and the age pension was about $7bn more than a non-means tested age pension for everybody 65 and over. This was after taking into account the $7bn saving to pension funding from super concessions as outlined in Laura Tingle's article above.

I was going to show the calculations but lost the post.

Was worth a watch - pretty civil both extremes argued.

http://www.abc.net.au/news/programs/national-press-club/

Thanks. I'll watch it over the next couple of days.

 

[Julia]

Pretty sure there is a liquidity waiting period of upto thirteen weeks after that is served the assets test to cut out (no phase out) the payment is the same as when the pension starts to reduce. ie around 200K for a single non-home owner and up from there depending on your circumstamces - so not that mean really.

Thank you, craft. I've had a look at the Centrelink website and it looks as though the assets test is similar to that for pensions and all other allowances, unless I'm misinterpreting the info on the website (entirely possible).
So that's a huge improvement and something the government hasn't publicised at all, given the still widely held understanding that all assets need to be used up before accessing Newstart.
Full credit to the government for this change, if it's actually how it works.

 

[Intrinsic Value]

Well worth a read.

A few things I was surprised by

A partial Age Pension is payable for home owning couples with earnings up to close to $2,500 per fortnight and
with over $1,000,000 in non-housing assets.

For example, a couple who are homeowners with non-housing assessable assets of $750,000 and assessable
income of $45,000, are eligible for a considerable part Age Pension payment of over $10,000 per annum, and
those with even higher income and $1 million in non-housing assets are still eligible for a partial pension.

We estimate that the cost of administering the Age Pension by Centrelink could be as high as $1 billion a year

Second, although the eligibility for the Age Pension is 65 and increasing to 67, retirees can access their
superannuation at age 60. This allows early retirees to spend some or all of their superannuation and fall back on
the Age Pension at a relatively young age.

It appears incongruous that people cannot claim a Newstart allowance until they have used up their own money
first, while there is a generous asset test for the Age Pension. Further, Newstart has no partial payment – you
either qualify or you don’t.

I like the proposals they have to simplify access to the aged pension. Would in many ways stop the double dipping that can occur now.

Too generous by half and unsustainable in the long run. There needs to be a lot of rework on super and the OAP before it becomes equitable and sustainable.

 

[sydboy007]

Too generous by half and unsustainable in the long run. There needs to be a lot of rework on super and the OAP before it becomes equitable and sustainable.

Very true

Howard certainly set the budget up for a slow death with all the increased access he gave to a partial OAP which then provides a lot of other perks.

 

[sptrawler]

Too generous by half and unsustainable in the long run. There needs to be a lot of rework on super and the OAP before it becomes equitable and sustainable.

Too true, just vote Labor, to get it fixed.

 

[Intrinsic Value]

Too true, just vote Labor, to get it fixed.

You seem to be forgetting that is was the Howard govt that created this mess in the first place buying the grey vote with unsustainable election bribes.

Sooner or later whoever is in govt will have to wind back some of these policies.