...........
The only reason I raised the matter of fees was that you and I have both likely seen people that are not looking after their clients as much as they're looking after themselves. Some of these people are not deserving of the trust vested in them or the fees they collect. A simple question as to how their fees are calculated can help people smell a rat, because again, if someone is embarrassed about how much they're being paid when quizzed on it, it's likely because they know they're being paid too much.
This is all well and truly off topic now, so if anyone would like clarification I will respond by PM, or if there was a separate thread I'd contribute to that.
Back to your regularly scheduled class warfare.
Firstly, I pay tax on the taxable component of my SMSF pension as I am under 60, it does qualify for a 15% offset.
I don't pay any tax on the taxfree component of my pension, as the funds were put in as after tax contributions.
So it is a furphy saying after $50k, you should pay tax. What if all the pension comes from after tax contributions, as opposed to concessionally treated contributions.
That's all well and good if the person is working, and can add extra to it, what if they are drawing a pension?
If currently the cap was $1m giving a return of 3.6%, that would mean $36k income, as opposed to a Government pension of $32k.
The only way the majority of "normal" people, can get sort of money into super, is by putting in after tax dollars. This could be done by downsizing, selling investments or just doing without and putting as much cash as you can in.......''
http://www.superannuation.asn.au/media-release-3-july-2014
''Amidst ongoing public debate regarding the equity of superannuation tax concessions, a report released by the Association of Superannuation Funds of Australia (ASFA) today provides a clear picture of where superannuation tax concessions flow. 'The report found that the tax concessions applied to concessional superannuation contributions are not significantly skewed towards high-income earners, and, in fact, support the bulk of the working community to save for their retirement.
Based on an analysis of superannuation contributions and tax concessions by taxable income bracket, around 75 per cent of the tax concessions applied to contributions go to those paying either the 30 per cent or 38 per cent marginal tax rate.
However, the report also found that, when it comes to the tax concessions applied to superannuation investment earnings, a large portion of tax concessions flow to middle-to-high-income earners, with 65 per cent flowing to those earning over $80,000, and 23 per cent to those with a taxable income of more than $180,000.
ASFA CEO Ms Pauline Vamos says that development of public policy regarding the equity and sustainability of the superannuation system must be based on sound assumptions and facts.
“This report clearly shows that when it comes to the tax concessions applied to superannuation concessional contributions, the majority flow to those in the middle-income bracket, who make up a large part of the Australian workforce.
“This provides evidence that the contribution caps, which have been lowered substantially over the past few years, are working to reduce the concessional contributions made by upper-income earners, while continuing to provide support to the majority of Australians to help them save for their retirement.”
Notwithstanding this, Ms Vamos says there are various policies that could be adjusted to increase the equity of the system.
“While tax concessions are a very important feature of our superannuation system, once people have accumulated more than enough money to fund a comfortable lifestyle in retirement, they no longer require government assistance. With this in mind, there are a number of ways government policy could be adjusted to make sure that people are using superannuation for retirement purposes, and not as a wealth accumulation tool.”
The report makes a number of recommendations in this area, including applying a lifetime cap to non-concessional contributions, and looking at ways to remove the concessional tax treatment for very high superannuation balances in excess of $2.5 million.
“This would help ensure that people are using superannuation as a means to provide enough income for a comfortable retirement, and not for wealth accumulation or estate planning purposes,” says Ms Vamos.
....''
What do you think about the recommendation of capping at $2.5million?
I for one, get fed up with young people making erroneous sweeping statements, to support their drive for higher super taxes, to support their drive to lower their personal tax.
If the below ATO figures are correct then that means based on a $1.8T super funds base
* 2% of accounts hold ~ $540B in assets
* 10% of accounts hold ~ $1T in assets
* remaining 90% of accounts hold ~ $720B in assets
Certainly shows how lopsided the super system is.
Based on the income deciles, it's also plain to see where the tax expenditures are going, and it's not really targeted at minimising future pension liabilities.
The interim results of the Murray review were interesting, however I anticipate that the Abbott government will take little/no action following the release of the final report. Most of these recommendations will be detrimental to the short term profitability of the Big 4 and Wealth Management industry which is already taking a beating in the media with the whole FOFA debacle.
The focus on reducing total fees in super I also expect will be ignored... the purpose of MySuper is to reduce cost and this is still in the process of being implemented.
Sydboy, tax concessions for high income earners and large super balances clearly need attention, but I wouldn't hold my breath on this one! Tax reform still a while off.
That is to assume the wider public know or care enough to even think about it in the first place. Do you really think your average Australian spends time pondering tax reform?ALL tax reform is a long way off. Sadly I think it will be the next recession that gives some impetus to reform, though it'll depend if there's anyone leader with the political cajones to actually get the voters to understand what needs to be done and support it. making sure there is some equity involved would go a long way to getting that public support
That is to assume the wider public know or care enough to even think about it in the first place. Do you really think your average Australian spends time pondering tax reform?
The head of the Financial Services Council, John Brogden, has accused the Grattan Institute think tank, and Financial System Inquiry chairman David Murray, of sloppy use of data to back their arguments that superannuation fees are too high.
Mr Brogden said critics had not taken into account Australia’s more active management, choice and life insurance options when comparing costs to international pension schemes.
Mr Brogden, who will stand down from the group in January to head the Australian Institute of Company Directors, said it was “remarkable” the Grattan Institute had concluded that MySuper had already failed. He pointed to research commissioned by his group from Rice Warner, which found that MySuper had reduced fees in default superannuation from 0.92 per cent to 0.73 per cent between 2011 and 2013.
This fee level compared with CalPERS in the US at 0.77 per cent, the Canada Pension Plan at 0.92 per cent, the Government Pension Fund of Norway at 0.74 per cent and the MPF system in Hong Kong at 1.30 per cent.
Rice Warner chief executive Michael Rice told the conference that across all superannuation products, fees had fallen between 2002 and 2013 from 1.37 per cent to 1.12 per cent and with MySuper, this would head below 1 per cent.
This article in The Age reflects my view on our super system, in that it's not as expensive as it's made out to be.
Older, more expensive products are still being phased out and replaced by lower cost options. MySuper is still being implemented.
We have vast choice & flexibility in respect of investment and insurance options.
Of course. Why would someone near or over 60 years want to see change in tax free super when it's possible to have an 80K super pension tax free and in the last FY earn another 20.5K outside super tax free as well when using the LITO.
Golly gosh, a $100K income and not a cent to pay in tax. Shame on those PAYG tax slaves wondering how they'e supposed to fund everything with a declining participation rate and swelling ranks of politically powerful over 55s.
There you go again Syd, bending things again.
If someone near 60 is getting an $80k pension, that equates to 4% of $2m, how does someone get $2m into super other than after tax dollars.
The salary sacrifice component will be taxable, and the 20.5k he/she earns will be added to that taxable component, then taxed minus the 15% offset.
The component of the $80k, that was put into the super after tax, is tax free. Or would you have them taxed on that as well? A bit like taxing you on money you withdraw from the bank.lol
Looking at your example, lets say the $2m is made up of $1m salary sacrifice and $1m after tax contribution.
Therefore 50% of the $80k is taxable, i.e $40k, add to this the $20.5k earned at Bunnings and the taxable income is $60.5k less a 15% tax offset.
In reality the salary sacrificed component would probably be much less, due to the contribution caps, therefore the taxable component would be even less.
If the person is over 60, then your example is accurate, however even if you taxed peoples pension, it would only be on the taxable component. I don't think that part of the equation is as big a deal as you are making out.
The bigger issue is tax free earnings in the fund.
Ves, Craft and Junior can correct me if I'm wrong
Certainly none that would affect those in that age bracket who have engaged in retirement planning around the existing super taxation laws. Benefits will need to be wound back depending on one's age bracket, the younger you are the less generous future benefits will likely be. In my view, the biggest inequity in the whole system is the primary residence exemption from the age pension assets test. Property millionaires should not have access to the age pension period, future generations will likely be less inclined or able to support such largess.The point I was making is if you are near 60 or over 60 then why would you want any changes to the current very generous tax system around super.
True, but penalizing those about to retire or already retired by changing the current system will not solve the long term funding issue either.The below graph sums up pretty well how little super willa ctually help with reducing the cost of the aged pension because little of it actually goes tot hose that will receive it.
Already there and I still have a way to go yet before I will have sufficient funds to be a self-funded retiree.Earnings in the funds is where the tax benefits are going to grow the fastest. I've got to a super balance last year where the earnings was within a few hundred dollars of my employer contributions, so I'm now at the point where the tax breaks on the fund earnings will usually be higher than on contributions.
The point I was making is if you are near 60 or over 60 then why would you want any changes to the current very generous tax system around super.
I have an issue where a small subset of super pension recipients are able to receive tax breaks more than the pension - tell me how that makes budgetary sense. It seems all tax expenditures are off limits in the current environment. The below graph sums up pretty well how little super willa ctually help with reducing the cost of the aged pension because little of it actually goes tot hose that will receive it.
Earnings in the funds is where the tax benefits are going to grow the fastest. I've got to a super balance last year where the earnings was within a few hundred dollars of my employer contributions, so I'm now at the point where the tax breaks on the fund earnings will usually be higher than on contributions.
Certainly none that would affect those in that age bracket who have engaged in retirement planning around the existing super taxation laws. Benefits will need to be wound back depending on one's age bracket, the younger you are the less generous future benefits will likely be. In my view, the biggest inequity in the whole system is the primary residence exemption from the age pension assets test. Property millionaires should not have access to the age pension period, future generations will likely be less inclined or able to support such largess.
True, but penalizing those about to retire or already retired by changing the current system will not solve the long term funding issue either.
.
The point I was making, was you don't give accurate information to support your arguements.
With regards the tax breaks greater than the pension.
If you are going to tax individuals when their self funding pension is greater than the government funded free pension. Why would anyone put their own money in?
This would then lead to the only money going into super, being the employers contribution. Which in turn would leave everyone with inadequate funds in super.
I don't dissagree the tax breaks on super need reviewing, just think it has to be in a realistic manner.
Everything you mention, would in my opinion, cause the super system to fail. Ridiculously low caps, tax on earnings and on pensions.
As I said above, how can you tax people on their own money when they are withdrawing it?
If the individuals pension is composed mainly of after tax contributions, how can you tax their pension just because it is more than the age pension. That's crazy.
From what I've read, when comparing the Australian super system to overseas variants, we have probably the most tax light system out there.
We have minimal tax on the way in and tax free on the way out. No other country does this.
Most countries provide minimal to no tax on the way in or the way out. In the US there's no tax on benefits going in, but they pay normal income tax rates on pensions paid from the 401K plans.
The current system is not affordable. Is it fair that gen X and those behind them have to pay higher taxes to fund tax free super?
As wayne said, how is it reasonable for property millionaires to be able to claim a full pension, especially if they've used their 100-200K super balance to pay off the mortgage? The longer the unfair level of support to the super system continues, the more we will see budgets like this year were students, families, the unemployed face the brunt of spending cuts.
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