Superannuation, the ultimate government cash cow?

[sptrawler]

Actually when you think about the super system, it isn't the funds that are already in there that are the problem.

It is more about the funds going in, what is happening is bracket creep.

In the early days 15% entry tax, was fine a lot of workers in 2000-2008 were on less than $35k.

Now nobody who works full time is on less than $35k, so everyone is getting a tax break on super.
IMO that is where the problem is manifesting, it is becoming a perk for the plebs, the engine room.
You can't have that.
Just my thoughts.

It will be interesting to see how they manage the increase in wages and maintain 15% contribution tax.

 

[Julia]

Business is making fairly clear to the government how they feel about suggested tampering with Super.
http://www.theaustralian.com.au/nat...cil-of-australia/story-fn59nsif-1226573057536

 

[pixel]

Business is making fairly clear to the government how they feel about suggested tampering with Super.
http://www.theaustralian.com.au/nat...cil-of-australia/story-fn59nsif-1226573057536

... but when has our current Gov'mint started to listen to Business?
Maybe the next one might - but only where it suits them. They always have "The Greater Good" in mind.

 

[banco]

Business is making fairly clear to the government how they feel about suggested tampering with Super.
http://www.theaustralian.com.au/nat...cil-of-australia/story-fn59nsif-1226573057536

They might not have to if Howard hadn't given away the farm in 2006.

 

[prawn_86]

They might not have to if Howard hadn't given away the farm in 2006.

Lets please keep this thread on topic with regards to superannuation and any future changes that are upcoming as opposed to political arguments as to who did what as we all know all politicians are as useless as each other

 

[sptrawler]

Lets please keep this thread on topic with regards to superannuation and any future changes that are upcoming as opposed to political arguments as to who did what as we all know all politicians are as useless as each other

Quite right prawn, I haven't heard either side say "hang on a minute, how can we discuss the general super system and its taxing? When we don't apply the same litmus test on the system we enjoy"

 

[sydboy007]

The way superannuation is currently working it's not really a cost effective way to reduce the financial burden of providing the aged pension.

Depending on the person's income you can be getting up to 75% of the current age pension as a tax discount, though this has been reduced a bit for those earning over 300K.

How making super tax free in the pension phase is supposed to help I still haven't read anything that makes financial sense to me. Allowing someone over age 60 to do a TRB along with salary sacrificing up to 25K is a GIANT tax loophole based on age based discrimination.

I'd suggest setting up super so that once you have a balance that would provide you with say 125% of the aged pension that you can only add fully taxed money into you account. Once a person isn't going to be a burden on tax payers, why should the government "care" any more? What is the point of keep income taxes higher to fund super tax breaks?

I'd argue that by cutting back on the amount of lost super tax it would easily allow the Government to provide biannual tax cuts, along with funding some infrastructure. Better yet, help devlop a retail corporate bond market in this country and let the SMSF sector help fund the productive investment of local companies

 

[sptrawler]

The way superannuation is currently working it's not really a cost effective way to reduce the financial burden of providing the aged pension.

Depending on the person's income you can be getting up to 75% of the current age pension as a tax discount, though this has been reduced a bit for those earning over 300K.

How making super tax free in the pension phase is supposed to help I still haven't read anything that makes financial sense to me. Allowing someone over age 60 to do a TRB along with salary sacrificing up to 25K is a GIANT tax loophole based on age based discrimination.

I'd suggest setting up super so that once you have a balance that would provide you with say 125% of the aged pension that you can only add fully taxed money into you account. Once a person isn't going to be a burden on tax payers, why should the government "care" any more? What is the point of keep income taxes higher to fund super tax breaks?

I'd argue that by cutting back on the amount of lost super tax it would easily allow the Government to provide biannual tax cuts, along with funding some infrastructure. Better yet, help devlop a retail corporate bond market in this country and let the SMSF sector help fund the productive investment of local companies

I think you've lost the plot, salary sacrificing $25k is not going to give you a reasonable pension.
I've said before, if you want a steady, I'm not saying lavish, retirement in the current climate you need $2m.
The labor party are saying $800k are fat cats, just shows how they are out of touch with reality.
I think both parties would be much more realistic, if their pensions were taxed the same as everyone elses.

It is o.k backing one, but do either live by the rules they apply to others.
That is why I've said Allan Carpenter was the only politician that had morals. Guess what he was labor.lol

Guess how long he lasted. lol Not long

 

[banco]

I'd suggest setting up super so that once you have a balance that would provide you with say 125% of the aged pension that you can only add fully taxed money into you account. Once a person isn't going to be a burden on tax payers, why should the government "care" any more? What is the point of keep income taxes higher to fund super tax breaks?

Because the baby boomers are a large and very active voting bloc who want to be kept in the style they've become accustomed to?

 

[McLovin]

I've said before, if you want a steady, I'm not saying lavish, retirement in the current climate you need $2m.

$2m, are you joking? Have you actually worked out what the annuity on that would be, even at 3%? Over say 25 years it would be around $110k/annum. With no kids, house paid off, minimal living expenses, and no tax, you'd be living on $110k/annum disposable income. What do you consider lavish?

 

[sptrawler]

Because the baby boomers are a large and very active voting bloc who want to be kept in the style they've become accustomed to?

Most baby boomers have very little in super due to the fact it was only introduced in 1992, even then it was 3%.
If baby boomers have money in super, it is mainly from after tax contributions, e.g downsizing.
The Labor party ethos of demonising people is a double sided sword.
They don't put themselves forward as saying we will adopt the same taxing regime as everyone else.
Secondly most baby boomers I know are trying to downsize and fund their own pension, while still supporting adult children.
They are the most demonised section of society.IMO
Cheap shot banco, just remember you have to live with the outcomes.

 

[sptrawler]

$2m, are you joking? Have you actually worked out what the annuity on that would be, even at 3%? Over say 25 years it would be around $110k/annum. With no kids, house paid off, minimal living expenses, and no tax, you'd be living on $110k/annum disposable income. What do you consider lavish?

Talking glib is fine if you are an accountant, however some look beyond the crap.

http://www.superguide.com.au/boost-your-superannuation/crunching-the-numbers-a-2-million-retirement

What I consider lavish is M.P's getting $100k - 200k indexed for life tax free, gauranteed.lol

The examles given are for 5-7% returns and I'm talking about retiring at 55.
Currently term deposits are 4-4.5%

 

[McLovin]

Talking glib is fine if you are an accountant, however some look beyond the crap.

http://www.superguide.com.au/boost-your-superannuation/crunching-the-numbers-a-2-million-retirement

What I consider lavish is M.P's getting $100k - 200k indexed for life tax free, gauranteed.lol

The examles given are for 5-7% returns and I'm talking about retiring at 55.
Currently term deposits are 4-4.5%

So, living to 100 at 5% (the most conservative calculation) gives an inflation indexed amount of $82k/annum in today's dollars. Same scenario, tax free, mortgage free, child free. Almost $1,600/week in disposable income for life.

 

[sptrawler]

So, living to 100 at 5% (the most conservative calculation) gives an inflation indexed amount of $82k/annum in today's dollars. Same scenario, tax free, mortgage free, child free. Almost $1,600/week in disposable income for life.

Yes that's at 5%, currently term deposits are 4-4.5%. The talk is returns going to 3%, so it isn't as glossy as you make out. In U.K, U.S and Europe it's about 1%.
You could take risks and buy dividend paying shares, I realse that, but I'm using solid data, not speculation.

But trust me, as a pleb to save $2m in todays terms, takes a lot of sacrifice.
To do the same in 10 - 20years time would require saving $4m-$6m.

Also it shows how good a $100k -$200k pollies pension is, in real terms.

So to cut to the chase, McLovin what do you think is a reasonable retirement sum?

 

[sptrawler]

So, living to 100 at 5% (the most conservative calculation) gives an inflation indexed amount of $82k/annum in today's dollars. Same scenario, tax free, mortgage free, child free. Almost $1,600/week in disposable income for life.

Sorry forgot to mention, they would be taxing that, as it would be above $800k supporting the pension. what a hoot.

 

[sptrawler]

O.K McLovin, now we have established 15years in parliament, gives you the same retirement benefit as having $3 - 5m in super.
Lets get back to reality, Here is the same link if you have $1m in super.

http://www.superguide.com.au/boost-your-superannuation/retirement-why-can’t-1-million-last-forever

Just because you are fed rubbish doesn't mean you have to eat it. $1m in super and a person will probably end up on the pension.

This is why the pollies gave themselves a 40% payrise recently, inflation will knock the crap out of a $1m nest egg.

 

[Tyler Durden]

Just thought it relevant to share this here:

The four most disproportionately influential industries in Australia, they say, are superannuation, banking, mining and gambling.

Employers in Australia are required by law to remove 9 per cent of employees' pre-tax wages and deposit it in a superannuation account the employees can't touch until they retire. The industry has now persuaded the Labor government to gradually increase this to 12 per cent.

Thus the government has compelled almost all employees to become the customers of a particular industry.
The average management fee paid by Australians with a retail super fund is about 2 per cent of their fund balance each year.

So someone with a balance of $100,000 is paying a fee of about $2000 a year, or nearly $40 a week. This is more than the average Australian pays for electricity. After the compulsory contribution rate is raised to 12 per cent, these annual fees will have increased by a third.

To be fair, the government is working to oblige the super industry to give its captive customers a better deal. But it is encountering - and yielding to - much push-back from the industry.

http://www.smh.com.au/opinion/politics/the-four-industries-that-rule-australia-20130205-2dwew.html

 

[sydboy007]

I think you've lost the plot, salary sacrificing $25k is not going to give you a reasonable pension.
I've said before, if you want a steady, I'm not saying lavish, retirement in the current climate you need $2m.
The labor party are saying $800k are fat cats, just shows how they are out of touch with reality.
I think both parties would be much more realistic, if their pensions were taxed the same as everyone elses.

It is o.k backing one, but do either live by the rules they apply to others.
That is why I've said Allan Carpenter was the only politician that had morals. Guess what he was labor.lol

Guess how long he lasted. lol Not long

You're missing the point.

What is the Government's prime reasoning for super? I'd argue it's to minimise the cost of the aged pension on tax payers, and as has been showing the dependancy ratio is going to sky rocket over the next 15 years, so the remaining tax payers are going to be in a real bind if the aged pension costs blow out.

So to argue that you need $2 million to fund a comfy retirement isn't really an issue for the Govt. Super should pretty much be about getting the largest number of people on an income that's a bit more than the current aged pension. Anything above that is up to the individual.

To me, the current argument smacks of the nanny state. The Govt has a slight role to push us all to have a basic minimum saved for retirement, but after that, it's a personal choice how much you want to slow your current spending now to have more to spend later in life.

As for that $2 million for a comfy retirement, lets say you have 30 years to live after retirement. You should be able to draw down around 65K a year over that 30 years, with CPI increases each year. Your super balance isn't some untouchable sum of money, you DON'T have to just survive on earnings alone. It is meant to fund your retirement. 5% of $1M is 50K a year, and I'd argue it is still relatively easy to find shares and some bonds that pay at least this much. Just look at AKY or AYK - listed interest securities funds that are paying at least 8% yield.

I'd argue a major issue for Australians is the lack of access to corporate debt. When I signed up with FIIG last year I was amazed at how many higher yielding bonds are out there. It seemed like you could easily earn 2 to 3% extra if you were able to move in the wholesale debt space. While that kind of debt was a bit riskier than what was available for retail investors, we certainly weren't talking about junk bonds or financially vulnerable companies.

We need to have a listed corporate debt market that is as liquid and cheap to buy sell as currently for shares. It would make the country a lot less vulnerable to the ebb and flow of the money markets, and it would benefit us all by allowing our super funds to increase their investments into what is generally a more stable form of income, especially for those in the pension phase.

 

[sydboy007]

Just thought it relevant to share this here:



http://www.smh.com.au/opinion/politics/the-four-industries-that-rule-australia-20130205-2dwew.html

I'd argue that is one of the major reasons that the number SMSFs has skyrocketed in recent years. For a single person with 100K it's worthwhile, for a couple with more it's a no brainer, especially if you have adult children. With esuperfund I'd say you can have a fixed annual fee of $1000, so spread between 2 to 4 people it's a very cheap way to manage your money. Having complete visibility of the fund is another major draw card or me.

 

[sptrawler]

What you say has a lot of merit Sydboy.
The one thing that annoys me, with the tax debate is, the tax cost is a percieved loss, not a actual loss.
If there was no super, there wouldn't be tax collected as there would be no savings( disregarding tax collections on the spending)
What they are saying is if those savings were taxed normally there would be more tax collected.
The only 'real' loss of tax is when it is contributed at a concessional rate.
Once in the system it is locked away and all earnings are taxed, no tax free threshold.
The individual has no access to the money and it props up our monetary system, which was exposed in the 87 crash. From memory two of our banks nearly went under, due to overseas borrowing exposure.
To say it is costing our younger generation is probably a complete fuphy, as they are enjoying the tax concession on the contribution.
With bracket creep and with the lowest marginal bracket at 19% everyone who works is getting a tax concession. Now that is an actual cost to the government, even the lowest paid are getting a 4% tax break.

As for $2m ,If you want a comfortable lifestyle it will cost about $80k.
That is an overseas trip of say 6 - 8 weeks, going to the movies once a week, changing your car every 7-8 years.
I'm going off a friend who has been retired for 20 years and is fairly diligent with his money. Neither of them smoke.
We are talking about having enough money to never need any government support.
Having $1m you just about qualify for part pension and you will be on full pension within 20 years.