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Superannuation, the ultimate government cash cow?

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Not for me it isn't.
I earned 103k (on my group certificate) and this was my taxable income and was not reduced by how much compulsory super was paid to my super account.
 
Wysiwyg said:
Not for me it isn't.
I earned 103k (on my group certificate) and this was my taxable income and was not reduced by how much compulsory super was paid to my super account.
Click to expand...

Did you pay your compulsory contribution or did your employer?
Are you saying that you paid tax on an income of $103k and then paid a contribution of 9.5% of $103k - that is, are you saying that you paid $26k tax and then paid a contribution of $9785? If you did, shouldn't that reduce your taxable income ?

And if paid a contribution after you had paid tax, isn't that a non-concessional contribution?

http://www.superguide.com.au/how-su...e_concessional_contributions_treated_tax-wise

''....An individual can choose to use a salary sacrificing arrangement as a way to pay less tax by reducing the amount of personal income that is taxable (although the concessional contributions are subject to at least 15% tax within the fund).
...''
 
You guys are just arguing semantics with regard to who pays the SG. The worker earning 200K example is on a salary of 200k including super, so his actual income could also be described as $181,000pa + super. It depends what industry you're in as to how it's worded I find.
 
sptrawler said:
....

I think they would be better off just concentrating on returning to the original concept, rather than trying to get everyone off the pension. It won't happen, so give everyone the pension and tax super.
Click to expand...

Here's the reason why I think it would be nigh impossible to return to the old system.
The problems need to be fixed.



''...Fun managers rake out roughly $23.5 billion in fees each year from Australia's $2 trillion superannuation system. It mostly goes to the banks. Their fees are the highest and they control the greatest chunk of the market...''

Read more: http://www.smh.com.au/business/bank...d-industry-20151112-gkxsi7.html#ixzz3rbLDm38l
Follow us: @smh on Twitter | sydneymorningherald on Facebook
 

Agreed... the point is that concessional contributions cost the budget $17 bil, and the low earners are disadvantaged in this system.
 
Yes I have always had my annual income represented without employer paid super included. This is the normal for wage employees I believe. To answer k.smith too
 

Look we can go on about this endlessly, I don't agree with the belief that the lowest income earners are missing out. They pay no effective tax and receive, tons of cash low income cash handouts. I'm sure I read the lowest 20% of wage earners receive about $435/week in concessions of one sort or another.

They will also qualify for a fully funded Government pension upon retirement, if you believe they require a further handout, in the form of a tax payer funded retirement bonus savings plan, that's your prerogative.

How much would you like them to have?
Wouldn't it be easier, to just up the pension?

Sooner or later, you will end up running out of other peoples money, to give away.

Look it may sound a bit harsh, it wasn't meant to.
We have one of the most generous welfare systems in the World, you may have noticed many are trying to get here to avail themselves of it.
It is funded by a low percentage of the workforce, paying a lot of direct and indirect taxes, this in turn makes these workers internationally uncompetitive and job losses result.

The way to fix the super system is to limit the amount a person can accumulate in it, when that is reached, no further can be added.

Then set the contributions, earnings and withdrawl taxes in a way that makes the system sustainable.

Running around with bandaids changing the system every couple of years, is a ridiculous situation.
 

More handouts...???
I am suggesting we STOP ALL handouts on concessions and save $15 bil.
In the current super system it is the wealthy who are receiving the "taxfunded retirement bonus savings plan", certainly not the low earners...
the crazy thing is that if the LISC stops in June 2017, the low earners will actually be paying for the high earners !!!

Crikey article is very to- the- point
http://www.crikey.com.au/2013/04/04...oor-to-give-to-the-rich/?wpmp_switcher=mobile
 
k.smith said:
More handouts...???
I am suggesting we STOP ALL handouts on concessions and save $15 bil.
In the current super system it is the wealthy who are receiving the "taxfunded retirement bonus savings plan", certainly not the low earners...
Click to expand...
Super could be taxed according to ones income level so concessions are still used. 100k to 150k pays 20%, 150k to 200k pays 25% and above 200k pays 30% for example
 
sptrawler said:
Running around with bandaids changing the system every couple of years, is a ridiculous situation.
Click to expand...

I agree with your posts on this sptrawler, especially this part. People like knowing what they can put in, get taxed at and work towards the end result which is retirement without interference and changes half way through their working life.

Continually changing things makes people distrust the product and walk away. I remember when they changed access to Super from age 55 to age 60, I wonder how those people feel now that they have to work another 5 years?

Why would anyone want to change the Second best retirement system in the world? As you say, just cap the amount one can accumulate in it and stop the high end rorting, that just might do the trick.
 
Bill M said:
Why would anyone want to change the Second best retirement system in the world? As you say, just cap the amount one can accumulate in it and stop the high end rorting, that just might do the trick.
Click to expand...

Well said. I think some people need to scale back their criticism of our retirement system.

Simply reducing the caps or introducing a limit would be a quick and simple fix, and would only impact the wealthiest individuals out there.

For those suggesting that everyone should be entitled to a government pension....I strongly disagree. The government cannot be trusted to ensure that this is fully funded and sustainable over the long term, especially with the demographics of our population. We have a shrinking pool of taxpayers and increasing life expectancy. The cost of health and aged care is growing, we don't need to pay pensions to those who can comfortably afford to self-fund their retirement.
 
Junior said:
''.... I think some people need to scale back their criticism of our retirement system....''
Click to expand...

My criticism is directed to the fact that people are treated unequally in a government-initiated system where they are legally compelled to make deposits to super.

Junior said:
''.....Simply reducing the caps or introducing a limit would be a quick and simple fix, and would only impact the wealthiest individuals out there.....''
Click to expand...

Definitely agree with introducing a limit, but do not agree that such a quick and easy fix will fix the inequality.
I think better to forego the concessions on contributions (which means we all enter on equal terms, save the budget $15 billion, probably not need a GST hike, and retain the right to save in ratio to our individual earnings - within reason) and accumulate tax free within super.

The next problem would be to do something about the fee structure. If funds were to be free of the 15% tax within the fund, funds under management would increase dramatically...more fees !

http://www.smh.com.au/business/bank...lian-super-fund-industry-20151112-gkxsi7.html

"...Fun managers rake out roughly $23.5 billion in fees each year from Australia's $2 trillion superannuation system. It mostly goes to the banks. Their fees are the highest and they control the greatest chunk of the market....''



What is the difference between trusting the government to fund government pensions or trusting the government to sustain every increasing super concessions?



Junior said:
''..... The cost of health and aged care is growing, we don't need to pay pensions to those who can comfortably afford to self-fund their retirement.
Click to expand...

So why should we give the biggest tax concessions to "those who can comfortably afford to self-fund their retirement?


http://www.theaustralian.com.au/opi...rners-a-tax-edge/story-e6frg6zo-1227393615401

''....For those earning more than $180,000 a year, the tax saving is 30 cents for each dollar contributed. For those earning between $18,200 and $37,000 it is a tax saving of four cents for each dollar contributed......

....Every year, contributions concessions cost about $17 billion and earnings concessions about $16bn ”” and mostly benefit the top 20 per cent of income earners. Although you can’t add these numbers and not all the revenue would be collected if there were reforms, it is the biggest leak in the income tax system. It means government can’t afford to reduce bracket creep, which hits middle Australia hardest.
''....
 
Struggling to find some info so hoping someone can point me in the right direction / literature:

I anticipate retiring 65 to 68.

I don't anticipate relying on the Government for a single cent in retirement. I'm also not interested in an annuity.

All money into my Super is Concessional.

My preference is to withdrawn yearly as a lump sum, say around $80K in today's dollars. Can I withdraw a yearly Lump Sum? From my understanding this ($80K) would be taxed at my marginal tax rate or at 22%, whichever is lower.

After withdrawing a yearly lump sum, what happens to the balance in the fund? Is the balance earning a crediting rate? And is this earning tax free? i.e. I only pay tax on the lump sum withdrawal?

Many thanks in advance.
 

You really seem to have a problem understanding, that low income earners actually pay less in tax, than they receive in concessions.
How you can come up with the statement above, just shows, we are on a completely different planet.

If a person is in effect paying no tax, due to concessions, why would you put LISC into their super? They would probably prefer the money in their pockets now.
Also as they, in every probability, will be on a full pension, what is the point.
It isn't going to reduce the Governments pension obligation, which is what super is about, according to you.
 

My understanding is that low income earners who's income falls below the tax free threshold pay no tax, but are compelled by law to contribute 9.5% of that tax free income into super, where they are then charged a 15% contributions tax, which in effect leaves them paying tax on tax free income. The Low Income Super Contribution (LISC) paid a rebate of up to $500 annually for low-income earners if you earn less than $37,000 a year, but this support is going to be withdrawn in 2017.

On the other end of the equation, a high income earner in the highest tax bracket who deposits the maximum super contribution of $30k into super reduces his taxable income, and is more than 30% better off after paying the 15% contributions tax.

I know we are on different planets ! !
But the media reports that are published on the planet where I live support the argument !
For example, this:


''...The more you put into super, the more the government provides support. The top 10% of wage earners, mostly men, receive 35% of super tax concessions - more than the amount received by the bottom 70% of the working population.

Tax concessions double the retirement savings of Australia’s top earners. Perversely, the lowest income earners - most of whom are women - pay more tax on their super than their take home pay and suffer a 14% reduction in their super savings....''

- See more at: http://www.industrysuperaustralia.c...ding-the-gender-pay-gap/#sthash.Pd0dJ7eM.dpuf

Happy to provide more links to more articles from the planet where I live !

Can you please explain what you perceive to be the ratio of concessions to tax regarding low income earners please?
 

You're making a straightforward scenario complicated. A financial planner would be able to help you.

EDIT: I would suggest googling the following to learn a bit more yourself as that's obviously the aim:
*Preservation Age
*Allocated Pensions
*Tax on Superannuation in Retirement

Your super fund will be able to provide some basic advice on how to draw an income in retirement and what the tax implications will be, but a financial planner will be able to assist with how much you can afford to withdraw depending on how long you want your super to last, how your super is invested etc. It takes quite a super balance to sustain $80k p.a. - I'd want professional advice if I was unsure what to do with that kind of money.
 

Removing the LISC was a dumb move made by a dumb Liberal govt (coming from me, traditionally a Liberal voter). I agree with you in that it was a good move, and I think that whatever solutions come out of this review we will see something along the lines of the LISC or a change in how tax is applied so that low income earners don't pay tax they otherwise wouldn't have needed to. They are, however, still net tax recipients not tax contributors, and frankly any bleating about how it's not fair on them should take into consideration the welfare available in this country. I dislike the contributions and earnings tax on super for low income earners because it's inconsistent with our tax system, not because it's 'not fair'.

You have mentioned a few times that super doesn't need any tax concessions because it's compulsory. If they take away the tax concessions they should also take away the compulsory nature, otherwise it might as well be confiscation of private assets. Who are the government to tell private individuals how they should manage their money?

You've also taken aim at fees, with fund managers "Raking it in". What return would an everyday person get on their forced investments if they didn't have professional management? Hint: They'd be sitting in cash. A negative real return in cash doesn't help people save for retirement. For the benefit of generating a real return and growth over the long-term, what fees would be reasonable for managers to charge? Or should the government dictate them as well?

It's been said a few times here, and in about 95 other pages of this thread; capping the amount of assets in a super fund that receive concessional tax treatment is the only way to ensure the top end (who are few in number but large in balance) don't milk it for all it's worth. What needs to be preserved is people's ability to contribute to super at a time that suits them, through reasonable or generous contribution caps. Most people tend to play catch up towards retirement, and a large part of their super might all be contributed in the 10 years prior to them stopping work. They should still be able to get the money from the sale of an investment property, an inheritance or a significant redundancy into super - that's what the current non-concessional cap and bring-forward rule achieve. Limiting everyone's ability to do that because doctors, lawyers and engineers are in a position to take advantage of concessional contributions for more of their working life would be a crap solution.

*I'm in favour of more consistent treatment of lower income earners between income tax and super tax.
*I'd also like to sea reasonable benefit limits/asset caps on super balances after which point tax benefits are phased out gradually to 0 (to avoid reluctance to contribute to super at all for fear of going over the limit).
*I'd be in favour of significant inheritance taxes, as those that would be impacted would be most able to afford it, those that passed away won't miss it, and those that are receiving the assets as a result of the estate are essentially receiving a windfall anyway.

*I don't want to see the tax system and super system become more complicated.
*I don't want resources pumped into helping low income earners build up assets when they're unlikely to achieve enough to reduce their pension entitlement anyway.
*I really don't want contributing to super in general to be disincentivised or fall out of favour. People need to contribute more than they are as it is to fund a comfortable retirement.
 
k.smith said:
What is the difference between trusting the government to fund government pensions or trusting the government to sustain every increasing super concessions?
Click to expand...

A massive, massive difference.

As I wrote in my previous post, I am in favour of reducing the concessional cap, or introducing a limit on super balances. Thereby ensuring the system is sustainable. This means those with the ability to fund their own retirement can continue to do so, without receiving excessive tax concessions.

Tax concessions are foregone revenue, whereas paying out age pension is an expenditure, which needs to be funded somehow. It's a big difference. Concessions can be taken away or reduced at any time, where once the government sets a precedent that all retirees will be paid a government pension for life....it would be difficult/impossible to then take it away, no government would have the balls.

Have a look at the countries who do pay out pensions to all....you will notice those countries are running massive budget deficits, and Australia is not.
 
http://www.smh.com.au/business/bank...p-on-superannuation-fees-20151115-gkzghy.html

Regarding the article about fees on superannuation. It is well written, and I like Michael West as he tackles some important issues.

HOWEVER, anyone who reads this article and gets mad must realise it is very easy to change super funds. There's a wealth of information online, all superannuation products fully disclose their fees on their website. If you can't get your head around it, find a good adviser. There are cheap products out there.
 
Thank You for that

No disrespect to Financial Planners, but I'll shy away from them unless I absolute must. Noing personnal to them, just my opnion.

I've run the numbers through extensively myself. All in todays's numbers: Anticiptate having $1.3M to $2.0M in Super dependant on whether I retire at 65 or go through to 70. Haven't factored the equity in my House, downsizing from $1.2M to $600K either. I'll be debt free from 65 (no need to use Super to pay any debts off).

I'm probably one of the 'hated' Super people in here. On a circa $200K salary + Super, SGC fluctauates from $17K to $18.5K a year. Salary Sacrificing $11K a year. Hoping the Contribution Threshold is raised to $35K so I can get more Salary Sacrifice in.

Cheers
 
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