Superannuation, the ultimate government cash cow?

[PZ99]

The way our budgets are going it won't be long before the Govt tries to confiscate parts of our super playground and/or make it harder to access by increasing the preservation age.
This choice of two evils happened as recently as April 2015 and doesn't inspire much confidence in a system of forced investment with dubious security.
http://www.abc.net.au/news/2015-04-...s-for-high-income-wealthy-australians/6410800
http://www.smh.com.au/federal-polit...nnuation-preservation-age-20140519-38kjj.html

 

[Bill M]

Not a post since November, it is a BIG issue, but everyone is scared to say anything, after the latest tsunami.
I think everyone is in a state of "stunned mullet", with the recently enacted and impending rule changes.
Get ready for no pension if you own a brass razoo. lol

There is actually quite a bit of noise around because of these changes. But you see those that aren't on pensions (younger people) don't care as it doesn't affect them and those that it does affect amount to about 300,000 pensioners. Some have said things like "I have voted Liberal all my life but now because they have chopped my pension I will not be voting for them next time." Really, who wants a pay cut?

A couple's limit of assets other than the family home is now $816,000. Some people might think wow that's a load of money but at a closer look it is not really. They say that a couple to live a comfortable retirement requires $60,000 per year. That pot of gold would be gone in 16 years (income from that amount not included), it really isn't that much. Seeing that most people live for 30 years or more they will exhaust their savings pretty quickly and end up on a full pension anyway.

Some people with lower amounts of assets have actually gained out of this. But those 300,000 that have lost are not happy. If an election was to be held now, I wonder how many of those affected would actually vote for someone else and if they did would they change anything?

Here's a good article on it:

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From midnight, the minimum pension will stop for homeowner couples with about $816,000 of assessable assets and for singles with about $542,500.

https://thewest.com.au/business/personal-finance/new-year-bites-into-pensions-ng-b88342986z
---

 

[Bill M]

Get ready for no pension if you own a brass razoo

Sometimes I talk about this to my wife. I explain to her that we can buy a fancy apartment (high value not assets tested), new car, clothes, furniture and blow a considerable amount of money on overseas trips and cruises and end up on a full pension or just be tight arses and save our money and be frugal and end up with nothing from the Government. Which would you take?

Those that save get penalised, those that spend it all get a full pension. Fair or not?

 

[Bill M]

it won't be long before the Govt tries to confiscate parts of our super playground and/or make it harder to access by increasing the preservation age.

They did it once already. One day Joe Bloggs went to work and a representative from a big Super company was there giving financial advice to the employees. He showed that if you continue to salary sacrifice into super at a high rate you can retire at age 55 and have enough to live off for the rest of your life. 5 years later the same rep was there again but Joe Bloggs wasn't happy to see him this time. The government raised the preservation age from 55 to 60............thanks for nothing, now all of Joe's plans are stuffed up.

Moral of the story is don't trust the government for anything. People should have certainty. Governments and the people they represent have been complaining for 25 years about constant changes to the Super system and yet they are still changing things every year. Doesn't sound to appealing does it?

 

[sptrawler]

Yes Julia, would be spinning in her grave, as she always said why did the Australian Government change from the British system.
In Britain, Canada and New Zealand, if you worked until 65 and paid tax, a part of that was set aside for your pension.
When you attained pension age, you get a pension, irrespective of your financial situation.
You do however pay tax on any pension received through superannuation.

Australia, the clever Country, decided to rob the pension scheme and incorporate it into consolidated revenue, from memory during the Menzies years.
Well we all now know how that went, they spent it, then Hawke and Keating scrubbed the tax levy pertaining to it, and introduced compulsory super.
Magic, write it off and reinstall it under another name.
This was introduced under the disguise of improving peoples retirement, but in reality it was a levy on peoples wages to replace the system they had butchered.IMO
Now they are butchering this system, Labor at least had the sense to see that a tax on earnings was reasonable.

 

[PZ99]

The Govt is considering allowing first home buyers to dip into their super to buy a house. But the catch is the only money you can take out is the extra money you had put in voluntarily. The article doesn't say whether the top-up payments were made in the form of salary sacrifice or after tax top ups.

What do people here think? Will it make housing more affordable or unaffordable by distorting the market? Or is it a waste of time because most struggling first home buyers wouldn't be topping up their super in the first place?

http://www.news.com.au/national/pol...s/news-story/f4e4ad6d3648cdd2e5b347dfbf038329

 

[Junior]

The Govt is considering allowing first home buyers to dip into their super to buy a house. But the catch is the only money you can take out is the extra money you had put in voluntarily. The article doesn't say whether the top-up payments were made in the form of salary sacrifice or after tax top ups.

What do people here think? Will it make housing more affordable or unaffordable by distorting the market? Or is it a waste of time because most struggling first home buyers wouldn't be topping up their super in the first place?

http://www.news.com.au/national/pol...s/news-story/f4e4ad6d3648cdd2e5b347dfbf038329

Total waste of time. Vast majority of FHB would have little to zero voluntary contributions in super.

I have been deep in research in relation to the latest round of super reforms, most of which will come into force on 1st July 2017.

The Government has successfully added another thick layer of complexity on top of an already-complex system. Crazy stuff.

The assertion that super is a waste of time because the Government will steal your money is b/s. It's still a very generous tax structure.

Anyone who has spare assets not in the super system, get them in before June 30.

Anyone who already has $1mill in super/pension - seek advice on what the changes mean. There are planning opportunities as well as traps to be aware of.

 

[PZ99]

@Junior what happens after June 30 ?

 

[Junior]

The changes primarily affect people approaching or already in retirement. Additionally the changes primarily affect those with a larger balance. In short, the biggest changes are:

• Concessional contributions cap reduced from $30,000 ($35k for those over 50) down to $25,000 for everyone.

• Non-concessional cap reduced from $180,000 to $100,000. (or if using bring-forward rule, reduced from $540k to $300k)

• Transfer balance cap of $1,600,000 per person (maximum which can be transferred into a pension).

Below is a list of the key changes taken from eSuperFund.

There are many underlying complexities associated with each change.

 

[PZ99]

Thanks for that. So on one hand the Govt wants to allow first home buyers to use their concessional contributions to buy a house but on the other hand they want to reduce the cap for concessional contributions. Looks like another conflicting narrative from the Govt. LOL

 

[Junior]

Labour's proposals were far simpler (i.e. reduce the caps and tax pension income above $100k), so to differentiate themselves the Coalition decided to go down the complex path.

 

[Bill M]

What do people here think? Will it make housing more affordable or unaffordable by distorting the market?

My opinion is that dipping into Super to get a house deposit is not a good idea. It will only drive house prices even higher and we need that like a hole in the head. Not only that, Super should be what it was designed for and that is for retirement. What's to stop someone pulling out a deposit from Super and then selling the house a year later and then spending the $$$ on a car and a holiday around the world? Leave it as it was intended, for retirement only.

 

[sptrawler]

The Govt is considering allowing first home buyers to dip into their super to buy a house. But the catch is the only money you can take out is the extra money you had put in voluntarily. The article doesn't say whether the top-up payments were made in the form of salary sacrifice or after tax top ups.

What do people here think? Will it make housing more affordable or unaffordable by distorting the market? Or is it a waste of time because most struggling first home buyers wouldn't be topping up their super in the first place?

http://www.news.com.au/national/pol...s/news-story/f4e4ad6d3648cdd2e5b347dfbf038329

It would be a good opportunity, for the Government to have tax free contributions, removed from super accounts.

 

[sptrawler]

It is getting close to the end of financial year, there are a lot of changes to be enacted on July 1, if you have a SMSF you probably need to start getting everything in order.
A few things that require attention are, the $1.6m cap, last opportunity for the $180k bring forward and updating the trust deed and investment strategy.
I'm sure Craft, Junior, McLovin, Ves and others can add some other ideas.

 

[Junior]

For those using a Transition to Retirement pension, review whether this strategy remains appropriate or not. It may be beneficial to revert back to accumulation phase.

 

[Belli]

Doesn't affect me but a couple of people I know receive a defined-benefit pension from Commonwealth coffers and also have an SMSF.

Apparently the pension is included in the $1.6M cap by multiplying the pension by a factor of 16 and I understand that as a result, in their case, their SMSF will be taxed on earnings (I think) along with there being some impact of the taxation arrangements of their pension.

A rather nice problem to have, in my view.

 

[sptrawler]

Doesn't affect me but a couple of people I know receive a defined-benefit pension from Commonwealth coffers and also have an SMSF.

Apparently the pension is included in the $1.6M cap by multiplying the pension by a factor of 16 and I understand that as a result, in their case, their SMSF will be taxed on earnings (I think) along with there being some impact of the taxation arrangements of their pension.

A rather nice problem to have, in my view.

Absolutely, I wonder if it includes politicians pensions?
It would be nice if it did, then it would give a feeling of the politicians being genuine, about the need for fairness.
It always seemed to be lacking in previous legislation, that exempted them and high court judges and senior public servants.
Perverse sense of fairness seemed to rule, one would hope the context has changed.

 

[sptrawler]

Well June 30th is getting really close now, if you have a SMSF really sit back and have a think, it is the last opportunity to balance members accounts.
After July 1 it will be more difficult to balance up account balances, it may not matter to anyone, but it's just a heads up.
All the best hope it works out for everyone, sorry about your situation Craft, but it's been a great ride.
Craft, Junior, Ves and McLovin can probably give some more enlightened sujestions, I'm just muddling along, in my own incompetence.

 

[Belli]

Yep, I've done all I can. Made a deductible contribution plus lump sum withdrawals with re-contribution in order to turn most (over 98% I think) of my single member SMSF into after-tax contributions. Nothing more I can or will do I reckon. Mind you, as I am no longer in the workforce, my opinion is allowing such arrangements to be permitted in my circumstances, although lawful, is or was rather silly. Still, we all tend to organise our affairs according to the legislation in place at the time.

Of course, others have more complex situations and I wish them the best in getting the financial matters sorted out.

 

[sptrawler]

Yes belli.
I'm in a similar situation, always stashed as much as the other half would let me, downsized as the Government recomended.
Now have to try and rebalance, wish I hadn't believed them.lol