Superannuation, the ultimate government cash cow?

[Smurf1976]

There does seem to be an emerging trend toward nationalisation of things or at least more direct government involvement than we've seen in recent times.

Tasmania bought back its railway system. Had to spend a fortune fixing it but bought it nonetheless.

SA government building a power station.

Vic and federal government stepped in to keep Alcoa operating at Portland Vic.

Threats of export controls involving gas.

Plus a few others and now it's superannuation.

I'm not arguing for or against but a trend does seem to be developing.

 

[Belli]

Interesting reading today, that there is a suggestion the Government should take over the administration of compulsory super, we talked about this on the forum years ago.
Funny how history repeats, we said it would, RIP Julia.

Well, nothing like shutting the stable door after the horse has bolted. So many issues with compulsory super, aside from the temptation of Government to get their sticky fingers on the dosh and playing politics with the thing. Yet I can see a rationale for it given many providers (and some employers) don't appear to have the individual's interests at the forefront. High fees, inappropriate insurance or employers not making payments - one acquaintance of mine is furious as the employer hasn't made payment for 18 months dsspite promising to do so.

Of course, should the G'ment take it over, you can bet your bottom (super) dollar it will not be staffed properly in order to operate effectively. Hello CentreLink!

 

[Belli]

Phew, took me a bit (about two months) but I finally got the non-lapsing Binding Death Benefit Nomination completed for my SMSF. Plus finalising my Testamentory Will incorporating as a subset a Superannuation Proceeds Trust along with a clause transferring ownership of the shares of the Corporate Trustee which administers the SMSF to the Executor. All fun and games as was the Enduring Power of Attorney.

As exciting as bat poo to many but an essential task I feel. I'll now have a beer on it.

 

[sptrawler]

Well the myth that retirees take their super as a lump sum, seems to be blown out of the water, yet again.
When will they realise, the only retirees who have money, are the savers.
Why would they change, the very characteristic, that got them there in the first place?

https://www.theage.com.au/money/sup...en-they-don-t-need-to-be-20180223-p4z1gm.html

Part of the article is below:

It’s the longevity risk – fear of running out of money - that is the main driver of retirees becoming scrooges.

Covering unexpected expenses like future medical bills and residential aged care also has them worried and they reluctant to spend their superannuation too quickly.

Other studies have shown that retirees like to have access to a lump sum to pay down their mortgage, to carry out maintenance on the house or to buy new car.

Dr Reeson suspects a lot of retirees are over-estimating the likelihood of these expenses and the scale of the expenses.

He says it seems clear there are many retirees not enjoying the standard of living in retirement that they could afford because of their "perception" of the risks they face.

Maybe if the Government, gave some certainty, self funded retirees may have the confidence to spend their money.
Until then, they will edge their bets, as they have done all their lives.

 

[sptrawler]

https://www.theage.com.au/politics/...-59-billion-revenue-grab-20180312-p4z40d.html

Beautifull, just beatifull, Labor out to screw the working man who has scrimped and saved.
Why The fluck wouldn't you just spend it?
Well because then they will make you work till you die, because you won't have any money.LOL
The old adage of the unionist, there is nothing worse than an ex unionist, because their motto is "the working class can kiss my arse I've got the bosses job at last".
It isn't just an attack on retirees, it is an attack on working families that buy shares, in the lower income earners name.
My guess is it is a huge call to try and make the coalition gag, but could backfire hugely.LOL
So Silly Billy wants to get rid of franking credits and negative gearing, WOW, so why does anyone invest?
To give free rent to the homeless, at your own cost? or to gamble on the stock exchange? Billy has lost the plot.

 

[Junior]

This would be a big whack to SMSFs. And potentially to ALL super funds, including industry funds (I wonder if Bill realises this?).

How would it work for the small business owner, who pay themselves a FF dividend from their own company, and then claim the franking credits personally? Would you need to distribute a big enough dividend, such that there is no refund due?

If this plan ever goes ahead, there will be many questions & complexities involved IMO.

 

[Toyota Lexcen]

ridiculous situation if goes ahead for shareholders

 

[tech/a]

The issue is the rate of tax.
Superfunds are taxed at 15%
Franking credits at 30%
15% difference he wants to reign in thus
saving payouts of Billions from the Coppers.

Sounds fair.

But if the 30% is paid by the Company for the benefit
of investors why shouldn't the investor who has been
given the franked dividend NOT get the full benefit.
Why should the Govt get 15%.
Why would the Govt not be happy that the SMSFs get
richer! After all they wont be claiming a pension.

This is just short sighted.

Why don't they give a further 15% back to the company if
they aren't going to pass the benefit on to the investor.
If its paid in the first place why should the Govt pocket it.

 

[sptrawler]

Typical of BS Bill and Labor, using figures from 2014-2015, when the reality is the rules changed last year.
Those in the pension phase no longer have the amounts in their account, that would return a $2.5m dividend.
They are only allowed $1.6m in total in the pension phase, but why let the truth, get in the way of a$hit butty.
Superfunds will recieve a lot less anyway, due to the changes last year, where excess amounts had to be rolled back into the accumulation phase.
Typical labor, how the hell are working people going to derive a decent return on their savings, in retirement? Risk buying shares for 5% return, or savings at 2.6% return?

From the article.

• Some SMSFs received cash refunds of up to $2.5 million in 2014-1

 

[galumay]

Meh, seems reasonable to me, its simply returning the system to its original design. There is no logical reason that taxpayers on a rate lower than the corporate rate should receive the difference - its really just a form of welfare.

 

[sptrawler]

Well it will certainly cause a rapid decline in the value of super funds, the draw down rates and reduction in earnings, will have a compounding effect on account balances.
Most SMSF people will end up on the pension.IMO

 

[PZ99]

Well to be honest if your super balance is low enough to qualify you as a pensioner then you shouldn't be playing around with an SMSF. The running costs will kill your profits.

 

[sptrawler]

Well to be honest if your super balance is low enough to qualify you as a pensioner then you shouldn't be playing around with an SMSF. The running costs will kill your profits.

How do you draw that conclusion?
If a 70 year old has say $1m in super, the charges by an industry fund are say 0.75%, which equates to $7,500 p.a.
I know it only costs me $1,500p.a to run my SMSF, so where do you derive your figures from?

 

[PZ99]

If you have $1m in super you won't qualify for the pension.

You said earlier: "Most SMSF people will end up on the pension"

To be in that position your balance would have to be less than say... $250K yeah? $1,500 p/a is too much when you can simply take the money out tax free and invest outside of super instead.

 

[sptrawler]

If you have $1m in super you won't qualify for the pension.

You said earlier: "Most SMSF people will end up on the pension"

To be in that position your balance would have to be less than say... $250K yeah? $1,500 p/a is too much when you can simply take the money out tax free and invest outside of super instead.

No, to get a part pension for a married couple it is about $800k, so most will get there.IMO

If you only have $250k, it will be a full pension and yes there is no way I'd be leaving $250k in super.

If it is earning 4%, that's $10k it would be pointless, to have it in super. IMO
As can be seen by the actions of both major parties, it is perilous leaving money in super.
It is only a matter of time before they confiscate the taxable component.IMO

 

[Smurf1976]

My thought is this makes Australian shares a less attractive asset to hold.

That being so, logical outcome is the ASX ends up lower than it otherwise would have been. That’s an issue for investors no matter what their tax situation.

 

[poverty]

My thought is this makes Australian shares a less attractive asset to hold.

That being so, logical outcome is the ASX ends up lower than it otherwise would have been. That’s an issue for investors no matter what their tax situation.

Apparently we have the only fully-refundable dividend imputation system in the world? If that's all that's holding the ASX up Australian shares are in bigger trouble than I thought. Maybe without the pressure from retirees to pump out so much fully franked divis Australian companies might be inclined to reinvest more of their profits into growing their business and building infrustructure for the future?

 

[sptrawler]

Apparently we have the only fully-refundable dividend imputation system in the world? If that's all that's holding the ASX up Australian shares are in bigger trouble than I thought. Maybe without the pressure from retirees to pump out so much fully franked divis Australian companies might be inclined to reinvest more of their profits into growing their business and building infrustructure for the future?

Do you have any idea, how much pension money is in the market? and how much effect it will have if it's removed?

 

[poverty]

Do you have any idea, how much pension money is in the market? and how much effect it will have if it's removed?

No, I gather it's a hell of a lot. But other countries don't need cash refunds of imputation credits to those paying no tax, so why do we? Why would the money be removed and if it was removed where would it then be invested?

 

[sptrawler]

No, I gather it's a hell of a lot. But other countries don't need cash refunds of imputation credits to those paying no tax, so why do we? Why would the money be removed and if it was removed where would it then be invested?

Well the simple answer is most other countries that have a welfare system like ours, have a funded pension system, which we had before the Government put it into consolidated revenue and spent it.
After they spent it, they started telling everyone that they could improve their retirement, by supplementing via superannuation.
Now it has become obvious, it isn't supplementing but replacing the system they plundered previously, probably doesn't bother younger people who didn't forego pay rises and lifestyle to self fund their retirement.
But it is a bitter pill for those who did.

As for where would it go and where would you put it, easy change from shares to cash, if it is only 1-2%less, with minimal risk to capital.

Your avatar, may well represent a large majority of Australians, in 20 years time.IMO
Increasing population, decrease in job opportunities, lower tax base. It doesn't bode well.IMO