Superannuation, the ultimate government cash cow?

[Knobby22]

Problem is, they will just keep changing the rules, to force you into the industry funds.
What have Labor suggested over the last few elections?
Tax earnings above a certain threshold.
Tax the Family Home.
Tax the franking credits.
It's pretty easy, just keep taxing untill you roll over into a union fund.

Not Union fund. Half employer half union controlled, non profit.
Why would you put your super in AMP or the banks and get 40% less in retirement ?
Why would you pay accountants and set your up own fund with big costs when Industry Super give excellent returns with no effort?
I found out that one of the main anti Industry Super commentator on Macquarie Radio network actually has his money in an Industry Super Scheme, after all he is not thick.

 

[sptrawler]

Not Union fund. Half employer half union controlled, non profit.
Why would you put your super in AMP or the banks and get 40% less in retirement ?
Why would you pay accountants and set your up own fund with big costs when Industry Super give excellent returns with no effort?
I found out that one of the main anti Industry Super commentator on Macquarie Radio network actually has his money in an Industry Super Scheme, after all he is not thick.

That's exactly why me and a lot of others started SMSF, and it costs me $850/PA, retail or industry are going to charge $5K.
Why should I have to be forced into that, flick them I'll spend it.
I left school nearly 50 years ago, never been on welfare, saved to be self funded.
All Bill has done, is show me the error of my ways, I am a quick learner so I will avail myself of his charity.

 

[Smurf1976]

I hope this doesn't come across as an attack on you @Bill M. I'm there would be a lot of people thinking the exact same way as you. And it won't be good for the country, it will just push more people on to the pension and increase the welfare budget.

Central to all this is the problem of static accounting. That is, the assumption that each variable exists in isolation and that changing taxation policy won't result in changing anything else.

For a simple example to make the point, suppose that a hefty tax is introduced on the sale of lawnmowers if they are blue or green in colour, there's a moderate rate of tax applied to those coloured red, orange or yellow and no tax on any other colour. Someone has done their research into mower sales and worked out that the tax will collect quite a bit of revenue.

I'll give you a guarantee. Within months after such a policy coming into effect you won't be able to buy a blue, gree, red, orange or yellow coloured mower. The market for them will disappear overnight and manufacturers will respond by making them a different colour whilst unsold stock of the taxed colours will be sent straight to landfill.

End result = a lot of brand new mowers dumped at the tip, no tax actually collected and we live in a world where mowers are always painted grey.

My hypothetical mower tax has a lot in common with Labor's proposal. Retirement savings will be centered around avoiding the tax rather than paying it.

 

[Smurf1976]

I guess in the back of a lot of people's minds, is what if there's no government pension by the time you're ready to retire? Or what if the retirement age is pushed back so late - let's say 85 to get a government pension, that you're physically not going to be able to work that long?

Already an issue for a lot of those in manual labour type jobs who will be retired in practice in their 50's.

Labor's policy seems primarily aimed at giving these people a kick in the guts really. Sad thing is, they're the absolute core of those who would have traditionally voted Labor.

 

[Smurf1976]

There's also another side to this and that is the non-financial risk.

Delayed gratification today so you'll be better off tomorrow sounds great in theory but what if tomorrow doesn't come?

This time last week I was sitting exactly where I'm sitting right now. Neither myself nor my pet cat who I'd had for 11 years had at that point any reason to think that her life would end just hours later as it sadly did.

For humans, well I know two in their 40's who've died in the past year or so. Cancer in both cases and neither were smokers or unfit.

Not taking that overseas holiday this year or spending your weekend working overtime instead of watching football or whatever does come with the risk that you'll never end up getting to do what you missed out on. You'll have the money but it's of no use once you're dead or in poor health.

Nobody's rationally going to save and invest just to break even over the course of their life. They'll only do it if doing so makes a substantially bigger improvement to their latter years than the sacrifice made in their younger years to achieve it so as to justify the risk of ending up dead before you see the benefits.

To that I will further add that, considering health, you'd be very wise to make sure you've obtained those benefits by your early 70's at the latest. Beyond that you're dealing with luck really and the risk that you don't get to do things due to health very rapidly increases.

 

[Zaxon]

What if in 2 years they tighten the means testing again down to $500k...would you spend the extra $200k again.

And then a further 2 years down the track they tighten it further again down to $300k.

Short of spending your money and making yourself poor, as you've alluded to, about the only available method of retaining the pension right now is to buy a house in the most expensive suburb your savings can afford. And then should the pension gets decimated, move back to a cheaper suburb. Of course, once your PPOR gets means tested, that's all over.

 

[Zaxon]

The only possibility IMO, is that they will make you spend everything, before you get any pension.

And possibly decrease the rate. If the pension was the same amount as Newstart, that would take pensioners so far below the poverty line.

Really all Labor have shown, is your a dick, if you are a blue collar worker and save anything.

And given that their traditional base is blue collar, it's a very "Liberal" policy to be putting through.

 

[sptrawler]

There's also another side to this and that is the non-financial risk.

Delayed gratification today so you'll be better off tomorrow sounds great in theory but what if tomorrow doesn't come?

This time last week I was sitting exactly where I'm sitting right now. Neither myself nor my pet cat who I'd had for 11 years had at that point any reason to think that her life would end just hours later as it sadly did.

For humans, well I know two in their 40's who've died in the past year or so. Cancer in both cases and neither were smokers or unfit.

Not taking that overseas holiday this year or spending your weekend working overtime instead of watching football or whatever does come with the risk that you'll never end up getting to do what you missed out on. You'll have the money but it's of no use once you're dead or in poor health.

Nobody's rationally going to save and invest just to break even over the course of their life. They'll only do it if doing so makes a substantially bigger improvement to their latter years than the sacrifice made in their younger years to achieve it so as to justify the risk of ending up dead before you see the benefits.

To that I will further add that, considering health, you'd be very wise to make sure you've obtained those benefits by your early 70's at the latest. Beyond that you're dealing with luck really and the risk that you don't get to do things due to health very rapidly increases.

Absolutely smurf, on a cruise next Thursday, back for a month then another cruise, back from that pick up my next bike.lol
I'm over this do the right thing $hit,

 

[sptrawler]

Short of spending your money and making yourself poor, as you've alluded to, about the only available method of retaining the pension right now is to buy a house in the most expensive suburb your savings can afford. And then should the pension gets decimated, move back to a cheaper suburb. Of course, once your PPOR gets means tested, that's all over.

Bill has let the cat out of the bag IMO, the illusion that super will give you a better retirement, is a myth.
All it is going to do, is reduce how long they have to give you welfare.IMO

 

[Zaxon]

Already an issue for a lot of those in manual labour type jobs who will be retired in practice in their 50's.

That's a very good point. I guess that's why I see a lot of ex-tradies working at Bunnings.

 

[sptrawler]

And possibly decrease the rate. If the pension was the same amount as Newstart, that would take pensioners so far below the poverty line.

They wont do that, newstart is for people who are able to work, the pension is where everyone ends up who is too old to work.

And given that their traditional base is blue collar, it's a very "Liberal" policy to be putting through.

The Liberals would never get away with putting forward these policies, Labor and the press, would shout them down.
Not only the attack on franking credits, but the fact that only rich people will be able to negative gear (as in only new builds) and Government subsidies for renting them.
It has all become very weird. IMO
I never expected anything like this, obviously polling has given labor free reign, to run amok.

 

[Smurf1976]

I never expected anything like this

Something I've learned in life and I expect you and others have too is that just because something "shouldn't" happen doesn't mean it won't and vice versa.

There are many examples of that. It's another subject but one we've discussed many times. Australia has an abundance of coal, gas, uranium, sunlight, wind and other energy resources. As such one problem we should never have is power supply. And yet that very issue has been a factor in the demise of the last four Prime Ministers and among the most consistently present issues in political debate over the past decade.

That's just one example but there are many more where things that should rationally never be an issue most certainly are in practice.

 

[sptrawler]

Something I've learned in life and I expect you and others have too is that just because something "shouldn't" happen doesn't mean it won't and vice versa.

There are many examples of that. It's another subject but one we've discussed many times. Australia has an abundance of coal, gas, uranium, sunlight, wind and other energy resources. As such one problem we should never have is power supply. And yet that very issue has been a factor in the demise of the last four Prime Ministers and among the most consistently present issues in political debate over the past decade.

That's just one example but there are many more where things that should rationally never be an issue most certainly are in practice.

This is where the taxable and tax free components become important. IMO

 

[Bill M]

Yea, it's funny. I saw an article that showed most wealthy retirees won't eat into their capital no matter what and are therefore forced into a pretty poor lifestyle.

As the article points out when you reach your 80s you will struggle to spend anyway and also you can't take it with you.

I think one of the big concerns about retirees is wondering how they will pay the in going bond for a nursing home or similar institution. This is particularly significant if it is for only one partner while the other stays in the family home.

From my experience these organizations demand full financial disclosure of all your assets and the bond is nicely sized to take as much of the these as possible. $500, 600, 700k .

In theory this is not supposed to be the case. In practice - another story.

These 2 posts go hand in hand. Yes some older folk don't spend money and it is true that they live in run down houses so they don't spend their capital but the time will come when they will have to move into a nursing home, in other words there is no other choice.

As basillo pointed out, this isn't cheap. My Mother had to sell her house and pay $500,000 for a refundable accommodation deposit and that was 4 years ago. These days it can over $1 Million. Think that can't happen? It can, we never thought our tough Mum would end up like that. You think your kids want to put you in a spare room and shower you and wipe your ar$e for you? Think again, no one wants to do this. The message here is you will need every bit of cash you have when you have to go into a nursing. This could be part of the reason why some older Australians are reluctant to spend their capital. Nursing homes are not free anymore.

 

[Bill M]

I hope this doesn't come across as an attack on you @Bill M. I'm there would be a lot of people thinking the exact same way as you. And it won't be good for the country, it will just push more people on to the pension and increase the welfare budget.

Nah, no attack, it's all good. Put it this way, whatever they do I will reorganise myself and my funds to maximise my returns for my wife and myself so we can live a good retirement for the next 20 years or so. I will adapt and I will survive.

As for skates dump it thread, good on him for doing what he does, way smarter than me. I don't do trading, never really have and I don't understand it anyway nor do I have any interest in it. I'm about preserving what I have and hopefully making it last until we check out.

I still think it is dumb policy where a someone receiving a $5 pension from the government is entitled to all of their franking credits back whilst the person with a couple of grand extra in super with no government pension gets it all ripped off of him. This is totally unfair and I will never vote for such a proposal.

 

[Humid]

How have these high yield dividend companies that people use performed against the asx in the last 5 years?

 

[Humid]

That's exactly why me and a lot of others started SMSF, and it costs me $850/PA, retail or industry are going to charge $5K.
Why should I have to be forced into that, flick them I'll spend it.
I left school nearly 50 years ago, never been on welfare, saved to be self funded.
All Bill has done, is show me the error of my ways, I am a quick learner so I will avail myself of his charity.

Any of that money you saved and constantly rave on about derived from penalty rates
I would guess most comes from Union rates and conditions in your line of work

 

[basilio]

One of the overwhelming issues regarding the creative use of dividend imputation credits is the effect on our tax base and the fact that they are overwhelmingly used by the very wealthy.

I appreciate that posters point to the more frugal end of superannuates as examples of who is going to lose. No one yet wants to look at how this lurk has been used to enable the very wealthy to grab a few more billion from the public purse.

I just saw a story on how some of very wealthy in England intend to reduce their tax and stiff the rest of the countries tax payers. Can't help feeling this is happening here as well.
UK's richest man moves to Monaco to 'save £4bn in tax'
Brexiter Sir Jim Ratcliffe’s company Ineos is reportedly working with PricewaterhouseCoopers to reduce bill
Sarah Butler
@whatbutlersaw
Mon 18 Feb 2019 05.57 AEDT Last modified on Mon 18 Feb 2019 06.55 AEDT

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The shadow chancellor John McDonnell said he was ‘really disappointed’ by the decision of Ratcliffe, pictured in 2015, to move to Monaco. Photograph: Christopher Thomond/The Guardian
Britain’s richest man, the Brexit supporter Sir Jim Ratcliffe, and two of his key lieutenants at chemicals firm Ineos have reportedly been planning to save up to £4bn in tax after moving to Monaco.

The company, which is valued at about £35bn, is working with tax experts at PricewaterhouseCoopers (PwC) to create a new structure for the business to dramatically reduce the tax paid on its global revenues, according to the Sunday Times.

Ratcliffe, who has lobbied to weaken green taxes and reduce restrictions on fracking, owns 60% of Ineos, which made profits of more than £2.2bn last year and employs 18,500 people. His top two lieutenants at Ineos, Andy Currie and John Reece, each own 20% of the company worth £7bn and were also reported to be moving to Monaco and involved in the tax avoidance plan.
It emerged last year that Ratcliffe, the founder and chief executive of Ineos, was preparing to move to the tax-free principality on the Côte d’Azur, but the latest reports indicate exactly how much the three could save – putting the minimum at £440m.
https://www.theguardian.com/busines...est-man-plans-save-4bn-pounds-tax-monaco-move

 

[sptrawler]

Any of that money you saved and constantly rave on about derived from penalty rates
I would guess most comes from Union rates and conditions in your line of work

I've done my share of picket line work and extended strikes.
Just because I saved it, instead of blowing it, shouldn't mean I get stiffed now. IMO

 

[Junior]

How have these high yield dividend companies that people use performed against the asx in the last 5 years?

Under-performed. These type of funds, typically have overweight holdings in Bank stocks & Telstra.

"Growth stocks" have been the best part of the market over the past few years, and these typically pay zero/low dividends.