Why are they reducing super limits?

I have my own ideas on this.
But why do you think this government is cutting back what people can contribute?

sptrawler said:

I have my own ideas on this.
But why do you think this government is cutting back what people can contribute?

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Ill take a wild guess.

Because rich people have been taking advantage of the generous tax concessions for many years and by greatly reducing the contribution limits the Govt hopes to levels the playing field somewhat and help the people who need it the most....not greedy rich people who have too much money anyway?

That's my take on it.

Personally im just about to start some serious salary sacrifice and in about 5 to 7 years may come close to being able to afford reaching half the new limit...if im lucky....very very lucky.

Ok I may have been under a rock but whats this about reducing limits? Is this different to the plan that was put in place a few years back.. where they progressively reduced the limits for a few years and were then (I think) going to increase them again. (Why they were doing this I dont know).

My understanding was; it is still 25K and 50K for over 50s.
Please correct me if I am wrong.

cheers

jbocker said:

Ok I may have been under a rock but whats this about reducing limits? Is this different to the plan that was put in place a few years back.. where they progressively reduced the limits for a few years and were then (I think) going to increase them again. (Why they were doing this I dont know).

My understanding was; it is still 25K and 50K for over 50s.
Please correct me if I am wrong.

cheers

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After 1/7/2012 the $50k limit for over 50s only applies for those who have a superannuation balance of less than $500,000.

This change opens up a new strategy for some couples, whereby you should direct contributions to the spouse with the lower super balance, to ensure the $50k concessional contributions cap is still accessible.

Junior said:

After 1/7/2012 the $50k limit for over 50s only applies for those who have a superannuation balance of less than $500,000.

This change opens up a new strategy for some couples, whereby you should direct contributions to the spouse with the lower super balance, to ensure the $50k concessional contributions cap is still accessible.

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Thanks Junior

So that I dont too many questions - where is a good site for the facts? The over 50 limit you say has been reduced, can you tell me to what, I think I may already have the 500K limit.

jbocker said:

Thanks Junior

So that I dont too many questions - where is a good site for the facts? The over 50 limit you say has been reduced, can you tell me to what, I think I may already have the 500K limit.

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With regards to the $500k super limit for $50k cap from 1st July 2012, this is only an election promise at this stage, hasn't been passed as legislation.

The normal cap is $25k for concessional contributions, this is indexed but only increases in $5k increments.

Not sure about a good website..I'm in Fin. Services so have the textbooks here at my desk!

With a universal concessional cap of $25,000 when your super total is equal or greater than $500,000, means you in effect are being pegged to inflation i.e 5%.
So how do workers become self funded retirees when the labor government is basically removing concessions. At a level that what would be considered the lower end of what is required for a modest retirement.
I suppose it is one way of keeping the " Baby Boomers" in the workforce for as long as possible.
It is a shame they don't puts some constraints on their own benefits.. Oh I forgot life doesn't have to be fair

The fine print is going to be interesting. Does the $500k kick in at the beginning or end of the financial year or is it to apply at any time during the financial year?

Bloody tough if you are at $500,001 but ecstatic at $499,999. Always the trouble with arbitrary and artificial limits.

Anyway, given the circles I move in, I don't know too many with $500k in their super or $25,000, let alone $50,000, to put into super each year. Nevertheless, I do get the feeling that in order to "get at" the very few, ideology may have shafted many and the ramifications in future years could get rather messy.

Judd said:

The fine print is going to be interesting. Does the $500k kick in at the beginning or end of the financial year or is it to apply at any time during the financial year?

Bloody tough if you are at $500,001 but ecstatic at $499,999. Always the trouble with arbitrary and artificial limits.

Anyway, given the circles I move in, I don't know too many with $500k in their super or $25,000, let alone $50,000, to put into super each year. Nevertheless, I do get the feeling that in order to "get at" the very few, ideology may have shafted many and the ramifications in future years could get rather messy.

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I suppose the the thing is $500,000 invested at 5% is $25,000 a year income, which would be a very modest income for a married couple. They would definately be relying on government pension top up( which the government is trying to avoid)
If the husband earns say $85,000 and the wife earns $35,000 and because they have been trying hard to save for their retirement, they live on her salary. That allows them to salary sacrifice $50,000 of his wage into super, because of the $150,000 he had in super prior to 50 he can only contribute $50,000 for 7 years. Even though his wife only has $50,000 in super he can't salary sacrifice the $50,000 to get her total up

Actually just had another thought( most unusual).
If the assett limit for a single pensioner is approx $450,000 and the limit approx $850,000for a married couple when the pension elegibility cuts out.
Why would you be putting limits in place to stop "Mr and Mrs average getting there.
I doubt very much, it is because they are desperate to pay pensions, so therefore what are they thinking of.

sptrawler said:

If the assett limit for a single pensioner is approx $450,000 and the limit approx $850,000for a married couple when the pension elegibility cuts out.

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Where are you getting these figures from?
The current assets test for part pension is $668,000 for single home owners and $991,000 for couple home owner.

Julia said:

Where are you getting these figures from?
The current assets test for part pension is $668,000 for single home owners and $991,000 for couple home owner.

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Hi Julia, I was only going off memory the last time I looked them up, which was obviously quite a while ago.
However that reinforces the point I was making, why make it difficult for people to reach the level where the pension cuts out.
Aren't they supposed to be encouraging people to become self funded and less dependant on the pension? Especialy with the baby boomers comming through?
There is probably a really simple reason that I am missing.

Julia said:

Where are you getting these figures from?
The current assets test for part pension is $668,000 for single home owners and $991,000 for couple home owner.

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To further the discussion, using your numbers Julia, why wouldn't the government be encouraging singles to get $700,000 in super and couples to get $1000,000 in.
Doesn't make any sense to me,that they are saying you can only salary sacrifice $25,000 when you have $500,000 in super if you are single or married.
Why wouldn't they say you are limited salary sacrificing $25,000 if you are single and have $700,000 or a couple with $1000,000 in super?

(I know these figures are for home owners, don't know the figures for non home owners and am trying to keep it simple).

I don't know the answer to your question, sp, but could it be that if salary is contributed to Super this is non-taxable, in contrast to the government receiving tax on that amount if it's not?

Julia said:

I don't know the answer to your question, sp, but could it be that if salary is contributed to Super this is non-taxable, in contrast to the government receiving tax on that amount if it's not?

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Salary sacrificed into super attracts a tax of 15%, that's why it isn't worth sacrificing if you are in the 15% tax bracket.
The problem is with the current arrangements. The wealthy can place $150,000 a year of after tax money into super. The politicians get all their super tax free and guess what " joe average" gets all sorts of problems trying to get enough into super to give him/her a reasonable chance of becoming self funded.
There has to be a reason for it and the only one I can think of is this government doesn't want the workers to retire.
If this wasn't the case the limits wouldn't be set so low when compared to the pension eligibility levels.

In short
The Govt wants it both ways
1 to gain as max tax as possible
2 to minimize pension payments

There so damned dumb they won't achieve either efficiently.

My advice to anyone is
Make provisions for yourself and MAKE SURE you create passive income which will see you way beyond your natural life span.

If YOU take control of your future then you won't need to concern yourself with any of this rubbish.

Now the best way to do this is serve a term as a ploy!
Super indexed to inflation for life.---- sweet!

This pathetic Gov't has always and continues to transfer monies from buisiness and traditional income demographics that do not vote ALP, to demographics (lower income), that do vote ALP.

The piss it up the wall stimulus spending.

Carbon tax- a direct wealth transfer to lower income demographics.

Minerals tax- direct transfers to lower income super etc

AND, this stupid limit on people over 5o who have over 500,000. The ALP knows that the people who vote for them won't have that much super so who cares. AND, they get the extra tax from higher income earners who don't now get that additional $25,000 at 15% tax by putting it in their super.

I am just 51, and run my own buisiness. It is just me, and I work 7 days and nights a week, and have had two holidays in the past 15 years (both less than 3 weeks in duration). Yes I do make good money, but if I divided my income by the amount of hours my actual pay rate is not that flash. I have invested in super and despite financial crisis and ALP polices creating sovereign doubts overseas now re this great country of ours, I do have over $500,000 in super.

I consider myself an average Aussie. Not rich but able to support myself. I know I will not get a pension, and want to be able to accumulate money in super so I can retire comfortably after working my **** off.

To only allow me to put $25,000 into super when I will not get a pension, is just unfair and panders totally to the ALP's demographic. Is this a Gov't (and I use the term very loosely), for all Aussies or just those who vote ALP.

The bottom line is the super fund cutoff at $500,000 is ridiculous. It is sold by the ALP to it's voting demographic as some massive amount, and bring fire brands and nooses and string up these wealthy bastards!

To be able to invest a mere $50,000 a year when you work hard, and gain a tax concession, when you will never recieve any bloody benefits when you retire, is surely no great deal. High income earners still pay high tax on the rest of their income.

By the way, if you have not guessed, I do not vote ALP and think that anyone who does needs to seriously start putting this great country of ours first rather than just voting as if supporting a traditional sporting team.

Crom

Great and entirely accurate criticisms, Crom. Perhaps be slightly consoled by the almost certainty that this government will not be around come the next election and the Super limits are unlikely to be maintained by the Libs who have a bit more respect for those who are prepared to take responsibility for themselves.

Crom said:

This pathetic Gov't has always and continues to transfer monies from buisiness and traditional income demographics that do not vote ALP, to demographics (lower income), that do vote ALP.

The piss it up the wall stimulus spending.

Carbon tax- a direct wealth transfer to lower income demographics.

Minerals tax- direct transfers to lower income super etc

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The way you talk about the Labor party one would almost think your describing a left wing socialist organisation.

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Crom at 51 with over half a mill in super you are in the top 50% (average SMSF balance 488K) and the average normal super balance less than half that amount...while you may consider yourself an average Aussie the reality is your above the average, substantially above it.

So_Cynical said:

The way you talk about the Labor party one would almost think your describing a left wing socialist organisation.

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Crom at 51 with over half a mill in super you are in the top 50% (average SMSF balance 488K) and the average normal super balance less than half that amount...while you may consider yourself an average Aussie the reality is your above the average, substantially above it.

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So Cynical - is that figure $488K the average super at 51? Or something else?