Superannuation Discussion + market volatility

[andye]

Better still reduce spending......

I wouldn't say no to some extra cash for hospitals, community aged care and defence subsidised from rich adults' inheritances (noting few toil for capital gains)

 

[Quickstatus]

A lot of chatter post election about ur-CGT on Super > $3M

 

[cove]

It is ugly by catching up to 1.8 million Australians with Jim Chalmers proposals.
We are not caught as we are in pension phase but we have colleagues who need to do some changes before the proposed July 1st ,2025 start. The tax rate of 30% is not so bad but it is on unrealized assets too.

 

[burmans]

If the Libs had been prepared to negotiate on this rather than just opposing everything they might have been able to negotiate out the unrealised capital gains last term. Unfortunately they didn’t and now looks like this is a done deal.

 

[cove]

Yes @burmans we had the wrong people in place from both sides to end up with sensible legislation.
$3 million not indexed per person could be a problem seeing the RAD to get into aged care is approaching $1 million per person in some locations. For two that could be $2 million.

 

[Brissy1]

at one stage they were planning to not index AND tax unrealised Gains

They still are.
I think that when people become or are just a little over the $3m will withdraw (if only to avoid compliance/valuation costs)...buy lifestyle assets, home improvements or home upgrade et c. But don't sell those CBA shares you bought for $25

Super is not an investment, it's a structure. People with larger excess will withdraw and invest through another structure which doesn't tax unrealised gains.

Even I (ordinary person and not an accountant/lawyer) can see benefits of, say, transfering excess into private investment Company structure- no unrealised CGT (but realised cgt is higher), 30% tax on net profit but can pay out franked (!) dividend as desired (unlike trust profits), and bonus avoids the super "inheritance" tax. Message to Gov, people aren't stupid.

 

[cove]

Who told you that about people not being stupid @Brissy1.
I would believe most folks with more than $3 million in their superfunds are probably smarter than the average.
At 75 I am in run down so we don’t need to scramble.
This proposed new law is good for accountants and lawyers.
I don’t know how the big superfunds will comply on unrealized profits.

 

[Quickstatus]

I've starting depositing into a family trust

 

[cove]

We started our family trust in 1978 so it has been going before we had children and a grandchild. It has been a good vehicle for investing over 47 years. We had to make our two sons directors of the trustee company just in case we drop off the perch at the same time.

 

[burmans]

I think that when people become or are just a little over the $3m will withdraw (if only to avoid compliance/valuation costs)...buy lifestyle assets, home improvements or home upgrade et c. But don't sell those CBA shares you bought for $25

The trouble with this theory is that for most people (i.e. younger than retirement age) withdrawing isn't easy. Plenty of people in their 30s/40s will have to do some serious calculation on whether their super will top $3M in 20/30 years time and make decision on how much they contribute voluntarily (via salary Sacrifice etc.) well before they get to retirement. I personally think that for younger people that indexation will prove more concerning than the unrealised capital gains.

Of course, in reality there are plenty of things not indexed (e.g. tax) but over time governments magnanimously announce they are increasing thresholds to look generous. I seriously doubt that in 30 years time the cap will still be $3M but the insecurity will no doubt put many off investing extra into super.

 

[cove]

People seem to be panicking based on some news reports.

 

[Quickstatus]

over time governments magnanimously announce they are increasing thresholds to look generous

Yes, a lot of the "tax cuts" over the years doled out by successive govts have been to address the bracket creep issue. They should be called bracket creep adjustment rather than tax cuts.

I expect that they will do similar as an election carrot

 

[burmans]

Yes, a lot of the "tax cuts" over the years doled out by successive govts have been to address the bracket creep issue. They should be called bracket creep adjustment rather than tax cuts

Yes. It's all just marketing but very effective marketing nevertheless.

 

[Kerrodt]

The point of this abhorrent tax concept is for the government to actively encourage superannuation member with balances above $3M to take the money out of the superannuation system (where it is a concessionally taxed and/or zero-taxed investment structure) and put it into a different investment structure (personal names, trusts etc) and therefore putting it into a different tax tax environment where the government will get more tax revenue from the same investment pool.

If anyone keeps their money ($3M+) in superannuation and pays more tax there than what they could pay by having the money somewhere else and pay less tax is a fool.

 

[Quickstatus]

The point of this abhorrent tax concept is for the government to actively encourage superannuation member with balances above $3M to take the money out of the superannuation system

Would be simpler to say that accumulation accounts cannot be greater than the total balance cap in any one year.

Any residual amounts will be removed from the super system and taxed at its exit.

 

[CaptJCool]

Chamlers had remarked that it’s Upto a future government to change the thresholds.

Politicians seem to be content to make cosmetic adjustments.
The appetite for large scale reform nope