Superannuation Discussion + market volatility

[VPS]

Just had a visit from someone that fits into the >$3M category. Ran a small business working 80-90 hours a week and is not happy Jan

 

[cove]

Yes we have colleagues who are in that position. It is likely to cause a bit of upheaval in the markets as fear spreads about taxing unrealized gains in other areas.

 

[JohnK]

The fact that there is a vocal minority of people in Australia who think they have the right to dictate how much is 'enough' to retire on is a disturbing example of the communist envy culture of tall poppy syndrome that has poisoned today's society.

"You will own nothing and be happy!"

It's crystal clear. Everything they're doing points to this outcome.

 

[CaptJCool]

The March 2025 figures are available




The new entrants are lower

With the wave of baby boomers coming through, this is about 1/3 of folk getting a govt age pension

And less on the full rate

 

[Kerrodt]

Until we see the final regulation we don’t know if someone in “pension phase” is not affected.

As it stands, anyone with a Total Superannuation Balance (TSB) over $3m will be subject to Div 293.

That includes Pension, Residual Accumulation plus DBS.

My understanding of the way things are at the moment is that pension balances are included in calculating the total balances and the movements of total balances from point to point, although that calculation is adjusted for pension payments (not balances) made during the period.

Many of the hypothetical examples presented online in various "expert" commentators articles specifically include pension balances in the calculated balances.

 

[andye]

The fact that there is a vocal minority of people in Australia who think they have the right to dictate how much is 'enough' to retire on is a disturbing example of the communist envy culture of tall poppy syndrome that has poisoned today's society.

No-one is telling anyone how much they can retire on. There are plenty of avenues to acquire wealth to supplement super.

They are baulking at providing very significant tax subsidies within super to already wealthy people.

Those subsidies are at the expense of current and future workers and/or the ability of the country to provide better schools, roads, hospitals, armed forces etc

 

[Kerrodt]

No-one is telling anyone how much they can retire on. There are plenty of avenues to acquire wealth to supplement super.

They are baulking at providing very significant tax subsidies within super to already wealthy people.

Those subsidies are at the expense of current and future workers and/or the ability of the country to provide better schools, roads, hospitals, armed forces etc

I can agree with a fair bit of what you write here but I have an issue with the following statement:

"They are baulking at providing very significant tax subsidies within super to already wealthy people."

The new Div296 tax proposal is to tax the change in the total value of a super fund. You seem to be suggesting that by currently not taxing this change in total value that it is a "significant tax subsidy" to a group of people.

At the moment, nobody in the Australia tax system is taxed on the change in total value of their assets, whether in super our outside of super. So, at the moment, this "significant tax subsidy" is available to, and enjoyed by everyone irrespective of how much wealth they have and where they might accumulate it.

If you had $5M in assets in your personal name and this value goes up to $7M through unrealised gains would you think that you should be taxed on that $2M increase (in addition to all other taxes you would be paying)? Would you think that you are getting some sort of "tax subsidy" by not being taxed on the unrealised gains?

A fairer method, and something that would be more in line with the broader tax system, would be to simply increase the tax rates on earned income and reduce the CGT discount rates on realised capital gains within superannuation.

 

[tgh]

Drifting away from fact to belief here..
There is certainly a strong push back from the wealthy ; but the nub of the argument is the way this tax is structured.
It is difficult to argue against fair taxes and fairly easy to make noise about unfair harvesting.

 

[Happy Dude]

Who would be happy to have unrealised capital gains held in their personal names, outside of super, taxed in the same way? I wouldn't and I doubt that many people would.

Land tax and rates are being used as an example of taxation of unrealised capital gains. Lots of people affected by those.

 

[andye]

I can agree with a fair bit of what you write here but I have an issue with the following statement:

"They are baulking at providing very significant tax subsidies within super to already wealthy people."

The new Div296 tax proposal is to tax the change in the total value of a super fund. You seem to be suggesting that by currently not taxing this change in total value that it is a "significant tax subsidy" to a group of people.

At the moment, nobody in the Australia tax system is taxed on the change in total value of their assets, whether in super our outside of super. So, at the moment, this "significant tax subsidy" is available to, and enjoyed by everyone irrespective of how much wealth they have and where they might accumulate it.

If you had $5M in assets in your personal name and this value goes up to $7M through unrealised gains would you think that you should be taxed on that $2M increase (in addition to all other taxes you would be paying)? Would you think that you are getting some sort of "tax subsidy" by not being taxed on the unrealised gains?

A fairer method, and something that would be more in line with the broader tax system, would be to simply increase the tax rates on earned income and reduce the CGT discount rates on realised capital gains within superannuation.

The unrealised gains aspect was not the principle I was replying to and I agree it is problematic (I personally prefer the @Kerrodt approach)

But...apart from the tiny proportion (of the 0.5%) who suffer an overall capital loss at eventual realisation, it should only be a cashflow issue as "surely" the CGT due will have to be paid at some point (or is the plan to never realise the asset*..or to creatively structure tax/inheritance to reduce the future taxable component of the gain in some way)?

*I doubt the farmers who have decided to include the farm within super and are unhappy about the changes would be happy at paying 30% tax on the farm value above $3M when they (+/- spouse) die. For most in this situation, super is being used as an intergenerational tax-minimisation strategy which is not its purpose

 

[Pushka]

No-one is telling anyone how much they can retire on. There are plenty of avenues to acquire wealth to supplement super.

They are baulking at providing very significant tax subsidies within super to already wealthy people.

Those subsidies are at the expense of current and future workers and/or the ability of the country to provide better schools, roads, hospitals, armed forces etc

And a very significant issue with this is taxing UNREALISED gains that may never see the light of day. They simply don't exist until converted to cash.

Post automatically merged: Wednesday at 1:04 PM

Land tax and rates are being used as an example of taxation of unrealised capital gains. Lots of people affected by those.

Properties rarely fall in value. Shares etc will. Eventually. But yes it's the same principle.

 

[tgh]

Unrealised capital gains tax , from a business perspective are a contingent liability and affect loan structures and other value basis calculations.
The exercise for many is not as simple as stealing from the poor , it is likely more about stuff like the cost of borrowing to plant next years crop .

 

[Kerrodt]

The unrealised gains aspect was not the principle I was replying to and I agree it is problematic (I personally prefer the @Kerrodt approach)

But...apart from the tiny proportion (of the 0.5%) who suffer an overall capital loss at eventual realisation, it should only be a cashflow issue as "surely" the CGT due will have to be paid at some point (or is the plan to never realise the asset*..or to creatively structure tax/inheritance to reduce the future taxable component of the gain in some way)?

*I doubt the farmers who have decided to include the farm within super and are unhappy about the changes would be happy at paying 30% tax on the farm value above $3M when they (+/- spouse) die. For most in this situation, super is being used as an intergenerational tax-minimisation strategy which is not its purpose

@andye you have hit the nail squarely on the head with your last sentence above. Spot on!!

 

[Ansett Nostalgic]

No-one is telling anyone how much they can retire on. There are plenty of avenues to acquire wealth to supplement super.

They are baulking at providing very significant tax subsidies within super to already wealthy people.

Those subsidies are at the expense of current and future workers and/or the ability of the country to provide better schools, roads, hospitals, armed forces etc

Actually that is exactly what is being done with this proposal - it is being justified on the basis 'oh if you have $3m you have enough money'.

The concept of a 'tax subsidy' is absurd. It implies that all income and assets belong to the government by default and that it is up to government to decide how much an individual can keep. Totally immoral. Every dollar of income earned and assets acquired with it belongs to the person who earned it.

 

[Brissy1]

My understanding of the way things are at the moment is that pension balances are included in calculating the total balances and the movements of total balances from point to point, although that calculation is adjusted for pension payments (not balances) made during the period.

Many of the hypothetical examples presented online in various "expert" commentators articles specifically include pension balances in the calculated balances.

The PM stated the the tax will also apply to exMPs on their gov (DB)pension. I think that makes it clear that it will apply to pension balances too.

"...calculation is adjusted for pension payments..." Oh yes (adjusted=added back in), surely you won't be able to have a $xx_xx unrealised capital gain and get away with it not being counted, by having a $xx_xx pension withdrawal.

 

[Kerrodt]

The PM stated the the tax will also apply to exMPs on their gov (DB)pension. I think that makes it clear that it will apply to pension balances too.

"...calculation is adjusted for pension payments..." Oh yes (adjusted=added back in), surely you won't be able to have a $xx_xx unrealised capital gain and get away with it not being counted, by having a $xx_xx pension withdrawal.

I can't wait to see the logic and formulas for calculating the tax payable by the ex MP's, judges etc on the Defined Benefits Scheme pensions. It will be next to nothing is my bet, justified by some illogical rationale.

 

[Pushka]

@andye you have hit the nail squarely on the head with your last sentence above. Spot on!!

According to someone’s theory about how much super someone needs to fund their lifestyle costs.

 

[andye]

Actually that is exactly what is being done with this proposal - it is being justified on the basis 'oh if you have $3m you have enough money'.

The concept of a 'tax subsidy' is absurd. It implies that all income and assets belong to the government by default and that it is up to government to decide how much an individual can keep. Totally immoral. Every dollar of income earned and assets acquired with it belongs to the person who earned it.

Good luck travelling along the footpaths (no roads) with your private bodyguards (no police or justice system) and your personal doctor and nurse.
If you have a heart attack, hire some tradesmen to build a hospital for your treatment in the 15 minutes you have before the heart muscle dies.
I'm sure you will donate generously to charity to help the beggar retirees, illiterate poor children and disabled people who would otherwise get in your way.
If a foreign country decides to invade, form a militia with your friends.

Australia is an amazing country and part of that is because we pay taxes. Every 3 years, we get a (tax-funded) opportunity to express our wishes on how much those taxes are, who pays them and how they are spent.

 

[CaptJCool]

I can't wait to see the logic and formulas for calculating the tax payable by the ex MP's, judges etc on the Defined Benefits Scheme pensions. It will be next to nothing is my bet, justified by some illogical rationale.

Bear in mind these people and former State and Federal public servants are paying tax on a portion of their pensions
Until 60, most the pension was taxed
Since 60 the larger 3 portion is less taxed but it’s still taxed at marginal rates

 

[Brissy1]

Bear in mind these people and former State and Federal public servants are paying tax on a portion of their pensions
Until 60, most the pension was taxed
Since 60 the larger 3 portion is less taxed but it’s still taxed at marginal rates

Yes not realised by many.

Perhaps "to create a fairer and more sustainable system" super pension mode payments should be similarly taxed.

Listen to the screaming then. Although really, it doesn't seem right that a single income family person on the average income pays a large amount of that in tax, whereas a retired single person on the same, pays nothing just because it's been previously taxed at 0% to 15%. Maybe introduce a 15% tax on all super pension withdrawals above the current income tax free threshold.