Superannuation Discussion + market volatility

[Quickstatus]

Intention would be to recontribute immediately (the maximum benefit is limited by contribution caps and rules).

Against that withholding from the cap just exposes the remaining balance to taxation in the accumulation account.

I would have to spreadsheet the 2 to see whether there are significant differences.

 

[andye]

Against that withholding from the cap just exposes the remaining balance to taxation in the accumulation account.

I would have to spreadsheet the 2 to see whether there are significant differences.

Ah i see...I mIssed the stage of closing down pension and starting a new one

 

[Quickstatus]

Ah i see...I mIssed the stage of closing down pension and starting a new one

No not that but Withholding transfer up to the cap in order to benefit from indexation of the unused TBC. The income from the amount of withholding remain taxed while it sits in the accumulation account.

I'm not saying there is no benefit but only that it's worth a spreadsheet analysis to see the actual benefit.

 

[CaptJCool]

No not that but Withholding transfer up to the cap in order to benefit from indexation of the unused TBC. The income from the amount of withholding remain taxed while it sits in the accumulation account.

I'm not saying there is no benefit but only that it's worth a spreadsheet analysis to see the actual benefit.

earnings taxed at 15% in accumulation phase
Earnings taxed at 0% in pension phase

 

[JohnK]

How much tax is coming in from (very) affluent retirees though (particularly as CGT on super growth is effectively 0% after 60). Income tax pre-retirement is doing most of the heavy lifting.

Considering you potentially spend over 50% time retired as you do working, I'm not sure how sustainable this is from an intergenerational perspective.

I started working full-time when I was 19 years old and I'm now 61 years old and will try to retire 69 years old.

I'll never consider myself affluent and I'm not sure I'll even be close. If I can live to 80 years old that's a huge win and even bigger win if I continue to pay $0 tax and leave something behind to the little one.

The government should be looking at tax dollars from the younger generation not the older generation but that may prove to be a huge challenge.

 

[SydneySwan]

The government should be looking at tax dollars from the younger generation not the older generation but that may prove to be a huge challenge.

I disagree completely. The younger generation has a much tougher time with HECS debts and housing costs through the roof. At the same time us oldies are drawing super tax-free. It is unfair and unsustainable.

 

[SYD]

I disagree completely. The younger generation has a much tougher time with HECS debts and housing costs through the roof.

That’s true but also quite a few have or will benefit from some hefty tax free windfalls through inheritance. Even super (yes, it might get a 15% tax on the way out but the beneficiary doesn’t pay tax).

At the same time us oldies are drawing super tax-free. It is unfair and unsustainable.

But it’s your money that you had to forgo access to for years as preserved SGL payments. Providing that tax free super pension was Keating’s deal to make it fair and keep us off the Gov OAP - which was unsustainable with a growing aging population.

We’re still paying GST, and those of us who have decent non-super investments are probably still paying income tax, Medicare levy as well as CGT… Not to mention the shedload of taxes paid during our working lives.

 

[andye]

I started working full-time when I was 19 years old and I'm now 61 years old and will try to retire 69 years old.

I'll never consider myself affluent and I'm not sure I'll even be close. If I can live to 80 years old that's a huge win and even bigger win if I continue to pay $0 tax and leave something behind to the little one.

The government should be looking at tax dollars from the younger generation not the older generation but that may prove to be a huge challenge.

I dont know the family K finances but it doesnt sound like you are in the group I feel are getting too cushy a deal.

Money in super is tied up for a long time, and the overall principle helps the nation enormously. So there should be some tax benefits.

But I personally feel that people with $2M+ (maybe even lower) in super should be contributing more to the nation's tax revenue than they are. 0% on realised capital gains even outside of a pension account is
the particular thing that stands out to me as approaching a rort.

It seems strange to me that someone working in Woolies is paying a fair bit of tax when someone with a pension income of >$100k a year can be paying none at all

Spending the tax raised wisely is an entirely different issue. Wouldn't object to an income tax cut if it meant we ended up with surplus tax

 

[Pushka]

I disagree completely. The younger generation has a much tougher time with HECS debts and housing costs through the roof. At the same time us oldies are drawing super tax-free. It is unfair and unsustainable.

I don't see it as unfair as most of us didn't have super for many years of our working like. But when they are our age they will have much more in super than we do. But I do agree it's unsustainable given current cost of living. HECs - our kids paid them off by the time they were 30.

 

[Pushka]

Spending the tax raised wisely is an entirely different issue. Wouldn't object to an income tax cut if it meant we ended up with surplus tax

And that will never happen. Because once it's taken out it is the Governments money and if there's a surplus then it will get spent anyway.

 

[SYD]

And that will never happen. Because once it's taken out it is the Governments money and if there's a surplus then it will get spent anyway.

Like the question earlier about the Medicare levy. What we pay doesn’t go directly to Healthcare - it goes straight into to “Consolidated Revenue”.

You can just hear the slushy slush fund sound if you press an ear to the Treasury Building!

 

[Pushka]

Like the question earlier about the Medicare levy. What we pay doesn’t go directly to Healthcare - it goes straight into to “Consolidated Revenue”.

You can just hear the slushy slush fund sound if you press an ear to the Treasury Building!

At least our Medicare Tax has decreased sharply since we take minimal salary now, salary sacrifice and have started the pension phase. Along with keeping our accumulation account. But I worry for our grandkids. Hopefully we can help them.

 

[Quickstatus]

earnings taxed at 15% in accumulation phase

Possibly more with the upcoming changes depending on TSB (total super balance)

The younger generation has a much tougher time with HECS debts and housing costs through the roof.

For many, they will need the assistance of Mum and Dad ATM. They won't get their inheritance when M&D passes but a lot earlier.
I will be helping out our kids buy their first home with substantial % capital plus their whatever their deposit is.

Ive been fortunate that I've been able to significantly reduce the loan on the Hunter Valley investment property that Miss QS lives in. My intention is I will give her the house when she gets married next year (Ok thats an official announcement) and the couple will then have a much more reasonable loan with effectively 60% deposit so the loan repayments will approximately equal their rent. Potentially I could wait until i retire when the CGT can be a lot less but the value of the house would also have gone up a lot.

I'll have to do the same for the Mstr QS1 and QS2. They are likely based in Sydney so that would be a lot more difficult.

While govt can see my assets including super with greedy eyes, they should know that a lot of Mums and Dads are doing the same - intergenerational transfer of wealth will occur before one generation passes and it won't be because of a greedy generation but because of the abject failure of successive governments to solve housing supply.

then it will get spent anyway.

It already has
Federal net debt exceeds $500Billion currently and not long before it gets to $1T. Todays taxes ae paying for prior years expenditure.

 

[QF WP]

It seems strange to me that someone working in Woolies is paying a fair bit of tax when someone with a pension income of >$100k a year can be paying none at all

Everyone is paying indirect tax of 10% (GST). How much direct tax you pay depends on your marginal rate of tax. Yes, people with super funds after age 60 have the capacity to not pay any tax on either income or withdrawals, so long as they are eligible to withdraw (either by way of lump sum withdrawals from super, or commutations or income from pension funds).

 

[andye]

Running up debt now is asking our children and grandchildren to pay for us. That's why I think the affluent over 60s need to be paying more now. You can be 3 decades in retirement and contribute little except GST.

The bank of mum amd dad for property and large inheritances from big super accounts isn't good for the nation either. Young people without rich parents should be able to work hard and still afford somewhere to live.

 

[Quickstatus]

It seems strange to me that someone working in Woolies is paying a fair bit of tax

Im not sure that is the case:
Significant Government transfer payments occurs to effectively cover the tax they pay.

 

[SYD]

Running up debt now is asking our children and grandchildren to pay for us.

What debt?

That's why I think the affluent over 60s need to be paying more now.

Why? Should we remove family rebates so they pay their fair share?

You can be 3 decades in retirement and contribute little except GST.

But 4 or 5 decades paying heaps…

Think about it, pre Super retirees went on the tax free Government funded OAP (with pension card). Now, as intended most of us are doing the heavy lifting paying for our own retirement but don’t get a pension card nor subsidised health care.

Not sure how that’s somehow gaming the system?

The bank of mum amd dad for property and large inheritances from big super accounts isn't good for the nation either. Young people without rich parents should be able to work hard and still afford somewhere to live.

Anyone who owns a family home - they don’t have to be “rich” will be passing down a lot.

 

[Pushka]

Running up debt now is asking our children and grandchildren to pay for us. That's why I think the affluent over 60s need to be paying more now. You can be 3 decades in retirement and contribute little except GST.

The bank of mum amd dad for property and large inheritances from big super accounts isn't good for the nation either. Young people without rich parents should be able to work hard and still afford somewhere to live.

Well, you need to have a chat with the Government as to why there's a housing shortage. There's nothing even us oldies can do about that. There's no incentive for many to downsize. Government charges and cost of buying another have killed that idea. Our future aged care costs are eye watering. The only way I can avoid these is to die. But if I don't I will need that money.

We've lived our lives pretty much without much government financial support - family allowances, child care availability let alone government payment for those costs, so mostly one income homes unless grandparents could do child care. Yes, no HECS fees. But. No SG. I sure as heck didn't start as having rich parents. They couldn't afford to buy a house until mum inherited one when I was 32 years old. Our first homes and furnishings were nothing like what people expect now. All second hand furniture. No floor coverings. Sheets for blinds.

I'm certainly not rich. But don't get a pension.

This generation are having different challenges. But taxing us extra now is wrong.

 

[Quickstatus]

Young people without rich parents should be able to work hard and still afford somewhere to live.

The problem is actually a more fundamental issue called housing supply. Taxing retirees wont increase housing supply.

That's why I think the affluent over 60s need to be paying more now. You can be 3 decades in retirement and contribute little except GST.

Against that the super will have to last 3 decades so that there is no need to make a call on the OAP.
There is also as I said a hidden and significant contribution to future aged care plus transfer of wealth to children and grandchildren to assist with housing prices. I expect the Aged care refundable accomodaton deposit to progressively reduce from 100% refundable to now 90% refundable to less and it wont be long before the RAD will exceed $1M.

So take out $1M for aged care and then about $0.5M that covers the aged pension. You end up with a more realistic $1.5M of "excess" income producing assets before we start using some of that to assist the kids with a house or 3. These self retirees also contribute by not clogging up the public health system as they will be the ones holding private health insurance.

The most important thing about super is that the value depends on economic performance. I dont think anyone can guarantee over 30 years timeframe that the value of Super will never implode.
Maybe take all the money out hide it under the mattress and then get the OAP

 

[lakeman]

Running up debt now is asking our children and grandchildren to pay for us. That's why I think the affluent over 60s need to be paying more now. You can be 3 decades in retirement and contribute little except GST.

The bank of mum amd dad for property and large inheritances from big super accounts isn't good for the nation either. Young people without rich parents should be able to work hard and still afford somewhere to live.

Been thinking about this a lot.
I am comfortably retired with decent assets but only pay a few thousand dollars in tax per year.
I have some capital gains that will eventually be taxed.
Per this paper https://grattan.edu.au/wp-content/uploads/2016/11/879-Age-of-entitlement.pdf ,Sapto and the aged based Medicare levy apply aged based advantages to retirees.
The tax free status of of super pensions also means self funded retirees don’t contribute Medicare levies on their super income.
I know that for many people these age benefits help to ease into retirement but for people close to or above maximum super levels ,they could be considered a rort.