Thank you for providing this helpful pointer. I managed to find the contact information for JENNY PAMOGAS CANAYA, and she appears to be highly skilled and adaptable. I have scheduled a call session with her.!
This forward thinking is the same logic some people had when Labor introduced the HECS student loan scheme. People warned that the minimal co-contribution being charged and 'generous' repayment schedule (in 1990) was the thin edge of the wedge and students would one day have American style loans of tens of thousands of dollars, some over 100k. Politicians scoffed at such suggestions as scare-mongering. Then. Now? It is as bad as the worst-case scenarios put by the skeptics of the original scheme (Now called a HELP loan.... a HECS sounds too much like the curse it has become). So your caution about future consequences is well-placed.
I find the redefining of what Super is for to be quite disturbing. What is the point of sacrificing to boost our super to reduce the risk of financial pressure in retirement when the government see what I have saved to protect my wife and I - to be fair game to take from me to make life easier for those who have not bothered to prepare for retirement. The "equitable" word in the definition is ringing alarm bells for me. I think your adive to place savings where they are outside of super and under our own control is very sound Katherine. Thankyou for your considered thoughts in this video. I am dissapointed at some of the negative comments. Please keep informing us and keeping us up to date. Most of us really appreciate the effort you make to help people on this channel.
One also needs to consider future lump sum death benefit tax of 15% on the taxable component of the super balance to non-dependents such as adult children. Any earning on balance over $3m will effectively be taxed at top marginal tax rate in total. There is also annual admin and investment cost of around 0.7% in a typical industry super fund. Assuming an optimistic gross annual return rate of 7%, this equates to about 10% reduction in earning or like an additional 10% tax. In short, I think it does not make financial sense to keep more than $3m in super with the proposed changes. This is going to hurt the younger generation as the impact will be greater given there will be no indexation.
An excellent summary of the superanuation changes and their impact on future generations. Agreed no indexation combined with the insidious creep of inflation is the elephant in the room with Chalmer's proposals. Majority of the punters will agree with taxing the superannuation balances of 'wealthy' individuals@30%. Who's going to lose sleep if someone with a balance of tens of millions or even hundreds of millions get slugged with a higher tax rate? This is a relatively low risk strategy for the government right now but will become a hot potato for future governments as more and more get caught up in the net of no indexation.
Thankyou Katherine for this clear explanation of future tax on Super. It has really put into perspective the struggles that future generations will have to endure.
HI Kevin, I don't want to discourage you, but I think it is wiser to keep saving money where you have more control, savings few bucks in tax is not worth it.
@@AboutRetirementTV Agree, until recently that was my view but once i had paid my home loan off I thought i might contribute more to super. wont do that now though.
@@petercampbell1478 If it was only the $3m i would be, unfortunately its not just about the limit. I was very sceptical of contributing extra to my SMSF before these changes use to the length of time the money is unable to be withdrawn and potential of changes to regulations impacting my cash. It’s not like i can get the cash out again when the rules change. I think you missed the point of the video.
Thank you, think I got it, basically you're saying the 3m cap for now (or in 10years)won't impact majority however in another 30/40years it will impact everyone,which would be our next generation. From this point I think you're helping people to realise that we need to vote, that this change must have a condition, which is the inflation need to be considered, that means the 3m cap will be also increased as same as the index every year,so in 40 years time, the cap could be 6m or something depends on the inflation rate....
Thanks you for your excellent explanation. As always. The Labor Party are doing great harm to people’s confidence in the future of the superannuation system to work for them in retirement. I believe many people will only make minimum contributions to super and spend their money instead. Which will be the opposite effect to what was originally intended. How can the labor leaders be so foolish. They are also counting on taxing larger super balances Many people will move their money elsewhere. Also to avoid the death tax on super balances.
Absolutely, 100% agree. this will have the opposite affect that the super system could provide for retirees and actually for the whole country (economy, government budget, Age Pension, Aged Care the list can continue)
Whenever Labor is in the government there is not good things. Labor is a big spender and only know how to tax but fail many policies to better the Australia economy as a whole.
Really interesting perspective and very thought provoking. Thank You Katherine. I think some of your suppositions about what MIGHT happen are overly pessimistic however. Sure, the consultation paper is a bit rubbery...but that is often the case at this early stage isn't it? Given this has been raised by a Labour government, I doubt the true intentions are as negative as you suggest. I think that as the process for change progresses the rules and definitions, plus the clarity around the intentions will become clearer. One obvious flaw at the moment is the lack of Indexation, which is just silly. I think the system does need to change as the extremely wealthy are disproportionately benefitting as the tax benefits stand at the moment.
Hi Daniel, I honestly hope you are right, and this is non-well thought through recommendation. Again, I have nothing against the extra tax for super-wealthy, as they used the superannuation system as the way to reduce their tax, but in all honesty, as long as it is legal, every person of sound mind would do this if the system, allows. I do have an issue with lack of indexation, this was pointed out to the government, but it appears that they do not want to back down on this recommendation, and this is a worrying factor.
Once again thank you, that was a very valuable in site to the mechanisms at work behind the window dressing; in the beginning they were “Tax Incentives” to encourage people to invest in supper, today they are called “Tax Concessions” how long before they or others start calling it a rort?
I think if I had $3m, I would not have to worry about paying tax. Also, my super funds are not voluntary savings that I should be fiercely protecting, but paid by my employers in a compulsory manner. I have worked hard to get to retirement age, and paid a lot of tax over the years, but I know many people who have never worked. Those people have no super funds, but should the rest of us be supporting their retirement? I think we already do, no matter how you word your video. Thanks again for your contribution to our planning processes.
Your employer pays into your super fund in a "compulsory manner" but, in fact it is your money being paid into your fund and which would otherwise have been paid to you in cash by way of a wage increase.
@@frednerk3477 Thanks, but in my case, I would definitely have not been paid such a wage rise. This has been my compulsory savings for retirement, and my employer would never have volunteered funds, or a pay rise, hence the mandatory super contributions.
@@Robyn19fnq @fred nerk The compulsory super was originally paid in lieu of a wage rise that your employer would have had to pay. The agreement by labor, unions and employers was to pay it into super instead of wages to stop the inflation cycle. No-one suggested it this time around when employers said 'no' to cpi wage increases (because, they said, it would fuel inflation, which is partly true). But they could have paid the cpi increase AND avoided the problem of inflation by paying it into super. Funny how they didn't suggest that.
Lack of indexation is a fair criticism ... why don't you lobby the government to include that in the legislation? ... a simple change that still closes a $1B loop hole
Th aged pension is supposed to be a safety net, rather than an entitlement. There are lots of reasons why people cannot earn enough money to have a big super balance to be comfortably when they retire. Funding people who have no super, or insufficient super to survive their retirement needs has to be funded from somewhere, and basically this takes the form of various taxes. The rich can obviously afford to pay more tax than the poor, but there is a twist to this that is not often mentioned. Large corporations. They have access to all sort of ways to avoid tax. They can influence governments to under-tax them, they can hide profits overseas, and hundreds of other schemes. This is not actually a political thing in terms of socio-economic status. if governments are unwilling or unable to make multi-national corporations pay a reasonable amount of tax [remember that these corporations use roads and other public infrastructure that the government [[and hence tax-payers have to pay for]], so the entire tax burden falls on smaller corporations, businesses and wage earners. So the reality is that a person that is well-off [say has 3 million in super], and a nice house well over a million, has more in common financially with a person who works 3 part-time jobs and only earns about $45,000 a year. or for that matter, a homeless poverty-stricken person. because these are the sort of people that will pay ALL of the tax. Even the homeless person may be slugged with GST for essential food or hygiene items like soap. This is the "invisible elephant in the room" that no one is talking about. As an example, a cafe owner who employs a dozen people has more in common with their employees than with a huge corporation. Both of those parties are being squeezed by the government via the tax system. But instead, governments play workers off against small employers! This is also true of government-mandated wage increases. A corporation that employs thousands of workers won't even notice if the minimum wage increases by a few percent or dollars, but the small cafe owner will, and he/she has the right to complain. So do the workers, because BOTH are being screwed. And if you are going to give the worker and the cafe-owner tax relief, it has to come from somewhere else. Take it from trillion-dollar corporations that pay little or no tax! Both Labor and conservative governments generally get this wrong, and this is why everyone is livid. To be fair, this has to be an international agreement among nations, because corporations will pack up and leave, and go to a tax-free nation. Have you noticed how major manufacturing keeps popping up in poorer and poorer nations? Corporation move their factories around so that they do not have to pay tax [or very little] and can hold the country to ransom, demanding an "incentive payment" by the government, before they come and do business there. The people, and local businesses always miss out. So then you I-phone is made in sweat shops that are almost slavery prisons with barbed wire on the roof to stop despairing workers from jumping to their deaths. Child labour is another trick. Move your factory that does not have child-labor laws. Or safety laws. Or minimum wage laws. Although SOME corporations are ethical, many are not, hence the need for such laws.
Thanks katherine very good summary ...I have another question though off topic (I hope that's ok?)...if uou use your super as a lump sum to pay off your house (thus moving it from as part of asset test (super) to exempt from asset test (family home)...how does this work? Many thanks once again !
I cannot afford to retire. I expect to be working until 74 years old, and even then i will be really poor. I think superannuation should be named the "Work till you drop scheme" for many older women.
Unfortunately, each generation will have to wait longer for their super. Unless changes for women and men who work and have children, where their employer continues to pay Super while on maternity leave and parental leave at the moment it stops. After not contributing to my Super because I chose to have kids, because I worked part-time, I couldnt afford to. My Super balance suffered. But I'm still not entitled to the age pension due to my house value is too high, my Super won't last me. All that hard work down the drain. I paid tax all my working life. Whereas someone renting is entitled to the pension. Home owners don't get anything...I'm buying a tiny home and selling my house when I get too old and live on the proceeds
Can you please give us an honest opinion of how long do you think it will be before the government stops people from taking out their super in a lump sum? We are a few years away from gaining access and wondering if it is worth cutting our losses paying extra tax now to get the money out before they take control and force us to accept a weekly income (with the balance going to the government on our death).
It will still be a while, those changes will be happening over time, but this will happen and I am not the only person who has started seeing this trend. As mentioned in the video, for baby-boomers retirement soon or retired already, I don't think will be a problem, but let's wait another 7-10 years and the superannuation environment might look very different. Please DO NOT withdraw any money from super now, this is not advisable, just watch those changes as they are being introduced.
A future Coalition government will "reverse" any changes made by Labor "pilfering" the superannuation system. On past experience the people will tire quickly of Labor incompetence and fiscal wastage in government and they'll be in opposition again soon enough, and sanity, (good governance), restored. Sooner the better...
Are you able to suggest some other investment options other than Super? Prior to these Govt discussions I had been planning options and thinking of putting more in Super following an inheritance, and for downsizing, but no longer want to do this due to these changes, and do not expect to be putting any extra funds in super, even though my super fund is not high. At the moment my income is very low anyway, and so the current 15% is not an incentive or benefit to me personally.
Hi Linda, this is a question for a personal advice, therefore I cannot really suggest any products. Product recommendation is regarded by law as part of a personal advice, because in order to advise, I would need to know your full financial position. However if you are on low income, contributing to super might not the best idea, as the money will be stuck in super till you meet conditions of release, as you just don't know what could happen in the meantime. But you could invest funds into chosen managed funds, shares or even while unsure keep it in a term deposit, until you receive an appropriate advice.
What you do not STRESS is that the 15% concessional tax is still applicable for amounts from $1 to $3m . 30% only applies to the income earned on amount above $3million AND it is per person… I think it’s going to be a good few years away before that affects most Australians.
this is correct, but once the policy is in force, this is it, the government will not back down, so why should our children not benefit from a good, reliable retirement system, why make it so much worse for them? Today's economy is not easy, so many cannot afford to buy a family home, cost of living is sky-rocking and now additional tax in super?
@@AboutRetirementTV because superannuation was not meant to be a means of accumulating wealth, it’s purpose is to allow one to be self sufficient in retirement. Why should the most wealthy in our society be subsidised in order to have a bigger nest egg to leave their descendants … this tax concession is meant to encourage people to save for their retirement - never envisaged to become a means of encouraging the most wealthy (yes it’s legal) to evade tax…
@@Jacquiminns I agree with you, all I am asking for is to have 3mil increasing with inflation, because if not, in anther 10-15 years everyone will pay 30% considering that everyone has a super from day 1. So this is a very smart way to introduce a tax supposedly affecting few, and sitting quietly for few years and the government has a new pool of incredibly high balance to charge and tax at 30%. This will affect all our children. It does not affect you at all. Also, I am not sure if you would like for the government to close your access to your money, but this is what the longer-term plan is.
Well - if everybody paid tax commensurate with their actual income, rather than on their "used every scheme known to canny accountants to minimalise their declarable" income, the govt. might be able to increase the tax-free threshold, rental assistance, etc. Your great on how to improve things but then want to take one of the ways that the govt. has found to increase it's revenue.
This 'loophole' has meant that I have salary sacrificed about 12k pa on average into super, costing the taxpayer about $1800 pa, over the past 16 years, so $28,800 altogether lost from the tax system in concessions. However, consequently, I won't be eligible for any government age pension when I reach 'pension' age. Funnily enough, the single person age pension is roughly the same as the amount the taxpayer would otherwise have to cough up for each and every year of my retirement as was given to me as a tax concession over the entire 16 years. Taxpayers make back their investment in ONE YEAR then save 26k or so each and every year thereafter. I took the hit, funding my own retirement, because I locked away income I could have used/wasted/invested. The biggest winner in a super system designed to promote self-funded retirees is the taxpayer. No shelling out a government pension for 20-odd years. Provide a modest tax incentive during their working lives and workers can retire without being a long-term burden on the tax system. Taxpayers are about half a million dollars ahead in just my situation alone and I'm happy to not be a burden and allow the government to divert the resources to those who are unable to provide for themselves. Had there been no tax concession, I wouldn't have bothered with salary sacrifice and would have been headed for a full age pension. Which scenario provides the best outcome for everyone?
@@v.a.7594 those are some unpleasant words. Just because you have a different point of view does not mean you can be rude towards another person, I think my channel brings lots of benefit and information to many, so a comment such as yours is very hurtful, Good luck to your children and grandchildren then.
It is hard to see how a $3million dollar super balance returning $150,000 per annum at 5% could be construed as a difficult retirement situation. I am aware that you need to provide advice and nobody wants to hear that they will have to contribute (beyond $3M) what others would have to do before 65/67. The greedy government angle re covering deficits and expenditure is a bit exaggerated (no doubt for effect). Defining super seems entirely reasonable to me as the previous arrangements seemed very dodgy and certainly exceeded my notion of $25K yearly contribution limits and $1.6M balance limits. The effect of inflation you mention will have to be taken into account as I am sure will be done.
Your comment about rich people being willing to pay for tax and financial advice ignores the fact that many people on low incomes simply can't afford to pay for financial advice. We are not low income earners and it will still take us several months of saving to pay for the advice we will need.
Thank you for your message, and I understand your point that financial planning advice is on a more expensive side, but also fees vary between practices. This is also why I run this channel, to help those that cannot afford the service, so hopefully can slowly learn via my videos. However, financial planning is a similar service as for example setting up your Will. The legal advice or accounting advice is also costing money, but it is essential, so we pay. I honestly believe that a good financial advice would provide a much higher benefit that the fee paid, but it is a matter of priorities. The sad part is, that many people on low incomes might be missing out on benefits that maybe they could be eligible for, but one will never know, unless advice has been provided. Sad reality of life.
@@AboutRetirementTV but you were still happy to make a dog about people on low incomes not being willing to pay for advice when they simply cannot. Your privilege shines very brightly in this video.
@@v.a.7594 well, we have never spoken personally, you do not know anything about my work, you have no idea how much pro bono work I do, so please don't make your judgement. I help those in need at lot. And I work very, very hard in my work, But then I know lots of people who just want everything for free, which is not right. Anyway, let's just agree to disagree.
@@AboutRetirementTV I never said you didn't work hard. You are the one implied poor people aren't willing to pay for financial advice rather than realising they simply can't afford to. It is simply ignorant.
I really like your channel normally, and its very informative, but lately it just sounds like a labour government bashing. Which is very unputting, i and most people are no where near the 3m account balance and will never be now or in the future and the people in that bracket has had it very easy on taxes in the past. I say tax the wealthy and help those that need, super should not be a tax haven for the extremely wealthy.
Unfortunately, I didn't see anything in your video to show me that there's anything wrong with the proposed changes. I did get a feeling of someone trying to look after their job. Labor is addressing a $1B tax loophole, where you assist people to avoid paying marginal tax on their income by using super as a savings account. You put up a slide to say how many people are affected by the proposal, but didn't put up a slide that shows the rest of the story - the average Australian approaching retirement has approx. $560,000 in their super accumulation account. Given we have a progressive income tax scheme, why shouldn't we also have a progressive scheme for those in the accumulation phase of super? Perhaps you could have reminded people that this initiative has absolutely no impact on the funds they drawn down on when actually in retirement.
@@perspective4517 You are correct, Perspective 451. The average is inflated by the large super accumulation account balances (someone has over $500m!). The median for males (60-64yo range), in June 2019, according to the Superannuation Association was $178,808.
Absolutely it is bias, superannuation is for retirement, it is for our security for later years, this is all good now, but as I said our children and grandchildren will not have the same retirement system you are enjoying. and that worries me a great deal.
@@AboutRetirementTV isn’t it up to them and future generations to vote for the changes they want? you fail to mention the deficit inherited by this government, this is also something our children will inherit if not addressed… if this turns out to be unpalatable the people can vote…. Put it in perspective - Those with $3m are paying less tax on their earnings than those earning $45,000 per year !!!
@@Jacquiminns I am not disputing introduction of the tax, I am oppose not indexing the amount of $3mil. This is a brilliant way of introducing the policy that today only impacts a few and tomorrow the whole nation.
This is a good plan from the Government to tax people with Superannuation balances above $3mil.
May I ask which investments are good? I've been looking at a few different ones but want others' opinions as well
Thank you for providing this helpful pointer. I managed to find the contact information for JENNY PAMOGAS CANAYA, and she appears to be highly skilled and adaptable. I have scheduled a call session with her.!
This forward thinking is the same logic some people had when Labor introduced the HECS student loan scheme. People warned that the minimal co-contribution being charged and 'generous' repayment schedule (in 1990) was the thin edge of the wedge and students would one day have American style loans of tens of thousands of dollars, some over 100k. Politicians scoffed at such suggestions as scare-mongering. Then. Now? It is as bad as the worst-case scenarios put by the skeptics of the original scheme (Now called a HELP loan.... a HECS sounds too much like the curse it has become). So your caution about future consequences is well-placed.
This is a very good point. Thank you
I find the redefining of what Super is for to be quite disturbing. What is the point of sacrificing to boost our super to reduce the risk of financial pressure in retirement when the government see what I have saved to protect my wife and I - to be fair game to take from me to make life easier for those who have not bothered to prepare for retirement. The "equitable" word in the definition is ringing alarm bells for me. I think your adive to place savings where they are outside of super and under our own control is very sound Katherine. Thankyou for your considered thoughts in this video. I am dissapointed at some of the negative comments. Please keep informing us and keeping us up to date. Most of us really appreciate the effort you make to help people on this channel.
thank you Trevor 😀
I agree 100% with your comments!!!!
One also needs to consider future lump sum death benefit tax of 15% on the taxable component of the super balance to non-dependents such as adult children. Any earning on balance over $3m will effectively be taxed at top marginal tax rate in total. There is also annual admin and investment cost of around 0.7% in a typical industry super fund. Assuming an optimistic gross annual return rate of 7%, this equates to about 10% reduction in earning or like an additional 10% tax. In short, I think it does not make financial sense to keep more than $3m in super with the proposed changes. This is going to hurt the younger generation as the impact will be greater given there will be no indexation.
100% agree, super will no longer be a good investment choice and most young people should reconsider how much to contribute.
An excellent summary of the superanuation changes and their impact on future generations. Agreed no indexation combined with the insidious creep of inflation is the elephant in the room with Chalmer's proposals. Majority of the punters will agree with taxing the superannuation balances of 'wealthy' individuals@30%. Who's going to lose sleep if someone with a balance of tens of millions or even hundreds of millions get slugged with a higher tax rate? This is a relatively low risk strategy for the government right now but will become a hot potato for future governments as more and more get caught up in the net of no indexation.
absolutely agree 🙂
Thankyou Katherine for this clear explanation of future tax on Super.
It has really put into perspective the struggles that future generations will have to endure.
Yes, and this is a real worry. Thank you Brett 🙂
I have a feeling I am going to regret my past decisions to contribute extra to super with still 15 - 20 years of working life ahead of me.
HI Kevin, I don't want to discourage you, but I think it is wiser to keep saving money where you have more control, savings few bucks in tax is not worth it.
@@AboutRetirementTV Agree, until recently that was my view but once i had paid my home loan off I thought i might contribute more to super. wont do that now though.
@@kevinrudd9257 Contribute up to $3M and you will be laughing.
@@petercampbell1478 If it was only the $3m i would be, unfortunately its not just about the limit. I was very sceptical of contributing extra to my SMSF before these changes use to the length of time the money is unable to be withdrawn and potential of changes to regulations impacting my cash. It’s not like i can get the cash out again when the rules change. I think you missed the point of the video.
Thank you, think I got it, basically you're saying the 3m cap for now (or in 10years)won't impact majority however in another 30/40years it will impact everyone,which would be our next generation. From this point I think you're helping people to realise that we need to vote, that this change must have a condition, which is the inflation need to be considered, that means the 3m cap will be also increased as same as the index every year,so in 40 years time, the cap could be 6m or something depends on the inflation rate....
Absolutely, you got it 😀
Thanks you for your excellent explanation. As always. The Labor Party are doing great harm to people’s confidence in the future of the superannuation system to work for them in retirement. I believe many people will only make minimum contributions to super and spend their money instead. Which will be the opposite effect to what was originally intended. How can the labor leaders be so foolish. They are also counting on taxing larger super balances Many people will move their money elsewhere. Also to avoid the death tax on super balances.
Absolutely, 100% agree. this will have the opposite affect that the super system could provide for retirees and actually for the whole country (economy, government budget, Age Pension, Aged Care the list can continue)
Whenever Labor is in the government there is not good things. Labor is a big spender and only know how to tax but fail many policies to better the Australia economy as a whole.
Really interesting perspective and very thought provoking. Thank You Katherine. I think some of your suppositions about what MIGHT happen are overly pessimistic however. Sure, the consultation paper is a bit rubbery...but that is often the case at this early stage isn't it? Given this has been raised by a Labour government, I doubt the true intentions are as negative as you suggest. I think that as the process for change progresses the rules and definitions, plus the clarity around the intentions will become clearer. One obvious flaw at the moment is the lack of Indexation, which is just silly. I think the system does need to change as the extremely wealthy are disproportionately benefitting as the tax benefits stand at the moment.
Hi Daniel, I honestly hope you are right, and this is non-well thought through recommendation. Again, I have nothing against the extra tax for super-wealthy, as they used the superannuation system as the way to reduce their tax, but in all honesty, as long as it is legal, every person of sound mind would do this if the system, allows. I do have an issue with lack of indexation, this was pointed out to the government, but it appears that they do not want to back down on this recommendation, and this is a worrying factor.
Once again thank you, that was a very valuable in site to the mechanisms at work behind the window dressing; in the beginning they were “Tax Incentives” to encourage people to invest in supper, today they are called “Tax Concessions” how long before they or others start calling it a rort?
Thank you Stuart
I think if I had $3m, I would not have to worry about paying tax. Also, my super funds are not voluntary savings that I should be fiercely protecting, but paid by my employers in a compulsory manner. I have worked hard to get to retirement age, and paid a lot of tax over the years, but I know many people who have never worked. Those people have no super funds, but should the rest of us be supporting their retirement? I think we already do, no matter how you word your video. Thanks again for your contribution to our planning processes.
Your employer pays into your super fund in a "compulsory manner" but, in fact it is your money being paid into your fund and which would otherwise have been paid to you in cash by way of a wage increase.
@@frednerk3477 Thanks, but in my case, I would definitely have not been paid such a wage rise. This has been my compulsory savings for retirement, and my employer would never have volunteered funds, or a pay rise, hence the mandatory super contributions.
@@Robyn19fnq @fred nerk The compulsory super was originally paid in lieu of a wage rise that your employer would have had to pay. The agreement by labor, unions and employers was to pay it into super instead of wages to stop the inflation cycle. No-one suggested it this time around when employers said 'no' to cpi wage increases (because, they said, it would fuel inflation, which is partly true). But they could have paid the cpi increase AND avoided the problem of inflation by paying it into super. Funny how they didn't suggest that.
Lack of indexation is a fair criticism ... why don't you lobby the government to include that in the legislation? ... a simple change that still closes a $1B loop hole
Th aged pension is supposed to be a safety net, rather than an entitlement. There are lots of reasons why people cannot earn enough money to have a big super balance to be comfortably when they retire. Funding people who have no super, or insufficient super to survive their retirement needs has to be funded from somewhere, and basically this takes the form of various taxes. The rich can obviously afford to pay more tax than the poor, but there is a twist to this that is not often mentioned. Large corporations. They have access to all sort of ways to avoid tax. They can influence governments to under-tax them, they can hide profits overseas, and hundreds of other schemes.
This is not actually a political thing in terms of socio-economic status. if governments are unwilling or unable to make multi-national corporations pay a reasonable amount of tax [remember that these corporations use roads and other public infrastructure that the government [[and hence tax-payers have to pay for]], so the entire tax burden falls on smaller corporations, businesses and wage earners.
So the reality is that a person that is well-off [say has 3 million in super], and a nice house well over a million, has more in common financially with a person who works 3 part-time jobs and only earns about $45,000 a year. or for that matter, a homeless poverty-stricken person. because these are the sort of people that will pay ALL of the tax. Even the homeless person may be slugged with GST for essential food or hygiene items like soap.
This is the "invisible elephant in the room" that no one is talking about. As an example, a cafe owner who employs a dozen people has more in common with their employees than with a huge corporation. Both of those parties are being squeezed by the government via the tax system. But instead, governments play workers off against small employers! This is also true of government-mandated wage increases. A corporation that employs thousands of workers won't even notice if the minimum wage increases by a few percent or dollars, but the small cafe owner will, and he/she has the right to complain. So do the workers, because BOTH are being screwed. And if you are going to give the worker and the cafe-owner tax relief, it has to come from somewhere else. Take it from trillion-dollar corporations that pay little or no tax! Both Labor and conservative governments generally get this wrong, and this is why everyone is livid.
To be fair, this has to be an international agreement among nations, because corporations will pack up and leave, and go to a tax-free nation.
Have you noticed how major manufacturing keeps popping up in poorer and poorer nations? Corporation move their factories around so that they do not have to pay tax [or very little] and can hold the country to ransom, demanding an "incentive payment" by the government, before they come and do business there. The people, and local businesses always miss out. So then you I-phone is made in sweat shops that are almost slavery prisons with barbed wire on the roof to stop despairing workers from jumping to their deaths. Child labour is another trick. Move your factory that does not have child-labor laws. Or safety laws. Or minimum wage laws. Although SOME corporations are ethical, many are not, hence the need for such laws.
Thanks katherine very good summary ...I have another question though off topic (I hope that's ok?)...if uou use your super as a lump sum to pay off your house (thus moving it from as part of asset test (super) to exempt from asset test (family home)...how does this work? Many thanks once again !
It becomes exempt as being part of your home 😆
Great Explanation, Katherine I will be Sharing this video in the hope it opens peoples eyes to what the Goverment are trying to achieve.
Thank you Douglas, I think we all need to know the truth about where the superannuation future is moving towards to.
I cannot afford to retire. I expect to be working until 74 years old, and even then i will be really poor. I think superannuation should be named the "Work till you drop scheme" for many older women.
Thanks Katherine for this very clear explanation.
Most welcome 🙂
Unfortunately, each generation will have to wait longer for their super. Unless changes for women and men who work and have children, where their employer continues to pay Super while on maternity leave and parental leave at the moment it stops. After not contributing to my Super because I chose to have kids, because I worked part-time, I couldnt afford to. My Super balance suffered. But I'm still not entitled to the age pension due to my house value is too high, my Super won't last me. All that hard work down the drain. I paid tax all my working life. Whereas someone renting is entitled to the pension. Home owners don't get anything...I'm buying a tiny home and selling my house when I get too old and live on the proceeds
Thank you very much for the clear helpful explanation.
Most welcome 🙂
Can you please give us an honest opinion of how long do you think it will be before the government stops people from taking out their super in a lump sum? We are a few years away from gaining access and wondering if it is worth cutting our losses paying extra tax now to get the money out before they take control and force us to accept a weekly income (with the balance going to the government on our death).
It will still be a while, those changes will be happening over time, but this will happen and I am not the only person who has started seeing this trend. As mentioned in the video, for baby-boomers retirement soon or retired already, I don't think will be a problem, but let's wait another 7-10 years and the superannuation environment might look very different. Please DO NOT withdraw any money from super now, this is not advisable, just watch those changes as they are being introduced.
A future Coalition government will "reverse" any changes made by Labor "pilfering" the superannuation system.
On past experience the people will tire quickly of Labor incompetence and fiscal wastage in government and they'll be in opposition again soon enough, and sanity, (good governance), restored.
Sooner the better...
Are you able to suggest some other investment options other than Super? Prior to these Govt discussions I had been planning options and thinking of putting more in Super following an inheritance, and for downsizing, but no longer want to do this due to these changes, and do not expect to be putting any extra funds in super, even though my super fund is not high. At the moment my income is very low anyway, and so the current 15% is not an incentive or benefit to me personally.
Hi Linda, this is a question for a personal advice, therefore I cannot really suggest any products. Product recommendation is regarded by law as part of a personal advice, because in order to advise, I would need to know your full financial position. However if you are on low income, contributing to super might not the best idea, as the money will be stuck in super till you meet conditions of release, as you just don't know what could happen in the meantime. But you could invest funds into chosen managed funds, shares or even while unsure keep it in a term deposit, until you receive an appropriate advice.
Well said
What you do not STRESS is that the 15% concessional tax is still applicable for amounts from $1 to $3m . 30% only applies to the income earned on amount above $3million AND it is per person… I think it’s going to be a good few years away before that affects most Australians.
this is correct, but once the policy is in force, this is it, the government will not back down, so why should our children not benefit from a good, reliable retirement system, why make it so much worse for them? Today's economy is not easy, so many cannot afford to buy a family home, cost of living is sky-rocking and now additional tax in super?
@@AboutRetirementTV because superannuation was not meant to be a means of accumulating wealth, it’s purpose is to allow one to be self sufficient in retirement. Why should the most wealthy in our society be subsidised in order to have a bigger nest egg to leave their descendants … this tax concession is meant to encourage people to save for their retirement - never envisaged to become a means of encouraging the most wealthy (yes it’s legal) to evade tax…
@@Jacquiminns I agree with you, all I am asking for is to have 3mil increasing with inflation, because if not, in anther 10-15 years everyone will pay 30% considering that everyone has a super from day 1. So this is a very smart way to introduce a tax supposedly affecting few, and sitting quietly for few years and the government has a new pool of incredibly high balance to charge and tax at 30%. This will affect all our children. It does not affect you at all. Also, I am not sure if you would like for the government to close your access to your money, but this is what the longer-term plan is.
Indexing the $3m number to inflation is the key! I am surprised the government hasn’t done this. 😊
Well - if everybody paid tax commensurate with their actual income, rather than on their "used every scheme known to canny accountants to minimalise their declarable" income, the govt. might be able to increase the tax-free threshold, rental assistance, etc. Your great on how to improve things but then want to take one of the ways that the govt. has found to increase it's revenue.
This 'loophole' has meant that I have salary sacrificed about 12k pa on average into super, costing the taxpayer about $1800 pa, over the past 16 years, so $28,800 altogether lost from the tax system in concessions. However, consequently, I won't be eligible for any government age pension when I reach 'pension' age. Funnily enough, the single person age pension is roughly the same as the amount the taxpayer would otherwise have to cough up for each and every year of my retirement as was given to me as a tax concession over the entire 16 years. Taxpayers make back their investment in ONE YEAR then save 26k or so each and every year thereafter. I took the hit, funding my own retirement, because I locked away income I could have used/wasted/invested. The biggest winner in a super system designed to promote self-funded retirees is the taxpayer. No shelling out a government pension for 20-odd years. Provide a modest tax incentive during their working lives and workers can retire without being a long-term burden on the tax system. Taxpayers are about half a million dollars ahead in just my situation alone and I'm happy to not be a burden and allow the government to divert the resources to those who are unable to provide for themselves. Had there been no tax concession, I wouldn't have bothered with salary sacrifice and would have been headed for a full age pension. Which scenario provides the best outcome for everyone?
How do you feel about this superannuation change?
I support the change. Listening to the scare mongering from you is sickening and disappointing.
@@v.a.7594 those are some unpleasant words. Just because you have a different point of view does not mean you can be rude towards another person, I think my channel brings lots of benefit and information to many, so a comment such as yours is very hurtful, Good luck to your children and grandchildren then.
@@v.a.7594 I suppose you predominantly survive on the government benefits other people’s tax payments fund.
@@kevinrudd9257 you would be wrong. I have worked full time for the last 28 years. Try again.
It is hard to see how a $3million dollar super balance returning $150,000 per annum at 5% could be construed as a difficult retirement situation. I am aware that you need to provide advice and nobody wants to hear that they will have to contribute (beyond $3M) what others would have to do before 65/67. The greedy government angle re covering deficits and expenditure is a bit exaggerated (no doubt for effect). Defining super seems entirely reasonable to me as the previous arrangements seemed very dodgy and certainly exceeded my notion of $25K yearly contribution limits and $1.6M balance limits. The effect of inflation you mention will have to be taken into account as I am sure will be done.
Your comment about rich people being willing to pay for tax and financial advice ignores the fact that many people on low incomes simply can't afford to pay for financial advice. We are not low income earners and it will still take us several months of saving to pay for the advice we will need.
Thank you for your message, and I understand your point that financial planning advice is on a more expensive side, but also fees vary between practices. This is also why I run this channel, to help those that cannot afford the service, so hopefully can slowly learn via my videos. However, financial planning is a similar service as for example setting up your Will. The legal advice or accounting advice is also costing money, but it is essential, so we pay. I honestly believe that a good financial advice would provide a much higher benefit that the fee paid, but it is a matter of priorities. The sad part is, that many people on low incomes might be missing out on benefits that maybe they could be eligible for, but one will never know, unless advice has been provided. Sad reality of life.
@@AboutRetirementTV but you were still happy to make a dog about people on low incomes not being willing to pay for advice when they simply cannot. Your privilege shines very brightly in this video.
@@v.a.7594 well, we have never spoken personally, you do not know anything about my work, you have no idea how much pro bono work I do, so please don't make your judgement. I help those in need at lot. And I work very, very hard in my work, But then I know lots of people who just want everything for free, which is not right. Anyway, let's just agree to disagree.
@@AboutRetirementTV I never said you didn't work hard. You are the one implied poor people aren't willing to pay for financial advice rather than realising they simply can't afford to. It is simply ignorant.
I appreciate your videos but I'm just not swallowing the comments in this one.
I really like your channel normally, and its very informative, but lately it just sounds like a labour government bashing. Which is very unputting, i and most people are no where near the 3m account balance and will never be now or in the future and the people in that bracket has had it very easy on taxes in the past. I say tax the wealthy and help those that need, super should not be a tax haven for the extremely wealthy.
There it is ... the sky is falling argument "I'm sure that with🤣 another change ...". Another job protection argument🤣
Unfortunately, I didn't see anything in your video to show me that there's anything wrong with the proposed changes. I did get a feeling of someone trying to look after their job.
Labor is addressing a $1B tax loophole, where you assist people to avoid paying marginal tax on their income by using super as a savings account. You put up a slide to say how many people are affected by the proposal, but didn't put up a slide that shows the rest of the story - the average Australian approaching retirement has approx. $560,000 in their super accumulation account. Given we have a progressive income tax scheme, why shouldn't we also have a progressive scheme for those in the accumulation phase of super? Perhaps you could have reminded people that this initiative has absolutely no impact on the funds they drawn down on when actually in retirement.
Average. Which average? Mean or median? I could believe mean, but I'd be shocked if the median super balance of all retirees was that high.
@@perspective4517 You are correct, Perspective 451. The average is inflated by the large super accumulation account balances (someone has over $500m!). The median for males (60-64yo range), in June 2019, according to the Superannuation Association was $178,808.
Normally I find your videos fantastic but not this one! I found it very bias.
Absolutely it is bias, superannuation is for retirement, it is for our security for later years, this is all good now, but as I said our children and grandchildren will not have the same retirement system you are enjoying. and that worries me a great deal.
@@AboutRetirementTV isn’t it up to them and future generations to vote for the changes they want? you fail to mention the deficit inherited by this government, this is also something our children will inherit if not addressed… if this turns out to be unpalatable the people can vote…. Put it in perspective - Those with $3m are paying less tax on their earnings than those earning $45,000 per year !!!
@@Jacquiminns I am not disputing introduction of the tax, I am oppose not indexing the amount of $3mil. This is a brilliant way of introducing the policy that today only impacts a few and tomorrow the whole nation.
I’m wondering if you are wearing your advisor hat? A biased report.