Chalmers has Superfund Earnings in his Crosshairs
The current Federal government is starting to think retirees with superannuation accounts in pension stream paying zero tax on super earnings are getting it too good. The suggestion by former Treasury official Mike Callaghan is to introduce a modest tax on all super earnings. Apparently “retirees would hardly notice a tax on investment earnings because it would be automatically deducted!”…Huh? I think I would notice!
AFR story today “One fact stands out: Chalmers targets tax breaks for Super”, part copied below:
“The much bigger future cost to the budget is the tax breaks on super earnings, which are projected to jump from 1 per cent of GDP to almost 2 per cent of GDP by 2060, according to Treasury’s Intergenerational Report.
The tax breaks on super earnings alone will double from about $25 billion a year to around $50 billion, in today’s dollars in real terms.
Hence, overall super tax breaks will exceed the cost of the age pension by midway through this century, as Chalmers identifies. Almost 70 per cent of retirees will remain on the full or part pension.
Mike Callaghan, a former Treasury official who led the retirement income review for the previous Coalition government, says it is crucial that the system is made more equitable and sustainable.
“The super tax concessions on earnings is the part that is going to be costing the budget a lot more,” Callaghan said on Monday.
Super accounts in the pension retirement phase with balances below $1.7 million pay zero tax on their investment earnings (and no tax on withdrawals to avoid double taxation).
In contrast, working-age superannuants and retirees with balances above the $1.7 million pay a maximum 15 per cent on their investment earnings, but in reality pay about 7 per cent after imputation credits and capital gain discounts are included.
Callaghan says a fairer system would be for all super earnings – both during working lives and in retirement – to pay a modest tax.
Many retirees would hardly notice a tax on investment earnings because it would be automatically deducted, as it is for working-age people during the accumulation phase, he says.
Super withdrawals could remain tax-free to avoid double taxation.
Ultimately, Chalmers will need to decide if he is only interested in fiddling with a cap on large balances, or a more major tax shake up of super.”
Bell Direct have a similar offering to eSuperfund (approx $1500pa). According to their marketing material, they have more 'service' than eSuperfund. Currently offering a free SMSF setup until 30 Nov.
https://www.belldirect.com.au/smarter/investor-solutions/smsf
Here is their comparison to eSuperfund https://www.belldirect.com.au/smarter/compare-smsf
Just throwing it in as an option. DYOR, I have no direct experience with Bell Potter.
Thinking of jumping into a SMSF. I just received an email from Auzbiz promoting Stake Super with an annual fee of $770.
According to the promo Stake Super allows you to invest your super freely through a self-managed super fund. With a digital application process and our accountants taking care of all the admin, audits and reports for your SMSF, you can invest your super without worrying about paperwork!
Does anyone use Stake Super? Any thoughts appreciated. Thanks in advance.
There is a lot of hype about the costs of running an SMSF, the amount of work required etc but I setup an ESuperfund about 10 years ago and I found it to be quite a simple thing to do once setup, and the setup isnt that hard either, and costs are really low. It is all self interest from Industry superfunds and Retail Superfunds trying to make it sound harder than it is.
I did make the mistake of not setting up with a Corporate Trustee initally and decided to make the change a couple of years ago. This was straightforward too really but I did move away from ESuperfund and moved to Xpress Super which is similar but had a few features I liked and was cheaper to do the change to Corporate Trustee.
My personal opinion is that if your sophisticated enough as an investor to be on Strawman Premium I honestly think running your own SMSF is quite a simple step. I use a mix of managed and passive funds and my own stock picking and my SMSF is more conservative than my personal fund but I like knowing where it all goes and it is not difficult to setup an invetment strategy and stick to it (for me anyway!). I stay away from direct property and all my investments can be purchased on the ASX or are a managed fund.
I recommend both Esuperfund and XpressSuper and encourage you to have a serious look at setting up a SMSF if you have more than $250K - if nothing else you pay a lot more attention to what is happening with your money. I do like the direct investment options people are using inside their Industry Super funds but I like to have direct interest outside the ASX300 which you normally cant do and also pick managed funds (Like Lakehouse) that you can't normally access in the Supefunds.