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.”
Just wanted to thank everyone in this thread, as reading through it all has resulted in me doing a bit of research around relative costs of my current fund (SunSuper, which I'd been pretty happy with up until now) and the various SMSF options. This then led to me taking the leap and establishing my own SMSF through esuperfund (took advantage of the promotional offer so saved myself some of the setup costs).
The thing that pushed me over the edge was checking my latest annual statement from SunSuper and finding that I got hit with over $4k worth of fees for FY21, compared to at worst $2k through the lower cost online SMSF administrators (including my estimate of brokerage over the course of a year of self-management).
I'm really looking forward to starting my SMSF journey now!
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.
I have my own SMSF that I run myself and all the compliance aspects are managed for a fee of about $340 per month including end of year tax filing and ASIC stuff. In this account I can invest in any small cap stock or ETF as I choose in my self generated Investment Strategy document.
Whilst this might seem expensive, what you need to do is look at the cost as a % of the funds under management. As your account gets bigger then this self managed option becomes cheaper.
If you can make 15% per year in one option (because the limit your stock choices) or 25% in another option, then the management costs become less important.