We might save more in super if we knew where it went

N says:

01:34pm | 15/07/10

Wow, smart move; you have a resource boom kicking off in WA, an election year, a bumper crop season and you’re totally invested in cash…. Enjoy your mediocre retirement.

Faul Kinell says:

07:04am | 16/07/10

Hello N,  I did say “where my super is right now” I have the option of moving it back to sharemarket exposure when I see the ASX200 or All Ords reverse from primary down trend which it most clearly is at the moment. I don’t see and Blind Freddy would’nt see a boom in world or Australian economies for a while yet. Why not enjoy a reasonable cash rate, it’s where the smart money is right now!

Dash says:

11:14am | 15/07/10

I think the idea is good John, but I’d hate the money to be under the control of a government like the one we have at the moment! Can you imagine your super dollars lost down the National Broadband Network black hole, or wasted to repair the damage under the insulation fiasco,  or used to plug the $7b hole opened up in Swan’s budget, or rorted by Labor backed builders under the school building scheme. Or perhaps skimmed off to pay Pollies own superannuation schemes. No thanks. I think I prefer the money to be put into the private sector where they at least have a licence to maintain, shareholders to answer to and a corporate governance regime to maintain. The government would waste it. I mean this lot have turned a large surplus into a $40.4billion defecit in about half an hour. They have racked up record levels of foreign debt. Nup, don’t give them our superannuation to waste as well.

John A Neve says:

12:15pm | 15/07/10

Dash,

Two points, we don’t always have the same government, also with private funds you are paying them as specialists to look after your money not lose it. Added to which the management fees paid tp private companies could be going into you fund balance.

As to the NBN a seperate issue, I’ll say yet again thay should never have sold Telstra. If the people still owned it, we would not have this fiasco.

Dash says:

12:50pm | 15/07/10

Hi John, I guess I’m a free market forces kind of guy whereas you would prefer a nationalised model. Reasonable arguments for both I’m sure. There is always a balance between risk and return. Putting the money with the government wouldn’t change this would it? So if equity markets dropped globally like they did recently, we’d still lose fund value right? Yes I agree, you’d need to out perform to justify the management fees but then again, corporates wont work for nothing? Maybe if they set the right controls up like the need to maintain statutory funds which the government couldn’t touch, people would be more willing to accept your model. the whole Telstra debates a tricky one. Once again free market forces would work if there was true competition. Perhaps that’s the issue?

John A Neve says:

03:42pm | 15/07/10

Dash,
With regard to our super, if it was government controlled, it could be government guaranteed. The money could be loaned to the governments both state and federal for infrastructure projects. Reducing reliance on off shore money lenders.

While Telstra was not the best, that is more a management issue than any thing else. They had the network and we owned it.

I am not opposed to free enterprise, but that is about making money, private companies are not going to run KM’s of cable to service 5 or 6 houses. Yes, they will service the cities and large regional centres, but forget those beyond the Black Stump.  We will never have a NBN if we wait for free enterprise to provide it.

Ryan says:

11:28am | 15/07/10

@Tim : and so many thought that those exorbitant super management fees were there for the Super Companies to afford to employ specialists to wisely invest for the benefit of the customer. Instead what we see is Super companies throwing your money into a selected bucket without a thought of the performance of said buckets and making super profits off the fees they charge for doing less than nothing.

Tim says:

09:48am | 15/07/10

What tax incentives did they remove dash?
Are you talking about the concessional limits being lowered?
They weren’t a tax incentive, it was a rort allowing rich older people to minimise the amount of tax they pay, knowing that they would be able to access that money in a few years.
If you planned and saved for your retirement as you say, then you wouldn’t need to put in large sums of cash into super in the last few years before you retire.

John A Neve says:

09:52am | 15/07/10

Dash,
Did your parents and grandparents “save for their retirement”?
The fact is for many older people the option of super was not there.

As for tax incentives, tax on super is still very low. But more to the point, why should you have to be encouraged to save for your own benefit?

Dash says:

10:31am | 15/07/10

Tim, if the government was serious about stopping tax rorts they would capture the people dealing in the cash economy by increasing the GST as has been done recently in NZ (you can’t avoid consumption) and by bringing the marginal tax rates into line with the corporate tax rate so the PAYG taxpayer doesn’t get hammered and corporates pay a fairer share of the tax take. But alas this government does not have the balls to implement root and branch tax reform. I also have an issue with why those who contribute most to our society in tax (i.e. higher effective tax payers) seem to be punished and why people like you think the more you contribute in tax, the less you should be entitled to. Is this a communist country?

John A Neve, yes my parents are self funded retirees that worked for everything they own. My father stepped off a boat in 1955, went straight to work as a 15 year old, put his sisters and brother through school and supported his mother (father died when he was 7). He has never taken a cent from the government, declared and paid all his taxes and is still paying his own way at 70 and he’s very proud of it! As a significant tax payer all his life, he now gets nothing from the government except concessional bus travel.
Keating’s compolsory superannuation was easily the best thing he did for the country. It has pumped trillions of dollars into our financial system and the tax incentives he put in place and maintained by the Howard government, encouraged people to save and to put money into the financial system. Tim says it’s a tax rort but in reality it keeps these people off the public purse and it puts money into the finance industry. I would put more into super if I had the tax break but now I’m looking for other ways to build wealth and pay my own way.

Tim says:

11:19am | 15/07/10

Dash,
i agree with you re the GST.
It should be raised and applied to everything. The inconsistent tax we have currently is too complex.
I believe that people should be planning for their retirement at an early age. When I retire, i will be a fully self funded retiree.
As for the tax break, you can still put $25000 concessionally into super every year, so the benefit is still there for you to do so.

The problem I have with the old system, is it allowed older well off people to salary sacrifice nearly all their income into super. They weren’t paying large amounts of tax as you say, because they were using their super to lower their tax rate when they knew they could access that money in a few years.

Dash says:

12:04pm | 15/07/10

Tim, I take your point. However, it wasn’t only older well off people, there were a few young people who would take advantage of the tax break as well. A lot of bonus payments found their way into superannuation. In terms of GST, as more people drop out of the workforce, they are going to need to increase the rate as the size of the PAYG tax base deminishes.  And yes, simplify it by making it apply to everything. I think the PAYG tax system is part of the problem here. There is too much difference between the corporate rate and the top marginal tax rate. And there is too much room for corporates to avoid tax and to split income none of which is available to the poor PAYG tax payer. Although it kicks in at a lower level, NZ’s top marginal tax rate is only 33%, a 12% difference on our top rate and a lot closer to their corporate rate of 30%. Yet GST there has been increased to 15%. A much fairer system in my view. The fact that nothing was said in the Henry review about PAYG scales and the GST, makes me very sceptical about his so called independence.

Betelnut says:

04:30pm | 15/07/10

@Dash

Ken Henry was specifically prevented from examining the GST rate when commissioned to do the tax review, a decision which had nothing to do with his independence (or lack thereof).  You can blame the lack of enthusiasm for reviewing GST rates on both a risk-averse ALP government, and a mendacious Opposition, who ran the ALP = increased GST scare campaign at the 2007 election.

Dash says:

10:25am | 16/07/10

Betelnut. Exactly, so a commission with direction is not independent is it. I rest my case. I understand that the GST is politically difficult. All the more reason for having an “independent” review. And, as I have said, with the ageing population and a reduction in the PAYG tax base, it’s inevitable that the GST rate needs to increase. It would broaden the tax base. Also the PAYG taxpayer deserves to have the same luxuries afforded to small business. Why should any individual in this country be expected to pay more in effective tax than the corporate rate? It’s beyond me. No one has been able to explain that too me. And lets not even get into the ability for corporates to split income and reclaim GST. Oh and what’s the issue with Henry reviewing the GST, the government has done nothing out of his review but try to implement an additional tax and then water it down.