Superannuation Discussion + market volatility

[Pushka]

Those things are bl**dy criminal!

My brother was doing the same until he retired in July.

So the usual now $25k we plebs have to follow doesn’t apply here?

 

[nickfromeastryde]

So the usual now $25k we plebs have to follow doesn’t apply here?

Someone is now going to explain this to us now and p!ss us "plebs" of even more!!!

 

[Quickstatus]

Someone is now going to explain this to us now and p!ss us "plebs" of even more!!!

Pollies look after themselves. There is a species of pollies who look after constituents but must be like the Tasmanian Tiger - is it extinct or not?

 

[JohnM]

Someone is now going to explain this to us now and p!ss us "plebs" of even more!!!

It's not pollies. It's some state government super schemes. Something to do with powers of the federal gov't over state gov'ts.

I don't claim to understand the details, only that it exists because of what my brother (a police officer) told me. Bottom line, as I understand it, is that the $25K limit doesn't apply. I think where it really came out is when state court judges (at least in WA) screamed blue murder and made sure about it.

Personally, I think it's terrible that the rules aren't completely consistent across the nation and can be thwarted by a legal federal/state jurisdictional loophole.

This may help (I have yet to read it myself):

Super contributions - for defined benefit funds and untaxed funds

 

[VPS]

The info from @JohnM is correct. You can salary sacrifice your whole salary if you want but mostly you can't join these funds unless you're a government employee and once you leave the government you can no longer contribute to them

 

[andye]

Is it true that withdrawals from these defined benefit funds are liable to income tax when in pension phase?

 

[rogerkambah]

IFM Investors - Asset Portfolio

All you airport lurkers and road warriors are nicely contributing to my super.

Look up the assets that my industry super is earning an income from. I should say “Thank You” . I should not neglect to thank all those consumers about to use electricity in NSW this morning

Yes, your super fund and 26 other NFP super funds own IFM Investors - about 11M contributors.

 

[JohnM]

Is it true that withdrawals from these defined benefit funds are liable to income tax when in pension phase?

Correct - at standard tax rates, less a 10% rebate (it was formulated as part of the Costello 2006/7 tax-free super changes).

It is because they were 'untaxed' schemes - ie. the contributions were never taxed at the usual 15%.

I think most, if not all, would be history now.

 

[rogerkambah]

Correct - at standard tax rates, less a 10% rebate (it was formulated as part of the Costello 2006/7 tax-free super changes).

It is because they were 'untaxed' schemes - ie. the contributions were never taxed at the usual 15%.

I think most, if not all, would be history now.

For further clarification, defined benefit schemes are comprised of both taxed and untaxed elements. The untaxed are only the employer (government) contributions.
The taxed are the member contributions made from salaries after deducting tax, often at much greater rates than 15%.
The marginal rates of personal income tax topped out at 60% in the early 80s, although not many would have been paying at those dizzying heights. I wish I had been.

 

[Flying mermaid]

Correct - at standard tax rates, less a 10% rebate (it was formulated as part of the Costello 2006/7 tax-free super changes).

It is because they were 'untaxed' schemes - ie. the contributions were never taxed at the usual 15%.

I think most, if not all, would be history now.

They are history in terms of new members but there are still a fairly large number of public servants in the original CSS and of course an even larger number who will be drawing pensions for years to come and a residual to their spouse. The CSS closed to new members in 1990. The PSS only closed in 2005 and I am pretty sure that was a defined benefit which could pay a pension.

Disclaimer - not having been a public servant bit hazy, but my friends talk about them

 

[rogerkambah]

................The PSS only closed in 2005 and I am pretty sure that was a defined benefit which could pay a pension................

It was and it does.

 

[Cossie]

That's why I can not for the life of me understand why anyone would have opted out of the CSS or PSS when we were outsourced!

As I understand it, new starters if they are permanent employees are now joining an acculation scheme, the PSSap.

 

[OATEK]

I receive a tax free pention from the NSWG defined benefits scheme, as I preserved my pension when I resigned to go to the private sector after 30yrs. I am not sure how they handle the tax on the Govt's component, but it happens long before the pension reaches me. I also use the NSWG's financial advisory service who manage the funds from CGT+salary sacrifice contributions from my 20yrs in the private sector.

 

[JohnK]

Super is a very long term investment. It should be invested at least partially into long term assets not speculative shares

I miss the days of privately managed superannuation. Not a lot went wrong and all profits stayed in the fund.

 

[tgh]

I miss the days of privately managed superannuation. Not a lot went wrong and all profits stayed in the fund

..So ?? That's what I do.
Passive investment , roll with the flow, minimise the costs

 

[Buzzard]

When comparing funds, it's interesting what different funds call "Balanced"
Super investors warned about turbo-charging 'safe' funds to boost performance

 

[Pushka]

Interesting rehash of Labor strategy to cut Imputation credits as of 1/7/2019.
Excess franking credits: Shorten shortchanges millions of retirees

We seem to have cut him off in his tracks by pretty much collapsing our super fund and moving to HESTA. Still have a slab of cash to distribute but have to wait until our tax return is finalised.

I have a question.
If I don’t earn any PAYG salary and receive a franked distribution from our business (after July next year), the IC will pay any tax liable for that distribution but I just won’t get any excess returned as cash?

 

[Flying mermaid]

Interesting rehash of Labor strategy to cut Imputation credits as of 1/7/2019.
Excess franking credits: Shorten shortchanges millions of retirees

We seem to have cut him off in his tracks by pretty much collapsing our super fund and moving to HESTA. Still have a slab of cash to distribute but have to wait until our tax return is finalised.

I have a question.
If I don’t earn any PAYG salary and receive a franked distribution from our business (after July next year), the IC will pay any tax liable for that distribution but I just won’t get any excess returned as cash?

i assume you mean 1) if Labor gets in (pretty definite I would think, but you never know) and 2) if they get the change through (less certain imho). Ok so assuming those two things then yes - you will have a two tiered system where those who can offset the ic against their tax will still get a benefit, but those who can’t won’t. I am sure there will be a lot of restructuring going on to ensure people can get as much benefit as possible from the franking credits. Any distribution you pay yourself (as long as it doesn’t go too high) will be tax free but any excess franking credits are lost.

 

[tgh]

Can't say I have seen any sensible options other than kissing most of it goodbye.
There are always structural machinations available and they usually (imo) result in more harm than good

 

[Flying mermaid]

Can't say I have seen any sensible options other than kissing most of it goodbye.
There are always structural machinations available and they usually (imo) result in more harm than good

There are all sorts of options available - e.g. keeping shares that are long term holds and pay franking dividends in personal names, so the excess franking credits can be used to offset investment property rent. Keep stocks that are more short term and will be sold in the super fund so no tax on any capital gain. It certainly changes the investment thesis when looking at returns on stocks.