Superannuation Discussion + market volatility

[CaptJCool]

This probably has the best approach to investing

Capture upside hopefully turbocharging it
Avoid downside

How we invest

Our investment purpose is to provide comfortable retirement outcomes for you and your family.

www.csc.gov.au

Of course with international shares you have 3 potential incomes
Dividends
Capital gains on sale share price
Foreign exchange gains

Voila 7-8% pa
However the volatility of year to year performance is reality
Unlike the political posturing over avoiding any recession which is part and parcel of normal

 

[andye]

A question
What are the practicalities of paying an SMSF tax bill to ATO? Won't apply to me until next Feb

Do you draw down the sum from the SMSF and then pay via normal channels?
Or
Do you need to pay ATO directly from the SMSF

I realise there are all sorts of rules around SMSF payments so if the former is it allowed to use a CC, processor etc once you have an approved drawdown? (The ATO site does seem to indicate you can pay by CC)

 

[lakeman]

A question
What are the practicalities of paying an SMSF tax bill to ATO? Won't apply to me until next Feb

Do you draw down the sum from the SMSF and then pay via normal channels?
Or
Do you need to pay ATO directly from the SMSF

I realise there are all sorts of rules around SMSF payments so if the former is it allowed to use a CC, processor etc once you have an approved drawdown? (The ATO site does seem to indicate you can pay by CC)

My understanding is that paying any bills for an SMSF privately is a big no no and can lead to losing tax deductibility for contributions and other complications.
My yearly documents and emails from the ato reinforce that position.
If the tax bill is a div293 which is raised in the taxpayers name ,then you can elect to pay it yourself and hence get the benefit of paying and getting some rewards..

 

[andye]

My understanding is that paying any bills for an SMSF privately is a big no no and can lead to losing tax deductibility for contributions and other complications.
My yearly documents and emails from the ato reinforce that position.
If the tax bill is a div293 which is raised in the taxpayers name ,then you can elect to pay it yourself and hence get the benefit of paying and getting some rewards..

May I ask how you do pay the bill?

 

[lakeman]

May I ask how you do pay the bill?

The trustee should pay the bill from its funds.
For example I ,as trustee , operate a CDIA attached to my SMSFs share account and can use bill pay or direct transfer.(edited for spelling and clarity)

 

[andye]

The trustee should pay the bill from its funds.
For example I ,as trustee , operate a CDIA attached to my SMSFs share account and can use bill pay or direct transfer.(edited for spelling and clarity)

Thanks. Exactly the answer I was looking (though maybe not hoping) for

Ours will be ser up with Macquarie and I shouldn't need to do until Feb 2026

 

[lakeman]

Thanks. Exactly the answer I was looking (though maybe not hoping) for

Ours will be ser up with Macquarie and I shouldn't need to do until Feb 2026

Running an SMSF publication now available | Australian Taxation Office

This publication completes the suite of lifecycle publications which includes Starting an SMSF and Winding up an SMSF.

www.ato.gov.au

This should be useful

 

[Pushka]

Could someone interpret please?

https://www.adelaidenow.com.au/business/treasurer-jim-chalmers-flags-major-changes-to-superannuation/news-story/909aa90cc717878c1cc9e094ee6d0d30

Jim Chalmers has flagged sweeping reforms to how retirees will be able to use their superannuation, as more than 2.5 million Australians are set to retire in the next decade.
Changes to regulations will allow super funds to offer more “innovative products,” such as payments distributed through instalments instead of an upfront lump sum and money back guarantees, with the reforms slated to kick in from mid-2026.

“We are improving the innovative income stream regulations and supporting more innovation in retirement products,” the Treasurer will say in a prerecorded speech set to be delivered at the Association of Superannuation Funds of Australia conference on Wednesday.

 

[CaptJCool]

At the moment there’s not a great choice of what one can do with super when it’s placed into pension phase

Take it as a lump sum and blow it and go on age pension ….

 

[MARTINE]

Could someone interpret please?

https://www.adelaidenow.com.au/business/treasurer-jim-chalmers-flags-major-changes-to-superannuation/news-story/909aa90cc717878c1cc9e094ee6d0d30

Jim Chalmers has flagged sweeping reforms to how retirees will be able to use their superannuation, as more than 2.5 million Australians are set to retire in the next decade.
Changes to regulations will allow super funds to offer more “innovative products,” such as payments distributed through instalments instead of an upfront lump sum and money back guarantees, with the reforms slated to kick in from mid-2026.

“We are improving the innovative income stream regulations and supporting more innovation in retirement products,” the Treasurer will say in a prerecorded speech set to be delivered at the Association of Superannuation Funds of Australia conference on Wednesday.

Aaaah. ‘Enhancement’

 

[drron]

The will be in the detail. but more than likely an "enhancement" QF style.

 

[CaptJCool]

The enhancement I imagine is to STOP people taking lump sums and blowing it on filling their large exempt home with all sorts of hidden treasures and morphing onto the age pension and instead creating multiple varieties of “innovative” income streams so as to keep them in the manner to which they are accustomed and Orf the age pension

 

[SYD]

The enhancement I imagine is to STOP people taking lump sums and blowing it on filling their large exempt home with all sorts of hidden treasures and morphing onto the age pension and instead creating multiple varieties of “innovative” income streams so as to keep them in the manner to which they are accustomed and Orf the age pension

Except taking the max pension from super tax free is probably as good as it gets.

Converting a lump sum to something income producing outside super is really dumb.

Blowing it to fall back on the OAP would be even dumber.

 

[Pushka]

The enhancement I imagine is to STOP people taking lump sums and blowing it on filling their large exempt home with all sorts of hidden treasures and morphing onto the age pension and instead creating multiple varieties of “innovative” income streams so as to keep them in the manner to which they are accustomed and Orf the age pension

My concerns too. Also that when you get to an age where future needs are clear and you want to avoid ‘death taxes’ to non dependents.

 

[Kerrodt]

At the moment there’s not a great choice of what one can do with super when it’s placed into pension phase

Take it as a lump sum and blow it and go on age pension ….

There’s a heck of a lot more choice than this.

 

[openseat]

I hope this does not mean the end of churning pension back into the super fund in the pension phase.

 

[andye]

I'm guessing he's suggesting the option of a very simple annuity-type product with a higher guaranteed income but no surrender value when you die.

I wouldn't touch such a product with a bargepole myself but if you had only a small balance (so you could still claim pension), no dependents and a family history of longevity it might make sense

 

[Gremlin]

Wow. There's a lot of bias and not much fact in the most recent posts.

The proposed changes relate to enabling super funds to offer annuity style products to those in pension phase. A lot of people in retirement want a steady, known income stream, most likely stepping up with inflation.

Whilst the retiree can draw down an income stream, it's the retiree that bears the risk of shortfall. In order to protect against that, retirees generally don't withdraw as much as they otherwise could, which reduces quality of life, especially in the earliest years of retirement. Super funds can't legally offer annuities to those in pension phase, so if you want income certainty with protection against longevity risk, you have to withdraw your super lump sum and buy an annuity in a more tax disadvantaged environment.

Think of it as having the choice to use some or all of your superannuation's pension fund to purchase a defined benefit income stream, even if you weren't in a defined benefit super fund.

There are some regulatory wrinkles that need to be ironed out, but the proposal is fundamentally sensible if you ask me. It's not for everyone, but I think it will appeal to quite a chunk of the retiree market.

There's also a couple of things about reporting performance for funds in pension phase. At the moment the 'league tables' reflect the performance of accumulation funds. Because tax applies differently to accumulation and pension, the net of tax performance of different funds can differ between accumulation and pension phase. So there will be different 'league tables' shown for each. I'm not a huge fan of 'league tables' but I think performance measures should reflect the circumstances of different cohorts, so I'm all for reporting different performance measures depending on the different tax treatments of funds. So again, a fundamentally sensible change in my opinion.

 

[SYD]

Wow. There's a lot of bias and not much fact in the most recent posts.

The proposed changes relate to enabling super funds to offer annuity style products to those in pension phase. A lot of people in retirement want a steady, known income stream, most likely stepping up with inflation.

Whilst the retiree can draw down an income stream, it's the retiree that bears the risk of shortfall. In order to protect against that, retirees generally don't withdraw as much as they otherwise could, which reduces quality of life, especially in the earliest years of retirement. Super funds can't legally offer annuities to those in pension phase, so if you want income certainty with protection against longevity risk, you have to withdraw your super lump sum and buy an annuity in a more tax disadvantaged environment.

Think of it as having the choice to use some or all of your superannuation's pension fund to purchase a defined benefit income stream, even if you weren't in a defined benefit super fund.

There are some regulatory wrinkles that need to be ironed out, but the proposal is fundamentally sensible if you ask me. It's not for everyone, but I think it will appeal to quite a chunk of the retiree market.

Isn’t that already the exception? ie taking from super (lump sum) and putting straight into an Annuity is tax free over 60 yo?

For whatever reason, Annuities have never been particularly popular in Oz .

My mother had one years ago. Dad was a Primary producer - zero super, but sold the “business” after he passed away and used the proceeds to pay off the residual mortgage, buy the max annuity but still just qualify for the min OAP (mainly for the health care card) and some cash leftover.

But yes, making them available from within Super kinda makes sense but I can see why there’s complexity involved.

 

[serfty]

I suspect Superannuation Funds are happier to keep the $$$ under their control rather than give the money to those who have earned it (and paid 15% tax interest process). "We know it's your money but we are better at spending it than you".

I percieve significant lobbying from the "industry super funds".