Very early on in CV despite contacting various Federal MPs who I've dealt with in the past - not one responded other than with a 'thank you' note. This was before the scheme was announced btw.
Given the constant message on mandatory superannuation:
- Crucial for people to save for their retirement (or permanent incapacity)
- Most tax-effective vehicle for such savings (debateable)
- Safe (well regulated & monitored (ha!) - thanks to ASIC [oops!] Fox in charge of the hen house?)
- Long term best savings vehicle (highest after tax returns)
Also consider that the RBA is & has been pumping cash into the system by buying up Commonwealth Govt Loans (CGLs) otherwise known as Govt bonds.
Why instead of people having to withdraw up to $10,000 from their super pre & post 30 June 2020 (after 15% contributions tax) and if they wish to replace at a later date to get their balance up they will again pay 15% contributions tax - so a net 30% tax rate all up which places them in an equivalent position to someone earning > %160,000 (avg tax rate paid not marginal rate) - did the Fed Govt
NOT allow people
to borrow from their own super account a maximium of whichever is the lower amount $10,000 or 85% of their current balance at the time of request.
The interest rate charged would be paid into their super account (so still a growing balance) at the RBA short term rate + 0.25%, so 0.50% per annum. If people's financial situation gets so bad then there is no difference for them vs the scheme the Fed Govt has gone with. Otherwise vs the additional 15% contributions tax they will have to pay if they can rebuild their balance down the track - they can take 30 yrs to repay the money and NOT be worse off vs what the Federal Govt actually did. Meanwhile as they repay their borrowing (forced savings) it is earning money at a much greater rate than the interest charged - so they're doubly better off. Only worse if Super funds underperformed at below 0.50% per annum over the long term (24+ years).
There is no risk for the Fed Govt.
There is no risk for the Super fund provider.
There is less risk & cost for the person 'borrowing' from their account.
One shadow-minister I spoke with argued very strongly against my idea. Saying this was unfair for Industry Funds as they'd have to come up with the cash somehow, and would incur costs selling the assets. I pointed out that all super funds actually game the system & some actually allegedly pocket this in a little sleight of hand. Perhaps I could provide him with some funds to have a look at to see exactly what goes on. Silence.
How?
There is a buy/sell spread on the units each one of you (who is working) buy each period with your compulsory super contributions. However the period may be only annual - shockingly. Some businesses wait until late June to put the money into the super funds their employees are in - instead of putting it in every pay period. Quite often property developers do this per project. Perhaps an Australian airline does this - worth asking the question for any employee (have a look at your record of contributions by calling the trustee and asking for a dated list of how much & what unit prices the units were issued at for the last financial year. Can be very revealing. For example, when I've suggested this to people in the past their immediate response was that they check their pay slips and they show the deduction.
That the money has been deducted from your wage/salary does not mean it has been paid to your super fund to buy units -and never has!
ASIDE - Now why after over 60 years of superannuation (first funds for workers NOT senior executives etc were the Seafarers Fund & Stevedoring Employees Retirement Fund SERF). Effectively the first industry funds before the term was thought up in the 1980s. Many people on both sides (unions & employers) were murdered in the battle to get these funds set up - may be a 'Underbelly' series on it one day. Amazing how easily someone can fall into an empty hold & break their neck, or slip off a gang plank and get crushed between a coal carrier & the wharf. Even if they'd never set foot on a docked ship in their life previously but worked on Collins St.
Finally a delivery of flowers to the MD of a major shipping line's home addressed to his wife & 3 lovely daughters saw the war end & the negotiations begin.
Meanwhile back at the ranch....
So how do some funds 'play the float' as it is known?
There are always people retiring - which requires you to realise all your 'Super Fund' holdings even if you elect to go into a pension scheme with the same fund provider. So the provider (such as an Industry fund or corporate) 'sells' your units in the Super fund at the redemption price (a margin below the market value including all potential tax liability or Net Tangible Asset price) and either buys units in the pension fund or after some days delay (where they earn the interest) pay you the money. If it buys units in a pension product it does so at a margin ABOVE the Net Tangible Asset price. So the find provider has generated a double margin overall.
However, it gets better (for the fund provider) as every week there is money flowing into it from peoples' SGC contributions - which buy units at issue price (margin above NTA) in the very same fund that you just paid a margin to redeem from. The fund has not had to sell nor buy any assets - so has not cystallised any tax liabilities nor had any transaction costs to provide the assets.
For the pension fund > 94% of cases (other than the few days after 30 June) does it require to purchase assets as its regular pension payments from the fund are covered by the inflows. So again it is earning a double margin for nothing - and both customers are worse off.
So perhaps now you can understand why NOBODY would even acknowledge (in writing that is) what I suggested despite there being no negatives to it for the community just a significant benefit however it would have eliminated a very nice little (not so little) benefit for the fund providers.
Some fund providers may use this to offset 'fees' others create some smoke & mirrors' methods to abide by the letter but not the spirit of the law.
Some fund providers could have internal service companies set up to 'manage' the cash flow transactions on their behalf, perhaps calling them XYZ Finance & Investments. Perhaps they generated $$ millions in profits per annum. Odd though how nobody ever hears about them is it not? Perhaps some even pay salaries etc to people who receive salaries from the fund provider under another company name.
So much for a level playing field, does make you wonder what the definition of 'safe' really means when it comes to super - or is it 'shades of grey'?
Too much that the public never finds out about & the authorities don't want to know....
