Australian Super member direct

@Bigchrisb yeah wait until you can switch the assets (up to the transfer balance cap) to pension mode and then no CGT

Out of interest, are there any reporting requirements with respect to deferred CGT in a SMSF?

 

Hi @ChrisP73
You don't have to run tax effect accounting for a SMSF. So you don't even have to acknowledge the deferred liability in your accounts. You can run tax effect accounting if you wish and I do, but you are still totally in control of how the capital supporting the liability is invested and the earnings from it distributed to members. The liability will be extinguished with a journal entry up to the limitations of the cap when a pension is started.

When I get the chance I will run through a SMSF example using tax effect accounting - it will probably be the cleanest way to highlight the issues.

As @Bigchrisb states above - you wouldn't be racing to wind up a SMSF in accumulation mode to realise the CGT obligation. In a pooled fund you are being charged theses tax expenses by way of post tax unit pricing as you go even though as a passive investor you haven't actually triggered them.

I'm not surprised, 95%+ of people working for the super funds themselves would have no idea of how tax accounting and member allocations decisions interact with each other. Of the few that have power to set policy in these areas, the "machine" (size and power of the superfund as in institution and the position and politics of those employed within it) is more important and the greater good they seek to serve is the collective. If you can even get to the right people expect them to be evasive. Your quote below nails the nib of the problem.

 

I remember anomalies between the index returns and the benchmark sonewhere in this thread about recreating VDHG in Sunsuper: Recreating Vanguard diversified funds at SunSuper - Investing

Could these be the result of what we are discussing? These are significant differences in my opinion.

 

Hi @Zenith Chaos - thanks I hadn't seen that. Will review.

 

@ChrisP73: warning before you trawl through the entire thread that it may not explain the reason for the difference in performance between Vanguard and Sunsuper indexes. There was underperformance in every period for every equity index except 1 yr Australian shares. These are the after-tax on distribution figures (Recreating Vanguard diversified funds at SunSuper - Investing):
1 Yr 3 Yr 5 Yr 10 Yr
Sunsuper Int. Shares – Index (hedged) 5.7% 11.1% 9.0% 13.2%
Vanguard Int. Shares Index Fund (hedged) 6.5% 11.2% 9.3% 14.1%
Underperformance -0.8% -0.1% -0.3% -0.9%

Sunsuper Int. Shares – Index 11.1% 12.9% 12.4% 11.6%
Vanguard Int. Shares Index Fund 12.1% 13.4% 12.5% 12.0%
Underperformance -1.0% -0.5% -0.1% -0.4%

Sunsuper Aust. Shares – Index 12.3% 11.6% 7.8% 10.4%
Vanguard Aust. Shares index Fund 12.2% 11.8% 7.8% 10.7%
Underperformance +0.1% -0.2% – -0.3%

Sunsuper Emerging Market Shares -0.7% 12.2% 6.9% 6.8%
Vanguard Aust. Shares index Fund -0.7% 12.9% 8.7% 8.1%
Underperformance – -0.2% -1.8% -1.3%

Sunsuper Aust. Property Index 23.3% 9.3% 13.4% 13.8%
Vanguard Aust. Shares index Fund 24.7% 9.5% 14.2% 14.6%
Underperformance -1.4% -0.2% -0.8% -0.8%

Sunsuper Diversified Bonds Index 4.9% 2.9% 4.4% 5.4%
50/50 Vanguard Aust Fixed Interest / 5.3% 2.7% 4.3% 4.9%
Vanguard Int. Fixed Interest
Underperformance -0.4% +0.2% +0.1% +0.5%

Sunsuper Balanced – Index 8.1% 8.2% 7.8% 9.2%
Vanguard Growth Index Fund 8.7% 8.6% 8.0% 9.9%
Underperformance -0.6% -0.4% -0.2% -0.7%

 

Does anyone else know/heard this, doesn't seems to make any sense for AusSuper to see and create CGT event to move to Choice Income account when moving to retirement.

 

Read the PDS: https://www.australiansuper.com/-/m...t-disclosure-statements/pds-choice-income.pdf

Seamless Transfer to Choice Income
Members can maintain their Member Direct listed
investments when they transition from super to
Choice Income without triggering a tax-event, or
incurring brokerage costs, by requesting a Seamless
Transfer to Choice Income. Certain restrictions
may apply.
You can learn more about Seamless Transfer
at australiansuper.com/MemberDirect
Refer to terms and conditions at
australiansuper.com/MemberDirectTCs

 

Actually I have read that, I understand the Member Direct scenario, I was thinking more about the CGT for the pre-mix inverstment options, apart from the deferred tax liability which is common on all the pooled super funds, is there any different with AusSuper when I move my funds from Super Account to retirement account?

 

That is not the advice I got on the phone......

 

My understanding is the DTL is the CGT, and it will be reflected in the unit pricing.

What else would the DTL relate to? Tax on income & expenses will be taken up as they are accrued/incurred.

 

Yeah if it only DTL, it will be common on all the pooled super funds so I guess there wont be any different if you are with AusSuper or any other super fund

 

Maybe, maybe not. Might depend on each fund's policies and approach to allowances for DTL and the behavior of other members in the fund which influence this and actual tax payed by the pool. But yeah, unit prices are calculated to make allowances for tax (including cgt across the fund - or maybe the option), so your report balance (in $s) is the balance you get if you leave. Roughly equivalent, maybe...who knows... the funds won't tell anyone.

 

Not exactly - it's an estimate/allowance for potential future cgt at the collective level only. It's not actual tax.... yet.... or some - maybe ever, maybe. So murky.

 

But it's based on the asset value at the time. So yes, it will probably change daily, but there is a basis for that number.

 

Thanks @Zenith Chaos

Both might be after tax but the vanguard after tax is unlikely to include any CGT based on full liquidation.

The sunsuper unit prices will include an allowance at the pool/option level for CGT based on full liquidation.

One way to possibly get a better baseline comparison is to compare the vanguard ,0% tax rate after tax performance with the pension mode unit prices from sunsuper index options. I'll give it a go when I have time.

 

.
As long as your ok with that, but ..@dunno explains the concern very well here
Australian Super member direct

 

See what I said earlier - the ability to NOT incur CGT when going from accumulation to retirement is dependent upon the ability of the overall entity to do an 'in-specie transfer'. And if you were in managed funds it'd be a buy/sell spread you were trying to avoid.

If the particular fund can't do this, it may simply be because they haven't built the function in the registry system (the thing that contains all the information) yet, because they went to market with an offer heavily based on accumulation funds and figured they'd get around to the problem of people transferring into retirement at a later date - and to date they haven't. These products are relatively new.

In the superannuation world, of which I'm part, you often build new products without everything you want... "often" - perhaps I should say "always" - and then scramble to build the remaining stuff later, as and when funds are available to do so, and that's often based on commercial realities of whether enough customers are screaming for it, or there's feedback that people don't want the existing offer the way it's structured. It could be that simple an answer, rather than being a deliberate strategy by Australian Super.

As has been pointed out above, would your average person even know what to ask? Never underestimate what people don't know about superannuation.

 

Well, let me tell you if you think I know nothing I can assure you I know Sweet FA. So there!

 

I don't think there's any fairer way to do this, do you? Otherwise the last suckers in the fund wear all the tax cost of previous members leaving.

And the super funds will be audited, so there probably is a reasonable basis for how the number is calculated & allocated.

As to the Sunsuper bonus - I'd suspect it would be the members with balances over $1.6m who are wearing a disproportionate share of that.

 

Isn't that the truth. I'm starting to feel despairing that I have opened pandora’s box. There is so much mis-understanding, confusion and people talking different points in this thread already.

The in-species transfer’s you refer to only effect whether a fund can offer a switch capability from their member direct options to the retirement pension funds. As far as I’m aware those offering member direct options also have switch capability to the income funds. Not all funds though offer member direct options, that might be because of the system problems you speak about.

The real problem for passive investors lies in the DIY Mix index options where unit price allocation is after tax. This thread topic is Australian Super members direct. Members direct (from any fund) with individual tax treatment is far superior for passive investors than DIY pooled options IMO. I had a look at the Sun Super thread referenced (you see it lots of other places too) and I see lots of people diligently trying to minimise expenses whilst inadvertently selecting options that because of the tax structure could be detrimental far in excess of the fees they think they are saving. I hope in time I and maybe others that catch onto this elephant in the room can explain the issue better.