Government Retirement Income Review

Yes that's certainly what I understood too. Just thought it was interesting that Keating seemed to profess a different view in 2013.

 

Keating’s original plan included a compulsory 3% employee contribution as well as the compulsory employer contribution.

That extra 3% would make a big difference to retirement super cheap income, but seems to have been conveniently forgotten by both parties.

 

Keating however didnt forsee the rampant changes made by Costello that made super the second best tax avoidance scheme in the world by allowing UNCAPPED tax free income and UNCAPPED wealth. More rational thought has since decided that the tax outgoings from generous tax outcomes need to be limited to avoid a budget blow out. Whether $1.6m caps and $25kpa caps are too high or too low are likley to be considered in the review.

The $25Kpa cap is actually poorly supported by many older workers. Many taxpayers dont elect to salary sacrifice and build super when they could. And those that dont often moan about their low super. Same with those who rent and dont buy. They always argue they cant afford to. Those that do use super salary sacrifice typically do well financially when they retire as do those who invest in property. It reflects a level of engagement with retirement wealth. Personally I would love to see non-cash wealth be permitted to be added to super eg transfer a investment property to a smsf etc. The issue of maximum limits has to be a factor in some way

 

That little lurk has now been limited by restricting the amount transferred to the tax free allocated pension phase to $1.6m, with its compulsory draw-downs. Anything over that remains in the 15% tax accumulation phase of super.

 

No issue with the $1.6m cap on allocated pension or the 15% tax on accumulation income, but I think the yearly limits on concessional contributions are a disadvantage to some particularly people that have been out of the workforce for one reason or another or weren't able to take advantage on consesional contribution earlier in their life. I understand there are catchup provisions available now but they have significant limitations.
A lifetime cap on concessional contributions might, for example, be more equitable.

Just a thought.

 

What i would like to be discussed:

ATM, once you reach retirement age, you can withdraw ALL your super, blow the lot (cars , cruises anyone?) and then get on the Old Age Pension...

Why don't they consider restricting entire withdrawals and instead have an "annuity" like system of withdrawal? And as our super system matures, the asset test should see many of us not making the cut for the OAP.

That should start the ball rolling and take the stress off the govt coffers ...i read something like one third of our govt budget (read: the taxes we pay) go into supporting our pension system. Then more money for schools, roads etc

 

You can also cash in assets, withdraw most of your super, leaving just enough to slip under the asset test limit, and buy a mansion for a PPOR and then go on the full pension.

 

I had a friend who did this very thing; her mother in law who came from old money passed all her money to her 3 sons; the eldest inherited the money and bought a VERY luxurious house on the upper north shore ; she lived in a separate wing AND CLAIMED THE FULL AGE PENSION Go figure!

 

In this lady's case, she did not inherit anything. She would be either a private house guest or the wife of the man who bought this "home". I would like to see the private home above a certain value included in the asset test.

 

Is not always capped !

New members cant exceed $1.6m at all.
A small business CGT amount can increase it
A substantial gain in value on the assets used for a $1.6m can also push it up. (Many dont know that)

Strategy - Ensure high growth potential investments support the pension NOT the accumulation balance. If the $1.6m property supporting a $1.6 pension doubles the member has a $3.2m cap !!

 

If she gifted the money to her son, she would have had to wait 5 years but then, yes, she could have gone on the full pension. Sadly, all legal.

 

I interpreted the statement that the friend is living in her husband's new mansion. The husband inherited a stack of cash from his deceased mother (who passed away).


I see now - the friend is the Mother in Law and she is now living in her eldest son's mansion and she claiming a full pension. Yes, she would have had to wait five years.

 

True. just make sure gifted 5 years before pension age is the sweet spot. Not something for me - beholding to a child and their partner is a risk I could never take. I'm a control freak

 

There are far too many stories of these arrangements turning sour and the aged parent left out in the cold.

 

Especially when so many people seem to post asking about the very issue. Not the parent posting. Giving away money is never a financial strategy.

 

If I was that lady, I would far prefer to have plenty of my own assets and income and be totally independent, than make all sorts of bargains and limit myself to the limitations and restrictions of a "pension".

 

Karma's a ***** eh? Try and screw the taxpayer and you get screwed yourself. Probably serves them right

 

Many of these arrangements are instigated by the children greedy to get their hands in their parent’s money.
When it turns sour, it is the vulnerable, broke and elderly person who suffers. Never the one who benefited, by “screwing the system”.
Very sad.

 

Any surprise there? If you know Super is constantly reviewed, changed, modified and adjusted by the ones in power why would anyone elect to place funds into such an environment?
Many businesses require some stability in laws so they can plan short, medium or long term goals, similarly we wish to adopt similar goals for our Super, BUT there's no trust, honesty or transparency what will happen to our funds.
Who would in their right mind tie up their funds early in life not knowing what will happen to them say 40 years later, I for one wouldn't!
I tried this and have been burned, making long term goals but needed to change the set of my sails, as those winds keep blowing and changing directions constantly!

 

We did.
Took advantage of salary sacrifice limits, contributed as much as we could.
Now very comfortably retired on an extremely generous tax-free income.