Why is superannuation so complex?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Zenith Chaos, 20th Mar, 2019.

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  1. Zenith Chaos

    Zenith Chaos Well-Known Member

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    The most complex super system in the world - Cuffelinks

    Why can't it be simpler? I just want to:
    1. Choose my investment option
    2. Contribute my money
    3. Receive my money when I hit retirement age either as a lump sum or periodic payments
    4. Get fair tax treatment

    What's all this crap about fund, contribution, guarantee, concessional, non-concessional, SMSF, accumulation, pension, salary sacrifice, bring-forward rule, excess contributions tax, preservation, transfer balance cap?

    I think the government just wants to keep us mentally active as we get older. Yeah, that's it.
     
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  2. 738

    738 Well-Known Member

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    so you can get all as lump sum, spend it all in 2 months then go on pension?
     
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  3. kierank

    kierank Well-Known Member

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    I believe I have used all of those options to my benefit. Thank goodness they were there ;).

    To me, it is a bit like transport. Some people enjoy riding a horse. Me on the other hand, would way prefer driving a fully optioned up prestige car :D.

    Each to their own.
     
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  4. D.T.

    D.T. Specialist Property Manager Business Member

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    Its pretty obvious, it's invented by the government which is synonymous with complicated and bureaucratic.
     
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  5. MWI

    MWI Well-Known Member

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    Then there are Reserves, LRBAs, and so on....perhaps they wish to make it so complex that nobody will bother with SMSF, just leave it to retail or industry funds, then the compulsory saving system will grow to a huge pie and then the government can decide what share they can take out of it when they need it...very smart indeed!
    I read somewhere that wealth in Australia is held around 50% in RE and 20% in Super, so I guess that's where the constant changes will occur?
     
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  6. Lacrim

    Lacrim Well-Known Member

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    Just wish it could be accessed a little sooner like 50/55.

    It's our money at the end of the day, and we pay enough in taxes outside of it. It's not my fault the Govt mismanages the revenue it gets. End of rant.
     
  7. MWI

    MWI Well-Known Member

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    Totally agree, IMHO if they provide us to have control over our Super investments and those investments are sufficient enough for us to retire, why age is the benchmark then?
    I have friends who are self-sufficient, no pension from govt, yet live off their investments at ages say, 46 and 58, not from Super though.
     
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  8. SatayKing

    SatayKing Well-Known Member

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    Sitting in the gorgeous Sun, munching on a sandwich, nice thermos of coffee and looking out over the ranges. Peaceful.

    So what's the problem with super?

    Actually I don't sweat about. As it's gone through various changes I've adapted along with it. Now my attitude is if it changes again, I'll shrug the shoulders, throw the matter before the FP and say "Do your thing, dude (or to be PC, dudette.")
     
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  9. SatayKing

    SatayKing Well-Known Member

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    As to why the complexity, maybe it started with this and then it went all downhill from there.

    Magna Carta an introduction

    All the in's and out's can be utterly infuriating. It's a mess as far as I'm concerned and I think it'd be very easy for someone to inadvertently fall foul of the legislation. Not because of any intention to do so but because it is so bloody complicated. And if it's bloody complicated, with all due respect to the legal people, to get rid of their involvement and save cost simplify the thing. Won't happen though of that I am sure.

    Years ago I had to deal with a legal section. A mixture of people. One old stager was really laid back, saw I was totally over my head trying to understand, leaned back in his chair and pronounced: 90% of law is not about people. It's about who owns what and who owes what to whom. The job is sometimes to try and prevent others getting their hands on what we have and other times trying to get our hands on what they have.

    Sort of encapsulates superannuation :)
     
  10. neK

    neK Well-Known Member

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    Government:
    People need to save for their retirement
    Hmmm, people aren't saving as much as we would like. Lets introduce some incentives
    Hmmm, our budget isn't as good as what we like, lets cut back some of those incentives, but we don't want to annoy our voters, so lets scale it back and introduce some limits
    Damn, those limits weren't enough, lets limit them some more.

    And that boys and girls is how a simple solution became ridiculously complex.

    Note: They did well in 2007 with the changes, but the successive government f'ed it up again.
     
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  11. Perthguy

    Perthguy Well-Known Member

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    What you have to realise is that super is trillions of dollars in a low (or no) tax environment. Compare how much tax revenue the government would get if those same funds were outside super vs inside super where the tax rate is 15% or 0%.

    Super seriously dents the government's tax revenue. So, they want people to self fund their retirement but not put so much into super that they crash government tax revenues.

    When you see all those complex terms and concepts they all really boil doen to protecting the government's tax revenue stream which means putting limits on how much people can put into super.
     
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  12. Scott No Mates

    Scott No Mates Well-Known Member

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    They've overcome that by mandating a fixed % to come out annually, gradually at first then in larger chunks. This brings money back into a taxed environment and may reduce other payments.
     
  13. Phar Lap

    Phar Lap Well-Known Member

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    Lump sum me as soon as I can get hands on it!
     
  14. Perthguy

    Perthguy Well-Known Member

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    True, but only if people don't put too much into super in the first place, which is what the contribution caps are for. Super is already 1.5x GDP and growing exponentially.

    It is a real issue for government to try to balance the amounts going into and coming out of super against tax revenue. That's why the system is so complex.
     
  15. Scott No Mates

    Scott No Mates Well-Known Member

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    How does the gummint expect a couple to live off the 5% mandated drawdown (tax-free) on their $1.6m x 2 capped amount?

    A school leaver (age 18), contributing $7,500/yr with a 5% after tax return will only amass $1.264m over 49 years of work (assuming the contribution stays constant, rules don't change, pigs might fly, cap/retirement age doesn't change etc). Not a bad sum for only a $367,500 input over a lifetime.
     
  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Its complex since its the best wealth creation and tax avoidance scheme in the world. But its important to remember its around 8.6% of a workers total lifetime remuneration. With a huge compound growth benefit.

    $2.5 trillion dollars is always going to be complex to make it attractive, make it unattractive and to limit abuse.
     
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  17. Perthguy

    Perthguy Well-Known Member

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    Frugally?

    Realistically though, how many people will retire with $1.6m x2? The current average super retirement balance is currently $355,000, which is why the government is providing incentives for people to contribute more to super... just not too much.

    I don't disagree. I'm not saying super is bad, which seems to be how you are taking my comments. I am just saying the government needs to manage it for the factual reasons I have outlined above. The result of the management is a complex system. Which, incidentally, is also not a complaint... merely an observation.

    Personally, I am tipping into super as much as I am permitted to. I think it's great!

    I know they will change the rules but we can change our game. It's complex but not impossible to understand
     
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  18. SatayKing

    SatayKing Well-Known Member

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    :D

    Yep. It'd be tough life. Gees, I'd have to earn over $190k pa to get $128k after-tax amount at age 60. Just so very cruel.
     
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  19. bashworth

    bashworth Well-Known Member

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    Super is as complex as you want to make it.

    I can do all of 1-4 through my Industry scheme (Vision Super) for a very reasonable charge, including changing investment options at no cost on the day I decide to change.

    They look after the complex stuff.

    Simples:cool:
     
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  20. Scott No Mates

    Scott No Mates Well-Known Member

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    Of course we'd have to live frugally if we had to rely on that. That's why we invest outside of super as well.

    I'm in agreeance with you @Perthguy - first they made sliced bread, then the concrete pump, then the dishwasher and after that it was super. I hit the cap last year and will continue to do so when I can.
     
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