Letters: Government guaranteed deposits and Monadelphous misery

Government guarantee scheme closure

Robert Gottliebsen’s article, Time to get off the downhill rates slide, suggests shopping around for better interest rate with smaller banks, and states that amounts under $250,000 are government guaranteed. I thought that new account liabilities were closed as of 31 March 2010.

Name withheld

Editor’s response: Thanks for your letter. As per the Q&A section of the government website on the guarantee scheme: “deposits up to and including $1 million and changing to $250,000 from 1 February 2012 will continue to be covered for free by the Financial Claims Scheme. People can find out more about the Financial Claims Scheme from the Australian Prudential Regulation Authority at www.apra.gov.au or through the hotline 1300 558 849.” (see: http://www.guaranteescheme.gov.au/qa/closure.html)

Monadelphous misery

Earlier this year I bought shares in Dicker Data and Monadelphous. My Dicker Data shares are up 22%, but Monadelphous is down by 40%. I had planned for the Monadelphous shares to be potentially a life-long holding. Monadelphous and Dicker Data each individually comprise 6% of my SMSF. Since much of the damage has probably already been done, I think I should probably continue to hold Monadelphous, and just let the dividends help to “heal the wound”. 

I would appreciate thoughts on this one, if someone can share them.

I love the Eureka Report – it’s always a great read.

Paul Cooper

Editor’s response. Thanks for your letter. John Abernethy wrote about Monadelphous last month, (see: Three companies on the growth radar screen), saying that investors will need to be patient when buying MND as the short-term outlook is for flat to declining earnings over the coming 12 to 18 months.

The key to super is simple

I have just read Bruce Brammall’s article, Changing the super changes mentality.  To me, the establishment of a Council of Superannuation Guardians is exactly what is wrong with Australia today. We shouldn’t be creating more departments, councils, advisors etc to manage our lives in areas that we should be looking after ourselves.

Simple rules should be put in place for superannuation and then left alone.

1. Tax super contributions under $50,000 per annum at 10% and over 50,000 at 20%;

2. Tax funds taken from super before age 65 at 15%;

3. There should be no restrictions on the amount of contributions in any one year; and

4. There should be a restriction of 15% per annum for funds removed for those under 65 and $150,000 per annum for those over 65.

Simple rules like this don’t need hundreds of pages of regulations and thousands of people to administer it. A smaller government with less interference is needed.

Name withheld

More super tinkering

It was nice of ASFA to suggest a new tax on lump sum withdrawals from superannuation. As if the government needed another excuse to dip into the honey pot. Just hope Eureka Report voices its strong disapproval to this idea. I'm getting sick and tired of the many threats to move the goalposts.

George Phillips

Discovery Metals fails to deliver

Could Tom Elliott please explain why Discovery Metal’s share price is still at the 18 cents mark when there is a possible takeover bid of 35-40 cents?

It just doesn't make sense.

EN

Tom’s response: The share price is still low for 3 reasons:

1. The bid may not proceed;

2. Even if it does, the DML board may not recommend it; and

3. If the bid doesn't go ahead, DML has already flagged a need to raise further equity capital.

All in all, a good one for the punters (100% upside), but not without risk!

Broadening the tax base

I would like to see some articles in Eureka Report on broadening the tax base, including through the goods and services tax (GST). In such articles, contributors could discuss whether changes in the economy over time have made the horizontal fiscal equalization assumptions inadequate to give a fair distribution.

It would seem to me that successive federal governments have destroyed the integrity of the income tax and company tax and the possibility of getting more funds from GST is much closer than we think.

Name withheld