I’ve just read the article by Scott Francis on tips on how to reduce your super fund earnings below $100,000 and I hope that over coming months experts such as Scott will think of other suggestions that may be more effective than those suggested yesterday. Just a brief summary on each suggestion:
Contribution splitting makes sense if you’re married and have the funds to contribute, but somewhat useless if you’re single.
Assets outside super are a good idea to a point, depending on your marginal tax rate outside super. Also it could be too late for many super members who have spent years transferring assets into superannuation.
Negative gearing – now this is brilliant idea, not. Negative gearing means you lose $1 to save paying $0.15. Gee whiz, that makes sense. Oh but I hear you say, what about the capital gain. Well, that’s entirely dependent on the asset you buy, when you sell it and whether the profit covers all the 85 cents you’ve lost. Seriously, would any financial planner recommend an investor on a marginal rate of 15% to buy a negatively geared asset?
Stay in accumulation phase – Scott is suggesting we leave the funds in an environment where the current and future means the earnings are taxed at 15%, but we are saving by not drawing a pension from the funds. Beyond making your super maybe last longer, there appears to be nil taxable benefit Avoid tax ineffective investments – I have no argument with this, but to pick on a little issue where you talk about gathering franking credits on dividends. The little trick on franking credits is when a fully franked dividend is paid, you must declare the cash payment plus the franking credit, which means a higher taxable income.
Personally I think some of our so-called financial experts were “snowed” on Friday by concentrating too much on the statistically irrelevant $2 million figure. There will be a lot more than 16,000 hit by this new tax. Imagine the fund with $1 million earning 10%. Quite possible with franking credits, distributions and interest rates when they inevitably rise.
Starpharma stats and Aussie QE
With regard to Starpharma I agree with Brendan Lau (Starpharma’s price slide doesn’t gel). P Values mean little on their own. To make it simple for people to understand, a P value of 0.05 simply means “we are 95% certain”. Likewise a P value of 0.04 means “we are 96% certain”. You get a P value after you enter all your experimental data and compare it to the control group/s. What is important is how the experiment is set up and whether the sample is random and representative enough. If either of these are flawed P values mean nothing.
I also agree with PW about how disturbing money printing is (Letters of the Week April 10). I have often wondered how the Chinese felt about seeing their $3 trillion US bonds devalued by 30%. If war doesn’t break out over it, I think Australia should get on the bandwagon. We could fix our exchange rate by printing the new high speed train.
Happy to pay taxes
John Howard and Peter Costello put the viability of the super scheme into disrepute when they abolished tax on super pensions, which had previously been at a very low minimum. After all, retired superannuants will probably need the resources that only governments can provide such as hospitals and aged care facilities. Unless the budget revenue is secure everybody will suffer. Young taxpayers will get fed up with paying out for retirees who are increasingly getting older and not dying at 65 as they did formerly. Countries like Greece illustrate how greedy non taxpayers can ruin a nation.
I am very happy to pay my taxes as should all responsible Australians.
For more Letters of the Week, click here.