Super cash grab averted … but don't relax just yet

PORTFOLIO POINT: The Superannuation Minister Bill Shorten has made a surprise backdown on plans to rip special concessions for superannuation savers … but the story is far from over.

We don’t believe we were solely responsible at Eureka Report for scuttling what looked like the worst attack yet on superannuation … but a radical backdown today (October 10) from the Gillard regime on plans to penalise superannuation is a useful victory for all investors.

Our lead story this time last week in Eureka (click here) received wide attention and prompted literally hundreds of emails from our subscribers.

One of the outstanding lessons we have learnt over seven years at Eureka Report is that NOBODY represents Australian superannuants – especially almost 1 million investors who now actively engage in DIY funds. Sure, there are a range of professional bodies that sound like they do … but on close inspection these organisations turn out to represent industry professionals.

That’s why Eureka Report moved fast to let the world know just how unfair it would have been to strip concessions from the very people who have worked hardest to avoid being a burden on the state.

As you’ll see from the selection below (from the 250 responses we have received so far) Eureka Report subscribers have a remarkable range of concerns and fears over our current superannuation system … but they all have one thing in common, they appreciate a system created by both the Keating and Howard administrations and lately threatened by the Gillard regime. Moreover, we remain on red alert for any attempts by the government to ransack superannuation as it searches for funds to replace missing billions from Treasury’s over-ambitious commodity forecasts.

As Bruce Brammall explained last week (click here) after Superannuation Minister Bill Shorten warned that ‘nothing was off the table’ in his plans to review superannuation, the financial planning industry had been bracing for change. At its most severe those changes might have included taxing pensions for the over 60s or cutting the concessional contributions to super yet again (they have already been pared back to an unreasonable $25,000 per annum).

Bur for the moment those cutbacks are postponed (October 10). Minister Shorten has let it be known that he will not be attempting any major change to super in the coming months. Earlier reports were that the government was going to introduce superannuation cuts in the forthcoming mini-budget. Now any significant cuts are not expected before next year’s May federal budget, and since this will be very close to the next Federal election the specific issue may simmer for some time.

It must also be said that very sensible comments from key Labor figures such as former ACTU secretary Bill Kelty and former superannuation minister Nick Sherry to that effect that super should be ‘left alone’ have been important in the latest backdown.

But that is not to say the superannuation system is safe or indeed to suggest for a second the system is as successful for savers like you as it is for institutions who pull in $18 billion in fees from the system every year. In the weeks ahead Eureka will be developing some of the issues raised by this latest threat to superannuation … in the meantime we present (an edited version) of some of the most interesting responses from our subscribers below … for the full suite of responses please click here.

Time to speak up

I am a self-funded retiree and I am joining Eureka subscribers in objecting to targeting superannuation for a tax grab in order to help the government fulfil the dubious political objective to end this financial year with a surplus. After the massive waste of taxpayers' funds in harebrained schemes such as NBN, BER, pink bats, cash for kids, and others, it really hurts that the government – to cover their own gross financial mismanagement – has the audacity to contemplate penalising us through an attack on our hard earned and saved retirement funds.

We are the generation of people who often had to fund their own education (before the Whitlam years), people who worked hard all their lives to earn decent salaries. Salaries which were taxed and taxed again to provide the cash needed for all those who were too lazy to get education or work hard for themselves and who are now drawing government pensions.

In addition, a lot of SMSF members (who earned over $80,000 p.a., if I remember correctly) would have for many years paid surcharge tax of 30% on their super contributions, before Peter Costello reduced it to 15% in line with the rest of contributors. They have already been taxed enough.

But what angers me most of all is that some echelons of our society (such as the public service fat cats, judiciary, politicians etc.), who make the calls, exclude themselves by law from limitations to and surcharges on super contributions. Why have we got one rule for us and a different rule for them? Nick Sherry is spot on to question this reality. How can we, the voters, allow them to get away with this?

With quickly reducing earnings (and thus income) from superannuation investments due to the plummeting interest rates and flat stock market, any further attack on income through additional taxation would take many self-funded retirees to the brink of bare subsistence means. Once we also constituted "the working families", but we never received any benefits for our children. Now we are the forgotten people. Unfortunately, as mentioned in Eureka Report, we are generally not Labor voters and therefore don't matter. It's time to speak up.

D Rawson-Harris

A younger perspective

I am 31 years old and was considering entering into a SMSF this year.). Being a Eureka Report subscriber I have been very much interested in recent articles regarding the possible moves by the current government to tax super and SMSFs. I was considering salary sacrificing to make up a higher balance to run the SMSF, but maybe this is not a good idea now.

I'd still like to manage my own super, because as it has been written about recently in Eureka, I am just about fed up with watching my super deteriorate and not grow. I know I can do a better job investing it myself.

With the government hungry for a surplus and eyeing off super, I keep questioning where is the incentive for me to invest more? I have held off putting $25,000 of my income into super because well, if the government ends up taxing it anyway, it’s better off having it outside of super which is locked away.

Outside of super I have properties, shares and other investments, and am disenchanted not only by the potential for the government to tax super further, but also by their short-sightedness to kill other golden geese, i.e. booming mining investment in this country. It's all interconnected. A Cichello

New election masterpiece

Peter Costello's election masterpiece is the obvious choice for responsible tinkering with super; there is no good reason for earnings within super to be tax-free. Contrary to what most beneficiaries suggest, I think the sooner that the number of taxpayers is returned to a sustainable footing for the long-term, the less likely the government will be voted out.

Indeed, for the current government, such a brave move could be easily spun as its own election masterpiece.

T Brain

Time for a lobby group

My husband and I have an SMSF which is nothing like the multi-million dollar ones the government talks about. We are an average, hard-working Australian couple that would like to be able to comfortably retire without insufficient government handouts. For years we saved and made the legal contributions but more and more we are getting the feeling that maybe superannuation in Australia is truly living up to the expectation of the people that resisted paying into super in the first place. It seems that this government is keen to destroy this country and the will of people to go out, work and be self-sufficient. Our politicians are obsessed with a surplus that we do not need.

I believe all DIY investors should form a lobby group and maybe the Eureka network would be an ideal thing for us. I for one am sick to be told by the government how I should live, save (or, as they push, no longer save, as we will shortly be struggling to survive in a high tax, no benefits and no jobs environment) and accept that our politicians get all the good perks and behave in a very bad manner.

I am looking forward to hearing how others think about this and what we all want to do to stop the money grab by this incapable and demented Labor government.

M Portier

Risking votes

I have spent my adult life supporting political parties in Australia that have been committed to social democracy and social justice.

But I have also worked hard and taken huge financial risks, with my family, to build businesses that have employed many fellow Australians. Those risks eventually paid off and I was financially rewarded for them.

Encouraged by our political leaders, I saved and invested those rewards for my retirement, and established my own SMSF where most of my assets now reside. Those assets were brought into my super fund some years ago by bringing forward very large tax payments at the time of transfer.

If this current Labor government decides to re-tax SMSFs and pensions, I would view it as an act of very bad faith and they would lose my support (read vote) for good on that issue alone. Labor: be warned!

B Board

Super should be sacrosanct

I have just read, with dismay, the article about Bill Shorten's intention to raid our self-managed super funds. I am a small business owner and manage my own fund, like probably most of the other small business owners in Australia, because I do not trust the large superannuation funds to give me a decent return. It is hard enough to growth a business and pay employees’ salaries and save for the future without the government, of any flavour, wanting to dip into our money. All politicians have a privileged position where superannuation is concerned; we don’t see them put their hands into their pockets – no, they would rather rob all of us!

I simply cannot understand the obsession of balancing the books at the next budget. If it takes one more year – who cares – no one that I know does.

Superannuation should be sacrosanct and I do not believe it should be taxed at all.

R Herrick

Facts to help the fight

Like so many others running their SMSFs, I worked and saved hard to live a decent retired life. I paid taxes and, now in retirement, we are supporting ourselves with our SMSF in difficult economic times, and we do not draw on the welfare system.

It is with grave concern that we hear of regular attempts to tamper with a good system. Like others, I see Eureka Report as a bastion who can articulate and fight our cause. Please continue vigorously along this path.

When I try to articulate our ‘cause’ I am aware that there are many issues and facts that I am not fully informed about. If I were to engage a politician, I would not be able to present a convincing argument based on facts. For example, it seems that public servants and politicians have special privileges and are excluded from the proposed damaging changes.

Robert Gottliebsen mentioned some of this recently. It defies belief that Treasury officials and politicians can be so hypocritical as to raid the super piggybank while keeping their own (disproportionate?) benefits safe.

My requests are:

1. Please have someone compile the case for protecting our Super (including comparisons with the public service and politicians benefits) and paste it on a permanent section of the Eureka Report where we can refer to it time and again. As new threats emerge and circumstances change, this document can be updated.

2. When the time is appropriate, please guide and encourage us to write to our politicians and media. This is where we need the facts in the first point.

3. We must challenge the view that we are the few very rich (that deserve to be fleeced). It is amazing that these views are propagated by politicians and public service officials whose salaries are by no means low (and with secure retirement entitlements). Those who pander to the politics of envy will find that ‘tradies’ and ‘fluoros’ are doing very well financially (good on them), and they are no longer the safe fodder for this kind of politicking.

André Morkel

A Labor voter’s concerns

I appreciate your continual highlighting of the current difficulties for SMSFs. I spend many hours chasing yield and decent sharemarket returns – I will not be able to really retire as this work will be ongoing. Like many, the size of our super fund has been hit by the financial crisis, declining property values and declining interest rate yields. Consequently our expected income has also fallen and we will likely have to draw on our capital much earlier, with, as you point out, the possibility of it running out. It has been quite distressing to find that the current government may add to these difficulties.

Whilst as a Labor voter I appreciate the government's need to fund programs for the less able, I agree that this should come from all superannuants, including highly paid public servants and politicians. I believe that politicians who have held office prior to 2004 have an overly generous superannuation scheme. Julia Gillard needs to consider what she plans to contribute rather than look only to others.

D Sorensen