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EYE-BALL Guru on – Superannuation – the new great big Australian rip-off!!!

October 25, 2011
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Title:
SUPERANNUATION – the great big Australian rip-off!!!
Mr Bill Shorten – [The ‘Sphincter’ within the Australian Labour Party and everything that represents what comes forth from such an orifice] – was interviewed during last Sunday’s – [23rd Oct] – ABC Insiders  on Superannuation among other matters and its need to pay for the retirement of aging Australians.

Superannuation:

Mr Shorten – where did you get your Economics degree – theory as opposed to the practical makes for flawed debates.  You even went so far as to disparage the US over the wisdom in Australia’s early 1990’s compulsory Superannuation plan. He made light and boasted about Australia’s A$1.3 trillion in superannuation savings over the last 20 years because of this compulsory Superannuation legislation. He even made comparison that America would have US$13 trillion to off-set their National debt if they had of done as Australia did 20 odd years ago.

It was the slime that slips for the Sphincter’s hole talking in a throwback way – Mr Shorten was but a blimp 20 years ago and you would think from the way he spoke – he was the master strategist who made some contribution to the plan.   Flying on the then PM Keatings coat-tails and his Superannuation gift to middle and low-income Australia does not cloud his dark droppings as he tries to find a place to make his mark.

Insider’s Presenter Barrie Cassidy’s interview angle was blunt and very disjointed – his questions and the answers that came forth offered so much fodder if Cassidy was listening.  But alas, as so often happens journalists these days do not think on their feet – they have a script to follow at their Directors urging  and this was no different.

Cassidy should have changed his tact if he understood what he was being offered from his mark – once Shorten had opened the Superannuation door – the follow-up questions should have prodded and scraped his bowels for all the hidden truths behind the Government’s ‘tax’ revenues from this Superannuation savior. [See chart below for Australian Tax office revenues for Superannuation Taxes.]

It is known that the new Superannuation was a godsend in forward thinking – but the hidden sting was the up-front 15% tax grab that took from the individual and funded the Governments thirst for new income streams.  The numbers reflected in RBA statistics show how the Government has siphoned from the Superannuation windfall – including the 15% ‘up front’ tax – as opposed to the previous 30% ‘retirement’ tax levy – and is now a matter that the Government relies upon to fund itself.

The reality of the ‘up-front’ impact of this tax collect is lost in all the Political rhetoric – not only has this 15% up-front tax not accrued within the individual Superannuation holdings – but it has allowed the wealthy to contribute A$ million’s into their own personal super provisioning to avoid paying the salaried higher rate of taxation.

Examples of Superannuation Abuses:

An example – this is a true story – a father told his daughter when she went to work at a Merchant Bank to take er salary as 100% ‘salary sacrificed’ and contribute it to her super.  The father promised to cover her living costs and provide for her else wise as she required.  Within three years her superannuation fund was able to but her a home that she then rented and so the growth in the Super Fund was assured.  Yet the tax paid remained at the 15% whilst the poor were paying more than double the tax rate.

This is just one example – another was the wealthy individual working for a Company and was due a large end of year bonus – rather than pay the high marginal rate of tax – he put it all into his self-managed super fund – he then negative geared the fund to make it a non-complying fund and used the expenses of upgrading the rented properties to improve their capital value – once he was done and sold the properties and repaid the loans – the fund once again became a complying fund and the 15% tax applied to the capital gain on all the properties.  Perfectly legal – yet because of his wealth he was able to avoid paying due tax liabilities that not so wealthy persons would have to pay.

These are just some of the loopholes Superannuation is being used for to make the wealthy wealthier.  Prior to the 1992 legislation – the wealthy were means tested and if their assets were above certain thresholds – they were not entitled to a pension.  They were required to live off their wealth.  What this Superannuation rort hs become is not what it was intended for and The Sphincter and his pals are all in the middle of the gravy train that is the Federal Governments Superannuation scheme.

Late in the Howard/Costello Government reign [see chart above] – you can see the topping up that happened as people who though Howard was going to get rolled.  The high income earners rushed like ‘mad-monks’ to stash the allowed annual $1 million a year to superannuation – in one year alone some $12 billion went into self-managed super funds to take advantage of the Governments offer.

This level of contributions made a mockery of the Superannuation pretence and the Governments policy to use the 9% of earned wage increases by workplace employees towards a  salary sacrifice to fund their future retirement needs.  The wealthy were allowed to poke their snots into the trough as well – shame – shame – shame … and this Government has done nothing to squash or penalise these wealthy parasites for their greedy slimy efforts.  Where has the true Labour Party gone – who is there to protect the worker – is it a case that Labour Party values have elevated themselves to upper-middle class levels?

Share Markets:

The Sphincter’s other gaping hole from whence crap flowed was when Cassidy failed to exploit comments made about share markets and the value they offered.

It was surely a novice’s comment – this is the Australian Assistant Treasurer and he favours the benefits and privileges afforded to shareholders over all other Australians. He does not understand what he does not understand.   His feeble knowledge of Markets and how they operate is never exposed by journalists – they are just as dumber or even dumber when it comes to understanding the motivators that drive Bulls and Bears.  You would think that from the environment they live in – where whatever the cost for a story might actually teach them something about the instincts needed to follow the Markets – they might be able to think on the feet when an opportunity presents itself.

This story is for another day – back to the Superannuation Rort …

Firstly lets address this Superannuation question.

Let’s assume a working career of 40 years with salary paid fortnightly – also assume a constant yield of 10% on the superannuation contributions and the interest dividends are paid fortnightly – and let’s use the 9% superannuation levy against a gross fixed income level of $50,000 p/a over the 40 year work employment period.

This produces an end of term SUPERANNUATION Fund value calculation as follows:

  • Example 1: =FV(10%/26,40*26,(9%*50000)/26,0) = $2,393,137.85.

[That is to say that if all the 9% contribution went into the superannuant’s holdings – and was retained – that $4,500 p/a contribution – [i.e. 9% of $50k] – with a face value of 40*$4500 = $180,000 – becomes almost $2.4 million when compounded at 10% and paid and invested fortnightly.]

Now – lets apply some reality – the Government takes 15% of the 9% contribution up front – they take another 15% at the end of the annuity all under a ‘tax’ levy.

Remembering that up until the 80’s retiree’s were generally ‘means tested’ – and the wealthy were not entitled to receive a pension.  Some were entitled to a part pension depending on their asset levels – this is still the case today.  Yet now – the superannuation rort does more for the ability to reduce salaried and wealthy people alike by giving them options to reduce the salaried ‘tax’ paid then it does for the poor.   This is criminal in the way the law is applied – and the Government has been too slow to close the loophole.

If you are on welfare there is no superannuation payment into any retirement fund if you draw a disability or other welfare payment – nor any holiday loading of time off allowed.  If you earn a minimum wage – say $25,000 p/a – the same calculation as above in Example 1 yields you A$1.196 million less all the taxes etc.

  • Example 2: =FV(10%/26,40*26,(9%*25000)/26,0) = $1,196,568.92

When the up-front 15% is applied to the calculation over the course of the employed period i.e. 40 years – the end result becomes the following:

  • Example 1: =FV(10%/26,40*26,((50000*9%)-((50000*9%)*15%))/26,0) = $2,034,167 – a ‘tax’ earn of $358,970
  • Example 2: =FV(10%/26,40*26,((25000*9%)-((25000*9%)*15%))/26,0) = $1,017,183 – a ‘tax’ earn of $179,485

If we were now to apply the 15% retirement or lump sum tax levy when the working career is finished – the total up-front and lump-sum taxes collected by the Government equates as follows:

  • Example 1: =(FV(10%/26,40*26,((50000*9%)-((50000*9%)*15%))/26,0))*15% = $305,125 – or a total tax collected during the 40 year term of $664,095 against a salary sacrifice of =50000*9%*40 = $180,000
  • Example 2: =(FV(10%/26,40*26,((25000*9%)-((25000*9%)*15%))/26,0))*15% = $152,562 – or a total tax collect during the 40 year term of $332,047 against a salary sacrifice of =25000*9%*40 = $90,000

[To be sure there are no tricks in these numbers please feel free to copy and paste the formula’s into an Excel spreadsheet to verify the numbers.]

To summarise further – if you earned $50k p/a for 40 years paid fortnightly – you would hand over $180k or 9% of your salary for super contributions.  The compound earnings effect of the 10% on those funds – allows the Government to earn some $664k in tax collections – and $305k of that amount paid in tax, was paid throughout the working life.

That $664k represents 27.8% of what the fund would have been worth if no taxes were paid during the 40 year term of the annuity and before any lump-sum taxes were levied. The numbers for a $25k wage earner are similarly 27.8% – i.e. $332k in tax levies against a $1,196k fund value.

So you tell me who this Superannuation rort benefits most?  From a $180k of real contributions – the Government has earned itself  $664k in tax collections from a single employee.  Now that is creative accounting and financial management the likes that have never been explained or exposed in a public way before.  Least not to my knowledge.

National Savings – Your Superannuation:

When anyone talks about superannuation and its ‘National Savings’ measure – one has to become somewhat annoyed and nervous. The way the Sphincter presented the debate on The Insiders interview – he talked about ‘National Savings‘ as if it was the property of the Government to allow them to offset its value against National Debt.

Once again – Mr Cassidy failed to grasp the significance of the comparisons and did not ask the relevant question – re who the National Savings really belonged to.

Some Superannuation Myths:

There are many questions that arise from the content of the data presented hereto on Superannuation. More than many can provide an answer to – for example:

  • For who was the SUPERANNUATION genie installed – Government coffers with the cash flow benefits of taxing contributions ‘up-front’ – or the individual because the Government did not want the liability of pay pensions to an aging workforce?
  • What happened to all the tax provisioning for retirement and pension payments before SUPERANNUATION became the escape Legislation that allowed Government’s to forgo the generation who had paid taxes all their working lives – where have those tax revenues been elsewhere spent?
  • What of the earnings SUPERANNUANT’S would have earned if they had not paid the 15% ‘up-front’ tax – surely that should have belonged to the individuals?
  • Then there is the 3-4 years of salary forgoence and sacrifice prior to the SUPERANNUATION 9% levy being introduced – employers benefited yet employees went without –
  • The question of an aging population is often used to mitigate the implementation of a salary sacrifice to pay for ones own retirement – thus absolving the Government of a responsibility it once shouldered. In abolishing that responsibility and bringing a new up-front tax on all SUPERANNUATION – the Government in effect pushed two liabilities off their budget calculations and replaced them with asset revenues – all on the back of employee salary yield and done with the Legislative stroke of a pen – no wonder ‘home-ownership’ is becoming so difficult.
  • Perhaps the consideration of using SUPERANNUATION to help finance a Superannuant’s home would be a better use of their own savings – provided the equity contribution was preserved in any sale of the home ownership should be a priority on the Assistant Treasurers list of options …
  • As proved above – it is the ‘compound’ factor that allows SUPERANNUATION to grow – yet with so much of it now invested in EQUITY markets both domestic and abroad – and the scant returns on offer in recent years with Interest rates so low – and the recorded capital loses the SUPERANNUATION funds are carrying forward – Government revenues have diminished and and again pressured Budget forecasts – no wonder the talk of increasing the levy to 12% is high on the agenda for Mr Shorten and the other Treasury proponents – who is he trying to fool …

SUPERANNUATION is now a poison chalice that all poor folk have been forced to drink from – it is time the turn that poison upon the real beneficiaries who benefit from the initial concessions SUPERANNUATION provide for.

SUPERANNUATION is but one of the ‘cock’s’ upon which the Government uses to rape the innocent and spawn its seed to prosper from the labours of its workforce – are they entitled to do so?  They make more money from this new scheme than they ever did under to old scheme.  Yes there is need to plan for the aging population – but why take the windfall tax revenues they do as part of the scheme?

It is no longer the safety valve it was presented as when it comes to retirement.  Over the last 5 years the folly of investing long term liability needs management into short term capital gain investments has  jerked the superannuation investment question into the limelight.  This author proposed to the Prime Minister several years ago a policy that would allow individuals to use their Superannuation to help keep or buy the family home.  It was never responded to – yet the common sense in investing in your own home with your own superannuation makes all the sense necessary to rid the Nation of the speculators who use the National Savings to plunder returns that make the Manager’s wealthy.

Just imagine the Fees that would be saved for starters and how it may help to solve the social problems bought about by the home ownership and financial hardships that brings to the table.Once again – where have the Labour Party policies disappeared to?

When the new compulsory Superannuation was introduced it served a purpose – how long before the National Savings that purpose as amounted to – some $1.3 trillion truly becomes ‘National Savings’ in the true sense or how The Sphincter was calling it?

________________________________________

The EYE-BALL Guru …

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  1. HissyFif
    October 25, 2011 at 2:24 pm

    Great Post Guru – never knew the Superannuation sums were so Tax orienated …

    HissyFit …

  2. LongJohn
    October 25, 2011 at 2:25 pm

    The Sphincter – great name for the slimeball …

    LongJohn.

  3. FireCracker
    October 25, 2011 at 2:28 pm

    Guru –

    You wander to places few chose to go – light the firecracker Guru … blow their comfort factor and see how they feel …

    FireCracker …

  4. HarryHoundDog
    October 25, 2011 at 2:45 pm

    Well Done Guru …

    These Bastards ought to know that we know what bullshit they tell us …

    Harry …

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