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EYE-BALL’s Guru on – Superannuation 2013-14 – the Government’s new Slush Fund – Proposed Changes show SWAN and SHORTEN’s stupidity –

April 5, 2013
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Latest GURU Posts:


– 4th Apr – Australia’s Parliamentary Remunerations –
– Part III – Superannuation – The Future Fund –


– 3rd Apr – Government not happy about its tax collect – Claims Tax Minimisation deserves ‘Naming and Shaming’ –


– 31st Mar – The Cyprus Bail-out


– 31st Mar – Australia’s Debt – and the idiots Managing the Treasury –


– 20th Feb – Australia’s Parliamentary Remunerations – Part II – Entitlements and Allowances –


– 13th Feb – Australia’s Public Sector Remunerations Part I – Parliamentarians “Base-Salary” and “Additional” entitlements –


– 31st Jan – The Devil is in the Detail, there is none – Gillard chooses shock, awe & Spin over Policy –


– 23rd Jan – The Turmoil is Already here – We just have to accept what is coming –


– 22nd Jan – The Turmoil is beginning – Japan’s Economic Stimulus to tip the scales –


– 20th Jan – Wayne Swan Tips his hat at New Yorker’s


– 10th Jan – The ANZ Whitehaven Hoax –


– 5th Jan 2013 – Financial ‘Ghosts’ from the Past – Hawke and Keating v Gillard and Swan –


– 29th Dec – The Great Big Financial Swindle – Part II – The ‘Budget Surplus’ Backflip – Swan tells his own Porkies …


– 22nd Dec – The Great Big Financial Swindle – Part 1 – The ‘Budget Surplus’ Backflip – Swan serves up Senator Wong


– 14th Dec – The Walls are crumbling – Government admits High A$ policy is hurting –


– 4th Dec – Retailers and bureaucrats don’t understand – high A$ value responsible for off-shore purchases –


– 19th Nov – Government Expenditures Part I – Department of Prime Minister and Cabinet – DPMC – STAFFING –


– 3rd Nov – Shareholders – Holding back the world – scared money – scared boss’s –


To see more GURU posts: – click here …


Title:
– Superannuation 2013-14 –
–  the Government’s new Slush Fund –
– Proposed Changes show SWAN and SHORTEN’s stupidity –
| Author: EYE-BALL Guru | 5th Apr 2013 |
Tdebate on Superannuation has raged for decades, and as each Government comes their version leaves an imprint.  The replacements then come again and go about trampling all over the previous version to implant their own versions of an equitable share of the tax burden – i.e. fairness – Hah … crapola I say … read on

There should be such a thing as ‘sacred ground’ – something Governments should never be allowed to tamper with.

That ground has to be respected and forever be off-limits to any Government looking to tamper with the tax collect.  Superannuation by the very ALP definition and reasoning why it introduced the scheme in 1992 has been altered 53 and now a 54th time since the Guarantee was introduced in 1992.

Lets take a look at some of the reasoning and process’ superannuation has had to deal with along the way.

Post 1992 Superannuation:

The charts below – [sourced from Reserve Bank of Australia statistical database series (Budgets)] – will help give a perspective on the Federal superannuation tax collect since 1996.   Further research to pre 1996 figures is ongoing along with data requested for the pre 1992 period – this post could not wait … the information contained herein is too important.

  1. 1996-2012 Superannuation Tax collect [value $billions]

[… click on chart to enlarge in a new window …]

  1. 1996-2012 Superannuation Tax collect [% of total Government Revenues].

[… click on chart to enlarge in a new window …]

The Superannuation Act has been tinkered with for 20 years an now in 2013, Treasurer Swan and Superannuation Minister Bill Shorten have come up with a Gillard inspired socialist platform that reeks of ‘class warfare’, and something they believe will solve all the answers to future retirement planning and needs.

This pair of boofheads place themselves as smarter then all those that went before them.

What would make anyone believe this new proposal has better answers, better solutions, better outcomes, and is better policy?

Macro Superannuation Rules post 1992:

  1. Government takes a 15% chunk of all super contributions up front thus eroding all compound earnings on that 15% – pre 1992 the Government only taxed superannuation upon retirement at 30%.
    • This has a significant impact on the value of your ‘end of working life’ superannuation plan.
    • See link here to view an extrapolated example of the impact.
    • The example shows a near 30% reduced value of the 40 year fund as a result of these compound earning factors.
    • These tax collected monies feed into Government revenues for all your working life – and are a separate tax over and above your payee tax liability.  This was not the case pre 1992.
  2. Government taxes your Superannuation fund at 15% of earnings ever year the fund is functional. In the aftermath of the 2008-09 GFC impact and its depreciation value on capital and asset values – the capital losses sustained by Fund Managers are reflected in the Superannuation tax collected post 2008-09 – see Graph above to verify the visual impact of the revenue fall.
    • Swan and Shorten are faced with a May 2013-14 Budget that needs to find revenues to fund the legislated NDIS and the Gonski Education reforms.
    • The reduced Superannuation tax collect during 2010-13 is a reflection of the economic times since the GFC.
    • This contrasts in economic restraint when compared with a Government prepared to do any desperate deed to prop up its revenue needs to fund its socialist spending agenda.
    • At no time has Gillard and her Government paused since 2010 to reflect on the macro economic impact since the GFC, nor attempted to take stock in how the economy is performing against a Government competing in the market for capital/funds.
    • The $300 billion of new Government debt created in the 5 years of Labor has forced the private sector to pay higher cost for funds.
    • This Government has not given fair and equitable compensation to the Private sector for its own mismanagement of the economy, and now wants to tax high net worth individuals who have large superannuation funds as a result of pervious superannuation tax concessions, to prop up its own spending needs.
    • This is the ‘Cyprus Bank Depositor Heist’ by any other name …

Pre 1992 Superannuation:

APRA – [Australian Prudential Regulatory Authority] was founded in the early 2000’s … its primary role is regulatory supervision over the financial markets and players – i.e. [Banks, Merchant Banks, Stock Brokers,  Fund Managers, Superannuation, and the like] – who partake in the market.

APRA have a broad history in how Superannuation evolved since the 80’s – linked here –  and states in part:

… While superannuation as a form of savings has existed for more than a century in Australia, for most of the time it applied to a minority of employees, generally higher paid white collar staff in large corporations, employees in the finance sector, public servants and members of the Defence Force.

However, from the 1970s superannuation started to become more widely available as a result of claims lodged in the industrial relations arena.

The advent of institutionalised employee superannuation began in September 1985 when the Australian Council of Trade Unions (ACTU), as part of its National Wage Case claim with the Conciliation and Arbitration Commission, sought a three per cent employer superannuation contribution to be paid into an industry fund. The Government supported the claim in pursuit of its inflation control objectives and, in February 1986, the Commission announced that it would approve industrial agreements that provided for contributions of up to three per cent to approved superannuation funds.

The superannuation funds approved by the Commission were generally multi-employer industry funds jointly sponsored by trade unions and employer associations. New industrial awards were progressively negotiated under the guidelines established by the 1986 National Wage Case. Consequently, superannuation coverage rapidly increased from around 40 per cent of employees to 79 per cent in the four years following the Commission’s decision. Coverage in the private sector grew from 32 per cent in 1987 to 68 per cent in 1991.

In spite of the rapid growth in superannuation coverage, award-based superannuation had a number of problems:

  • nearly one third of private sector employees remained uncovered by 1991;
  • not all employees who were entitled to award superannuation received it, in part because compliance could only be enforced through a laborious case mounted with the Conciliation and Arbitration Commission;
  • award superannuation as a universal entitlement did not effectively take into account the significant number of employees who already had some superannuation rights as part of their employment; and the three per cent award was too small to provide a significant improvement in retirement incomes for many employees.

The compliance problems associated with award superannuation prompted the Industrial Relations Commission in 1991 to reject an application, supported by both the ACTU and the Government, for a further three per cent of salary in award superannuation. The Commission recommended that the Government convene a national conference on superannuation
involving all relevant parties to consider issues such as non-compliance; the extension of award superannuation to all awards, including state awards; building more flexibility into award-based superannuation; the extension of superannuation to casual and part-time employees; and the role of the Commission in ensuring appropriate levels of retirement income.

continues

If anything is true, then the past 20 years have shown that superannuation was always a work in progress.  Swan’s and Shorten’s version delivered today is a continuation of that stupidity.

In any market forum discussion on investment – any forecast returns on a 40 year investment/annuity is no sure thing.  For example –

  • the Nth Korean threats of a nuclear Armageddon if carried out will reduce all the hard earned savings and investment income in all the world by some 90% and perhaps more.
  • Another example – in the aftermath of the GFC – Western Nations are bankrupt, all caused by the stupidity of Governments borrowing monies to fund 40 years of election campaign promises.

The World has no capital left other than pension and superannuation funds – the life savings of a global population left to the mercy of corrupt an inept Governments who for 40 years have lived on the hog.

When Gillard says – ‘you can trust us with your super’ … you should be looking for ways to get your super into your own hands and as far away from Government and regulatory oversight as possible.

John Howard erred in hindsight when he opened the doors to allow up to $1 million of individual Superannuation contributions in the 2007 financial year. Some $50 billion poured in as reflected by the spike in superannuation tax revenues in the graph above.

It was a sign of an economy doing well with debt virtually zero, and budget surplus’ the norm.   How Labor and the GFC changed all that …

Howard had no prior warning … nobody did unless you were a market operator and ben calling the big thud since 1987 … finally … and an even bigger thud is coming …

In addition … the $60 billion Costello and Swan gifted from the taxpayer owned Telstra sale to the ‘Future Fund’ – all to plug a parliamentary superannuation ‘Ponzi Scheme’ – would never have happened had they had a crystal ball to tell them the GFC was around the corner.

That is the point – over a 40 year term investment – who knows what will be law and financial security at the end – it’s an absolute lottery to gauge the value of the cost of living in a society 40 years hence – any body who thinks they can is a bigger dunce than either Swan or Shorten.

Hell 40 years ago I started work at the Commonwealth Bank – my salary was $2,200 p/a, a three bedroom high set new house purchased three years later cost $31,500.  My Bank Manager boss was earning $3,900 p/a.  The QLD State Manager on the Bank earned $7,500.  The Big Chief earned $10,000 p/a.  You work out the multiples – a Bank CEO today earns around $15 million with heaps of additional perks per year.  That is a multiple of some 1500 …

The same house is valued at $400k – a multiple of 12.7 …

It just does not work and for Politicians to stand up 54 times since 1992 and tell you that they are tweaking the Superannuation rules – you have every right to spit in their face.

To be honest – Keating sold the superannuation deal in part because he wanted access to the superannuation tax revenues up front rather than wait for the retirement of the superannuant. All the compound investment income that would have be earnt by the superannuant on that 15% now goes to the Government.

Any debate on the real tax on superannuation has to factor in the compound earnings the Government now earns on post 1992 superannuation tax it collects.  In the extrapolation – linked here in a previous post – the value of an employee working 40 years at an average income of $50k, with a 10% annual return on his super paid fortnightly, the full value before the 15% tax is collected is $2,393,137.85 – see calculation below … [assuming the 9% contribution of salary remains constant.]

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

Now apply the 15% tax factor and that value diminishes to –

  • Example 2: =FV(10%/26,40*26,((50000*9%)-((50000*9%)*15%))/26,0) = $2,034,167 – a ‘tax’ earn for the Government of $358,970

Now work out the compound value on the difference – this will give the compound earnings on the 15% tax paid up front:

  • Example 3: =(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

This has to make you and everybody else second guess the value of Superannuation and who derives the best dividend under the post 1992 arrangements.

Somebody earning the same income average under current tax laws pays $3,572 plus 32.5c for each $1 over $37,000 – a sum of $3,995.

If you were to divide the $664,095 from the above calculation by 40 years,  the annual tax collect by the Government on your 15% of super handed over represents – $16,600 per year.

That is four (4) times the annual tax they would pay out of their regular income – that is the importance of compound earnings … and this and past Governments wanted in on this 20 years ago and have been ripping off Australians ever since.

You ask yourself do they deserve more of your funds to pay for wanton spending programs and Parliamentary Superannuation Ponzi schemes?

[There might be some holes in the above numbers basis the 10% return,  and fortnightly compound factor – however they are in the ballpark and should not be discounted in their reality.]

The Government are worse than Bank Robbers – they are robbing your blind and using the law to do so.

Swan and Shorten’s New Superannuation Rules announced today are  Linked here

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Have your say where it counts: – contact your Local Federal Representative via the links below and let them know how you feel about this, or any other topic that you feel strongly about – or you can just post a comment below and let off some steam.


The EYE-BALL Guru …

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  1. April 5, 2013 at 4:04 pm

    Sorry – I meant to go to the ‘fees’, and ‘bonus’ payments collected by Fund Managers, and also the annual 15% tax in earnings – my haste my error …

    Then there was the new Council Shorten plans to set-up … more regulatory oversight … nah … will cover that all in the next post on Superannuation …

  2. April 5, 2013 at 7:00 pm

    To indicate that I’m not just a wrecking ball – some alternatives for long term retirement planning might include –

    1. – Some arrangement to invest super savings into Family Home keeping the SUperannuation portion partioned and pro rate in any house sale/upgrade …
    2. – Scope to invest in a Holiday or Retirement home using contributions as payments/installments…
    3. – Less prudential and regulatory control over self managed superanuation, allowing for fees and other levies to be minimised … greater scope to negative gear, to pool family funds for better returns etc …
    4. – Provisions to allow salary sacrifice up to 50% to allow fund to more quickly get to a threshold limit considered to be the equal to twice the annuitised aged pension value paid over a pension life expectancy of 20-25 years… and provisions in place to allow additional contributions of a similar value from one off type ‘bonus’ payments …
    5. – Once the find attains the annuitised value – i.e. twice the aged pension annuitised value, it becomes a ‘complete fund’ and taxed as a normal superannuation fund … where continued contributions are equal to the current salary guarantee levels … so long as the annuitised value is maintained …

    There are many more options and circumstances that need to be considered – what about all dependents on a pension – the pension payment does not include a 9% super contribution, self employed persons and small business operators who are struggling and can’t afford to make any superannuation contributions, contributor earners who lose their savings to fraud and mis-management … etc …

    People need to think this all through and not rely on other people to earn them investment income on their monies … the GFC taught us all about that … like lambs to teh slaughter … yet the Banks still got paid their management fees.

  3. April 6, 2013 at 5:46 am

    This is a mighty fine appraisal.

    There are no guarantees. Hybrid securities like built space can only be valued by the rental streams that accrue. Should those rental streams change, valuations change. Risk is not predictable. These are all basic tenets of investment.

    Every retiree is most secure when they own their own home. Retirement is a massive study in itself.

    The article is also angry that this government is attempting to rob retirement savings to plug a deficit black hole. This government has brought us to the position where it simply needs more and more revenue to sate its never ending spending programs of very questionable outcome.

    National Broadband, or Gonski, or NDIS are presented as visions, which partly is true, however there is no tough capital rationing going on that will bring about these social change without massive damage being ultimately inflicted. That is the wash up of National Schools building program and the insulation cash back fiasco. Why should retirement savings be squandered on Gonski, or NDIS. There are much more prudent ways.

    Above you highlight how the government revenue from superannuation taxes have fallen dramatically post 2008 GFC. The correction in equity markets was never predictable but it still is cyclical. Howard’s 2007 initiative on capital gains being rolled into superannuation was stupid. Back then we had issues arising from too little supply of government bonds (gilts). But hey was it a hell of a ride!

    Cyprus can now be seen as a very real catalyst. The shock of bank deposits being taxed to shore up banking capital has really brought home how we are drowning in public debt. Politically the government can say stupid things like we will never apologise for putting jobs first, but we the electorate don’t buy it. Household budgets are stretched way too thin. Indeed our safety and security is challenged constantly. Compare this to 2004 when everyone was feeling so safe and secure.

    Eyeball, these statistical charts you have been producing over the last 10 months are priceless. Showing the myth of the government’s 300bn accumulated debt cuts straight through the crap. Here the cycle of Superannuation revenue to government too is priceless. It is widely known and understood yet not quantified elsewhere in the press. Thank you

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