Australian (ASX) Stock Market Forum

# Superannuation, the ultimate government cash cow?

#### PZ99

##### ( ͡° ͜ʖ ͡°)
I just re read the post, my math's is crap, if the member has \$300,000 in shares and they pay 5%.
That would mean they get a dividend of \$15,000 and the franking credit would be 30% of that, so \$5,000 tax return.
So how with me making high pension assumptions, 600,000 getting \$5k works out to \$55Billion is really weird.
I wish someone would ask silly Billy and Bowen, to please explain.
Figures like that usually come from treasury and are stated over a long time frame. It's probably \$55b over 10 years or something. Or course, if people adjust their portfolio to avoid being overtaxed then the \$55b is fake - which is the most likely outcome.

In the above case, I would go for something with a better return than a 5% grossed up divvy.

#### willy1111

I just re read the post, my math's is crap, if the member has \$300,000 in shares and they pay 5%.
That would mean they get a dividend of \$15,000 and the franking credit would be 30% of that, so \$5,000 tax return.
So how with me making high pension assumptions, 600,000 getting \$5k works out to \$55Billion is really weird.
I wish someone would ask silly Billy and Bowen, to please explain.
As PZ99 says, the \$55B is over 10 yrs so about \$5b a year.

If a dividend is fully franked it represents 70% net cash payment with 30% franking credit. Thus a \$15k fully franked dividend divide by 7 times by 3 is approx \$6,428 franking credit.

600,000 x 6,428 = 3.8B × 10 years = \$38b

There are also quite a few outside SMSF that will be impacted. They have just built up share portfolio's in their individual names over the years and retire on the dividend payments. So they probably make up the difference

#### sptrawler

As PZ99 says, the \$55B is over 10 yrs so about \$5b a year.

If a dividend is fully franked it represents 70% net cash payment with 30% franking credit. Thus a \$15k fully franked dividend divide by 7 times by 3 is approx \$6,428 franking credit.

600,000 x 6,428 = 3.8B × 10 years = \$38b

There are also quite a few outside SMSF that will be impacted. They have just built up share portfolio's in their individual names over the years and retire on the dividend payments. So they probably make up the difference
That looks a lot more like it, but we are working on the assumption everyone has \$1m in their retirement account, which I would think is highly unlikely.
But it will be interesting to see the actual figures, when they come out, which I'm sure they will.

#### willy1111

That looks a lot more like it, but we are working on the assumption everyone has \$1m in their retirement account, which I would think is highly unlikely.
But it will be interesting to see the actual figures, when they come out, which I'm sure they will.
I'm starting to think it will not get through the senate anyway.

#### Bill M

##### Self Funded Retiree
I'm starting to think it will not get through the senate anyway.
You think so? I'm not so sure about that as the Greens would support it and together with Labor would get it over. This should be made as a key election policy. 10's of thousands of seniors depend on it and it should be out there and talked about, people need to be clear as to how it would affect them. I think the whole idea should be dropped to be honest.

#### PZ99

##### ( ͡° ͜ʖ ͡°)
You think so? I'm not so sure about that as the Greens would support it and together with Labor would get it over. This should be made as a key election policy. 10's of thousands of seniors depend on it and it should be out there and talked about, people need to be clear as to how it would affect them. I think the whole idea should be dropped to be honest.
The Greens were partially against it during the Batman byelection. If they hold the balance of power in the senate I expect they'll carve it up to something a lot less than than a \$55b saving.

#### luutzu

Paul Keating on Super.

Raising Super to 12%? Introduce an longevity levy?

With all due respect... come on Paul. That's just shifting more wealth from the poor and working class to the upper class, again.

I mean, he's assuming that every person, across all profession and trades will live the average Australian life expectancy. No they don't. Most blue collar workers wouldn't make it to 85. So a longevity levy on them... unless it kicks in at way above the average wage, will just mean everyone pays but only those lucky few who eat well, had a relatively easier working life, will get to enjoy the insurance benefits.

Then there's the 12% super. That's just more cash for the investment managers. It will mean less wage for new job seekers. To pretend that an increased in super wouldn't affect employer's wage scale is just dreamin'.

#### sptrawler

Paul Keating on Super.

Raising Super to 12%? Introduce an longevity levy?

With all due respect... come on Paul. That's just shifting more wealth from the poor and working class to the upper class, again.

I mean, he's assuming that every person, across all profession and trades will live the average Australian life expectancy. No they don't. Most blue collar workers wouldn't make it to 85. So a longevity levy on them... unless it kicks in at way above the average wage, will just mean everyone pays but only those lucky few who eat well, had a relatively easier working life, will get to enjoy the insurance benefits.

Then there's the 12% super. That's just more cash for the investment managers. It will mean less wage for new job seekers. To pretend that an increased in super wouldn't affect employer's wage scale is just dreamin'.
The really funny thing is, Keating said when he introduced super, it was to add to the pension to give people an enhanced retirement.
In reality it is becoming more obvious, it is to make people forego wages to pay for their own pension, now he is complaining people might live too long and end up on a Government pension.
I wish he was so worried about his Government pension.

#### luutzu

The really funny thing is, Keating said when he introduced super, it was to add to the pension to give people an enhanced retirement.
In reality it is becoming more obvious, it is to make people forego wages to pay for their own pension, now he is complaining people might live too long and end up on a Government pension.
I wish he was so worried about his Government pension.
Yea, the more I hear from him the more he sounds like a typical polly. He sounds genuine enough... so he's a very good polly.

Imagine asking labourers to chip in for a longevity levy they'll get to see anything of if they live beyond 85. Geezus man, I know plenty of tradies and labourers and most are struggling physically in their late 50s. Lucky if illness doesn't already stop them from living a full life in their 60s.

To raise the super rate will mean more cash to managed by the banks and "professionals". More fees; higher stock/asset prices. No need to guess who that benefit the most right.

#### sptrawler

Well we might not like it, but what St Nick is saying is right, why would you scrimp and save to get \$1M in super.
When you can have a ball, spend everything have \$300k put in to super by your employer and have a better outcome.
At least with the pension it is indexed, with the money you saved and put in your super, it can be lost in a week as is happening now.
The only difference is, if you have spent everything and are on a pension you are the salt of the earth a battler, if you have saved some money you are a capitalist pig that deserves anything the media and Government want to throw at you.

#### willy1111

Well we might not like it, but what St Nick is saying is right, why would you scrimp and save to get \$1M in super.
When you can have a ball, spend everything have \$300k put in to super by your employer and have a better outcome.
Time...super is accessible at 60 now, whereas age pension is around 67 (they were going to push it out to 70)

Most savers/investors would have assets outside of Super so likely could be self funded way before 60.

I agree the age pension is a great safety net to fall back on though.

#### Skate

Well we might not like it, but what St Nick is saying is right, why would you scrimp and save to get \$1M in super.
When you can have a ball, spend everything have \$300k put in to super by your employer and have a better outcome.
At least with the pension it is indexed, with the money you saved and put in your super, it can be lost in a week as is happening now.
The only difference is, if you have spent everything and are on a pension you are the salt of the earth a battler, if you have saved some money you are a capitalist pig that deserves anything the media and Government want to throw at you.
Hi @sptrawler

What Nick is saying is right, but its not good advice to follow as it plays to confirmation bias. People with low Super balances will find comfort in reading his article. This type of article is trotted out every few weeks as a story filler. I've read it all before.

Let me explain why you should scrimp and save to get \$1M into super & why Australians aren’t saving enough money - meaning their savings will inevitably run out.

We should all seek a better tomorrow, have financial independence & not be condemned to the aged pension (The poverty net)

Financial independence

Happiness is really about is creating an extraordinary quality of life, life on our terms.

Money and financial independence can have a significant effect on everything from our psychology, to our health, to our relationships.

Our decisions

Our decisions ultimately control the quality of our lives.

Current trends

Australians who plan & save for their retirement usually die with savings almost as large as when they retired - meaning they lived their life on their terms.

Trading isn’t about getting rich, but more about one day having the financial independence of being able to support yourself without an income. The truth is at some point in your life you’re going to have to stop working. The only question is whether you’ll be forced to stop before you’re financially prepared, or whether you’ll be able to choose to end on your terms.

The only person who can make sure you’re able to do it on your terms is you. Nobody is going to give you the money you need to support yourself without an income - it’s all on you to save up as much as you need. Therefore, your financial freedom is at stake here, and there is no better time to start creating it than right now.

Many people never start trading because they’re worried about losing their money. It feels like you have to spend a lot of time and energy to get it right and if you don’t, then you might lose all of your money.

The very act of getting started is much more important than getting it right.

Skate.

#### willy1111

Well said @Skate

I could spend my excess income on nicer cars, a better home, more expensive holidays - but I would prefer to be more conservative on those items and put my excess funds at risk in the share market in an attempt to generate wealth, because wealth buys freedom from being a wage slave meaning I get much more choice in how to spend my limited time on earth.

I'm pretty sure many people on this site would have a similar philosophy, the average person on the street doesn't think like this, they think in terms of what else they could spend that capital on (a nice new shiny sports car, etc) that they could get enjoyment from rather than risk losing it in the share market.

#### Toyota Lexcen

"risk losing it in the share market"

rather than losing it in the share market

numerous financial commentators see this as best option for Australians, whats wrong with getting the pension? most have contributed to it

at 67, a couple with mortgage free house, holidays done, small car purchased, small trading account as hobby

#### Triple B

Trading isn’t about getting rich, but more about one day having the financial independence of being able to support yourself without an income.
Exactly . I have a time span of 10 years to learn to Trade . Slowly adding to account when proven consistently profitable. almost 45 now. Would like to be 50/50 income by the time Im 50.and full retirement at 55. \$200 per week into a bank account until 1000 trades are made with smaller account.(aprox 10months)
Then deposit 25% in broker account no need to put it all in brokers acc an sit the unused portion at Broker Risk

potentially trading \$200,000 to \$300,000 with 0.5 % risk at 55. 1200 trades a year at 50% win with 2:1 pay of would be nice. \$200000 acc income potential at 0.5%R = \$600000 PA not compounded.
Draw down of 5% a 2.0% chance in 50 Trades. seems crazy but thats the numbers.Costs aprox \$8400 at todays commission so say \$10000 in 10 years
If we take out 200 trades at BE thats 1000win or loss trades at . so numbers then become 500,000 -costs. I f risk is reduced further \$100000 is an acheivable figure.

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#### sptrawler

Jeez it has been a while since anyone has posted here, just shows how much super has got on the nose, since Labor started their slash and burn who gives a fluck about SMSF's get them to move into union funds campaign. lol

So after that bit of a rant, I wonder if the companies can pay unfranked dividends to SMSF's? That would be interesting.

#### MarketMatters

Unfortunately we live in a high consumer discretionary world today with so many shinny new toys being dangled in front of us that the average person struggles to escape the marketing ploys of these giant retailers ...and the usual keeping up with the Jones's. Consequently, superannuation has become the boring lousy long term investment no one wants to look at because they can't touch it! Great tax vehicle though

#### MarketMatters

@sptrawler I believe I saw a recent article praising the benefits of industry funds and returns over the Future Fund. Timing is everything!