Adviser and accountant animosity builds on super

The Federal Government is facing a growing backlash from planners and accountants as they dig deeper into the consequences of the Budget changes to superannuation with many describing the impact on their clients as "disastrous".

The planner and accountant backlash has come at the same time as some senior Government ministers have struggled to explain the Budget changes during the election campaign, with the Foreign Minister, Julie Bishop, acknowledging her lack of detail around the changes to Transition to Retirement (TTR) arrangements during a radio interview on Tuesday.

Brisbane-based adviser and mentor, Robert Ross reflected the views of many accountants and advisers who have contacted Money Management when he said the Budget changes had missed the mark and had placed many of his firm's clients behind the eight-ball in terms of seeking to meet their retirement income objectives.

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He said that on the basis of an examination of his company's client files, the Government's targeting of upper income earners seemed destined to have unintended consequences by targeting professionals who had a serious need to top up their superannuation as they drew to the end of their careers.

"These are the professional people who are now over 50, did not earn a cent until in their mid-twenties because of education requirements — who then got married and had three kids — the youngest still at uni and who have had to pay off mortgages, private school education uni fees because their kids could not get HECS or any help because of parents income," Ross said

"These people expected to leave off saving seriously for retirement until their last 10 or 15 years of work life then to contribute $100,000 or more a year until they are 65 — hoping to get at least $1 million into super. After all they expect to live another 25 years after that."

"Some expected to contribute their inheritance when their parents die. That idea is now in ruins. The new cost of age care — introduced in July 2014 — with other quietly introduced income rules on 1 January this year — guaranteed to use up every penny the parents own — and now the caps on super — can only have one result. Ordinary Australians will need age pension support forever," he warned.

The warnings about the Government's approach have come as industry groups position to seek the negotiation of changes to the Budget super settings after the election, while actuarial research house, Rice Warner, has claimed few super fund members will be seriously affected.

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It really all shows how poorly super is misunderstood by policy makers. And that then extrapolates to the profession and all the attendant regulations ( piled on top of old regulations) - the whole thing needs to be blown down and built again.

This nation's obsession with glorifying 'the battler' (whatever that is these days) is leading to poor, class-warfare style policy decisions on both sides of politics. We should all be chipping-in to repair the balance sheet, not just higher income earners.

""Some expected to contribute their inheritance when their parents die. That idea is now in ruins."

So these people are complaining that the income on the tax free money that was given to them might now be subject to tax. Forgive me if I'm not crying you a river.

Yes that's a poor example to use as reason to not change the legislation, and likely to only fit a narrow segment of the population, Mr Ross missed the mark there - he probably had one client in that basket! Straw man.

Failed govt policies [thanks to Treasury & Scott Morrison] that actually encourage more people onto the full aged pension, due to ridiculous Centrelink taper rates along with a bizarre $500,000 non-concessional super cap will never "repair the balance sheet". Greece here we come.

Pretty sure eligibility for HECS-HELP doesn't depend on your parents income.

So much misinformation being fed by vested interests. $500,000 in lifetime NC contributions is more than enough for these 'battlers' to 'catch up'. Combine that with an annual $25,000 concessional cap that can now be spread over multiple years. What are these people complaining about!

Balances for the vast majority of people will be under the $500,000 lifetime NC cap limit.

People complain far too much about this budget. Get over it.

I'm seeing a definite trend of more people coming to me asking the question as to how to spend their money to get an increased age pension as opposed to how I we save our money. More and more people are realizing they are being penalized for being middle to upper middle class Australians. All started by Labor ruining the economy. The system is getting clearly skewed in favor of welfare, I mean "entitlements''

Yep. By law, ASIC requires you to give advice in the best interest of the client. In many cases that would mean some clients should stop saving & do whatever it takes to get onto the full aged pension. Coming your way 1 Jan 2017.

Well most people don't understand super or the transition to retirement rort. I have more than the 1.6m in super so I'm no envious whinger. The reality is the cap is reasonable (you still get significant benefit of 15% tax on the rest) and $500K cap on non concessional contributions is reasonable and stops the very wealthy splitting the base between couples. The transition to retirement is a failed experiment and had the unforseen consequence of allowing high income individuals to avoid tax by large salary sacrifice and then drawing revenue from super accounts this is nonsense and should have been ended years ago. The LNP propose that the transition now get taxed at 15% because it effectively is an accumulation account.
Now contrast the ALP policy of taxing earnings at 15% above $75K in a investment environment that goes something like this per year for 10 years 20%, -5%, 15%, 0, 12%, -22%, 17%, 5%, -18%, 28% the 1.5m base ALP talk about will be eroded by about $150k (with more than $300K tax paid) even with a 7%+ average return but under the LNP policy it grows substantially and no tax.
Stop the bitching about responsible changes that the LNP have proposed and focus on attacking the non idexed $75K ALP rip off

Finally, someone who makes sense. The labor policy is almost impossible to implement and will add undue cost to the system. The $1.8m pension cap allow a reasonable amount to be earned tax free and the rest concessionally treated. People seam to forget it was intended to be a 3 pillar retirement policy - pension, super and discretionary. the balance is finally reset and it actually provides good opportunities for retirement planning.

You are incorrect. TTR's are not used by high income individuals much - why draw income that only attracts a 15% offset when you are already on the highest marginal rate or drawing the income puts you into that bracket? Also, your returns sequence references total returns, the tax applies to taxable income, not unrealised gains.

Phil, I have to disagree. I have plenty of high income client's that use TTR's from age 60 onwards due to the tax free income...

Don't even get me started on TTRs with constitutionally protected funds.. Some salary sacrifice their whole income (excluding tax free threshold).

Id say of the TTRs I have seen only about 10% are used for what they are designed for... The rest are simply used to reduce tax.

yes, re the over 60's, understand on the tax free, but those who are being hurt by this are those 55-60's who aren't in top tax brackets, and far from wealthy.

It still works for those 55-60...albeit not quite as attractive due to tax within TTR pension (still planning opportunities here though as tax is only payable on realised gains and taxable income of the fund). The 15% tax offset on the pension income says it all. Provided you don't sal sacrifice down below the 32% rate they will always be better off by the 15% arbitrage due to the tax offset from pension income.

Cry me a river indeed. These proposals are fair. The TTR strategy has been the biggest tax loophole since it was introduced and has been abused. it was not sustainable.
Vested interests looking after their own. however, there are planning opportunities and other avenues to consider. these people will not necessarily go onto income support. that's a lot of bs. think outside the square.
Importantly, there is nothing wrong with paying your due taxes.

"there is nothing wrong with paying your due taxes" - what, so that the government can continue to spend it "wisely". It's a joke the amount of our hard earned goes towards taxes. Almost all of the people who have a fair whack in super have paid their way in taxes all their lives. The government just want a piece of everything you have and some... How is the $500,000 lifetime cap fair? So that money is in a taxable environment instead? Great!

A lot of this complaining also fails to mention the $28,000 tax free threshold on income tax for over-60's. On a 5% income return, that is $560,000 that can be held in their own name. Add the $500,000 NCC into super, (plus some concessional contributions), move it into pension phase, and there we are $1 Mill tax free with income of $50,000 pa. Double that if you include the spouse.

Out here in the real world this morning, I met a woman who worked out if she invested all her funds into house, she will collect the full age pension. This is the logical outcome of Scott Morrison's changes to the Centrelink Asset Test & the $500,000 lifetime non-concessional super contributions. She has worked out that the Liberal Govt is penalising her for saving, & rewarding her for hiding all her assets in her own home. The end result? Scott Morrison is blowing out the budget black hole even further

Steve, dumping money into the non-assessable primary residence has been rife for some time now, don't see how it is enhanced too much by these changes. I understand where you are coming from but hardly see how the 500k limit has a huge effect for someone collecting the full age pension. If that 500k limit didn't exist and she contributed more to super, the assets would still be deemed and therefore reduce her pension.

She wont be effected by tax changes as she clearly isn't near 1.6m and isn't using a TTR. Can use SAPTO if needing to invest outside super.

If she came to this conclusion now, id say she would have prior to the budget as well.

Agreed. Two messages from Govt that penalise you for saving, one way or the other. Epic fail.

Agreed. However the combination of both measures will ensure that they will be many more couples building & investing in $3 million homes [which they can then leave to their kids tax free], because that way they are guaranteed an equivalent $1million capital sum in order to receive a lifetime indexed $36,000 Govt Guaranteed Centrelink Pension. No $500,000 lifetime after tax caps on building tax free multi-million dollar castles. Whereas anyone who is silly enough to save anywhere else, will miss out. This serious distortion in retirement policy is an epic fail for budget repair.

Nice to see some discussion- there should have been more before the budget-
Congratulations Craig- you are in the top 2% who has in excess of $1.6 million in super-self employed- who usually employ others and pay their super- often have least. 25 years ago we had RBLs Who remembers these?? You could contribute up to 11.2 times your salary into super even-if you did it on the very last day of work.
The levels of compulsory drawdown starting at 4% rising to 14% brings all people back into age pensions sooner or later.
Sorry Nathan- Austudy is parental income assessed not HECS. Thank you.

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