Retirees are “at boiling point” over the government’s changes to their money

It has never been smooth sailing for Australia’s retirees. Back when baby boomer’s were working, they didn’t have compulsory superannuation. And

It has never been smooth sailing for Australia’s retirees. Back when baby boomer’s were working, they didn’t have compulsory superannuation. And the rules kept on changing throughout their lives. Now, the Government wants to change it again and Australia’s self funded retirees are not happy.

According to Morningstar’s head of equities, Peter Warnes, self-funded retirees are “at boiling point” over the government’s proposed budget superannuation changes, ­describing the government’s proposals as worse than “Ned Kelly”, reports The Australian.

Mr Warnes said “The blood of self-funded retirees and many other superannuants reached boiling point in the aftermath of the budget.

“People are gobsmacked by the extent and complicated changes to our already complex superannuation laws.

“After carefully planning their retirement according to government legislation, self-funded retirees have been bushwhacked by an un-Australian bushranger.

“Retrospectively, Ned Kelly was not this brazen and unless there are meaningful changes the government could be headed for the gallows.”


Mr Warnes says he believes many frustrated Coalition voters could change their vote in protest. “I suspect that this election could see a record informal vote as self-funded retirees who can’t take the bigger step (of voting Labor) will vote informal.”

He warned Malcolm Turnbull and Scott Morrison to be “concerned — very concerned” at the fallout from the anger of self-funded retirees who have worked hard not to be on a full pension.

The changes proposed are a cap of $1.6 million on the amount that can be transferred into a tax-free superannuation environment. This means anyone with more than $1.6m in super will have to keep their ­assets in an account that is taxed at 15 per cent.

In his newsletter where he made his comments, Mr Warnes said, “At the time when central banks have already pushed investors to a space on the risk curve not previously visited, the Treasurer had the gall to suggest that superannuants caught by the $1.6m transfer balance cap could ‘invest in a business, invest in innovation, where other tax concessions apply’.

“This comment clearly demonstrates that Morrison has no idea about prudent levels of risk”.

It clearly is a very frustrating issue. What are your views?

  1. Alec McCracken  

    So what percentage of self funded retirees have 1.6 million to play with anyway ?

    • Jennifer  

      Yep. I don’t mix in those circles

    • Anne  

      For a couple that would be $1,600,000 X 2=$3,200,000. A lot of money in my world….stop being greedy.

  2. All our lives we worked hard, reared 2 children. We were never ever out of work, did everything advised by governments to ensure we had enough to live off in our retirement. Now with retirement looming the game changes again, thinking now we should never have put extra money into our super and went without things to ensure we were self sufficient. Now apparently we are ‘rich’ absolute joke. I and many others thought Malcolm and the coalition may just have been just what thus country needed! Seems we were all so so wrong! 😬

    • J.F.Dettori.  

      Yes a lot of people agree with this….

      • Lyn Ward  

        Want to know something! You are rich!! We have worked all our lives putting in lots of extras into superannuation and saving what we could but we haven’t got anywhere near that. We qualify for part pension and it gives us a comfortable retirement ( without overseas travel ) We also worked until we were 69.5. And we own our own home, so we do alright. To have over 1.6 million means in my opinion you should pay tax over that amount!

  3. Wendy Mulligan  

    I agree Alec, who has $1.6 million anyway? We will own our own home and that’s about it (superannuation ( what little there was) finished paying off our home and their is very little left. Now they have raised the pension age to 66 (we are 60), I am not working (due to ill health and no govt support), my husband is now unemployed through business he worked for being sold and not much chance of another job. Thanks Mr Turnbull and all pollies, you get richer with your pensions, perks and all while we struggle. Vote for any if you? Fat chance!

  4. The watcher  

    Simple solution: vote 1 for any party candidate you like, put the lieberal party or nationals last. That will teach them a lesson. Since 2010 we had a succession of liars in the highest elected office. Brazen and shameless. Put them last on the ballot.

  5. Lesley Blight  

    There are still lying and cannot get along with one another. Still making promises they cannot keep. There is no one with any skills practical experience in their port folios. Cannot understand this decision justs another money grab to help the defeciet. Just leave people alone that plan for their retirement and do the right thing and are not reliant of centerlink which is a great burded to the country. We all pay into a superannuation fund so it is out money. Whay haven’t we been asked. Looks like this was another sneaky thing government has done. We need good managers in government who work for the peoole that voted them in.

  6. $1.6 million hummm, don’t think that concerns me, but I vote Labor anyway. I think in Ned Kelly’s day there was no pension and the elderly were cared for by their adult children. Perhaps retirees could vote for Labor anyway. Australians were never so wealthy as when Julia was PM, but since then………

  7. val martin  

    I really don’t get the drama about the $1.6m cap on “tax free” super. First get to $1.6m! One can still save for retirement over the $1.6m BUT that portion will be taxed (at a quite reasonable rate). We need to remember that Super is for OUR retirement NOT a tax free dowry for our children.
    If any of you have chosen to use super to pass on tax free benefits to your children then you are gaming the system.

  8. colin  

    ONE> dont vote LNP

    TWO> too bad so sad about the kids inheritance, just spend it , let them earn it like we did

  9. Henry  

    Go to the AEC ( website and practice how to vote, how to make your vote count for the Lower House and the Senate, so that you do not invalidate your vote as informal which will not count. Practice to nominate the Labor,Greens and the Liberals last so that they don’t get any preference votes. Vote under the line not above the line where the dominant party will dictate. It’s time to break the power of the three morons. Vote for smaller parties such as Xenophon, Family First even ALA, CDP or just the Independents. This forthcoming election is your only chance for YOU to move the goal posts, to demonstrate your resistance and protest against being “f__ked around with” by the three big morons. Break up their power base and depose them to the oblivion of minorities. If you need to find now who are the candidates in your electorate Google “Candidates of the Australian federal election 2016” and select the Wikipedia link.

    • Henry  

      Also demand to know from the candidates where their preference votes go to. If their preferences go to Labor, Greens or Libs, simply don’t vote for those candidates.

  10. Pamela  

    It’s time the deeming rate dropped to reflect available interest rates!

  11. Peter Knight  

    Malcolm Not in the Middle
    I feel it is my civic duty to highlight the distortions surrounding the debate about taxation in Australia at the present time; May 2016. The middle class are being labelled as rich and are being asked to pay more and more tax whilst the uber rich people in society continue to amass huge fortunes without being taxed fairly and appropriately. I am really fed up to the back teeth with the hypocrisy shown by all sides of politics about this and other issues. No side of politics will address the issue of mounting debt and no side of politics will address the issue of excessive remuneration of company executives. Instead, all the politics revolves around confected concern about welfare dependent people and continual attacks on the reducing wealth of the middle class.
    I am not a socialist and I do believe that people should be appropriately rewarded for their efforts. I don’t have any problem with people amassing large fortunes as long as they don’t force me to pay extra tax in order for them to do so; as is presently being suggested by the LNP. I also believe that responsible Trade Unions are essential in society in order to limit the rapacious attack on ordinary peoples’ entitlements and conditions, undertaken by a few irresponsible CEO’s, whilst they themselves increase their own remuneration to an obscene degree! I also detest the politics of envy practiced mainly by the ALP and the Greens and abhor the suggestion that because someone is middle class, they must be rich. When discussing who should pay extra tax and by how much, I believe it to be a good idea to quote a much admired late American President:
    “Ask not what your country can do for you — ask what you can do for your country”- JFK.
    During the following article I will make continued reference to what I describe as the uber rich. My definition for Uber Rich is anyone with in-excess of $30 million in assets. These people can withstand any major downturn in financial markets without a significant long term affect on their disposable income and asset base. Not only that, these people can take advantage of depressed asset prices to increase their level of wealth during such inevitable market downturns. This situation is NOT available to the middle class. The uber rich are not compelled to use borrowed funds unlike the middle class. When borrowed funds are used for investment, then the risk of investing is magnified significantly. It stands to reason, therefore, that the uber rich should be compelled to pay a wealth tax because they can easily afford to do so without any significant impact to themselves.
    There has been a lot of talk and discussion about why members of superannuation funds should pay tax on earnings above $1.6 million in their superannuation pension accounts.
    The reasons given by the Government for this draconian change revolve around the following misconceptions and deliberate distortion of the facts by the uber rich. People such as the Prime Minister of Australia for instance!
    1. Members who have more than $1.6 million are considered to be rich. FACT; they are not rich they are almost entirely of the middle class. The uber rich don’t need superannuation but the middle class relies on it very heavily.
    2. Members should not bequeath their super balances to dependants on the death of the member, but rather spend it all whilst they are alive. The government supports this idea because it maintains that it wants to stop inter-generational wealth transfer via superannuation. The FACT that no one knows when they are going to die seems to have escaped the attention of the advocates of this belief. The question must be asked; why is it OK to bequeath large capital amounts in the form of the family home tax free to one’s dependants, but not large capital amounts of superannuation? Furthermore, it’s highly unlikely that large sums would be bequeathed by superannuants because of the government’s minimum annual drawdown rules; so where’s the problem? Minimum drawdowns on reaching preservation age, starting at 4-5% and increasing roughly one percentage point every five years or so. This inevitably means that the vast majority of people will exhaust their superannuation savings before they die! As I said previously, where’s the problem?
    3. Members who have more than $1.6 million in superannuation have somehow rorted the system to obtain large savings balances. This is despite the fact that the government has put in place legislation to encourage people to do exactly that. FACT; in order to achieve high balances, people deliberately forewent consumption in their earlier years in order to save for their future retirement and therefore, become proudly self-funded, rather than relying on the government age pension. That’s another way of channeling JFK isn’t it?
    4. The Government has inexplicably decided what tax free amount of earnings is adequate for everyone; this is regardless of the differing prior earnings realities of individuals when those individuals were in paid employment. FACT; if someone has been earning $300,000/annum and paying tax as they go, no one can expect that person to live on 4% of $1.6 million which equates to $64,000/annum. It isn’t reflective of the lifestyle that particular individual has been accustomed to over the course of their working lives. Just because one is retired, doesn’t mean that the bills stop coming in the mail!
    5. No thought has been given to one’s reasonable replacement rate (RRR) of earnings when retired. FACT; the RRR is approximately 65% of prior earnings which happens to be an OECD recommended figure. Take the example of the person earning $300,000 prior to retirement; 65% of that amount is equal to $195,000. A great deal more than $64,000!
    6. The Government has stated that an account balance of $1.6 million in superannuation is equivalent to four times the earnings amount of someone on the age pension. FACT; an age pensioner would receive cash (pension payments) as well as a health care card and aged care assistance when needed. I would say that more than $1.6 million would be required to achieve the same result for a self-funded retiree. With cash at call interest rates at 2% or so and probably going lower, $1.6 million would yield $32,000 with no allowance for inflation. FACT; the aged pension is indexed. Self- funded retiree incomes are NOT indexed for inflation or for any other measure of the cost of living.
    7. The LNP are saying that the revised superannuation rules are not retrospective. I believe I can torpedo that statement with the following simple example; FACT; consider the situation where a member has paid a deposit of say, $100,000 to purchase a commercial property for their super fund prior to budget night 2016. In order to complete the purchase the member was intending to borrow $400,000 outside of superannuation as well as using another $600,000 already in his superfund. If the member had, prior to budget night 2016, already exhausted the lifetime Non Concessional Cap (NCC) of $500,000, then he would not be able to transfer the borrowed funds ($400,000) into his super account to complete the purchase after budget night 2016! This would mean that the purchase of the property couldn’t be completed and the member would lose his deposit of $100,000! Who apart from the uber rich can afford to lose $100,000? If anyone from the government truly believes this scenario isn’t retrospective, then they must also believe in fairies at the bottom of the garden! In any event, it’s all extremely worrying for the continued safe stewardship of the nation.
    The Prime Minister would do very much better in the Australian Electorate by showing true leadership and deciding not to tax the middle class, as he is presently proposing to do; but rather instead, to exercise his power to tax the uber rich; people such as himself for instance. Malcolm Turnbull is not in the middle class, he is in the class of the uber rich. Malcolm is NOT in the middle.
    Please see the following before continuing:
    Why is it that the PM can live in a Sydney-side mansion worth in the vicinity of $50 million or so and pay no tax on that residence? He can bequeath that property as his principle place of residence (PPR) to his dependants with no tax payable. Surely if middle class people have to pay tax on their retirement earnings above $1.6 million, why aren’t the uber rich, people such as the PM, paying tax on ALL of their assets? They are eminently capable of paying some kind of wealth tax and you would think in this era of exciting times, be happy to do so? Quite obviously the PPR is being used by the PM and others as a tax free vehicle to amass huge tax free fortunes. I would say that this activity is a rort and needs to be tackled. I am certain the PM would agree as he is always advocating that it is such an exciting time to be an Australian. Let’s all ramp up the excitement index by levying a wealth tax on the UBER RICH! That would make a lot of people really excited and gives the PM the opportunity, probably for the first time in his life, to truly contribute to his country instead of just selfishly following his self-interest. Remember what JFK so eloquently advocated, all those years ago.
    I would suggest levying a tax on any Principle Place of Residence (PPR) whose value is calculated at more than $10 million. I am sure the PM would applaude this suggestion as it allows him to show true leadership in the area of tax reform. This figure should be indexed on a yearly basis to ensure that the middle class remain exempt and only the uber rich people such as the PM are captured in the uber rich persons’ tax net; as they should be. The tax levied on a yearly basis could be calculated as a percentage of the property’s worth in excess of $10 million. The figure that should be used to calculate the rate of tax, should be the State land tax revenue rates used by all state governments in Australia. Only the value above $10 million should be used for the calculation of the tax payable. If the PM’s PPR is worth in the order of $50 million dollars, this would mean that he would pay in the region of $780,000 NSW State land tax per year. Given that this State land tax is tax deductible, the PM would effectively only be paying 49% of that amount; loose change to the uber rich such as himself. According to the Domain website mentioned above, the compound rate of capital growth on his PPR over his 21 years of ownership, has been in the region of 11.2%/annum and the effective rate of land tax after the tax deduction is approximately 1%, then the PM is still 10.2 % ahead-go Malcolm! This rate of compounded return on his PPR is quite simply extraordinary and what’s more extraordinary, it’s totally tax free to the PM and others of the uber rich! Those that can afford to pay more tax without feeling the pinch, unlike the middle class.
    I believe the $50 million capital value figure of the PM’s residence to be conservative as it doesn’t take into account the extra 600m carved out of the adjacent block and transferred on to Malcolm’s title. His house could be worth $70 million or more, but let’s assume a conservative $50 million!
    The same CANNOT be said for people who are living off the meagre earnings on $1.6 million super pension for 30 years or so and forced by the government as they get older, to withdraw an increasing minimum percentage amount over their remaining lifetimes! It’s quite obvious that they will run out of money far too early because those savings can’t be replenished, unlike the uber rich.
    If there is anyone living in a PPR which is worth more than $10 million dollars and who can show that they can’t afford the wealth tax, then the tax can be levied from the estate on the death of that person. This measure would protect the little old lady scenario who definitely should not be penalised by the excesses of the uber rich; people such as the PM using their PPR’s for excessive inter-generational wealth transfer. Something the government believes the middle class shouldn’t be allowed to do with their superannuation, but is apparently OK for the uber rich on their PPR! Quite simply mind blowing logic and something more akin to the spirit of George Orwell’s Animal Farm novel, rather than the late, great JFK!
    To summarise the above;
    1. True leadership starts at the top where the example must first be set. That is, FIRSTLY the PM, Company Executives and the uber rich; NOT the middle class.
    2. Stop taxing the middle class and instead, focus on the uber rich.
    3. Do not make the superannuation rules retrospective.
    4. If the government insists on changing the rules for superannuation, then for heaven’s sake have some grandfathering provisions for people who have already started pensions etc.
    5. If the government wants to tax peoples’ retirement savings, then it must tax the uber rich before they go after the middle class.
    6. The uber rich don’t need superannuation-just ask Malcolm.
    7. The middle class relies heavily on superannuation in retirement and quite often is the only asset they have, other than their PPR.
    8. Show some true leadership Malcolm and start taxing all assets of the uber rich.
    9. I never thought that I would see the day in Australia when the middle class are taxed more punitively than the uber rich.
    I fear that if the information above is ignored by the PM, instead of channeling JFK, he will be condemned by history as channeling the leader Napoleon from George Orwell’s Animal Farm, when Napoleon says in all earnest; “all animals are equal, but some animals are more equal than others.”
    It’s now up to you Malcolm to make an exciting announcement for the benefit of the middle class!
    Peter Knight SaFin.
    May 2016

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