In last month’s article, we talked about long-term investing as opposed to living in the moment and how a ‘now bias’ can lead to short-term thinking with unintended consequences in the future. Receiving an ever-growing amount of information; solicited and unsolicited that can make us feel good, even motivated and more confident.
The same can be said of making policy decisions, such as the proposed changes to the tax concessions applied to superannuation balance that exceed $3M. Such proposed changes need to be well thought through, backed by facts and allow reasonable time for community and industry consultation.
Quite often in the public arena, the ‘this does not affect me’ factor or ‘this will only affect the wealthy’ prevents us from thinking through what it could look like for many more of us in the future. Comments around ‘superannuation concessions overtaking the Aged Pension costs’ may add to the perception that this all makes sense and needs urgent attention.
However, there is another side to the discussion, which may come from those that have headed the Government’s encouragement through super tax concessions, to be self-sufficient in retirement and not rely upon the Government Aged Pension. This is particularly so for SMSFs, as they are more active in managing their funds, possibly take an interest in utilising all available opportunities to provide for a comfortable retirement and wish to avoid relying on the ‘public-purse’. Yes, some as a result, will have been successful in doing this and may have large balances.
Introducing balance to the discussion, the SMSF Association has raised a number of concerns with the proposed legislation that in the main, centre around the unintended consequences of including unrealised capital gains in measuring earnings – that is, for those with balances over $3M, a tax on what are considered ‘earnings’ that may never eventuate.
Other concerns the SMSF Association has relate to:
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Disclaimer: The information contained in this document is provided for educational purposes only, is general in nature and is prepared without taking into account particular objective, financial circumstances, legal and tax issues and needs. The information provided in this article is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. While SMSF Association believes that the information provided in this article is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the Corporations Act 2001.
Ian Irvine - Guest Contributor
Ian has been a keen investor for over 40 years and can draw on his experiences from both investing on his own behalf and also having worked in financial services for more than 30 years. Over this time, he has seen many changes that impact investors’ attitudes to in what and how they invest.
He started his career in what is now referred to as fast moving consumer goods (FMCG) or grocery, working for an Australian margarine manufacturer. In 1986, he was recruited to Westpac around the time of deregulation of the sector, where he spent 10 years before taking a role at AMP and then with ASX for 14 years up to the end of 2017. He continues to be involved with ASX; working on their educational programs.
In 1996, he and his wife established their own SMSF and again the experience and lessons learned regarding managing an SMSF over the years have provided him with many insights and ideas. He enjoys sharing these with others where these are helpful and always suggest that if an investor or SMSF trustee is unsure, that they should seek appropriate advice from a licenced professional.
Ian holds a B. Com (UNSW), and lives in Sydney and enjoys travelling to and meeting investors and SMSF trustee at the educational events with which he has involvement with from time to time.