Superannuation thread

[happy]

It pays to keep an eye out if you are receiving some govt supplement/rebate/benefit and you are near a threshold. Years ago I was close to a threshold for childcare rebate or a family tax benefit, can't remember which. My employer wanted me to increase my hours just a little, by 4 hours.  I did the math, and sure enough went over the threshold and reduced my net income. She looked at me weirdly when I declined, saying I would take home less money.

[Alchemisst]

I am thinking of changing to hostplus super and 100% stocks: 50% U.S, 50% ex U.S. Does this sound like an ok plan, or is there something else I should consider? Also is it still worthwhile contributing to super more than the 25k concessional amount?

[mspym]

I am thinking of changing to hostplus super and 100% stocks: 50% U.S, 50% ex U.S. Does this sound like an ok plan, or is there something else I should consider? Also is it still worthwhile contributing to super more than the 25k concessional amount?at

Inside v outside super rather depends on your age and when you are looking to retire. The earnings are taxed ta a lower rate but you can't access them before your retirement age. Have you used the Aussie firebug calculation spreadsheet? It was useful to have an Oz specific calculation of how much to put inside super and outside it.

[Abundant life]

I've just heard that the age limit to contribute to super without working has been raised to 67. @deborah I think you mentioned a while back that you regretted not putting more into super, while you had the chance. This might be your lucky day, or not :)

Apparently you can also use the bring forward rule.

[deborah]

Thanks. No, I have the right amount in super at the moment.

There are several changes I’d like to see. One is that people can put the $20,000 back that they took out during the covid19 changes at some time in the future. This would allow early retirees more flexibility if they got the amounts inside and outside super wrong, and wanted to take some out now and have the option to put it back later. As dividends all look to be reduced, having some extra cash around as an emergency for the duration could be very useful.

I wonder if anyone is planning on taking advantage of being able to sell the house you’ve owned for more than 10 years when you’re over 65 and both you and your spouse being able to put an extra $300,000 (from the sale of the house) each into super no matter how much you already have in super and no matter which of you actually owns the house. It must meet guidelines for being your PPOR, but that can be rather flexible.

[Abundant life]

I wonder if anyone is planning on taking advantage of being able to sell the house you’ve owned for more than 10 years when you’re over 65 and both you and your spouse being able to put an extra $300,000 (from the sale of the house) each into super no matter how much you already have in super and no matter which of you actually owns the house. It must meet guidelines for being your PPOR, but that can be rather flexible.

We already downsized before that rule came in and we wouldn't have met the age requirement anyway. We knew people who did so.

An interesting quirk is that you could buy a more expensive ppor and still put the extra into super if you had the money. I think the total super limit per person was still $1.6 million.

[deborah]

I wonder if anyone is planning on taking advantage of being able to sell the house you’ve owned for more than 10 years when you’re over 65 and both you and your spouse being able to put an extra $300,000 (from the sale of the house) each into super no matter how much you already have in super and no matter which of you actually owns the house. It must meet guidelines for being your PPOR, but that can be rather flexible.

We already downsized before that rule came in and we wouldn't have met the age requirement anyway. We knew people who did so.

An interesting quirk is that you could buy a more expensive ppor and still put the extra into super if you had the money. I think the total super limit per person was still $1.6 million.

No, it's EXEMPT from the $1.6million, so if you have reached the limit for the lifetime cap, selling your house and buying another will allow you to put extra money into your super.

[lollylegs]

I wonder if anyone is planning on taking advantage of being able to sell the house you’ve owned for more than 10 years when you’re over 65 and both you and your spouse being able to put an extra $300,000 (from the sale of the house) each into super no matter how much you already have in super and no matter which of you actually owns the house. It must meet guidelines for being your PPOR, but that can be rather flexible.

I had planned to do this, sell our house & downsize into the IP and add that money to super. But hubby has changed his mind about moving which has mucked up my plans a bit.

[kaetana]

My husband and I haved moved from Australia to the Netherlands, and we've both left superannuation accounts. I'm trying to figure out if there are any changes I need to make to optimize our supers given that we're no longer residents for tax purposes.

My husband is over 60 and he has retired. He's withdrawing the minimum amount from his super as an income stream (currently 2% due to COVID-19), and this income is not taxed due to his age. If I understand correctly, though, any earnings through super investments are still taxed at 15%. Given this, should we consider still contributing to his super? If we invested that money outside of super, investment earnings would be taxed at 32.5% (non-resident rate). Of course we can always just keep money in our offset account to reduce mortgage interest.

Since I'm nowhere near preservation age, I've basically been treating my super as money I likely won't need by the time I can access it. That's the plan, anyway. I looked into potential early access due to COVID-19 but I don't believe I qualify due to my continued employment (through a non-Australian company).

Is there anything I'm missing that I should be considering?

[Alchemisst]

Is anyone using hostplus for super? I am trying to emulate VTS/VEU which is what I have outside super, I see they have 1 choice called international shares and one called Int shares, but don't really explain the difference between them.

[Abundant life]

Is anyone using hostplus for super? I am trying to emulate VTS/VEU which is what I have outside super, I see they have 1 choice called international shares and one called Int shares, but don't really explain the difference between them.

I'm with Hostplus pension, which is in Indexed Balanced (a variety of index funds) and cash from which I draw the pension. I chose this as Scott Pape recommends the Indexed Balanced because of the low fees.

[Alchemisst]

Is anyone using hostplus for super? I am trying to emulate VTS/VEU which is what I have outside super, I see they have 1 choice called international shares and one called Int shares, but don't really explain the difference between them.

I'm with Hostplus pension, which is in Indexed Balanced (a variety of index funds) and cash from which I draw the pension. I chose this as Scott Pape recommends the Indexed Balanced because of the low fees.

How does it compare to hostplus normal super, what's the difference?

[mspym]

Is anyone using hostplus for super? I am trying to emulate VTS/VEU which is what I have outside super, I see they have 1 choice called international shares and one called Int shares, but don't really explain the difference between them.

I'm with Hostplus pension, which is in Indexed Balanced (a variety of index funds) and cash from which I draw the pension. I chose this as Scott Pape recommends the Indexed Balanced because of the low fees.

How does it compare to hostplus normal super, what's the difference?

The proportions of where the money is held eg bonds/stocks, australian/overseas, corporate /govt that make up the index. You know, as per the very large PDS that they jazz up with some tables and charts explaining the make-up of each fund?

I don't read investment books for fun, but spending a few hours coming up with my personal investment statement, including a rough breakdown of what ratio of holdings let me sleep at night, was worth the effort. I could then go through the PDS and look at the breakdown of the various funds and decided that
1- the Indexed Balanced matched my preferred investment profile and
2- I didn't want to faff about with constructing a profile for myself out of their other funds  and then have to futz about rebalancing. I had done that for about 3 years in my Vanguard acct before moving to a premade index.

You need to know the basics about investing - enough to read a PDS - and about yourself - what risk you are comfortable with, how much effort you are prepared to put in/what you find fun.

[Abundant life]

Is anyone using hostplus for super? I am trying to emulate VTS/VEU which is what I have outside super, I see they have 1 choice called international shares and one called Int shares, but don't really explain the difference between them.

I'm with Hostplus pension, which is in Indexed Balanced (a variety of index funds) and cash from which I draw the pension. I chose this as Scott Pape recommends the Indexed Balanced because of the low fees.

How does it compare to hostplus normal super, what's the difference?

The proportions of where the money is held eg bonds/stocks, australian/overseas, corporate /govt that make up the index. You know, as per the very large PDS that they jazz up with some tables and charts explaining the make-up of each fund?

I don't read investment books for fun, but spending a few hours coming up with my personal investment statement, including a rough breakdown of what ratio of holdings let me sleep at night, was worth the effort. I could then go through the PDS and look at the breakdown of the various funds and decided that
1- the Indexed Balanced matched my preferred investment profile and
2- I didn't want to faff about with constructing a profile for myself out of their other funds  and then have to futz about rebalancing. I had done that for about 3 years in my Vanguard acct before moving to a premade index.

You need to know the basics about investing - enough to read a PDS - and about yourself - what risk you are comfortable with, how much effort you are prepared to put in/what you find fun.

Thanks mspym for the explanation :)

The Hostplus normal super performs slightly better. I wanted index funds, after reading JL Collins and Scott Pape.

Prior to Hostplus I was with ING Super while in the accumulation phase, where I chose the index funds myself, and had to re-balance. Then they decided to raise the fees, (they thought I shouldn't be bothered as I was doing ok)! So I rolled over to Hostplus.

[lush]

Hi - I am in the default Hostplus Balanced Fund and have been thinking for awhile now to move it over to the Balanced Indexed option, just because of I am a fan of index funds. Any one else done that / thinking to doing the same? Cheers

[Alchemisst]

I'm in the international index and international index (hedged) which I think is similiar to VGS and VGAD

[MrsV]

Hello! Long time lurker. I've got so much going through my head right now - from investing in Index funds outside of Super to trying to work out if ER at ages 52 for me and 54 for my husband (5 years from now) is even possible! But, for now, I saw this Superannuation thread and hoped I could put something out there that has been bothering me.

I'm in Westpac's BT Super. I have $620,000 stashed away there. There is a good chance I won't have any employer contributions as my job (in travel) was pretty much killed off by Covid, but I did have a side business I'm trying to build up to replace Job Keeper when that finishes in March. With my focus now on ER and all our money in super and our Primary House, I figure if I can make this business work to replace my wage and then some, I should be diverting money to Index Funds and not my super which, I think, should mature from its current figure to a reasonable sum just over the next 13 years I have ahead before being able to access it. My husband has $250,000 in his super and should have employment for the next five years so even without him contributing there should be another $75,000 poured into his account before any market returns and compounding.

My question is - I know BT gets a lot of bad flack for its fees and I think they may even have been recently handed a warning notice from ASIC. What Superannuation funds to people suggest these days? I know Host Plus has been talked about a lot here - is it still a good one, and at my age, is there an investment offering from them that I should start to study?

Thank you in advance for any help - while I'm working through our situation outside of super to figure out whether retiring in 5 years is possible, it would be good to at least get this important part of our investment lives sorted.

[mspym]

@MrsJ Hello and welcome onboard. I can't recommend a Super fund - ex-banking industry pounded that one in my head - but BT always positioned themselves as a premium brand and I expect their fees still reflect that.

I recommend playing around with the Aussie Firebug https://www.aussiefirebug.com/australian-financial-independence-calculator/ which is excellent for working out how much to invest inside and outside of Super. In my case, I need to move from primarily investing outside of Super to increasing my Super holdings and allowing it to compound between retiring and accessing it. I am aiming to get a similar amount in there as you currently hold.

[MrsV]

Thank you - I will definitely have a look at that calculator!  I’ve got so much to learn with index funds too (had no idea there were so many under vanguard alone!). But if I can sort this super to work it’s hardest over the next 13 years it is a big thing to tick off the list. Thank you again.

[deborah]

Hi @MrsJ . The best performing funds vary from person to person and year to year! Have a look at https://www.superguide.com.au/comparing-super-funds/best-performing-super-funds

However, maybe you should go back to basics, develop an investment plan, https://moneysmart.gov.au/how-to-invest/develop-an-investing-plan, decide when you want to retire, and work out where your money should be before you do. What types of investments you’re happy with, and which ones you think are too risky. Depending on your own experience, you will be happy with different types of investments than everyone else. Many types of investments are available in superannuation funds, and once you’re happy that you want a particular mix of investments you can then work out which ones you want inside and outside super. It may be that super funds provide everything you want, or that you want to set up an SMSF and purchase investments within it - you appear to have enough money between you that financial advisers may think it worthwhile.

From your post, as @mspym says, you’ll need some investments (which may be cash - you need to work out the investment type that works for you) to last you for the years between retirement and when you can access super, but the majority of it (in your case) should probably be in super.

[MrsV]

Thank you very much Deborah! I'll check out that site and try to get DH involved in a bigger plan (right now it is more me, he commented he is so happy I'm taking such an interest in all this!).

[Abundant life]

Hi Deborah, I was reading your quote below on the Australian Investments's thread on defined benefit pensions:

A defined benefit pension counts as

16 x annual pension

towards your transfer balance cap. If you expect to be near your transfer balance cap, this may be a problem, especially if both of you have residual defined benefit pensions that, when added together may break the transfer balance cap after one of you dies.

Depending on the pension, it can be worth more or less. Is it indexed to inflation? Does it have a residual benefit - for instance, some public service DB pensions give 65% to your widow(er), whereas some give nothing, and some give a lump sum... The thing you need to look at is its value to you, which might be completely different.

Most pensions are pretty poor value to a FIREee, because they look at your income in your last years of work at the company and work out the pension amount from that. Anyone who leaves early is penalised, and many have a different (more generous) calculation if you reach retirement age.

On the other hand... Some of them assume that you retire at 55, and can give you an earlier retirement stream than most super. They can also be worth more if you’re retrenched. If they’re indexed to inflation or cost of living, they can provide a certain income, no matter what investments do. So if you’re not retiring particularly early, they can be really good value.

These don't apply to us, but I think they're what our teacher friends and other public servants have?

Is there any benefit to adding after tax money to such a fund? Are you even able to top them up? They appear to be fabulous if you live a long time, but then your spouse only gets a percentage if you die early and your children get nothing unless they are dependents?

With inheritances in mind are people better off having an industry fund as well as the defined benefits fund, (assuming you can't opt out of the defined benefits fund) so to protect your assets?

[deborah]

DB funds used to be available from many large organisations as well as the various public sector organisations. Once DC (defined contribution - which most funds now are) funds started to be available, a lot of DB funds were closed to new members, because they were costing much more as (if you stayed until you retired) they tend to give people more money. The public sector organisations seem to be about the last places that still have any DB funds available, but a lot of them have also been closed.

Again, it depends on the fund. I have been in three DB funds during my working life. The first two didn’t allow you to add anything to them, so you would need to have a different fund for any extra contributions. If you left these before retirement age, you would be removed from the fund and given a superannuation cash out, to be transferred into another fund. This was about the same amount as I’d put in, with very little interest. I would have been much better off in a DC fund.

The third fund allowed extra contributions of two sorts - either as pre tax money that allowed you to multiply your pension benefits, or as post tax money that effectively went into a separate DC fund. The pretax contributions were very worthwhile but the post tax DC fund wasn’t worth it, so I put that money into a different fund. As I was closer to retirement age and I was retrenched (the fund had higher benefits for people who were retrenched), this was an excellent fund to be in.

Inheritance is definitely better for DC funds. However, the government gives the tax breaks to superannuation on the understanding that it’s going to be used during your lifetime and not inherited. The transfer balance cap is one way of them clamping down on superannuation being used for inheritance. I suspect that there will be future regulations to reduce inheritance even more.

All the DB funds I know of that still exist can be opted out of - and I think it might be contrary to the legislation if you couldn’t, since you are supposed to be able to chose your super fund. Whether a DB fund is worthwhile really depends on how old you are, and how long you expect to work there.

[WTPF]

Hi,

We're FI but working semi casually whilst waiting for our boys to fly the coup (one just finished high school and looking at doing gap year with defence force and other is midway through uni with a year or so to go) before we hopefully retire at the Sunshine Coast. I'm still 10 years off preservation age, but believe we have enough funds outside of Super to see us through until we can access super. As such we've been maxing out concessional contribution ($25K pa for both wife and I) plus pumping additional non concessional into my wife's super as she has a lower super balance than me (ironically most of the investments outside super is in her name as I was / am the higher income earner). As it stands we're about 7% HISA, 44% investments outside super; 49% in super. I'm with Hostplus and wife is with QSuper and would rollover to Vanguard Super if it gets off the ground.

The question I have is upon retirement, Super goes from Accumulation to Pension stage. What strategy is being used to manage the mandatory drawdown (4% to start with) to avoid selling investments in depress markets especially if the drawdown is more than is required due to investments outside super. I haven't looked into it but heard that with Covid the government has reduced the mandatory drawdown amounts.

Peter Thornhill's strategy is investing in LICs with the cashflow going into a cash account (2 years living expenses) within super which they use for their mandatory drawdown but I believe he would have a SMSF. How do everyday people without SMSF do it.

Is it as simple as setting up a "cash" investment within Super so that proceeds from other investment options are paid to the cash investment account for the compulsory drawdown (ie can nominate where the drawdown comes from). Also is there any reason to leave money in the Accumulation phase rather than moving 100% into Pension stage (I realise that you can only move up to the threshold of $1.6 million which we are not in that position).

Lastly, is there a reason to move investments from outside super into super as we get closer to preservation age (selling to put into super would incur capital gains tax). As we each can earn up to $18k tax free pa and a large portion of our investments outside super are in International Vanguard Wholesale indexed funds (lower dividends compared to Aust shares but without franking credits), it's not like we're getting a huge tax penalty due to the distributions. Together with the 4% compulsory drawdown from super this should easily meet our yearly expenses.

Thanks for hearing me out

Thanks
WTPF

[Abundant life]

Hi WTPF,
I've struggled with a lot of your concerns and found JL Collins' website helpful (although US based rather than Aust).

The question I have is upon retirement, Super goes from Accumulation to Pension stage. What strategy is being used to manage the mandatory drawdown (4% to start with) to avoid selling investments in depress markets especially if the drawdown is more than is required due to investments outside super. I haven't looked into it but heard that with Covid the government has reduced the mandatory drawdown amounts.

Is it as simple as setting up a "cash" investment within Super so that proceeds from other investment options are paid to the cash investment account for the compulsory drawdown (ie can nominate where the drawdown comes from).

I keep a certain amount in cash to cover the pension draw down, two or three years worth, allowing the balance in Hostplus' index balanced to keep growing. I can top up the cash component when it gets low.

The government allowed halving the drawn down percentage after the market took a dive with covid, but I think it is only until the end of the financial year and it was optional. I don't expect it to continue after the market has bounced back.

Also is there any reason to leave money in the Accumulation phase rather than moving 100% into Pension stage (I realise that you can only move up to the threshold of $1.6 million which we are not in that position).

While in accumulation your interest/dividends are taxed at 15%. Once in pension there is no tax (so far).

Lastly, is there a reason to move investments from outside super into super as we get closer to preservation age (selling to put into super would incur capital gains tax). As we each can earn up to $18k tax free pa and a large portion of our investments outside super are in International Vanguard Wholesale indexed funds (lower dividends compared to Aust shares but without franking credits), it's not like we're getting a huge tax penalty due to the distributions. Together with the 4% compulsory drawdown from super this should easily meet our yearly expenses.

Once you stop working you only have certain ways you can add to your super. eg downsizing your house enables you to put in $300K each - I don't think there's an age limit. There are other ways: after tax lump sums - it used to be $540K but reduced to $300K over a 3? year period. (I don't know if there's an age limit).

Bear this in mind if you are likely to receive an inheritance in the future, it might change your strategy in the short term. There are others here who are definitely more expert than me. :)

[WTPF]

Thanks for replying "Abundant Life"

I've struggled with a lot of your concerns and found JL Collins' website helpful (although US based rather than Aust).

Yes, I'm a fan of Mr Collins and have read "Simple Path to Wealth" as well as this Stock Series on his blog. He talks about increasing bond allocations in retirement to stable the ship but I don't see much of an advantage in bonds over HISA in Australia. I know people say there isn't much difference between using dividends vs selling investments if the total return is the same but I quite like Thornhill's approach if LICs can consistently churn out 6.5% dividend yield inclusive of franking credits (but nothing that I have not owned any LICs to date). His argument is that LICs can smooth out the cashflow by withholding dividends and the cashflow is less sensitive to market movements (although I note many companies have cut dividends with Covid so there is always an exception). In other words live off the dividends without selling the underlying investment. Pity Vanguard doesn't have an Aust Industrial Index fund as I agree with criticism that ASX200 is too heavy on banks and resources.

While in accumulation your interest/dividends are taxed at 15%. Once in pension there is no tax (so far).

Yes, I was aware of that. So there is really no reason not to transfer everything from Accumulation to Pension stage aside from having to put up with the mandatory withdrawal. But I guess if you have to withdraw it and invest outside of super (surplus to needs) and you've exceeded the $18K tax free threshold then you're taxed at 19% which is more than the 15% if retained in the accumulation phase.

Once you stop working you only have certain ways you can add to your super. eg downsizing your house enables you to put in $300K each - I don't think there's an age limit. There are other ways: after tax lump sums - it used to be $540K but reduced to $300K over a 3? year period. (I don't know if there's an age limit).

But why would you want to add to super after you stop working. Yes I know in pension stage there is no tax on earnings. Hence my original question about putting investments in from outside super leading up to preservation age but to balance that against the capital gains tax incurred.

[mjr]

I retired at 52 and I continue to add my $25k concessional contributions to super (from dividends and cash reserves).  It brings my taxable income down.

Regarding keeping cash to pay drawdown, I have an SMSF so I can do what I like.  But I manage Mum's super pension, her fund allows me to specify what percentage to keep in the cash account, so I could fiddle that to load it up if I was convinced that the market was soon to take a dive and I wanted to not have them sell units.  But I don't worry about that.

Your post is well-written and thought out.  A pleasure to read.

[marty998]

Would hazard a guess the current very generous tax treatment of pension fund earnings is not going to last forever. Suspect it will be adjusted back to 15% soon enough.

I don’t think you’ll have much to worry about WTPF. My parents have been drawing a super pensions for almost a decade now... their balances are much higher than when they started, because over the long term, investment returns are much higher than the 4-5% draw downs in the early years.

Even if you have to invest outside of super with the excess that you don’t spend, you’ll still get your franking credits, meaning you can still earn almost 80k(?) each before paying cash tax.

It pays to be an old fart in this country.

[mjr]

You'd hazard a guess, or your politics/ideology want it to be removed ?

A shot at franking credits (although I can't work out what the shot is) and denigration of old farts.  I get a vibe of a disgruntled young person railing at how good the boomers have it.

Also, pllease show us how a couple can earn $160k tax-free outside of super, I'm genuinely interested in that one.

[marty998]

Not very hard to see... $80k in fully franked dividends, gross it up for ~$35k franking credits.

Apply marginal tax rates, less franking credits equals $0 cash tax paid.

As to your other comments, there’s been a bit of commentary lately about the current government’s ideological position of basically wanting to dismantle the super system (see Tim Wilson). Throw in the mix ACOSS who are suggesting a 15% rate so that boomers actually contribute meaningfully to the increasing cost of their own age care and their isn’t much love for super on both sides.

Genuinely horrifying the entitlement of boomers who don’t want to pay any tax at all because... why? What is the actual equitable argument for unearned passive income for a 60 year old being tax free, and employment or business income from a 40 year old not? I’m yet to hear it.

[WTPF]

Not very hard to see... $80k in fully franked dividends, gross it up for ~$35k franking credits.

Apply marginal tax rates, less franking credits equals $0 cash tax paid.

I must be a bit slow because I have trouble coming up with that figure as well. Franking credits is basically getting back the 30% tax that has already been paid by the company providing the distributions.

The lowest marginal tax of 19% applies for income over $18,201. This figure also equates to the maximum dividend prior to applying franking credit before tax is payable. To work out the total income inclusive of franking credit before tax is payable would be as follows:
Total * (1 - 0.3) = $18,201.
Total * 0.7 = $18,201
Total = $18,201 / 0.7
Total = $26,001.

So the franking credit portion would be $26,001 * 0.3 = $7,800
So dividend of $18,201 plus franking credit of $7,800 = total income of $26,001 with no tax payable
So for a couple = $26,001 * 2 = $52,002

That's a long way from your $80,000 * 2 = $160,000 pa for a couple

Note also that the above is based on investments having 100% franking credits. International shares have no franking credits.

Happy to be be corrected

Cheers
WTPF

[marty998]

The point is you don’t pay the company tax in cash.

Yes if you look at it from the “all in” perspective the company tax is indirectly paid by you, but from a cash flow perspective it’s not.

If you receive $70k in fully franked dividends cash, only accountants will tell you you have an income of $100k. After franking credits you don’t owe cash tax payable.

You can argue that you’re the one paying the $30k corporate tax but I’d argue you haven’t really “earned” it or “paid” by passively holding shares.

I don’t think I’m going to change anyone’s mind here, just making the point about your cash position vs your accounting position.

[Abundant life]

Thanks for replying "Abundant Life"

I've struggled with a lot of your concerns and found JL Collins' website helpful (although US based rather than Aust).

Yes, I'm a fan of Mr Collins and have read "Simple Path to Wealth" as well as this Stock Series on his blog. He talks about increasing bond allocations in retirement to stable the ship but I don't see much of an advantage in bonds over HISA in Australia. I know people say there isn't much difference between using dividends vs selling investments if the total return is the same but I quite like Thornhill's approach if LICs can consistently churn out 6.5% dividend yield inclusive of franking credits (but nothing that I have not owned any LICs to date). His argument is that LICs can smooth out the cashflow by withholding dividends and the cashflow is less sensitive to market movements (although I note many companies have cut dividends with Covid so there is always an exception). In other words live off the dividends without selling the underlying investment. Pity Vanguard doesn't have an Aust Industrial Index fund as I agree with criticism that ASX200 is too heavy on banks and resources.

While in accumulation your interest/dividends are taxed at 15%. Once in pension there is no tax (so far).

Yes, I was aware of that. So there is really no reason not to transfer everything from Accumulation to Pension stage aside from having to put up with the mandatory withdrawal. But I guess if you have to withdraw it and invest outside of super (surplus to needs) and you've exceeded the $18K tax free threshold then you're taxed at 19% which is more than the 15% if retained in the accumulation phase.

Once you stop working you only have certain ways you can add to your super. eg downsizing your house enables you to put in $300K each - I don't think there's an age limit. There are other ways: after tax lump sums - it used to be $540K but reduced to $300K over a 3? year period. (I don't know if there's an age limit).

But why would you want to add to super after you stop working. Yes I know in pension stage there is no tax on earnings. Hence my original question about putting investments in from outside super leading up to preservation age but to balance that against the capital gains tax incurred.

WTPF I learnt more from your reply :)
 
My response was coloured by our own experience as baby boomers with a low income background from a not for profit, and super only coming in half way through my husbands career. Many of our friends don't seem to have had an easy ride either.

We are not typical baby boomers as portrayed by some who could afford to attend uni when education was free. When I did attend as a mature aged student I paid upfront despite encouragement to get a hecs debt as it was, 'a debt that died with you'.

We worked three jobs each to raise the money for a house deposit and that was for a house outside the metropolitan area, when finance was not as easy to get as it is today. After paying off our first house in 13 years on one income by careful management, I approached a bank about a mortgage with a view to moving closer to the city. I was told we couldn't afford it and they recommended we sell and rent!

It was unheard of for ordinary people to invest in the stock market, that was the domain of the wealthy. The best you could hope for was an investment property when you paid off your own home.

Sorry to get off track.

Most of our super came from downsizing and everything was reasonably set until I received an inheritance in the last year.

[urbanista]

Would hazard a guess the current very generous tax treatment of pension fund earnings is not going to last forever. Suspect it will be adjusted back to 15% soon enough.

A much better policy would be to limit the ability to draw large lumpsums from super. If super income going to be taxed,  people can draw lumpsums between 60-67y.o. to gift to children, upgrade property and cars as well as hide cash under the mattress, then claim age pension at 67.

[Abundant life]

Would hazard a guess the current very generous tax treatment of pension fund earnings is not going to last forever. Suspect it will be adjusted back to 15% soon enough.

A much better policy would be to limit the ability to draw large lumpsums from super. If super income going to be taxed,  people can draw lumpsums between 60-67y.o. to gift to children, upgrade property and cars as well as hide cash under the mattress, then claim age pension at 67.

Holding assets outside of super would be a cheaper option if the funds are going to be taxed anyway, (depending on your tax bracket). IIRC my husband is paying around $40 per week in fees in an industry fund for his super pension, which was about what we were paying for private health insurance at the time.

Also it might not be to upgrade property and cars, but for costly repairs to older homes or to replace an older unreliable car, or pay out of pocket medical expenses.

Centrelink count assets and income in and out of super and it is usually painful dealing with them. Advice seems to depend on who you deal with, leaving the client bewildered. Unequal rules: you've been overpaid? we will garnishee your pension until it is paid; you've been underpaid? we will only backpay you 3 months, too bad you didn't notice earlier.

They also want to know what you've done with your money, there are limits to how much you can 'gift' to children. You've divested yourself of assets? you have to wait 5 years to apply for the OAP.

Personally I'm glad my head is out of the Centrelink noose.

[WTPF]

Hi.. Does anyone know if there are issues with rolling over super in pension stage to another fund. My parents found out that due to stricter regulations their financial advisor is doubling his fees to over $3k pa. On further investigation, I was aghast to discover their super is with Colonial First State and invested in over 15 fund managers in various asset classes (finger in every pie with emerging markets, bonds, international equities, Aust equites, fixed interest, property, cash etc) with exorbitant MERs. I compared what they would pay in Hostplus investing in index funds equivalent based on simplifying to 3 funds between international, Australian equities and cash and based on their balance they would reduce fees from $5.5k (including advisor fees) to less than $500 pa with Hostplus. They are receiving part pension. I told them to speak to current advisor as well as Hostplus but main concern is that the rollover process doesn't impact their pension or leave them with a tax bill (wouldn't expect to as super in pension stage has no taxes). They are in their mid 80s in good health and active. Thanks

[marty998]

Hi.. Does anyone know if there are issues with rolling over super in pension stage to another fund. My parents found out that due to stricter regulations their financial advisor is doubling his fees to over $3k pa. On further investigation, I was aghast to discover their super is with Colonial First State and invested in over 15 fund managers in various asset classes (finger in every pie with emerging markets, bonds, international equities, Aust equites, fixed interest, property, cash etc) with exorbitant MERs. I compared what they would pay in Hostplus investing in index funds equivalent based on simplifying to 3 funds between international, Australian equities and cash and based on their balance they would reduce fees from $5.5k (including advisor fees) to less than $500 pa with Hostplus. They are receiving part pension. I told them to speak to current advisor as well as Hostplus but main concern is that the rollover process doesn't impact their pension or leave them with a tax bill (wouldn't expect to as super in pension stage has no taxes). They are in their mid 80s in good health and active. Thanks

No issues. They may eat a small exit spread on redeeming out of the CFS funds, but that will be less than the ongoing fees.

I will say however, CFS have some index products (Aus Equities, Aus Fixed Interest, Aus Property Securities) and, combined with their mySuper option may be just as comparable with Hostplus on fees. However with CFS you'll still pay the advisor and possibly the wrap/administration fees, which will reduce the value proposition compared to industry funds.

I am with Australian Super. It bears pointing out that Australian Super's equities options have outperformed their benchmarks over the long term. There may still be a place for active management... and for high fee options where there is significant outperformance. Can't say which fund, but there is one industry fund mandate my organisation has where we basically tripled the value of the mandate and triggered an outrageously large performance fee.

The industry fund was unhappy because even though their performance figures would be significantly turbocharged, their fees expense ratio would go up and their members (many of whom are part of the FIRE community here) would leave because they only look at fees and not performance.

It's an odd mentality that has been instilled in parts of the FIRE followers.

[marty998]

A reminder to everyone who wants to do this before June 30 to pay their super contributions tomorrow to be able to have enough time for their fund to receipt the money and for you lodge your notice of intent to claim a deduction forms so you can use your carry forward contributions cap space.

[kiwiozearlyretirement]

I have a question about in specie transfers of shares.
We have been buying shares outside of super and now want to transfer them to our SMSF. The form I have looked at asks for the date of purchase. This implies you can only transfer a 'bundle' of shares you bought on a certain date meaning a form and a fee for each bundle.  For example if we bought 100 shares on 01/07/21 and 100 on 02/07/21 do we need to do 2 forms and incur 2 fees {$55 from my sums platform). This will be laborious as we want to transfer quite a lot while the markets are down to reduce CGT.
Has anyone done this?

[kiwiozearlyretirement]

Ok so I ended up answering my own question after multiple phone calls.

You can do an off market transfer form and if it is all the same share/ETF you only need the one form. You just nominate how many shares and then pick an average date or the date when you bought the bulk of them. I ended up transferring all the shares we had bought in the last 12 months as they are all worth a lot less now and I figure it’s better to have them inside super at a lower price now than have to pay the considerable cgt bill they will incur in later years.
 But when you do your tax return you will have detail all  the different bundles of shares to do the CGT calculations.