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Survey on super changes and your investing

Many commentators are comparing the current potential for a couple to place over $1 million into super by 30 June 2017 with the Peter Costello top up of a decade ago. On 5 September 2006, the then-Treasurer said, "People will be able to make up to $1 million of post-tax contributions between 10 May 2006 and 30 June 2007."  The inflow to super was unprecedented, as documented in this article. In 2007, SMSFs alone received contributions of $70 billion compared with only $20 billion in 2006.

The timing could not have been worse. It was at the end of a massive bull market which had started over four years earlier in March 2003, creating great confidence in equities as a place for retirement savings. We all know what happened next.

Source: Yahoo Finance

On 1 November 2007, the All Ordinaries Index peaked at 6,873 (versus its current level of about 5,800) and then the GFC hit, destroying the retirement plans of thousands.

Anecdotal evidence from super funds and advisers this time confirms the flows are strong but nowhere near the levels of 2007. Most of the investments are into balanced funds or in line with the usual allocation weightings where the Australian shares component is less than 30%. There is also far greater wariness of super following years of rule changes, and less of the blind optimism of 2007 as we are not on the back of a confidence-inducing rally.

According to the latest Westpac/Melbourne Institute survey of the 'Wisest place for savings', desire for shares has been falling since 2004 while bank deposits and repaying debt are strongly favoured. Superannuation (which is an investment vehicle, not an asset class) has kicked up strongly recently but from a low base (data is for the general population, not retirees and high net worths).

Source: Westpac/Melbourne Institute, AMP Capital

There's little evidence of super-injected flows pushing up Australian shares this year, perhaps also countered by tax-selling to realise capital losses at this time. Those who were hoping for a supercharged rally in the ASX underestimated the structural changes since 2007.

To find out what our readers did with their super as a result of the changes, we are running this short survey, and the results will be published next week. To show the opportunities available prior to 1 July, here's a peek at one of the questions:


Graham Hand is Managing Editor of Cuffelinks.


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June 24, 2017

In relation to the leading point, "Many commentators are comparing the current potential for a couple to place over $1 million into super by 30 June 2017 with the Peter Costello top up of a decade ago., ...", it will be interesting to compare the time between the Costello announcement and the start of the GFC, to the time between now and the start of the next big downturn.

Personally, I moved significantly to cash over a year ago and have missed out on the intervening market returns since then (ouch), but I won't be returning to risk-based assets any time soon.

Graham Hand

June 23, 2017

Over 300 responses, thanks, including:

Super much less attractive now due to legislative risk and the death tax no one talks about for any taxable component going to adult children. I'm winding super back in favour of personal negatively geared investments. The party is over and you can't trust politicians where there's a big pot of money.

I feel the same frustration as many others at the caps that have been legislated. The Govt seems to be at the mercy of Treasury "modelling". Surely allowing people to live off their super by enabling them to invest more funds into their schemes will save on Govt pension outlays. Yes, I know there is some lost revenue for the Govt but people also feel better supporting themselves.

The Transfer Balance Cap is an obviously a temporary measure designed to last approximately 5-7 years (i.e. at least two elections) as part of the process of a having a flat taxation rate across superannuation, that is, having the retirement phase taxed at the same rate as the accumulation phase.

I think it is pertinent to have good investments outside super as well. You can't trust governments!!

Trust in superannuation for the future has been destroyed by constant government milking, to avoid hard tax decisions now.

Still attempting to recover from the GFC . However this now appears unlikely unless take on extreme risk and as now in pension mode reluctant to go to that stage.

The cap needs to be lifted to allow more people to increase their balance to are level that will sustain a good standard of living.

I think the government is very short-sighted with these changes. By limiting our ability to contribute more money, ourselves, into our superannuation only ensures that people will have to access at least some age pension in their retirement. Thus ensuring that people stay dependent on government welfare. The very thing the government claims it is trying to reduce. This makes no sense at all.

Changes did nothing for already retired people wanting to add to their SMSF. Even though Scott Morrison promised to allow retiree's to add to their SMSF.

I'm not tax driven, but invest where I feel best convenience and best risk/reward mix. In pension phase of super other than what I want as fully liquid.

Also plan to even up the contributions between me and my spouse, to guard against one of us hitting the $1.6m cap in the future.

More survey comments

June 23, 2017

In pension phase so sold shares with large non-realized cap gains & build Cash balance for start of Accumulation a/c.

Wife was convinced she met work test, hence the additional funds were to take advantage of that, and to recontribute to her accumulation from my above cap pension

Made major withdraw and re-contribution due to abolition of anti-detriment payments

Sold most shares bought before 9 November 2016 plus sold some shares bought since then with nice profits where suspected that share price likely to fall soon. Also withdrew and recontributed to take final advantage of 3-year carry forward rule to turn taxable amounts into non-taxable amounts.

The limit of the 3yr non conceesional bring forward rule and its effect of transferring funds into super from the subdivision and sale of 50% of the Principal Place of Residency land and it also being compressed and restrictive because of age limits and work test rules for contributions into super in general.

diverted new contribution money from super into insurance bonds

I have sold down all assets carrying notional capital gains while the fund was wholly tax free. The resetting rules are complicated and will be a headache, especially for complicated assets such as instalment warrants. I have held back notional losses until the new year so they can shelter gains when the fund is taxable. My investments will rely far less on income investments and will take advantage of growth assets now that not all assets need to fund the 4% minimum income stream..

Stopped investing in equities.

2 member fund. both in pension mode (1 a TRIS). Previously segregated assets. Then unsegregated as all in pension mode. Now need to stop TRIS. Has mucked up the accounting of the fund re segregation.

Moved $700K out of non super into super for the caps

This has entailed moving from the normal asset allocation to liquidate some holdings to fund the transfer. After the transfer has been done, the asset allocation in the super fund will significantly vary from normal long-term asset allocations.

Keep changing goal posts. So now have portfolio outside super.

I rolled my pension components out of SMSF to an Industry fund and now have SMSF in accumulation only

Began a defined benefit pension stream

actions take place around 30June/1 July

suddenly we are taxpayers again. vis. ST vs LT gains, Gains vs yields, massive increases in accountant charges

Changing asset allocation over time to get more imputation credits to offset 15% tax on earnings in TTR accounts

More cash for pensions due to 12 month 100 CGT post CGT releif

Re balanced members balances to take advantage of the higher NCC limits in this FY

Sovereign risk of continued Government retrospective changes to Super mitigated against switching to accumulation

contributed Non Concessional amount to spouses super account due to pending $1.6M tax free pension cap limit

Graham Hand

June 22, 2017

Already over 200 survey responses, thanks. Here are more comments.

Investors have a 40 year period in mind for their superannuation - the government has a 4-year time frame, and ne'er the two shall meet...

These changes are short sighted and over time will increase reliance on the Aged Pension instead of reducing it. Also younger investors are now wary about investing money into super and are lokking at alternatives.

The 15% tax on transition to retirement pension would have hit us hard a few years ago. I'm sorry for those who recently found themselves out of work and took up transition to retirement thinking it was just enough to live on.

Much of the commentary on these changes has been like listening to pigs squeal when you pull their snouts out of the trough.

I agree with the caps as the tax system is too heaving weighted in favour of oldies .

There is too much meddling with super rules and the cap of $1.6m is certainly retrospective legislation in its impact. This has caused loss of earning and time consumption which is the lesser evil to paying tax on the earnings on capital in excess of $1.6m

the changes have made super more complicated, and without an advisor to difficult.

Super Survey comments

June 22, 2017

Prepared to change investments to more conservative option to utilise the First Home Saver Super Scheme.

CC cap reduction means have to reduce our salary sacrifice contribs by $10K each and considering directing this to an investment property.

Withdrew funds from my name and re-invested in wife's name both to equalize non-concessional and also to be under $1.6.

part re-jigged portfolio to higher growth/lower dividend paying stocks

Changes have made it more complex where people will need a SMSF specialist to comply, likely greater breaches... The $25,000 concessional contribution limit is a joke given average weekly earnings. In today earnings its likely to earn little future income after tax etc. Also the adjustment mechanism to various limits should be clear and precise further to the future.

These $1.6M Cap changes will involve our 2 person SMSF paying in excess of $25000 income tax p.a. Very lucrative for the ATO.

How can you plan for your retirement in light of the political football relating to changes

Generally little effect on balances of less than 3.2M for couples - some extra thought has to go into arrangements for death. Absolutely, totally sick of the "fiddling" - high time we had some statesman as politicians.

The increased administration of the super changes are ridiculous, with the inevitable increases in costs

Superannuation remains tax effective and I do not agree with those people with excessive amounts being too upset and intending to remove Kellie ODwyer from her preselection. Superannuation should not be a means of intergenerational wealth transfer.

Think it is outrageous they have dropped the concessional cap to $25k, particularly as I am two years off 50 and was looking to increase salary sacrifice.

Basically before 3oth june wanted to get the max $180K additional into super (industry super fund of course due to their superior performance overall) as non-concessioanl instead of having that amount outside super

why can't Superannuation be simpler?

They represent a new level of complexity and may perhaps last 5 years!

I don't use super to invest other than the compulsory, due to the constant tinkering and rule changes by govts.

We contributed more than we otherwise would given the impending change from $35000 concessional down to $25,000 and the max. $180,000 non-concessional down to the impending $100,000

Some Super Survey comments

June 22, 2017

The majority of rules wont affect our super until another 15 years and by then who knows what the situation will be

I will commence a new separate SMSF Accumulation account by transferring Cash assets

Took funds from spouse in retirement and contributed to spouse who is in accumulation mode

Consider eventual need to transfer Super assets to accumulation on death of a member

changed nothing this year but will likely make changes in the coming years (mortgage payments were more appealing despite the low interest rate)

There is still time after 1 July for necessary changes


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