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Have your say

Welcome to the ‘Have Your Say’ section. We have received thousands of comments on articles over the years, but here is a chance for you to set the agenda.

We have moved hundreds of earlier comments from 2019 here and 2018 comments here.

Cuffelinks often receives emails from readers offering opinions on subjects not directly related to any article, including feedback on the weekly editorial in the newsletter.

While Cuffelinks is not licensed to give person financial advice and often cannot respond directly, ‘Have Your Say’ is a place where you can share your opinion and engage with each other.

Comments must meet our community standards with no product flogs and no personal attacks. Keep it respectful and constructive.

Comments relating to a specific article should be posted with that article.


October 31, 2019

We really need the retirement incomes review to put everything on the table and come up with some recommendations, otherwise, it will gather dust.

August 11, 2019

Only two: Can Journos please only report the facts, not their (often biased) opinions - we can form our own - and world-wide it seems that the inmates are in charge of the asylum.

August 09, 2019

All very well to praise the web site people for your new site, B U T thanks to all the “cuffe link ateers ” for years of education and entertainment !
Freddie Butler

August 09, 2019

What a newsletter!

Firstly, Trump unhinged. What can one say about that? Not sure if he’s the best thing to happen to American business, or the worst, accelerating a cataclysmic catastrophe.

Then Gavekal’s trust fund investing story. Bureaucracy gone mad? How is that even legal?

And finally, stats on the 37,000 companies that listed… few survive let alone generate profits.

What a time to be alive!!! ??

August 09, 2019

Thanks Graham as always, but I wonder what pressure Unisuper advisers are to keep member funds in there?

August 09, 2019

Re your unisuper adviser example. This is a not for profit and industry funds loss lead with their advice businesses. They charge low advice prices because they can and no adviser could live off this as we need to make a profit. All industry funds show is that there is demand for advice at a cost that an adviser can’t provide it at. Our dear government has made it this way, there is no doubt demand, but there is not so much demand at a price an adviser must charge due to the cesspit of regulation. If they were subject to what we were and couldnt cross subsidise via vertically integrated product sales, it would be a different story. Perhaps that’s the next story?

August 09, 2019


They’re still trying to figure out what constitutes Insider Trading.

The golden rule: He who has the gold , makes the rules.

Good luck

Tony Jackson
August 09, 2019

It’s not only banks that treat existing customers worse that the new ones. I note that on Origin Energy’s current website it lists the new “Standing Offer Prices for NSW Residential Customers.” effective 1st July 2019 which shows a small reduction in the domestic all day tariff – i.e. down from 29.799 cents per kw/hr to 28.578 cents per kw/hr. However my recent bill which includes supply up to 3rd July 2019 was still all costed at the old rate. When I rang them I was informed that, as an existing “Maximiser” customer I was not entitled to the reduced rate. Needless to say I am currently (no pun intended) looking for an alternative supplier.

Dr Bruce Moon
August 09, 2019


Loyalty taxes need to be considered as a legitimate tool. So many of the Australian business ‘principles’ these days are those advocated by American business texts.

If we are to abhor ‘loyalty’ taxes, why not also focus on the other abhorrent business ‘principles’ advocated by those without morals from the other side of the Pacific.

Maybe second ‘off the rank’ ought be the disgustingly immoral levels of payments made to CEO’s.

And, ‘third’, all employees to be paid above award, and rewarded annually with a rise in line with inflation or percentage award increase – whichever the higher.

I could go on.

Jenny G
August 09, 2019

I always thought the Royal Commission failed to focus on this issue of loyalty taxes. It cheeses me off chasing rates at the end of introductory offers so I’ve now stopped. Do banks realise the animosity it causes?

August 09, 2019

This seems to be standard practice in Aust – not just insurance and banks but electricity, Foxtel etc – after 13 yr with Foxtel I queried my charges and was offered a large discount. I cancelled the service totally as I don’t want to deal with companies that adopt this “loyalty taxing”. Hopefully more will follow.

August 09, 2019

Along with the loyalty taxes there is also the endless efforts that banks make to make things more and more complicated,every year they must offer a bonus to anybody that can make something impossible to do.

Westpac are masters at it.More complications must mean a better product in their eyes.

Interest only in advance,impossible to do for them to do.A simple mortgage,go into the bank,pay the say $10K,easy.

So they change it,now you have to do 2 or 3 things,we have made it easier .Now you must ring Adelaide,centralisation is better.Then they change it again,now ring Adelaide,ask them to post forms out,now it is a 5 page form,that must be easier than a one page form ,and it goes on and on.Change it again,make it more complicated .Over and over ,do not let the customer walk into the local branch and give them $10 K to pay the interest,that would be far too easy.I snap and tell them exactly what to do,I take the mortgage to a different bank,they let me set up a direct debit once a year,so easy

I then make a stupid mistake,take out a margin loan with them.Once a year take the interest out of a linked account.
The first year it is difficult.The second year,I have to go into my local branch,the young guy is brilliant,cannot fault him.He has the same problem,he has to ring a Westpac call centre .He is on the phone for 40 minutes,we still don’ t know which forms I have fill in.

He brings up a screen on his computer and scrolls down.There are 4 or 500 different forms ,I have no idea which forms are needed,he has no idea which forms are needed.The call centre for margin lending seems to have no idea which forms are needed.Eventually after 2 hours in the branch we manage to sort it out.

On the due date they may take the money out of the linked account,cross your fingers,and hope for the best.

Third year,surprise they have changed it again,different forms,more of them.Twenty hours of phone calls to the call centre.Just take the money out of the linked account,on the due date.
Can I put you on hold while I check something,over and over.They take the money out of the account on the wrong date.They decide to charge me dishonour fees because I have not put the money into the account,it is 4 weeks before the due date.

More calls to tell them,just take the money out of the account on the due date.We think you have filled the wrong forms in they say,can you go on the internet,try to find different forms and post them back to us,can I put you on hold,I need to do further checking .

Over and over Call them,we are BT,you may have to call Westpac,they have made the error.Call Westpac,can I put you on hold to check something ,they come back.I will have to put you through to BT,they have made the error,over and over,on and on for hours.

E mails are sent,they will get back to me,perhaps the e mails should be directed,to Westpac.

Eventually they get back to me,an e mail,we will definitely take the amount of money out of the linked account on the due date.Surprise,they actually take the money out of the account,on the due date.They then take exactly the same amount of money out of the account the next day .When I call to ask why they deny it.Can I put you on hold while I check something .You will have to ring Westpac,we think they did it.I hang up..

Next year they don’t get the margin loan,it goes to a different bank.

No doubt next year there will be a huge bonus for anybody that can make the impossible even more impossible.Can we reach 100 forms that need to be filled in to say ” take the money out of the linked account on the due date”.

August 09, 2019

Unlucky? Even “dreadfully unlucky” is a massive understatement considering the umpires stuffed up and should have only award five runs from the “overthrow event”, not six. Not only would this have meant the Kiwis should have one from that alone, Stokes would not have been on strike for the next deliveries. A travesty and a shame that the game and the World Cup was marred in such a way.

Graham Hand
August 09, 2019

Hi Neil, there has not been a major competition in any sport which has not involved a debate about a referee or umpire error. It’s part of every game. In any case, England needed two runs from the last two deliveries to ‘draw’ the game, and if that had been only three runs, Stokes and Rashid would have played differently. Rashid is no slouch with the bat (across his ODI career, strike rate 102, high score 69, average 19). NZ would not have won simply by making it a five rather than a six, as the game had not reached its ‘decisive’ moment. For example, Stokes would not have simply prodded the last ball of the innings down the pitch if he needed more runs.

August 09, 2019

When did we change so much that we need a winner and loser from every contest. A TIE after such an exciting match appropriately rewards both teams and spectators. Those of us on this page are old enough to remember hard fought ties after extra time in rugby matches. No Golden Point or Penalty Shootouts in soccer and other sports.
A TIE rewards both teams for the effort they put in.

August 09, 2019

Well said Graham. We don’t need overly emotional commentators (and a couple of former players back in the Ch 9 studio) to tell us how the game will pan out. That is the role of the players. Loved the match from start to end. Never felt the result was assured at any stage. With the ball moving around as it was, the flat track bullies in the English top order were always going to be tested. Hasn’t Trent Boult become a world-class bowler! We tend to gloss over the skill of the players under pressure. The fact that Guptill got the last ball from Archer as far as he did was a good achievement and the pick up and throw from deep mid-wicket to Buttler had to be faultless in its execution.

August 09, 2019

Great game but have to say Kiwis are dreadfully unlucky. For a 6 to come from a deflection off the batsman diving to the crease at the death , being caught and standing on the boundary for another 6 and NZ scoring the same number of runs with 2 less wickets, all went against them .
Still, a great tournament made by the expanded qualifying format and wickets which gave bowlers a chance and made the batsmen bat properly.
Saw the SBS first night of the 50 year Moon Landing – what struck me was the open and optimistic way the challenge,huge costs and innumerable risks were laid out before the public by Kennedy and co . Today’s political and social commentariat would not even try .

Warren Bird
August 09, 2019

I find it interesting that there’s so much angst about the way the tie was resolved. All the players knew the situation before the super over, otherwise England wouldn’t have celebrated and NZ wept when only 15 came off the NZ attempt. The coaches and captains had signed off on the conditions for the tournament before it started, so it’s not like anyone just made up an arbitrary rule on the spot.

So, by the tournament’s agreed conditions, as heart-breaking as it is for NZ, England won fair and square. The NZ captain, Kane Williamson, has said so many times since Sunday.

The real irony is that One Day Cricket is a fabricated situation in the first place. Limiting how many balls a team has to face to 50 overs, limiting each individual bowler to 10 overs, fielding restrictions that change during the match (bizarrely called ‘power plays’ for some unknown reason) and using a statistical method called Duckworth-Lewis to force a result in match reduced by weather to less than 50 overs – unless there happens to be a spare day to come back to play, as happened in the NZ – India semi-final.

Fabricating a way of separating the teams if scores are level is just another fabrication in a fake version of real cricket.

One day and T20 is just cricket trying to be what baseball has always been – a bat and ball contest that’s completed within a day. Baseball does this right, and has essentially been played the same way for over 100 years. The starting pitcher can finish the game if he’s going well enough; when he’s replaced he’s out for the rest of the game; each side has to get 27 batters and score more runs to win the game; if it’s tied at the end of the game, they keep playing an extra innings (under exactly the same rules as for the first 9 innings, with batters coming to the plate in the same order as they have the whole game) until one team comes out ahead; the shape of the diamond doesn’t change; fouls are always balls hit behind 1st and 3rd base lines; if a ball is caught by a fielder, the batter is out even if the fielder falls headfirst into the spectators in the stands after taking the ball (Trent Boult would love that rule to apply, I’m sure!), etc.

Short form cricket can only ever be a poor imitation, an attempt to create a game that’s over more quickly out of a game that isn’t meant to be finished in a day. In the end One Day and T20 is a bastardisation of the best bat and ball game ever invented, viz Test cricket.

Real cricket is 2 innings a side, bowlers hurling down the leather for as long as their form and fitness allow, matches drawn if rain washes out too much play and a tie is a tie. In the UK, that’s about to start when the original real cricket series, The Ashes, gets underway in a couple of weeks’ time.

August 12, 2019

Could not agree more with your comment about short form cricket, Warren. The real test of character and skill starts on 1 August. Now we just need pitches that give everyone a chance to shine. I am sure the English will accommodate. Another 2005 series please!

August 09, 2019

The cricket? Sport at its greatest is exhilarating and tortuous!
How the great players keep their focus and execute under extreme pressure is equally amazing, but far worse for fans and especially family!
Watching the 50th year on the Moon Landing series, the TV cameras zeroing in on the families’ reactions as the Saturn rocket took off struck me as akin to a reporter asking Keith Miller if he ever felt pressure playing Test cricket. His response-“Pressure? Pressure is when there is a Messerschmitt up your arse!”

Ian Nicol
August 09, 2019

The topic of the week has been the structure and adequacy of the Deeming rate for part pensioners. Part pensioners are expected to achieve a government imposed deeming rate above the minimum threshold for singles or couples by presumably moving them up the risk curve from cash. ie for money above the 1% threshold for singles and couples.
I understand the government needs to protect the surplus and manage taxpayers funds but to entice (bully) part pensioners into managing a portfolio of risk assets to achieve an artificially imposed deeming threshold seems less than optimum.
Surely an alternative of having the Future Fund manage the part pensioners funds above the minimum threshold would allow pensioners to enjoy their retirement and presumably by having professional managers manage the pensioners at risk funds there could be a bonus for the surplus and taxpayers in general. The onus is on the Future Fund professionals to achieve the alpha!
If its good enough for the Future Fund to manage the defined benefit Superannuation Funds for public servants ( not sure about MP’s) then why should pensioner funds be excluded. The risk of not achieving the prescribed deeming rate would rest with the professional money managers and not the million part pensioners.

John FLynne
July 11, 2019

A thought to open discussion when I started my super fund it was obligatory to comply with the 30/20 rule as well as paying 50%tax on income over 5percent. The world has moved on since then
But as the government has protected super so much and we have so much infrastructure needed. Could the government require say 5 percent or more to be invested Government infrastructure bonds paying 6%? This could enable infrastructure to be built on cheaper terms than now and be a cost of government subsidy to our superannuation system and I would suggest more efficiently

July 04, 2019

Hi Graham,

In your editorial, I think this should say Trillions:

"It was a year when the investing rule book was thrown out of the window. Global debt with negative yields now total US$12.5 billion."



Graham Hand
July 04, 2019

Thanks, James, yes TRILLIONS. A trillion here, a trillion there, and pretty soon, you're talking serious money. G

Graham Hand
July 04, 2019

In today's editorial, I should have said FY20 is the first year when a roll forward of unused concessional contribution caps from FY19 is available.

June 25, 2019

Dear Graham

Had to laugh at your personal gold experience. Hard to believe my financial thought processes could approximate those of a career banker. Old enough to be middle aged when gold hit $800 an ounce in 1980 I never thought I’d ever actually buy any. But a year or so back I approached it very scientifically, buying as much as I could (just) lift with one hand and then hiding it. This was a low level buffer like a lesser version of people sewing their diamonds into their clothes. Using 100 as the purchase price it’s now at 125. So what to do next? Sell it and spend the profit on an expensive overseas trip or a new car for one of the children/grandchildren? Or keep it on the premise that Mr Trump can upset everyone even more yet. The bugs reckon that once through the USD1400 it may go anywhere. Well it’s just done that. Of course one should never be greedy but this is supposed to be a buffer, meaning when the ASX index drops to 4000 it will be worth zillions.

June 22, 2019


The concept isn’t new but invariably it keeps being ignored! Savers – particularly those in retirement whether pensioners or not – are facing poorer living conditions because the interest rates on cash are way below cost of living increases, bank and other lending rates and so forth. Whatever the economics that drive Central banks and other deposit interest rates to this inequitable level such theories/practices seem to have little positive impact except for house buyers and all in the property industry. I say inequitable because in Australia this situation favours the young and disadvantages older people – particularly at times when they are more vulnerable. In fact the situation gives rise to a “Them and Us” descriptor. Less than responsible treatment of its seniors is never a good look for any society! We’ll leave out the further inequitable handicap of deeming rates! BUT WHY NEED THIS BE SO?

The dilemma can perhaps be likened to a seesaw! One end’s passenger being the handicapped older saver/retiree; the other being government’s funding needs for national investment! Of course it’s the government’s end in the ether and poor old John Citizen’s in the mire!

Australia and its States’ needs for massive infrastructure spending are enormous and long-term ie for our future! But government income falls far short of such priority needs. Water, transport, health, energy, regionalisation growth are all areas where this country spends too little despite the vital longer term needs. Surely the seesaw balance is solvable by government raising infrastructure funds from savers and of course all Australians through say Infrastructure Future Investment Offers (IFIOs) that offer a guaranteed 2% to 3%+ Interest over and above for instance the Central Bank’s declared interest rate or other appropriate measure? I understand that Government borrowing is relatively cheap from overseas financial channels and from tax raising. But is their availability and cost endlessly reliable? Take tax raising for instance – the net number of Australians paying tax at levels greater than income they receive from government gets less every year and is already below the 50% figure and falling annually. Government’s frequent recourse to private/public partnerships is also far too high and based on false cost justification bases. In economic reality terms such arrangements cost the government and taxpayer BIG TIME! Particularly the public because the price of “using” the infrastructure is high, the spend is always way above budget and the projects are often poorly planned and executed. But regardless Governments keep adhering to the private/public partnership fiction of economic efficiency.

My guess is that Australians would queue up to invest in such “bonds” or whatever the instruments were named. Apart from gaining a fairer return we would be participating in our country’s future generations. What do we have to do to have government seriously “buy” this “win for all” approach? carlo

Warren Bird
June 23, 2019

Carlo, Ive heard your sort of suggestion a few times over the years. But you can't just concoct higher government bond interest rates like that.

Why should the government issue such bonds at a higher interest cost than they can issue ordinary CGS? To do so would be just a gift to those who invested in them. Not fiscally responsible at all and not really workable.

The government could debt fund infrastructure itself, thats true. But they'd do it by selling Commonwealth or State Government bonds that currently pay 1.5% interest for 10 years.

Interest rates are not set by the RBA in a vacuum
Its not like they could have them at 3% if they wanted to, but theyre just being b....ds to savers. Interest rates are determined by the interaction of borrowers and lenders and the rates of return generated by the economy. Cash rates - and bond yields - are low because the economy is not generating a higher risk free rate of return. There's too much spare capacity so wages arent rising, businesses cant put prices up and interest rates are very low.

It's not a great state of affairs but you cant just magically create a higher interest rate just because you want to.

Carlo Bongarzoni
June 24, 2019

Thanks Warren - appreciate your response and of course you're right. But in essence I wasn't trying to pick the right return on the sort of investment bonds I had in mind. I was really trying to generate more interest in the concept. That is some sort of government approach to enabling Australians and particularly pensioners provide money to government in return for a guaranteed percentage earning that provided a better dependable living base.

For instance - instead of using the Future Fund for superannuation investments the Federal and/or State governments might consider implementing an Infrastructure fund that invests the monies received, uses the funds for infrastructure projects and pays a return to individual investors based on an appropriate formula and with money- back guarantee.

I'm sure variations on this sort of theme are alive around the world. Singapore for instance gets involved with its citizens' superannuation?

June 24, 2019

If governments borrow enough their credit worthiness would become more dubious and interest rates might rise.

Warren Bird
June 25, 2019

Carlo, you are still proposing that the government issue a government bond at a higher interest rate than the market is demanding. A money-back guarantee from the government over a portfolio of infrastructure projects is not really any different to a money-back guarantee from the government over a portfolio of all the things that government does anyway.

If the government wishes to supplement the incomes of a sub-set of the community - in this case, those on the aged pension - then they should just do that through an increased pension payment.

I'm not sure what aspect of the Singapore system you have in mind. From what I understand, in their system you pay up to 20% of your salary into a fund, with your employer topping that up by up to 15%. But it goes into 3 accounts, one to assist with housing, one for retirement income and one for healthcare. The proportions of the contributions vary as you get older. It's a different system to ours, but there's nothing there that tells me the Singapore government somehow magically creates more income in those funds than is available from investments.

June 22, 2019

I received a statement from my accountant, and when I couldn't understand what it was about I googled "The franking level is 27.5%, so please consider as part of your personal tax planning." and the first link that came up was:

and now it's perfectly clear.

So I'm just writing to thank you for Cuffelinks - and congratulate you on the "long tail" SEO keyword ranking! :-)

Kind regards,


June 07, 2019

I enjoy "cuffelinks'.

Did read Vanguards white paper but soon lost interest as they seemed not to know there was a compulsory minimal drawdown annually which rises with age point talking about 0-3.0 % withdrawals etc !!

June 22, 2019

"no point talking about 0-3.0 % withdrawals etc":

It is perfectly legal not to spend super withdrawals. 3% * $1,000,000 = $30,000 = no tax for senior.

June 07, 2019

A 15% tax is to be introduced on superannuation earnings.
In 3 years I have paid 20k to the ATO in earning taxes. Then another GFC hits, plus a market downturn which lasts 3 years and I have a 35k loss. Can I claim 15k back from the ATO in relation to my 35k loss as they have taken 20k from me in tax? They are still 5k in front!

David Mc
June 02, 2019

I think we need to come back to the purpose of compulsory superannuation which was to provide a retirement income stream and replace the age pension. We need to move to compulsory annuities (market linked or guaranteed at the members choice). The pension payment needs to have some restrictions and be income for Centrelink means testing. This will reduce the nations cost on age pension. As for tax an increase in gst could be a simple solution. We are seeing significant wealth accumulated with tax concessions and its important we don’t allow people to blow most of it and then have a free ride on the tax payer in the form of age pension.

June 02, 2019

"The pension payment needs to have some restrictions and be income for Centrelink means testing.":

A 15% tax on Age Pensions and Age Pension for all Aged Pensioners.

No need for mean testing.

Then all could have it whether or not they earned and saved it.

June 03, 2019

David Mc,
Alas, you're not quite correct. The original policy intent for superannuation and the introduction of the Superannuation Guarantee (SG) was not to replace the Age Pension but to supplement the Age Pension. It is noted that the notion of using superannuation as a replacement for the Age Pension has been the focus point for society and the financial services industry since (SG) inception. Actually, the first Treasurer who said that superannuation is to replace the Age Pension was Scott Morrison!

Possible changes:
- Removal of the tax deduction for life insurance premiums and a corresponding removal of the tax on benefit payments attributable to life insurance benefits;
- Changing the age from 55 regarding the small business CGT concessions and superannuation to reflect preservation ages;
- Removal of the CGT discount for superannuation fund trustees;
- A reduction in the tax rate for superannuation funds with a flat tax rate applied to both the accumulation phase and retirement phase;
- Linking superannuation benefit payments to the Age Pension. Maybe a dollar for dollar reduction in the Age Pension for each dollar received as a benefit payment from superannuation.

Having a flat rate of tax for the accumulation and retirement phases would simplify the system, allow different and innovative income streams, no longer need to worry about segregation of assets, allow for the abolition of transfer balance amounts and caps.

May 31, 2019

I am going to miss my weekly instalment of franking credits discussion... We need another finance issue that creates a generational divide to light a fire under us all to keep our souls warm during the winter months.

May 31, 2019

Well, a move to marginal tax system on pension earnings is probably the next major tax reform. Remember back to the 1993 election. The fightback package (including introduction of a broad-based consumption tax) cost Hewson the election. And yet, by the end of the decade, the LNP government introduced a GST with some sweeteners. If history is a guide, the Shorten/Bowen experience will be brought to life again but in a subsequent Parliament. Let's hope that the approach taken next time is a more rational one!

May 31, 2019

Imputed Credit LIKE GST is now toxic No party will touch.


May 31, 2019

The Super scheme even with the $1.6m cap is still too generous. On a return of 5% and with a max balance of $1.6m the return is $80k add min drawdown of 4% that is a yearly income of $144k tax free. On the basis that you are luck enough to have a spouse with similar balance that is a tax free income of $288k.

On the basis that the introduction of the super scheme was to relieve the Gov't of paying pensions currently $36,301 for a couple. The tax payable difference on $36k and $80k is $14,108/year. The difference between $36k the gov't would say should be free to achieve non reliance and the $144k is $37,473 per year. On a couple the Gov't is missing out on $74,946 per year to provide a couples pension. I cannot see that continuing. So our retirees have dodge a bullet at the election on the franking credit issues but I believe Future Gov't who is running short of cash will revisit super.

May 31, 2019

"On a return of 5% and with a max balance of $1.6m the return is $80k add min drawdown of 4% that is a yearly income of $144k tax free.":

'Government Induced Inflation-Tax' chops ~5% to ~3% and risk premium chops that to 1%. 1% * $1.6M = $16k = real risk adjusted earnings of fund.

Withdrawal from super is capital - not income. Except untaxed component.

"The tax payable difference on $36k and $80k is $14,108/year.":

On the basis that $1.6M relieves the Government from forking over $40k / y, not only should selfie retiree accounts tax rate be 0% taxed but Government would do well to hand over the ($40k - $16K) = $24k owed to the valiant retiree - together with expressions of deepest gratitude.

John Simkiss
May 31, 2019

Max tax-free is $1.2m. At 5% is $60000. Add some refund. Say $70000,
Drawdown is return of your own money. Contribution taxed and income taxed. No longer taxable.
Tax on $70000 is in super at 15%-equals $10500-a long way below pension saved.

But above $1.2m and well above is a different story.


John Simkiss
May 30, 2019

Productivity Commission got 2 things right, one wrong and completely missed one.
It got the need for one account, and for opt-in insurance. Got New Sovereign Default Fund(no guarantee) wrong(it rejected that option), and completely missed that default product should be Growth product until super retirement date(members can opt out if they wish).

John Simkiss
May 30, 2019

• Australian imputation works for progressive tax rates from0-47%
• Refunds were a package with GST introduction
• Cap for SMSF could be 4(no. of members) x $30000(around maximum for refunds on $1.2m of tax-free assets(would stop refunds for very large assets and around age-pension)
• Progressive rates on SMSF’S from 15-47% for income/asset ranges above $10m per fund(or force removal of assets above $10m(4x$2.5m)

Anthony Pogson
May 30, 2019

Some good points and my observation on this debate

1. Any good financial planner will start with the question – “What income do you require in retirement?” From that, and earnings assumptions, the capital required to support this can be calculated. Remove franking credits, then the capital requirement increases by around 40%. If it’s a ‘gift’ then so are all social benefits. But the fact is it was the arrangements since 2001 under which retirees planned to retirement capital base.

2. Everybody would be affected – current workers would need to save 40% more to meet requirement income goals.

3. The so-call “Greedy Baby Boomers” worked for many years before compulsory super was introduced (1992). And the contribution rate started at 3% of salary, only become 9% in 2002. Any tax on contributions was 30% (now 15%) for many years. So the younger generation will benefit from longer contributions and at a lower rate of tax.

4. The franking refund attack was a blunt instrument. It targeted all SMFS but left self-funded retires who invested in industry funds unscathed. Where is the equity in that?

5. Up to June 2007 there were “Reasonable Benefits Limits” placed on concessional Lump Sums and Pensions. The current various caps, most notably the $1.6m pension transfer balance cap, address some of the excesses that may have arisen by removing the RBL.

Like others, I think unfortunately all we have is a hibernation situation. When the bear wakes up again, beware – he will be coming for the SMSF honey-pot!

Peter & Coralie
May 30, 2019

My objection to the Labor proposal on franking credits was not based on the $18,000 annual loss to our pension paying SMSF, but more importantly, the proposal was complex and inequitable, because (for example):

it wouldn't affect wealthy people (who could still offset the franking credits against other tax liabilities);

it wouldn't apply to anyone receiving even $1 of age pension;

it wouldn't apply to "Not For Profit" organisations;

It wouldn't typically affect members of industry and retail funds.

In any case, the Labor proposal lacked integrity, because it flies in the face of the purpose of franking credits, ie to avoid "double taxation" of income, or, more correctly, to ensure income is taxed at the "correct" rate in the hands of the ultimate recipient.

But we agree with many commentators that we baby boomer self funded retirees are not paying our fair share of tax.

We would like to see the 15% tax on the earnings of super funds extended to all pension paying super accounts. This would go most of the way to fixing the problem.

Such a change may need to be phased in or "grandfathered" to make the move more politically palatable - but it seems to me that would be an appropriate long term correction to the tax imbalance.

May 30, 2019

"15% tax on the earnings of super funds extended to all pension paying super accounts":

... if extended to Age Pensions, and,
... Age Pensions made available to all Aged Persons.

Revenue neutral?

John O
May 31, 2019

"We would like to see the 15% tax on the earnings of super funds extended to all pension paying super accounts."

Zero tax in pension phase and a belief we will live that long is how citizens are convinced to allow taxable compulsory contributions and taxable earnings on them. If an additional tax applied on the way out (T+T+T) it would only be acceptable if one existing T rate was reduced/eliminated, as it is in some countries. Otherwise, it may be attractive to opt out of the super system and manage one's marginal tax rate via negative gearing.

However, no Government would forgo the near term revenue of the current system in order to collect tax down the road from retirees - if they live that long!

Errol Davey
July 12, 2019

The worst part of labor’s proposal was that it didn’t affect the labor politicians and their parliamentary pensions, just a bunch of total hypocrites

May 30, 2019

Multiple SMSFs? Really? Have you looked at the costs of auditing these accounts?

Where there's a will there's always a way. The problem is that vested interests do not have the will.

FYI I predict the rotten government we had to have for a third time WILL modify the franking credit system. They'll have to.

May 30, 2019

One of the comments here noted that any revamp of the superannuation system would require bipartisan political support.

When John Howard introduced the refund of tax overpaid by way franking credits (in accordance with the Ralf review), the move received bipartisan support with Labor enthusiastically supporting it. In none of the build-up to the election did I hear Labor accept their original support of the policy. In fact, Labor continually implied that the refund of franking credits was a "gift" introduced by Howard.

So much for a "bipartisan" acceptance of a policy?

May 30, 2019

Yes there is a need for a review of retirement incomes, but there is also a need for a review of the investment structure and the purpose of retirement incomes.

I have a concern with the amount of funds being taken out of retirement savings by those who claim to be justified to receive fees because of the service they provide. It seems everyone has their hand out for money that really belongs to the person saving for their retirement.

Every cost charged to retirement savings all serves to reduce the retirees retirement savings pool. It could be advisers, it could be platform managers, it could be investment managers, it could be accountants, it could be auditors, it could be trustee fees, it could be other administration fees in all its forms [ which may even include kickbacks to someone].

Many of these costs are not based on being in the retirees best interests, they are all in the best interest of those charging the fee.

Then as a result of these fees we find many retirement investments incapable of achieving what a market index is able to achieve. Why then are these other groups due what they receive as pay?

In my mind that should not happen. We should not have retirees receiving less than a relevant index in investment returns.

It would seem this could only ever be achieved by nationalising superannuation. I am not one to promote nationalisation for the sake of nationalisation, but if it were to happen I could see the outcome being extremely beneficial to the Federal Government as it would over the long term reduce the reliance on welfare.

In addition, the additional savings will produce a bigger pool on which the Government can receive tax earnings. Yes it may reduce the amount collected in tax from companies and individuals, however, when money is distributed to companies and individuals they are all working to avoid tax payments and so even at the lower tax rate on retirement savings the collections may still prove to be higher.

Further to the above change, I feel retirement savings should be accompanied by insurance that would ensure funds are available so that if someone cannot or does not work after age 40 that they are able to receive an ongoing income.... from their retirement savings... rather than from the government welfare pool. The insurance would need to be sufficient to ensure appropriate payments can continue indefinitely.

[For those under 40 they would rely on the Government welfare arrangements and have a holiday from super contributions which hopefully will still grow during the time out of employment]

For those that work to retirement age then they should have access to a regular income stream as well as a lump sum pool which could be used for additional income or withdrawal for particular purposes. There needs to be an incentive to keep working.

I feel it necessary to have a reliable, consistent, growing income stream to provide security in retirement.

So, some outlandish ideas..... that may be worth considering.

May 30, 2019

Since Morrison has ruled out any tax considerations in the superannuation review there will be no resolution of what some people think are rorts and others think are entitlements.
Any payments of any nature from the government (via ATO from whatever other revenue raised from taxes) have to be funded by other taxpayers. It doesn't matter what labels you put on it, outgoings have to be funded by someone (or by printing money as in a budget deficit).
If Morrison doesn't deal with it in the interim it will become clear to those other taxpayers they are funding it, directly or indirectly.

May 30, 2019

It’s good to make the suggestion of a cap but I agree the tax laws work on a taxpayer by taxpayer basis and it is the fund which is the taxpayer not each and every member of the fund.

I agree that if a policy on franking credits was to be contemplated that the equity issue needs to be addressed for every one and entity that is able to claim the franking credit.

May 30, 2019

My father retired at 60 and died at 63. I'd like to following in his footsteps - apart from the dying bit, of course - and also retire at 60 in a couple of years time. I believe I will have enough assets, inside and outside of super by then, and enough investment skill, to generate a perpetual income stream much higher than the standard "comfortable" level without touching capital or threatening the $1.6m accumulation super cap. My partner is in approximately the same boat, in terms of financial numbers and age. We're both homeowners and will relocate to somewhere near a beach and have change from that exercise. We won't be needing a pension and hopefully will well and truly be completely self supporting. We have both worked hard but recognise we're also lucky to live in such benign economic times.

As neither of us have children, there will hopefully be a huge pile of funds to deal with when we die. We're both healthy and it's not unreasonable to think that one or both of us will get to 90 or beyond.

It seems completely incongruous with the spirit of life in Australia - a fair go and all that - that upon retiring at 60, I can effectively shuffle my assets into a structure that means that I will never again pay any tax, or very little, for 30 years or more, under the current rules. Naturally I will try to do this - why wouldn't I? As a child free large net taxpayer for decades, the concept that I should pay more tax NOW whilst working tends to get short shrift from me - but I never expected that I would be able to stop paying tax AT ALL for my last few decades. It simply can't be a sustainable thing as more and more relatively well off people like me, thanks to the superannuation system maturing, sail off into retirement and stop paying tax.

So there's clearly a huge legislative risk somewhen in the future that I need to consider and cater for, but the nature of it is quite unclear - and so this will probably keep me working longer than I want to, tying up a job that some young person might do, and accumulating more funds than I will probably need, "just in case".

So I'm quite open to paying some tax in retirement - it's more or less inevitable from where I'm standing and seems a fair thing to have to do, but gee, can we just get on with working out what it is and applying it in a fair and equitable manner in a bipartisan fashion?

May 30, 2019

I believe they will reintroduce the reporting of pension payments on tax returns for the over 60s. It is almost the last remnant of John Howards mining boom money splash that changed pensions from being reportable for all to being only for those under age 60. Not all of the pension payment is reportable under current rules for those under age 60 ... that % part of the annual pension which was funded by taxable component is reported with an accompanying 15% tax offset. You can earn $45,000 of taxable pension and the 15% offset basically takes care of the tax on it. If you have undertaken non-concessional after-tax contributions or re-contributions you may find a chunk of your pension payment each year not reportable. The firm I work for recommends re-contributions to our clients to "wash away" taxable component as we think this is where the system is going. It is literally a "tick a box" for retail and industry funds to comply as any client under age 60 is treated in this manner.

May 30, 2019

Geoff, i think you are right in the implication that the whole inter-generational tax relationship needs to be worked over.
For those entering the workforce now, the super scheme we have will do well enough (for males anyway), but for many retired already, and coming into retirement it hasn't and doesn't as shown by the many cases brought to attention over the franking credits saga.
We should be writing to our local MPS and say please fix the whole sorry mess across the generations.

May 30, 2019

"stop paying tax AT ALL for my last few decades":

Don't you worry about that.

The majority will be net anti-taxpayers for all their decades.

May 30, 2019


If we are to have this sweeping review then it needs to start at the highest level, not just tinkering with details such as franking credits, which of course need to be addressed, particularly given the heat generated by that one item alone.

By highest level I mean purpose of structures before considering such detail. It seems to me that many issues are obscured by something which is always with us: human greed, whether for money or power. A good example is what was known to many of us but was revealed so clearly by the Hayne Royal Commission: on the one hand the rapid agglomeration of up to 80% of the financial planning field by the four banks, thinking that because they understood banking this would be a simple financial add-on and opportunity. On the other hand unions (meaning a handful of union officials) gaining control of hundreds of billions of dollars through the industry funds. Such control may have been argued as appropriate 50-60 years ago when more than half the private sector workforce was in trade unions. Now it is less than 10% it is totally inappropriate. But under the specious argument that the returns are OK the RC chose not to look into this sector.

At the individual level, greed has led to SMSF’s coming to be considered as devices for tax avoidance and generational wealth transfer protection. Of course they were not meant to be such. There is no chance of a government committing political suicide by fixing this disaster so at best we will see some tinkering at the margin. Another example makes this point; the age pension. In 1909 when introduced the life expectancy of a (white, since at that time there was universal agreement that indigenous people didn’t count) Australian male was 55. So all a man had to do to collect the pension was outlive his life expectancy by 10 years!! Foolishly, governments didn’t move the collection age up gradually as life expectancy improved. When finally addressed, a man’s life expectancy had risen to about 80, meaning to be consistent with the original idea would mean getting the pension at 90. Taking a more reasonable view, given we are one of the wealthiest countries in the world, say awarding it at 75 or 80.

How long would you stay in opposition on that one? Instead we are planning to put it up to 67 by 2023. From when that idea was mooted until it will (maybe) be introduced the life expectancy could have risen by those two years. Tinkering at the edges is all any government wishing to stay in power will do. The only significant possibility is that a Labor government, given Labor’s dislike of SMSF’s and preference for everyone to be in a fund (preferably industry), might encourage, or even force retirees to migrate. But given the fuss over details so far that is highly unlikely.



May 30, 2019

Hi David, With health costs, pensions and superannuation a rapidly rising percentage of budget expenditure, and the number of Millennials now exceeding the Baby Boomers (and older), I would not want to be relying on the public purse for services when I reach 80 is 20 years.

May 30, 2019

My view is that we Oldies ( tax free) cannot accept that this condition can last.
I think a flat 10% on earnings is fair.
As well ALL super schemes must have the same conditions. Government employees and Parliamentarians must be treated the same as the 'Humble' employee.

Someone has to pay for ALL the services all individuals need over their lifetime.

Errol Davey
July 12, 2019

I am 68 yrs old and have paid hundreds of thousands in tax over over 52 years, someone who has been in prison for yrs at a cost $100,000 entitled to a tax free pension of $36,000 (couple) housing assistance, cheap prescriptions...
then when l retire after 52 years and not costing the taxpayer a cent you are suggesting l should be taxed more?
No wonder the young have lost the incentive to save and achieve!

May 30, 2019

At the risk of prolonging the franking credit debate just a little longer (it is still on Chris Bowen's website: ) - I was intrigued to see on this website the following words about the franking credits:

"Under Labor’s plan:
o No one will pay a single cent more tax
o No one will lose a single cent from their super contributions
o No one will lose a single cent from their pension
o No one will lose a single cent from their share dividends."

Are you kidding Mr Bowen? "Franking credits" are also called "tax credits", so of course people would be paying more tax (because they were going to receive fewer tax credits); and the last dot point above was a big lie - share dividends have franking credits ATTACHED to them so of course people would lose money "from their share dividends".

Glad this guy did not become Treasurer, I don't think he understands how it all works. But clearly the voters did.

May 30, 2019

"There is one example which, frankly, is a clincher as to why this is the right thing to do," Bowen says.

"A nurse who earns $67,000 a year we charge $13,000 in tax. But a retired shareholder who has $67,000 in income we charge her zero tax and then write her a cheque for $27,000. That is not OK."

The problems were that Bowen nor the ALP apparatus:
. could not perform simple arithmetic, and,
. were profoundly deaf.

May 30, 2019

I agree it doesn't make sense. And what I find interesting is governments around the world are spending billions changing laws to get multinationals to pay tax in the country they earned the income from, not pass it back to a parent company in a low or no tax entity. but then why collect the tax if we just hand it back to the shareholders anyway if living here .... when I ask many people "do you think big companies should pay their fair share of tax" they all say yes .."Why?" they want money for hospitals and schools, but then when you point out that a lot will just end up as tax refunds ... there is confused silence .... the conflicted thinking is too hard for many to get their heads around

Steve Martin
May 30, 2019

It is simply the magic of a Shorten Bowen government. No increase in taxes but they would get $6bn in revenue. Why was anyone complaining?
The early comments from Anthony Albanese seemed to support a cap. I wonder if these guys actually understood the policy or were they just caught up themselves in their own propaganda campaign. I hope they do some honest homework before resetting their policies and repeating the mistakes of the past.

May 30, 2019

hmmm ... it is a true statement just not the whole picture

You won't pay more tax .. as the company paid the tax not you ... you will not receive your usual REFUND however

You will have to draw a higher SMSF Pension to pay your bills, so your capital will run out sooner, and you may lose a dollar of age pension if you are income tested under the old system.

Although as your capital will run out sooner, you will soon find you are getting more Age Pension under the Assets test ha ha ironic laugh.

You won't directly lose a cent from contribution .. true it is not a change of tax on contributions ... but if you were relying on the refund to make a contribution, then the contribution will be a lower amount.

Your cash dividend shouldn't change theoretically as the company should be making business decisions about how much to retain and distribute HOWEVER the franking credit system has always skewed companies towards over-distributing and not retaining to grow the company. So anyone who would prefer growth was being disadvantaged by this.

May 24, 2019

The super system (for pensions) is far too generous, initially due to Keating way back in 1988 when he introduced a 15% tax on investment income for accumulation assets but not for pension assets. The tax on investment income from pension assets has always been tax free.

So this has been a growing issue about which I have been telling people for 30 years! The "issue" is that more and more money was going to move into the pension phase (due to the tax advantage and the ageing of the population) and from a national budgetary point of view, this was going to be a problem. I have never understood the logic of having a zero tax in the pension phase, other than to placate the grey nomads who vote (as we saw last week!). There was some sense to keep a zero tax for pensions already in payment, but not for pensions that would start in 2019!

Of course Shorten’s Labor recognised this budgetary problem and tried to address it; but as has been discussed in recent months/weeks/days, attacking refundable franking credits was not the way to address this issue - indeed it had the perverse effect of harming those with modest incomes and leaving those with high incomes unscathed - how could Labor have got it so wrong? Anyway that's history (I hope!)

But the Government should still look at the super system and reform the tax within it. I would increase tax on pension investment income from 0% to 10% over a 10 year period (by 1% pa). This would need to be modelled to see its effect. Unlike the franking credit issue, this would not have any retrospective effect and it would be a very marginal reduction in pension fund investment returns. There would have to be exemptions for annuities already in payment, but not for account-based pensions. This proposal would also address the perverse situation we have now where an asset held for many years in accumulation phase can be sold one day after converting to pension phase and no CGT applies – and you can then transfer the money (after paying no CGT on the sale) back to the accumulation phase!

Ultimately I would like to see all investment income being subject to the same rate of tax, so I am also proposing to slowly decrease the tax on accumulation assets’ investment income from 15% down to 10% over the same period. Again this would need some modelling, but the current system cannot go on forever. If phased in over a long period of time (like SG has been) it should be OK.

But this needs to be bipartisan otherwise it will cause political headaches for the incumbent government. Wouldn’t it be novel if, for once, both major parties got together and agreed on a long term sustainable tax regime for super? [I can hear people saying – “tell him he’s dreaming!”]

Imagine the benefits of having the same rate of tax – no need to switch from accumulation to pension; just one super account for life (just like we can have one bank account for life); no need for transition to retirement pension accounts; just one set of unit prices; easier to communicate with members; ability to contribute to super even when pension payments are being drawn down; no CGT advantage when transferring assets into pension phase (because that tax-exempt phase would not exist); no segregation of assets for pension purposes; no need for a $1.6 million cap on pension assets; and more.

You’d have to put in place rules about drawing down payments after pension age (67) because governments don’t want concessionally-taxed money accruing forever without drawdowns, it needs to be used for retirement income. It's crazy that today accumulation assets (that are subject to concessional tax treatment) can stay accruing in that tax effective environment and never be drawn down, until death when the proceeds go tax free to the person's spouse.

Just my thoughts, but we need to do something.

Warren Bird
May 24, 2019

No problem with a debate about the zero tax rate on income in pension phase. Must be clear that capital withdrawals aren't counted as "income" (we don't tax bank account withdrawals and shouldn't tax super fund withdrawal in pension either - there's already been tax paid on that) and it must be at a lower rate than normal or what's the point of encouraging people to put money away for 30 years!

And it must be a progressive tax scale.

Mind you the $1.6 mn cap does this to some extent already.

My issue in the whole debate has been with the poor policy making that the targetting of one class of taxpayer in an inefficient and inequitable way would have been.

Imputation as we now have it is a world class system for fully integrating the personal and company tax systems. We should NOT mess with it.

As Keating once said, poor policy is poor politics. Touche.

May 24, 2019

Agree Warren. I am only talking about the tax paid by the super fund, not the tax (if any) paid by the member. The tax on super fund investment income needs to be less than personal income tax rates, I agree; which is partly why I say make the tax rate equal to 10% on all super fund investment income, which compares favourably with the 19% tax rate on personal income above the $18,200 tax free threshold. Which by the way is another good reason to do as I suggest - the current 15% tax on investment income from accumulation assets is far too close to the current 19% that applies on personal income above $18,200.

What I would like to see is someone like a Mercer or Rice Warner (or indeed the Government itself) do some modelling and present sustainable options to Government.

Wayne Ryan
May 26, 2019

Thanks Michael. I have always thought zero tax on pensions was unsustainable but the $1.6m limit had been an improvement. Your suggestion on how the super fund is taxed seems sensible, in which case there would be no need to tax the pension?

May 26, 2019

"zero tax on pensions was unsustainable":

If self funded retirement is or was "unsustainable" then un-self funded Age Pensions must be many times unsustainable.

Gen Y
May 26, 2019

Unfortunately the selfish baby boomers have spoken this election and nobody would dare revisit retirement income tax reforms. The only way to even up the tax system is continual removal of child care benefits and bracket creep for the younger generations who were clearly too stupid to follow the boomer lead and vote for their best interests.

May 30, 2019

Gen Y, maybe if younger generations were willing to forego some of the government benefits that that entitled to as well then maybe the baby boomers might be willing to forego some as well. I receive $5K in franking refunds while my son receives $20k in childcare rebates. And no, I didn’t receive childcare rebates when he was a child as they weren’t available 40 years ago. Maybe if there were less government welfare then the government could reduce taxes so younger generations could then have more money.

May 30, 2019

Spot on Michael. The current tax system for retirees is inequitable and unsustainable. Chris Bowen has been good at identifying problems and lousy at designing practical solutions. Not unlike Royal Commissioner Hayne in other financial matters.

In the spirit of adjusting inequitable tax rates, I would also suggest abandoning the "Seniors & Pensioners Tax Offset". This cynical grey vote grab allows older Australians to pay less tax on ordinary income. It further exacerbates some of the issues you have highlighted.

May 30, 2019

Michael, Spot on re child benefits not available, from memory there was about $20/mth child endowment 35yrs ago and no assistance with child-care for working parent, if indeed one could find childcare at all. I sent my child to private school at 4yrs as it took them at 4 not 5 and had after- care which no local public school had at time, not because I was wealthy but so I could have career to save for later life as no superannuation.
Also, current retirees will recall most of our taxable lives Taxfree threshold was $5400, then $6000, it was Labour who took it to $18200 so retirees paid tax on $12000 odd more whole of life so I am sick of GenY thinking we were better off. Tax on 12000 at 19% is 2280p.a. x 10mill taxpayers is approx. 22.8 billion if threshold reduced to old level. Maybe time to reduce the threshold.

Geoff Larsen
May 24, 2019

Reposted with some revisions from Tony Dillon's article

Thanks for this information Tony.

From the 2014/15 year $47.7 billion of franking credits were distributed.

$24.2 billion to foreigners with no refunds
$17.6 billion to Australian residents which were refunded as offsets.
$5.9 billion to Australian residents which were refunded in cash.

I never understood why it is just the cash refunds which are looked upon as so called "tax leakage". Presumerably it’s because only this amount, for example, $5.9 Billion in 2014/15, appears on the expenditure side of the tax office accounts.

$net revenue = $total revenue – $total expenditure.

However the $17.6 billion of offsets, in 2014/15, was actually equivalent to a cash refund of $17.6 billion, followed by tax payable on the franked dividends, including the franking credits. So in fact, $dollar for $dollar, an offset has exactly the same impact on $net revenue in the above equation, as a cash refund.

This “tax leakage is hidden in the $total revenue above, reducing $net revenue by $17.6 billion.

Another way to show this hidden expenditure is to bring it onto the expenditure side by adding the $17.6 billion to both $total revenue and $total expenditure. The – sign between the 2 means $net revenue remains the same. However we see now that $23.5 billion of franking credits are now included in $total expenditure and the $total revenue now includes the total tax collected on franked dividends in $2014/15 by Australian resident, franked dividend receivers.

Call the $23.5 billion "tax leakage” if one likes but actually it’s the total cost of running the current dividend imputation tax system, eliminating the double taxation of franked dividends, for Australian resident shareholders.

June 06, 2019

Lyn: "Also, current retirees will recall most of our taxable lives Taxfree threshold was $5400, then $6000, it was Labour who took it to $18200 so retirees paid tax on $12000 odd more whole of life so I am sick of GenY thinking we were better off. Tax on 12000 at 19% is 2280p.a. x 10mill taxpayers is approx. 22.8 billion if threshold reduced to old level. Maybe time to reduce the threshold."

Lyn: You are spot on! I have for many months pointed out how Labor increased the TFT to $18200 and the merits of reducing the TFT (for increased revenue) but you are the first to agree with me. Also, when Howard with Labor support introduced cash refunds as part of the GST compensation package the TFT was raised from $5400 to $6k and family benefits increased. Cash refunds for retirees balanced by higher TFT and benefits for working people. Labor's plan was grossly unfair because it took from the elderly but kept all the benefits enjoyed by the young. And older voters saw through that!

Paul K
May 23, 2019

Graham's comments are spot on and again show why the superannuation system is an abysmal failure and a complete dud.
1. The government is confiscating 9% (12% if vested interests had their way) of hard earned wages which is sorely needed by young families to feed, house, clothe and educate their kids;
2. The system has nurtured a complete industry of crooks and scammers (ask Hayne) whose singular purpose is to feed off this flawed system;
3. As Graham notes, when you finally retire with what pittance of your hard earned is left, governments of all persuasions treat it as something akin to a pork barrel to dip into as they please as you are being accused of being "gifted" the money by a generous government.

Its time to end the scam. People don't need this cynical and unfair system to save for retirement. Those who are motivated will save and those who aren't won't. And the pension will still be there for those who truly need it.

Mark Morten
May 23, 2019

To make it fair to everyone who is receiving tax exempt pension income from a superannuation fund and to keep it simple why not introduce a 5% tax on income earnt by the superannuation pensioner.

alan udell
May 23, 2019

yes Costello did 3 things, made the tax on pensions ZERO, removed pension income from Assessable income and gave extremely generous contribution levels. My friends and I all in the Finance Industry could NOT believe this. Surely the pensions should at least be included in income even if taxed at 0. A small tax say 5 - 7.5% maybe on the excess of $5000K per pensioner would surely be acceptable given how generous the concessions are.

Jon Kalkman
May 23, 2019

As someone not involved in the Finance Industry let me tell you:
1) Costello did not make tax on pension funds ZERO - Keating did that in 1992. Costello made withdrawals from super tax-free for members after age 60 which is not the same thing, since it is the fund that owns the shares and the fund receives the franking credits.
2) Costello REDUCED the generous contribution levels. Before 2007, the concessional contributions for people over the age of 55 was $105,000 - he reduced it to $100,000 and it has been progressively reduced since. Before 2007, non-concessional (after-tax) contributions were UNLIMITED and that is why we still have funds with $80 million. He reduced it to $150,000 annually. That has also been progressively been reduced since. In response to the outrage he allowed 1 year's contribution of $1 million. It is now impossible to accumulate a large balance in your super fund.
3) Super payments were always regarded as the return of your own money - just like a withdrawal from a bank account. Therefore it was also not counted towards the assets test in Centrelink pensions until 2015. That is why it was never regarded as assessable income.

People seem to forget that this compulsory money, deducted from salary, is taxed on the way in, and taxed while it is the fund for up to 40 years with no access until retirement when it then affects your eligibility for the age pension. The tax-free retirement was always seen as the incentive for people to save for their retirement so that they would less dependent on the age pension.

Remember that the present value of the age pension for a couple is around $800,000. You get that without lifting a finger. How much incentive should there be to encourage people to save? It is already clear that young people already have given up on making after-tax contributions because they do not trust the rules to stay unchanged. What are the implications of that for future age pension payments?

May 23, 2019

You’ve done a great job explaining the franking credit issue, which naturally highlighted all the flaws.

A question on the intergenerational equity research – did anyone think Gen X has got the best deal? Most of us were too young to get free education, and too old to get paid maternity leave and child care subsidies.

The other big equity issue I see is equal work for equal pay based on geography. In many professions people get paid less in Hobart and Adelaide than Sydney and Melbourne, and less again in larger regional centres. For people in Sydney and Melbourne it’s a big disincentive to leave. For people getting paid less for the same work, it flows through to less super so more reliant on Government in retirement. Adding in lower house price growth it means children of people living in smaller centres inherit less savings and less house value, so has a significant intergenerational effect aswell.

May 23, 2019

The Millennials are quoted as saying the Boomers get the best deal, no one seems to take into account that the Boomers have been working for 40 - 50 years prior to retirement paying taxes and contributing to the economy and infrastructure that the Millennials are now getting the benefit of, the Millennials contribution to the economy is very limited and only now commencing and I am sure after they have been contributing and paying taxes for 50 years they too will appreciate some recognition of their efforts through various support measures provided by the government.

RON Cross
May 23, 2019

yes Pat it is along time to go without and spending with going overseas trips and new cars that the young indulge in far too often . They also benefit from low interest rates far below our 18 % on house mortgages . They have no right to criticise our savings and imputation credits and tax free super on pension phase . The young also receive franking credits in their member accounts in super when in accumulation phase

Nick Chaplin
May 23, 2019

Hi Graham,
Thanks for your comments on the franking credit resolution that was the election outcome on Saturday. I don't mind saying it was great to revisit Don's Party, albeit without the swimming pool scene. A great result.
I re-read Tony Dillon's article and was so pleased to get this very sensible assessment of what was going to be atrocious policy on franking credits. The fact that Chris Bowen was basing his future expenditure (some $58b) on erroneous "savings" that were simply hot air makes the election outcome unsurprising. Tony Dillon is one of very few writers on the subject that noted the "savings" would disappear almost completely by investors simply changing the way they invest. If hybrids were sold because of fear for this policy, someone that can use the franking credits would buy them instead of buying an all-cash bond, and the ATO lost its expected windfall. No-one seemed to tell Bowen that this would happen, or he had to ignore it to justify the cost of Labor's promises. Incidentally, hybrids have rallied hard since the beginning of the year so there really isn't a lot of room left, but the reaction since Saturday has been compelling - a good win for canny investors.

Malcolm Hutton
May 23, 2019

People consciously or unconsciously are always asking the question ‘What’s in it for me?’, and abstract things like the climate emergency aren’t understood. Many politicians and others have said something like ‘When there’s a horse called ‘Self- interest’ running in a race, back it every time’. In contrast Labor provided several reasons for electors not to vote for them e.g. cancelling the gifting of excess franking credits, limiting negative gearing, and doubts about jobs (direct or indirect) in coal mining regions of Australia.
Labor’s policy package appealed to me; I thought it hung together well and various policies on their own would not have made as much sense. But I’m typical of the first group described below by Bernard Keane:
From Bernard Keane in Crikey:
It’s also clear that climate change is fundamentally dividing Australia between well-educated, middle and high-income urban Australians who understand it is a global emergency and lower-income voters who see it as, at best, a third-order issue and who continue to see extractive industries as key to their future.
As a recipient of excess franking credits I initially wondered about its fairness, but when I thought it through I viewed it as people getting an age pension-like gift from the Government without having to pass a means test.

Rob V
May 23, 2019

Anyone who still calls franking credit refund a “gift” does not seem to understand that it is a tax taken out of, and paid on, the all profits of the company. When these profits are distributed as dividends, that tax paid then belongs, and is credited, to the shareholder and must be declared as income in their tax return.

The proposal was to stop “refunding excess franking credits”. “Refunding” implies returning money to its rightful owner and ALL of the franking credits, including excess credits, belong to the shareholder; not just any portion that may be used to reduce a tax liability on other income.

To suggest restricting the “refund” to some people on the argument that the government needs more money ignores the “loss” of revenue to anyone who receives franked dividends. The wealthy person who may receive $100 000 franking credits may not get a cheque for their refund, but reduce the tax they must pay by $100k. This “loss of government revenue” is a refund just the same, and yet there seems to be no argument there.

I suggest franking credit issue should be looked at, and maybe limited. Mr Shorten, with great indignation, referred to people who got $100k franking credits, and yet proposed nothing to address that. If the few very large SMSF balances are the concern, then address them rather than use them as examples to justify hitting smaller SMSFs? That was a deliberate and dishonest reason for promoting their flawed policy

Should Labor continue with such unfairness, might they then extend it to refusing to refund the PAYG tax taken out of salaries of workers who have a taxable income in the tax-free bracket?

May 23, 2019

I finally got a chance to dig into something I had wondered about: how the USA does this. The US offers various incentives via federal tax credits. Well, it turns out that some things are refundable tax credits and some are not. For example, you can have a $7,500 federal tax credit if you buy an electric car, but it cannot be refunded in cash if you pay no tax. Other things such as education expenses are refundable.

So in the end, all we were squabbling about is which category dividend imputation credits should go in.

Tony G
May 23, 2019

Re Malcom Hutton,s comment (i) "The climate change divide", I suppose I am well educated (BSc, Post Grad Dip) but I hold the opinion that climate change is not a global emergency but a bit of a scam. (ii) "Franking credits are a gift", there is always the option of charitable donations if you have guilt over receiving the refunds, that way you can "walk the walk".

May 23, 2019

This problem isn't going away. The cost to the budget will keep increasing and some future government will have to address it. The Millennials are going to be out with their pitchforks eventually.

Financial Adviser
May 16, 2019

Definition of Socialism: a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. The Labor Party wants to control all private wealth, starting with super. Their franking credit, trusts, caps on tax fees, SMSF borrowings, CGT and neg gearing policies are just the tip of the iceberg.

May 08, 2019

Hey, What's happening with the" Inverted Yield Curve?" Are short term bonds higher than long term?

Was the previous inverted yield curve a precursor to the GFC. ?


Graham Hand
May 08, 2019

Hi Paul, previous article on this subject here:

Jon Kalkman
May 06, 2019

Chris Bowen said today in the debate at the National Press Club with Treasurer Frydenberg: "if people get a cash refund for their excess franking credits, it means that in many cases there is no tax paid at all on our company profits like BHP, Telstra etc, and that is completely unacceptable."

The taxpayers he is referring to are retirees in a super fund paying a pension . Such a super pension fund has a zero tax liability and therefore at present, the fund receives a full refund for franking credits, since none of the credits are required to pay any tax.

What he didn't say, for whatever reason, is this state of affairs occurs precisely because the franking credit system was designed to ensure that taxpayers should pay tax on their dividends at their marginal tax rate and no more. If the tax rate is zero, then there should be no tax to pay.

By extension, if these super funds do not get a refund fro franking credits, it means that the tax rate on shares at least (and only in an SMSF) is no longer zero as originally designed by Keating back in 1992. (It had nothing to do with Costello).

So Chris, if that is the problem created by your mentor, Keating, why not fix it by taxing ALL super pension funds uniformly, That means taxing all pension funds, including industry funds and taxing income from all assets, not just shares. That seems to be fair.

May 07, 2019

The curious case of ATO's franking credit refund giveaway':

'The Opposition Leader was also confronted by a man who said he would lose 20 per cent of his income as a result of Labor's plans to limit franking credits. Mr Shorten said it was a "gift" paid for by millions of working Australians.'

Refunds of franking credits come only from tax paid by the shareholder's companies. No working Australians taxes involved.

Not once in it's history has ATO gifted money. Advice, yes; money no. To say otherwise is to try to knowingly hoodwink.

May 02, 2019

Great reading - Buffett and the letter exchange with Bowen re the franking changes the ALP propose



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