The Meeting Place

Self-funded retirees could be a soft target

dart in a target with coins in the background

Self-funded retirees are at risk of becoming a soft target for tax reform which would help the government repay money borrowed to finance COVID-19 relief measures, says an SMSF administrator.

Heffron managing director Meg Heffron said the question on many people’s lips now we are coming out of restrictions is: “Who pays back all the money borrowed to finance much-needed government support?”

Ms Heffron suspects SMSF clients, particularly retirees, are at most risk.

“Many would be the first to acknowledge that the tax system has given them enormous benefits in the last 10-15 years and would not begrudge winding back some of the current concessions. As the asset owners in our community, they are possibly a soft target for tax reform,” she said.

“But while these same people are not losing their jobs or businesses, they are seeing their dividend income fall, their investment portfolios buffeted, income from investment properties dry up and their children struggling financially. It would only be natural for them to feel somewhat aggrieved if asked to shoulder a disproportionate share of the burden going forward.”

She added that the wider self-funded retirement sector may also be looked at, not just SMSFs.

“The government has spent a lot of money, for good reason. Somehow, it will need to replenish the coffers and is talking about growing our way out and creating jobs and that will be great,” she told selfmanagedsuper.

“I also think that they will look to ‘where the money is’ to see if there are changes they can make to claw back some dollars, and their gaze will naturally fall on the pools of wealth held by retirees – often in super – and the outcome may well be a reduction in tax concessions.

“I suspect that any reduction in tax concessions will focus more on retirees than accumulators.”

Ms Heffron said this was her personal opinion in relation to how the government could increase its income without taxing incomes during a period when it is also encouraging people to start spending again.

4 comments

So the government that "is committed to no new taxes and reducing existing taxes" may be about to introduce some new taxes.  What a surprise.  My wife and I are self funded retirees with no money in superannuation - yes, we took it out and manage it ourselves - thus we have no vested interest in superannuation taxation at all.  However, we believe that no government should introduce legislation that has a retrospective effect -we believe that any new taxes should apply only to superannuation funds accumulated after the legislation is passed into law.  Since this won't produce the revenue stream that the government so urgently needs, all of you who have super, watch out!  Better still, lobby your MPs NOW and try to prevent increased taxation on your retirement savings.  I wish you luck - our MP Dr David Gillespie, National Party, doesn't answer his emails even when we ask hime direct questions about issues that are important to us.

Buggies those with money in Superannuation have benefited greatly by reduced or no taxation on money earnt and reduced taxation on a large part of their contributions so I see no reason to reason to grandfather any new tax changes to super.

No reason for Gillespie to respond or take action so long as he is a well behaved Nat – vote with the libs and ask for more handouts, subsidies, tarrifs and concessions on behalf of farmers. Holds his seat with a 30% margin so not under any threat.

Mjp, many with money in superannuation DID NOT benefit greatly from reduced or no taxation. I didn't. Low income earners' superannuation monies were taxed at their marginal rate, or higher in some cases. For me, superannuation represented over-taxed money that fed fat-cat managers. After a decade of contributions, there was a lot less there than had been taken from my pay. If I'd been allowed to put the same amount in the bank instead, I'd have had twice as much. 

Maybe if everyone stopped making baseless assumptions and believing myths and focused on fact, we could develop as system that was fair and equitable and economically sustainable. The problem in Australia is assumptions and generalisations. Labor ASSUMED (very wrongly) that all SFRs were far better off than part pensioners, so decided to attack SFRs. Didn't work out too well, did it? Now drips-under-pressure are suggesting taxing SFRs based on the ASSUMPTION (very wrong) that they accumulated savings through huge tax concessions. Some did, for sure. Many certainly did not. 

The temptation to withdraw everything from super and have a spend up gets stronger and stronger. 

If you hit the SFRs you will have less of them in the future; they will see that it just is not worth it to try to provide for

themselves and shall spend their dough like  myself and accept the part pension and kiss their worries

goodbye. If you cannot get $50'000 a year without Govt pension concessions you are far better off being a pensioner.

Spot on, Mariner. Already many SFRs are feeling their saving is being harshly punished and all their hard work was futile. Take any more and hundreds of thousands will give up striving to remain independent. Maybe threats like this one will motivate couples with around $1 mil in savings to spend half of it on home renovations or upgrading to a new home, claim the $25,000 handout, and apply for the pension. Their income would increase. They would have far less stress and greater security. And they wouldn't be at risk of hideously unfair taxes making them even worse off.

Agree 

..this situation is also worsened by the forever changing gatepost

My God, now we have an opinion from one person based on a suspicion that something may happen in the future with no proof, no comment from any government source and immediately it is accepted as the truth. Can YLC get any lower? My opinion, for what it's worth, is that YLC is already lower than a grave digger's bootprint.

So Horace, where do you suggest the gov. is going to get the funds to repay all the borrowings after cov-19? They wont be getting it from companies that are paying nearly zero tax now,they wont be getting it from people who have become unemployed cos of cov-19, they wont be getting it from small businesses who will have shut down. They certainly wont be getting it by cutting their own pay and perks or those of public servants. Doesnt leave a lot does it?

They could can the 50Bn submarines I guess and a lot of other defense spending. There certainly is a lot of waste in a lot of areas they could cut. I'm sur e with your expertise you can figure out what it could be and let them know.

Who are the easy fixed targets?

I have no idea, pedro the swift, just as Heffron managing director Meg Heffron has no idea. I do know that useless speculation doesn't help and can place people under stress if they believe the fantasies. 

gov can do many types of shenanigans such as issue bonds, print money, increase gst, get rid of tax exemptions, reintroduce FID and BAD taxes etc but no reason to get excited because a self-serving SMSF consultant from Maitland has an opinion - treat her comment as a paid advertorial or infomercial

4 comments