Save
Middle, low-income retirees to wear 15% loss under new policy
New modelling has found a significant opportunity cost in the ALP’s controversial tax policy, with modest earners set to be 15 per cent worse off in retirement if it goes ahead.
Middle, low-income retirees to wear 15% loss under new policy
New modelling has found a significant opportunity cost in the ALP’s controversial tax policy, with modest earners set to be 15 per cent worse off in retirement if it goes ahead.
Earlier this year, the federal opposition announced plans to scrap cash refunds on dividend imputation credits.
The policy intent is to stop and prevent high income earners and SMSF members with big balances from exploiting or disproportionately benefiting from tax concessions, relative to low and middle income earners.
However, the policy design has been picked apart by the SMSF community, and it appears the policy will actually hurt the portfolios of those it’s looking to benefit.
The most recent data analysis from SuperConcepts, an SMSF administration and software house, shows that retirees with an account-based pension receiving $45,000 per annum at age 65 will find themselves 15 per cent worse over a 20-year period.
SuperConcepts’ calculations are based on the common portfolio make-up of an SMSF. It assumes a 40 per cent allocation to Australian shares, 3 per cent capital growth and a 4 per cent income return. The calculations also assume the SMSF has one member with a retirement phase interest in the fund.
Based on those assumptions, analysis shows that the member’s closing balance after 20 years would be $825,519 if refundable franking credit were removed, compared with $953,480 if refundable franking credits were not removed.
“This equates to a significant impact on the fund’s earning rate and the total income received per annum,” said SuperConcepts general manager of technical and education, Peter Burgess.
“In year one the total income received including franking credits is $36,771 compared to $30,600 if refundable franking credits were removed. After five years the income differential is $7,631 per annum and after 10 years the differential is $9,207 per annum,” he said.
“As a consequence, after 10 years the member’s minimum annual pension entitlement would reduce from $60,756 to $56,762 and after 20 years from $88,298 to $76,991,” he said.
How will you fare under the reforms?
For more about the real-word impact of these reforms, and if they are likely to impact you and your portfolio, click here for our extended analysis.
RELATED ARTICLES
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
More articles
OUR PLATFORMS AND BRANDS
- Accountants Daily
- Accounting Times
- Adviser Innovation
- Australian Aviation
- Broker Daily
- Cyber Daily
- Defence Connect
- Fintech Business
- HR Leader
- Independent Financial Adviser
- Investment Centre
- Investor Daily
- Lawyers Weekly
- Money Management
- Nestegg
- Property Buzz
- Real Estate Business
- Smart Property Investment
- SMSF Adviser
- Space Connect
- Super Review
- The Adviser
- Wellness Daily
- World of Aviation
EVENTS AND SUMMITS
- Accountants Daily 30 Under 30 Awards
- ACE25
- Adviser Innovation Summit
- Australian Accounting Awards
- Australian Aviation Awards
- Australian Broking Awards
- Australian Defence Industry Awards
- Australian Law Awards
- Australian Space Awards
- Australian Space Summit
- Better Business Summit & Awards
- Broker Daily Business Awards
- Corporate Counsel Summit & Awards
- Cyber Security Summit & Awards
- Defence Connect Budget Lunch
- Defence Connect DSR Summit
- Fund Manager of the Year Awards
- ifa Excellence Awards
- ifa Future Forum
- Investor Daily ESG Summit
- Lawyers Weekly 30 Under 30 Awards
- Lawyers Weekly Women in Law Forum
- New Broker Academy
- Partner of the Year Awards
- REB Awards
- Reinnovate
- SME Broker Bootcamp
- SMSF Adviser Technical Day
- Super Fund of the Year Awards
- Women in Finance Awards
- Women in Law Awards
- Accountants Daily Podcast Network
- Australian Aviation Podcast Network
- Broker Daily Podcast Network
- Defence Connect Podcast Network
- HR Leader Podcast Network
- REB Podcast Network
- Relative Return
- Space Connect Podcast
- The Adviser Podcast Network
- The ifa Show
- The Lawyers Weekly Show
- The Smart Property Investment Show
PODCASTS
LEARNING AND EDUCATION
MOMENTUM MARKETS NETWORK
LINKS
STAY CONNECTED
Make your nest egg grow. Register now for nestegg updates.