And you thought your superannuation was safe from a government cash grab? Heh. Treasurer Jim Chalmers says otherwise. And the media is having a field day with his comments. Today, Iâll give you my response to his plans to tax and give âpurposeâ to how your retirement money is invested. Iâve been warning about precisely this issue for years, of course. And everyone laughed at me. âSuper is too sensitive to touchâ, or âItâll be too politically unpopularâ, they said. But the python that is government always squeezes a little tighter. Itâs only a question of how fast. Of course, I had an unfair advantage in seeing what was coming. By following the fate of pension systems in a long list of different countries where I was forced to put money into them, I can spot the trends others miss. The constant encroachment of government on the pension money they created by offering tax incentives is, well, constant once you face it regularly from a list of governments. Do you remember the changes to super lump sums? They used to be tax free. But now there are a long list of T&Cs if you want to escape paying tax by getting your money out. That change in Australia allowed me to tell my readers in the UK about how the same change was coming for them. And recently, thatâs looking rather likely, with the UKâs Telegraph headline reading: âScrap tax-free pension lump sum to end surge in early retirement, urges Labour-linked think tankâ. In the UK, Former Prime Minister Gordon Brown changed dividend tax policy for pensions, resulting in a tax grab worth hundreds of billions of pounds to the government. I still get reader mail about it years later. And Iâm expecting the same thing to happen in Australia, where dividends are unusually tax incentivised. But letâs focus on the latest news in Australia. Even if what happens overseas is often a good warning sign of whatâs coming next. This bit of Orwellian double-speak from the treasurer had me grinding my teeth: âWhen I think about how best we can use the budget to support Australians towards a better retirement â one fact stands out. âRight now, weâre on track to spend more on super tax concessions than the age pension by around 2050. âIâm not convinced thatâs a sustainable way to get to our destination â good retirement incomes for more Australians, now and into the future.â Now, Iâm sorry to point out the obvious, especially about a âfactâ, but super tax concessions are not spent money. This is peopleâs money, which is not taken away by the government. Welfare and keeping your own money are completely different things. The fact that the treasurer canât tell the differenced is a little concerning but does explain a lot. Not that people havenât paid tax on the money in their super. They pay by way of corporate tax, GST, and plenty more. And not that they wonât pay tax on it again when they try to spend it via GST and other taxes. But to classify untaxed money as spent money is just absurd. The âfactâ is that theyâre completely different. Secondly, why does the greater âspendingâ on super than the age pension in 2050 mean super is unsustainable? Wasnât the whole point of super that it lightened the load on the age pension by encouraging people to take responsibility for their own retirement? Isnât the huge super system relative to the age pension a sign that the policy worked rather than failed? It certainly isnât a sign that the super system is unsustainable. In fact, how can a retirement savings system be unsustainable? Only by way of lacking funds, if you ask me. Not by being too big. Perhaps the treasurer means that his budget is unsustainable without a raid on superannuation funds? That would make more sense⦠Of course, any such raid would just increase the need for welfare, which is the same thing, remember? So weâre not really getting anywhere by taxing super⦠What about this idea of having the government direct how your super is invested? Giving it âpurposeâ, theyâre calling it. Well, David Murray, who led the 2014 financial services inquiry, did a rather good job of pointing out that itâs inappropriate for the government to direct how membersâ own property is invested: âIt is not the governmentâs property, it is the membersâ property, and we believed at the time that is wrong, and I still do. It is not the governmentâs money to appropriate. âIf there are good alternative investments, why is there not superannuation money already in them? The trustees and their managers have the wherewithal to identify good investments for their members to make sure theyâre diversified and that they work for members. âItâs just not the place of the government to direct membersâ money. If you distort the membersâ asset allocations, you distort returns and that can only be harmful.â Iâd like to add something he missed in his comments. The proposed change is for superannuationâs purpose to be redefined from âincome in retirement to substitute or supplement the age pensionâ to âthe objective of super is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable wayâ. Letâs leave aside that what Jim Chalmers considers to be âdignifiedâ likely differs rather dramatically from what you and I would consider to be dignified. The trouble is that âequitableâ is a matter of judgement. And, somehow, I donât think itâs you and I who will be doing the judging. Helpfully, the government has specified that âequitableâ includes the following constraint: âSuperannuation also needs to fit within the broader fiscal strategy.â Huh? If they come up with a completely mad spending policy, superannuation must be reshaped to fund it? Whose money is it? The governmentâs or yours? Well, given the government created and controls the super system with legislation, Iâd say itâs your money in the same sense that a deposit at the bank is yours. (It isnât.) Which has been my point and warning all along. The super system is a haunted house with a door that slams shut once youâre inside. You can contribute any time you want but can never leave with your money intact. A big part of Chalmersâ plan is, I suspect, to require you to invest money in government bonds. Which is a financial advisorâs way of saying that youâll be giving him the money to spend on welfare, warfare, and fanfare after all. Either via tax or government debt (or both). But itâs worse than that. As the market historian Russell Napier has been warning since before the inflation spurt, weâre entering an age of financial repression. Just as wages arenât keeping up with prices, so too are interest rates falling behind inflation. This means that investing in government bonds is a losing propositionâ¦for investors. For governments, it allows them to inflate away their debt. This policy will be a stealth tax, a transfer of wealth from the investor to the government, and a scam. Which is why youâll have to be forced to do it. Hence the idea of government directing peopleâs super into âthe broader fiscal strategyâ. The only good news is that, by the time the changes are made, itâll probably be the other party that gets to spend the money. And when Labor discovers what they spend it on, the mistake will dawn on them. Itâll be an expensive form of entertainment for you and me to watch their faces. But at least itâll be entertaining. Until next time, Nickolai Hubble, Editor, The Daily Reckoning Australia Weekend The post Can Jim Chalmers the Money Out of You? appeared first on Daily Reckoning Australia. [Image] Hi Gang! 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[Can Jim Chalmers the Money Out of You?]( And you thought your superannuation was safe from a government cash grab? Heh. Treasurer Jim Chalmers says otherwise. And the media is having a field day with his comments. Today, Iâll give you my response to his plans to tax and give âpurposeâ to how your retirement money is invested. Iâve been warning about precisely this issue for years, of course. And everyone laughed at me. âSuper is too sensitive to touchâ, or âItâll be too politically unpopularâ, they said. But the python that is government always squeezes a little tighter. Itâs only a question of how fast. Of course, I had an unfair advantage in seeing what was coming. By following the fate of pension systems in a long list of different countries where I was forced to put money into them, I can spot the trends others miss. The constant encroachment of government on the pension money they created by offering tax incentives is, well, constant once you face it regularly from a list of governments. Do you remember the changes to super lump sums? They used to be tax free. But now there are a long list of T&Cs if you want to escape paying tax by getting your money out. That change in Australia allowed me to tell my readers in the UK about how the same change was coming for them. And recently, thatâs looking rather likely, with the UKâs Telegraph headline reading: âScrap tax-free pension lump sum to end surge in early retirement, urges Labour-linked think tankâ. In the UK, Former Prime Minister Gordon Brown changed dividend tax policy for pensions, resulting in a tax grab worth hundreds of billions of pounds to the government. I still get reader mail about it years later. And Iâm expecting the same thing to happen in Australia, where dividends are unusually tax incentivised. But letâs focus on the latest news in Australia. Even if what happens overseas is often a good warning sign of whatâs coming next. This bit of Orwellian double-speak from the treasurer had me grinding my teeth: âWhen I think about how best we can use the budget to support Australians towards a better retirement â one fact stands out. âRight now, weâre on track to spend more on super tax concessions than the age pension by around 2050. âIâm not convinced thatâs a sustainable way to get to our destination â good retirement incomes for more Australians, now and into the future.â Now, Iâm sorry to point out the obvious, especially about a âfactâ, but super tax concessions are not spent money. This is peopleâs money, which is not taken away by the government. Welfare and keeping your own money are completely different things. The fact that the treasurer canât tell the differenced is a little concerning but does explain a lot. Not that people havenât paid tax on the money in their super. They pay by way of corporate tax, GST, and plenty more. And not that they wonât pay tax on it again when they try to spend it via GST and other taxes. But to classify untaxed money as spent money is just absurd. The âfactâ is that theyâre completely different. Secondly, why does the greater âspendingâ on super than the age pension in 2050 mean super is unsustainable? Wasnât the whole point of super that it lightened the load on the age pension by encouraging people to take responsibility for their own retirement? Isnât the huge super system relative to the age pension a sign that the policy worked rather than failed? It certainly isnât a sign that the super system is unsustainable. In fact, how can a retirement savings system be unsustainable? Only by way of lacking funds, if you ask me. Not by being too big. Perhaps the treasurer means that his budget is unsustainable without a raid on superannuation funds? That would make more sense⦠Of course, any such raid would just increase the need for welfare, which is the same thing, remember? So weâre not really getting anywhere by taxing super⦠What about this idea of having the government direct how your super is invested? Giving it âpurposeâ, theyâre calling it. Well, David Murray, who led the 2014 financial services inquiry, did a rather good job of pointing out that itâs inappropriate for the government to direct how membersâ own property is invested: âIt is not the governmentâs property, it is the membersâ property, and we believed at the time that is wrong, and I still do. It is not the governmentâs money to appropriate. âIf there are good alternative investments, why is there not superannuation money already in them? The trustees and their managers have the wherewithal to identify good investments for their members to make sure theyâre diversified and that they work for members. âItâs just not the place of the government to direct membersâ money. If you distort the membersâ asset allocations, you distort returns and that can only be harmful.â Iâd like to add something he missed in his comments. The proposed change is for superannuationâs purpose to be redefined from âincome in retirement to substitute or supplement the age pensionâ to âthe objective of super is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable wayâ. Letâs leave aside that what Jim Chalmers considers to be âdignifiedâ likely differs rather dramatically from what you and I would consider to be dignified. The trouble is that âequitableâ is a matter of judgement. And, somehow, I donât think itâs you and I who will be doing the judging. Helpfully, the government has specified that âequitableâ includes the following constraint: âSuperannuation also needs to fit within the broader fiscal strategy.â Huh? If they come up with a completely mad spending policy, superannuation must be reshaped to fund it? Whose money is it? The governmentâs or yours? Well, given the government created and controls the super system with legislation, Iâd say itâs your money in the same sense that a deposit at the bank is yours. (It isnât.) Which has been my point and warning all along. The super system is a haunted house with a door that slams shut once youâre inside. You can contribute any time you want but can never leave with your money intact. A big part of Chalmersâ plan is, I suspect, to require you to invest money in government bonds. Which is a financial advisorâs way of saying that youâll be giving him the money to spend on welfare, warfare, and fanfare after all. Either via tax or government debt (or both). But itâs worse than that. As the market historian Russell Napier has been warning since before the inflation spurt, weâre entering an age of financial repression. Just as wages arenât keeping up with prices, so too are interest rates falling behind inflation. This means that investing in government bonds is a losing propositionâ¦for investors. For governments, it allows them to inflate away their debt. This policy will be a stealth tax, a transfer of wealth from the investor to the government, and a scam. Which is why youâll have to be forced to do it. Hence the idea of government directing peopleâs super into âthe broader fiscal strategyâ. The only good news is that, by the time the changes are made, itâll probably be the other party that gets to spend the money. And when Labor discovers what they spend it on, the mistake will dawn on them. Itâll be an expensive form of entertainment for you and me to watch their faces. But at least itâll be entertaining. Until next time, Nickolai Hubble, Editor, The Daily Reckoning Australia Weekend The post Can Jim Chalmers the Money Out of You? appeared first on Daily Reckoning Australia. [Continue Reading...]( [Can Jim Chalmers the Money Out of You?]( And, in case you missed it: - [Fresh Trading Ideas to Close Out the Short Week](
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