Franking credits boost spending in retirement by 5-6%: research

New academic research has found that the franking credits on dividends boosts consumption in retirement by 5%-6% – the equivalent of a 8%-9% higher balance at retirement.

The paper What Dividend Imputation Means for Retirement Savers was written by three academics at the ANU. “Our results highlight that dividend imputation makes a significant difference to retirement savers, both in terms of how they might structure their portfolios, and the value that it generates.”

The researchers note Labor’s policy of stopping refunding excess franking credits, saying “such a policy change could potentially end, or at least limit, access to imputation credits for Australian retirees”. Though the research does not model Labor’s policy, instead taking a broader view look at franking credits. Read more...

ATO estimates tax gap from large super funds at $127 million

The ATO estimates that $127 million in tax was not collected from large super funds in the 2015/16 financial year, in an update to the tax gap figures.

This $127 million net tax gap for large super funds is around 1.5% of the total tax reported by the sector. The gap largely arises from over claiming foreign income tax offset, incorrect application of GST provisions and over claiming of franking credits, according to the ATO.

The tax gap for smaller super funds (including SMSFs) for 2014/15 is lower, at $40 million. Though this represents 3.2% of the tax reported by the smaller funds. Read more...

Gen X, Y and Z think they’ll need up to $1.74 million to retire

Younger generations think they’ll need between $1.5 million and $1.74 million each in savings to retire, according to new research from ING. This contrasts to the savings required for a comfortable retirement according to the ASFA Retirement Standard, which is currently $545,000 for a single person or $640,000 for a couple.

The research also found differences between people in the generations wanted to retire and when they thought they would be able to retire. Gen X wanted to retire at 63, but didn’t think they’d be financially ready to retire until 72. Gen Y wants to retire at 61, but expects to be able to do so at 68. Gen Z wants to retire at 62 and expects to be able at 65. Read more...

ASIC issues stern warning for firms and trustees to join AFCA “now”

ASIC has issued a stern warning to financial services companies and some super fund trustees that they “must” join the Australian Financial Complaints Authority (AFCA) by tomorrow.

AFCA replaces the Superannuation Complaints Tribunal (SCT), Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO).

ASIC warned superannuation trustees (SMSFs aren’t required to become members of AFCA), Australian financial services licensees, Australian credit licensees and authorised credit representatives that they are required to join AFCA by 21 September 2018. Read more...

Parliamentary inquiry into removing refundable franking credits set up

A Parliamentary Committee will inquire into implications of removing refundable franking credits

The House of Representatives has set up an inquiry into the implications of stopping refunding of franking credits – a Labor policy.

The House of Representatives Standing Committee on Economics will inquire into the “implications of removing refundable franking credits”.

In March Labor announced a policy of stopping the refundability of franking credits, from 1 July 2019. Two weeks later the policy was changed to exempt Age Pensioners and some SMSFs. Read more...

Labor plans to phase out $450 Super Guarantee threshold

Labor has announced it would phase out the $450 minimum monthly threshold to receive Super Guarantee contributions, as part of a broader women’s super security package.

“Too many Australian women retire in poverty,” says a statement by Labor.

“A Shorten Labor Government will help women plan for a secure financial future, investing $400 million to strengthen Australia’s superannuation system and boost women’s superannuation balances.”

“Labor knows that closing the gender gap on superannuation is absolutely critical to Australian women having dignity and certainty in retirement.” Read more...

SMSF investments outperform MySuper for third month running

Investments held by SMSFs have outperformed those of large MySuper funds for the third month running, according to data from SuperGuard 360.

SuperGuard compares the performance of SMSF investments – based on ATO statistics – to the portfolios of MySuper superannuation funds. July 2018 was the third consecutive month in which SMSFs had outperformed MySuper. Though prior to May 2018 MySuper had outperformed for “almost two years”, according to SuperGuard.

For the 12 months to July 2018 the SG360 SMSF Reference Index (SMSFs) returned around 10.5% before fees and taxes, compared to 10.2% for the SG360 Default Index (MySuper). Read more...

ASIC Deputy Chair Peter Kell resigns, effective December 6

It has been announced that ASIC Deputy Chair Peter Kell will resign, effective 6 December.

Mr Kell has been an ASIC Commissioner since November 2011, and Deputy Chair since May 2013. He was reappointed as Deputy Chair for a one-year period from May 2018 by then Minister for Revenue and Financial Services Kelly O’Dwyer.

“His experience and understanding of corporate regulation has been appreciated by successive governments as well as members of ASIC,” said a statement from Treasurer Josh Frydenberg. Read more...

$52.5 billion more in super if all Choice super switched to MySuper

Total superannuation could be $52.5 billion higher in a decade, in today’s dollars, if all Choice super accounts were switched over to MySuper, new research has found.

“Higher returns and lower fees of MySuper products could continue to have a material impact on the superannuation market over the next 10 years,” says RiceWarner. RiceWarner was commissioned to conduct the research by the Australian Institute of Superannuation Trustees (AIST).

“There is a general view that members who choose to invest their superannuation assets outside MySuper products should achieve a better outcome as they are tailoring their investment decisions to their personal circumstances and financial goals. However, our analysis shows that this is not generally the case.” Read more...

3 year financial services ban for SMSF LRBA advice upheld by AAT

The Administrative Appeals Tribunal has upheld a decision by ASIC to ban a financial adviser from providing financial services for three years, relating to SMSF advice.

ASIC banned Jason Sean Atkins from providing financial services for three years in 2017. ASIC said it had found Mr Atkins had advised clients to set up SMSFs and use Limited Recourse Borrowing Arrangements (LRBAs) to buy property in ways that breached the best interest duty.

The Administrative Appeals Tribunal (AAT) has now upheld the three year ban, following an appeal of ASIC’s decision. Read more...