Is Kevin Rudd Planning to Steal Your Superannuation and Bankrupt Your Retirement?

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Superannuation savings could be in danger of being wiped out by the federal government. The Australian Financial Review (AFR) reported recently that the federal government was about to seize the superannuation balances of foreign temporary workers. This is a big deal and I’ll come to why it affects you shortly… Here’s what the AFR said:

Budget to grab $800m from super funds… After the initial payment in June, super funds will be required to hand over their obligations from temporary residents twice a year, in April and October.”

The super balances in question belong to people that have come to Australia, worked for a period of time, paid taxes, received superannuation contributions from their employer, and then left the country to return home.

But stealing private property doesn’t seem to worry the government or Kevin Rudd, at least not yet. Besides, as the AFR reports, if these foreign workers want their property back: “Members will be able to claim their savings from the ATO, but from this month former temporary residents will have to pay withholding tax of up to 45 per cent, up from 40 per cent previously.”

You see, the process of expropriating this private property is that it will be treated as tax revenue. The Australian Taxation Office (ATO) will tax these super balances at 100%. The funds will then be added to the government’s consolidated revenue – in other words, straight into the government wallet for it to spend.

It all sounds very Venezuelan doesn’t it? Kevin Rudd and superannuation. Hugo Chavez and oil.

Needless to say, not only is the Rudd government grabbing $800 million from superannuation, but because it will spend the money to ‘save’ the economy, it will add another liability to Australia’s balance sheet as each year more money is snaffled from savers and spent.

And the scary thing is, I saw this coming. I wrote in Money Morning recently that now would be the perfect time for the government to sink its paws even further into your wallet and your savings. But even this has happened quicker than I thought possible.

Is Kevin Rudd coming for YOUR retirement cash?

The next logical step is for the government to grab the superannuation balances of all working Australians. Don’t forget, the government is about to embark on a massive $200 billion spending spree and it’s got to pay for it somehow.

Australian taxes are already high. What are the other options? It can increase the GST for starters, but that’s only going to drip feed through to government coffers. If it wants a big one-off hit what better way than to get hold of the $1 trillion held in superannuation.

It would wipe out government debt in an instant and still leave it with plenty of your money to spend on wasteful infrastructure projects.

What this means is that yet again savers are being punished. The dream of paying for your retirement with your super could be about to end. To read more about how developments in the market affect your super, make sure to sign up for my free daily e-letter Money Morning. Click here to sign up to Money Morning.

Kris Sayce
Editor, Money Morning

Kris Sayce
Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Daily Reckoning e-newsletter in 2005. He is currently the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service — Money Morning.
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34 Comments on "Is Kevin Rudd Planning to Steal Your Superannuation and Bankrupt Your Retirement?"

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Russ
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Are you crazy?

How do you justify a jump from the Govt recouping money from Super funds that is unclaimed by temporary workers a little faster than previously to them taking ALL Australian’s Superannuation?

I cannot believe you are a fully-qualified advisor (assuming you are) and hold those views.

I guess not all financial advisors are equal.

Claytonator
Guest

Russ,
Where else will the money come from?

Don
Guest
This is not news to me. Since retirement is about 30 years away (and counting), I have always thought that my super would end up as “pension credits” once the government had squirrelled it all away on pet projects. Then I will have an “account balance” that has no real value but it will determine whether I eat premium cat food (with real fish pieces) or snappy tom. You always bet on form in this world and the old saying “never get between a politican and a bucket of money” has held true in any society, any time in history.… Read more »
Robert
Guest
I have never trusted super as my primary retirement savings vehicle and am increasingly thinking physical gold and copper, lithium and uranium may be a good portfolio to keep on a block in the bush and sell as needed. My major concern is though that we have a society that is the wealthiest and most productive in the history of mankind. We need 3% of the workforce to grow all our food and 15% say to make all the products we need but we still need to increase our pension age to 67. We should be allowing people to retire… Read more »
Colin
Guest

Der

The Aust government in particular have been doing just that for at least the last 8 ears that I know of.

Just ask any employer who accidently paid his SGLevy a day late due to road based Aust incompetent Postal System, to be effectively fined 100%and then find that all the employees contributions have been confiscated. still Unfindable 8 years later.

We fear this is only the tip of the bucket

Coffee Addict
Guest
Jeff Bresnahan from Super Ratings and Michael Janda the ABC’s on-line business reporter appear to both require some on-line brain surgury. Check their article out at: http://www.abc.net.au/news/stories/2009/05/21/2577372.htm They can’t have it both ways. On the one hand they are saying that your super is like a KO’ed boxer who just lifed his head. On the other hand they are saying that its not a good time to switch from a “balanced” allocation to a cash allocation or the like. Not withstanding the HIGH risk’s associated with so called cash allocations promoted by some funds, now would I believe be an… Read more »
DG
Guest

Your logic is one of the more courageous leaps I have witnessed for some time. While your sentiment is appreciated your argument has a fatal flaw. This is still a relatively well functioning democracy and with so many voters having a stake in this system expropriation is still a fraught strategy for incumbent Governments. It can only occur in Argentina and Venezuela because they are affectively one-party states. I expect a more subtle approach will be more likely i.e. greater tolerance for inflation

Charfcutter
Guest
Is this article some sort of experiment to determine the gullibility of readers of the Daily Reckoning. Will there be another article pointing us to a safe haven investment for our super where it is kept safe from the government? Maybe somebody will be able to suggest something that will keep it safe from us as well. I think we all need to use our own brains a bit and not believe everything we read. The government is copping flack for raising the retirement age. Even if seizing superannuation funds was the recommendation of every treasury, university, think tank and… Read more »
Biker Pete
Guest
‘Seizing’ is probably an exaggeration. Many (all?) industry funds are however linked to major players like Members’ Equity, which have solid, direct union links. It’s no huge flight of imagination to visualise Labor tapping this ma$$ive well when things get tight… . As far as switching from balanced to cash, we have been more radical… and successful, by switching from ASX to cash, then from cash to ASX, then back to ASX, etc. Many might see this as online gambling… certainly not for the faint-hearted… but we’ve not only saved hundreds of thousands initially, but picked up a tax-free 600-point… Read more »
technibyte
Guest

I think Super is a gamble. I’m not expecting to get any $ when I retire, as the govt make the rules and will change them accordingly to suit their requirements. All these schemes sound great, where you hand your money over to someone else to manage (and often never see it again). I agree with Robert – hard-work and saving is the only way. At the end of the day, you’ve got to have something tangible in your hands. Make sure you stash something under the mattress, people.

Biker Pete
Guest
That’s a pity, technibyte. I’m about to take my major lotto win (super) and dump it into offset accounts and live happily ever after…! :) For a very long time, the first twenty years, perhaps, I didn’t have a clue how super worked. Once the ‘new’ disclosure rules were enforced… and I asked a lot of direct YES/NO questions… I began to take control of it. The next stage was to manage it online. The greatest mistake, probably made by 95% of Aussies, was to ‘Set & Forget’. Yes, hard work is one of the keys to success. So are… Read more »
Coffee Addict
Guest
Biker Pete. I agree with your philosophy and clearly, when the dust settles, you are likely to retain your wealth (relative to others). You are unlikely to be lured (like the industry funds) into dodgy government infrastructure investments and if they increase the tax on you super at collection it probably won’t effect your lifestyle that much. Everyone’s circumstances are different. With the number of workers supporting each oldie in 2040 expected to be about half what it is now, I can’t see the super numbers adding up for the younger generation – or indeed for those that will need… Read more »
Biker Pete
Guest
As a fellow Caffeine Aficionado, I agree, but I’d be disappointed to just _retain_ our assets, CA. I don’t believe money spent on adventure sports is wasted BTW (it has kept me relatively sane) but I do believe that probing the system to find out who’s taking what and how (trailing commissions, fees, etc) is critical. I’m able to analyse daily now, where every cent is going. Before disclosure we had no idea… and it’s clear we were lied to initially when we asked… . We ended up dismissing two FAs. Salary packaging 85% of earnings (less now the rules… Read more »
Greg Atkinson
Guest

It seems everyone is assuming Rudd and Co will get a second term? I guess Gough thought he would be around for years when he swept to power as well all those years ago. Rudd might be making noises about tapping into super but will he ever actually get the chance to do that?

technibyte
Guest

Hey Biker Pete – I’d love to be as positive as you are re Super, but I don’t trust the Govt, especially over the longer term (20 years +). I think that huge pot of money sitting there will just be too tempting. I’ll still stash something under the bed, just in case……

Biker Pete
Guest

I understand, technibyte… but the ‘money-in-the-mattress’ strategy does mean that inflation will ‘depreciate it’, annually. Far better to go with the gold acquisition strategy, I think… . You have to understand that I’m at the end of the super cycle… the payout stage… so it all looks pretty rosy to me. I was interested to see the more conservative of my two young sons putting a lot of cash into super recently… but he may just be covering all the bases…

Ned S
Guest
I see a number of issues with super: A person gives up a lot of control of the money for a tax advantage now and a promise that it will be tax advantaged on payout at some future retirement age. And the government gets that control that has been surrended. By seperating a person from a sizeable portion of their income and assets it means they have to borrow more to buy a house or whatever and will take longer to pay off any borrowings. And the interest on those borrowings has to be at least partially offset against whatever… Read more »
Biker Pete
Guest
Some good points, Ned. As you say, they may fool with it. I guess our timing has been right. From 55 we transferred the bulk to TTRs, where the earnings are untaxed and the payouts are untaxed. In other words, your money is working in a tax-free environment AND the payouts are untaxed. Yes, at the point of transfer, I was hit for 10% and my wife 12% (age difference). But now we each get double monthly pay cheques, with no loss of principal. That money will never be taxed again… even at the time of withdrawal. We’ve paid the… Read more »
Don
Guest
Congratulations Pete on your successful strategy – sounds like your golden years will truly be that. I would also have no issue in pouring money effectively into super if I only had a relatively short time to go before I could get my claws on it – but that is not the case. By the time I get to retirement age I believe that the burden on the super system will also reflect the changing demographics of that time – very grim. As time wears on and the various crisis manifest themselves, I believe that the super rules will change… Read more »
Greg Atkinson
Guest

Biker Pete – you mean you are never taxed until you spend the money :) Lest we forget the GST and the whole range of other taxes we sometimes forget. On the subject of the GST I wonder if anyone behind closed doors in Canberra has flagged the idea of raising it to get the budget back in surplus?

Biker Pete
Guest
Spot on, Greg. Mine dew, a lot of it may be spent OS, where state and federal taxes on purchases may be claimed back from those governments, on exit. Quite unpatriotic of me, but there’s the rub. Our imminent seven-month bike trip (US and Canada) is a good example. Canada refunds GST and PST to travellers like us. Not sure about the US. We haven’t explored that avenue on previous trips… . I’d put money on an increase in GST once things go really pear-shaped. Won’t exactly stimulate the economy! May even be counter-productive if we do enter that predicted… Read more »
Biker Pete
Guest
Don, you’re probably right. As we’ll never see a cent in pensions, or health card benefits, the first part of those checks and balances may not happen. Remember we’ll be literally ‘out-of-super’ in two years. My FA (The Missus) counsels that we should leave a few thou left ticking away there, to give us re-entry status should The Rules change. Flexibility has always been our motto: the more escape routes we leave open, the greater our options…! Do remember that there are winds of political change a’comin’ in the next decade, as boomers like me enter the retirement phase. Greypower… Read more »
Don
Guest

Greg, I think GST 12% is on the cards sometime in the future, especially if the carbon tax is squashed.

Rick Rakauskas
Guest
Menzies did it in the 50’s and said we could all have a pension as a consolation prize. Can anypne live on a pension these days? Search me, but my parents were upper middle class and worked hard and paid a heck of a lot of tax. At their peak they kept 350 people gainfully employed. Due to poor fiscal management my old man went broke when he was 69 and died at 72 leaving my mother nothing but the pension to survive on. And she is treated like a thief by Centrelink when my well off brother in law… Read more »
gobsmacked
Guest
For those who are incredulous at the idea of our government outright stealing our savings, an obvious political solution is so easy it is staqgering. Governments don’t have to outright steal our money, they can simply ‘borrow’ it and pay us back in never never iou’s like Arny is doing in ‘Californica’. Many people here are still in the mindset that this current recession is like the others we have had since WWII; temporary setbacks that will self-correct in a couple of years. But we are not in a typical recession. We are in a full-blown debt-induced contraction in which… Read more »
Bargeass
Guest

Of course Rudd wants to steal your hard earned money! All socialists do because they are lazy failures who can’t support themselves.

Pat Donnelly
Guest

Kevin and his missus are the richest pollies in Australia! Dumbo!
They espouse socialism but have garnered millions beating Malcolm! Know your enemy!

Biker Pete gets my common sense award!

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[…] scheme with a new odorous tax regime, and it looks like superannuation is the next target with some suspicion that Rudd wants to change the tax-free arrangements governing people’s accounts and begin […]

christina
Guest

I can see why they used to say during the great depression of the 1930’s: “if you don’t hold it, you don’t own it”

If you don’t hold it in your hot little hand, then all you own is a promise

Dan
Guest

Yes, Biker Pete, it’s wise not to rely at all on superannuation for your retirement. All empty promises. Kiyosaki said in one of his coffee table books – never base your investment strategy just on tax laws or government policy, (which I believe because it’s usually a trap) – superannuation is shares with a tax break. I don’t like shares, so I don’t like super. That leaves houses, family and direct involvement in business as a retirement/investment strategy.

gut feeling
Guest

I agree with Ned S comments (27 May 09). The gov’t can change the rules when they like, so it could all be taxed differently by the time I’m accessing it in 23 – sorry 25 years! (or more, as they’ll no doubt raise the retirement age to 70+ by the time I retire).

Also concerning is: who is going to employ a 60+ year old? If you are simply a worker and not in the public service, ageism is already rife in corporate Australia even at 40+ yrs.

Don
Guest
I am right there with you gut milad – about 25 or so years to go and no doubt rising as they push the goal posts back. One thing we can be sure of is that the economic strain that an ageing population will put on the pension system is unknown but will undoubtably it will not be good or pleasant for the old folk, especially ones which are going to rely on the pension to support them. Forgive me if I am wrong but I don’t think that any country has yet to fully experience this grey tsunami as… Read more »
Michael
Guest

As I get older, the one thing that I have come to believe is that it is part of a politicians psyche to believe that they know better than the rest of the population on how one should live their life and spend their own money. Communism and fascism is just like capitalism and socialism with one exception, the politicians of fascist and communist states are just “better” at being “politicians”.

jack
Guest
This is true only i think its even worse ,where are the super funds now? sitting in the Cayman islands ,now what would it be doing there i ask you? this was uncovered during a police investigation of the RBA millions stashed there too ,this says one thing its not safe in Australia and neither is your money ,when the on purpose crash comes for the USA dollar everyone will most likely lose up to 98 cents in the dollar with the new world currency ,no wonder china and USA are propping things up so they can buy up the… Read more »
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