Going forward, how does anyone reaching the 3 million super cap when you can’t make non concessional contributions after 1.9m?

[kodybricen]

I guess I am just wondering what’s the point of the 3 million super cap. In reality, no one is going to be able to hit it going forward, given you can’t make non concessional contributions after 1.9m which most people won’t make anyway. So what’s the point of the 3m cap

 

[suzanne123]

@kodybricen Compounding is a hell of a drug.

If you had 1.9m you'd have over 3m in 7 years if you were getting 7% on your money.

 

[amarie07]

@suzanne123 So I have 200. In seven years I'm getting 300.

 

[carolinafan74]

@amarie07 The problem with that amount of money is that there are managed funds with less capital than that. Diversifying is hard when you have so much money that you could put 2-5m in every MF and still have left overs.

Not saying they’re lucky enough to have that amount of cash but achieving 7-10% consistently is so much easier with $1m than $1B

 

[kopchicksaved2014]

@amarie07 No, you’ll have 0 after all the fees. Wealth creation is not linear. It’s hard to make money with very little money.

 

[somethingon]

@amarie07 You're ignoring compounding. It 200*(1.07)[sup]7[/sup] to give you 321.

 

[eso]

@kodybricen Many people will get there by 'accident' of sorts: wage inflation + mandatory super contributions + compounding interest over 10 / 15 / 20 years.

 

[isaiahak7]

@eso Exactly. Average wage tripled over the past 30 years (3.8% growth). Imagine the super balance we'll see in 2053 when wages are $270k.

This site is great for that

https://www.thecalculatorsite.com/finance/calculators/savings-calculators.php

Somone 20 with zero super investing $700 a month increasing by 3% getting a 7.5% return would exceed 3m.

Edit:

Thought I'd run the numbers.

2053

Balance transfer cap 3.8m (indexed with inflation in 100k steps)
Salary sacrifice limit 81k (indexed with average income in 2500 steps)

If they don't index the 3m upper limit then everyone's super account will be taxed at 30%.

Eventually the annual sacrifice limit will exceed the balance transfer limit.

 

[olavisjo]

@eso Most people won't hit because even though the limit is automatically indexed, just like income tax rates, it would be adjusted for wage inflation by future governments.

Anyone telling you the $3 million limit will remain as is in 20 years are just scare mongering.

 

[sheraldo]

@olavisjo I mean it took them 16 years to move the top tax bracket, even after all that time it is a big political ordeal and it's not even close to where it would be if it was just automatically indexed.... you don't think the same thing could happen here?

 

[angelh0809]

@olavisjo

are just scare mongering.

Wrong. If they specifically said they have no plans of increasing it with inflation, then it's most likely not increasing with inflation for a very long time. It's literally the words from the government.

Inflation without tax bracket adjustments, is just simply another form of hidden taxation and they know it. Few people have balances of 3m, more people will have balances over 3m in the next 5, 10, 20, 30 years, which means more taxes as more people enter that 3m bracket.

 

[olavisjo]

@angelh0809 The government also says there's no plans to change the income tax bracket outside of stage 3 tax cuts. Are you saying income tax rates will remain the same over the next 30 years?

 

[ima_believer]

@angelh0809 You really think the government will be the same in the next 10 years?

You can't trust the government more then a couple of years out.

Espically with the no-allition who basically want to do the opposite of Labour. They where in power for a decade and where quiet on nuclear and now they are out of power they talking about nuclear like it's a viable option for Australia. They will literally run a campaign to just do the opposite of the other other party.

 

[lindseym1013]

@kodybricen The cap isn’t for your average Joe. It to prevent wealth accumulation in super by, the wealthy

You’re thinking like a normal wage earner, who you’re right won’t ever get there with indexation.

But wealthy people who set up SMSF do, they often do so via property where gains are amplified by leverage

A SMSF that 15 years ago bought a $1M property with 200k down, may today have $2-$3M in just that property.

 

[flores]

@lindseym1013 It's more the people that bought something like Apple shares for 25 cents each inside their SMSF, or the CBA/CSL IPOs etc..., or there used to be no contribution limits on super. Property gains are paltry in comparison to certain stocks.

 

[angelh0809]

@flores No, it's for the "above" average person too, sure it won't affect the average Joe but it will certainly be affecting many young and old professionals.

If it was truely for the people you described, then the threshold should be more at 5m to 10m.

 

[flores]

@angelh0809 I mean, super was designed to replace the aged pension, not to be a tax loophole for multimillionaires. The aged pension is around $27k/year, the tax concessions on a $3m super pension balance are worth ~$110k/year.

It's already extremely generous and will likely be further reduced as the government continues to not tax multinationals and look at PAYG employees as their primary source of revenue.

 

[angelh0809]

@flores

I mean, super was designed to replace the aged pension, not to be a tax loophole for multimillionaires.

I know you're just repeating what mainstream media and redditors are saying, and of course I've heard this before, but let's dissect that again...

It replaces the aged pension but it's not exactly the same thing, aged pension is funded by tax payers, super is funded by you. How it's setup and designed, is you have the options of VOLUNTEERING ADDITIONAL FUNDS into YOUR FUND, which is controlled by reasonable LIMITS. If it were supposed to be exactly like the pension then impose more stricter limits, prevent the wealth and loopholes of it becoming a tax haven in the first place...

Wealth limits and taxing 'unrealised' gains (as this is a new type of tax, it's not just an increased tax % as people are telling you), is insane and not done in the majority of the world.

Second point is that, who are you to say that 1m, 2m, 3m is too much to fund a (decent) retirement?

What if the person was one of those FIRE individuals and barely spent any money and wants to spend the majority of there funds in retirement? They may have not "travelled the world" and now want to do it, which is expensive. Or buy that sports car they never bought while others had nice cars in the midlife. They could also have health conditions and be spending a lot more than they once were, and who knows how long they'll live for, they could still be around for another 30 years or more after retiring.

You are are pointing your finger and saying, hey, look at these multimillionaires, but you need to be a millionaire anyway or better if you want a COMFORTABLE RETIREMENT. And so why should your super fund be designed to be a BARELY PASSING retirement fund.

 

[flores]

@angelh0809 Not sure why you are referring to wealth taxes, when I never mentioned them?

I will hit the $3m super cap, and I feel that it's rather generous to be able to invest that much tax free in today's dollars.

What is really unfair is that the cap isn't indexed, so future retirees will be screwed compared to today's wealthy boomers, but isn't that just Australia in a nutshell?

 

[veranup]

@lindseym1013 That's simply wrong, the threshold was deliberately not indexed to inflation in order to affect more people over time.

A 25 year old earning $100,000 with 3% annual salary growth (which may not even beat inflation) and 7% annual returns (below historical averages) will hit 3 million in 40 years with mandatory contributions alone. Could get there much faster with decent salary growth, better returns, and/or voluntary contributions.