The Queen described 1992 as an annus horribilis for herself and the British royal family as a result of several tumultuous incidents throughout the year, including the fire that ravaged Windsor Castle, and no one could blame her for that assessment.
And if Australian superannuants, especially SMSF trustees, echoed Queen Elizabeth II’s sentiments when looking back over the past 12 months or so, I think we’d all understand.
It’s been a period where just when you thought it couldn’t get worse, it did.
Readers of this column would know I’ve been highly critical of most of the federal government’s recent policy moves in the retirement savings space as they have resulted in, what I could consider, unfair treatment for people who should be rewarded for their saving discipline rather than punished for it.
Most of the criticism has centred on policy moves making the system so complicated that finding your way out of the most confusing labyrinth in the world would be a lot easier.
But the 2017 budget showed the government was not happy hitting super fund members via the structure of the system, seeing it has now indicated it wants to make its negative mark on the investment front as well.
The evidence is the introduction of the new bank levy to apply to the four major banks and Macquarie Bank.
Now there are so many things fundamentally wrong with this tax I’m not sure where to begin, but I think it is a measure likely to hit superannuants hardest.
You see, regardless of all the discussion about whether or not the banks will wear the new impost or pass it on to their customers, one thing is undeniable – it will affect the share price of these institutions.
Anyone doubting this consequence only need revisit what happened on the Australian Securities Exchange the day the budget was handed down.
Despite all the fanfare about the budget lock-up, a leak from Canberra obviously occurred regarding this measure because that afternoon, before anything concrete had been announced, the stock prices for all of the major banks dropped.
This market movement was prior to any discussion as to how the banks would treat the new tax.
And as they say in the classics, “you do the math” as to which superannuants this was likely to affect the most.
You see, research paper after research paper over the years has come to the same conclusion and that is the equity components of SMSF investment portfolios are too concentrated and tend to ostensibly include the four major banks, the telcos and the big mining companies and not much else.
So to have their investment portfolios devalued as a result of government intervention is yet another blow they’ve had to endure from the Turnbull government.
But don’t worry about just the SMSF sector. If you have a look at the portfolio allocations of most of the large superannuation funds, you’d see a large number of their mandates invested in the big four banks too.
Who knows what effect the levy will have in future years, but usually an increase in costs means a decrease in share prices rather than an increase.
Unintended or not, this is yet another move from the government that has adversely affected SMSF members, who would be forgiven for thinking they are being hit from all sides at the moment.
