SMSFs to power economy

Grant Abbot

Grant Abbott

There is no doubt SMSFs are a big sector of the economy and a favoured savings vehicle for those who aspire to lead a comfortable life in retirement. With $1 trillion expected to be in the sector, all things being equal, by 2020, it is a significant weight of money not to be messed with.

And with the growth of not only the SMSF sector, but the continuing growth of industry and retail super funds as well as public sector funds, calls are being made loudly by Treasury, the Australian Taxation Office (ATO) and many economists to have the tax concessions for super shaved and given a serious haircut.

I think we all agree there will be changes at some time, but the government, despite intense pressure, has maintained its commitment not to make any changes to super in its first term. The next term? Well that’s more questionable. But before making any changes, the Australian SMSF Members Association (ASMA) believes the picture is much bigger than simply taxation. SMSFs can, in fact, be nation building and our members have voiced their desire to direct their superannuation into favourable nation-building investments in a big way.

In terms of governments changing super, our members had this to say in one of our surveys:

  • Please do not change current arrangements with respect to lump sum withdrawals without penalty. Respect the fact that many self-funded retirees have provided for themselves without being on above average salaries/wages by being very frugal and undertaking often less-than-pleasant employment in order to maintain themselves and their families.
  • Do not make any changes to the current SMSF rulings that will disadvantage the retired and those nearing retirement. We have worked hard over many years to contribute to our funds in order to be completely self-funded in retirement, thereby saving the government and community many thousands of dollars in pension payments. We appreciate the benefits the Howard government provided and this is how we repay that advantage.
  • The government and the opposition need to get together and create an independent commission to look after super. Plus future policies should only be made with bipartisan agreement. You cannot trust any one party with the vast wealth of the super industry.

Importantly, ASMA should be seen as a vehicle allowing its members a vessel through which to voice their opinions. The trustees do not have the vast lobbying power of the big collective funds, so their frustration gets an opportunity to be voiced through an ASMA survey. But not all communications are negative.We have had a number of interesting issues canvassed, including how SMSF trustees can be persuaded, but not forcefully, into using the power of their money to help out the economy.

In a recent survey of our more than 3000 members, we asked them to comment on the following and rate their interest in committing funds to the following two products/projects.

Long-term infrastructure

The Abbott government is committed to being regarded as an infrastructure government. In our latest ASMA survey, we asked the following question: If the government provided a long-term bond – 10-plus years – that was used to provide infrastructure investment across Australia, given the right terms and conditions, would you invest?

It may come as a surprise to many, but SMSF members crave long-term secure cash flow and if targeted genuinely to nation building. The response to this question was 74 per cent in the positive and we are talking about actual investment, not just whether it is a good idea.

Solving the housing affordability crisis

The housing affordability crisis is one that is not going to go away. Government and councils are moving as fast as they can to get new stock, but the entry-level pricing in the major capital cities is frightening. There are many parents who either have their children living with them while they are trying to save for retirement or have to use non-super savings to help or provide a deposit for their child. With more than one child, that is a significant financial burden.

We asked our members the following: Housing affordability for the younger generation is at crisis levels. Should we be looking at how superannuation and SMSFs can solve this crisis?

Our members were not as positive as they were on the long-term infrastructure bonds, possibly because many of them are in their retirement years and have children that are well and truly in their own home. But for some it is a big issue and that is borne out by the fact that 56 per cent believed SMSFs could be used to solve the housing affordability crisis. ASMA, armed with this knowledge, is currently drafting up a white paper with a range of solutions on the issue.

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