Sent: 04-05-2010 10:52:08
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Superannuation versus Resources Super Tax
The Henry Tax Review has come and gone.
Alan Kohler mentioned on his website the Government adopted 1.75 of the 138 recommendations and said almost nothing about all the others ideas.
As this point in time we don't know what the Coalition will do with the Henry recommendations.
The super industry seems almost universally very excited about the additional compulsory super contributions and concessions.
Personally I think it's a bit too early to be popping Champaign corks.
Some of the cost to Government for these new contributions will be funded by the new super resources tax.
As you're all aware listed mining stocks were hit fairly hard yesterday. The ASX 200 Resources index lost just over 2.6% (Monday 3 May).
Financial markets often overshoot both good and bad news so it should come as no surprise that the same will probably occur with this new super resources tax - assuming it is actually implemented.
It's important to note that this new resources tax will commence in July 2012 and SG contributions will begin to increase from July 2013. Other super changes commence from July 2012 and July 2013.
Let's assume that listed mining stocks continue to suffer lower performance because of the likely poorer earnings outlook due to the new tax for many years. Not an unreasonable assumption, I presume?
This means that the performance of any superannuation portfolio with mining stocks might also underperform and this lower performance has started now. These portfolios might also 'enjoy' lower future dividend payments.
I guess the investors who will suffer this lower performance should be grateful that in a couple of years time they might get some of these lower earnings back via the new super concessions.
All the same I'm sure glad that I'm not a super investor who yesterday needed to sell some mining stocks (or to sell a portfolio with mining stocks in it). Perhaps these sellers needed to make a lump sum benefit payment or regular pension payment.
As my children might say, "too bad, so sad".
I find it interesting that super operators are crowing about government policies which will slowly increase their funds under management over the next decade and beyond whilst saying nothing about a government policy that lowered many member's account balances today and will probably continue to have this impact for quite sometime into the future.
I've always thought that superannuation was about maximising current member's benefits. It's a trust law duty, after all.
(For the sake of disclosure my Self Managed Super Fund owns BHP Billiton shares. I personally own shares in AWE Ltd.)
You may be wondering what my thoughts about the Cooper Review's SMSF discussion paper. I'll have more to say about this tomorrow and in a forthcoming DIY Super article in The Australian.
Finally please consider purchasing a copy of my book. You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
The second edition has just been released.
Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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