Welcome to that Super Show, a podcast where we talk all things super from the inside. I'm Neil Benson, CEO of superwire.

And I'm Sarah Penn, CEO of Mayflower Consulting. Each week we unpack what's changing in the industry, what funds are wrestling with, and how tech and regulation are shaping the landscape.

Sometimes we bring in expert guests, but mostly it's just us having a real conversation about how super is working and what could make it even better.

Let's get into it.

G', day, Sarah. Welcome to that Super Show. It's great to have you back again. How are you doing?

Hello, Neil. I'm very good. I can't believe it's been two weeks already. What happened?

Well, lots happened, actually. The government. After how many episodes have we been noticing that there's been a lack of legislative agenda? They pulled their finger up.

Well, clearly it's because they've listened to our podcast.

Neil, I was just thinking that. Thank you very much, Dr. Chalmers, and Mr. It's good to have you listening to us in the audience there. A very special welcome to you.What have they been up to, Sarah?

Well, they have finally announced they are actually going to do something about making this $3 million tax live.And I have to say, sanity has prevailed, which I know I said earlier, I didn't think it would, but sanity has actually prevailed and it isn't going to be on unrealized capital gains, only realized, thank the good Lord above.

So there was a little bit of noise in the press for the last week or two there that the Prime Minister's office had intervened and had a word and there may be some changes.And a few people speculated that they might drop the unrealized gains element of it, and then also the lack of indexation on the $3 million amount as well.But the treasurer did manage to sneak in a little surprise while everybody was looking the other way and introduced another concessional tax rate on balances over $10 million. And I think everybody here in the cheap seats is, you know, celebrating the fact that folks with a lot of money in superannuation might have to pay.

A little bit more. Yes, indeed they will. So if you've got more than $10 million in your super, lucky you, well done. Let's be friends.That income drive from that over the $10 million will be taxed at 40%, which is 25% higher than the 15% that, you know, that otherwise would have been. It occurs to me that actually what has essentially happened by the earlier 1.9 or whatever, it's up to and now we've got that +3, +4.It introduces the idea of a staggered tax rate just like we have on income tax.And then it therefore does give future governments the ability to mess around with those rates as they need to to adjust the tax to manage it all more effectively. Which I actually think is really good.

Yep.

The idea of super was never that. It was somewhere where you could hide away squillions of dollars to hand on to your, to your offspring.It was always supposed to be about making sure you had enough money in retirement. I don't know. I think if you've got 10 million bucks in your Super. Do you have enough money for retirement? I'm not sure. Neil, what do you think?Is it enough?

I've got a lot of kids, I need to, you know, protect their inheritance as well. Three cancer cheering me on. Danny, can you hit the $10 million tax rate please in your concession of superannuation contributions?So Jim Chalmers said at a press conference in Canberra on Monday that was the 13th of October, this was announced that this is a government which takes feedback seriously, which works through issues and advice in a methodical and considered way. And you're seeing the fruits of that today.So it's been over two years since the day of 296 taxes were first know floated and I think the, the lobbyists, the industry groups, employers, the financial advisors have all been pretty universal in their derision over the unrealized capital gains tax, the lack of indexation. So it's taken two years of all those protests for the government to finally make some adjustments to the proposed legislation.

It's not very often when there is a pile on from every single single quarter.Normally with this sort of stuff you'll see either the industry super fund saying that it's a good thing because you know, high income, you know, or super high balances should be taxed appropriately. But even though like how do you think we're supposed to manage this? This is just ridiculous.And then once you've lost them, and we know we've obviously lost everyone at the other end of the spectrum who thinks if you've got lots of money then you made it and you should get to keep it all and everyone in between who was going to have to administer it. I'm not sure who there is left who thought it was a good idea.

I think Dr. Cholish was the only.

But good on him for having the whatever to stick to it for a very long time before he finally gave in.

He did, he did.I don't know there was rumours going around that the Prime Minister's office intervened and maybe had a word in his ear and although Mr. Albanese has been on holiday with the press release was announced on Monday. So I think calmer heads have prevailed and I agree with you.

Yes.So I'm actually very happy to see that calmerheads have prevailed because they do have the numbers in the lower and upper house they could have just forced through unworkable legislation. It's not to say it won't happen on some other. On some other topic.

Yes.

If you work in some other industry, it probably already has. I'm not sure this is much more sensible. And then of course at the same time they've made some changes to the listo as well.The low income super tax offset. God. Lucky I suddenly remembered that I had my notes ready.

I was going to help you.

The what? What? The listo, which funnily enough is not included in their overview that they've. They've sent out around the 3mil and 10mil.But obviously these things balance up. Right. And I do think it's worthwhile.Although as we were talking about before we started recording, there is this thing that if you are a very low income earner, is it really in anyone's best interests to force you to put money away when you don't have enough money to put food on the table?

Yeah.

Which I think is a very relevant issue for a lot of people. And 12% is a lot, right?

That's right.

The thing for me is that at a system level if you have any kind of de minimis, then you are opening up for that to grow over time and for it eventually to become something depending on which government's in and what they think about things, you could say that it could eventually become something where only people who have earn over 100 grand or something have to put money into super. Then the whole system starts to fall apart.So I do think listo is one thing with the helps but more generally I would like to see our lower people who are at the very bottom end and not able to put food on the table more broadly supported by the government through other means rather than super, even though it ends up being a bit of robbing Peter to pay Paul sort of thing.

So for those wanting to keep up, anybody earning between $37,000 and $45,000, I think the listo amount will increase by $310 to take you to $810 a year. So it's a government contribution into your superannuation. And it's really there about the marginal tax rate up to $45,000 is about 16%, I think.So your effective tax rate on all your income is about 14, whereas your superannuation tax is 15. So it's really just making up that little difference in the extra tax you pay on your superannuation contributions compared to your income.And so the adjustment kind of offsets that.

Yeah, yeah, I know it's for low income earners, but if you have kids that have recently started work and don't earn much money, it's a great way to get a bit of extra money into their super early and to sort of introduce them to the complications of the taxation. Super. The taxation system in super, but in a positive way.

So the government reckons There are 14 times as many people who are going to benefit from Listo and that uplift compared to the number of people who are going to be affected by the new Div 296, who have got a balance of over $3 million. That's huge. Only half of 1% of Australians have balances of over 3 in the middle. $3 Million in the superannuation.

Yeah. And it's 0.1% have more than 10 million. I mean, there's just not that many of those left now.And I think the thing too is to remember is that if you have that sort of money in super, more than 10 billion bucks, no one's making you keep it there if you don't want to have it in there.Because for various reasons and whatever very fancy tax structures you have in place, that 40% on income is going to push higher than you want, you can take money out of super and do something else with it. There's nothing to stop you doing that.I feel like sometimes with these discussions, it sort of ends up being framed as though the government is forcing people to do something with their money. But the truth is, once you've retired, you can do whatever the hell you like with it.You can take it out and buy a fleet of sports cars or helicopters or. I don't know. What else do you buy? I like pretty colored pens.

But you know, you forgot about my private jet, Sarah. But I like the idea of.

Oh yeah, it's a private jet. Yes, yes. Well, funnily enough, my total left field.But where my, where my office is, I'm quite close to the Channel 7 campus and their helicopters on the top of their building. One of my daughter's first words was hubba dubba, as in helicopter.Because you'd say that you see them flying from where we are into the city to look at things. Sorry, that's got nothing to do with super, does it? What else is happening?

Well, just to wrap up, the new changes are going to be delayed by a year as well.

Yes, thank goodness.

They kind of retrospectively push everything through and take effect on the 1st of July this year. Sensibly, they've deferred everything to the 1st of July next year. So that's another saving grace as well.

It is indeed.And in fact, the other thing that I did notice, which is in the more technical side of things, they are looking at how the ATO is actually going to figure out the numbers and who's going to pay the extra tax and how it's going to be passed through. It looks like they've done some more work around that as well in the preceding last two years, which will be helpful because that's.That's one of the things. Right. It's all very well to come up with these grand plans of over X amount.People have to pay extra tax, but often people have multiple super funds money in different places and, you know, how's that supposed to work, Team? It's all very well to write something down. Reality is a whole nother ball game.

Sarah, I've got a theory that this is all planned, that this is a master stroke in misdirection. Hear me out. So the proposals were first floated in March 2023, just over two years ago.Everybody, all the lobbyists and the industry groups and the press and I hang out and read it quite a bit and there's all sorts of trolls and armchair critics in there. They were all, every single person was hobbling with the lack of indemnation, lost their ever loving minds about the unrealized capital gains tax.Suddenly, two years later, without any real warning, the Treasurer backs down substantially from those two principles that he has stuck to for the last two years. Meanwhile, introduces a new 40% rate on balances over 10 million. And there is applause from every corner.Positive reaction from everybody and the sigh of relief is unanimous even from people who were never going to earn have balances over $3 million. They're also relieved that the tax they would never have to pay has been changed to make it fairer. Was it a genius move by the Treasurer all along?

Oh, one of my favorite quotes is never a tribute to malice, that which can be explained by incompetence. And I would put that in both the positive and negative.

Fair enough,.

Yeah, that's a good idea. I'll have to think about that some more. I don't think so. I think they were just. Someone did the. You can make a spreadsheet look like anything.Someone in treasury did a spreadsheet that went, oh look, if we include unrealized capital gains, tappity tappity, tap, tap, tap, tap, tap. Look at all this extra money we get. And we can say it's still on only balances over 3 million. Oh my goodness, look at this.And they all got very excited about it because I did note in the discussion there was a bit of, you know, po faced, mealy mouthed. Well, you know, it's raising a lot less money than what we originally thought.

Only $1.6 million a year, 2.5 or whatever they wanted in the first place.

Yeah, yeah, that's, that's right. Which I thought was quite entertaining.There was just that little sideline of, okay, we'll do it your way, but it's not going to be as good for the community.

We're going to have to find another way to pay for submarines now.

I know, that's right.Well, the thing is, I saw on LinkedIn the other day and I just went, oh my God, really, you know, after years of ESG and we really need to be doing things that are positive for the climate going forward and that are better for society, blah, blah, blah. I saw someone's, I think it was a post on LinkedIn, a big rara, about how investing in defense spending was a new way to make tons of money.

Arms dealers and missile manufacturers.

Yes, yes, yes. So if you, if you've got more than $10 million in your super, just get into arms dealing. There you go. Sweet.

How do you think they've ended up with $10 million balance in the first place?

One would hate to comment.

Yeah, there was a preceding announcement, the introduction. Finally, finally, finally, a few days earlier on the 9th of October, that was Thursday.Last week, the government has introduced the Treasury Laws Amendment Payday Superannuation Bill 2025.So that's going to mean that employers are going to be required to make their superannuation guarantee contributions within seven days of payday, which I think is a really tight timeline, but good on them.The bill would also help the ATO enforce the law, help them identify bad employers who haven't met that deadline and there's going to be some tweaks to the superannuation guarantee charge, which includes a collection of penalties and interests that you have to pay if you don't abide by the law as an employer. So Finally, Payday super is going to take into effect in the again 1st of July next year. The bill has been introduced.Sarah, tell us about passing a piece of legislation like that. What does it take to get through? Is it a done deal?

Except that they do have the numbers, as they say, enough people in the lower and upper house to pass it through, but it has to go through the lower house and there will be lots of discussions and debates and yelling and screaming at each other because that's how Australian Parliament works. And then it will go to the Senate or the Upper House and will be repeated.The thing is, the final bill has to be approved in exactly the same form by both houses and sometimes that does mean that you can end up with a piece of legislation sort of shuttling back and forwards between the upper and lower house before it gets passed.However, going back to earlier comments, they have the numbers in both, so as long as everyone pulls their heads in and behaves themselves, I think it should pass fairly cleanly. And seven days is better than real time payments, which is a whole other option that they could have gone for.The obvious thing to do with this if you're currently paying your employees on a fortnightly basis is just to pay them quarterly because then you'll.

Wow, that's cunning. Wait until the Mayflower Consulting team finds out about this.

It's a plan so cunning I'm going to put a tail on it and call it a weasel. I don't think it's a good thing. It should seriously cut down the amount of people who aren't getting paid their Super.It'll make it much easier for the average punter to one check they've been paid and then two check that their super has gone in.You know, there's not that big lag in timing, which is one of the things that makes it currently very hard to figure out whether or not you're getting paid your super or not. It's obviously easier to tell if your credit card bounces when you're at Coles on your day to day money. So yes, good thing, very happy.And yes, it has been extended out to starting from the 1st of July next year, which again I appreciate because by the time the actual legislation is passed it'll probably be fairly late in the piece already. People do need time to prepare for these things.

I think most funds, certainly the ones I've been speaking to about Payday super are preparing for it. We know some of the industry players, we talked to NPP recently and they're helping funds work through that the ATO has been on board.So there's been lots of planning behind the scenes by the industry, even though the legislation hasn't been passed yet. But we're expecting it any day now. So that's great.

Yes, yes, that's what we like.

Average member is going to be $110 a year better off because the contributions land in their account earlier and gets invested earlier, which is great. $30,000 On retirement it could be for a young member now who's going to get paid every two weeks. So yes, that's pretty meaningful change.

Yeah, it really is. And it's one of those things that just shows the impact of timing in investments we've moved from in the more non superspace institutional space.When I started with this is still retail. But when I started with Guard years ago, what was that? Years. That's correct.When you put money in to your super or investment account or whatever, it often wouldn't. You'd send a check in the check darling, the check pre bpay even. And it might not get invested for three or four months.And when you wanted money out, it would equally not come out four months and months and months later. That was normal. And then it went to 30 days and then, then it went to sort of T +1.And now actual investment is generally once the money's there, it gets invested straight away.And each of those stages there was a whole lot of, you know, Chicken Little and shouting at the skies and you don't understand, you're going to ruin everyone's life and all the rest of it. And everyone did survive and it's much better.And for the average person that does, that does make a difference, especially when you regularly investing, which you are with super that that money hits your account earlier, those little bits add up. And because of compounding, which as we all know is the eighth wonder of the world, you know, it makes a big difference at the end of the day.So despite it being a bit of a really as a business owner, it's the right thing to do, she says, getting all pious.

So there are some critics of the superannuation system who shake their fist because there have been last count about 1800 changes to the regulation and legislation since it was introduced. And here's another bill and another proposal for more legislation, more changes. And I think it's great because the system is getting fairer.We couldn't have designed it perfectly 30 years ago. You have to tweak it as you learn more about it. And demographics force you to make Adjustments and income tax changes force you make adjustments.I think those changes are a good thing, by and large, and they have made the system fairer for almost everybody. So I'm not afraid of making more changes. I'd like to see these things come through the system.

Yeah, I think legislative changes that make it fairer for the punters, for the mums and dads, I am all for.And I actually, as I said earlier, I do think now that we've got the various different rates of tax on money coming out of super, that'll give the government a way to manage that more finely going forward on a needs basis, the same way we do with just normal income tax. There is so much other legislation though, and some of it overlaps.So I do know that ASIC and APRA are currently looking at where there are overlaps in legislation, especially to do with reporting, to try and get to the point where super funds especially only have to report data and issues and stuff once to one place because at the moment it ends up with lots of duplicates. So they are looking at that. So that's a positive. And it's hard, isn't it?I think, like it's that sort of macro level, when you look at it and you go, how many changes to legislation are we trying to do? All of them all at once. Oh, my God.But on the other hand, a lot of them are there because funds, you know, the odd fund here or there, or people in some funds, whatever, aren't doing the right thing.ASIC is looking at legislating how long it has service standards for death benefit and insurance payouts, and they wouldn't have even considered it if funds hadn't started taking so bloody long. Give people their money.

Yes.

Sometimes I look at those things and go, really, guys? Really? You complain about it, but there you are.And I think CPS 510, which is about governance, about how boards are constituted and a bunch of other things, I feel that's a little bit the same the way that some of the governance stuff works.And this is more just how we're all sort of used to working, rather than pointing at any one particular fund or person and going, that's not good enough, is doing that step back and going, is this really best practice? Is this, you know, we are managing huge amounts of money for huge numbers of people.When we look at our governance, are we really doing it in a way that across the world, across the globe, you would say this is best practice? And I don't feel like there's enough of that happening. And so we've ended up with CPS 510 which is still a while away coming.But you know, we'll still need to be here too. So. Yeah, it's hard, isn't it? You look at each piece and you go, yes, well that's sensible. Of course, we need to improve our governance.But then you look at the sheer number and you think of Jesus Christ. And when people say things to me like oh, you know the regulator in Super, I'm like the regulator. It's about six plus plus plus plus.

Plus well Sarah, I think we'll leave it there. It's been a busy week for news and we will return to our usual programming.We just wanted to record a quick episode to bring everybody up to speed on Those latest with Dev296 and Payday. Super. So we will catch everybody else up in a couple of weeks time.

Yes. And we'll call this one Sanity has Prevailed.

Very good.

Thanks Terry. Thanks Neil. See you soon.

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