January 23, 2008 | Ronda Jambe

The not so super sting in the tail

Having bitten the bullet and removed my remaining funds from my industry fund, other questions arise. Namely, who ‘owns’ the loss? The following is based on my understanding and limited knowledge of how super works and what was said over the phone, and is therefore hardly rock solid. I hope to leave you in some confusion, which is where some of the legalities apparently stand.
My spouse spoke to the Australian Taxation Office, who were taken by surprise by the simple question: can I claim a capital loss? They hadn’t heard that one before, perhaps because during previous slumps in the share market there wasn’t such a collossal amount of money invested. Now there is over $1 trillion, and baby boomers like myself want to use that money for fun and income.
Investors in super are not taxed on the profits the fund makes during the accumulation stage. The quid pro quo is that losses cannot be claimed for tax purposes either. Fair enough, so far as that goes. However, my industry fund, in acting as my agent, is apparently able to claim a a tax loss on my money, which they can use to neutralise future gains. That is where things get a bit fuzzy.
You see, it seems that technically the fund has made the loss, not me. How can that be? And since I have left $1000 in the fund, they are still my agent.
Surely my deductible contributions, which attracted 15% tax on input to the fund, were an investment. They were intended to grow. But having lost money, why can’t the losses be claimed?
The best advice the ATO could give was to request a private ruling, which I will do. The ATO lawyer indicated that there are some unclear aspects. Since so many people are in my position, many requests for clarification are probably going to follow. Meanwhile, any enlightenment is welcome.
One comment on my previous article about super said that super is not an investment, it is a tax strategy. But surely the intention is to grow the money? It was for me. And all the calm advice to just ‘hang in there’ might be viable if I was younger. But to look at possibly 2 years before I get back to square one is not acceptable, especially with current levels of inflation. I need to make my money work a bit, at least paying off new debt or bringing in some income. Otherwise I am going backwards, and we all know the only way to coast is downhill.
There is really no escape from actively managing your money. If I had any appetite at all for learning about the stock market, well I probably could have lasted the distance in those programming courses I dropped out of, or at least learned how to set up a spread sheet. Terrible confession from someone whose first degree was mathematics, but I hate detail and manipulating numbers.
This last week will probably be a watershed in how Australians view superannuation. My spouse was salary sacrificing 80%, counting the future growth until it should hit a magic number that would guarantee a comfy retirement. Now he has pulled back to the minimum, and is more inclined to agree with me that you can’t trust institutions with your money. I like playing with houses and renovating and designing, and I’m pretty good at that. Wouldn’t you die for a carpet like this one in your bedroom? But perhaps most blog readers are still male, and therefore impervious, like the men in my life, to profound cuteness.
for blog bed room DH.jpg
Every financial advisor I have ever had a preliminary meeting with (must have been at least 6) suggested I sell all my property, sit back, and let them manage it for me. Especially in the last year or two, they dangled the tax free carrot. Several of my friends have these situations, no worry to them about leaking rooves [is that form of the plural still correct, or has orthographic change also left me behind?]
So last year I hesitantly sold one apartment, put the money into super and sat back to watch. Not only did I find it difficult to ascertain, without independent personal records, just how much I had either put in or how much it had earned, but now I’ve taken the proverbial bath.
This may sound scatterbrained, but I do not think I am unusual in finding even electricity bills hard to decipher, and my industry superfund’s web site does not provide this detailed information. This is all part of the outsourcing of record keeping and management to the individual; my spouse spent a full 4 hours on the phone with Telstra, just trying to get them to send him back copies of his phone bills. You wouldn’t think it was that hard.
For my part, not at all inclined to enjoy gambling of any sort, I will cut my losses and move on. I like to see volatility on the big screen, not in real life. (My own emotional excesses, of course, do not count.) You can expect a trickle of formerly retired professionals to fill some of the workplace skills shortages. That’s where I’m headed.

Posted by Ronda Jambe at 6:31 pm | Comments (3) |
Filed under: Commerce


  1. While a super fund is a type of investment fund, I don’t believe it to be a fund as in speculation.
    The latest figures I read are that investment in bonds has been more profitable than the exchange.
    You have apparently retired? and are free to do what you will with your super money and presumably have the ability to invest wisely but are lazy?
    Lazy enough to believe you can “pass the buck” to other tax payers.
    Get real!

    Comment by frank luff — January 24, 2008 @ 10:31 am

  2. Rhonda, superannuation is not an investment, it is structure within which you can hold just about any asset available (including cash, property, art, shares, bonds etc etc).
    You clearly don’t understand the ‘tax-free carrot’ or how it works to your benefit.
    Put simply: own your 5 investment properties in your own name and you will be taxed on the rental income and the capital gain when/if you sell the properties at your marginal tax rate.
    Sell the properties (or stick them in a SMSF) and the rental earnings are tax free and so are any payments from the fund to you if you are over 60.
    It’s a complete ‘no-brainer’ as they like to say.
    and also, you are gambling a lot more than you know by leaving all your assets in one asset class (ie property)

    Comment by countryboy — January 24, 2008 @ 1:37 pm

  3. My understanding (in reply to country boy)is that you cannot sell your property into a super fund.
    Thus the only option open to me is funds. But I agree diversity is desirable, for me that will probably mean cash.
    I reject the complexities of even outsourcing a smsf, life is too short and the whole purpose of having a decent retirement income is surely to not have to spend a lot of effort on managing one’s money. Otherwise it’s like another job.
    My reply to fluff4 is that spending all my time learning about investments. Lazy is a relative term. I’ve never shirked from tax, and I see property as an ethical avenue, because I am one of the best landlords any tenant will come upon.

    Comment by Ronda Jambe — January 25, 2008 @ 9:00 pm

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