Apathy in the super system

So, this week it was revealed that South Australian workers have been underpaid an estimated $283M in super in the 2019FY: Nestegg, 18.1.22, Jon Bragg, “Unpaid super deals a $283m blow to SA workers.”

Last week, it was QLD workers who had been ripped off to the tune of $940M in super in the 2019FY: Accountants Daily, Emma Ryan 12.1.22, “ATO urged to address ‘Super rip-off’ impacting Qld workers.”

Earlier this week, the credit Union Building Societies (CUBS) Superfund became the latest big retail fund to announce that it would wind up in March of 22. This announcement was triggered by the introduction of some very basic, low bar performance hurdles by APRA which kicked in as from 1.7.21.

Why all the carnage in the Australian superannuation system? Why does the industry seem to lurch from one disaster to the next on a seemingly constant ‘hamster wheel’ like cycle?

One answer is apathy; a lack of interest, concern or energy.

Specifically in the retail superannuation context, an employer makes (or forgets to make) quarterly super payments to an employee’s choice of fund. The employee never sees the cash – it is jettisoned off into some Orwellian memory hole and never re-materialises in a meaningful way. The employee lacks the skills or the time (or both) to actually understand if the correct amount of super was ever paid in, let alone to assess how the cash paid in is performing in the selected investment option. Corruption breeds in this dark pit and is periodically dragged out into the light of day – sometimes by a regulator, occasionally via Royal Commission. It will continue.

Is there a way to stop this from occurring?

From an economy wide perspective, apathy will continue to pervade retail super. On a member-by-member basis however, the good news is, self-managed superfunds automatically combat apathy in the retirement savings space – but only for members who actively choose this path. Specifically, SMSF trustees are forced to be involved with their super from the point of payment in from the employer right the way through to assessment of investment returns. This is because the cash paid in actually hits a cash bank account which the SMSF member trustee must then invest. By forcing a member to take active personal responsibility for their own retirement outcomes, a SMSF is the perfect vehicle to rectify much of what is terribly wrong with the current superannuation system in Australia. The key with a SMSF is for the member to locate and engage with a SMSF professional who is compatible with them and operates on a low cost, fee for service, client focused set of beliefs – that’s where Solve comes in.

Reach out to Chris Bloxham at Solve on 0414 985 724 or email chris@solveaccounting.com.au to discuss your super anytime.

Economic contribution does NOT include income tax payments

Westfarmers released their annual “tax contribution report” today (16.12.21). It’s a useful read for a bloke like me – but most people will be able to carry on with their lives quite comfortably without any knowledge of its existence. Apparently, this is their 6th such report although this is the first one I’ve ever heard of – I’m a bit behind on my reading.

There is one point I want to highlight for the everyday reader here – and possibly also for some tax technical people too.

The below graphic is a big picture, heavily rounded summary of some key report numbers:

I’ve highlighted in yellow and underlined in red the number I want to hone in on – the Australian income tax expense. My point here?; the economic contribution of an Australian corporate tax entity (like Wesfarmers) should NOT include Australian income tax payments.

Why? Simple; the imputation system.

Imputation requires by law that every cent of income tax paid by Wesfarmers and all other companies listed on the ASX, and even every private company, is credited against the income tax liability of someone else. That “someone else” is the shareholders of the company. These shareholders may be humans, superfunds or even other companies. They may be residents or non-residents. The point is that the income tax paid by the Australian company is in one way or another a “tax shield” for the shareholders on an ozzy-dollar for ozzy-dollar basis.

Accordingly, at a minimum, this should be explained in a detailed footnote in all “contribution” reports or preferably get its own paragraph explaining the net zero effect of Australian corporate income tax payments. To leave this key detail off along with a detailed reconciliation of the franking account is a deplorable oversight at the very least – but more likely a blatant deception.

To understand how imputation can work for you and your family group, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au

Why & How Haystacking Works

The Australian investment universe is pretty small. For most investors who lack the time or expertise to pick needles in this (relatively small) haystack, the better approach may be just to buy the whole thing.

A good illustration of why this works is currently playing out in real time on the ASX. Bunnings is trying to buy Priceline – but Woolworths has lobbed in an offer to buy it too.


So, if you own Woolworths shares only, or Bunnings shares only, i.e. if you’ve picked a needle, then, you might be following this deal closely and actually care about the outcome. But if you own both, it’s a moot point and you can carry on with your day unaffected.

For a second haystacking principle illustration at play in this deal. This one has to do with the institutional service providers to the deal belligerents. It’s safe to assume that the bank i.e. CBA, NAB, ANZ or WBC, which is really just one single business with 4 different fail safe divisions, will be either financing this deal somehow or providing profitable ongoing retail banking services to all 3 of Bunnings, Priceline & Woolworths. Again, if you hold shares in only one of the divisions, then you may actually care about the outcome. But if you own all, it’s a moot point and you can carry on with your day unaffected; and that’s the “why” – haystackers can take a more relaxed approach, confident that they will capture whatever value is (hopefully) created regardless of what individual participants do and regardless of the outcome.


Quickest, and importantly the cheapest and most efficient, way to achieve the haystack is to buy VAS. Perhaps a better way to achieve global haystack for an Australian tax resident is 50/50 VAS/VGS. A focused ozzy haystack might include bank, supermarket and VAS.

This deal, and the principles of haystacking discussed above, can be summarised in the below graphic:

To discuss any aspect of the above including how haystacking can be applied in a tax efficient way for your family group, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au

Retail Super: A Quagmire of Deceit

The “lazy tax” paid by apathetic ozzies who leave their superannuation dollars in retail fund accounts was again highlighted this week by 3 separate highly publicised matters.

Firstly, the class action filed against QSuper in the Federal Court by Shine lawyers on behalf of 140,000 of its own members who had been deceived into paying higher life insurance premiums by their own trustee. The next egregious deceit perpetrated on the poor old QSuper members, most of whom are teachers and health care workers in Queensland, is the fallout from the franking credit stripping scheme.

The ATO may be imposing a record penalty on QSuper in relation to this malfeasance by the people running QSuper – however its the members who will be footing the bill for any interest or penalties ultimately imposed – & from the sounds of it, there’s gunna be heaps! What a lot of retail members do not know or understand is that much of the supposed “performance” of big superfunds is delivered by franking credit arbitrage & has absolutely nothing to do with achieving superior returns. People inside retail super are all too aware of this rouse – yet another deceit to add to the long & growing list.

And if these first 2 humdingers weren’t impressive enough…

Perhaps most on the nose is the various applications to sundry courts around the country to allow retail superfunds to amend their constituent deeds allowing the funds to charge unsuspecting members a new class of fees to build “TFCR” buffers. Trustee Financial Contingency Reserves are essentially legalised theft from current members to protect degenerate fund managers inside the superfund against the worst of their own proclivities – the minister for superannuation, Jane Hume, said it best:

“Let’s not kid ourselves as to what this really is; taking member’s money out of their retirement savings to set up a pool of funds – owned by the trustee – to ensure they can pay for penalties due to their own misconduct”: nestegg, 23.11.21.

The entire retail super industry exists on inertia & apathy. These 2 ingredients when mixed together with a healthy sprinkling of deceit create the ideal conditions for unbridled immorality.

If you are wanting to exit the swamp, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au to discuss your options.

Franking Credits: What are they & why are they important to you?

What are Franking Credits?

Some people think that when you pay income tax, you get nothing back in return. A lot of clients say to me, “show me how to pay less tax?” It’s an instinctive reaction to seek to minimise your income tax expense everywhere you can.

Sometimes those same people set up a company to run a business through. Understandably, they seek to also minimise the income tax paid by the company. What many of those people don’t understand is that there’s a key difference between the income tax paid by them personally and the income tax paid by the company. The difference is that the company can pass on every dollar of value it has paid as income tax to the shareholders using franking credits.

In simple terms, franking credits are a refund of income tax paid by a company to the shareholders of that company.

Why are Franking Credits important to you?

The reason why this is important to understand is that this “franking credit refund” or “tax shield” can be used by company shareholders to reduce their personal income tax expense. It doesn’t matter that the company is the entity that has paid the income tax in the first place, the law allows the shareholder to claim it back in their own income tax return. This tax shield works even better if the shareholder of the company is a self managed superfund because it is income taxed at a much lower rate than most individuals are.

For more information, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au.