Question of the Week

Questions of the Week

Co-founder of the Switzer Report
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Question 1:  Were there changes to superannuation in Tuesday’s Budget?

Answer:  There were no newly announced changes in Tuesday’s Budget. However, there are a number of changes that apply from 1 July 2023. These include:

  • The super guarantee rate (contributions paid by the employer) increases from 10.5% to 11.0%;
  • If you are on an account-based pension, the minimum pension withdrawal factors double and revert to pre-Covid levels. These are age based, and depend on your super balance at the start of the year. They are as follows:
    • Under 65 4%
    • 65 – 74 5%
    • 75 – 79 6%
    • 80 – 84 7%
    • 85 – 89 9%
    • 90 – 94 11%
    • 95 and over 14%
  • The transfer balance cap (the amount you can have in the retirement phase of super) increases due to indexation from $1,700,000 to $1,900,000.

From 1 July 25, the Government will progress taxing the investment earnings on superannuation balances over $3m at a rate of 30%. This will apply to the portion above $3m, and include both realised and unrealised income.

Question 2: Why did NAB shares fall after it announced a big increase in profit?

Answer:  Despite being a 12.3% increase in profit for the half year to $4.07bn, it was less than the market had expected. The dividend of 83 cents was also a couple of cents less than most analysts had pencilled in. Further, NAB said that its net interest margin had peaked last October, with its exit NIM at 1.76%, down from 1.80%. Expense management could at best be described as ‘adequate’. You need to remember that NAB was being priced at a premium to both ANZ and Westpac, so when it delivered an ‘underwhelming’ result, the market punished it.

Question 3: When do the major banks pay their dividends?

Answer: If you are banking on the cash, you will have to wait till the new financial year. Westpac is the exception – it pays its interim dividend of 70 cents per share on 27 June.

The others pay as follows: ANZ on 3 July with 81 cents per share; Macquarie on 4 July with $4.50 per share; and NAB on 5 July with 83 cents per share.

Question 4:  Do you think the Government will go ahead with the stage 3 tax cuts?

Answer:  The Government keeps saying that the stage 3 tax cuts are legislated, but when they are asked to specifically commit to them, they seem to want to dodge the question. My sense is that they are looking for an excuse to dump them.

The stage 3 tax cuts don’t start until 1 July 24, so they have a little under 14 months to change their mind. They would, however, need to pass legislation to do this – and that may struggle in the Senate.

To recap, the stage 3 tax cuts implement a single rate of tax of 30c in the dollar for each dollar earned between $45,001 and $200,000. Above $200,001 the rate will be 45c. Today, the rate is 32.5c from $45,001 to $120,000, 37.0c from $120,001 to $180,000 and 45.0c from $180,001 to $200,000.

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