Don’t touch my dividends, Dude

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Photo: “How will we afford dog food without the franking credits from our dividends?” pixabay.com, CC Mike Flynn

There have been few occasions when dividends made it on to the front pages or lead item TV news. The first time was when Treasurer Paul Keating introduced the dividend imputation scheme in 1987, largely as a way of eliminating the double-taxing of company dividends. From that day, Australian investors were given franking credits on the dividends they received on their shares. This had the welcome effect of boosting the investment return for the investor or super fund.  It was just the sort of incentive needed to encourage Australians to prepare for their retirement and aim to become self-funded retirees.

Keating’s scheme did not, however, include the cash refund of the franking credit component of the dividend, which was introduced by John Howard and Peter Costello in 2001.

The second time dividend imputation was ‘trending’ was last week when Opposition Leader Bill Shorten said if Labor gets back into power he would scrap the current system. While emphasising Labor would keep dividend imputation, he said the plan was to scrap excess cash refunds on tax that was never paid in the first place,

The main targets are people with super fund balances of $1 million and more. There are plenty of those distributed among the large super fund managers but also around 30% of the self-managed fund sector are in that category.

In 2017, 1.12 million Australians were members of a self-managed super fund. There were almost 600,000 funds with assets totalling $696.7 billion. About 30% of SMSF assets are held in Australian shares, the ones that pay fully franked (tax-paid) dividends to investors.

What Mr Shorten’s plan appears to lack is a sliding scale which would exempt retirees whose fund balance is below a certain threshold or whose franking credit refunds are below the average ($5,000 a year).

A 2015 study which set out to debunk the myth that one needs a minimum $1 million to retire said that half of Australia’s workers approaching retirement have less than $100,000 in super. Three years hence, the proportionate numbers won’t have changed that much. The study by the Australian Institute of Superannuation Trustees (AIST) sets out to educate people that super is designed to work in tandem with the aged pension and that it’s OK to do that. Even a low super balance of $150,000 can nicely augment your pension.

Yet Bill Shorten says some funds are paying zero tax but picking up a $2.5 million refund cheque. At face value, that would seem to be a loophole worth closing. But at the other end of the scale are individual SMSF members with low fund balances who are undoubtedly already receiving a Centrelink part-pension. The shortfall caused by scrapping cash refunds on dividends will inevitably be recovered via a tweaking of government pension calculations on income and assets. Those who do not qualify for the pension will lose the lot.

Just how important a subject this is for retirees is shown in the Association of Superannuation Funds of Australia (ASFA) superannuation statistics: 1.427 million individuals received regular superannuation income in 2015-2016. Weekly payments averaged from $328 (term annuity), $496 (account-based) and $616 (defined benefit). Franking credit refunds on dividends from the ATO no doubt contributed to these payments.

Some industry super funds have come out in favour of Labor’s plan, but there is plenty of opposition, though so far there is no detail on which to base a counter argument.

ASFA says the proposal could have a significant impact on low-income retirees both inside and outside the superannuation system.

Chief executive Dr Martin Fahy said the system already has a $1.6 million cap in the retirement phase and reforms to superannuation and  retirement funding are working but they need time to bed down.

“If there is a concern about individuals with large retirement savings receiving the benefit of refundable imputation credits then this would be better addressed by measures more closely linked to retirement balance,” he said.

Currently, the Australian Taxation Office demands that if SMSF Trustees draw a Simple Pension, it must be a minimum 5% of assets (rising through increments to 14% for those aged 95 and over (!). For example, a fund with two members under the age of 80 and a balance of $450,000 must pay its members a minimum of $25,000 p.a. Providing their other assessable assets and/or income is under the threshold, they can also receive a part pension from Centrelink which could bump their annual income to around $45,000, (somewhere between a modest living and a comfortable retirement). The upside (for the country) in this fiscal strategy is that earnings will (hopefully) keep the members’ balances in the black for as long as possible. This in itself eases the burden on the aged pension system.

And if you need extra cash for a car, a bucket list trip to the Antarctic or to pay a ransom to a hacker, you can take a lump sum. If you’re Homeland’s Carrie Matheson, track down the troll, beat him up and demand he unlock the computer. (He just threw that in for light relief, Ed).

Policy on the run

You will forgive me for liberally quoting other sources on this thorny subject. The ALP has not published a policy paper or issued a media release. The only thing you will find is on Mr Shorten’s website, tucked away under the category: ‘Bill’s Opinion Pieces’.

I initially found Bill’s piece on a website run by the authority on all things super, Trish Power. Power, starting from the same position as all, except for Fairfax Media, which ‘has seen’ a policy draft, suggests it has all the hallmarks of ‘policy on the run’.

Trish Power’s website is a good place to visit if you want to avoid the scaremongering stories in the tabloids and current affairs TV. I bought a copy of her book “DIY Super for Dummies” and found it invaluable when starting our SMSF back in 2006. It may be overstating to say the promise of franking credit refunds was one of the attractions, but nonetheless it was.

Power and other guest writers are following this story while it remains a live issue so if you have a vested interest, here’s the link:

It does seem as if Bill Shorten is hanging his hat on this particular peg and plans to leave it there.

“When this (cash refund) first came in, it cost Australian taxpayers about $500 million a year,” he wrote. “Within the next few years, it’s going to cost $8 billion a year, more than the Commonwealth spends on public schools or childcare. It’s three times what we spend on the Australian Federal Police.”

You can see where he is shining his head torch when he writes that 50% of tax refunds go to SMSFs with balances of more than $2.4 million. Fine, stick it to the top end of town, but look further into this dodgy policy, Bill, and you will see that unless you giveretirees on modest incomes a break, they will be forced to rely more on the public purse. They will resent that and in turn resent you.

FOMM back pages: http://bobwords.com.au/super-end-week/

 

 

Cape Town’s water crisis and other updates

 

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Graphic courtesy of the City of Cape Town

Well-organised journalists keep detailed diary notes on the stories they have written, with the objective of writing updates. This is how the media knows when to descend on the courts when a murder trial finally starts. Or the updates could be on Twitter.

From my lazy post-city desk where I opine and inform about random topics, updates rarely occurs to me. Yet the same subjects crop up again and again: climate change, global warming, ocean pollution, poverty, refugees, fast-changing technology. Yes, who’d be a technology writer today? Blink and you’ll miss it.

So to the updates: you might recall I wrote on February 23 about Cape Town, South Africa, and how it was in danger of running out of drinking water. The city authorities have now decided to defer ‘Day Zero’, when all taps were to be turned off and people would have to queue for water at standpipes.

Nearly a month later, the city authorities, having postponed Day Zero from mid-April to early June, have pushed it out to 2019, on a date to be notified. Level 6B water restrictions are still in place and residents are being asked to limit daily use to 50 litres each.

Cape Town may not have thought ahead far enough to provide the buffer it might need after three years of drought, but they are making up for it with a well-thought out campaign to urge people to save water.

They’d need to, because even though combined dam levels are back to 23.6%, if the level drops below 14%, Day Zero looms again. Cape Town’s authorities are aiming to reduce average water use to 450 million litres per day (last week it was 537m litres). When I wrote my column about this, I was harking back to South East Queensland’s dire days of drought, when our combined dam levels fell below 20%.

Brisbane implemented Level 6 water restrictions, which, if you don’t mind an empty swimming pool and a dirty car, are not too onerous. At that time, people in South East Queensland reduced their daily water consumption to 140 litres per day (half the average use).

Check out the graphic from the City of Cape Town (above) and you’ll get some idea of how bad it could be, even though we now have a Drought-Ready plan.

In a curiously related aside, Cape Town recently had its own outbreak of listeriosis, not (as in Australia) from contaminated rock melons, but from processed smallgoods (with the responsible firm being named).

The Cabinet shuffle continues

Earlier in February I joined the outrage over the disposal of two ex-government filing cabinets, stuffed tight with confidential documents from the Department of Prime Minister and Cabinet. The ABC ran a series of stories based on the documents before handing them back (to ASIO).

Not much in the way of updates on that front although PM Malcolm Turnbull, after saying ‘heads would roll’, called for an inquiry and appointed senior public servant Ric Smith to the task. The terms of reference released on February 21 promise a preliminary report in March.

While the Canberra press gallery are waiting for the updates Smith continues with his task of finding out how it happened and how to make sure it never happens again. Smith would appear to have a job on his hands as this was no one-off; the Canberra press has published multiple stories involving confidential documents and diaries turning up in unsecure locations.

For instance this week Canberra Times reporter Andrew Brown turned up a similar story, albeit from 2013. The Department of Social Services sent old filing cabinets to a second hand store. The cabinets turned out to be full of personnel files, with personal information including security clearances. Brown found the un-named resident who, having established what he had bought, spent his own time trying to give the documents back to the department. Only when he wrote to the department was action taken and the cabinets collected.

A Department of Social Services spokesman said handling processes were ‘reviewed and updated’ as a result of the breach.

Mushroom cloud, anyone?

In early January I tried to lighten global nuclear conflict anxiety by revisiting a list of protest songs. This column was notable for the many examples of readers telling me, “Oh but you forgot about Good News Week…”

That’s the trouble with lists: after you’ve read them you wonder why the author bothered. You know the click-bait headlines: “These 12 amazing boob jobs will blow your mind.” And so on.

I’ve been noticing these cartoons of North Korea’s leader and The Donald facing off with missiles, one noticeably longer than the other.

I do wonder how this larrikin symbolism is interpreted in the Democratic People’s Republic of Korea. Mind you, the average NK citizen would never be allowed to see such salacious mischief on their heavily censored Intra-net.

After the fact, I was reading a fascinating book by Simon Winchester who in an astonishing feat of literary and journalistic ambition sums up the history of the Pacific Ocean in just one book. I’m two-thirds of the way in and he gets my vote thus far. The first chapter in Winchester’s Pacific covers the history of nuclear testing in the Pacific.

Winchester does not hold back, telling of the uncaring, nay brutal way the islanders of places like Bikini atoll and the surrounding Marshall Islands were herded up and deposited ‘Elsewhere’ while western forces went about perfecting atomic weapons.

He reveals that between 1946 and 1958 the US detonated 23 atomic bombs on or near Bikini Atoll. Though they moved the islanders, ‘Elsewhere’ did not provide them with enough food. So, half-starving they were transported to another Elsewhere (which did not have a coral reef so they were unable to practice the traditional lifestyle).

Still, it had enough food.

All told, between 1946 and 1962 the US exploded 105 atomic devices in the Pacific. The back story to this is a minefield of missed targets and mishaps, claims and counter-claims, compensation and persistent radiation levels.

I’d recommend Winchester’s book for the thorough way he covers any question which might arise about complex subjects concerning the Pacific; the Ring of Fire, tectonic plates, how Korea became two countries, the theory of continental drift or how surfing became a mainstream sport.

If you want a recap of the Bikini saga, the link below is as good a place as any. Georgetown University’s Timothy Jorgenson covers the sorry history of US atomic testing in the Marshall Islands chain.

He starts with a reference to the genesis of the bikini (swim suit). Who knew that the original 1946 design by Jacques Heim was dubbed ‘Atome’ (French for atom)? Allors!

Oh, and let’s not forget the 193 nuclear tests France carried out in Polynesia between 1966 and 1996. Tests were stopped largely because of protests inspired by the New Zealand government’s nuclear-free stance.

In light of all that, you’d have to wonder why all the fuss about North Korea’s six (6) nuclear missile tests. Whatever case I’m making about super powers, hypocrisy and exploitation of huddled minorities, I rest it here.

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Rising sea levels and apocalyptic fiction

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Photo of Kulusuk, Greenland by Nick Russill, flickr/cc https://www.flickr.com/photos/nickrussill/146760303/

I’d always thought my song about the mountain dwellers ending up on waterfront row because of rising sea levels was not to be taken too seriously. It was an apocalyptic view of what might happen if it didn’t stop raining and, moreover, not a terribly original idea as it turned out. But the risk of flash flooding from above-average rainfall is only half the problem for people living down there, at sea level.

A loyal reader, visiting the coast from cooler climes down south was discussing his theories about rising sea levels and coastal tourist locations like Noosa, given news of the Arctic region’s third winter heat wave in a row. His attention had been drawn to Greenland, where temperatures have remained above freezing at a time of year when it should be at least 30 below. Clearly such weather extremes in the fragile ecosystem of the Arctic region must accelerate the process of rising sea levels?

As The Independent reports, this is happening even though large parts of the Arctic Circle are trapped in perpetual darkness.

New global projections forecast a sea level rise of 2m by 2100, compared to a 0.74m rise in a 2013 study. So far, the forecasts that oceans would rise on average by 3mm a year has provoked a scornful debate between believers and climate sceptics. Yes, the science is not wholly believed. There are people in high places who have made naïve and disturbing statement such as “coal is good for humanity”, at a time when most scientists agree that CO2 emissions, produced largely from human activity, must be reduced.

The spectre of melting polar ice bringing an apocalyptic end to civilisation as we know it has been a favourite theme of science fiction writers for a long time. Now there is even a fiction sub-genre known as ‘cli-fi’ which has spawned many cataclysmic climate scenarios.

The spookiest forecast, before cli-fi was a thing, was The Drowned World, J.G Ballard’s second novel, published in 1962. Ballard’s main character is a scientist in charge of a floating research station, drifting above a submerged London, beset on all sides by encroaching tropical jungle. A 50th anniversary edition (with an introduction by Martin Amis) has been released and it is available as an ebook. I’ve not read it, though, relying on Peter Briggs’ review for the synopsis.

Ballard eerily conjured up a world where polar ice caps have melted and solar storms have left us in an irradiated world. Europe is a series of lagoons, devoid of human life, although the tropical bugs love it!

The most recent book in the cli-fi genre which I have read is The Ice by Laline Paull. Her 2017 mystery novel begins with wealthy tourists aboard the Vanir, traversing previously frozen Arctic oceans. The mission is to find a (now rare) polar bear, but instead they find the thawed body of an explorer who went missing years ago in mysterious circumstances.

Fiction aside, the alarming temperature rises in the frozen north have had a bizarre impact on Europe, the US and Canada in 2018, which at this time of year ought to be seeing the first thaws of spring. A day temperature of 1 degree celsius in Greenland might not seem too warm to us Aussies, but typically the days are often up to 30 degrees colder. And this is not confined to Greenland. The most northern US city (Utqiaguik, Alaska), has also been enjoying a balmy 1 degree celsius − again that’s 22 degrees above average.

Meanwhile,The Independent observed that a relatively high pressure system over Russia and the Nordic north and a relatively low pressure system across the UK resulted in freezing Artic air being drawn towards the UK and causing exceptionally cold weather there.

The chorus of Waterfront Row ponders: “Little did I think when I moved to the mountains, I’d end up on Waterfront Row, renting out my shed to all those who fled the torrents and the foment down below.”

Imagine my chagrin upon writing and recording this song to be told (by a country music fan), that the song was similar (in theme) to Graeme Connors’ A Beach House in the Blue Mountains. I had not heard of the song but googled it (as you do).

We’re not the only ones taking ‘cli-fi’ into the realms of songwriting. Sunshine Coast songwriter Noel Gardner made up this cheery tune about the low-lying island nation of Tuvalu. He takes the role of the climate sceptic to satirise the controversy about Tuvalu and rising sea levels.

Some years back, the tiny Pacific island nation was said to be so prone to inundation its citizens might have to become New Zealanders. As it happens, some 2,400 Tuvaluans have already moved to NZ or neighbouring islands, according to a not-for-profit group that monitors world poverty.

They may have moved too soon, if, as the article below says, Pacific atolls like Tuvalu actually grow and float, becoming impervious to rising tides.

Now, a study confirms what we’ve already known – atolls, and in particular Tuvalu are growing, and increasing land area, writes Anthony Briggs. “So much for climate alarmism”.

Nevertheless, the highest elevation on Tuvalu is 15 feet and it is perpetually exposed to rising sea levels, cyclones and tsunamis.

An article in The Conversation says previous studies examining the risk of coastal inundation in the Pacific region have been conducted in areas where the rate of sea level rise is ‘average’ – 3mm to 5mm per year. A team of authors, led by The University of Queensland Senior Research Fellow Simon Albert unearthed outlying examples.

At least five reef islands in the remote Solomon Islands, where sea level rises are in the order of 7mm-10mm a year, have been lost completely to rising sea levels and coastal erosion. A further six islands have been severely eroded. These islands range in size from one to five hectares and supported dense tropical vegetation that was at least 300 years old.

Last year, new projections from the National Oceanic and Atmospheric Administration (NOAA) in the US revealed that global sea levels could rise by 2 metres by 2100 if emissions remain at their current levels. As the ABC reported, this is substantially higher than the 74cm increase proposed in a 2013 Inter-governmental Panel on Climate Change (IPCC) report. Under these new projections, Sydney’s Circular Quay, Brisbane Airport, Melbourne’s Docklands and North Fremantle would be among locations at risk. So too Stradbroke Island, the Gold Coast and Sunshine Coast, while in South Australia the seaside suburb of Glenelg would also be in trouble.

Scarier predictions have been made, with scientists taking into account the prospect of Antarctica melting, as well as the Arctic, doubling predictions of a 2m rise by 2100.

Should we care? By 2100, the youngest person I know will be 89, so maybe she will care. Her children and grandchildren definitely will.

And what does this mean for Australia, where the majority of the population live along narrow bands of coastal land on the east and west coasts?

You can scare yourself (or reassure yourself) by checking out this interactive website which allows you to see the predicted results of sea level rises wherever you happen to live.

FOMM back pages

 

The risks of losing our digital photos and memories

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South Brisbane (Southbank), circa 1978), just prior to construction of the Queensland Cultural Centre) Author’s photo scanned from a colour slide.

Whenever I think about going through our thousands of family and travel photos, be they in digital form, colour prints or scanned to the computer, I develop what migraine sufferers assure me is not a migraine, just a headache.

The problem begins with the lack of a system. Few people other than professional photographers or serious hobbyists catalogue their photos and negatives in a logical way. So good luck looking for that photo of your little brother skateboarding when he was 10. It’s in there somewhere.

Recently, a family member took on a big project – to collect photos across seven decades to put in a book for my brother-in-law’s 70th birthday. This social media-savvy young person wisely, I thought, decided to capture the images permanently in a printed book.

The early contributions of course were box brownie snaps from somebody’s shoebox, scanned and photo shopped where appropriate. Some were from colour slides, also scanned and photo shopped, usually to obtain a larger image. Then we delved into photo albums from the 1970s, 1980s and 1990s, until the digital folders began.

Maybe we were late adaptors to digital cameras, but we seem to have left film and negatives behind only in the early years of the 21st century. By that time, they’d been in common use for a decade, even though Steve Sassoon of Kodak invented the first digital camera in 1975. We came home after a six-month sojourn abroad in 2004 with 60 CDs of photos we burned from images downloaded on to a borrowed computer.

Since then, my non-system has accumulated piecemeal on laptops, back-up drives and memory sticks. She Who Also Takes Photos has a smarter system in that she can readily find images by subject.

No such luck on my computer. For example, a folder labelled ‘March, needs sorting’ on review contains just 15 (of 97) images worth keeping. In the late 1990s, we both clung to shooting film on SLRs and sending the film off to a cut-price mail order business. Digital cameras and later cameras in smart phones replaced this process, which was costly.  You often had to wait a week or more until you could relive the memories from Aunt Gladys’s 90th. If only she hadn’t blinked.

I recall learning how to produce my own prints from negatives, albeit in black and white. Few young people today would know the thrill of seeing a photo you took that day materialise in a tray of chemicals.

If you watched the Netflix series, The Crown, you’d have seen a dramatization of one of the best film photographers of the time in action. Tony Armstrong-Jones is depicted in the dark-room with his latest amour (Princess Margaret), trying on what appears to be a well-rehearsed seduction technique. He’d taken an intimate shot, with bare shoulders – against mores of the time (1959). Margaret, who comments, “It’s a Margaret nobody has seen,” resists his blandishments (but not for long, Ed).

Film and self-processing makes a comeback

As Alexandro Genova wrote in Time magazine last year, there is a small but determined resistance to digital photography among amateurs and professionals alike. Some are effusive about film and its “unexpected palette, the grain and dynamic range”.

Portraitist Ryan Pfluger says of Kodak’s decision to revive Ektachrome film, that the “creamy ’70s tone” channels his fascination with memory and nostalgia.

Genova’s article is framed by a stunning shot of a wildfire in Glacier National Park, Montana. The image is by professional photographer and artist David Benjamin Sherry, who processes and prints his own work.

“There’s a spirituality that’s connected to it. I go out to take the pictures and at the end of the day I’m by myself, alone with my thoughts, in the dark room. It becomes very meditative,” he told Genova.

No doubt the majority of hobbyists, oblivious to this meditative magic, will continue to snap what used to be called ‘candids’ on their smart phones. They can then post instantly to Facebook, Instagram, or other social media outlets.

The 2004 earthquake and tsunami in the Indian Ocean revolutionised the way media covers news. Digital Spy’s correspondent Hunter Skipworth says the stark images of the tragedy were filmed by ordinary people, using their phones to capture images and video. From then on, anytime a major news event happened, anywhere in the world, it would be filmed by a citizen on their smart phone. That was a fairly short advance from the first commercially available digital SLR in 1991 (Nikon’s 1.3 megapixel camera, intended for use by press photographers). By the mid-1990s Casio, Kodak, Sony and others joined the race to produce an affordable digital camera. Digital Spy reveals that Apple had a short-lived flirtation in this field in 1995 with the QuickTake 100. Apple went on to focus on the Iphone with built-in cameras. Good move, Steve.

Most smart phones have cameras which have at least 4 megapixels and often up to 12mp – good enough quality for a ‘citizen’ photo. The practise is so widespread now most newspapers carry a regular ‘reader’s photo’.

However galling that may be to professional photographers and videographers who spent a lifetime learning their trades, it comes down to who first captures the image.

Facebook, which had a modest debut in 2004, surfed in on an explosive wave of change. The introduction of the iPhone in 2007, universal access to broadband and perhaps the invention of the ‘selfie stick’, all helped Facebook become the behemoth it is today.

My friend Mr Shiraz is slowly collecting images of his now adult children (and their offspring), with the idea of permanently preserving them in photo albums. He’s not alone in this quest.

Like others with Gen Y and Gen X offspring, he can see the potential for a catastrophic fail arising from the ubiquitous habit of impulsively posting memorable photos, trusting the archiving to that most nebulous of beasts, The Cloud.

Here’s an example, from the days when hacking mischief was in its infancy, of what can go wrong. In 2001 our computer was infected by the I Love You virus, which among other nasty deeds corrupted all JPG files. It was not such a disaster for us as we were still mainly wedded to film.

As we plough through our old photos, a common problem arises. Here’s your father as a young lad, standing with…now who are those three other people? There’s nothing written on the back and the people who could tell you are long gone.

The same fate awaits the millions of images consigned to the ‘cloud’ –data servers located, well, somewhere. You can establish when the image was taken, but not by whom. Nor, unless someone has ‘tagged’ the images with people’s names, can you determine who is in the photo or where it was taken.

What is even more annoying is not knowing who took the photograph: surely that matters? I’ll leave you with this rare snap of The Goodwills busking in Melbourne’s Bourke Street (a while ago).

No, I don’t know who took it. Perhaps it was a ‘selfie?’