Administrators of self-managed superannuation funds can relax after they escaped Treasurer Wayne Swan’s swinging axe in this week’s budget update.
Reports SMSFs would be targeted proved to be mainly false, with the sole hit to self-managed funds being the increase in the SMSF levy from $191 to $259, which equates to around $32 million a year in extra revenue.
There had been speculation that Swan would target the treatment of SMSFs in relation to capital gains tax in the Mid-Year Economic and Fiscal Outlook.
Peter Burgess, technical director of the SMSF Professionals Association of Australia, told SmartCompany the association was relieved the government did not make the speculated changes to SMSFs, although the increase in the levy was “disappointing”.
“There was speculation over the last few months that the government would make a number of changes to taxation rules around funds, in particular SMSFs, but fortunately that was not the case,” he says.
The other bonus to SMSFs is the government’s move to amend the law as it relates to the tax exempt status of fund income earned on investments used to support pensions, a move SPAA supports.
The decision overturns a draft ruling made by the Tax Office last year and will allow the pension earnings tax exemption to continue after the death of a pensioner until the deceased member’s benefit has been paid out of the fund.
Burgess says this is excellent news for the thousands of SMSFs in the pension phase which could otherwise have faced significant capital gains tax bills on the payment of death benefits.
Overall Burgess says the SPAA is just relieved the government avoided tinkering further with SMSFs as Burgess says any changes destroy confidence in superannuation.
“It just creates some uncertainty in the minds of super members and it does affect voluntary contributions as we know confidence in system and markets is a big factor behind people making voluntary contributions,” he says.
“What we now have with little change in the mid-year budget is some certainty for members that their retirement plans will not be upset.”
Keep up to date with SMSF news and issues by reading regular features on SmartCompany by SMSF expert Michael Laurence.
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