A senior industry executive has questioned one of the government’s assumptions associated with the proposed Division 296 impost with regard to the concept of clawing back tax concessions from individuals who have a total super balance in excess of $3 million.
“Here’s I think [one of the] misconceptions and misunderstandings by the government on this measure. That is, I think there is an assumption made that everyone who has more than $3 million [of retirement savings], being the large super threshold, [and] when a person is going to be affected by this measure, must be on the top marginal tax bracket,” Accurium head of education Mark Ellem told attendees of a technical webinar he hosted recently.
“So [these people] must be earning over $180,000 or $190,000 to be in the top marginal tax bracket, which I don’t think is always the case.
“They might have all their investment capital inside of superannuation, but outside [of this environment], and in their own name, their income might be extremely low.
“So the paring back of the concessions is not comparing 45 per cent with 15 per cent; it might be a lower [applicable] tax rate.”
Ellem took the time clarify the impact the new tax will have on SMSF administration.
“If a person has got less than $3 million, [everything will] continue [and there will be] no change. This measure will not change how you prepare financial statements and the tax return and SMSF annual return for a self-managed superannuation fund,” he said.
“[These items] will continue to be prepared [in] exactly the same [way] and the net taxable income will be subject to 15 per cent tax.
“Where a person has more than $3 million [in their SMSF], in addition to the 15 per cent tax on their share of fund taxable income that is allocated to their interest, there’s going to be an additional 15 per cent tax on this [element] called superannuation earnings.”
During the presentation, he highlighted the fact SMSF members subject to the Division 296 tax will more than likely have to change the way they go about completing the fund’s annual return.
