SMSFs and and self-funded retirees are at risk of becoming a soft target for tax reform aimed at generating revenue for the federal government to repay money borrowed to finance COVID-19 relief measures, according to an SMSF administrator.
Heffron managing director Meg Heffron said the easing of coronavirus restrictions has led people to consider what work will look like in the near future, but a looming question is: “Who pays back all the money borrowed to finance much-needed government support?”
Heffron made the comment in a blog post on the firm’s website, adding: “This is where I suspect our SMSF clients, particularly retirees, are at most risk.
“Many would be the first to acknowledge that the tax system has given them enormous benefits in the last 10-15 years and would not begrudge winding back some of the current concessions. As the asset owners in our community, they are possibly a soft target for tax reform,” she said.
“But while these same people are not losing their jobs or businesses, they are seeing their dividend income fall, their investment portfolios buffeted, income from investment properties dry up and their children struggling financially. It would only be natural for them to feel somewhat aggrieved if asked to shoulder a disproportionate share of the burden going forward.”
In additional comments made to selfmanagedsuper, she said the wider self-funded retirement sector would probably be looked at, not just SMSFs.
“The government has spent a lot of money, for good reason. Somehow, it will need to replenish the coffers and is talking about growing our way out and creating jobs and that will be great,” she said.
“I also think that they will look to ‘where the money is’ to see if there are changes they can make to claw back some dollars, and their gaze will naturally fall on the pools of wealth held by retirees – often in super – and the outcome may well be a reduction in tax concessions.
“I suspect that any reduction in tax concessions will focus more on retirees than accumulators.”
She noted this was a personal view and there had been no suggestion this might happen, but rather considered how the government could increase its income without taxing incomes during a period when it is also encouraging people to start spending again.
In mid-April, LightYear Docs and I Love SMSF chief executive Grant Abbott also predicted the government would look toward the SMSF sector for funds to repay COVID-19 relief measures via the abolition of refundable franking credits and higher government charges related to SMSFs.
