From the Editor

May we live in interesting times

August has now ticked over and the implementation of the super reforms has begun, and while we are only at the start of the process, already we can see the level of complexity that will no doubt trip up many SMSF trustees is a real and present danger.

What gets me is it’s not just the technical and compliance areas that have complexity attached to them. The language and terms used to convey the changes can only be seen as an attempt to try to create additional confusion as opposed to clarity.

For starters, we are no longer to use the term pension. Instead all pensions are now income streams. However, when describing the two phases of an SMSF, the term pension phase, as opposed to accumulation phase, is still generally used.

While on the subject of income streams, the linguistic difficulties don’t end there. Under the new rules, a transition-to-retirement income stream, or TRIS, is now categorised as being part of an individual’s accumulation account, with income from its supporting assets taxed at 15 per cent.

However, when a member with a TRIS satisfies a condition of release, such as turning 65, the TRIS automatically is then included in the person’s SMSF pension account. In effect, the TRIS becomes an account-based pension from that point onwards.

So why don’t the legislators just say that to make it more simple and easier to understand? Instead the law states even after this automatic conversion into what amounts to as an account-based pension or income stream, the arrangement is still referred to as a TRIS.

Another area causing great angst among trustees is the application of the capital gains tax (CGT) relief provisions under the super reforms. Once again it really is not a straightforward task if a trustee wants to take advantage of this relief and even the decision as to whether or not to do so is certainly not all that cut and dried.

But once this course of action has been chosen, the reporting side of things is again a bit tricky and something trustees and their advisers will have to be mindful of.

You see it would make sense, to me anyway, that the notification of having taken advantage of the relief would be included in the SMSF’s annual return, but no it is not. Instead this declaration has to be made on the CGT schedule of the fund.

And of course don’t expect the ATO to help you out in the process. The declaration in question 8 of the CGT schedule does not include any detail as to which assets the relief was applied and of course it does not require any record of what the notional gain on those assets was.

All that means is the ATO is off the hook from a data-keeping perspective and the onus goes straight onto the trustee to make sure their administration is absolutely shipshape from that point onward.

Simpler super it certainly is no longer. In fact, one wonders if the edict of the Turnbull government was to make the well-known Chinese curse “May you live in interesting times” a reality when formulating the latest super reforms.

If so, it’s probably one of the few things a lot of us can say they got right because we really now are living in interesting SMSF times.

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