When federal budgets are handed down, we usually pay close attention to what has been included and the implications those measures will have on our lives.
But the 2015 budget was all about what wasn’t included as far as SMSFs are concerned.
Specifically, it was the fact no new taxes on superannuation would be introduced. Having heard nearly all of the arguments justifying the use of the $2 trillion held in retirement savings as a fiscal lever, it was refreshing to see the government resist the temptation to use this significant pool of money to repair the budget deficit.
And the discipline to leave superannuation alone was significant for a couple of reasons. Firstly, it allows the dust to settle for a little while, at least across the retirement savings landscape. The entire sector is in agreement the constant changes to the rules have created a lot of uncertainty and a lack of confidence among the population in the super system to the point where allocating additional funds to retirement savings is regarded as a waste of time.
Having a period of no change will go a long way to rebuilding this confidence.
Secondly, it might be a small indication our elected officials may start treating superannuation in the same way they’d like us to. This means setting an example of properly recognising savings and investments through super are for the long term and any decisions made affecting this area should be done with this time horizon in mind.
Unfortunately, just about all of the messages focusing on superannuation, be they about legislation or costs or returns, address short-term issues and the mindset of the superannuant cannot change without an adjustment to this phenomenon. So hopefully this is a step in the right direction.
But the budget wasn’t all good news for SMSF trustees. One negative element is the decision to apply indexation rules to the dollar value of compliance penalty units, effective from 31 July this year. It means from this point in time administrative penalty units will increase from $170 to $180.
Furthermore, this indexation process will now occur in line with the consumer price index every three years, with the next adjustment scheduled for 1 July 2018.
As a result, trustees should be aware an SMSF found in breach of certain Superannuation Industry (Supervision) Act sections, such as the in-house assets rule, that attract 60 penalty units will soon be fined $10,800 instead of $10,200 per trustee.
The severity of this move may not be obvious when looking at one type of breach in isolation as breaches normally occur in clusters. In addition, it is not clear whether the ATO will apply all of the relevant fines or waive the lesser fines and make trustees liable only for the fines associated with the most serious breaches.
What is clear is how this budget announcement has made an even stronger case for a corporate SMSF trustee structure.
Compliance penalties are applied to each trustee, so the most serious administrative breach after 31 July would see an SMSF with four individual trustees attract a total fine of $43,200.
In comparison, an SMSF with a corporate trustee would only be fined $10,800.
It should provide the catalyst for the majority of SMSFs to review their trustee set-up.
