SMSF trustees may change their strategies governing when they are in accumulation phase or pension phase as a result of the proposed legislative change affecting earnings from assets supporting income streams, according to a specialist lawyer in the sector.
In April, the government announced its intention to tax earnings on assets supporting an income stream above $100,000 at the concessional rate of 15 per cent. It has been planned for this amendment to take effect from 1 July 2014. Until now these earning have been tax free.
“There may be a point in time where SMSF members get to a point of indifference as to whether or not to be in accumulation phase or pension phase. If you’re going to be over that threshold [of $100,000] and the tax regime in pension mode is 15 per cent, and assuming the same taxable income rules apply for the accumulation side, then you should be indifferent between pension and accumulation,” DBA Lawyers director Daniel Butler said.
“So therefore it might result in a trend once that tax is introduced to push more people into accumulation phase purely because they’ve reached this point of indifference.”
Butler qualified his prediction, saying the treatment of the assets’ capital growth in each superannuation phase would need to be considered in order to determine if that shift might occur.
“If your pension assets go up, the increase is tax free, whereas capital asset growth in accumulation phase, the increase is treated as being taxable,” he said.
He said taking those elements into account could build a more compelling case to remain in pension phase once the point of indifference had been reached.
“But it will be interesting what trends arise from that suggested amendment,” he said.
