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Not too little and never too late

Commentators, experts and journalists alike have not been backwards in coming forward to criticise the government for flaws in its treatment of superannuation. And while our elected officials have given us a lot of initiatives of which to be critical, we do have to give credit where credit is due and a number of positive moves in the past few weeks really must be acknowledged.

The first of these was the decision made by the House of Representatives to drop schedule 4 from the Taxation and Superannuation Laws (2013 Measures No 1) Bill 2013.

The effect of this decision was to allow the practice of crossing or off-market transfers of listed securities into SMSFs to continue.

The proposal to ban off-market transfers caused the SMSF community a significant amount of angst as the need to make these transactions via existing markets would have led to increased administrative expenses that would have been unnecessary.

Furthermore, there was concern an inordinate number of off-market transfers in SMSFs would have occurred in the lead-up to 30 June 2013 to complete these transactions before the new legislation was enacted.

Thankfully this senseless burden has now been scrapped. And while the government did not give any reasoning behind this change of heart, the hope is the myth of price manipulation and arbitrage opportunities perceived to be associated with these transactions has somehow evaporated.

The second bouquet to throw at the legislators stems from the change to the excess contributions tax. Until last month, these taxes had always been issued as penalties for superannuants who breached the contribution caps and levied at the top marginal tax rate.

This approach was applied by the Australian Taxation Office without fear nor favour, pretty much regardless of the size of the contravention and certainly without consideration as to whether the breach was inadvertent or not.

The mentality to punish individuals for these breaches led to situations where if both the concessional and non-concessional contributions caps were breached simultaneously, the SMSF members found themselves facing a tax liability of 93 per cent applied to the breach amount.

Finally though some common sense has been applied to this situation, with new legislation introduced in June changing how breaches of the concessional contributions caps will be taxed.

Instead of the previous penalty rate regime, akin to cracking a peanut with a sledgehammer, breach amounts will now be taxed at the marginal tax rates of the individual in question.

So dramatic is the change that it may now be beneficial to breach the concessional cap to a certain extent to boost retirement savings assets without undue penalty.

Furthermore, the option to actually withdraw the breach amount from the fund remains available.

Both initiatives reflect a more sensible approach to superannuation regulation and perhaps, at last, a slight abandonment of the mentality that SMSF members receive too much of an advantage and need to have their wings clipped in the pursuit of superannuantion equality.

On an additional positive note, the online newsletter was launched in June. This is a weekly news service providing coverage of all of the SMSF news in the market. 

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