The SMSF sector has responded enthusiastically to Treasurer Joe Hockey’s announcement last week to scrap the proposed tax on pension income over $100,000.
The SMSF Professionals’ Association of Australia (SPAA) welcomed the move, saying the decision had alleviated a significant administrative burden practitioners were going to have to address.
“Since the tax on earnings exceeding $100,000 was announced, SPAA has been a strong advocate to both sides of politics that the proposed tax was going to be extremely complex and inefficient to administer for all types of superannuation funds, big and small,” SPAA chief executive Andrea Slattery said.
“We were also concerned that depending on the investment earnings of the fund, the proposed tax would potentially apply to many more than the estimated 16,000 funds with $2 million of assets or more that the former government estimated it would extend to.
“The decision to abandon the tax will provide certainty for those saving for their retirement and those already in pension phase and relying on their superannuation to fund their retirement.”
Pitcher Partners superannuation director Shaun La Motte echoed SPAA’s sentiments.
“Dropping the higher taxes on superannuation funds with pension members earning above $100,000 in income is good news for both SMSF trustees and advisers. The earlier proposed change had many trustees raising questions about potential structural changes and ongoing management or investment decisions,” La Motte said.
“From the outset this potential additional tax was met with concern in the areas of not only an additional tax burden on self-funded retirees, but also a potential complicated and costly measure to administer for both trustees and government alike.
“The dropping of this measure gives trustees some certainty in relation to the taxation benefits for retirees invested in super for at least the short to potential mid-term.”
HLB Mann Judd wealth management partner Michael Hutton said the decision was a common sense one as he struggled to see how it could have been effectively implemented.
“I was saying from the start I couldn’t see how that could possibly be implemented. It’s a really difficult thing conceptually to do the reporting to get back to the $100,000 cut-off and to determine who it applies to and then who pays it, particularly if there are a number of funds involved,” he said.
“It was causing unrest with clients because we’ve got some clients in the self-managed super fund space where you can see there’s $100,000-plus in income in the year and they were starting to think they’d get taxed on that.
“Fortunately the Liberals have put that one to rest.”