Applying a calculation based on a fixed percentage rate for income generated from excess non-concessional contributions to be refunded along with the contributions over the limit is the optimal method to determine these earnings under the proposed new superannuation rules, despite fairness concerns, according to a leading SMSF technical services manager.
Using a fixed rate to determine the amount of associated income from excess non-concessional contributions would mean the practical application of the proposed rules would create the least administrative complexity, Heffron SMSF Solutions technical services manager Leigh Mansell told delegates at the Heffron Advanced SMSF Training Day 2014 held in Sydney last week.
Mansell said her opinion remained steadfast on the issue despite some apprehension from industry bodies that the method might be inequitable for the sector.
“I spoke to one professional body and they said what if the fund the person is invested in has gone backwards and they’ve got negative returns and they’re locked in to pay a fixed interest rate,” she said.
“My reaction to that is I think it’s the luck of the draw. If you turn the situation on its head, say my fund has earned 20 per cent on the excess non-concessional contributions and I have to pay 6 per cent on those contributions, I’m in front then so I don’t think you can have it both ways.
“So in my head a fixed rate of interest would be the way to go because otherwise it will just be too difficult to look after.”
She added a determination had not been made as to when the option to refund excess non-concessional contributions would apply, in particular where individuals had activated the bring-forward provisions.
“What we’re not sure of is when the refund option kicks in. Will it be at the point in time where we’ve triggered the bring forward and wish we hadn’t, or later on when you’ve actually got the excess contribution problem,” she said.
“In a perfect world we’d like both, but we’ll just have to wait and see.”
