The federal government’s proposed changes to superannuation rules might affect as many as 85,000 SMSFs with 160,000 members, which was much more than what was suggested in the budget papers, according to BGL Corporate Solutions.
BGL recently completed an analysis of the proposed budget changes using the new Simple Fund 360 Analytical Insights tool, which allows its clients to crunch live big data to test assertions made by the government.
The SMSF software provider performed the analysis on anonymous data from 1200 administration firms representing over 60,000 SMSFs.
It found that regarding the proposed $1.6 million pension cap, at least 15 per cent of SMSFs would be affected, or 85,000 SMSFs with 160,000 members at 30 September 2015.
That was a significant jump from the 4 per cent suggested in the budget, BGL said.
However, Labor’s proposal of $75,000 tax-free income for pension accounts was significantly more onerous, it found.
Based on the average returns of SMSFs from 2010 to 2014, it equated to a cap of $1.1 million and would affect at least 24 per cent of SMSFs, or 136,000 SMSFs with 256,000 members at 30 September 2015, the analysis showed.
Further, the proposed lifetime cap of $500,000 for non-concessional contributions (NCC), apart from being virtually impossible to accurately calculate, currently affected at least 10 per cent of SMSFs, or 56,000 SMSFs with 106,000 members at 30 September 2015, BGL’s data found.
The reason the NCC amount was virtually impossible to calculate was because the data had not often been available or provided to superannuation administrators, BGL managing director Ron Lesh said, adding he was also concerned at the retrospectivity of the proposed changes.
Many people had been planning their retirement for many years based on the rules that existed prior to 3 May 2016, Lesh said.
The reduction in concessional contributions to just $25,000 and the lifetime cap on NCCs would make it extremely difficult for anyone to build a super balance that would provide sufficient retirement income, pushing people back to the government age pension, he warned.
“I think the main difference between our data and the budget data is that our data is real-world data,” he said.
“Like with so many things in our world today, so many people use the spreadsheets to predict the effects of many things, but as we see time and time again these spreadsheets are simply wrong.
“We are seeing a lot of anger directed at the ridiculous impractical super policies from both sides of politics.
“Many people are disillusioned with their super. They feel the proposed super policies of all the major parties are simply unfair to people who have worked all their lives to build their retirement savings – they are bad for SMSFs, highly retrospective and in my view bad for Australia’s future.”
