The proposed superannuation concessional and non-concessional contributions changes in the budget will impact at least 10 per cent of Class’s SMSF members, triggering the need for contribution strategy reviews as well as gaining access to lifetime contribution data.
“The government said that the $1.6 million pension cap will only affect 1 per cent of super members and that’s true, but I guess the interesting thing is that we’ve done an analysis of our data and it’s clear that in terms of SMSF balances, it’s actually closer to 10 per cent,” Class chief executive Kevin Bungard told .
Class has over 100,000 funds comprising over 195,000 members, which represents around 17.5 per cent of SMSFs in Australia.
Based on Class data, 13.5 per cent of SMSFs and 9.3 per cent of members will be directly affected by the $1.6 million pension transfer cap.
In addition, 7.3 per cent of members already have a pension balance greater than $1.6 million and will need to take steps to reduce their balances before 1 July 2017 if the proposed changes are legislated.
A further 2 per cent of members have balances greater than $1.6 million and will be unable to move all of their remaining accumulation balance into pension phase.
“We’ve benchmarked the mix that we have against the ATO’s numbers, so member balances, number of members, asset allocations and so forth, and they were all in line with the ATO so there’s no particular skew from the Class client base – we think the numbers are representative of the industry,” Bungard said.
“And it was about where we thought it would be.
“Of those, 7.3 per cent of members already have a pension with a balance over $1.6 million so they’re the ones who will be forced to bring that balance down in some fashion before 1 July next year.
“Whereas the 9.3 per cent figure includes the 7.3 per cent in pension, but also those who are not in pension, so their issue is that they won’t be able to put all of that into pension.”
The analysis also found that based on contribution patterns, the reduction of the concessional contribution cap to $25,000 a year will impact almost one-quarter of SMSF members, requiring members to review their contribution strategies, given that in the 2015 financial year Class Super data showed at least 24.2 per cent of members contributed more than the proposed cap.
In regard to the proposed $500,000 non-concessional lifetime cap, Class said it did not have access to historical data required to determine the extent of the impact.
That lack of data highlighted challenges for the industry, Bungard said, as no one other than the ATO had ready access to lifetime contribution data and anyone who had a rollover, or who had changed administrators, advisers or software providers was unlikely to have the appropriate records.
“The budget papers noted that the ATO has reliable data back to the retrospective start date of 1 July 2007, but the ATO will need to make this data available to the members and their advisers,” he said.
“[Also] it would be helpful if the ATO could state what percentage of members have already exhausted their lifetime cap and the ATO should, with some urgency, inform the SMSFs’ service providers, for example tax agents, and the taxpayers of where they stand.
“Given these proposed caps are not yet legislation, how does the industry advise members in the meantime?”
He said he believed there was a lot more dust to settle with some of the other budget changes affecting the industry.
“I think the positive from the budget is that it’s making it very clear that with superannuation the sooner you start, the better and don’t expect to be able to drop it in [contributions] at the end,” he said.
“That’s generally in line with the industry’s main message – that you should think about super sooner.”
Last week, Class also announced it had made a deal with Findex that was expected to result in over 8000 SMSFs loaded onto Class over the next couple of years, the largest single contract for the cloud-based SMSF software services firm.
After an extensive evaluation of available solutions, Findex identified Class Super as the cloud solution best positioned to meet the needs of the organisation by providing innovative online and mobile access for its clients and the rollout of cost-efficient processes across the group.
“We are committed to fintech – it is in Findex’s DNA to harness technology to provide better and timelier services to our clients,” Findex chief executive Spiro Paule said.
Bungard said Class was thrilled to provide software to such an innovative industry leader.
“Findex have impressive growth plans and we’re confident that the Class Super technology along with the group’s extensive adviser network and track record will enable them to deliver on those ambitions,” he said.