The SMSF industry is split between knowing whether the current existing or budget announced non-concessional contribution (NCC) rules apply to clients, according to an online poll.
During the latest DBA SMSF Online Update, a poll of the webinar participants revealed 52 per cent were applying the NCC rules announced in the budget, while 48 per cent indicated they were following the rules currently in place.
“I would be inclined to use the rules that exist in the legislation right now, so I’m in the slight minority,” DBA Lawyers director Bryce Figot said.
“I think you should use the rules that exist in the legislation right now because we’re law-abiding, not announcement-abiding, especially since the announcement is coming from a party that is not elected.”
Figot said if the industry continued operating under the current NCC rules and the Labor Party was elected on 2 July, perhaps nothing would happen.
“Possibly business as usual,” he said.
“The ALP have been coy and have suggested that they wouldn’t introduce the same NCC cap that the Liberal Party have announced, or if they do, they’ve suggested they would only start counting NCCs from right now, not retrospectively from 1 July 2007.
“It’s been strongly suggested, however, I challenge you to find where they have expressly said that. They appear to have reserved some wiggle room.”
Should the Liberals win, the industry can expect to move to the new NCC policy of a lifetime cap of $500,000, with contributions counted from 1 July 2007.
“Based on the budget and what Malcolm Turnbull has said, they’ll be sticking by it,” Figot said.
“But is it such a big deal if you do have to withdraw the excess?”
Ahead of the end of financial year, Figot highlighted that advisers would need to alert their SMSF clients of reviewing succession plans and arrangements in the near future.
“One of the items in our checklist for pre-30 June planning is to give your clients a head’s up that they might need to revisit SMSF succession planning,” he said.
“Regardless of who wins in the election, I think there will be changes that will necessitate the revisiting, at the very least the review, of pretty much all SMSF succession plans.
“For example, think about your husband and wife clients. I dare say that the vast majority will say that when the first [partner] dies, they want the survivor to get the benefits in the most tax-efficient way possible, which is typically a pension.
“But with all these caps on the pension exemption and indeed with the Liberals proposing what appears to be a cap on the amount you can take as a pension, full stop, it could mean that for a lot of mum and dads, when the first member dies, they’ll actually have to cash their benefits as a lump sum and thus it will leave the super environment.”