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Superannuation

Return to straightforward super: tax body

The Tax Institute has said it is fundamental to get back to a simpler superannuation system and try to avoid any further tinkering to the system in the short to medium term.

“I’m still of that view [that we need to protect super and SMSFs] and I think it’s really important that we create an environment for the SMSF sector which is as straightforward as possible,” Tax Institute senior tax counsel Robert Deutsch told selfmanagedsuper.

“Now, I say that carefully knowing that laws do tend to be complex and that’s unavoidable, but it doesn’t always have to be.

“The message we need to get out there is to keep super as simple as possible and keep it as stable as possible by rarely changing it, with no new initiatives.”

Deutsch said it was vital Treasury allowed superannuation to settle for a few years following the major super reforms introduced in the 2016 budget.

“People are sick and tired of seeing super being fiddled with and getting new rules every year – this creates noise around super which sometimes isn’t even correct,” he warned.

“I doubt super will be removed from the budgetary cycle.

“I can’t see that happening because super is seen as part of the tax framework and therefore there’s a revenue implication and a spending implication. So if it’s always going to be focused on by government, I just think that we need to stop changing it all the time.”

He added the next federal election could result in further amendments.

“If we get a new government from the election, I’d imagine it would have its own ideas about superannuation, so we’ll face another round of changes,” he said.

“This is why people have started to lose confidence in the system – it’s always changing, they don’t know what they’re facing year-on-year and that’s quite disappointing.”

Commenting on other ways to simplify super, he said the concept of using a super fund to leverage or fund property is problematic.

“SMSFs can do this using limited recourse borrowing arrangements and I’m not a great supporter of that idea,” he revealed.

“Super’s an area where risk to the maximum extent possible should be taken out of it because the idea behind super is that you’re encouraging people to use relatively straightforward mechanisms to provide for their own retirement, so anything that adds risk to that should be removed if at all possible.

“And if there is a housing crisis in the country, it needs to be addressed through other means, not super funds.

“If you take these and all the other noise out of the super equation, you can create a very simple, straightforward environment for savings to accumulation in a super fund, which is attractively taxed, and that’s the idea. You’ll end up having more people relying less on the age pension.”

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