Regulation, Retirement, Superannuation

SMSF trustees face double whammy

SMSF trustees are facing adverse consequences from two policy proposals should Labor win the next federal election, according to a superannuation educator.

The first proposed policy that would significantly hurt SMSFs is the banning of franking credit refunds for certain SMSFs in pension phase, Chartered Accountants Australia and New Zealand (CAANZ) tax and superannuation trainer James McPhedron said.

“It could knock out 20 per cent, it could knock out 25 per cent, of [an SMSF member’s] cash flow. And like a lot of your clients, I’m sure they’ve learnt to live off the income [from those refunds],” McPhedron told the CAANZ National SMSF Conference 2018 in Melbourne last week.

He did, however, point out that even if Labor was voted into government, the policy still had to go through proper parliamentary process, which could make it difficult for it to be passed.

“But there are going to be a lot of people really worried [who have SMSF balances] from the $600,000, $700,000 or $800,000 up to the $1.6 million and it does disproportionately negatively impact self-managed super funds. It absolutely does,” he said.

He noted the search for alternative strategies in the form of investments via trusts in conjunction with an SMSF may not aid individuals either due to a separate proposed policy governing this area.

“[There is a] plan to tax at a minimum of 30 per cent [for trust distributions] to adult beneficiaries. So this is a huge change to trusts,” he said.

“Maybe it will impact on not only this, an alternative retirement vehicle, but all of your other behaviours regarding trusts.

“So a 30 per cent tax as a minimum on distributions to adult beneficiaries. There are some trusts that are going to be exempt, primary production and charitable trusts, but the details are not fully formed.”

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