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Superannuation, Tax

Franking credits policy won’t weaken sector

Taxation policy such as Labor’s proposed changes to franking credit refunds is unlikely to have a significant impact on the sustainability of SMSFs in the future, according to a sector expert.

Smarter SMSF chief executive Aaron Dunn told the SMSF Association National Conference 2019 in Melbourne last week that the SMSF sector will only come under threat if there is policy change affecting the foundations of SMSFs, such as introducing a custody arrangement.

“I’ve heard over the journey that SMSFs were doomed because of tax changes. Who remembers the end of SMSFs because of defined benefit pensions being prohibited?” Dunn said.

He added the sector is equipped to handle tax policy changes and has the ability to transition to new settings.

“We as practitioners thrive on that – that we can come up with ways in which we can advise our clients in a strategic sense to be able to take on what that issue is and create it into an opportunity,” he said.

The impact of the franking credits proposal may currently be the headline issue, but Dunn observed ATO statistics on the age demographic of new members indicate the policy will not have a significant impact on those initial trustees.

“Did you know in the September quarterly statistics on new fund establishments, 64.5 per cent of new members were under the age of 50?” he said.

“The value proposition for those sorts of clients are going to be distinctly different from the conversations that you’re having with your clients at the moment about whether they’re getting franking credit refunds or not.”

The “Future of SMSF” report compiled by Smarter SMSF and released last year found that out of 488 respondents, 39 per cent of SMSF professionals are seeking to increase their exposure to the SMSF sector, while 30 per cent are looking to expand their services in the next couple of years.

Dunn said these professionals may be contemplating introducing advice into their practice, or financial planners may be seeking to integrate the administration function into their practice.

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