Use budget to simplify super

budget superannuation system

The SMSF Association has urged the government to use the 2021/22 federal budget to simplify the retirement income system.

The SMSF Association has called on the federal government to use the 2021/22 budget to reduce the complexity in the superannuation and retirement income system.

As part of its budget submission for the 2022 financial year, the SMSF Association urged the government to remove or simplify transfer balance cap (TBC) proportional indexation, reduce the number of total superannuation balance (TSB) thresholds and provide SMSF advisers and administrators access to ATO portals in an effort to make the current system easier to navigate.

The association’s call for the simplification of TBC proportional indexation in particular follows the ATO’s recent announcement that indexation would occur this year due to the latest consumer price index exceeding the 116.9 figure required to trigger such a move.

SMSF Association chief executive John Maroney said: “The superannuation system is complex. Since 1 July 2016, the legislation and complexities in administering superannuation accounts, particularly for SMSFs, has significantly increased. There are now numerous thresholds, caps, indexation methods and limits that require constant monitoring and reporting.

“With TBC indexation now occurring on 1 July 2021, we believe it is imperative that a simpler method of indexation is implemented. Additionally, the TSB thresholds should be streamlined.

“The superannuation system is not only difficult for trustees and members, but also their advisers who must be privy to information which, in many instances, they are unable to access in an accurate and timely fashion.”

In particular, Maroney noted locking in a member’s TBC when they first start a retirement-phase income stream would be one way of reducing the complexities associated with proportional indexation.

“Although this option may cause some minor inequities, we believe these are acceptable to avoid the cost and confusion proportional indexation would cause,” he added.

“Alternately, if the government wishes to retain proportional indexation, the rules could be simplified by reducing the number of bands (currently 0 per cent to 100 per cent) of proportional indexation to five or some other appropriate number.”

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