A cap on large superannuation balances would punish people who acted under rules that operated in the past and are running SMSFs that are compliant with modern tax and superannuation rules, according to a leading accounting body.
Chartered Accountants Australia and New Zealand (CAANZ) superannuation and financial services leader Tony Negline said a cap on superannuation balances at $5 million had been raised in the media, but SMSFs with a balance above that were unlikely to have done anything wrong in reaching that level.
“There is a small number of very large SMSFs and some of them have hundreds of millions of dollars and for those people good luck to them,” Negline said at the CAANZ National SMSF & Financial Advice Conference 2022 in Sydney today.
“There is no doubt in my mind the ATO has spent a fair bit of time crawling all over those funds, checking to make sure they are doing the right thing on each and every nook and cranny they can examine, so I’m fairly sure, from a regulatory perspective, most of them are above board.”
Negline added the size of these funds was the result of “bad policy that was around for way too long” prior to changes made in May 2006, but they should not be penalised for government policy at the time.
“Prior to May 2006 there were constant rumours leading up to the budget the government was going to get rid of unlimited, undeducted contributions, which was the reason these large funds largely exist in the first place,” he said.
“Those rumours never came to fruition until [then treasurer] Peter Costello brought in his Simplified Superannuation policies.
“We can actually say through those people’s good fortune they managed to ‘escape the system’ when the law was not quite as good as it could have been and now everyone wants to try and punish them for them taking advantage of the situation that existed at that particular time.”
He said a cap on large funds, while creating work for SMSF practitioners, would be hard to administer for SMSF members.
“Let’s hope it doesn’t come in because it is going to be an almighty mess because let’s say I have $5.1 million in my super account and I find through market fluctuations it is now down to $4.9 million, does that mean I’m allowed to make contributions?” he said.
“There is a lot of things they need to sort out, so let’s hope they do that because it’s going to make the system so complicated.”
