Documentation, Superannuation, Tax

Balance cap has bookkeeping impact

balance SMSF record keeping

SMSF record-keeping procedures will need to change to minimise the tax liability for members brought about by the proposed new $3 million balance cap.

A sector strategist has outlined one change in SMSF administration and record-keeping that will be necessary to better accommodate and potentially minimise the proposed 30 per cent tax on a member balance over $3 million.

“The balances of industry and retail funds actually have accrued tax liabilities in them so their unit pricing, or the members’ unit pricing, is less than it would be in a self-managed super fund. We don’t accrue for tax,” LightYear Docs director Grant Abbott told attendees of a webinar he hosted today.

“[So if this new tax is implemented], we’re going to have to make provisions for taxation against member balances much the same as we have in industry funds.

“Why do I say that? [Because] it will be a duty of care we owe to our clients that if industry and retail funds are doing that and it gives a lesser result, then we’re going to need to do it as well.”

According to Abbott, up-to-date valuation of assets will be more important than ever and this means the impact of this government policy shift will have implications extending beyond the SMSF sector.

“This doesn’t just apply to SMSFs, although it’s targeted at them; it also applies to those balances in industry and retail funds that are above $3 million and that will be an interesting one because if you have a look at the industry and retail funds, their valuations aren’t always kept up-to-date [like SMSFs],” he said.

“Many of them have properties that haven’t been revalued for quite some time.”

He pointed out the current situation after the COVID-19 lockdowns, where offices in both Sydney and Melbourne have not returned to full capacity, will exacerbate this situation due to the significant commercial property holdings within Australian Prudential Regulation Authority-regulated fund portfolios.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital