The financial services industry has responded with a mixed reception to the federal budget, applauding the efforts to revamp the superannuation sector for workers, while expressing disappointment over overlooked opportunities in relation to the proposed soft cap tax and non-arm’s-length income (NALI) provisions.
The Association of Superannuation Funds of Australia (ASFA) backed the measures in the budget to commit over $40 million to the ATO to recover unpaid superannuation guarantee (SG) payments from non-compliant employers and bring super payments into line with payday.
“Missing out on superannuation entitlements means people have less retirement income. Every dollar counts in retirement and that’s why measures to improve SG compliance are so important,” ASFA deputy chief executive Glen McCrea noted.
The peak superannuation industry body also said the inclusion of public targets on the recovery of unpaid super by the ATO and funding for it to engage more effectively with business to address super liabilities were welcome developments.
The Financial Advice Association of Australia (FAAA) concurred that the move to align superannuation payments with wages was a positive move, however, it raised questions over the finer details of the proposed soft cap on total super balances over $3 million.
“We welcome the proposal on superannuation payment timeframes to align superannuation payments with wages from July 2026, previously announced but confirmed in the federal budget handed down tonight. This will help support the retirement incomes of Australians by making it much less likely that super payments will be missed,” FAAA chief executive Sarah Abood said.
“The introduction of a new tax rate of 30 per cent on superannuation balances over $3 million was also previously announced. The FAAA remains concerned about the lack of indexation for the higher tax rate on super balances above $3 million and the methodology for calculation of the taxable income.”
She also noted the association was caught off guard by the announcement to modify the provisions regarding non-arm’s-length income (NALI) to twice the level of a general expense.
“We now have more clarity around NALI, although the announced changes are a little surprising,” she said.
“Limiting the income that is taxable as NALI to twice the level of a general expense and exempting any that occurred before 2018/19 was not what was expected following consultation. Financial advisers will need to carefully consider the impact on any self-managed super fund clients who are affected.”
Chartered Accountants Australia and New Zealand (CAANZ) said the government had missed an opportunity to introduce a clear directive on the non-arm’s-length expenses (NALE) provisions and that a tailored approach should be considered, rather than a one-size-fits-all tax penalty to address the issue.
“We will continue to argue that any concerns the government may have about small super funds incurring non-arm’s-length expenses is a compliance issue and should not face excessive taxation rates. Overall, we are disappointed with tonight’s announcement,” CAANZ superannuation and financial services leader Tony Negline noted.
Financial Services Council (FSC) chief executive Blake Briggs commended the government on delivering a disciplined and balanced budget that included minimal tax increases while generating income opportunities in an uncertain global economy.
“The FSC congratulates the government on its fiscal discipline that delivers a significant improvement in the 2022/23 budget position and puts Australia in a strong position going into a more challenging economic environment,” Briggs said.
“Growth-orientated policies will offset global economic headwinds and help the government maintain a balanced budget over the medium term, without resorting to further tax increases.
“Tonight’s budget revealed the new tax on superannuation balances over $3 million will raise an unprecedented $2.3 billion each year from 2027/28, its first full year of operation.”