Pensions, SMSF

Legacy pensions a missed opportunity

Legacy pensions

Having no reference to the issue of legacy pensions in the 2023 federal budget has been labelled as a missed opportunity given other super measures.

The main SMSF sector body has indicated the federal government may have missed an opportunity to address the issue of legacy pensions in this year’s budget in light of the commitment to other superannuation policies.

“We were hopeful that perhaps we might see something around the legacy pensions in the budget seeing this was a great opportunity to push that through given the government’s appetite to progress with the $3 million tax threshold,” SMSF Association head of policy and advocacy Tracey Scotchbrook told selfmanagedsuper.

“While the amnesty around legacy pensions was proposed for a different purpose, there is now an added need for the amnesty, particularly in light of the proposed tax changes to allow people to restructure their super.

“So there are those members who have low balances and can’t wind up an SMSF because they are trapped in a product and need the ability to move out.

“But similarly with the $3 million threshold, people may need to restructure their affairs to deal with it.”

SMSF technical and education manager at Smarter SMSF Tim Miller noted the government’s decision not to include anything in the budget about legacy pensions or a change in the residency rules means these measures will not be contemplated now before 1 July 2024.

“We hope these measures are still on the table because we haven’t heard anything to the contrary, but the longer they remain outstanding gives reason to doubt they’ll go through, particularly with the definition of an Australian super fund as the whole measure was to abolish the active member test and change the safe harbour rules from two years to five years,” Miller said.

“The safe harbour rule was just a note to the legislation, it’s not even in the legislation, so I wouldn’t have thought that’s too difficult to progress through the legislative channels.”

Scotchbrook revealed the SMSF Association was not expecting any budget announcement regarding the superannuation residency rules.

“We acknowledge that there are a range of residency measures that have been announced in previous budgets and it’s our understanding that they’re looking at those together and they’re in the pipeline that will flow at some point,” she said.

“The October budget mentioned they are still on the policy agenda, but there had been a delay in the timelines.

“So I wasn’t too surprised about the residency rules and it’s just something we have to keep talking to Treasury and government about to ensure it remains on the policy agenda.”

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