Superannuation, Tax

Super tax threshold not negotiable

Superannuation earnings tax

The superannuation earnings tax is all but locked in and highly unlikely to change, with officials stating key aspects were non-negotiable.

The government is unlikely to change its position regarding the proposed additional earnings tax on superannuation balances over $3 million, including the taxation of unrealised gains, according to an SMSF expert who claimed Treasury officials stated they were non-negotiable issues.

Smarter SMSF technical and education manager Tim Miller said the statements were made during the recent two-and-a-half week, Easter-interrupted consultation process in early April.

“I sat in a roundtable with a number of my SMSF colleagues, the SMSF Association and Treasury and the latter started the conversation by saying the following things are non-negotiable and that was the $3 million cap and the way that earnings are calculated,” Miller said today in a webinar hosted by SuperGuardian.

“We asked why are we having a roundtable conversation if all the things that we want to talk to you about are not negotiable and Treasury said everything can be addressed and presented back to the government, but we feel that they’re not going to make any changes on these areas.”

He added that when addressing the total superannuation balance (TSB) calculation method that will be used to assess earnings for fund members, the SMSF sector representatives put forward a model to accurately calculate the tax for SMSF members, but this was rejected for the sake of simplicity across the super sector.

“The SMSF industry is not disputing the TSB calculation is one way to calculate the tax, however, we’re saying if you have the capacity to provide the actual earnings amount, then why don’t you have the capacity to use that to determine the liability because SMSFs can show actual earnings per member as part of the annual return,” he said.

“Treasury’s response to that was the government wants a simplified approach that is applicable across the entire industry so that there is no favourable treatment to one part of the sector over another,” he said, noting this runs counter to the positions taken in the budget regarding non-arm’s-length expenditure (NALE).

“The bad thing about the NALE measure is that rather than try and apply the two times factor across all superannuation funds, the government has provided a benefit to Australian Prudential Regulation Authority (APRA)-regulated funds by saying not only will the general expenditure provisions not apply, but the specific expense provisions will also not apply to those funds.

“So we now have a position where in one measure – the better tax concessions – they are saying we want to have a simple approach across every part of the sector, but for NALE we’re not going to apply those rules to APRA funds, but only to SMSFs and that has gotten our industry riled up because it’s not showing any element of fairness.”

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