Superannuation, Tax

$3m soft cap effect significant

$3 million tax impact

Advisers expect the proposed tax applied to people with a total super balance over $3 million will impact one third of their SMSF clients.

The latest research into the SMSF sector has found advisers are anticipating the proposed new tax on individuals with a total super balance in excess of $3 million will impact nearly one-third of their clients.

The Investment Trends “2023 SMSF Adviser Report” showed practitioners estimate the planned $3 million soft cap will affect 32 per cent of their client base.

Advisers also indicated the indexation of the general transfer balance cap (TBC), increasing it to $1.9 million on 1 July 2023, will have similar significance for their clients again with the measure predicted to impact one-third of this cohort.

While the client ramifications for both system changes are expected to be roughly the same, the study revealed SMSF members are more concerned about the $3 million soft cap, with 24 per cent of trustees having already initiated discussions with their advisers about the proposed policy.

By comparison, only 2 per cent of SMSF clients have consulted with their adviser about the increase in the general TBC.

“Fast-changing regulation has exacerbated the complexity of the superannuation system and continues to pose a great challenge for SMSFs,” Investment Trends head of research Dr Irene Guiamatsia acknowledged.

“Our research tells us advisers are anticipating the indexation of the transfer balance cap as having the greatest impact, however, investors themselves are actually more concerned with the $3 million cap proposal.”

Another finding from the analysis is the proportion of practitioners providing advice to SMSF clients increased from 74 per cent in 2022 to 79 per cent in 2023. However, it was also determined the proportion of specialist advisers, those in practice servicing at least 20 SMSF clients, had fallen.

Further, the report found servicing the sector is proving to be a profitable exercise for advisers, with 40 per cent of respondents saying SMSF clients have led to an increase in their practice revenue.

“It’s pleasing to see advised SMSFs appreciate the value delivered and be amenable to paying more for it,” Guiamatsia said.

“The challenge for advisers is to demonstrate value to the much larger pool of unadvised trustees who acknowledge gaps but remain reluctant to seek advice.”

The investment Trends “2023 SMSF Adviser Report” was compiled using the responses of 185 advisers who participated in an online survey between February and April.

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