Regulation, SMSF, Tax

Changes to super will not end

superannuation changes

The size of assets held within superannuation means governments are likely to make ongoing changes such as the proposed $3 million tax.

Changes in the SMSF sector are likely to continue into the future due to the significant size of the superannuation sector, requiring SMSF trustees and members to be more informed about the impact of any new measures, according to a super adviser.

HLB Mann Judd superannuation partner Mitchell Markwick said the continual reform of the investment structures within the super sector stem from it being worth $3.3 trillion and would see governments present and future continue to make adjustments to its operation.

“Changes to the system should not be unexpected. Given the median age of all SMSF members is close to 62 years old, certainty in transitioning from one phase of life into another would be welcomed by many, but unfortunately it doesn’t seem possible,” Markwick said.

He noted the proposal to introduce a soft cap via an additional earnings tax on fund balances over $3 million was a change that still required more consultation with industry.

“While some argue the intention is to try to start limiting the size of super balances in order to raise tax revenue, this particular proposal in its current form has a number of fundamental flaws, specifically, the taxation of the movement in the market value (or the unrealised gain) of an asset,” he said.

“Once that asset is sold, people will still be required to pay capital gains tax on the sale once actually sold, therefore triggering a double taxation arrangement, thereby warranting further consultation.”

He said the end of the financial year was a reminder SMSF members should be across the framework that controls their retirement savings and as a result of this rolling change they should focus on the rules that are in place rather than those that have yet to be legislated.

“While there is always likely to be draft legislation proposed for future financial years, members need to focus and ensure they are administrating a fund based on the current rules,” he said, adding this was particularly the case with estate planning.

“Estate planning is an integral facet of succession planning. SMSF members need to ensure they have the appropriate documentation in place, including a current and up-to-date trust deed, a valid binding death nomination, power of attorney, enduring guardianship and a valid will.

“In the event an SMSF member becomes incapacitated or passes away, this documentation will ensure the smooth and ongoing operation of an SMSF.”

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