A technical specialist has dispelled speculation the new 15 per cent tax to be levied on total super balances above $3 million will be significantly detrimental for SMSFs with the reason being the sector’s past success in navigating negative legislative changes.
Speaking at the SMSF Association Technical Summit 2023 on the Gold Coast last week, Heffron managing director Meg Heffron recalled similar fears in the past.
“Every five years or so, somebody [says] ‘this is going to be the death of SMSFs’. [I’ve] had people tell me that when RBLs (reasonable benefit limits) were removed, had people tell me that with [the introduction of] Simpler Super and transfer balance caps. All of these things are going to kill off SMSFs,” Heffron said.
“[So] is the $3 million superannuation tax going to be the thing that kills off SMSFs? Is the party over?”
In analysing the merit of such concerns, she used her organisation’s client base to establish the potential effect of the measure.
In examining the total super balances of clients at 30 June 2022, she found around 600 of 8200 members exceeded the $3 million threshold.
“So 7.3 per cent were impacted by this in the sense they had more than $3 million [in their super fund],” she noted.
“I know the government says 80,000 [people will be impacted], quite a small proportion of the overall population. [And] even in a client base like ours, which does tend to be [predominantly made up of] high net worth [individuals], it’s exclusively SMSFs … even we only have 600 out of 8200 [impacted].”
To determine the impact of the new tax in the 2026 income year, she estimated the equivalent of $3 million today would be around $2.5 million, which she estimated would affect around 9.7 per cent of the Heffron client base.
From this, she concluded the $3 million soft cap would not necessarily be the death of SMSFs, but suggested indexation of the threshold must be adopted to limit the extent of its impact.