Regulation, SMSFA, Tax

SMSFA broadens soft cap talks

$3 million soft cap SMSFA

The SMSF Association is engaging other industry bodies to help its campaign to have the government change the calculation method for the $3 million soft cap.

The SMSF Association has revealed it is working closely with other industry bodies in order to find a calculation method for the proposed $3 million soft cap that will not unfairly penalise funds owning the business premises of its members.

“What we’re trying to do is get unrealised gains out of the calculation [for the $3 million soft cap]. We think that’s unfair and we think it’s discriminating against self-managed super funds, particularly those self-managed super funds that have business premises in them,” SMSF Association Peter Burgess told attendees at the SMSF Association Technical Summit 2023 recently held on the Gold Coast.

“[To this end], we have had discussions with a number of small business associations, such as COSBOA (Council of Small Business Organisations Australia), the Pharmacy Guild and the [National] Farmers’ Federation, to make sure they understand this tax is potentially coming the way of their members – particularly those members who have their business premises in their self-managed super find.”

Further, Burgess highlighted how egregious the proposed new 15 per cent superannuation tax is for SMSFs and why the current calculation method has been suggested.

“This industry is paying a penalty for the fact that the large funds can’t report [taxable earnings down to the member level] and for some SMSF members it is a hefty penalty they have been asked to pay,” he noted.

“We’re trying to do what we can to right that problem.”

According to Burgess, SMSFs already have the ability to calculate each member’s taxable earnings and minimal change would be needed to the current reporting framework to capture this information for the purpose of calculating the proposed 15 per cent tax.

“If you look at the SMSF annual return now there is a box there that covers allocated earnings down to the member level. You could make some changes here. Insert a new label and call it allocated taxable earnings or losses and change the label ‘O’ to ‘Other allocated earnings and losses’,” he put forward.

“It is not difficult for the SMSF sector to report those labels. This will give the information the ATO needs to calculate earnings for the purpose of the new tax and there will be no unrealised capital gains included in that calculation.”

During the same presentation, he anticipated when the legislation for the $3 million soft cap might be passed.

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