Regulation, Superannuation, Tax

Super funds already differentiated

$3 million soft cap calculation

The reasoning behind the calculation of the proposed tax on the $3 million soft cap is at odds with other aspects of the superannuation system.

The government’s justification for implementing a problematic formula to calculate the proposed additional 15 per cent tax on total super balances over $3 million, on the grounds of simplicity and constancy, is flawed when compared to other aspects of the retirement savings system, two superannuation leaders have said.

While participating in a panel session at the ASF Audits Technical Seminar 2023 held in Adelaide recently, Chartered Accountants Australia and New Zealand superannuation and financial services leader Tony Negline pointed out different tax calculations for different individuals is an aspect that has been present in the system for a long time.

“[Allowing SMSFs to calculate the proposed tax in a different manner to public offer funds] is really no different from having a choice of [asset] segregation. You have a choice of [how to segregate assets for exempt current pension purposes] in your fund, either using the proportionate or segregated [method],” Negline told event attendees.

Fellow panellist SMSF Association chief executive Peter Burgess concurred and highlighted another existing policy setting where the treatment for Australian Prudential Regulation Authority (APRA)-regulated funds differs to that applied to SMSFs.

“Treasury would argue we want the same approach [to calculating the 15 per cent tax] across all funds – we don’t want one approach for SMSFs and one approach for APRA funds. The interesting thing there is they do that when it comes to NALE (non-arm’s length expenditure) – we’re about to have a set of rules which apply to SMSFs and a different set of rules that apply to large funds,” Burgess noted.

“If we can do it there, we can do it here. Essentially we’re not asking for a different rule; we’re saying that all funds should have the ability to report actual taxable earnings down to the member level and if the fund can’t do that, then [the tax should be applied to] notional earnings.”

According to Negline, the government is declaring its position on what it considers an adequate amount of retirement savings as well via this proposed measure.

“The more I look at this particular tax, the more I think it is as close as you’re going to get to the government effectively saying they don’t want you to have more than $3 million in a superannuation account,” he said.

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