The SMSF Association has used its latest submission to the government regarding the proposed $3 million soft cap to protest against the brevity of the consultation process associated with the exposure draft legislation covering this measure.
“We would like to express our concerns on the short consultation period afforded to this exposure draft legislation. The changes proposed are significant, complex and in need of careful, detailed review,” SMSF Association chief executive Peter Burgess noted.
Further, Burgess noted all of the information required for a proper assessment of the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 has not been provided.
“Elements of the proposed measures are heavily reliant upon regulations. Those regulations have not been made available as part of this consultation. This affects our ability to properly consider all aspects of these proposed measures,” he pointed out.
In general, the industry body criticised the proposed $3 million soft cap, suggesting it would add complexity to an already complex retirement savings system and result in an increase in the red tape and costs involved, as well as lead to certain unintended consequences.
It also communicated its worries as to how the $3 million threshold for the tax was arrived at seeing the original discussions had been about addressing total superannuation balances in excess of $50 million and $100 million.
“Despite the original stated objective of this policy, being the targeting of those with substantial wealth inside superannuation, we note that the proposed threshold has been struck at a considerably lower level,” Burgess said.
“The shift from $100 million to $3 million, and a measure of earnings that captures unrealised capital gains, utterly reframes the policy position from one that targets ultra-high net wealth individuals to one that starts to capture elements of middle Australia, small business owners and farmers.
“It has very different policy intentions and outcomes.”
Further, the organisation was critical of the proposal’s lack of consideration for an individual’s financial position outside of superannuation, as well as any recognition a person who can fund their retirement independently can ease some fiscal strain the government might experience in its provision of the age pension.
The association again highlighted its opposition to the taxing of unrealised capital gains in the calculation of the tax, recommending a better method to measure earnings, as well as the omission of a mechanism to take indexation into account.
It also drew the government’s attention to the research it commissioned the University of Adelaide to undertake that revealed the potential financial strain the new tax will put on SMSF members and other superannuants.
“Recent studies show a substantial number of SMSFs that will be affected by this tax change hold property and, given many will be small business operators and farmers who hold their premises and land in an SMSF, it is not difficult to see how disruptive this new measure will be not only for the SMSF sector, but for small business operators and the broader community,” Burgess said.
Finally, the member body reconfirmed its belief the proposed tax is being introduced to address individuals with large retirement savings balances unnecessarily as there are existing measures within the system to deal with this issue.