Legislation, NALI/NALE, Superannuation, Tax

Last chance to alter $3m soft cap bill

Division 296 tax NALE Superannuation earnings tax Senate

A review by a Senate committee will give the SMSF sector a final chance to put forward its case that the proposed superannuation earnings tax is poor policy and should be refined.

The SMSF sector will have a further opportunity to put forward its case for changes to the proposed additional superannuation earnings tax after it was referred to a Senate committee for further review, however, changes to NALE rules are likely to be implemented as they stand.

The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 was referred to the Senate Economics Legislation Committee on 7 December, the last sitting day of parliament for this year, with a reporting date of 19 April 2024.

The referral took place after the bill was introduced into the House of Representatives and read for a first time with a second reading moved.

Institute of Financial Professionals Australia head of superannuation and financial services Natasha Panagis said as a result of this referral, the SMSF sector would put forward its case for changes to the tax, which will be known as the Division 296 tax under the Income Tax Assessment Act 1997.

“We’re expecting to appear before the committee again as part of its inquiry into the bill and will continue to lobby with the government regarding this Division 296 measure,” Panagis said during a webinar today.

“We are opposed to this additional [15 per cent] tax and to limiting the size of account balances. We already have policy levers and laws in place to limit these high balances.

“If we do need to revisit these tax concessions on the superannuation sector, they have to be implemented in a fair and equitable way for everybody.”

She added the effect of the Division 296 measures would have a larger impact on SMSFs than the Australian Prudential Regulation Authority-regulated fund sector.

The progress of the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023, of which Schedule 7 will implement changes to the non-arm’s-length expenditure (NALE) rules, meant it was likely to be passed as it stands, she said.

She noted the Senate committee had recommended the bill be passed, despite the SMSF sector calling for the repeal of the NALE rules and amending Section 109 of the Superannuation Industry (Supervision) Act to address non-arm’s-length dealings.

“We had the last sitting period at the end of last week, but there is one last opportunity for the Senate to vote down the bill in the next sitting period and that is in February 2024,” she said.

“Now that the bill is before the Senate and once it is read for the first and second time with no further amendments, it can be then put to a vote to pass it.

“We are hoping that it gets voted down, but in saying that, we don’t like our chances, so it seems that this bill may pass as proposed.”

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