An SMSF technical expert has identified a significant missing element in the total super balance calculation method relating to the proposed $3 million soft cap.
Colonial First State head of technical services Craig Day pointed out the anomaly has arisen from the fact death benefit income streams will be treated separately from other member interests.
“You have to add [these items] in separately. The interesting thing with that is if we go and look at our accumulating account, our account-based pensions, our term-allocated pensions or otherwise known as market-linked income streams, we just use the withdrawal value at 30 June,” Day noted.
“[But] for our accruing defined benefit interests or our pensions in payment mode, what we’re going to need to do here is go and calculate a value for those pensions now.
“That methodology will be defined in regulations which we don’t have yet. For me that’s a really, really important piece of the puzzle here that we don’t have.”
To this end, he questioned the credibility of the consultation process put in place for the proposed new tax if important information pertaining to the measure, such as this, is yet to be disclosed.
As such, he took the opportunity to suggest some calculations regarding these types of pensions that might be considered before the legislation implementing the $3 million soft cap is finalised.
“[The government] could just [employ] a pension valuation factor [applied as a multiplication to] your income or it could go and look at the change in value or the value of your reserves paying that pension from year to year,” he noted.
“So that way you could look at that difference between the beginning and the end of the year and derive a value.
“We just don’t know how that’s going to work at this moment.”
