The SMSF Association is making another call for the government to fix what it describes as an obvious flaw in the bill tabled to enable the introduction of the Division 296 tax on total super balances in excess of $3 million.
As the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 stands, a person who dies on 30 June will incur a liability for this proposed tax.
“Individuals who have died before the last day of the income year don’t pay this Division 296 tax in that year. Now we think there is an obvious drafting error here … [because] it means if you’re unlucky enough to die on 30 June, you will pay this tax,” SMSF Association chief executive Peter Burgess told delegates at the industry body’s recent National Conference 2024 held in Brisbane.
“So what we’ve asked for is a change there. Now we think it’s quite a simple change and we were quite disappointed that when we put our submission in we didn’t see that change when this bill [was tabled] in parliament.”
Further, Burgess expressed his disappointment as to what this potentially revealed about the government’s consultation process regarding this proposed policy.
“It is frustrating when you see an obvious drafting error that does not get picked up and we did have it in our submission. You have to wonder sometimes if anyone is ever reading these submissions.”
According to Burgess, the industry is still waiting for the determination as to how defined benefit interests will be treated with regard to the tax as well.
“We are still waiting for the regulations to be released [stipulating] how this tax will be calculated for individuals with defined benefit interests, including politicians,” he said.
“What we do know from what has been released so far is that Division 296 is attributable to a defined benefit interest where there has been no payment started. So where it is still in the accumulation phase, what would happen is clients would have a Division 296 debit account.
“[Then] once the benefit starts being paid, well then the tax will start to be paid at that point. Until such time that the benefit starts to be paid from one of those interests, [the individual in question] will have one of these Division 296 debit accounts.”
