A senior financial services industry stakeholder has highlighted the unfair nature of the new role an individual’s total super balance (TSB) plays in the revised version of the Division 296 tax using the circumstances of the investors caught up in the Shield and First Guardian master fund collapses.
The amended Division 296 tax bill now stipulated a superannuant will be ‘in scope’ or captured by the new impost if their TSB at either the beginning of the financial year or the end of the financial year exceeds the $3 million threshold.
“[The latest version of the Division 296 tax will particularly impact] those clients who might see a reduction in their [TSB] say due to investment returns. [As a result, their TSB may have] taken a hit, but technically if at 30 June their balance has reduced [to below $3 million], they will still be in for Div 296 [if their TSB was above the threshold at 1 July in that income year],” Institute of Financial Professionals Australia (IFPA) head of technical services Natasha Panagis told attendees of a superannuation discussion group held today.
“As we’ve seen with the whole Shield and First Guardian managed investment scheme failures, if you’ve had clients with those types of investments in their fund and they’ve collapsed, their [total super] balances might have been quite high to begin with.
“And now, if we’re going with the way this new draft legislation has been [written], then if their opening balance [is above the $3 million threshold before scheme failures], then that’s going to be unfair for those members because they are going to be paying tax on lost wealth.”
According to Panagis, this set of circumstances is why IFPA used its submission in response to the draft legislation to recommend an adjusted TSB, such as that detailed in the original proposed policy, be reincorporated in the revised Division 296 tax bill.
“That [would provide] a fairer approach and that would address these kind of issues,” she explained.
