The absence of changes to superannuation in the federal budget have elevated the status of SMSFs as leading tax vehicles, particularly for those who fall within the Division 296 regime, DBA Lawyers special counsel Bryce Figot has claimed.
He pointed out announcements regarding changes to capital gains tax (CGT) and negative gearing will have no effect on any form of superannuation, including SMSFs, but there was a beneficial impact because of that exclusion.
“We get all sorts of statements saying these changes are not supposed to affect superannuation but here is one way in which it affects superannuation,” Figot told practitioners in a recent briefing.
“It’s a little quote from a play they made me study in high school ‘All motion is relative. Maybe it’s you who has moved away by standing still’.
“Perhaps superannuation has been impacted not by it changing but by every alternative to superannuation changing.”
He recognised this was relevant for practitioners with clients looking at moving funds out of their SMSF because of Division 296.
“Fine, but where are you going to put it? It is not like the other options or other structures via which you could invest have become better. In fact, after the budget, they have become more difficult beasts.”
Figot noted plans to remain in superannuation once the new impost commenced were reinforced by the budget.
“On its face, for a client significantly over the $10 million total super balance, even a client personally on the 47 per cent marginal tax rate, you might think major restructuring is needed.
“You might think the 50 per cent personal CGT (capital gains tax) discount trumps the one-third discount [in super].
“You might calculate personally they are paying 23.5 per cent [tax outside super] whereas in super it will be 26.6 percent.
“After the budget I’m not so sure, and what I want to emphasise is SMSFs will still get the one-third discount. So, with Division 296 it is a 15 per cent [fund tax] plus a 15 per cent [Division 296 tax] plus a 10 per cent Division 296 tax, for a [maximum] 40 per cent headline rate, but you still get the one-third discount.
“Under the new tax, even in the absolutely worst-case scenario, SMSFs are paying a total of 26.6 per cent where every other taxpayer on CGT in the future will be paying a minimum of 30 per cent.”
“In February, non-SMSFs looked better but now in June SMSFs look better, so I stand by my strategy that no major restructuring is needed.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason