Laying down the law – legislation in limbo: SMSFs
The sector heaved a collective sigh of relief when the Federal Government rejected the recommendation in its response to the FSI in October last year, stating that while there were some anecdotal concerns about the arrangements, they did not justify policy change.
However, it came with a caveat that the Government would commission the Council of Financial Regulators and the ATO to monitor leverage in the super system and report back to the Government every three years.
What remined unclear on the legislation front, however, was the redistribution of tax concessions available within super, due to be covered in the Tax White Paper.
In its Tax Discussion Paper Submission last year, the SMSF Association opposed the Government's move to tinker with the superannuation tax concessions for the wealthy, arguing that changing contributions tax to a more complex model would hike super administration costs, which would be borne by the super fund member.
It also argued that while a flat 15 per cent tax rate on contributions could be considered an inefficient tax policy as it encouraged income earners to invest in super rather than through other investments, it said this was a positive outcome as the purpose of super was to forgo their current spending to save for retirement.
The SMSF Association's Jordan George agreed with this, and said the Government should have a comprehensive understanding of the real cost of tax concessions to the system.
It disputed the Treasury estimates that tax concessions cost the budget $32 billion, adding that the use of an expenditure tax benchmark to measure the size of super concessions would see costs fall to $11.24 billion.
"The current figures that are published by Treasury in their tax estimates are often viewed as being inflated because they don't take into account much of the behavioural change if tax concessions were to change," George said.
"They also don't take into account the long-term savings to the Government by taking people off the Age Pension or reducing their Age Pension payments."
Other changes anticipated by industry experts like SuperConcepts' Peter Burgess included the ATO clarifying what constituted commercial terms around related party loans, as the deadline to get the terms under a commercial basis was 30 June if members had the loan under the LRBAs.
"The industry is going to need these guidelines, you would think, well in advance of 30 June so I would expect to see something come out on that relatively soon," he said.
He also expected guidance materials on some of their integrity measures that were announced last year around SMSFs such as buy-sell agreements, as well as taxpayer alerts on dividend stripping.
"In any case, buy-sell agreements explain what perhaps are of concern to the ATO and the arrangements that are not of concern to the ATO. Similarly for dividend stripping, providing more guidance around what arrangements are of particular concern, such as tax avoidance, is useful to know," Burgess said.
Read part one of this feature here: Managing those who manage themselves
Read part three of this feature here: Decision time looms for accountants
Recommended for you
After years of low rates, three younger fixed income specialists have shared how they navigated “one of the toughest environments for investment decision-making” in the form of their first interest rate hiking cycle.
The global nature and geopolitical threats involved in investing in emerging markets can mean the job of an emerging market manager entails additional challenges than its developed markets counterpart.
Australian financial advice firms are increasingly looking towards outsourcing as a tool to optimise their business, two industry professionals share, freeing advisers to focus more on client-facing duties.
Retaining new entrants in the advice industry as they complete their Professional Year is a key focus for advice firms in 2024, with younger generations increasingly valuing workplace culture more than ever.
