The Productivity Commission (PC) needs to consider why Australian Prudential Regulation Authority (APRA) funds do not allow their members to achieve the tax outcomes enjoyed by members of self-managed superannuation funds (SMSFs), according to specialist firm, Dixon Advisory.
The company has used its submission to the PC’s inquiry into superannuation efficiency and competitiveness to counsel the commission to be careful in seeking to make comparisons between APRA-regulated funds and SMSFs.
In particular, it suggested that the PC’s surveys of SMSF trustees needed to be carefully worded to obtain an accurate picture.
“To ensure a balanced assessment of competition across the system and genuine alignment to members’ best outcomes, the commission should extend the scope of Trustee surveys to consider why APRA funds do not allow their members to achieve tax outcomes that are already utilised by SMSFs (i.e. separation of capital gains income out from investment income would allow unitised funds to apply a 10 per cent tax rate to capital gains, rather than applying an overall tax rate of 15 per cent to all income),” the Dixon Advisory submission said.
In doing so, it noted that some APRA funds had moved to adopt a whole of life investment approach which allowed members to retain investments from accumulation all the way to the pension phase, allowing members to take a long-term investment approach and reduce unnecessary transactional costs, including in some instances tax, as well as risk.
“In determining the reasons why trustees establish an SMSF, the commission should consider the final wording of survey questions carefully,” it said.
The submission said that given one of the major benefits of superannuation is the tax concessions provided for saving towards retirement, “it would be unusual that individuals don’t identify tax as a reason for using their particular super fund”.
The Dixon Advisory submission pointed to the significant differences which existed between APRA-regulated funds and SMSFs, not least the generally much older demographic of SMSF trustees and the substantially higher account balances contained within SMSFs.
