What the budget means for SMSFs

Christine St Anne  |   15/05/2013 Text size  Decrease  Increase   |  
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Christine St Anne: The federal government's budget announced this week contained little surprises for the superannuation industry. However, they are some initiatives that SMSF trustees need to consider. To talk about some of the initiatives, I am joined by SPAA's Graeme Colley. Graeme, nice to see you again.

Graeme Colley: Thank you, Christine.

St Anne: Firstly, Graeme, is there anything to like about the budget?

Colley: Well, the effort that SPAA put in over the last few years certainly came to light over the beginning of April, and it was great to see the government confirm those announcements. The two good things we saw out of it; firstly, was the increase in concessional contributions to A$35,000 for those that are 60 and older, and that comes in at the 1st of July this year, and next year we see age 50 and above allowed to have higher concession contributions. That was the first thing we feel was great. The second thing we feel was great was excessive contributions, and the refund of excessive contribution fits into our policy position we've had for some time, and in addition to that, when the excess contributions are refunded, there is going to be an interest component to that. So it's simple to understand, and I think it will be very efficient and practical in the way in which the government is going about it.

St Anne: With the positives aside, what about any concerns?

Colley: The main concern with us is the way in which pension income in the superannuation funds will be taxed going forward, and that is with anybody who has got an account in superannuation and that account in this pension phase will be more than $100,000, then that will be taxed at 15 per cent. While that might be a simple concept being taxed at 15 per cent, the administration already is horrific and the reason for that is that everybody's account in Australia will need to be recorded on the amount of income in pension funds. So, you think about that, how many people in Australia would be drawing down pensions at the moment and how many may not end up with incomes on their pension assets of more than $100,000. I’d say that’s quite a few people, because the government is expecting that around about 16,000 people will be impacted by that, but we think there will be more than that simply because of variations in earnings rates of superannuation funds.

St Anne: Graeme, as you know, we are going into an election in September, so how likely are these changes to be passed, and should SMSF trustees really act now?

Colley: Well, on one announcement they shouldn't be concerned at all, because this afternoon, which is the day after budget, we know that the legislation for the $35,000 concessional contribution is going into the parliament. So that will go into the House of Reps this afternoon, and you would expect go through a Senate relatively quickly, because the government rises on the 27th of June. So that's great news.

Now for the $100,000 arrangement, we haven't seen the legislation for that. Whether we see that before the end of the financial year or before the parliament rises, we are not sure at the moment. The other thing with the refund of the excess contributions, we haven't seen the legislation for that, but hopefully the government will get that through. I would imagine that it will have bipartisan support, not only from the government, but the opposition and probably the Greens in the crossbenches as well.

St Anne: Finally, Graeme, the coalition is yet to respond. What sort of things would you like the coalition to focus on?

Colley: With the opposition, I think that support of an increase in concessional contributions, the refund of excess contributions, tax I think they must support that, because I know Senator Cormann has been speaking to us and a number of other people about how difficult that is for many people. As for the $100,000, I'm not so sure about that. I can imagine, I would say, we don't agree with that, because it's going to be very complex to administer, and maybe they won't support that. I really don't know at this stage.

Then I doubt whether they may come out with other new ways of looking at superannuation under these rules. We expected at one stage that we would have a deferral of some of the indexation and for contributions and so forth, but we didn't see that in the budget, and I doubt whether the opposition would support that, particularly in an election year.

St Anne: Graeme, thanks so much for your time.

Colley: Thank you, Christine.
 

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