Lyn Formica, head of education and content for Heffron, said one of the announcements that will impact SMSFs is the government’s decision to no longer proceed with changes to strengthen the ABN system.
Formica said in the 2019–20 budget the government proposed making changes to protect the ABN system. In an SMSF context, under these changes, failure to lodge an SMSF’s annual return for two or more income years could have resulted in the fund’s ABN being cancelled.
“Fortunately, the current government has now announced it will not be proceeding with this measure,” Formica said.
Meg Heffron, CEO of Heffron, said the announcement around deeming rates will be welcome news for people receiving the aged pension.
“Deeming rates will be frozen for another 12 months, and is of course highly relevant for people receiving the age pension, who have financial assets,” Heffron said.
“It is also relevant for wealthier clients who are receiving the Commonwealth seniors health care, because of course, whilst some of them have pensions that don’t count at all, some of them have account-based pensions that do count for this and the incomes worked out using those deeming rates.”
There was also money allocated to support the SuperStream Gateway Network Governance Body. Formica said it is hoped this money will be used to improve the operation of the SuperStream system and iron out some of the existing headaches.
Although the cost of the proposed Division 296 tax bills was not included in this year’s budget, the budget papers revealed the government has set aside around $9 million to work out its application to defined benefit interests held under government-funded superannuation schemes.
According to budget paper 2, the government will allocate $9.2 million over four years from 2024–25 to the Commonwealth Superannuation Corporation and the Department of Finance to implement the tax for members under Commonwealth defined benefit superannuation schemes.
An additional $1.1 million per year will also be set aside to implement the Better Targeted Superannuation Concessions, which is currently before the House of Representatives.
Aaron Dunn, Smarter SMSF CEO, said the government also announced $187 million in funding for the ATO to better protect taxpayer data and Commonwealth revenue against fraudulent attacks on the tax and superannuation systems.
“The funding will upgrade the ATO’s information and communications technologies and increase their fraud prevention capabilities,” he said.
“This will ensure the ATO has dedicated resources to manage increasing risk, prevent revenue loss, and support victims of fraud and cyber crime.”
He added that for SMSFs, two previous budget issues remain outstanding which the government has indicated their commitment to legislating.
The first is the two-year legacy pension conversion which Dunn said would have been “timely in light of the proposed Division 296 tax changes from 1 July 2025”.
“Some excessive pensions can already convert from capped defined benefit income streams (CDBIS) under the current law. Draft regulations in respect to defined benefit pensions will make these legacy pensions most complicated and expensive to manage, so an avenue to exit these was the industry’s preferred path,” he said.
Dunn said the other former announcement the sector would have liked to have seen was the relaxation of the residency requirements for SMSFs and SAFs by extending the central control and management test safe harbour from two to five years for SMSFs and removing the active member test for both fund types.
“With a federal election needing to be held on or before 27 September 2025, it becomes very clear that next year’s budget will be much more expansive on policy commitments towards tax reform, which you would expect will incorporate a level of change to superannuation as well,” he said.
“The next 12 months will see the finalisation of the objective of super, many SMSFs contemplating the impact of the Division 296 measures, further consultation about superannuation in retirement, and arguably more headwinds within the economy.”
Message to all- in government there is no such principle as KISS. All you have to do is as (N0) Services Australia staff to create a new form and they will convert 10 simple questions into a 12 page 60 + question document that is incomprehensible. Great work people!
The irony (moronic thinking by the government) behind this is total tax take from Div 296 is probably going to REDUCE because of these measures.
Now everyone is looking at taxable component, whether greater or less than $3m, but maybe in the future perhaps? Taxable components will be washed out or cashed out permanently hence reducing future death benefits tax take. Total collected by the Commonwealth -> probably less; compliance costs -> definitely massive increase; time and energy -> completely wasted.
Conclusion: Government policy is moronic, short sighted, ANTI productive and deleterious to the budget long term.
Why or why don’t they listen to the people who do this stuff for a living? No-one is advocating for continued existing concessions on >$3m, just fairness, equity and common sense. This seems too high a bar for the government.
If they’d only put their energy into stage 1 of QAR implementation we’d have something to commend them on. No we have nothing but to criticize them with and its all their fault.
The ridiculous thing is that the basic software to allocate “Taxable Income” to each member exists in multiple SMSF packages. It is simply an excuse that it is too difficult to scale it up and port to large industry funds.
What a waste of money to implement the Div 296 tax. Those that can will be moving assets to less egregious tax vehicles – I refuse to pay more than 3 times as much tax in super than I already do (as backed by personal figures submitted to the Senate Committee based, on the last 5 years of SMSF “Earnings”, as a real-life example had this been implemented once we went past $3m 5 years ago). This will leave some that choose to stay in the system and those that are forced to stay (under 60 and not yet retired), and then all of those that will be hit on Defined Benefits Schemes. They are all sitting ducks. At least those outside of the DB schemes can choose to move assets if we are over 60 and retired.
I just need to sell my business so that I can technically retire and then do what I have to do.
So complicated and costly all round.
The irony is that most people are OK with the concessions being reduced. The formula is fraught with huge issues though. Surely the money would be better spent to help the big super funds be able to update the software to be able to give each member their “Taxable Income”? Problem solved and all this stress for naught.
Message to treasury and government – KISS!