MGI Australasia executive chairman Grant Field says much of the hype regarding the changes to super in the federal budget has more to do with emotion than logic, and is due to a lack of understanding of the proposed changes.
Mr Field criticised the media’s focus on the issue as “absolute codswallop”.
“One point that has been lost in all the media hype is the fact that the $1.6 million limit is per member, not per fund, meaning an average ‘mum and dad’ joint fund could have $3.2 million in it before this change becomes an issue,” Mr Field said.
“I suspect the number of joint funds with more than $3.2 million in them will not be that high, but even for those in that category, the earnings on the $3.2 million will still be exempt from tax when in pension phase.”
Mr Field said the average size of an SMSF is around $1 million and consists of two members – the average mum and dad super fund.
This means the average individual SMSF balance is around $500,000, a long way short of $1.6 million, according to Mr Field.
He pointed out that it is only the income earned on the excess above the $3.2 million joint fund balance that is taxable, not the earnings when in pension phase, and even then it is only taxable at 15 per cent.
“Even low-income taxpayers earning over $18,200 per annum pay a marginal tax rate of 19 per cent, which is higher than the 15 per cent that someone would pay on a fund balance of over $3.2 million,” Mr Field said.
Elaine, were those same people complaining when the tax on their existing pensions was removed? I think not. Happy to take the windfall gain but scream like a stuck pig when it’s wound back.
How is it any different to me earning my current income and the govt decides to change the tax scales so that I end up paying more tax? I’ve already got my salary in place, isnt it retrospective to apply it to my salary in the future? By your reckoning they should have to wait until I change jobs b4 the new tax can apply?
Agree, that anyone with $1.6m invested can’t reasonably expect to pay no tax on what is invested, ever. Super or otherwise, the beneficial owner is getting the benefit of the investment returns and at some point has to expect to contribute to the Australian way of life they and their family enjoy. Just got back from overseas and not a lot of joy with schools, hospitals, roads, etc in those places.Still think $1.6m invested at no tax, and the rest at 15% tax is a dream run. Better than living in Singapore or HK.
Agree with you Barry
I don’t think the $1.6M cap is the problem. It’s the fact that it applies to pensions already in place. It changes the rules when the game is almost over (retrospective!!). I would suggest the cap should apply to new pensions and commuted pensions only. I would also suggest a lower cap would not be unreasonable either. As an SMSF administrator, we have maybe 2% of our clients that $1.6M would be an issue for. Even though so few people are affected, it is a matter of principle. Allowing the government to change things retrospectively sets a precedent that undermines confidence in the system.
Codswallop or not the facts are that Morrison made it clear before the election policy was drafted that superannuation was not going to be touched is a breach of trust and this government is not to be trusted or respected.