With the indexation of the transfer balance cap set to take place, BGL Corporate Solutions has expressed its concerns about the practical implementation and complexities that will arise on 1 July.
“It’s simply too complicated,” BGL managing director Ron Lesh said.
“Indexing the $1.6 million cap to $1.7 million is not the problem — it’s the partial indexation where a person has already commenced a pension that is crazy.
“There are two real problems with partial indexation. Potentially, every person can now have a different total balance cap, and the access to ATO total balance cap data is not readily available.
“This makes these changes a nightmare for SMSF advisers.”
Mr Lesh said the ATO and the Treasury have known for more than two years that this would be a problem but have done nothing about it.
“BGL and many others have been asking for API access to ATO total balance cap data, but our requests have been ignored — it’s simply not good enough,” he said.
Mr Lesh has urged the government to resolve the issue quickly.
“The simplest [way] is to remove partial indexation and increase the total balance cap for everyone to $1.7 million. This removes the complexity and is fairer than some of the other solutions,” Mr Lesh said.
“Why should the date a person commences a pension determine how much that pension should be? Clearly, this is unfair.
“BGL needs to implement these changes in our Simple Fund 360 SMSF admin software by 1 July 2021. Implementing partial indexation without access to ATO total balance cap data is going to result in many errors.
“It would be really nice if the government took into account the practical implementation issues of the legislation and made changes to help accountants who have already borne the brunt of the work around JobKeeper of the past 12 months.”
The transfer balance cap was always an overly complex solution to a simple problem. It is also inequitable, because the amount of tax free pension that a member will receive is based on the performance of the underlying assets. member 1 invested in Bitcoin, and now has a tax free pension balance of $6m. Member 2 invested in Crown and will soon have a tax free pension balance of $800k; not fair. It would be easier to just give everyone $100k of tax free income each year, and tax them 15% on the rest. All you need is two extra lines on the tax return.
Totally agree David Burnes. A level paying field for 15% tax on first $100k removes so many of the inequities with superannuation “tax concessions” . It would be fairer, more transparent & oh so much simpler to administer!.
Wow, check all the angst now that something that’s been legislated for the past four years actually happens! I agree that it’s an overly complicated solution to a problem that shouldn’t exist. Wait and see what happens to bring forward thresholds if contribution caps get indexed, that will be some complication for you!