Speaking to SMSF Adviser, federal member for Deakin Michael Sukkar said he was calling for the anti-detriment payments to be scrapped “following recommendations from the tax reform white paper”.
“The government is considering all options – including integrity measures on superannuation – to deliver a tax reform package to take to the next election that will help Australians work, save and invest,” said Mr Sukkar.
SMSF Association director of technical and professional standards Graeme Colley said it was a positive step by the government given that it is often difficult for SMSFs to fund the anti-detriment payment and that it can inadvertently result in excess concessional contributions.
“It is difficult funding for it in the first place, because you need to set aside monies out of the income of the superannuation fund and that needs to be done over a reasonable period of time to be able to build up your reserves so you can pay the anti-detriment payment,” Mr Colley told SMSF Adviser.
“When you do have the anti-detriment payment, you transfer it to the deceased member’s account, or out of the superannuation fund and it then it becomes a concessional contribution, [so it] could end up resulting in excess contributions. It’s sort of a two-edged sword, from that point of view.”
Mr Colley said the anti-detriment strategy requires a lot of planning to enable it to occur and it “may make things easier if it’s taken away”.
“If [practitioners] do recommend anti-detriment payments coming out of the fund, maybe they need to reassess the position and have a look at a recontribution strategy and how that might impact upon the client,” said Mr Colley.
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Myths & Reality:
First, it is an optional – given trustee fiduciary duties, it is not.
Second, the trust deed should allow for it: being a tax measure, absent a provision explicitly preventing it, wrong. Funds could not get out of the previous super-surcharge by saying the deed does not allow it.
Third, funds should have prefunded reserves to pay it: not necessary, as every collective vehicle pools fungible money. Being a sovereign obligation, it is AAA rated. Try this argument in reverse for tax owing to ATO!
Many practitioners have peddled the above, and APRA has comprehensively demolished them. Read APRA papers on Perfect Equity and Tax in Super.
Like waking up a sleeping tiger, this measure may trigger a spate of class actions against trustees did not pay it.
Watch the space!
Retention Anti detriment in system offers competitive choices for superannuates whilst conceptually a fair tax recovery. The fact it does not suit SMSF model is beside the point bearing in mind SMSF have other unique advantages.