Government looks to scrap anti-detriment payments
SMSF practitioners may need to reassess any anti-detriment payment strategies in place for clients with the government looking to remove the tax refund as part of its tax reform plans, says the SMSF Association.
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.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.