Broader industry consensus for several months has been that superannuation tax concessions would be targeted as part of the Turnbull government’s tax reform agenda. Most recently, EY told SMSF Adviser it’s unlikely superannuation will escape the budget’s firing line, given the government is potentially looking for “anywhere between two billion to six billion dollars” from the super industry.
Fairfax Media reported yesterday that the Turnbull government is preparing to reveal on budget night that it will cut the income threshold for more heavily taxing super contributions from $300,000 to $180,000.
The lower threshold will most likely come into effect in June 2017 when the temporary deficit reduction levy ends, Fairfax said.
The SMSF Association has voiced concerns around some of the speculated changes, in particular the lowering of concessional caps and lowering the DIV 293 tax threshold.
Speaking to SMSF Adviser, SMSFA’s head of policy Jordan George said the association sees these speculated policy changes to the superannuation as “tinkering with the system with an ad-hoc approach”.
“Our biggest concern of the measures suggested is the lowering of the concessional contribution cap from $30,000 to $20,000 because we do think that could damage the ability for people to save for retirement going forward, and make catch-up contributions to super to boost their incomes,” Mr George said.
This measure, he said, would be particularly negative for those with broken work patterns and volatile incomes.
“The best examples are women who take time out of the workforce to care for family who have broken work patterns, but also small businesses who have more volatile incomes because they may not be in a position to put money into super every year,” he said.
Mr Jordan also said he was concerned about how the Division 293 tax will function with the threshold expected to be lowered from the current $300,000 level down to $180,000.
The administration of the division 293 tax for those earning $300,000 or more, he said, is clunky and inefficient.
“A large concern for people going forward is that the compliance around DIV 293 is quite complex and clunky and it really will affect accountants and advisers going forward,” said Mr George.
This is especially the case with SMSFs, he said, as the ATO cannot raise an assessment of tax until both an SMSF member’s personal income tax return and their SMSF annual return have both been lodged.
“The majority of SMSFs lodge through tax agents so they often don’t have to lodge their return until May of the following financial year, so there is a long lag between the contributions being made for a relevant income year and the DIV 293 tax being raised further down the track,” he explained.
“That creates quite a bit of confusion for the taxpayer. They may have a tax bill arrive for contributions they made up to 18 months ago, so there’s an issue there.”
Mr Jordan also said there is a short turnaround time between when the trustee receives the assessment and when it must be paid, which creates issues for trustees and their advisers.