An industry lawyer is preparing to petition the government to remove the “retrospective” elements relating to the $500,000 lifetime cap, with any retrospectivity likely to have adverse impacts on small business and require the ATO to adopt new administrative systems.
DBA Lawyers director Daniel Butler said “one of the most disturbing aspects” of the $500,000 lifetime cap announcement in the 3 May federal budget is that the cap catches prior non-concessional contributions made since 1 July 2007.
“We consider this announcement is seeking to apply retrospective legislation for almost nine years, [from] 1 July 2007 to 7.30pm [AEST] on 3 May 2016 – 3,230 days or just over 8.8 years,” said Mr Butler.
Mr Butler said “retrospective law should really be contained to anti-avoidance measures or where there’s been skulduggery” and that if the proposal is to be legislated that the law should be prospective only.
He intends to lobby the government for the removal of the retrospective part of the proposed legislative through the various industry associations and their members, and contacting local members if necessary.
This proposal, if legislated, he said, will be particularly adverse for small business owners who do not contribute super throughout their lives and fall outside the CGT small business concessions in div 152 of the ITAA 1997.
“Many small business owners treat their business as a ‘de facto’ superannuation savings vehicle as they generally do not have enough cash to contribute to superannuation during the period that they need to build and ensure their business will hopefully survive and succeed,” said Mr Butler.
It will also limit the ability of business owners to utilise their SMSFs to acquire their business premises.
“This lifetime cap will adversely affect small business, farmers and others that wish to invest in real estate with many properties now in capital cities valued far in excess of $1 million,” he said.
He also argued that the retrospective part of the law will also been a lot more work for the ATO.
“People don’t have good records themselves, so what they’ll need to do is write to the ATO, and say 'ATO, please give me a print-off of all my contributions'.
“Everyone will want a print-off of their non-concessional contributions, so that they know what’s on their slate.”
Given that SMSF trustees already make mistakes with non-concessional contributions under the three-year $540,000 cap, Mr Butler said acquiring documentation for the nine-year period will be even more vital.
“The only sure-fire way of getting that is going to the ATO and saying ‘well, give me a print-out ATO’. So this is actually a new system the ATO will have to develop, and develop it very quickly because this is law, as it applies from the other night,” said Mr Butler.
He also argued that the proposed rules will stem the flow of foreign money into Australia.
Mr Butler said it is already difficult for people entering Australia to bring money sitting in overseas funds into the Australian system under the three-year $540,000 cap, and that it will be impossible under the budget proposal.
“That actually dries jobs, and dries the economy. I think it’s good to have the money in Australia, invested in Australia or invested in entities in Australia,” he said.
“One would think that the Australian government would be there welcoming the money coming in.”
He also noted that if the budget proposal is legislated, it will “be more attractive for Australians to invest in overseas managed investments, than it is in their Australian super”.
“We’re going to have more people investing outside of super.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 08:20Data feeds unreliable for new reporting, says mid-tierBy Miranda Brownlee
- 08:00Tax component confusion spurs potential tax liabilitiesBy Miranda Brownlee
- 08:00Contributions triple in June quarter, survey showsBy Staff Reporter
- 17 Aug 2017Industry questions ATO’s capacity for new reportingBy Miranda Brownlee
- 17 Aug 2017Qld succession law changes tipped to impact SMSFsBy Miranda Brownlee
- 16 Aug 2017Contribution limits restricting future balances, warns mid-tierBy Staff Reporter
- view all
- Data feeds unreliable for new reporting, says mid-tier
With an estimated 20 per cent of SMSFs still encountering errors from data feeds, one mid-tier firm believes the ATO should allow SMSF pract...read more
- Tax component confusion spurs potential tax liabilities
A lack of understanding around taxable and non-taxable components in super funds could be exposing SMSF clients to unnecessary tax liabiliti...read more
- Contributions triple in June quarter, survey shows
The average contribution amount from SMSF trustees tripled for the June 2017 quarter, with super members looking to maximise their contribut...read more
- Industry questions ATO’s capacity for new reporting
With events-based reporting set to generate huge amounts of data, concerns have been raised about whether the ATO’s systems will be able t...read more
- view all