The SMSF Retirement Insights report analysed data from more than 65,000 SMSFs in 2015 and found the $1.6 million cap would reduce the spending capacity of a $2.5 million balance by around $4000 a year, from $177,000 to $173,000.
This estimation was calculated on the basis that the income stream was withdrawn at the rate required for achieving income for life at 80 per cent certainty.
The estimates show it is still worthwhile retaining the money in super. However, with scenario analysis in the report indicating that if the same trustee was to remove the excess over the $1.6 million, their income would be reduced by $166,000.
“In that example, we found that it was certainly more beneficial to keep the money in super and be taxed at 15 per cent rather than withdraw to have it taxed at marginal rates,” Accurium senior actuary Doug McBirnie said.
“The impact on the overall sustainable spending level wasn’t huge, perhaps reduced it by 2-3 per cent.”
The SMSFA and Accurium analysis also show that while the government has estimated that only 4 per cent of the Australian population will be affected, it will largely be the SMSF community who would “bear the brunt of government proposed changes”.
“Were the policies in place in 2015, over 48 per cent of the SMSF trustees in Accurium’s database would have been impacted by at least one of the changes,” SMSFA CEO Andrea Slattery said.
Ms Slattery said it is important the government thoroughly reviews the changes as they will have long-term effects.
“We really need to understand the real data now and look at whether there is enough adequacy built into the current budget arrangements,” she said.
“For example, the $25,000 cap is going to affect people’s ability to save, it’s going to affect young people.”
The study found that nearly one in three SMSFs made contributions in excess of $25,000, while 70 per cent of those already have balances in excess of $500,000, meaning they can’t take advantage of the proposed five-year ‘look back’ rule.