Govt slammed over proposed changes to segregation method
The proposal by the government to remove the use of the segregation in certain circumstances will unreasonably limit the choices for SMSF trustees and result in additional costs, warns the SMSF Association.
Speaking to SMSF Adviser, SMSF Association head of technical Jordan George said the association believes SMSFs should be able to have the flexibility to be able to how to administer the tax treatment for assets in pension phase, whether it’s segregated or unsegregated
“We don’t think the legislation should impose on how they administer their tax outcomes for their pension income,” said Mr George.
In its submission to Treasury, the SMSF Association said main concern raised during by the consultation was that the requirement to transfer excess assets above $1.6 million into accumulation phase will increase the use of the segregated method and the transfer of assets between pools of assets to avoid tax.
Mr George said this is not evident from the current activities of trustees however.
“There have been numerous opportunities for trustees of SMSFs to “manage” the transfer of assets between accumulation and pension accounts for legitimate reasons to avoid tax for many years, but this has not occurred,” SMSFA said in their submission.
The potential application of the anti-avoidance provisions in Part IVA has effectively policed any unacceptable behaviour and will continue to do so.
The submission said the provisions are unnecessary and “create extra costs for no real reason in deterring the mischief indicated”.
“In addition, they contradict previous moves to reduce the use of specific anti-avoidance provisions and rely more broadly on the principles based general anti-avoidance provision in Part IVA.”
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.