The latest SMSF Benchmark Report based on data from Class indicates that the introduction of the $1.6 million transfer balance cap and change to the tax status of TRIS accounts have seen almost a quarter of SMSF assets that were tax-free lose that status.
The Class data indicates that the value of assets in accumulation phase increased by 90 per cent from $222 billion in March 2017 to $422 billion at 30 June 2018.
“The 2016 super reform changes have now been largely completed. The net result is a tectonic shift in assets,” the report said.
Class chief executive Kevin Bungard said the forced shift of assets out of pension phase has had dramatic tax implications for SMSFs.
“Even if we assume a modest return of 5 per cent on assets for the 2018 financial year, we would see an uplift in the tax due on SMSF earnings to $3.2 billion — a whopping $1.5 billion jump from 2017,” the report explained.
The report noted that these tax estimates are based on earnings only.
“The tax outcome of a fund also needs to take into account contribution tax, deductible expenses and rebates including franking credits,” the report said.
Given the impact of the 2016 super reforms on tax, Class said it doesn’t consider the proposed Labor policy to further increase the tax burden on self-funded retirees by reducing imputation credits for SMSFs to be appropriate, especially if it disproportionately impacts SMSFs compared to APRA funds.
“If the proposed changes go through, SMSFs will not only be subject to 15 per cent income tax on a higher portion of their assets, now in accumulation, but they may also lose their tax credits on their pension and accumulation assets,” the report said.
In the lead-up to 30 June, Class found the reforms — and in particular, confusion with pension accounts — were causing major delays to SMSF lodgement.
The “biggest ECPI changes in a decade” are also creating waves in the SMSF community, for which more information can be found here.
Can’t we also say the retirees are the greedy bunch. Why when they retire, their investments and savings all the sudden become tax free. It is the stupid and lazy Howard and Costello that created the entitlement mentality for all the oldies to whinge.
So sad… so greedy
Its hard to balance what is ethical and fair with a stable superannuation system.
It is maybe unfair someone with say $10m has their total super in a tax free cocoon. We should all do the heavy lifting. The disappointing thing is the government does not seem to be good economic managers.
The counter side is we do not like constant changes to the Super system.
Well the reality has finally reared it’s ugly head that all this upheaval and flood of changes aimed at SMSF’s by this Government was one great big cash grab.
Just like the 9.5 billion cash grab inflicted on the banks we see the true colours of a Government with its hand in the till with huge implications for retirees who have planned their retirement plans during working careers only to have the carpet ripped out from under them.
Cry me a retirement river Barry, bugger all retirees are affected by the effective reintroduction of RBLs that never should have been removed in the first place. And my clients with $7, $9, $10, $12 Mill in SMSF don’t mind paying 15% tax over the tax free pension caps. They should have never had a 10yr tax free super holiday.