‘An almighty mess’: $5 million cap to further complicate system
Adopting a $5 million limit on the amount that can be held in superannuation is likely to add further complexity to the system and create new issues, says one of the major accounting bodies.
Speaking at a recent CA ANZ SMSF conference, Chartered Accountants Australia and New Zealand (CA ANZ) superannuation and financial services leader Tony Negline noted there has recently been a lot of publicity around a proposal to limit the amount that can be held in super to $5 million.
The proposal has been raised by superannuation industry bodies such as ASFA that believe the tax concessions available in super for the 11,000 members with balances over $5 million should be limited.
Mr Negline said that if the government does choose to proceed with this proposal, there will be a number of issues to be worked through.
“What is it going to be called? The total total super balance or the bigger total super balance or some other mythical [term]?” Mr Negline questioned.
While Mr Negline acknowledged there are a small number of very large superannuation balances in the system, the ATO likely conducts thorough compliance checks on these funds to make sure they comply from a regulatory perspective.
He also noted that the reason why many of these large funds exist is due to the policies that were around in the lead up to May 2006 when the government made significantly regulatory changes to superannuation.
“You could say that the law wasn’t perhaps as good as it could have been then, but now everyone wants to try and punish them for taking advantage of a particular situation that existed at that particular time,” he said.
Mr Negline questioned whether these members will be able to add more into super in situations where there has been negative fluctuations in the market.
“If I have say $5.1 million in my super account and I all of a sudden find that through market fluctuations that it’s now down to $4.9 million, can I then make contributions?” he stated.
“Let’s hope this [proposal] doesn’t come in because it’s going to be an almighty mess.”
Assistant Treasurer Stephen Jones said that Labor is unlikely to look at the issue in the Federal Budget next week but hasn’t ruled out addressing some of the distortions in the system at a later point in time.
“We’re looking at all of the issues in superannuation and across the board and seeing ... where we’ve got distortions in the system or not. I think we need to look at superannuation as a whole,” he stated.
“I’m going to approach it from this point of view: the objective of superannuation is to provide for retirement income. If you’ve got massive retirement balances in a superannuation fund, it’s pretty hard to argue that that’s for retirement income. It might be, you know, cleverly managing your superannuation affairs. But it would be hard to argue that that’s for retirement income.”
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.