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SMSF reserves expected to form part of threshold policy design

By sreporter
March 13 2023
1 minute read
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SMSFs planning to circumvent the $3 million threshold through the use of reserves have been warned that Labor will likely be addressed in the design of the regime, a technical expert warns.

Earlier this month, the government released a fact sheet explaining how it plans to implement the extra 15 per cent earnings tax on balances above $3 million threshold.

Speaking in a webinar last week, Smarter SMSF chief executive Aaron Dunn said while the fact sheet provides some details about how the measure will operate, there are still a range of unknowns with this policy.


One of these areas is how reserves will be treated under this policy, he said.

Mr Dunn said he has already heard some discussion around the use of reserves following the announcement of the $3 million threshold.

“The ATO has already previously issued a Regulator’s Bulletin on the use of reserves and what its concerns are,” Mr Dunn cautioned.

The ATO made it clear in SMSFRB 2018/1 that reserves should only be used for specific and legitimate purposes. The Regulator’s Bulletin also states that the ATO will scrutinise any arrangements that may be used to reduce a member’s balance in order to circumvent superannuation reforms.

However, Mr Dunn said an earlier policy proposed by Labor back in 2015 also sheds light on how the government may address the issue of reserves in its policy design.

Under its Fairer Super Plan proposals released in 2015, Labor planned to reform the tax exemption for earnings on superannuation balances that exceeded $1.5 million.

With that policy, Labor discussed implementing a proportionate distribution of reserves back to members within SMSFs.

“These [previous policies] may offer an understanding of where some of these things may go because a lot of this stuff isn’t new,” said Mr Dunn. 

“These are things that Treasury really pull off the shelf of what they've looked at in the past and blow the dust off it and kind of reconfigure it.

“So the concept that they've got here, around this $3 million threshold, they looked at this in the context of fund earnings previously, as part of a previous proposal.”

Mr Dunn said he expects Labor may revisit this concept of the proportionate attribution of reserves within SMSFs back to individuals with its $3 million threshold.

“This would prevent individuals trying to attribute earnings to reserve to try and avoid having to pay the tax bill,” he said.


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