SMSF Owners’ Alliance executive director Duncan Fairweather said both major parties are approaching the 2 July election with retrospective taxes on superannuation.
The Liberal Party plans to impose a new tax on earnings on balances above $1.6 million and limit non-concessional contributions to $500,000 for life, while Labor wants to impose a new tax on retirement accounts earnings above $75,000.
“There has not been any tax on earnings on super balances held by retirees. Tax-free earnings for retirees have been an established feature of our tax system since income taxes were introduced,” Mr Fairweather said.
“Both the Coalition and Labor plans to impose limits on tax-free earnings in retirement will be retrospective because they will impose a new tax on the earnings on savings that have already been made.”
Mr Fairweather said superannuation is a “contract” between government and taxpayers, with taxpayers agreeing to forego income today in return for tax-free income in retirement, and with the government committing to that promise.
“Based on this contract, people have made life-changing plans for their retirement, including when to stop work, where they will live and the standard of living they expect in their, hopefully, long years in retirement,” he said.
“The contract has now been torn up by both of the major parties. They are reneging on their promise.”
Mr Fairweather said it had long been accepted that tax changes should not apply retrospectively except when they are needed to deal with tax avoidance.
“This convention has now been broken by both of the major parties,” he said.
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Great commentary Duncan. You’re the first person representing a group of SMSF Trustee’s that I’ve seen call these “changes” out for what they are.
It’s disappointing that many of your contemporaries have done nothing other than send out regurgitated Budget papers with little or no real commentary and opinion.
There are 550,000 SMSFs and they need to be heard!
I could not agree more with Mr Fairweather. This cap with no warning and no staging has resulted in clients in unconditional purchase contracts facing penalties because they planned on funding the settlement with NCC which now exceed the $500K lifetime cap. The timing of PCG 2016/5 and the budget announcements have related party LRBAs in a mess. None of these SMSFs were engaging in tax avoidance schemes – they all had carefully considered Investment Strategies adopting the contribution rules. This budget, if legislated, is possibly a source of a class action against the Commonwealth.