Robyn Jacobson, senior advocate at The Tax Institute, said high cost of living has Australians concerned about their retirement savings, and lagging superannuation legislation is no help.
“The fiscal settings look to remain uncertain leading up to the May federal election yet are crucial to ensuring Australia can secure their retirement lifestyle,” Jacobson said.
“The superannuation system in Australia must continue to reflect the developing circumstances of Australians and change to accommodate those needs. Clarity is needed on a range of superannuation measures.”
One of those measures is the Division 296 tax, which Jacobson said is “poorly designed and sets a dangerous precedent by including taxing unrealised gains”.
“The Tax Institute has made multiple submissions to the government with other preferable alternatives to the proposed approach, including to index the threshold,” she said.
“This proposed measure in its original form continues to hang over the heads of Australian taxpayers, without certainty of how it will affect them and their retirement. Fundamental changes are needed to better ensure equitable outcomes before further progress can be made.”
One of the other major concerns the Tax Institute has is the lack of movement on promised changes to the regulations regarding residency requirements for self-managed superannuation funds.
Jacobson explained that as part of the 2021–22 federal budget, the government proposed to relax residency requirements for SMSFs by extending the central management and control test safe harbour from two to five years and removing the active member test for both SMSFs and APRA-regulated funds.
“These plans were deferred as part of the October federal budget 2022–23 and no progress has been made since then,” she said.
“Extending the central management and control test safe harbour to five years would allow SMSF members to continue contributing to their own funds even when overseas. Abolishing the active member test would also level the playing field to align the treatment of SMSFs with APRA-regulated funds.”
Additionally, the institute has concerns over the Payday Super regime requiring employers to pay their employees’ superannuation at the same time as salaries and wages, which is slated to begin on 1 July 2026.
Exposure drafts of the enabling legislation were released only a week ago, and already there have been concerns raised about unintended consequences.
“We support the policy underpinning the measure and coinciding overdue reforms to the penalty provisions,” Jacobson said.
“We encourage continuing consultation by government, but time has run out for digital service providers to design software with the certainty of a legislated framework before the May election. The proposed start date of 1 July 2026 will likely need to be deferred so that employers have time to meet their proposed new obligations.”
She added that employers and their tax agents, as well as superannuation funds and other intermediaries essential to the payroll cycle, require certainty to prepare for and implement the significant changes associated with Payday Super.
In June each year many taxpayers miss out on getting their contributions into their superannuation account. The funds warn their members to not leave it to the last moment, so they are not disappointed.
How will this fit with payday super? How will funds fare when they cannot manage a once-a-year deluge of contributions, to then suffer a regular 1200% increase in volume: 4 times a year to 52 times a year?
And the banking system generally – if there are any outages (power or internet problems are common for our remote citizens and the government makes NO STP allowances for this), funds may not be transferred to meet the regulations.
How can legislation penalise the taxpayer when there are issues they have no control over which cause a default?
As a minimum the time limit to have the funds deposited should increase and there needs to be a safety net for reasons outside the control of the taxpayer. Bear in mind the taxpayer has no access to staff superannuation member accounts, so they may not even know there is a problem until the ATO come knocking!
The government would have been better off staging these changes. Make it monthly to start with and graduate the changes.