Post-election, the $750 billion self-managed superannuation industry is probably relieved that no further shake up of the industry is being planned.
Over the last couple of years, the SMSF industry has tried to implement and administer the historic number of changes that came about from the Simpler Super Reforms in 2016. There is no doubt they are welcoming a period of relative stability.
Labor’s proposed abolition of franking credit refunds was definitely a point of contention between both parties. The core of the debate was the differing opinions on how the tax policy around franking credits should be dealt with. Both opinions held merit.
Labor believed it was an erosion of the corporate tax base whilst the Coalition argued it was a reinstatement of the correct tax position of the receiving taxpayer. Due to the tax position of many self-funded retirees and SMSF’s, the impact of this measure had significant impact.
Prime Minister Scott Morrison has guaranteed “no new taxes on Superannuation”. Whilst this guarantee has been made, the Coalition has still announced a few minor changes to superannuation.
Some of these changes to SMSFs include:
- Changes to the ‘work test’ that will allow individuals aged 65 and 66 to make voluntary superannuation contributions. Currently only individuals over the age of 65 can make voluntary contributions if they have met the ‘work test’. This test requires ‘gainful employment’ for a minimum of 40 hours in a 30 day period before the contribution can be made;
- Extending the ‘bring forward’ rules to those aged 65 and 66. As the rule currently stands, a person needs to be under the age of 65 to benefit from the ‘bring forward’ rule so as to make three years’ worth of non-concessional contributions;
- Increasing the age limit for spouse contributions from 69 to 74 years;
- Reintroducing the measure of increasing the SMSF member limit from 4 to 6, despite the removal of the measure shortly before Parliament was dissolved;
- Administrative changes in relation to how the SMSF calculates exempt current pension income. This includes a eliminating a frequently debated requirement for SMSF’s to obtain an actuarial certificate when the fund is 100 percent in pension mode.
- Continuing to allow SMSFs to benefit from limited recourse borrowing arrangements.
As to when these proposed measures are introduced will be a matter of time, however what is critical, is that any further changes are assessed against the overall objective of superannuation. This main objective, being “to provide income in retirement to substitute or supplement the Age Pension”. To regain trust and stability in the industry, a long term view needs to be taken. This is further substantiated from the recent findings coming out of the Financial Services Royal Commission, Productivity Commission and APRA reports.
After many years of political turmoil in Australia and the desire of Australians for stable leadership, let’s hope that the Morrison led Coalition party will deliver this much needed requirement. It is a time to ‘reset’.