SMSF Association Media Release
The SMSF Association is urging the Federal Government to address two critical issues – legacy pensions and extending the temporary absence rule for non-residents – in its 2022-23 Federal Budget.
In its Budget submission, the Association CEO John Maroney says: “We would like to highlight several key measures announced in Budget 2021-22 that remain outstanding and are significant for the SMSF sector.
“They relate to the two-year amnesty for legacy pensions conversions and the removal of the active member test and the extension of the temporary absence rule for non-residents from two to five years. Both measures were intended to apply from 1 July 2022.
“These measures are important reforms for the SMSF sector, and we ask the Government and Treasury to undertake the necessary industry consultation and progress the required legislation as a priority.”
Maroney says the overarching themes of this submission are simplification, review, and the modernisation of the sector. Within this framework, eight issues have been identified where this can be achieved. They are:
- Simplifying Transfer Balance Caps. The indexation of the TBC on 1 July 2021 has added more complexity. The system has shifted from having a single cap to individual caps ranging from $1.6 to $1.7 million, causing confusion and increased costs. A single cap will benefit all stakeholders.
- Reduce the number of Total Super Balance (TSB) thresholds. The introduction of multiple TSB thresholds has added to super’s complexity, so reducing their number would be an important reform.
- Rewording or modifying the non-arm’s length income (NALI) provisions with new principles. The introduction of the non-arm’s length expenditure (NALE) rules from 1 July 2018 will have far-reaching and unjustifiable consequences for superannuation. The rules should be re-worded or re-drafted to require the Commissioner of Taxation to decide that the section applies and to allow trustees to rectify transactions in certain situations.
- Removing the cancellation fee that applies to approved SMSF auditors. This will provide equitable treatment with registered company auditors and removes a significant financial barrier to exit.
- Removing ambiguity regarding the application of the design and distribution obligations and target market determinations to SMSFs. These provisions should not apply to establishing an SMSF, adding a new member, or when starting a pension.
- Indexing key small business capital gains tax concession thresholds. Some of these thresholds have not been reviewed or updated for a considerable period.
- Protecting an individual’s unused concessional contributions cap: Under this measure the Commissioner of Taxation would be given the necessary powers to apply such amounts to the relevant year of income.
- Providing practical regulatory and compliance relief for minor breaches of the non-geared unit trust rules. Currently remediation is strictly limited to the winding up of the unit trust that can be costly and have a severe impact on the fund. Temporary measures adopted by the Commissioner of Taxation due to Covid-19 have demonstrated that such a framework, with the right setting, can function appropriately.
To read the SMSF Association’s 2022-23 Federal Budget submission, please click here.