Private super in frame for tax hit by: David Crowe, National affairs editor From: The Australian February 14, 2013 12:00AM TREASURY officials are sharpening their focus on the $460 billion held in self-managed superannuation funds as the Gillard government searches for ways to recoup tax revenue to pay for disability services and school reforms. The fast-growing sector is seen as a prime target for higher taxes as Labor examines ways to improve "fairness and equity" in the concessions on retirement savings. Talk of reform triggered warnings from the industry last night that the tax breaks available to self-managed super funds were no different from those already being used by everyday funds commonly used by millions of workers. SMSF Professionals Association of Australia chief executive Andrea Slattery issued a call to arms yesterday to 1500 delegates at the association's annual conference, telling members to press their case against further federal government changes to superannuation. Ms Slattery described the government's signals about reform as being "driven by short-term political pressures". Superannuation Minister Bill Shorten has expressed concern at the sustainability of the existing rules, given the $32bn in tax breaks on super, with the biggest benefits going to those on the highest incomes and those with the biggest fund balances. Industry figures suggest there are about 107,000 SMSFs with more than $1 million in assets, a benchmark that could be used to ensure any changes in the May budget apply to the wealthiest Australians rather than ordinary workers. Critics of self-managed funds believe they use the capital gains tax exemptions more aggressively than others because they usually have only one or two members who can move quickly to buy investment properties, while big funds hold large property portfolios over longer terms with benefits shared by hundreds of thousands of members. The Australian has been told that the rapid growth in the use of tax breaks by the SMSF sector including capital gains tax exemptions on the sale or transfer or property are under the spotlight as Treasury prepares the revenue options for government ministers. The Australian Taxation Office has warned of a significant rise in tax losses in the sector and governments officials are anxious over the potential for the sector's strong growth to undermine future tax revenue. "That's where all the money's gone," said one observer of the rise of the self-managed funds. Unlike retail and not-for-profit industry funds in which members delegate others to manage their money, SMSFs are mostly managed by their members with the help of accountants or other advisers. Figures for last month show there was $281 billion held in industry funds, $387bn in retail funds and $460bn in funds with fewer than five members, the SMSF sector. There were almost 492,000 of these funds as at last September, according to the Association of Superannuation Funds of Australia. Treasury began looking closely at ways to scale back tax breaks for SMSFs during the second half of last year but the government chose not to go ahead with cuts in the mid-year economic and fiscal outlook in October. Changes remain on the agenda, however, as the government seeks "structural savings" in the May budget to fund the National Disability Insurance Scheme and a response to the Gonski review of school funding. Combined, the two reforms could cost almost $15bn a year when fully in place. One area of focus is the way in which properties and other assets can be transferred into an SMSF to take advantage of an exemption on capital gains tax when a fund member reaches retirement age. Delaying the sale of an asset until the member reaches that stage, when the fund begins paying a pension, cuts the tax rate on the capital gain to zero. "They're desperately trying to find a way to tax that because it's about estate planning, not retirement income," said one person familiar with some of Treasury's work. Two other sources said it was on the agenda but there were no reliable guides to the potential savings. One said it could be several billion dollars given the scale of the SMSF sector. ATO assistant commissioner Stuart Forsyth used a speech last November to caution the SMSF sector about the "compliance focus" of tax officials looking at the sector, adding that the large number of funds in the pension phase had "definitely caught our attention". "The growing number of SMSFs underlines the need for the trustees running these funds to understand their responsibilities and obligations," Mr Forsyth said. Talk of an "unfair advantage" in the sector has infuriated the SPAA, which argues that the tax laws applying to their funds are the same as the rules for others. Ms Slattery said many retail funds and others took the same approach to capital gains on assets. "There is no difference between the SMSFs and the other funds in the way the assets are managed," she said. The industry group also has warned against any government bid to shake up the sector, citing research released this week suggesting that tax changes would undermine confidence in super and lead to a change in behaviour to put savings elsewhere. Government sources cautioned that while options might be considered by Treasury there were no decisions by government. Financial Services Council chief executive John Brogden, who represents retail funds such as AMP and BT, stepped up his warnings against a tax hit on super as he left Canberra after an industry meeting with the Coalition. "We have to remain vigilant and we are sending a very strong message that super has to be left alone," Mr Brogden said. "I'm concerned the government will use super to fund the National Disability Insurance Scheme and the Gonski plan for school funding. While that sounds good, there will always be a good cause that super can fund with a higher tax. "But there is a major risk of undermining super by using it to fund short-term objectives." Opposition Treasury spokesman Joe Hockey and superannuation spokesman Mathias Cormann used a meeting with industry leaders yesterday to vow there would be no "unexpected detrimental changes" to super if they gain government later this year. Those at the meeting included Mr Brogden as well as representatives from Industry Super Network, the Association of Superannuation Funds of Australia and the Financial Planning Association of Australia. Additional reporting: Glenda Korporaal
And I just started taking Super seriously! I was looking at investment properties, or estate planning or whatever it is being called now. Never mind, I guess there is always silver...
Its sch hypocrisy, those of us born after 1965 must take care of our own retirements and now they are going to tax us additionally for the privilige. The NDIS is a pipedream, a nice idea but not fundable in this day and age when the goverment is so large and they wont make cuts where they are really needed.
It's all being setup so you retire with nothing of any substance. They'll eventually rape and pillage SMSF's. Before that happens I'm looking at moving elsewhere, and taking my super with me.
Unfortunately you can't take your super mate. If you leave Australia you also cannot maintain a SMSF, it would need to be transferred into a Super Fund until you retire!
Can Swan fail any more than he has already? Is there an event horizon for failure that nothing can fail even more past a certain point? Swan makes Shorten look smart, and considering that every time Shorten opens his mouth the national IQ average drops 3 points that's saying something. Come on NR, where are you? Go get 'em fella!
My understanding here (correct me if I am wrong) ... if you give up your aust citizenship and back to your original country for good, then you can claim your super. bear in mind, you will be taxed at a higher rate. I know this fact as couple of my mates did.
I have been advised if you become a non-resident for taxation purposes i.e. lodge a final tax return, your SMSF must be wound up. I am not aware of the rules if you renounce your citizenship. For someone with only one nationality you would'nt be able to give that up until you became a citizen of another country I would presume? http://www.citizenship.gov.au/current/give_up/ additionally http://www.superguide.com.au/access...per-early/12-legal-reasons-to-cash-your-super
Bloodsuckers. It's real peoples' money - it's not yours for taking for any other purpose. If you can't fund the NDIS then you have a spending problem in the rest of government. You can't just change the rules so substantially. This is appalling
There's plenty of reasons you can cash-out of super early: http://www.superguide.com.au/access...per-early/12-legal-reasons-to-cash-your-super Some of them require the approval of trustees
Thanks HIho for a very informative post..I learnt a lot about Super that I didn't know. Regards Errol 43
Well no surprises there, we are the next step in the chain as far as the next big group of earners (Tax payers) It is in the countries best interest after all (insert sarcastic smiley) to figure out a way to bleed the next generation as well.
The skiing fiesta http://www.prosper.org.au/2013/02/08/smsf-speculatively-manipulated-skiing-fiesta/ As if negative gearing wasn't enough of a boomer subsidy (totaling $33 billion in write offs since 1993), young people will be wondering if there is a place on this earth for them once the extent of SMSF subsidies mounts. Will the electorate connect the dots between the decade long housing crisis and another tax handout to those who already own property, the tax free status of residential (and commercial) property investment for SMSF's in their pension phase? What if in Aust we had home mortgage interest expense for principal place of residence tax deductible (like in USA) against working peoples income, and got rid of ng and cgt welfare for the rich. Instead those with aspirations of buying a home with the associated stability, to start a family must need to sudsidise those with multiple properties first. This is the senate petition smart young people should be working on. This is the senate petition older people who don't believe in devouring the young should be working on.
This frustrates me. Not taking tax or having a lower rate of tax is not a subsidy! It's got a lower tax rate as an incentive to save!
Hi Hiho, What you are saying, if one day I been relocated to so other countries (work overseas), I can't hold my SMSF account? How about I still doing the annual report but just without a contribution, will that be okay? Froggy
Hi Froggy, You are either an Australian resident for taxation purposes or you are not. From what I've been advised and please seek your own advice for your particular purpose, if you leave Australia and become a non-resident for taxation purposes you cannot maintain a SMSF. However if you maintain your residency for taxation purposes you will be able to keep your SMSF. But the catch is you will have to file an income tax return also, and if you are paid OS you will have to declare your income to the ATO and they will then assess the tax you have paid versus the tax you would have paid here. There is then an equivalization amount applied depending on the difference after eligible deductions. You can thank Kevin Rudd for this http://www.grantthornton.com.au/Publications/Newsletters/ta_0909a.asp as there used to be a the 90 day rule, where if you worked OS for more than 90 days you were exempt from Australian taxation. There are many Aussie expats who used to work offshore who no longer bother as there is little to no financial advantage any longer. Some expats have simply not returned and filed a final tax return. More Reading http://www.ato.gov.au/content/00145592.htm
If you are overseas for more than 2 years your SMSF either with a corporate trustee or individual or benificiary is deemed to be noncompliant......correct me if that is incorrect but that was my understanding when i looked at working offshore again a few years ago Kind Regards non recouse
And these are the same people who we want to take an increased interest in gold (beginning with "our" gold reserves overseas)? The last thing I would want is for the govt to think they can make money out of getting access to other stores of private wealth (money under the mattress plus stacks buried in backyards or on boats) beginning with getting their hands on the public wealth (a.k.a. gold reserves in London). My apologies for taking the thread a little off-topic but it is on-topic in terms of public trust in the Government doing the right thing by all the citizens who it is meant to represent. Anyone would be insane to trust a desperate underresourced government with any form of wealth (SMSF or other)
