Top 5 issues for the SMSF sector

1.?Division 296 Tax – By far and away the most concerning issue that the SMSF sector has faced in several years.? This poorly-designed tax punishes all superannuants who followed the rules and accumulated their wealth in Australia’s (supposedly) world-best retirement savings vehicle.?These hard-working Australians will never be a burden on the Government welfare system, are self-funded retirees, yet are slugged with an inequitable tax riddled with unintended consequences.? To add insult to injury, the design of this measure taxes unrealised capital gains – all because Industry Funds’ archaic systems cannot determine realised gains on an individual member level (something SMSFs can do with ease).

2.??Legacy pension changes – Whilst Division 296 is an abomination, the Government did surprise the sector with a commonsense legislative change that now allows members with non-commutable legacy pensions to cancel those pensions, roll the money back to accumulation, and then either commence a commutable income stream, leave the benefit in accumulation mode, or withdraw the benefit from the super system.

3.??Non-Arm’s Length Expense (NALE) – This was another legislative piece that has been gestating for a long time.? The changes clarify long-standing confusion on general expenses by limiting the income tax payable at 45% for an eligible super fund to twice the difference between the amount that would be expected to be paid for that general NALE, and what was actually incurred for that general NALE.? The total amount taxed at the highest marginal rate for the fund is then capped to an amount equal to the fund’s income minus deductions.

4.??Quality of Advice Review – Another can that has been kicked down the road.? The current system of becoming an Adviser or re-entering the advice space after a hiatus is untenable, so the government’s announcement of a new class of Adviser should, in theory at least, provide much needed accessibility for the millions of Australians that need advice.? However, the role of Accountants to fill the ever-increasing advice void appears to have been overlooked.? We live in hope that future changes in this space reflect commercial reality, rather than the world of career politicians and bureaucrats.

5.??SMSFs surpass $1 trillion in assets – On a positive note, the SMSF sector grew to more than $1 trillion.? The Australian Taxation Office (ATO) September 2024 quarter figures also the number of newly minted SMSFs increased by more than 10,000.? People aged 35 to 44 established 38.5% of funds in the quarter, with the 45 to 54-year-old contingent setting up 33.4% of all new funds.? The key drivers for this surge by younger Australians was due to flexibility, control over investments and the fact this demographic is planning early for their retirement.

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