SMSF experts advise against hasty reactions to potential super tax changes

By Newsdesk

February 26 2024
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As the Australian Government proposes a new tax measure on superannuation earnings for balances exceeding $3 million, experts from the self-managed super funds (SMSF) sector are urging members not to make precipitate decisions.

SMSF experts advise against hasty reactions to potential super tax changes

Speaking at the 2024 SMSF Association National Conference in Brisbane, Heffron Consulting Managing Director Meg Heffron emphasized the importance of cautious deliberation before taking any action in response to this legislative proposal.

Heffron highlighted that while the potential tax changes are not ideal, they should not prompt hasty withdrawals from superannuation accounts. "Although our impacted clients would prefer this new tax would disappear, it’s not a disaster and clients shouldn’t remove excess amounts from super without careful consideration," she stated. She encouraged SMSF members to consider the broader implications of withdrawing funds, including potential impacts on tax exemptions for pension income and the tax implications for death benefits.

During her address, Heffron also noted the changing landscape of superannuation savings, mentioning that achieving a balance exceeding $3 million is becoming increasingly challenging. She pointed out that a significant portion of their client base, 43 percent are over 65 years old with balances under $3 million, indicating they are beyond their peak savings years.

Peter Burgess, CEO of the SMSF Association, offered a legislative update during his address at the conference, projecting that the $3 million cap could become legislation by June 30 of this year. Burgess shared concerns regarding aspects of the Government's proposal, such as the lack of indexation for the cap and how unrealised capital gains are taxed. "The only questions that remain is whether the Government’s proposal not to index the cap and to tax unrealised capital gains will survive the scrutiny of the Senate cross-bench," he said.

Burgess also proposed alternatives that could simplify and improve upon the current proposal, suggesting a taxation system that more accurately reflects taxable earnings and reduces volatility in tax liabilities year over year. He emphasized the benefits of simplifying the calculation of earnings, which could lead to smoother and less erratic tax liabilities for SMSF members.

The proposed super tax changes have sparked significant debate within the superannuation sector, with industry leaders advocating for a measured and informed approach to any potential legislative adjustments.

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