Almost 25 per cent of the self-managed superannuation fund (SMSF) assets which were tax-free before the 2016 Federal Budget have now lost their status, according to the latest Class SMSF Benchmark Report.
The report, released this week, described the impact of the 2016 Budget changes as “tectonic” with pension assets having been squeezed hard by the dual forces of the changes to the transfer to retirement income streams (TRIS) and the $1.5 million transfer balance cap.
However, the Class research has also revealed the manner in which SMSF trustees have sought to deal with the changes, pointing to the implementation of new strategies.
“… some funds appear to have also adopted new strategies in response to the changes,” it said. “Two of the most notable, an increase in contribution splitting and recontributions, have led to a significant improvement in the gender imbalance in SMSF assets and balances.”
The Class research said that as at June 2018, asset value in accumulation phase was $422 billion – a 90 per cent increase from March 2017.
Commenting on this, Class chief executive, Kevin Bungard said the shift of assets out of pension phase had dramatic tax implications for SMSFs.
“Assuming a modest return on assets for the 2018 financial year, we estimate this shift will result in an increase in the gross tax due on SMSF earnings of nearly 90 per cent from 2017 – a massive impact,” he said.
Bungard said a silver lining of Super Reform change highlighted by the report was that the increased adoption of contribution splitting and recontribution strategies had led to a significant improvement in the gender imbalance in SMSF assets and balances.
By Mike Taylor
2 August 2018