Extra tax slug for superannuation funds
AN extra $200 billion worth of assets in self-managed superannuation funds are now being taxed following changes to super rules by the federal government.
And the changes are expected to earn about $1.5 billion a year in tax for the government, according to a new analysis.
A report by administration software company Class SMSF says the new $1.6 million cap on tax-free pension balances has forced people to transfer $200 billion back to taxable accumulation accounts.
Class says that since the new rules were put in place on July 1 last year, estimated balances in taxable accounts held by SMSFs have increased from $222 billion to $422 billion.
Investment earnings from accumulation accounts are taxed at 15 per cent, compared with nil tax on investment earnings in pension accounts.
The government announced the $1.6 million pension cap and changes to transition to retirement tax benefits in its 2016 Budget.
Class chief Kevin Bungard said the rule changes meant almost 25 per cent of SMSF assets had lost their tax-free status.
Despite the higher tax slug, most SMSF members kept their money in the system, Mr Bungard said.
“People had the opportunity to take that money out of the superannuation system, such as (through) a lump sum or withdrawal, but they have chosen to keep it within super and have moved it back in to accumulation,” he said.
Superannuation specialist DBA Lawyers counsel Bryce Figot said there had been “an absolute frenzy” of transfers in the lead up to the new law.
“The government is probably quite happy because the ATO is collecting a lot more tax, which is essentially what the government wanted to happen,” Mr Figot said.
“Previously we have had clients with $10 million, $20 million in pensions and they wouldn’t have paid tax on any of that,” he said.
Originally published as Tax slug for self-managed super
By Karina Barrymore
The Daily Telegraph
3 August 2018