This Bill’s process is inching forward but there is still much that is required before it becomes law. The SMSF Association sponsored amendment – indexing the $3m cap – has been voted down in the House of Representatives. This is not surprising as Labor and the Greens hold a majority. There were a couple of other important amendments but these have been voted down as well. This is just a prelude to the important vote. Once this measure passes through the House of Representatives it will move to the Senate. This is where it gets interesting as Labor and the Greens do not have the numbers, without the support of independents, to get this legislation over the line. The SMSF Association’s Peter Burgess has spent considerable time in Canberra ensuring that the independents are given every opportunity to consider the ramifications of this Bill. Other associations, such as the CAANZ, have also been active. The result still hangs in the balance and the government will likely attempt to negotiate individual deals to win the necessary votes.

Comments by the assistant treasurer, Stephen Jones, in supporting the government’s position are disturbing. “For a matter of context, the average balance on retirement today is somewhere between $150,000 and $200,000 – that’s a long way south of the $3 million threshold that has been set in the bill before the house, and it’s for that reason that we’re confident that less than 0.5 per cent of all fund members will be caught by the new provision.” This completely ignores the reason for this particular amendment. There is no doubt that the number of individuals currently affected will be relatively small. Without indexation, a 3.5% inflation rate would ensure that a 30-year-old now would be subjected to the tax if they had $1.24m, at today’s value, at age 60. To leave indexation in the hands of the government of the day has proved problematic in so many areas where indexation should be the norm. The government is clearly comfortable in adding one more. Do they feel that a retirement balance of $200,000 is reasonable and $1.24m excessive? Probably. Or are they simply using forward revenue projections to pad the budget? – Interestingly this has already been included in forward revenue projections in the expectation that this Bill will pass. Watch this space.