I’m rather concerned that the consultation paper on the proposed new superannuation member equity tax measure does not invite comment on two of its most contentious components – the level of the cap and its lack of indexation.
The paper assumes a $3m unindexed cap and seeks input within that context. Much has been made of the measure affecting only 80k members. That no one is mentioning the 69k of these who have less than $5m is curious given that this measure is being promoted as one of equity and not a simple tax grab. Incidentally, almost all of the unintended negative consequences could be avoided by increasing the cap to $5m.
The paper does, of course, tick the box that requires public consultation. Of those government members that responded to my email on the matter, all said that they would rely on Treasury’s findings. A cynic might suggest that, with the terms of reference provided, Treasury’s findings are already largely known – but I hope I’m wrong.
On the plus side, due to the complications it introduces to the calculation, those limited recourse borrowings now counted as an asset for total super balance purposes – related party loans and loans participated in by members whose benefits are unrestricted non-preserved – are likely to be generally disregarded for the total super balance count. This would indeed be an equity measure as it would remove the mutually contradictory scenario whereby affected members are prevented from making non concessional contributions to liquidate a loan so they can make the non-concessional contributions to do so. Its introduction, promoted as an integrity measure by Treasury, has always seemed to me to be a solution seeking a problem. Let’s hope that Treasury’s findings on the current equity measure show somewhat more insight.
Submissions on the proposed extra tax for high balance members closes on 17th April. Given that the cap proposed is not indexed, it will have a much larger effect than what has been indicated. You can consider the latest information and model variable scenarios at
https://www.smsfalliance.com.au/proposed-excess-member-balance-tax-calculator/
