Political back-and-forth about superannuation tax has been widely publicised in the media for months, and it’s scaring clients so much they’re threatening to take their money out of SMSFs.
The Australian SMSF Members Association (ASMA) has announced that it will be conducting a survey to gauge the feeling of SMSF members, but initial research has already indicated some clear trends.
“In our initial research, SMSF members indicated that they would react to increased taxes on SMSFs by reducing their voluntary contributions to SMSF, with many also telling us that they would totally withdraw their savings from their SMSF immediately upon retirement,” said Anna Carrabs, director of ASMA.
She doesn’t know where clients will put their money, but presumes it will be to ‘cover holes’ they’ve got elsewhere. “Surely there’s better ways of dealing with it rather than saying they’ll pull it out; we need to understand what the policy is and why they believe they need to take it out.”
AFA CEO Brad Fox is worried that the voluntary participation in superannuation will disappear completely and it will become a compulsory system, which could see contribution rise to 20-25% of earnings. He says clients have been taking lump sums out from super and investing it as normal money, simply because “they at least knew they had control of it”.
Carrabs says it is unfair of the Government to target SMSF clients because they hold the view that they are ‘wealthy’.
“The people have put it there as their after tax savings, most of it hasn’t got there because there’s been concessional treatment, they’ve actually saved up their money.” She also questions why they should be taxed on it again.
“All these people have built this up under a system that was absolutely legal; to change the rules mid-stream for them is extremely unfair.”
She's calling on the Government to provide the research they have that tells them that SMSF is just for the wealthy. “The Australian SMSF sector is commonly perceived as being for the wealthy, but our research shows this is not the case,” says Carrabs. “Our members typically are ordinary, middle-class Australians who are proud to be providing for their own retirement.”
Peter Townsend from Townsend Business and Corporate Lawyers has also suggested that the concessional limit of $25,000 and non-concessional limit of $15,000 could be prejudicing SMSFs over industry funds.
“Is this prejudicing people with small businesses using an SMSF over wage earners using a public offer fund and whose contributions are indexed via the market increase in their salaries and the steadily increasing SGC?” asked Townsend.
“If these figures were indexed, for this year they’d be almost $28,000 and $167,000 respectively - $20K more into super than is currently allowed.”
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