Trustees and members of self-managed superannuation funds (SMSFs) should expect the regulatory framework of the investment structure to be under continual reform, according to HLB Mann Judd superannuation partner, Mitchell Markwick.
With the broader superannuation system now worth more than $3.3 trillion, Mr Markwick said current and future governments will continue to tinker with the system, with SMSF members needing to be better informed than ever.
“Changes to the system should not be unexpected. Given the median age of all an SMSF members is close to 62 years old, certainty in transitioning from one phase of life into another would be welcomed by many. But unfortunately, it doesn’t seem possible.
“As EOFY approaches, it should serve as a reminder to SMSF members that they need to be across the framework which governs their hard-earned retirement savings.
“Members should use the lead up to 30 June to educate themselves and plan accordingly. They should be making the most of current superannuation rules, including those pertaining to contribution caps and indexation of caps, transfer balance and total super balance caps,” he said.
Mr Markwick said the recent proposal by the Federal Government to introduce a new cap which could see earnings on super balances above $3 million taxed at an additional 15 per cent to a total concessional rate of 30 per cent, rather than 15 per cent, has raised the ire of many.
“While some argue the intention is to try to start limiting the size of super balances in order to raise tax revenue, this particular proposal in its current form has a number of fundamental flaws – specifically, the taxation of the movement in the market value (or the unrealised gain) of an asset.
“Once that asset is sold, people will still be required to pay capital gains tax on the sale once actually sold, therefore triggering a double taxation arrangement, thereby warranting further consultation,” he said.
Despite the constant change within the SMSF sector, Mr Markwick said members and trustees should adhere to the current rules – and not those yet to be regulated or legislated.
“While there is always likely to be draft legislation proposed for future financial years, members need to focus and ensure they are administrating a fund based on the current rules.
“As part of this, estate planning plays a critical role in growing superannuation balances, and yet, its importance is widely underestimated.
“Estate planning is an integral facet of succession planning. SMSF members need to ensure they have the appropriate documentation in place, including a current and up to date trust deed (for SMSFs), a valid binding death nomination (if appropriate), Power of Attorney, enduring guardianship, and a valid Will (possibly testamentary, if relevant). In the event an SMSF member becomes incapacitated or passes away, this documentation will ensure the smooth and ongoing operation of an SMSF,” he said.
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