The defeated proposals created unintended consequences, says Darren Kingdon, spokesman for Small Independent Superannuation Funds Association (SISFA).

‘These consequences included unwarranted restrictions imposed on in-specie benefit payments, which in effect may have impeded or prevented the winding up of an SMSF,’ he says.

SISFA is the only SMSF industry body representing administrators, accountants, auditors, lawyers, actuaries and advisers.

Broadly, the original proposal broadly was to ban:

• In-specie (in kind) contributions – assets going in to SMSFs from related parties; and
• In-specie payments – assets sold or paid out to related parties.

‘Previously, the Government considered that contributing listed shares to superannuation funds (referred to as in-specie contributions) resulted in tax and contribution cap date manipulation to illegally benefit the SMSF or the related party, despite there being no evidence to this effect,’ he says.

 ‘The matter was already the subject of various ATO rulings & publications,’ he says, and ‘fortunately commonsense has prevailed on both counts’.

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“If this goes ahead, it’s clearly a disaster and really is just the surcharge reincarnated. Although it is proposed to only apply to high income earners, the reality is that the costs of administering such a system will be borne by all super fund members, regardless of their balance or income.  The damage done to the perception of superannuation by such a measure is much higher than the tax actually collected. 

“Will it only be a matter of time before people earning less than $300,000 pa will also have a higher contributions tax? 

“This Government and future governments have to get over seeing superannuation and voluntary contributions as some cash cow that can be raided when other revenue channels are reduced. People have to believe that super is worthwhile and have confidence in the system. 

“And, on top of new rules, we are still awaiting a final announcement on the structure for over-50’s contributions from 1 July 2012,” said Michael Lorimer, Chair of SISFA.

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“It is a practical outcome for trustees and allows for greater flexibility in buying property where the opportunity to add value can enhance the retirement outcome for fund members.

“I have found that many trustees wanting a residential investment have had to primarily consider new, ‘off the plan’ residential developments where the need for improvements was not an issue. This practical change will allow for consideration of older properties that can be sensibly upgraded,” said Michael Lorimer, Chair of SISFA.

Industry concerns that trustees might overcapitalise properties under the new rules is not seen as a major issue or borne out by recent investment history.

“When SMSFs started to grow in numbers and the first round of SMSF lending was allowed, we heard howls that trustees would go broke and lose money because they weren’t in proper managed funds. That has simply not been the case and we have seen in ATO figures that SMSF portfolios are similar to standard balanced portfolios. They have not become over geared property portfolios and we can’t see that this practical change in treating property investments will cause any mayhem,” said Mr Lorimer.

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