Andrea Slattery

The need for a higher concessional cap and the accurate costing of superannuation taxation concessions are two key issues the SMSF Professionals’ Association of Australia (SPAA) raises in its submission to the Federal Government’s May Budget.

SPAA also wants the Government to explore polices that will assist people with broken work patterns improve the adequacy of their superannuation, as well as expressing its strong opposition to the Government’s decision to abolish the Low Income Superannuation Contribution (LISC).

SPAA CEO Andrea Slattery says: “For SPAA, these are the four significant superannuation issues that the Government needs to address.

“In our opinion the current general concessional contribution cap level of $25,000 and $35,000 for older Australians is too low to facilitate adequate savings for retirement.

“The low concessional contribution cap base, together with the absence of adequate indexation, will deny many thousands of Australians, who typically have a greater financial capacity to save for retirement later in life, the opportunity to do so.

“On superannuation tax concessions, SPAA strongly advocates that its fiscal cost be considered in the context of the three pillar retirement income system to accurately reflect the long-term nature of superannuation.

“SPAA has previously argued that the Treasury tax estimates method of measuring the value of these concessions is biased against them and misinforms the policy debate.

“Although the cost of the concessions has not been a prominent issue with this Government, we still believe that it is important that their cost to Government is measured in an accurate and appropriate fashion. This will better inform Government, the public and the superannuation industry when forming future retirement income policy.”

Slattery says equity in superannuation is critical, and as such SPAA urges the Federal Government to reverse its decision to repeal the LISC.

“The LISC helps underpin the superannuation system by ensuring that those earning under $37,000 a year do not pay more tax on their compulsory superannuation contributions than they do on their income.

“This maintains the concessionality of the Superannuation Guarantee contributions for low income earners, essential for ensuring the superannuation system is equitable.”

She says SPAA is urging the Government to address the superannuation adequacy of people with broken work patterns.

“The issue of broken work patterns disproportionately affects female workers, who often take time out of the work force to raise families, resulting in many females having inadequate superannuation balances for retirement.

“Female workers also have lower average wages and a higher incidence of part-time work, which reduces their ability to make contributions to save for retirement,” Slattery says.

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The changes include powerful new tax tools that could mean a better after-tax investment return for clients on particular transactions and new trading enhancements that reduce the time spent on portfolio management, client reviews and rebalances.

Head of BT Wrap, Chris Freeman, said the changes were part of an ongoing drive to increase the efficiency for advisers and deliver even better value to BT Wrap investors.

“These features are game changing. Not only will they make it easier for advisers to trade equities and managed funds, but they’ll also enable them to proactively manage tax outcomes of certain sales when trading. These enhancements have the potential to directly improve clients’ after-tax investment returns and in challenging markets like these, we all know that’s becoming increasingly important.”

BT Wrap will now offer “Minimum Gain” (Min Gain) as the new default sale allocation method for investment and accumulation accounts, meaning the parcel that will be sold first is the one that results in the lowest estimated taxable gain.
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In addition, BT Wrap will provide access to additional information on the trading screen. Advisers will now benefit from access to the estimated taxable gain or loss of the proposed trade to help make smart trading decisions and they’ll be prompted with warnings if a proposed trade may lose specific tax concessions. New daily financial year-to-date reporting for estimated realised and estimated unrealised capital gains will also be introduced to facilitate more meaningful dialogue between advisers and accountants to better manage clients’ CGT outcomes.
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Mr Freeman said early feedback from advisers has been overwhelmingly positive.
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“We have been working closely with advisers on these changes and the feedback we have already had is that this will dramatically improve advisers’ ability to offer better service to clients, and to do so more efficiently,” Mr Freeman said.

Details of the changes

• New default sale allocation method. The new default sale allocation method for investment and accumulation accounts is Min Gain. This increases the potential for clients to obtain a better after-tax investment return on particular transactions. It replaces the traditional ‘First In First Out’ (FIFO) method. Min Gain automatically sells the parcel that results in the lowest estimated taxable gain. For pension accounts the default sale allocation method is ‘Maximum Gain’ (Max Gain) – seeking a tax result which is generally appropriate for that environment. The appropriate default sale allocation method depends on a client’s particular circumstances – advisers can change from the default allocation to ensure the appropriate method is selected.
• Automatic calculations display the estimated taxable gain or loss for each sell order on the trading screen– giving advisers better tax insight to help make the right trading decisions.
• Automatic warnings at the point of trade where the trade could trigger the loss of specific tax concessions. A sophisticated warning system will alert advisers to the potential loss.
• Financial year-to-date Capital Gains Tax reporting on both estimated realised and estimated unrealised gains or losses. The reporting will display the sale (or simulated sale) as it applies to each tax parcel allocated to the sale and, for each tax parcel sold, will provide a separate CGT calculation. In addition, the report will help advisers manage their clients’ tax more effectively on a daily basis, without waiting for the end of the financial year.
• Single-trading screen. Advisers can now place up to 50 listed security and managed fund trades on a single screen. The single-screen trading feature – which brings market and company information, tax simulations, up-to-date cash balances and the trading engine together – makes the process simpler and trading smarter. Previously buy and sell trading was performed across up to five screens.

Click to download a copy of the enhanced-trading-quick-reference-guide and tax-quick-reference-guide from BT.

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