Following the tabling of the Division 296 legislation this morning in Parliament, the SMSF Association has welcomed some small technical amendments but remains concerned about the high likelihood of unintended consequences.
Commenting on the Bill, SMSF Association CEO, Peter Burgess said he was pleased that several amendments proposed in the Association’s submission had been reflected in the legislation, particularly in relation to the treatment of legacy capital gains and the calculation of a fund’s superannuation earnings which are attributable to in-scope members.
Mr Burgess said the Bill also improves the integrity of the earnings calculation for funds in pension phase by adopting a definition that recognises a broader range of deductions and that doesn’t limit the ability to utilise associated losses. Further, by excluding deferred gain amounts dating back to 2017 from the calculation, legacy amounts carried forward from earlier events are also quarantined.
“However, we are very disappointed that other more substantive issues raised in our submission appear to have fallen on deaf ears.”
“Of particular concern are scenarios where due to market movements, and other unforeseen circumstances, a member’s superannuation balance significantly declines during the income year. For Division 296 purposes, their tax liability will be calculated on their balance at the start of the income year meaning they could pay Division 296 tax on amounts that no longer exist.”
Or conversely, where a temporary spike in an individual’s superannuation balance at the end of a financial year potentially results in a Division 296 tax liability arising in two consecutive years.
The Association also noted much of the detail regarding the operation of Division 296 will be included in the Regulations which are yet to be released.
“With the Bill now tabled in Parliament, and in the interest of due process through the normal parliamentary process, we encourage the Government to release the draft regulations as soon as possible.”
“It is difficult to see how the legislation can be properly scrutinised and debated without these key details,” Burgess said.