Large super balances a ‘legacy issue’ that time will resolve

The SMSF Association remains firmly opposed to the introduction of a cap on superannuation balances, the Association’s Head of Policy and Advocacy, Tracey Scotchbrook, told the National Conference today.

While acknowledging that excessively high balances were outside the policy intent of superannuation, she said the introduction of Transfer Balance Caps have ensured it’s a legacy issue that time will resolve.

“Our fear is that a system that is already complex with multiple caps and thresholds will become even more so, and, consequently, having a negative impact on consumer confidence in superannuation.”

“We are also concerned that this debate is being framed as an SMSF issue when APRA-regulated funds also have large balances.”

Scotchbrook said a hard cap will raise investment issues for members, especially those who have illiquid assets.

“How much time will fund members have to act and what will be the potential disruption to markets with people being forced sellers. There is also the issue of the impact on fund administration and management costs, as well as the effect it could potentially have on other members of the fund.”

She says another concern is the potential for retrospectivity. “Any growth in fund investments has accrued in the current tax environment, so any changes to the taxation of unrealised capital gains would therefore have a retrospective effect.

“Gains accrued under the existing tax environment should continue to be taxed in the same manner, noting the CGT concessions that applied under the Fair and Sustainable superannuation reforms in 2016-17.”

Those individuals who have contributed personal injury compensation amounts or received insurance benefits in superannuation also should not be forgotten.

“These proceeds are essential for the funding of the ongoing care and needs for the lifetime of those individuals. Just like the current transfer balance cap and total superannuation balance rules, those proceeds must be expressly excluded from any proposed measures,” she said.