SMSF Association calls for simplification in Budget submission

SMSF Association Media Release

The SMSF Association has made simplification, modernisation, and the removal of red tape key
themes in its submission to the Federal Government’s 2024-25 Budget.

SMSF Association CEO Peter Burgess, who will address these issues in his legislative and technical update at the National Conference in Brisbane on 21 February, says the sector suffers from being
unnecessarily complex – a reality that makes the system more confusing and costly for no discernible benefit to trustees, members, and their advisers.

“Nowhere is this complexity more evident than with Transfer Balance Caps (TBCs), Super Balance Thresholds (SBTs), and the rules overseeing the notice of intent to claim a tax deduction. All three issues would benefit from being simplified.

“Indexing the TBCs on 1 July 2021 and 1 July 2023 has added further complexity to the system, having shifted from having a single cap to individual caps ranging from $1.6 million to $1.9 million.

“This is causing confusion and increasing costs across the sector – and can only increase with future indexation.

“It is no different to the introduction of multiple TSB thresholds that have made it increasingly difficult for individuals to understand their options. In our opinion, the number of TSB thresholds
could be significantly reduced.”

He says reforming the rules as they relate to the notice of intent to claim a tax deduction should be a priority. “How these rules operate is overly complex, contains multiple hurdles and points of failure.
The result is the loss of a tax deduction for an individual making the contribution. 

“The regime is inflexible and does not allow for amendments or remediation, with a point of failure
often being due to a simple administrative error that taxpayers are unable to remedy, and the Commissioner of Taxation has no discretionary powers to resolve.

“The operative provisions need reform and modernisation to ensure the law operates in a manner that is fit for purpose.

Burgess says proposed reforms seeking to improve the deductibility of personal financial advice fees
relating to a member’s superannuation account highlight an equity issue in that the proposal does
not provide an equivalent measure for SMSF members. “A law change is needed to ensure equitable treatment applies to members of SMSFs and to align them with the underlying policy intent.”

The Association’s submission says non-arm’s length expenditure (NALE) rules still need reforming.
“The treatment of specific fund expenditure and non-arm’s length capital gains under the current tax law results in the impost of disproportionate tax penalties.

“These are the result of poor legislative design. The latter is caused through the lack of cohesion across intersecting elements of the Tax Act. As a result, they do not operate as intended, and a legislative solution is required as a matter of urgency.

Burgess notes that amnesty for legacy pensions and amendments to the fund residency rules, which were reaffirmed as being on the Government’s policy agenda in last year’s Budget, still need to be legislated. “Both measures are important reforms for our sector, and we ask the Government and
Treasury to undertake the necessary industry consultation to progress the required legislation.”

View the full submission here