The SMSF Association has called for the Transfer Balance Caps (TBCs) to be simplified in its 2022-23 Federal Budget submission to the Federal Treasury.
In its wide-ranging submission on the Budget set to be handed down on 29 March, the Association has placed simplification of TBCs at the top of its recommendations, saying the introduction of indexation on 1 July 2021 has added greater complexity to the
superannuation system. The TBC is a limit on how much superannuation can be transferred from an accumulation superannuation account to a tax-free ‘retirement phase’ account.
SMSF Association CEO John Maroney says: “As our submission points out, the system has shifted from having a single cap to individual caps ranging from $1.6 to $1.7 million. This is causing confusion and increased costs across the sector. Inevitably, mistakes will be made, leading to inadvertent breaches of the TBC. This situation is being compounded by the lack of access for financial advisers and SMSF administrators to the ATO reports that are needed to obtain an individual’s TBC.
“In our opinion the use of a single cap will reduce costs, uncertainty and benefit all stakeholders – a position, we believe, is strongly supported across the SMSF sector.”
Other key recommendations include:
- Reducing the number of Total Super Balance (TSB) thresholds: The introduction of multiple TSB thresholds is unnecessarily adding to the complexity of the superannuation system, making it increasingly difficult for individuals to understand what their options are. We believe the number of TSB thresholds could be significantly reduced.
- Removing the registration cancellation fee that applies to approved SMSF auditors: This will provide equitable treatment with registered company auditors and removes a significant financial barrier to exit.
- Removing ambiguity regarding the application of the design and distribution obligations and target market determinations to SMSFs: We believe these provisions should not apply to the establishment of an SMSF, when adding a new member to an SMSF, or when starting a pension in an SMSF.
- Indexing key small business capital gains tax concession thresholds: Some thresholds have not been reviewed or updated for some time and this needs to be addressed.
- Protecting an individual’s unused Concessional Contributions Cap due to the late payment of prior years’ superannuation guarantee amounts: Under this measure the Commissioner of Taxation would be given the necessary powers to apply such amounts to the relevant year of income.
- Providing practical regulatory and compliance relief for minor breaches of the non-geared unit trust rules: Remediation is strictly limited to the winding up of the unit trust which can be costly and have a severe impact on the fund. Temporary measures adopted by the Commissioner of Taxation due to Covid-19 have demonstrated that such a framework with the right setting can function appropriately.
The Association also took the opportunity to its submission to urge the Federal Government to enact the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 currently before Parliament.
Maroney says: “This Bill contains important legislative reform for our sector, as well as the broader superannuation system, with the measures intended to apply from 1 July 2022.
“This includes lowering the age at which downsizer contributions can be made from 65 to 60; removing the work test for members aged less than 75 and extending the bring-forward rule for non-concessional contributions; and increasing the first home saver release amount from $30,000 to $50,000.”
To obtain the SMSF Association’s 2022-23 Federal Budget submission, click here.