Readers of my past editorials will know I have been extremely critical of some of the changes made to the superannuation system and in particular SMSFs by our elected officials in Canberra.
Too many times our members of parliament have either deliberately or unintentionally caused SMSF trustees unnecessary angst through legislative changes affecting the current retirement savings system.
Take for example the super reforms handed down in the 2016 federal budget we are all having to deal with now that have made life infinitely more complicated when it comes to running your own super fund.
But as they say, if you’re willing to throw brickbats at the protagonists, you need also to have the ability to throw a few bouquets when something is done correctly.
So I’m pleased to report a situation has arisen where our politicians have for once got something right.
One of the 2018 budget measures involved the requirement to have any inactive superannuation balances under the sum of $6000, defined as a low-balance account, transferred to the ATO. This move was designed to help reunite small retirement savings amounts with their rightful owners.
The initiative was really aimed at larger public offer funds in a bid to encourage the consolidation of superannuation benefits. However, as is often the case, it came with some unintended consequences for the SMSF sector.
Many SMSF trustees, when rolling over their benefits from a public offer fund at the time of establishment, have chosen to leave a small balance in the fund where their contributions used to go in order to retain risk insurance cover they could not match in their own fund.
These accounts would then become inactive as all of the main retirement saving activity would be processed through their SMSF.
However, if an SMSF trustee had implemented this strategy and the balance left in the public offer fund was below $6000, as may well be the case, they would be caught by this new measure and have these monies swept onto the ATO with the much-valued insurance cover being lost along the way.
Concerns over the implications of the announcement for SMSFs were communicated to Canberra when the budget was handed down and I’m pleased to say Capital Hill in this instance has actually listened and heard what the sector has said.
As a result, a new section was inserted into the parliamentary bill associated with this budget measure – Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018.
This section specifies: “An account through which an insurance benefit is being provided is not an inactive low-balance account.”
This new section is evidence our politicians do have the ability to recognise situations where unintended consequences have arisen due to a legislative change and have the common sense to rectify the newly created problem.
We should all be thankful the government has demonstrated its willingness to listen to the sector’s concerns and implement change in a more reasoned and sensible manner.
Let’s hope we see this approach to superannuation system changes more often in the future.