Many SMSF stakeholders, including myself, have been critical of the proposed 15 per cent tax on total super balances (TSB) over $3 million since it was announced and again after the draft bill to legislate the measure was released.
Of course, this was to be expected considering it is estimated of the 80,000 individuals the government has forecast will be affected by the new tax, 50,000 are likely to be SMSF members.
And it probably gives Canberra the ability to dismiss any of the criticism levelled at the policy to date on the basis it is all motivated by self-interest.
But after this week, Assistant Treasurer and Financial Services Minister Stephen Jones might have to actually sit up and take notice of some of the pushback this measure is receiving.
You see, one industry body that calls itself The Voice of Super, but really has been a mouthpiece for industry superannuation funds, has also expressed concerns over the draft bill, echoing many of the arguments already made against the new tax. This organisation is the Association of Superannuation Funds of Australia or ASFA.
You might ask why this is so significant.
Well one of the aspects included in the measure that has been creating most angst is the fact the calculation of earnings for the new tax is based upon the difference between a person’s TSB at the beginning and end of a particular financial year. This means it incorporates unrealised capital gains.
This methodology was adopted basically to make the exercise easier for public offer funds, and in particular industry funds, which don’t have administration systems capable of determining earnings for an income year at the member level.
So now you have a superannuation body representing industry sectors that have actually been treated favourably by the proposal speaking out against it.
In its submission, ASFA called out the inclusion of unrealised capital gains in the calculation of earnings, labelling it “an unorthodox approach, in the context of Australian taxation arrangements, and one that should not set a precedent for the taxation of superannuation or personal income tax more broadly” – something just about any commentary or feedback on the subject has also raised.
It was also critical of the fact the draft bill makes reference to a person’s TSB value as opposed to their transfer balance account. In short, this amount is to be determined by the withdrawal benefit for the member.
To this end, ASFA concluded “given the adoption of this TSB value concept, and the scope of detail that is to be prescribed by regulation, the full impacts of the Division 296 tax for many superannuation funds and individuals cannot be ascertained from the draft legislation currently under consultation” and added the proposal can’t be properly assessed right now.
Anecdotal evidence to date has suggested while encouraging the lodgement of submissions on the policy and the draft bill, the government has been completely unwilling to give any ground on the original measure it announced.
As I said earlier, this could have been on the grounds concerns have been registered motivated by self-interest. But this justification cannot be applied to ASFA’s response.
Should Jones not take notice of this feedback and announce a possible amendment to the draft bill, even if it is just to address the taxing of unrealised capital gains, then we can probably all conclude absolutely no substantive evidence will make him address any of the flaws contained in the policy.''