Back in May last year I wrote an editorial that suggested the politicians of this country hated SMSFs. At the time I came to this conclusion on the back of the new rules applying to limited recourse borrowing arrangements and how targeted they were to penalising this particular sector of the superannuation industry.
Well, if an anti-SMSF sentiment was confirmed then, the Labor Party’s latest proposal to prevent individuals drawing down tax-free income in pension phase from receiving imputation credit refunds from the ATO has to be a full-blown declaration of war against SMSFs.
Upon the announcement of the initiative, opposition leader Bill Shorten and opposition treasury spokesman Chris Bowen openly admitted it is a blatant strategy to gouge more tax dollars from the SMSF community.
But in a move typical of our elected officials in recent times, concerns certainly abound as to whether all potential flow-on effects or collateral damage arising from this proposal have been anticipated.
Already we have seen concessions having to be made for low-income retirees and SMSFs where a member is receiving some income from the age pension.
And seriously, how could you be expected to believe the estimate the amendment will affect only 200,000 SMSFs? Based on the ALP’s track record of being able to predict the impact of a change in terms of raw numbers, you couldn’t. Remember it was Shorten who predicted a change in the accounting licensing laws with regard to SMSF advice would deliver 10,000 more financial advisers to the industry. In reality it has delivered around 700.
Of course, other superannuation structures such as industry funds will be immune to the change because the pooled nature of these vehicles will mean there will always be income against which a franking credit can be offset.
Further, the justification saying it is to abolish a system that in times of a large budget deficit is unsustainable is just about as insulting to our intelligence as one can imagine.
After all, this is the same political party that has refused to scrap the carbon tax welfare payments, estimated to be worth $13 billion, despite the fact we have no carbon tax.
However, this renewed attack on SMSFs was about the single most predictable event that could occur. Why? Because the super reforms handed down in the 2016 federal budget were a signal from the coalition government to Labor this sector was fair game for both sides.
From a political perspective it meant a move like this is a no-brainer for Labor as it has been forecast to raise $59 billion of revenue over a decade through whacking a group of Australians who probably wouldn’t vote for the party anyway.
Contrast this to the coalition, which whacked it’s heartland of supporters with the super reforms and has been paying the penalty ever since.
So don’t expect the government to mount a credible argument against the proposal because it’s been politically snookered. It most certainly can’t claim any moral high ground with any degree of conviction, seeing it basically did a lot of the heavy lifting on this one, lowering the bar for SMSFs so Labor could so easily lower it even more.
Perhaps this will be the line in the sand that will mark a meaningful call to action against this type of inequitable legislation. There will have to be a point where SMSFs will take so much till they’ll take no more.