Never let a good crisis go to waste

SMSF regulation change

SMSF members being more concerned about changes in regulation than COVID-19's impact shows the government must have a better model for change

I don’t think anyone can argue that the coronavirus is the one thing that has had the biggest impact on our lives in 2020 and perhaps this millennium.

It has managed to have such a negative impact on so many elements we used to take for granted, such as going to work in an office and having children attend classes at their school.

When looking at the situation through an SMSF lens, COVID-19 has been no less disruptive. Probably the most obvious impact it has had in this arena is on investment portfolios, seeing it has prompted a fall in just about every asset class.

Further, it has significantly affected what could be considered standard corporate behaviour, such as the payment of dividends to company shareholders – a practice plenty of SMSF trustees rely on as a vital source of income for their funds.

It should then come as no surprise that an Investment Trends survey conducted between March and May, that is, immediately after COVID-19 had been declared a pandemic and restrictive measures were being introduced, showed 52 per cent of trustees nominated investment selection as currently the most challenging aspect of running their own super fund.

But despite the angst the coronavirus is causing SMSF trustees right now, it would appear they are treating it as just a temporary inconvenience. This is evidenced through another statistic contained in the Investment Trends analysis.

When asked what the biggest worry was with regard to their retirement, only 22 per cent of respondents nominated the COVID-19 outbreak. Of course this is significant, but only ranked as the seventh most worrying thing for individuals running their own super fund.

In comparison, 51 per cent of those surveyed revealed regulatory changes to rules governing super is their biggest worry as an SMSF trustee.

This would have to be seen as a damning indictment on how many changes have been made to the retirement savings system in recent times and how many more changes superannuants are anticipating in the years to come.

And when you look at recent parliamentary developments, you could only come to the conclusion the politicians either don’t understand this sentiment or just plainly refuse to acknowledge it.

There are several examples we can draw upon to support this conclusion, but one that springs to mind is the mistiming of the extension of the work test exemption and the amendment to the ability for retirees to bring forward their non-concessional contribution caps.

Without going into laborious detail, people aged 65 and 66 can now make superannuation contributions without having to satisfy a work test. Logically this should mean all of the other contribution rules are also now available to individuals of that age.

However, the age limit applying to the bring-forward rule that allows up to two years of non-concessional contributions to be made early, currently sitting at age 65 but set to include individuals up to age 67 as announced in the 2018 federal budget, is being brought into law via a separate bill and to date this bill has not been passed.

The mismatch basically means SMSF trustees who are 65 and 66 cannot properly formulate a strategy to maximise the contributions until the second piece of legislation is passed.

This obviously adds an extra layer of complexity to a situation that could have been avoided had the two amendments been contained in the same bill or the separate bills been passed in rapid succession.

Instead we have a situation where individuals nearing the age of 65 are having their contributions strategies held in limbo for the time being.

There have been many lessons from the coronavirus so far and this needs to be one of them. Canberra needs to sit up and take note of the fact a once-in-a-lifetime catastrophic event significantly affecting investment markets is causing less angst for SMSF trustees than the constant changes to superannuation law.

A popular political saying is “never let a good crisis go to waste” and to this end COVID-19 should not be a wasted opportunity to recognise superannuant sentiment and subsequently improve the legislative process concerning superannuation.


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