Self Managed Super: Issue 48

Two early Christmas gifts

For most of my life I have been a pragmatist, which pretty much means from an early age I stopped believing in Santa Claus. But two positive developments to come out of Canberra in the final days before the politicians took their end-of-year leave have had me reflect on my Grinch-like stance.

The first of these was confirmation the bill for the proposed Division 296 tax had not received passage through the upper house. This result has certainly spawned a ripple of optimism among sector stakeholders, with SMSF Association chief executive Peter Burgess suggesting the $3 million soft cap has now been reduced to a “zombie measure”. While we don’t want to get ahead of ourselves, and that is why the positive sentiment is only a ripple and not a wave or tsunami, I think Peter is correct.

That’s because in recent months the measure has met firmer resistance across both houses than I think Financial Services Minister Stephen Jones anticipated. To this end, the penny dropped with certain elected officials as to how much damage could be done to both the tax system and the general public if the ideology of taxing unrealised gains was implemented. This impasse would be difficult to fix without a redraft of the piece of legislation – a scenario this government has seemed averse to from the outset.

The next question then is if the Albanese government would be willing to include this policy as part of its election platform after declaring it would not touch superannuation the last time we hit the polling booths. I predict it would not have the appetite to do so.

And then finally you’d have to wonder if the Member for Whitlam would have the courage to reintroduce the bill if Labor was re-elected. Again, this is highly doubtful as even the most optimistic ALP members admit the best-case scenario it has to hang on to power would be through minority government and that means the Greens would have the balance of power.

Of course, it’s the Greens who offered to support the Division 296 bill on the condition the threshold included was lowered to $2 million and a ban on limited recourse borrowing arrangements would be brought to bear. I’m positive Stephen Jones would not be prepared to go that far to get this policy through so I think it’s sayonara to this measure.

The other gift was confirmation the five-year amnesty to allow individuals to exit legacy pensions has now officially been put in place. Many quarters of the SMSF industry felt this initiative might be dead in the water once the Division 296 bill was not passed as the two measures were so closely linked due to total super balance calculation methodologies.

But Capital Hill showed a good degree of common sense and treated the legacy pension relief as a completely separate matter and to that I say bravo. While some detail is yet to be revealed, such as the social security implications, it is a long overdue solution to eliminate structures from the superannuation system that are no longer fit for purpose and problematic in so many ways.

So the sector got two early Christmas presents and in my view they’re better than two front teeth.

FROM THE EDITOR DARIN

DARIN TYSON-CHAN

INAUGURAL SMSF ASSOCIATION TRADE MEDIA JOURNALIST OF THE YEAR