The SMSFA's revised draft bill faces scrutiny: Is it fair for all?
Peter Burgess, speaking to SMSF Adviser, boldly claims that the revised legislation needs further refinement. While acknowledging the Treasury's pursuit of simplicity, he argues that the current version may lead to unfair outcomes for a minority. But here's where it gets controversial: is this an acceptable trade-off for simplicity?
The SMSFA submission highlights several scenarios where unintended consequences could occur, potentially affecting individuals' financial situations. For instance, individuals not benefiting from a superannuation benefit may still face Division 296 tax liability, and members may be attributed inappropriate amounts of Div 296 earnings.
The association suggests adjustments to prevent these unfair outcomes. They propose changes to the CGT adjustment provisions for simplification and emphasize the need to consider cost-effective alternatives to the current approach.
One notable concern is the treatment of insurance proceeds and their impact on total super balance (TSB). The SMSFA advocates for either excluding affected individuals from Div 296 or adjusting their TSB to account for insurance payments. This is especially relevant in cases of TPD insurance proceeds received via superannuation, which can be substantial.
The submission also addresses the potential consequences of the TSB integrity measure. It argues that using the greater of the TSB opening and closing values may penalize members for temporary spikes in their TSB, such as the example of Sarah, whose TSB fluctuated due to market movements beyond her control.
The SMSFA questions the fairness of the proposed approach, suggesting it lacks equity. They recommend a fixed TSB test time or, at the very least, discretion for the ATO Commissioner to adjust calculations to align with policy intent.
And this is the part most people miss: the potential impact on the superannuation industry. The SMSFA warns of substantial increases in implementation and ongoing costs, which may affect all fund members, not just those in scope. This raises concerns about the sustainability of Div 296.
So, is the revised draft bill truly fair and balanced? The SMSFA's comments spark a debate: should simplicity be prioritized over potential unfairness, or is there a better way to achieve both? Share your thoughts in the comments below!
