Panic selling of SMSF assets 'totally unnecessary'
SMSF Alliance principal David Busoli says panic selling of SMSF assets over concerns around the Albanese government's proposed 30% tax on superannuation assets over $3 million is "totally unnecessary" and urged people to "look at the facts".
Busoli says assuming the policy is passed into law and commences on July 1, the cap would only be on a per member basis and the additional 15% tax would only be applicable to earnings attributable to balances in excess of $3 million.
"There will be individuals who will achieve a better tax outcome by reducing their super balance to $3 million but they don't need to do it in haste. And there are many who will be best served by making no change at all," Busoli says.
"There is plenty of time to consider what the legislation ultimately becomes before making a decision. Any panic to meet the June 30, 2025 'deadline' is due to confusion regarding the significance of the definition of earnings."
Busoli says only a portion of an SMSF's earning will be taxable, so while there will be a larger tax bill in certain circumstances it will not be as extreme as some think.
Hamilton 21 managing director Richard McDougall says while the tax is controversial, franked dividends may become an efficient way to manage tax inside a large super account.
"Division 296 will apply regardless of how a fund generates returns. That's why franked dividends, while not a shield against the new tax, remain a vital part of managing a fund's total tax burden," McDougall says.
"Franking credits cannot reduce the Division 296 tax itself, but they can eliminate the 15% tax on assessable income for superannuants in accumulation phase - and have an even greater effect in pension phase, where income is not taxed at all."
McDougall says this approach can improve the after-tax efficiency of a portfolio.
"They help preserve capital, particularly in accumulation phase, and generate valuable cash refunds in pension phase. These benefits matter more than ever when a second layer of tax is introduced," he says.
Treasurer Jim Chalmers says that losses incurred on a super balance, before the new tax becomes legislation, would be able to be brought forward.
"They can carry [losses] forward as an important part of the design of what we're talking about... consistent with other elements of the tax system people will be able to carry forward losses," Chalmers confirmed.
When asked whether his government was talking to the Greens about their proposal to lower the threshold for the super tax to $2 million, Chalmers said the were "not considering that".
This article first appeared on Financial Standard
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