There has been a lot of chatter and “leakages” that the government is planning on tightening up rules around Self Managed Super Funds and increasing taxes.
There are a number of reasons for this.
Firstly, super is currently concessionally taxed and it is always tempting for governments to dip into the honey pot. The good thing about super (from a government perspective) is that most people are oblivious about it and as long as they don’t increase income tax which is the big headline then the population will broadly accept it.
Let’s think about this for a moment. If the government increased the contributions tax on super from say 15% to 20% what would be the outcome? Well, less money will be invested in super, take home pay will stay the same and tax revenue would rise. What would professional financial advisers do? Well, nothing. It would still be concessionally taxed and whilst some on the fringe may be effected it is unlikely to stop advisers recommending that investors put money into the best tax structure in town. The problem of reduced super balances in years to come is not something that is likely to concern any current sitting government.
Secondly, there is a real focus on Self Managed Super Funds. Why? Because they are an easy target. The broad thinking is that these are the domain of the rich. They have by far the largest balances. Any extra tax on the “rich” is always an easy sell for the government. Just look at how easy it was to increase super tax for those earning over $300,000. Hardly caused a ripple.
Thirdly, there is also some genuine concern that the property scam professionals are getting into this space. Remember that property is not governed under Australian Financial Services Licencees so they do not need to conform to the regulations that control financial advisers. The opening up of Self Managed Super to borrowing for property potentially opens the floodgates to this “unregulated” industry.
And fourthly, and this is the big one. The super industry doesn’t like them. Why? Because they are now the largest sector by value in the industry and they effectively are competitors to the big banks and industry funds. The banks are trying to work out solutions for the sector and tap into the growth. The industry funds hate them with a passion because those with SMSFs have large balances that in many ways subsidise the low balances. The industry funds have millions and millions of low value accounts.
And given the union and Labor connection whose door would you be knocking on to restrict their growth?
This information is general in nature and does not take any individuals needs or objectives into account. It should not be taken as a recommendation to invest. Before making an investment decision you should seek your own financial advice to determine whether the proposal is appropriate for your individual circumstances.