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2015 Federal Budget Effects to SMSF

Phhhhewwww….all the concern and talk of changes to SMSF LRBAs and taxes on Pension Income has been overlooked in the 2015 Federal Budget.  The SMSF sector has plenty to smile about.

Our view is this provides a firm footing to superannuation in relation to tax changes in the short term.  In addition to that, recommendations in the Murray Report stemming from the Financial System Inquiry has seen the SMSF sector dodge a bullet with respect to a potential ban to leveraging via LRBAs.

That said, it would be naive to suggest speculation around proposed changes to pension income exemptions and LRBAs will not raise it’s head come the next federal election. 

Judging by the federal budget measures delivered, the approach appears to be one of ‘stimulate business activity in order to stimulate prosperity and savings’.  If businesses prosper, then government revenue will follow.  Hence there’s no need to fill budget ‘holes’ by way of attacking earnings in superannuation.

One minor but positive announcement included an amendment to the terminal illness condition of release which will allow people diagnosed with a terminal illness to access their preserved benefits in super sooner.

Asset test rule changes have also been proposed whereby the part pension asset threshold has been reduced downward.   This means some members in pension phase may lose part pension funding, which may require them to draw larger pension amounts from the Self Managed Superfund in order to maintain their standard of living.   This will also cause those members to carefully structure their asset allocations to ensure they have sufficient liquidity to supplement their incomes.

It must be noted that the introduction of the Division 20 Penalty provisions in the SIS Act have been given extra sting to the penalty tail of the ATO.  The cost per penalty unit will increase by $10 per penalty unit, from $170 to $180 per unit.  Further increases are proposed in line with inflation every three years!  Solution – educate your SMSF trustees about the rules and their responsibilities!!

Fingers crossed the senate passes the budget measures and we are able to assess the success of the measures in due course.