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Government’s super changes supported by voters
The reaction to the government’s proposed increase in the taxation on superannuation investment earnings for people with more than $3 million in accumulation accounts, has met with criticism from some industry bodies and support from the wider community.
As we reported, the government plans to double the tax rate on investment earnings from the current 15% to 30% starting in 2025–26.
The SMSF Association said it did not support the announcement, saying it would add further complexity and undermine confidence.
“Our preference has always been to have no cap on balances but if the Government has determined on this policy, having a ‘threshold’ with earnings on balances above the cap taxed at a reduced concessional rate would be our preferred option,” SMSF Association chief executive officer Peter Burgess said.
The Financial Services Council said that its analysis found that over 500,000 current taxpayers would be adversely impacted by the changes over time.
“If the Government does not index the proposed $3 million superannuation balance cap, 500,000 Australian taxpayers will breach the cap in their life and face a 30% earnings tax, including 204,000 Australians under the age of 30,” FSC chief executive officer Black Briggs said.
“Leaving the cap stuck at $3 million will mean that in today’s dollars a 30-year-old will have a real cap of around $1 million, calling into question the intergenerational fairness of an unindexed cap.”
But it appears the general public supports the changes to tax policy. When asked ‘how strongly do you support or oppose reducing tax concessions for people with superannuation balances over $3 million, so the returns on their super are taxed at a higher rate than returns for people with lower balances’ in Essential Research and Qualtrics fortnightly Essential Report, 50% of respondents said they strongly supported or somewhat supported the move, with 31% saying the neither supported or opposed the change and just 19% saying they opposed it or somewhat opposed it.
ASFA calls on Government to close retirement savings gender gap
Meanwhile, the Association of Superannuation Funds of Australia (ASFA) called on the government to use the revenue generated by the tax increase on larger balances to close the retirement savings gender gap.
“As we celebrate International Women’s Day, ASFA is calling for long overdue action to protect the retirement outcomes of women who take time out of the work force. Two simple measures – SG (Superannuation Guarantee) on paid parental leave, and a Super Baby Bonus of $5,000 would eliminate the gender retirement savings gap by 2050,” ASFA senior policy adviser Helena Gibson said.
On average, Australian women retire with 23% less super than men and ASFA modelling has found that the cost to the government of SG on paid parental leave would be $200 million. The increase in tax on earnings on larger super balances is expected to generate revenue of $2 billion in its first full year of revenue after the election, according to assistant treasurer and minister for financial services Stephen Jones.
Moves to boost consumer protections in financial services
The Federal Government has introduced a series of Bills – the Financial Accountability Regime (FAR) Compensation Scheme of Last Resort (CSLR) legislation – that are designed to establish the Financial Accountability Regime and improve consumer protections in financial services.
When introducing the bills, assistant treasurer and minister for financial services, Stephen Jones said they would extend “the provisions of the existing Banking Executive Accountability Regime to the superannuation and insurance sectors, and also establish a Compensation Scheme of Last Resort, for consumers who have suffered financial losses and have received a relevant determination in their favour from the Australian Financial Complaints Authority.”
Among other requirements, the FAR imposes heightened accountability obligations for prudentially regulated financial institutions and the directors and executives that work at them.
“The CSLR is designed to provide compensation to consumers who have received a relevant determination in their favour by the Australian Financial Complaints Authority, commonly known as AFCA, where that determination remains unpaid,” Jones said when introducing the bills.
Claimants may receive compensation of up to $150,000 in certain situations.
“The cap on claims helps maintain the ongoing financial sustainability of the scheme, while balancing the interests of consumers,” Jones said.
ASIC launches court action for alleged greenwashing
The Australian Securities and Investments Commission (ASIC) has launched its first court action alleging greenwashing and has commenced civil penalty proceedings in the Federal Court against Mercer Superannuation. ASIC alleges Mercer made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
ASIC alleges members who took up Mercer’s Sustainable Plus options had investments in companies involved in industries the website statements said were excluded, which included companies involved in the extraction or sale of fossil fuels, companies involved in the production of alcohol and companies involved in gambling.
“If financial products make sustainable investment claims to investors and potential investors, they need to reflect the true position. If investments in certain industries like fossil fuels are said to be excluded, this promise must be upheld,” ASIC deputy chair Sarah Court said.
Misleading conduct in relation to sustainable finance, including greenwashing, is one of ASIC’s 2023 Enforcement Priorities.
Jump in SMSF trustee disqualifications
The Australian Taxation Office (ATO) has disqualified a further 130 individuals from being a trustee, or director of a corporate trustee, of a self-managed super fund during the December 2022 quarter.
So far 389 individuals have been disqualified from being an SMSF trustee in the 2022–23 financial year compared to just 88 individuals in the same period the previous financial year.
The ATO disqualifies people from being trustees if they are found not to be complying with the super law or if it is concerned about their suitability to be a trustee.
A list of all disqualified trustees can be found on the government’s publicly available register.
SMSF’s growing popularity
The number of self-managed superannuation funds (SMSFs) rose by 4% last financial year to 603,000.
There were 1,123,430 members of SMSFs, which collectively held $868.7 billion in assets. That represents 26% of the total $3.3 trillion in super assets under management in the 2021–22 financial year.
Approximately 27,700 SMSFs were established last financial year while 2,057 were wound up.
In terms of auditor contravention reports in 2021–22, ACRs were lodged for 13,600 SMSFs reporting 40,000 contraventions and just under half (46%) of those contraventions were reported as rectified.
“The most commonly reported contraventions continued to be loans or financial assistance to members (20%), in-house assets (17%) and separation of assets (13%),” the ATO said.
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