The Budget 2021 includes a number of positive measures specific to the wealth accounting sector that are to be welcomed, but the industry needs ongoing evolution through government, according to Class Limited CEO, Andrew Russell.
“We have long said that the SMSF industry needs to be freed from regulatory constraints and excessive red tape by the government, so we welcome the changes to the systems announced by the Treasurer, Josh Frydenberg, as part of Budget 2021,” Russell said.
“However, there remain significant challenges for the SMSF sector such as dealing with complexity around indexation of transfer balance caps, and this is a missed opportunity to be simplified in this Budget.”
The means to convert legacy pension products should have been offered to the industry as part of the 2017 Super Reform, but it has finally arrived at this year’s Budget. It is a welcome change and may remove administrative burdens for at least 1,800 SMSFs on the Class platform.
“In particular the means to allow people to exit legacy pension structures will provide trustees with the opportunity to restructure and form the contemporary pension products that will cost significantly less to administer, and it will be easier to comply with transfer balance cap obligation. The potential impact will come down to the details and dates when the legislation is actually passed. There will be significant tax and social security implications for those changing their old-style pension products, so industry’s consultation on legislation will be critical.”
“Similarly, while overseas travel remains a distant event for most, the news that SMSFs can remain open for up to five years and receive contributions while the person is overseas will likely become more important as the world adjusts to the new ways of working post-covid, and we see dynamic careers become the norm.”
The removal of work test and extending the bring forward rule for members age 67 to 74, combined with lowering the eligible age to 60 for downsizer contribution, will provide a much-needed boost and flexibility for contributions, which has been significantly depleted since 2017 reforms. It will provide a powerful strategy for clients to rebalance lopsided SMSFs to achieve equilibrium between the two members.
“We also welcome the removal of the $450 income test to allow more Australians to reap the benefit of the superannuation system, and on every dollar they earn. This is an important step in reducing the gender inequality within the super system, but far more needs to be done.”