In previous years, the government has made a large number of changes to the superannuation law and regulations. But in this year’s budget, only small changes were made which will directly influence the self managed superannuation funds (SMSFs) industry.
One of the changes is with regards to accessing superannuation under the terminal illness condition. According to the current law, for a fund member to access the superfund’s benefits, two doctor’s statements which certify that he/she is going to die within a year has to be provided. Now from 01/07/2015, the time frame is extended to 2 years (i.e. 24 months). It is a good change, as members who have terminal illnesses can assess their superannuation earlier.
The other change is related to SMSF trustees and members who have made mistakes/frauds and will be penalised by the ATO for non-compliances. Starting from 31/07/2015, the penalty unit will rise from $170 to $180. So trustees and members should keep in mind that non-compliance will cost more money and breaches of the superannuation law should be avoided. It is interesting that administrative penalties are levied on the number of trustees. For example, under the new changes, each trustee may be liable for a penalty of $1,800(10 units) for failure to prepare financial accounts and statements. If the fund has four trustees, the total penalty will be $7,200. But if the fund has a corporate trustee, the total penalty is still $1,800. So it gives people another good reason to choose a corporate trustee when they set up their SMSFs.
The new budget does not mention any changes regarding the tax-free investment earnings in pension phase of SMSFs. But no news is good news. In the past few months, bringing a 15% tax on investment earnings over $75,000(or $100,000) has been a hot topic for the SMSFs. It may be a trend for the next few years, as the government is currently in a big deficit and is actively finding new income sources to pull its financial health back to normal. Although this time the government decides to keep the tax exemption for investment earnings in pension phase, the concession will not last forever.
In addition, people who worry about the government’s potential ban on limited recourse borrowing arrangements in super funds can finally breathe a sigh of relief, as the government does not make any changes about it in the budget.
Disclaimer: Campbell McCart is an SMSF specialist and principal auditor of SMSF Super Auditors. His advice is general in nature and you should seek professional advice that relates to your specific circumstances before making any decisions.