The collective sigh of relief from anyone connected with superannuation was deafening this week.
THE collective sigh of relief from anyone connected with superannuation was deafening this week when Treasurer Wayne Swan delivered the midyear budget review. Fears had been mounting that the Gillard government would balance the budget by increasing taxes on superannuation. In the final analysis, the midyear review was a mixture of pain and gain.
The pain is being borne by those couples wanting to have children, due to a reduction in the baby bonus big companies that will now have to pay their income tax instalments monthly instead of quarterly anyone with private health insurance due to the rebate being tied to CPI increases and SMSF members suffering a 29.5 per cent increase in the levy they pay to the ATO.
From the 2013-14 financial year onwards the levy paid by SMSFs will increase to $259 a year. This will be the fourth increase in four years. The first increase in this levy occurred with the introduction of ''simple super'' when it went from $45 to $150. It was then increased in the 2011 federal budget from $150 to $180, and then increased in this year's budget.
In the press release issued by Financial Services and Superannuation Minister Bill Shorten, the increase in the levy was heralded as a reform. Adding insult to injury, the press release contained either a typing error or another indication of how far removed from reality Canberra is. The latest increase was shown as going from $191 to $259. There has never been a $191 levy. In this year's budget the levy was increased from $180 to $200.
In the gain area, the supervisory levy paid by large superannuation funds regulated by APRA will fall 10.4 per cent for the 2013-14 year. This change indicates which sector of the superannuation industry has more influence with the Gillard government, and it certainly isn't self-managed super funds.
This fact is borne out with another press release issued by Shorten separate to the main release covering the midyear budget measures. In this press release, Shorten said $10 million would be spent over the next three years to fund yet another lobbying group called the Superannuation Consumer Centre.
This centre is allegedly required because, in the Gillard government's view, there is not currently an organisation that has a primary focus on superannuation policy, research and advocacy. If you believe the press release, there is also no organisation that exists to promote a member-driven approach within superannuation.
The sincerity of the Gillard government in setting up this new taxpayer-funded organisation must be in question as there is already an organisation that has this focus. This is the Self-Managed Professionals Association of Australia. This organisation has a dedicated focus on policy, research and advocacy relating to superannuation.
In addition, as SMSFs are run by the members of the fund, you could not get an organisation more driven by member issues related to superannuation.
The other gain that came from the midyear budget related to a Tax Office practice that was effectively a death tax on super fund members. The government has announced that it will amend the law so that when a member of a superannuation fund dies, and they are receiving a pension, no tax will be payable in the course of winding up and paying out the member's benefits.
If the budgetary situation further worsens between now and next May, it will be anyone's guess as to what further pain is to come, and it hopefully won't be more changes to superannuation.
Frequently Asked Questions about this Article…
What did the midyear budget review mean for superannuation taxes and should everyday investors be worried?
The midyear budget review largely avoided sweeping new taxes on superannuation, so many connected with super breathed a sigh of relief. The review was described as a mixture of pain and gain — some measures hit savers (notably SMSF members), while there were also wins such as changes to Tax Office practice around payments on death. Everyday investors should stay alert because the government said further budget pressures before next May could still lead to more changes.
How much will the SMSF levy increase and what does that mean for self-managed super fund members?
From the 2013–14 financial year the annual levy paid by SMSFs will increase to $259. The article says this is roughly a 29.5% rise for SMSF members and marks the fourth increase in four years (the levy previously moved from $45 to $150, then to $180, then to $200). SMSF members will feel the impact directly through higher ATO charges.
Was there any change to levies for large APRA‑regulated super funds?
Yes. The supervisory levy paid by large super funds regulated by APRA is set to fall by 10.4% for the 2013–14 year. The article points out this contrasts with increases for SMSFs and suggests larger funds have more influence with the government.
What is the change to the 'death tax' on superannuation mentioned in the review?
The government announced it will amend the law so that when a member of a super fund dies while receiving a pension, no tax will be payable during the course of winding up and paying out that member’s benefits. The article frames this as a meaningful gain compared with an earlier Tax Office practice that acted like a ‘death tax’ on some member benefits.
What other midyear budget measures could cause 'pain' for everyday households and investors?
The article highlights several painful measures: a reduction in the baby bonus (affecting couples wanting children), private health insurance rebates being tied to CPI increases, and large companies being required to pay income tax instalments monthly instead of quarterly. While not all are direct super changes, they can affect household finances and investor sentiment.
What is the Superannuation Consumer Centre funding announced in the midyear review and why does it matter to members?
The government said it would spend $10 million over three years to fund a new Superannuation Consumer Centre focused on super policy, research and advocacy. The article questions the need for this taxpayer‑funded body, noting existing organisations (such as the Self‑Managed Professionals Association of Australia) already focus on member advocacy, particularly for SMSFs.
There was mention of a press release typo about the SMSF levy — what was that about?
The article notes a press release showed the SMSF levy rising from $191 to $259, but there was never a $191 levy. In this year’s budget the levy was actually raised from $180 to $200, so the $191 figure appears to be a typo or an error in the release.
As an everyday investor or SMSF member, what practical steps should I take after this midyear budget review?
Keep informed: track further budget updates because the article warns more changes could come if the fiscal situation worsens. For SMSF members specifically, factor the higher $259 annual ATO levy into your costs and budgeting. Note the positive change on tax payable when a pensioner dies, and monitor how the reduction in supervisory levies for large funds might affect product costs or competition. Above all, stay tuned to official announcements and consider discussing any material changes to your super with a qualified adviser.
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