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 were the main superannuation changes announced in the midyear budget review?
The midyear budget review delivered a mix of outcomes for superannuation: relief that there was no broad new tax on super, but targeted changes including an increase in the annual levy on self‑managed super funds (SMSFs) to $259 from 2013–14, a 10.4% reduction in the supervisory levy for large APRA‑regulated funds for 2013–14, a government move to remove a previous Tax Office practice that acted like a 'death tax' on pension payments when winding up benefits, and other budget measures such as linking the private health insurance rebate to CPI and reducing the baby bonus.
How much will the SMSF levy increase and when does it take effect?
From the 2013–14 financial year the annual levy paid by SMSF trustees will increase to $259 per year. The article notes this is the fourth rise in four years and represents a roughly 29.5% increase on the most recent level.
Why is the SMSF levy increase controversial for everyday investors with self‑managed funds?
The increase is controversial because SMSFs have faced repeated levy rises over successive budgets while large APRA funds are seeing a supervisory levy reduction. The press release announcing the change even showed an apparent typo (listing a previous levy of $191 that never existed), which reinforced concerns among SMSF members that policy decisions may be out of touch with fund members' realities.
Will large superannuation funds see any levy relief from the midyear budget?
Yes. The supervisory levy paid by large super funds regulated by APRA is due to fall by about 10.4% for the 2013–14 year, which the article highlights as a gain for that sector compared with SMSFs.
What change did the government announce about tax on superannuation benefits when a member dies?
The government said it will amend the law so that when a superannuation member who is receiving a pension dies, no tax will be payable in the course of winding up and paying out that member's benefits. This reverses a previous Tax Office practice described in the article as effectively a 'death tax' on super payouts.
How did the midyear budget affect family payments and private health insurance rebate?
The review included a reduction in the baby bonus, which will affect couples planning to have children, and it tied the private health insurance rebate to CPI increases. Both measures are presented in the article as part of the 'pain' side of the budget's changes.
What is the Superannuation Consumer Centre announced in the budget and why does it matter to super members?
The government announced $10 million over three years to fund a new Superannuation Consumer Centre intended to focus on super policy, research and advocacy. The article questions this decision, noting existing organisations (such as the Self‑Managed Professionals Association of Australia) already focus on member‑driven super issues, and raises concerns about creating another taxpayer‑funded lobby body.
Could there be further changes to superannuation before the next federal budget?
Yes. The article cautions that if the budgetary situation worsens between now and next May, further measures affecting superannuation could be possible. Everyday investors should monitor developments leading up to the next budget in case more changes are proposed.
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