AGNES KING – Australian Financial Review
Labor’s threat to wind back tax breaks on superannuation in the May budget is expected to produce a windfall for accountants. But some fear the six weeks of “fear and speculation” will lead to unbillable nuisance calls from clients seeking solace from an industry with no answers.
“There’s so much speculation and innuendo, consumers are being driven by fear to pick up the phone and ask somebody what’s going on. A lot of accountants aren’t charging for that because they don’t have a concrete answer,” said Ken Raiss.
Speculation emerged in the failed parliamentary leadership coup two weeks ago that the government is targeting contributions and earnings of very high income earners, with a threshold of $300,000 being discussed.
Grant Thornton super expert Dennis Eagles said it will provide an immediate boost to accountants and tax agents if it goes through, but it is also a gift that will keep giving for years. “It takes us back to the surcharge system that ended in the mid-2000s and was a shocker,” he said.
Like the excess contributions cap which tripped up so many consumers last year, errors take years to emerge. When they do, consumers are sent scurrying back to advisers.
Cavendish Superannuation technical expert David Busoli said the government should avoid “the mess” of a surcharge, and instead boost its tax take by removing breaks for accounts with a fund balance over $10 million. “It would be a decent tax slug, affect the least number of people and keep super highly attractive,” Mr Busoli said. “There are pension funds out there with member balances of $100 million and $120 million.”
Accountants also expect an influx of work from a Taxation Office initiative to shut down 10,000 self-managed superannuation funds this year after a review of the fast-growing sector.
Funds being targeted are those that have not been lodging annual tax returns and almost all were inactive. “Winding up SMSFs is an administration burden and it will mean more work for accountants,” said BDO superannuation specialist Kim O’Brien.
Advisers warn that the constant chopping and changing on superannuation is eroding trust in the system.
“The government has not provided any legislative security as to the future of superannuation. It is like sailing into a storm without a rudder,” Ms O’Brien said. “Both sides of government should take a bipartisan approach in order to sustain every Australian’s superannuation, with the aim to protect it, as we protect the family home.”
She said some wealthy clients have started investigating other tax structures, such as discretionary or hybrid trusts, because super is so uncertain. But ultimately, it remains an attractive option and will continue to be used – albeit in a diminished capacity – as a wealth creation and retention vehicle, despite the attack on high-income earners.