Further rumoured amendments to the superannuation reforms taking effect on July 1, 2017, just over two months away, are seeding further panic among the superannuation industry. The document circulated by the ATO lists seven areas where further amendments, termed “minor and technical”, are being sought.
It is proposed that the government intends to enact these amendments in the winter sitting, that is before July 2017.
The most controversial of the seven items are the last two, both in relation to limited recourse borrowing amendments (LRBAs) and termed “LRBA related amendments”. Broadly, these provide for a transfer balance credit for each repayment of principle and interest under the LRBA.
So if a person starts a pension in their SMSF with $1 million of their balance, then it’s a $1 million transfer balance credit. If the trustee makes a periodic repayment of the LRBA to the amount of $10,000, then arguably it’s another $10,000 transfer balance credit to the member’s account. And this will therefore compromise that person’s ability to start further pensions.
Further, there is a proposal to count the outstanding balance of the LRBA loan towards the member’s total superannuation balance. So if a fund purchased a $2 million property under an LRBA and the outstanding loan is $1.5 million, then consequently it would appear that it is not the net value of the asset but also the liability attached to it that are totalled together to arrive at the member’s equitable interest in the superannuation fund.
The drafters of this proposal appear to be unconversant with Luca Pacioli’s work, and it is doubtful that the risk of being excommunicated is going to stop them from putting this proposal into law.
Treasury so far has released the exposure draft of the Treasury laws amendment (2017 Measures no. 2) Bill 2017 for consultation. Comments close by next Monday, April 24.
Briefly, the bill contains the following amendments:
Several changes to the operation of the transfer balance cap and transfer balance account, among them to enable additional transfer balance credits and transfer balance debits to be prescribed via regulationsBringing forward the ability to roll-over superannuation death benefits. It is proposed to start on the day when this bill is introduced into ParliamentA TRIS will be in the retirement phase if the member has satisfied a condition of release with a nil cashing restriction. This is a welcome change and will alleviate advisers and trustees having to convert TRIS pensions into account-based pensions.A clarification to the CGT relief is made to ensure that the CGT relief applies to a TRIS in a segregated fund.
The ability to prescribe transfer balance credits and debits is a worrying development in light of the newness of the system. Arguably, the regulations are easier to make compared to legislative acts. The operation of the transfer balance credits and debits is fundamental to the new reforms, but what is more concerning is the unrestricted ease for the government to change the rules on the fly.
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