SMSFA hits back at Jones on super cap

In a statement on Thursday, SMSF Association chief executive John Maroney made it clear that the professional body did not support introducing a cap on super balances.

“We do not and have never supported a cap on superannuation balances. The small number of SMSFs with extremely large balances are a legacy issue that the 2017 changes — which placed clear limits on contributions to superannuation funds and the amounts that can be held in the tax-free retirement phase — will remedy over time,” Mr Maroney said.

“It’s also our position that if there is a decision to restrict the retention of extremely large balances in superannuation, then [it] needs to be handled carefully to ensure that any rule changes allow adequate time to manage the restructuring that would be involved, especially where large illiquid assets are involved. It also must not adversely affect the vast majority of SMSFs with moderate balances.

“We did suggest in 2020 that the Retirement Income Review examine the issue of extremely large balances, but deliberately did not recommend where that line should be drawn.”

Speaking at The AFR Super and Wealth Summit, Financial Services Minister Stephen Jones said Labor plans to tackle tax concessions once an objective of the superannuation system has been put into legislation.

“The concessional taxation of superannuation is a lightning rod for discussion. When I see the size of some fund balances, I’m not surprised,” Mr Jones said.

“For example, we have 32 self-managed super funds with more than $100 million in assets. The largest self-managed super fund has over $400 million in assets.

“If the objective of superannuation is to provide a tax preferred means for estate planning, then you could say it’s done its job pretty well. Don’t get me wrong, the government celebrates success but the concessional taxation of funds like these has a real cost to the budget.”

Mr Maroney also noted that a cap on superannuation balances would conflict with then shadow treasurer Jim Chalmers’ pre-election statements that “Labor will not introduce any new superannuation taxes or balance caps if it forms government after the upcoming federal election”.

“But if the government has decided to have this conversation about balance caps, then it is one the Association and its members will actively participate in,” Mr Maroney added.

“In this vein, we strongly support the announcement by the Assistant Treasurer, Stephen Jones, that Labor ‘will consult widely to inform a common, agreed objective for superannuation. Australians need to have their say. With an objective that is settled, we can talk sensibly about tax’.”

He noted that the association has long supported the recommendation by the Financial System Inquiry to have an agreed common objective for superannuation.

“If this foundation stone is put in place, then it will allow a far more productive conversation about the entire system, including balances,” Mr Maroney said.

“What must always be remembered is that constant changes to the superannuation tax settings erode confidence in the system and discourage members from making long-term savings plans.”

In the lead up to the budget in October, Mr Jones reiterated that while the issue of high-balance superannuation funds has “been kicking around for a while”, “we have no plans for this budget to be dealing with that issue”.

“If you’ve got massive retirement balances in a superannuation fund, it’s pretty hard to argue that that’s for retirement income,” the minister added.

“It might be, you know, cleverly managing your superannuation affairs. But it would be hard to argue that it’s for retirement income. So, I think let’s get a proper order.”

This echoed the sentiments of the Association of Superannuation Funds of Australia (ASFA) in its pre-budget submission, with the peak body estimating that introducing a $5 million cap on the amount that an individual could hold in superannuation would lead to additional revenue of around $1.5 billion a year.

“A balance of $5 million in concessionally taxed superannuation cannot reasonably be justified as necessary to support a comfortable lifestyle in retirement,” ASFA said in its pre-budget submission.