A proposed cap on balances would bring further costs and complexity and prove disruptive for the self-managed superannuation fund space.
Speaking at the SMSF Association national conference in Melbourne, deputy chief executive, Peter Burgess, who would take over from John Maroney later this year, referenced the Government’s consultation paper on the objective of super.
The proposed objective put forward by Treasury was that “the objective of superannuation is to preserve savings, to deliver income for a dignified retirement, alongside Government support, in an equitable and sustainable way”.
Burgess’ criticism lay with the words ‘equitable and sustainable’ as he believed it meant a cap on super balances.
He said: “We do not support caps on balances. There is already a cap on high balances and that’s the transfer balance cap, designed to force large amounts out over time. So we’re concerned about having another cap introduced on high balances. It will just add further complexity and further cost into the system.
“If we do have a hard cap, where we have to force the money out of the system and the amounts above that cap have to come out, then there are a lot of issues that need to be worked through. How is it going to be taxed? Will it be a one-off thing? It’s very disruptive for the industry, for SMSFs with illiquid assets that have to forcibly sell them to comply with a cap.”
His comments were echoed by SMSF Association head of policy and advocacy, Tracey Scotchbrook, in a later conference session, who said individuals holding large super balances tended to be legacy issues.
Data from the ATO last year found as of 30 June, 2020, around 100,000 SMSF members had a balance of more than $1.6 million while 27 had more than $100 million.
“We certainly agree that those excessively large balances are outside the policy intent but there is only a very small number of them and these are legacy issues.
“We’d encourage the Government to take its time with this, take a breath if they are really serious about this policy and have think about it. We need to make sure if they are going to go down this path that we get the settings right and don’t throw the baby out with the bath water.”
