Self-managed super fund (SMSF) legislation needs to be addressed if Australia is to avoid the blow-out of pension costs to $68 billion a year by 2020.
National accounting firm Chan & Naylor believes that while SMSFs go a long way to addressing the nation’s lack of retirement funds, Government reform is also needed to fix “serious flaws” in the trust mechanism and create best practice.
These flaws include the arbitrary maximum limit of four members, the potential 93 per cent tax penalty for over payment of contributions and the age limits that restrict members from contributing.
It also lists the need for improving the operating environment of SMSFs to include better education and support, as well as lifting annual concessional contribution limits, which currently stand at $25,000 per year for most Australians.
“None of the above factors assist in the fundamental and bedrock sole purpose test of superannuation, which is to provide retirement income for members,” said Ken Raiss, director of Chan & Naylor.
He believes there should be more focus on maximising superannuation, rather than legislation that taxes and penalises those who contribute more to their retirement.
