Insights

The Complexity of Government Legislations & Superannuation

Written by Clayton Childs | 1/06/18 3:30 AM

Continuously altering a certain legislation historically leads to that legislation becoming compromised in terms of its original intent. It usually becomes too complex and thus uncertainty arises on how the legislation should be applied and whether unintended consequences start to dominate the impact of it. The superannuation reforms from 12 months ago could be seen within this class of legislation.

In this month’s round of articles it was decided we would cover superannuation due to the abundant number of changes in reforms and legislations that have surrounded it from 1 July 2017, and some of which come into effect on 1 July 2018. These are systems individuals and businesses need to know about and we have had enough time now for the dust to settle on these changes.

We have recently provided detail on the most relevant topics in relation to these changes in previous articles, included in summary:

  • The Transfer Balance Account cap which relates to new restrictions on pension accounts and the reporting requirements to the ATO related to it, as of 1 July 2018, to ensure the restrictions are in place. People impacted by this measure have definitely been impacted by complexity.
  • Changes to SMSF Contribution Caps and knowing those that apply to you, as they can be based on age, whether the contributions are made before (concessional) or after tax (non-concessional) and the time at which the contributions are made. The caps are not particularly complicated; however the historical annual “merry go round” of what caps apply to which years in question is disconcerting for just about everyone who utilises super.
  • Being aware that having an annual adjusted taxable income of $250,000 or over leads to the Division 293 Tax applying to concessional contributions that you make to your superannuation (effective tax rate of 30% on the contributions).

In my experience some people may avoid creating a self-managed super fund (SMSF) simply because it’s too difficult to comprehend the reams of legislative requirements that go along with it. They also do not have much faith in the current industry and financial services offerings for retirement savings due to a lack of transparency and complication. I am not sure with the current investigations into financial services that more regulation is the appropriate response but it is all we seem to get in the wake of these types of things occurring.

Unfortunately in the current Australian economic environment of constant change, in not only legislation, but political agendas and uncertainty around who actually controls the legislative process at the governmental level, we are probably not going to get any certainty around any of these things in the short to medium term.

*This information is relevant at the time of publishing and is subject to change*