The Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2018 was passed through the House of Representatives at the end of last week. It covered a few different issues. Some good and some still questionable.
So what are the good ones?
One-off 12 month amnesty to encourage employers to self-correct historical SG non-compliance. If complied with, the employer will also be entitled to a tax deduction for payments of SG charge or contributions made during the amnesty period. Also, penalties and fees that would otherwise apply will be reduced to nil. The Bill will also introduce the measure discussed in the 2018-19 Federal Budget, in relation to allowing certain employees with multiple employers, to elect to which employees are to be part of the SG regime and which ones are to opt out. This measure is to prevent these employees from inadvertently breaching their concessional contribution cap.
Not so good?
The Bill clarifies the operation of Subdivision 295-H to ensure that non-arm’s length expenditure falls within the ‘net’ of the non-arm’s length rules. This is not only an extension of the application of the ‘safe-harbour’ rules in relation to LRBA’s but also in other instances where expenditure is less or nil than would otherwise be expected if the parties were dealing with each other at arm’s length. The non-arm’s length provisions contained in section 295-550 of the ITAA are nasty. If this section applies, the non-arm’s length component is taxed at the top marginal tax rate.
The total superannuation balance of a member in certain circumstances is to include the member’s proportionate interest in any outstanding LRBA. Initially, it was to apply to all members regardless of age or membership profile. This Bill has relaxed the measure to a degree, by only making it applicable to members whom have satisfied a ‘condition of release’ with a nil cashing restriction or where the fund has a LRBA with a related party. In the latter scenario, it is to apply to all members of the fund that has their superannuation interests supported by asset(s) that are subject to an LRBA. This measure is to be effective from 1 July 2018 and only applies to SMSF’s.
On reading the EM, the reasoning on the ‘condition of release’ measure was to circumvent any re-contribution strategies that may be employed to reduce the TBC of the member. The latter measure was to continue through on the broader non-arm’s length measures.
Whether this holds merit, we all have our own opinions, with a strong consensus I am sure to the knee-jerk reaction to minority examples that affect the legitimacy of an investment strategy as a whole.
Julie Dolan, Technical Director NowInfinity