Patience urged over 'shortsighted' super tax

The SMSF Association (SMSFA) is repeating calls for the government to address "catastrophic" flaws in its proposed superannuation tax.

SMSFA chief executive Peter Burgess said the critical flaw in the proposed tax is its calculation of investment earnings, which "inexplicably includes unrealised capital gains".

Burgess said this would penalise SMSF members for paper profits that may never materialise.

"No one disputes Treasury's desire for a fair and equitable superannuation system, but to claim this tax only affects a minority and serves the national interest is shortsighted. It ignores the broader ripple effects," Burgess said.

"The government's narrow focus is blind to the vital connections between superannuants, small business owners, primary producers, and angel investors.

"This oversight is already destabilising the SMSF sector and threatens to disrupt the delicate balance of our economic ecosystem."

Wilson Advisory senior private wealth adviser Paul Aliprandi said despite concerns, patience is key.

"We advise clients to remain patient until the Bill is reintroduced into Parliament. At that time, we will carefully review the legislation for any amendments, with particular attention to the effective start date," Aliprandi said.

"This will provide clarity on the timeframe available to implement strategies to manage the new tax effectively."

Meanwhile, Heffron managing director Meg Heffron said while for some a "don't act now" approach would be the best course of action - there is one group of SMSF members facing a difficult choice.

"Division 296 tax depends heavily on how a member's 'total super balance' changes from year to year," Heffron said.

"Currently, a member who has a complying lifetime pension has a strange amount included in their total super balance for this pension - it's not the amount of their 'pension account' or even the 'actuarial value' of their pension. It's whatever was reported back in 2017 for their transfer balance cap.

"Ever since, the same amount has been recorded for that pension in their total super balance. Conceptually this doesn't make sense - the pension has actually become less valuable over time as it will stop when the member dies and obviously this becomes more likely as the member ages."

Heffron said since that would influence the member's Division 296 tax - assuming they have other super - it's important it's calculated more realistically.