Taxing times for trustees?

Christine St Anne: I'm at the SMSF Association's Annual Conference and this time I have managed to grab a quiet room, and today I'm joined by Graeme Colley to talk about some of the key legislative issues for trustees.  Graeme, welcome.

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Graeme Colley: Thank you, Christine.

St Anne: Now, Graeme, you had mentioned in your presentation some technical issues in particular the concession or contributions into superannuation and then the LRBAs. Can you give us a little bit of insight into those two initiatives?

Colley: With contributions we saw an increase last year around up to A$30,000 for people up to age 50 and then beyond age 50 it was A$35,000. We think that's a good thing, because people later in life probably need higher amounts to go into superannuation because of the adequacy there. So we're happy with that. We still don't think that's enough, but we continue to lobby the government in that regard.

Now with limited-recourse borrowing last year we saw the ATO issue some rulings, some determinations on certain non-commercial loans and they are trading those arrangements as being what we call non-arm's length income and they get taxed at 45 per cent rather than 15 per cent if you're in accumulation phase or zero if you're in pension phase. So, that's a pretty expensive exercise. We've also got legislation coming in fairly soon, which is going to look at what we call the look-through provisions about limited-recourse borrowing as well. So that will be interesting to see what that's got in.

St Anne: And the other topic that was brought up in the presentation was the recommendations in the Financial System Inquiry and specifically the tax white paper. Are there any issues of concern for trustees in that area?

Colley: Well we've seen a lot over the years on moving from accumulation to pension phase and that seems to be something that they'll certainly take into account, the taxing of the superannuation fund and we saw the Henry Review and what it had to say some years go. So we'll see what they come out with. I think they also mentioned franking credits and because we're quite unique in the world, actually unique in the world with a franking credit system that we've got. Then finally negative gearing and having a look at that. We think that was a good thing, because it seems to skew people's decisions away from superannuation where they really should be thinking about their retirement income.

St Anne: And there has been a lot of discussion of course about some of the generous concessions in superannuation and I know that the government has already – in the budget there won't be any changes, but do you expect any perhaps announcements to be made?

Colley: Not in the budget, there may be other announcements sort of relatively technical, but changes in the contribution levels, I think that they would leave that to the taxation white paper.

St Anne: Well, Graeme, thank you so much for your time today, and of course, we will be seeing you in a couple of weeks' time at our own conference in March. So thank you, Graham.

Colley: I look forward to this. Thank you, Christine.

St Anne: Thank you. Christine for Morningstar.