Peter Burgess

The proposed tax on super balances exceeding $3 million is still flawed and should not be legislated in its present form, the peak body representing self-managed superannuation funds said, imploring Senate cross-benchers to ice the bill.

The government’s plan to increase taxes on super balances above $3 million will have a costly impact on the SMSF sector, with thousands of members likely to face liquidity stress, according to new research from the University of Adelaide’s International Centre for Financial Services.

The government’s plan to include unrealised capital gains in earnings calculations when it doubles the tax rate for super balances above $3 million is “flawed policy”, according to the SMSF Association. It says there’s an easy fix.

Following the Labor government’s decision to shelve a program meant to streamline and modernise Australia’s business registry system, the SMSF Association has argued for keeping “key aspects” of the scheme that would have meant material improvements for corporate trustees and the SMSF sector.

While she acknowledged some in the industry may be resistant to expanding the scope of who can provide advice, the principal architect of the Quality of Advice Review urged support for its adoption, saying her recommendations are good for advisers and, most importantly, for consumers.

With new data showing offshore share investments comprise just 2 percent of total self-managed superannuation fund assets in Australia, advisers are warning SMSFs against overreliance on domestic shares and cash and urging diversification.

Stakeholders have welcomed a recommendation from the Senate Economics Legislative Committee that the government review its controversial plan to limit franking credits stemming from capital raisings and share buybacks.

The test allows investors who can certify that they earn $250,000 a year or have more than $2.5 million in net assets to access higher-risk securities normally off-limits to individuals. But many say the test is confusing and outdated, and an independent statutory body has called for an update.

While the move to tax superannuation balances above $3 million at a higher rate would affect only a handful of people at first, if the threshold is not indexed to inflation, future generations may be turned off from investing in their super, industry leaders say.

The federal government plans to use part of the $4.2 billion projected budget surplus to provide cost-of-living relief for Australian households and small businesses. It’s also moving forward with controversial plans to change tax concessions for the superannuation industry.