| 02 9982 2466

Crackdown on superannuation tax may create borrowing spike

Tougher superannuation rules may create an unintended spike in risky property borrowing by those with a self-managed super fund, with experts suggesting that the changes will force SMSFs to load up on debt in an attempt to increase returns.

While there are still incentives for people to wanting to own property within their SMSF, under the new rules announced in the 2016 Federal Budget, rather than being able to fund investments through their own equity, many SMSFs will be forced to take on more debt to do so.

Most of the superannuation changes are due to take effect from 1 July 2017. They include a $1.6 million limit on the amount that can be transferred from a super accumulation account into a retirement account and a new lifetime limit on non-concessional (after-tax) contributions of $500,000, backdated to 2007, which took effect on budget night.

In most cases, super funds are not allowed to borrow. The exception is the limited recourse borrowing arrangement, which is only allowed in Australia’s SMSF sector.

Since 2013, the Reserve Bank of Australia has expressed concerns over the number of SMSFs taking on debt to invest in property. More recently, the ATO has cracked down on SMSFs that don’t qualify for bank finance turning to related-party loans to buy property.

Posted on 12 May '16 by , under Tax.

Leave a Comment

You must be logged in to post a comment.

Join Our Mailing List!

Subscribe to our mailing list to receive all the latest financial newsletter updates as well as information on important dates on our business calendar.

Recent Updates

Firm News

What to consider when consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
  • Insurance policies
  • Investment options
  • Ongoing service fees
  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver's license, birth certificate or passport.
  • Your fund's superannuation product identification number (SPIN).
  • Your fund's unique superannuation identifier (USI).
  • Details of your previous fund.

Business Calender