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SMSF Proposed Changes for 2014

Monday, April 08, 2013

Hi all,

As we probably all know by now the government has released it's proposed changes.  At this stage we can't say exactly how this will affect SMSF and property investing.  It is very disappointing the the government is yet again tinkering with the SMSF rules.  This will erode confidence in SMSF's to some extent.  As usual, the announcements come with no technical detail as to how they will actually work in practice.

All we know so far is 15% tax on earnings over $100,000.  Yet Capital Gains on Properties in super have always been taxed at a maximum of 10%.  My guess is that, if these rules get through, which is doubtful, the following will occur.  When a property is sold and say a gain of $500,000 is realised, then the first $100,000 will be tax free and then the balance of the gain of $400,000 may be taxed at 10% or $40,000. In other words property is still a extremely viable investment option.  You have still made a net profit of $460,000.

However, the tax is still unfair and inequitable as at this stage it appears it will only apply to SMSF's.  Retail and Industry Funds also invest in property on a large scale.  Is the same rule going to apply to the proportion of funds allocated against pension members who have more than $100,000 in income stream.  Probably not, as most people with supposedly super rich superannuation of $2,000,000 or more are smart enough to have their money in SMSF despite the tinkering of the rules.

 

I will update again when we find out more about this.

 

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