rbs research note

In response to the $100k + tax @ 15%.
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Ed Note: Now more than ever these changes highlight the benefit of holding fully franked shares in superannuation. Franking credits are included when calculating taxable income,however, the credits can then be utilised to offset tax.

The change to capital gains tax rules will be a nightmare to administer, particularly for APRA-regulated funds. Accountants and administators alike will be laughing all the way to the bank on this one.

It will be interesting to see how exactly Treasury propose to
manage capital gains/losses on future pension accounts. The 'special arrangements' proposed is just another example of ludicrous policy.

A single member account with a balance of approximately $970,000 can fully expect to have taxable earnings of approximately $51,000 - averaging a 5.25% return. It won't take much if our markets continue to improve for member balances to increase such that the $100,000 threshold on earnings is met.

Estate planning may also change. Consider a pensioner who has a reversionary pension. If the pensioner dies the spouse will receive the reversionary pension. If the spouse already has a high member balance will the reversio nary pension be added to this balance
to determine the $100,000 limit or will current separate superannuation interest rules mean the $100,000 will continue to apply to each pension interest? If the former then different
strategies will need to be adopted so that the surviving spouse is not left with additional tax consequences.
It is another reason why popularity in SMSFs will continue to increase as tax planning and estate planning control will be of the utmost importance.