Family Trust as the New SMSF?

Have the ScoMo changes (which now seem likely to be implemented – subject to one or two minor changes) amounted to the demise of SMSFs as the preferred private wealth investment vehicle?

Possibly this view is overstating the situation.  Tax deductible contributions can only be made to superannuation funds: they cannot be made to family trusts.  Employer SG contributions can only be made to superannuation funds: they cannot be made to family trusts.

The investment income and any realised long term capital gain is taxed at 15% and 10% respectively during the period before retirement.  And, even in retirement, for most investors the investment income and realised capital gains will be subject to zero tax (and for investors with very large pension balances, they will be taxed at 15% and 10% on the portion of the balance above $1.6m).  These tax rates will generally be more advantageous for most family groups than the normal marginal rates even with the zero rate threshold.  Further, the controllers of the superannuation fund are not subject to the requirement to have to distribute the income to beneficiaries to avoid taxation at the top marginal rate.

While the significant ScoMo changes are negative (the less significant changes are generally beneficial) they have not entirely eroded or neutralised the taxation benefits of superannuation.