MYEFO - Yes it is out!

Possibly the most important thing about the MYEFO is that the Government did not announce any changes to transition to retirement pensions or limited recourse borrowing arrangements.

From a purely SMSF point of view there was one significant concession announced and two negative changes.

First, the significant concession.  The Government will amend the tax and super law to allow the tax concessions applying to pensions to continue for a grace period (yet to specified) after the death of the pensioner/member.  This does not mean that pension payments can still continue to be made after the death of the pensioner/member.  Rather that the change will delay the transfer of the assets supporting the pension from tax exempt to taxable status.  Consequently, this change will permit trustees to cash up the pension assets after the death of the pensioner member without incurring tax.  The full details of the change have not been released.  However, the change will operate from 1 July 2012.

We understand that given this announcement, it is likely that the ATO will soon finalise the Draft Pension Tax Ruling – with the change that death after 1 July 2012 will still terminate the pension, but will not immediately terminate the tax concessions the pension provided.

The two negative changes relate to the SMSF Supervisory Levy Fee and the increase in the dollar value of the penalty units for administrative and other offences.

The SMSF Supervisory Levy will increase from $191 to $269 per year per SMSF.  The increased levy will apply to the 2013/14 and following financial years.  Also, the timing of the payment of the levy will be brought forward.  Currently the levy is effectively paid in arrears – possibly up to 11 months after financial year end.  The Government proposes to bring forward the timing of the payment so that the levy for a particular year will be payable during that year.  This change will be phased in over two financial years to reduce the impact of having to pay two years’ levies in one year.

The other negative change relates to the dollar value of penalty units.  Currently each penalty unit has a dollar value of $110.  This will be increased to $170 per unit.  This increase will apply to administrative and other penalties imposed on trustees and others.  Presumably this increase will apply to all Commonwealth legislation.

As with everything to do with Superannuation – the devil is in the details and/or transitional measures and/or integrity measures.  Once the draft legislation is released to implement these measures, their full impact can then be considered.

Finally “MYEFO” is the acronym for “Mid-Year Economic and Fiscal Outlook”.