The accuracy of the content is not guaranteed. Please rely only on the authorised document. Retirees who convert their self-managed super to an allocated pension could lose up to 10 per cent of their savings in capital gains tax (CGT) thanks to a sneaky new superannuation bill says CPA Australia. In their submission today the CPAs say the bill could affect more than 180,000 small self-managed super funds that will be forced to pay CGT on any investments converted into an income stream. The bill, which contradicts Government goals to encourage savings, is a major blow to the super industry and thousands of Australians who intended to self-fund their retirement. It is also a major upheaval for accountants who are already inundated with tax work. CPA Australia’s super spokesman, Murray Wyatt said that after doing some preliminary sums, retirees affected by the bill will likely take the money as a lump sum instead of saving it and drawing a regular income. " Self-managed super funds in particular are likely to be the worst affected because of their size and structure. We have already spoken to many members who want to take their money and go." "Many self-managed funds have one or two significant assets that they would need to sell to generate income back into the fund to pay the pensions. Big funds will also have a problem segregating their assets." "The impact on self-managed funds will throw into chaos the plans of thousands of Australians who will now pay tax that was never expected. For some it could destroy their comfortable retirement." "There will be thousands of Australians in their 50s and 60s very upset by this change, a change that gobbles up any benefit they would have received from the Government’s tax reform package." Super bill to rob thousands more like Peter, says CPAs An example of the impact of CGT: Peter is 64 and a member/trustee of a single-person self-managed fund. He turns 65 on 2 July 2000 and intends to retire and begin an allocated pension. In addition to cash, Peter’s fund has an undeveloped property, now worth $400,000, which has done well with capital growth of $200,000 (the property was originally purchased for $200,000). Under the existing regime, Peter could have converted his self-managed fund to an allocated pension and sold the asset CGT free upon beginning the allocated pension (income stream). However, under the new bill, if he disposes of the asset after 1 July 2000, the full capital gain of $200,000 made on the property will be hit with CGT when it is sold. As the property is the fund’s major asset, Peter has little choice but to dispose of it soon after retiring to generate a cash flow back into the fund so he can receive his pension. As such, the fund pays $20,000 in CGT (10 per cent on the $200,000 capital gain) made on the property. Since this comes at the beginning of Peter's retirement, all his retirement plans are in shambles. When he sits down with his CPA and does the figures, he realises he will lose $33 a week gross (about $23 a week after tax) for the next 16 years! "In one fell swoop, the new tax has drained the benefits Peter saved for years to get. And there are several thousand Peter's out there who have structured their savings based on assets that are CGT free."
|
