Super System Review: Preliminary Report on SMSFs

The Super System Review has released its preliminary report, Self-Managed Super Solutions, which contains a host of recommendations. While the Government has not responded to the recommendations, if implemented, they will impact on the SMSF landscape.

The report makes the following key recommendations:

·         Exotic assets prohibited — Investments in collectables and personal use assets should be prohibited, such as paintings, jewellery, antiques, wine, exotic cars and yachts.

·         In-house assets prohibited — SMSFs should be prohibited from any in-house assets. (In brief, an in-house asset is an asset of the fund subject to a lease or lease arrangement between the trustee of the fund and a related party of the fund)

·         Leverage and instalment warrants — A review of the borrowing exception (ie instalment warrants) should be carried out in two years to ensure that borrowing has not become a significant focus of SMSFs.

·         Annual member disclosure — The corporations legislation should be amended to ensure SMSFs' members are provided with key information annually.

·         Illegal early release — Existing tax laws should be amended so that amounts illegally early released are taxed at the superannuation non-complying tax rate (currently 46.5%) rather than an individual's marginal tax rate.

·         Binding SMSF rulings — The Tax Office should be given the power to issue binding rulings in relation to SMSFs.