Some Ideas for the SMSF Party

There is no doubt that SMSFs are a big part of the economy and a favoured savings vehicle for those who seek to be self-funded in retirement.  With $1 trillion expected to be in the sector by 2022 – SMSFs are now the third largest combined pension system in the world.  But loud calls are being made by the Labor Party, Treasury, the ATO and many economists to have the tax concessions for super shaved and given a serious haircut. 

For existing SMSF members and superannuants, retrospective and immediate changes like the Coalition government imposing a $1.6M Pension Transfer Balance on existing pension balances is unsettling and in short, extremely unfair.  With a possible incoming Labor Government seeking to reduce non-concessional contributions to $75k, getting rid of the five-year concessional contribution averaging, knocking out refundable franking credits and a possible lowering of the pension transfer balance cap – there is a need for not only protection of existing superannuation benefits but a promise of not making further changes.  Once retired, the last thing a retiree needs is a change to their retirement income stream, particularly self-funded retirees who have chosen to look after themselves rather than rely on the aged pension. 

Well before the Labor Party proposals, which have created great furore, we did a lot of surveys and research of SMSF members.  This is some of the real feedback:

“Please do not change current arrangements with respect to lump sum withdrawals without penalty. Respect the fact that many self-funded retirees have provided for themselves without being on above-average salaries/wages by being very frugal and undertaking often less than pleasant employment in order to maintain themselves and their families.”

“Do not make any changes to the current SMSF rulings that will disadvantage retired and those nearing retirement. We have worked hard over many years to contribute to our funds in order to be completely self-funded in retirement, thereby saving the government and community many thousands of dollars in pension payments. We appreciate the benefits the Howard government provided and this is how we repay that advantage.”

“The government and the opposition need to get together and create an independent commission to look after super. Plus future policies should only be made with bipartisan agreement. You cannot trust any one party with the vast wealth of the super industry.”

It was always considered that associations would be able to sway government votes.  But that is clearly not the case.  Sure, they make submissions but the power is always held in the government and more importantly, votes.  Let’s be realistic, the Labor Party will always go out of its way to foster, grow and protect Industry Super Funds.  Why do you think the refundable franking credit issue was put on the table with the stopper that if it is a concern, move to an Industry Super Fund.

I ask you when was the last time anyone in government really understood, let alone stood up for SMSFs?

My frustration is that of many and having sat on the outside of government with no effect, there is a need for an SMSF Party.  I honestly wished that the Coalition stood up for SMSFs but with aged-based limits for over 50s of $107,000 a decade ago now diminished to a mere $25,000, the jig is up.  And don’t think the pension TBC will remain at $1.6M.  Look at the high-income earners surcharge on super contributions.  It started at $300,000, then Morrison moved it to $250,000 and Labor has proposed it to go to $200,000.

But the SMSF Party is not just about saving tax concessions; it is also about using the financial and economic power of SMSFs to help the economy.  Consider some of these ideas that could be put forward as potential platform issues for the SMSF Party:

Long Term Infrastructure

Drive around the cities and it is clear that there is a need for significant infrastructure spending and the governments are not committed to that spend in any meaningful way. On the other side, there is more than $200 billion sitting idly in SMSF cash.  In a survey of SMSF Trustees we asked the following question:

If the government provided a long term bond – 10+ years, that was used to provide infrastructure investment across Australia, given the right terms and conditions would you invest?

It may come as a surprise for many but SMSF Trustees crave for long-term secure cash flow and if targeted, genuinely to nation building.  The response to this question was 74% positive and we are talking about actual investment not just whether it is a good idea.

Solving the Housing Affordability Crisis

The housing affordability crisis is one that is not going to go away.  Government and councils are moving as fast as they can to get new stock but the entry level pricing in the major capital cities is frightening.  There are many parents who either have their children living with them while they are trying to save for retirement or have to use non-super savings to help or provide a deposit for their child.  With more than one child that is a significant financial burden. 

I have proposed in the past that a parent’s SMSF may, with the appropriate regulatory and payment safeguards, be used to partially fund a first home purchase for a lineal descendent. 

Sure, it will take a lot of work to implement but it solves one big problem.T

The Next Survey: Regional Development

Many SMSFs are in regional Australia and their members have seen many towns being ravaged by urbanism as their children move off the land leaving generations-held farms in danger of leaving the family.  It is important to safeguard our food bowl and that is an area where a regional development fund could step in and offer attractive bonds to SMSF investors.

These are just some big ideas and I am sure that if we put the power of SMSFs to work in a favourable government climate we can really make them the greatest show on earth.

Not yet a member of the party? Sign up here: www.thesmsfparty.com – no financial requirement.