New super tax sparks SMSF shake-up: What property investors need to know
Self-managed super funds (SMSFs) are in sharp focus again, with legislative reform and political uncertainty shaping how investors approach property through their super.
In a recent episode of The Property Nerds podcast, John Collignon from C2 Financial Group joined Arjun Paliwal, Adrian Lee and Jack Fouracre to unpack the complexities and myths of SMSF investing.
Top of the agenda was Labor’s proposed Division 296 tax, which targets super balances over $3 million – controversially including unrealised gains.
“Here we are with one of the most controversial superannuation taxes that’s ever been release,” Collingnon explained. “One of the most controversial tax policies, in my view, that’s ever been released that is taxing people on unrealised gains, which is kind of unheard of.”
The proposed tax structure presents challenges for large super funds, which will struggle to calculate the 30 per cent tax on unrealised balances over $3 million, the group discussed.
“The easiest way for them to do it is just to say, well, your balance was X at 30 June. The next 30 June, your balance was at a higher amount ... you’re paying a tax on that difference at a higher rate of tax,” he explained.
But the policy may stall in the Senate.
Labor lacks the numbers and will need the Greens or Coalition to pass the bill, and neither are fully aligned.
“In the Senate they don’t have the majority to get any legislation through. They’re going to have to rely on the Greens to pass anything. Or they could rely on the Liberal Party, but that’s assuming they both agree. But the Liberals have already said that they’re not going to pass it."
The Greens want tougher rules, including lowering the threshold to $2 million and banning borrowing within SMSFs.
The experts explained that the move could seriously restrict property strategies.
Despite this, public interest in SMSFs remains strong, though misconceptions persist.
“Probably one of the big ones is that people think that self-managed super funds are only for the very wealthy. The fees on an SMSF have come down a lot in the last five to 10 years,” Collignon continued.
Technology and competition have driven down admin costs, making SMSFs viable for investors with balances around $200,000.
When it comes to property, there are still interesting opportunities including buying a commercial property from yourself at market rate: “With a commercial property, you can actually buy your own commercial property. Your self-managed super fund can actually buy a commercial property from a related party.”
Residential properties, however, cannot be purchased from yourself or a relative.
Education and advice are key for investors looking to set up an SMSF, the expert advised: “You really need to get your head around what it is you’re doing and work out your strategy ... before you set up the fund.”