TBCs and TSBs need attention to reduce super complexity

To reduce complexity in retirement income, the government should remove or simplify the transfer balance cap (TBC) proportional indexation, reduce the number of total superannuation balance (TSB) thresholds, and provide self-managed superannuation fund advisers and administrators access to Australian Taxation Office (ATO) portals. 

These were the recommendations of the SMSF Association in its 2021/22 pre-Budget submission. 

The association’s chief executive, John Maroney, said: “With Transfer Balance Cap (TBC) indexation now occurring on 1 July 2021, we believe it is imperative that a simpler method of indexation is implemented.  Additionally, the Total Superannuation Balance (TSB) thresholds should be streamlined. 

“The superannuation system is not only difficult for trustees and members but also their advisers who must be privy to information which, in many instances, they are unable to access in an accurate and timely fashion.” 

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He said locking in a member’s TBC at the time they first started a retirement phase income stream would address complexities with proportional indexation. 

“Although this option may cause some minor inequities, we believe these are acceptable to avoid the cost and confusion proportional indexation would cause,” he said. 

“Alternately, if the Government wishes to retain proportional indexation, the rules could be simplified by reducing the number of bands (currently 0% to 100%) of proportional indexation to five or some other appropriate number.” 

On TSB thresholds, Maroney said the solution was to reduce their number as there were multiple differing thresholds for individuals to be aware of when accessing certain super concessions, and some of these were indexed and some were not. 

“It also increases the risk of inadvertent breaches of the contribution caps and TBC leading to time-consuming and often costly remediation. Reducing the number of thresholds is achievable and will significantly reduce the complexity in the system,” he said. 

Maroney also noted the lack of information for SMSF advisers who needed to provide advice based on a myriad of complex caps, thresholds, and balances. The association called for SMSF advisers to be granted access to the ATO portal. 

“We recommend individuals who are registered with the TPB as a tax (financial) adviser and the fund’s appointed SMSF administrator should have access so they can provide financial advice more efficiently,” Maroney said. 

“…Accountants can obtain information but cannot provide advice and financial advisers are unable to obtain information but can provide advice. This jeopardises the quality and efficiency of advice being provided to members.”