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Recent Changes to SMSF Cap and Their Impact on Property Valuations

The Australian government has recently announced its decision regarding the introduction of a $3 million cap for superannuation tax concessions. 

This means that any earnings generated from superannuation balances exceeding $3 million will be subject to a concessional tax rate of 30% - instead of the usual 15%. The purpose of this change is to enhance the sustainability of the superannuation system while also contributing approximately $900 million to the government's budget in the short term, and around $2 billion annually in the long term. 

The implementation of this new rule is scheduled to take effect from July 1, 2025, following the next Federal election. However, certain considerations and concerns have been raised regarding the potential implications for individuals who possess single-member funds with balances surpassing $3 million, especially when distributing benefits to non-dependent beneficiaries (someone who isn't their dependent). This aspect has drawn comparisons to the notion of a "death tax" in some discussions. 

It's worth mentioning that the successful execution of this policy involves addressing various challenges. These challenges include data capture and management, updating the Australian Taxation Office's systems to accommodate the new tax rules, and addressing any existing delays in the submission of superannuation information, particularly in self-managed super funds (SMSFs).

Implications with the SMSF Cap

Understanding the SMSF Cap Increase

The SMSF cap refers to the maximum amount an individual can contribute to their superannuation fund while still enjoying the concessional tax rate. Prior to the recent changes, the SMSF cap was set at $1.6 million. However, the Australian government recognized the need to adjust this cap to keep pace with inflation and changing economic conditions, leading to the new cap of $3 million. 

Additional Tax on Unrealized Gains

Under the new cap, SMSF members may be required to pay additional tax if unrealized gains push their total superannuation balance above $3 million. This differs from how pooled superannuation funds operate and has raised concerns among SMSF members.

Impact on Existing Superannuation Pension Members

The majority of individuals affected by the cap will be existing superannuation pension members. This has caused significant concern, particularly regarding the treatment of unrealized gains. Pooled superannuation funds determine member balances based on the pool's daily unit price, while individual investments held by SMSF members may be valued differently.

Valuation of Unlisted Assets

There is growing discussion regarding the valuation of unlisted assets held by pooled superannuation funds. If these assets are forced to be priced more uniformly, it could have a significant impact on the application of the new cap. 

Legislation is not being 'grandfathered'

'Grandfathering' in legislation allows existing individuals or entities to be exempted from new regulations or requirements if they were already in compliance before the new law was enacted. It provides continuity and fairness by allowing them to continue their activities or enjoy certain benefits without being subject to the new rules. 

Unfortunately the new $3 million SMSF cap legislation is not being grandfathered, meaning any exiting individuals with SMSFs will be susceptible to the $3 million cap and increased taxes on amounts exceeding this threshold. 

For Property Valuations:

The increase in the SMSF cap brings about several notable implications for property valuations within SMSFs: 

Regulatory Considerations

While the SMSF cap increase offers more flexibility, it is crucial for SMSF members to understand and comply with existing regulatory audit requirements. Property valuations within SMSFs must be conducted in accordance with the Australian Taxation Office (ATO) guidelines, which we strictly follow. Valuations should be conducted by independent and qualified professionals such as Acumentis, to ensure compliance with the Superannuation Industry (Supervision) Act and related regulations. It is advisable for SMSF members to seek expert advice to navigate these regulatory considerations. 

It is important to ensure regular valuations are undertaken to take stock as to where your portfolio sits, and if you are near or going to exceed the $3 mil cap. This will become increasingly relevant as the July 1 2025 effective date approaches.

Having these insights will give you the intel to speak to your financial or SMSF specialist on how this impacts you, and how to strategize to find the best way forwards for you. 

If you found this article helpful, recommend Acumentis when chatting to your SMSF advisor, our team of experts are ready to assist.

Acumentis SMSF Property Valuation Experts

LOCATION
Tony Lenord
State Director Commercial - Sydney
Sydney
Daniel Carr
Valuer
Newcastle
Nathan Jones
Valuer
Norther Rivers (Lismore, Ballina, Byron Bay)
James Morrell
Associate Director
Norther Rivers (Lismore, Ballina, Byron Bay)
Angus Cooke
Valuer
Inverell
Merv Hooper
Senior Valuer
Albury
Tom McDouall
Director - Regional Residential Operations NSW
Newcastle
Terry Glitsos
Director NSW Government Statutory Assets & Legal
Sydney
Heath Craft
Valuer
Albury
Richard Lam
Valuer
Sydney
Gregory Jordan
Valuer
Port Macquarie
Andrew McDonnell
Associate Director
Sydney
Harry Morrow
Senior Valuer
Tamworth
Alison Seymour
Senior Valuer
Sydney
Damian Daczko
Regional Director
Taree
Damien Burley
Senior Director Advisory
Port Macquarie
Jiaxin (Kate) He
Commercial Valuer
Brisbane
June Button
Valuer
Gladstone
Adrian Marks
Valuer
Brisbane
Scott Blanchard
Senior Valuer
Cairns
Dale Rohde
Senior Valuer
Cairns
Clancy Miller
Valuer
Townsville
Paul Krause
Senior Valuer
Mackay
David Hosking
Regional Director
Cairns
Jared Teitzel
Senior Valuer
Brisbane
Jun Hao Ang
Associate Director
Brisbane
Henry Brown
Director
Brisbane
Wayne Airey
Associate Director
Sunshine Coast
Carlo Lando
Regional Director - Townsville
Townsville
Jany Pezard
Director - Valuations
Sunshine Coast
Gareth Turner
Director
Brisbane
Michael Everingham
Valuer
Gold Coast
Annette Smith
State Director Regional Operations (North)
Emerald
Lachlan Dunsdon
National Director Rural & Agribusiness
Brisbane
Paul Robbins
State Director Commercial QLD
Brisbane
Russell Cripps
Director Valuations
Hobart
Joe Stansfield
Regional Director - Tasmania (North)
Launceston
Andrew Goding
State Director Commercial - Victoria
Melbourne
Alexandra Churches
Regional Director - Victoria
Bendigo
Quentin Churches
Associate Director
Bendigo
Patrick Monaghan
State Director - Regional Operations Victoria
Gippsland
Nathan Camac
Associate Director
Melbourne
Damien Stone
State Director Residential - Victoria
Melbourne
Damian Lynch
Associate Director
Melbourne
Brenton Jones
Associate Director
Gippsland
Will Phillips
Director - Rural & Agribusiness
Western Australia
Aaron Hughes
Regional Director
South West WA
Ross Sharp
State Director – WA – Rural & Agribusiness
Perth
Richard Graham
Regional Director - South West
Bunbury
Damien Schifferli
Regional Director - South West WA
Busselton
Nathan King
National Director – Advisory, State Director – WA Operations
Perth
Tony Lenord
State Director Commercial - Sydney
Sydney
Daniel Carr
Valuer
Newcastle
Nathan Jones
Valuer
Norther Rivers (Lismore, Ballina, Byron Bay)
James Morrell
Associate Director
Norther Rivers (Lismore, Ballina, Byron Bay)
Angus Cooke
Valuer
Inverell
Merv Hooper
Senior Valuer
Albury
Tom McDouall
Director - Regional Residential Operations NSW
Newcastle
Terry Glitsos
Director NSW Government Statutory Assets & Legal
Sydney
Heath Craft
Valuer
Albury
Richard Lam
Valuer
Sydney
Gregory Jordan
Valuer
Port Macquarie
Andrew McDonnell
Associate Director
Sydney
Harry Morrow
Senior Valuer
Tamworth
Alison Seymour
Senior Valuer
Sydney
Damian Daczko
Regional Director
Taree
Damien Burley
Senior Director Advisory
Port Macquarie
Jiaxin (Kate) He
Commercial Valuer
Brisbane
June Button
Valuer
Gladstone
Adrian Marks
Valuer
Brisbane
Scott Blanchard
Senior Valuer
Cairns
Dale Rohde
Senior Valuer
Cairns
Clancy Miller
Valuer
Townsville
Paul Krause
Senior Valuer
Mackay
David Hosking
Regional Director
Cairns
Jared Teitzel
Senior Valuer
Brisbane
Jun Hao Ang
Associate Director
Brisbane
Henry Brown
Director
Brisbane
Wayne Airey
Associate Director
Sunshine Coast
Carlo Lando
Regional Director - Townsville
Townsville
Jany Pezard
Director - Valuations
Sunshine Coast
Gareth Turner
Director
Brisbane
Michael Everingham
Valuer
Gold Coast
Annette Smith
State Director Regional Operations (North)
Emerald
Lachlan Dunsdon
National Director Rural & Agribusiness
Brisbane
Paul Robbins
State Director Commercial QLD
Brisbane
Russell Cripps
Director Valuations
Hobart
Joe Stansfield
Regional Director - Tasmania (North)
Launceston
Andrew Goding
State Director Commercial - Victoria
Melbourne
Alexandra Churches
Regional Director - Victoria
Bendigo
Quentin Churches
Associate Director
Bendigo
Patrick Monaghan
State Director - Regional Operations Victoria
Gippsland
Nathan Camac
Associate Director
Melbourne
Damien Stone
State Director Residential - Victoria
Melbourne
Damian Lynch
Associate Director
Melbourne
Brenton Jones
Associate Director
Gippsland
Will Phillips
Director - Rural & Agribusiness
Western Australia
Aaron Hughes
Regional Director
South West WA
Ross Sharp
State Director – WA – Rural & Agribusiness
Perth
Richard Graham
Regional Director - South West
Bunbury
Damien Schifferli
Regional Director - South West WA
Busselton
Nathan King
National Director – Advisory, State Director – WA Operations
Perth
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