Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 192

Do new rules create incentive for single member SMSFs?

Are you a member of an SMSF or small APRA fund (SAF)? Are your circumstances, aims, goals and objectives similar to those of your fellow members? Particularly, are you in the same phase of superannuation? No? Well your position will be changed dramatically from 1 July 2017.

Contrary to the statement in Treasury’s Budget 2016 Making a fairer and more sustainable superannuation system fact sheets and Q&As that “In the superannuation system, and most areas of tax, people are taxed and treated as individuals not families or households”, for members of SMSFs and SAFs the tax outcome of earnings on assets owned by one member will depend on the tax position of other members.

This reflects that in seeking to avoid members with accumulated super benefits in excess of $1.6 million segregating assets in pools to achieve a tax advantage, the new rules also prevent segregation of assets by member when it comes to calculating the fund’s tax liability.

A simple example of the issue is an SMSF or SAF with only two members, one in pension phase and one in accumulation phase. When the fund realises an asset in order to make a pension payment and so makes a capital gain (inevitable with the working of the increasing pension factors) that capital gain will be taxed solely because the other member is still in accumulation phase. Which member should bear the cost of this tax? – the pensioner, who if in any other fund would have no tax liability, or the accumulator, who would have no need to realise the asset?

Those members of SMSFs and SAFs finding themselves in this unexpected position of their benefits being taxed because of the other member may find it difficult to extricate themselves because rolling their benefits out to an unaffected fund will trigger a potential capital gains tax event in their current SMSF or SAF. Given the imminent implementation date, you need to be talking to your superannuation advisor ASAP.

In this simple move away from people being taxed as individuals not families or households or SMSFs and SAFs, the new system is not fairer and the Government has created an advantage for the industry and large retail funds and an impetus to single member SMSFs.

 

Rick Turner is a client adviser at a leading stock broker. This article is for general information only and does not consider the circumstances of any individual.

 

SMSF expert, Monica Rule, has provided her feedback on the points made in this article:

Rick Turner is saying that if there are two SMSF members and one is in accumulation phase and the other is in pension phase, then their SMSF would need to pay tax on earnings from assets and capital gains from the sale of assets that are supporting the pension account from 1 July 2017. This is because you can no longer segregate assets to support a pension if your superannuation balance exceeds the transfer balance cap of $1.6 million. The tax payable will be on the portion that represents the members’ accumulation accounts.

He is also referring to the fact that if the same member was in a retail superannuation fund, due to the number of members and pool of assets, the member would possibly incur less cost in his superannuation account.

Going forward from 1 July 2017, SMSFs will incur more costs due to the amount of additional work accountants will have to do to keep track of members’ personal transfer balance accounts as well as keeping records of the actual members’ pension and accumulation accounts.

RELATED ARTICLES

Why 'total superannuation balance' is important for SMSFs

How to prevent excessive superannuation balances

Meg on SMSFs: Tips for the last member standing

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.