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

Meg on SMSFs: Tips for the last member standing

Meg on SMSFs: Timing and the new super tax

banner

Most viewed in recent weeks

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Designing a life, with money to spare

Are you living your life by default or by design? It strikes me that many people are doing the former and living according to others’ expectations of them, leading to poor choices including with their finances.

World's largest asset manager wants to revolutionise your portfolio

Larry Fink is one of the smartest people in the finance industry. In his latest shareholder letter, the Blackrock CEO outlines his quest to become the biggest player in private assets and upend investor portfolios.

Latest Updates

Investment strategies

An enlightened dividend path

While many chase high yields, true investment power lies in companies that steadily grow dividends. This strategy, rooted in patience and discipline, quietly compounds wealth and anchors investors through market turbulence.

Investment strategies

Don't let Trump derail your wealth creation plans

If you want to build wealth over the long-term, trying to guess the stock market's next move is generally a bad idea. In a month where this might be more tempting than ever, here is what you should focus on instead.

Economics

Pros and cons of Labor's home batteries scheme

Labor has announced a $2.3 billion Cheaper Home Batteries Program, aimed at slashing the cost of home batteries. The goal is to turbocharge battery uptake, though practical difficulties may prevent that happening.

Investment strategies

Will China's EV boom end in tears?

China's EV dominance is reshaping global auto markets - but with soaring tariffs, overcapacity, and rising scrutiny, the industry’s meteoric rise may face a turbulent road ahead. Can China maintain its lead - or will it stall?

Investment strategies

REITs: a haven in a Trumpian world?

Equity markets have been lashed by Trump's tariff policies, yet REITs have outperformed. Not only are they largely unaffected by tariffs, but they offer a unique combination of growth, sound fundamentals, and value.

Shares

Why Europe is back on the global investor map

European equities are surging ahead of the U.S this year, driven by strong earnings, undervaluation, and fiscal stimulus. With quality founder-led firms and a strengthening Euro, Europe may be the next global investment hotspot.

Chalmers' disingenuous budget claims

The Treasurer often touts a $207 billion improvement in Australia's financial position. A deeper look at the numbers reveals something less impressive, caused far more by commodity price surprises than policy.

Fixed interest

Duration: Friend or foe in a defensive allocation?

Duration is back. After years in the doghouse, shifting markets and higher yields are restoring its role as a reliable diversifier and income source - offering defensive strength in today’s uncertain environment.

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.