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Tax consequences for SMSFs tipped with budget repair levy


Labor’s plans to reinstate a budget repair levy of 2 per cent could trigger some taxation consequences with SMSFs, warns a law firm.

By Miranda Brownlee2 minute read

Speaking in a recent webinar, DBA Lawyers senior associate William Fettes said that Labor has announced that, if elected, it will reinstate the temporary budget repair levy at a rate of 2 per cent.


The original budget repair levy, which was introduced in the 2014–15 federal budget by the Coalition, applied over a three-year time frame, with the levy ceasing after the 2016–17 financial year.

While there isn’t a lot of detail about this proposal yet, Mr Fettes said that it appears if it is implemented by the government, it will be a standing levy.

“There has been some commentary about its removal once the budget reaches a sustainable, fiscal position but not an automatic expiry,” Mr Fettes said.

If the measure is passed by the future government, the top marginal rate will increase to 47 per cent plus Medicare, which means the top tax rate will rise to 49 per cent or potentially even 49.5 per cent if the Medicare levy goes up too, he explained.

The increase in the top marginal rate will also have implications for some SMSFs where the fund is made non-complying or derives non-arm’s length income.

“It could have an impact on SMSFs that are non-complying or funds that don’t have a low tax component and have non-arm’s length income would need to be aware that the rate of tax that applies would be the 47 per cent rate, not the current 45 per cent rate, because of the impact of that levy,” he explained.

Mr Fettes said that, with the election date now called, the superannuation measures put forward by both major parties “now hang in the balance”.

“A lot will be contingent on the outcome of the election and what the future government is going to do,” he said.

Tax consequences for SMSFs tipped with budget repair levy
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Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

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