SuperConcepts general manager of technical and education services Peter Burgess said that a self-funded retiree with an SMSF will not be eligible to receive a refund of excess franking credits, while it appears that same individual in most public offer funds will continue to benefit from refundable franking credits.

The proposed pensioner guarantee, the GM said, does little to protect SMSF members from the impact of removing refundable franking credits and over time is likely to exacerbate the disruption to tax neutrality.

“The guarantee will apply only to an SMSF if one or more members of the fund were receiving a Centrelink pension before 28 March 2018,” the GM said.

“This ‘at point of time’ approach means an SMSF that didn’t qualify for the pensioner guarantee, but has members who qualify for a Centrelink pension sometime on or after 28 March 2018, will still not be eligible for a refund of excess franking credits.”

This is despite the same member being entitled to receive a refund of excess franking credits had they chosen an alternative retirement savings vehicle, noted Mr Burgess.

“The same applies to new SMSFs established on or after 28 March 2018. These funds will not be entitled to the pensioner guarantee and will be denied access to refundable franking credits regardless of the assets of their members and their entitlement to Centrelink benefits.”

Mr Burgess said that for many existing and prospective SMSF members, this policy, if passed, is likely to be a significant factor when weighing up the merits of an SMSF.

SMSFs, the GM said, play a valuable role in allowing people the choice to exert more control over their retirement savings, and they also provide a more competitive dynamic in the superannuation sector.

“The existence and success of the SMSF sector over many years has put downward pressure on administration fees and continues to foster higher levels of investment choice and member engagement across the entire superannuation industry,” the GM said.

“You don’t need a PhD in economics to understand the basic tenets of supply and demand, and if the SMSF sector is weakened, then the flow-on effects will be felt by members in other superannuation sectors as well.”