Self managed superannuation funds (SMSFs) that are used for pre-retirement spending are open to tax abuse, according to a South Australian barrister.
The importance of using SMSFs for the sole purpose of providing income for people after they retire was raised during a SPAA (SMSF Professionals Association of Australia) presentation on ethics in superannuation by Paul Heywood-Smith QC.
"When SMSFs are used for tax avoidance, then ethical issues arise," he said. "Taxation of citizens is necessarily moral. It is just. Evasion of taxation is immoral.
The use of SMSFs to avoid payment of tax and to create a fund that goes way beyond what is needed for a comfortable retirement raises ethical questions," Heywood-Smith said.
"Once tax evasion measures are introduced those least able to carry it are handed the tax burden that others have avoided," he said.
This was probably the reason why the government introduced reasonable benefit limits (RBL) in 1990, Heywood Smith said.
"I am yet to fully understand why in 2006 RBLs were abolished."
