Speaking to InvestorDaily, Tria Investment Partners principal Andrew Baker said the SMSF sector is "not contributing anything" to the taxation system.
In fact, according to statistics from the 2011-2012 tax year, $600 million was refunded to SMSFs – while APRA-regulated funds paid $7.2 billion in tax.
"Tax collections from SMSFs rose into the financial crisis and fell afterwards, but unlike APRA funds, they have not recovered," said Mr Baker in an article for InvestorDaily's sister title, SMSF Adviser.
The SMSF sector had gross taxable income (including taxable contributions) of $33 billion in the 2012 financial year, he said.
"Take away the $15 billion of taxable income that related to SMSF pension accounts – this is tax exempt," said Mr Baker.
Fees, expenses and other deductions came to $3 billion, which left SMSFs with net taxable income of $15.6 billion – which indicated the taxable component at 15 per cent would have been around $2.4 billion.
"Enter the miracle of franking credits. SMSFs picked up just under $2.5 billion in franking credits over 2012, completely eliminating the segment’s tax bill, and in fact leaving a bit left over," said Mr Baker.
The fact the sector is yet to contribute anything to the taxation system is partly because about half of SMSFs' assets are already in the pension phase, he said.
"So half of it’s tax exempt for a start. And then it’s mostly the franking credits story," he said.
Given the ageing population in Australia, the problem of tax collection from the $500 billion SMSF sector will only become more pressing, said Mr Baker.
"I think the obvious thing to do is to equalise the earnings tax and put 15 per cent tax on the pension division," he said.
"The fact there’s two different tax rates means there’s obviously an arbitrage between the accumulation and pension divisions.
"What you see a lot of people trying to do is avoid realising any capital gains in their SMSF until they hit the pension division, which means the capital gains are just deferred forever," he said.
While the SMSF sector is not growing as rapidly as it once was, "it doesn’t look great when you’ve got 30 per cent of superannuation not paying any tax", said Mr Baker.
