ATO cautioned over defined benefit income streams
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The Australian Taxation Office (ATO) has been urged to delay changes it proposes to implement with respect to superannuation defined benefit income streams impacted by successor fund transfers (SFTs) because of the risk it may make such arrangements unworkable.
The Association of Superannuation Funds of Australia (ASFA) has urged that the ATO delay any changes until after the Government legislates to overcome specific negative consequences.
In doing so, ASFA suggested that the approach being considered by the ATO appeared to be in conflict with key pieces of legislation – the Superannuation Industry (Supervision) Act and the Superannuation Industry (Supervision) Regulations.
“Those provisions allow for the transfer of a member’s interest in a superannuation fund without the member’s consent, but do not allow for the commutation of an income stream being paid to a member without the member’s consent,” it said.
”Two possible interpretations of the operation of the SFT provisions appear open:
- there is no power to transfer an income stream member as part of an SFT, and thus consent would be required from each and every income stream member (to allow the commutation of his or her commutation) as part of the implementation of an SFT; or
- the relevant income streams do not cease and recommence.
“ASFA submits that the first of these interpretations would render most large SFTs unworkable,” ASFA said. “Further, the second interpretation gives rise to significant uncertainty as to the tax treatment of amounts paid by the closing fund to the ongoing fund in an SFT that reflect the value of an income stream member’s liabilities.”
“In light of this, ASFA considers that the ATO view as expressed in the revised TR represents an appropriate compromise. However, ASFA submits that, as part of finalising the revised TR, the ATO should liaise with APRA to provide broader guidance to the industry that better reconciles the SIS provisions and the tax legislation. This guidance could, for example, make clear that APRA considers that the member’s income stream in the closing fund can cease (or be commuted) without the member’s consent in the context of an SFT.”
Will APRA be meeting the super fund executives to discuss this matter over dinner, followed by drinks at a nearby…
So, given the vast majority of Australians bank with one of only four retail banks, which BTW represent nthe greatest…
Me to
Why do I get the feeling this will drag on and on for years and go in a big circle…
Perhaps if Jayaweera got himself a job within Treasury helping them persecute thousands of innocent advisers, he would have escaped…