ALP refutes defined benefit restrictions
By Rebecca Evans
SHADOW Minister for Retirement Incomes and Savings Senator Nick Sherry recently announced the Labor Party’s intent to disallow regulatory provisions he says prohibit super funds with less than 50 members from providing defined benefit pensions.
“If these regulations are allowed to stand, do-it-yourself funds would either have to close or transfer their funds to a new product — doubling the cost of operation,” Sherry says.
He argues until the Government concludes its own review of the regulations — scheduled for completion by April 2005 — the regulations should be withdrawn.
“Enormous uncertainty has been created for DIY fund members by this approach. What are the rules to be for 523,000 DIY fund members in 381,845 small super funds?” he says.
The call from Labor comes after the Government unveiled some unexpected changes to SMSFs in the 2004-05 Federal Budget.
In it, the Government announced its plans to compel accumulation funds to allocate all contributions, and fully vest benefits in a given member, as well as the requirement of defined benefit funds to have at least 50 members.
The 50 member requirement also applies for funds providing defined benefit pensions with the moves being labelled as tax avoidance measures in the small and non-arm’s length superannuation sector.
The Government has stated in the Budget Papers that “the measure will target arrangements that avoid limits applying to tax concessions and social security means test and that allow superannuation to be accumulated for estate planning purposes.”
But Sherry says evidence of avoidance is unclear from Treasury or the Australian Tax Office as to what level of abuse in numbers or lost revenue is.
“Why should the future of all DIY funds be threatened? It is clear that alternative anti-avoidance measures can be developed to ensure the integrity of revenue is protected,” he says.
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