The Federal Government and the Australian Taxation Office (ATO) will need to undertake extensive consultations with key sectors of the financial services industry to ensure smooth implementation of the superannuation and other tax changes announced in the Federal Budget.
That is the assessment of KPMG, which has been liaising with funds and has drawn up a list of issues which will need either clarification or regulatory change to make them workable.
The list of issues has been developed by KPMG’s head of superannuation tax, Dana Fleming and her colleague Ross Stephens, and has pointed out a range of issues flowing from the proposed Budget changes, which will require significant clarification.
Among the queries raised by the KPMG team is what changes may be required to the present superannuation fund reporting arrangements to the ATO with respect to the self-managed superannuation fund (SMSF) tax return for these funds, or in the separate Member Contributions Statement reporting for larger funds.
The analysis said it appeared that new fields in this reporting would be required to enable the ATO to monitor transfers to pension phase against the $1.6 million limit, to distinguish between transition to retirement (TTR) pensions and ordinary pensions, and potentially the $500,000 balance limit for catch-up concessional contributions, even though some reporting of opening and closing member balances and lump sum and pension benefits paid already occurred.
The KPMG analysis also pointed to issues around the beneficial tax treatment of deferred annuity-type products, and asked whether a retiree putting some of his or her money aside in a product of this type, which would then commence payments at (say) age 85, be deemed to have utilised some of his or her $1.6 million cap.
It also noted that some funds had paid a ‘bonus’ representing the released accrued tax when moving from accumulation to pension, and that this bonus may have been paid for transfers to TTR pensions.
“As the bonus cannot be clawed back from the members, this will represent a loss to the fund’s reserves if the assets supporting existing TTRs become taxable at 15 per cent as proposed (i.e., if existing TTRs are not grandfathered),” the KPMG analysis said.
The analysis also pointed to timing and logistical problems around the proposed low income superannuation tax offset, noting the new system “may mean funds do not have the wherewithal to pass on the offset to members until the fund lodges its tax return”.
