US – developments for entities investing in the US

PwC US recently released a publication on some of the tax developments for global companies operating in the US. The discussions on the developments and proposed changes may equally apply to superannuation funds that hold or make investments into the US. Some of the proposed changes include:

  • Significant changes to the Model US Income Tax Treaty to limit treaty benefits applying to ‘stateless’ income that is not taxed by any jurisdiction.
  • Revising interest expense limits to discourage excessive leveraging.
  • Reducing the application of the Foreign Investment in Real Property Act (FIRBTA) provisions to foreign pension funds (which would impact superannuation funds).

Funds with investments in the US should monitor these developments, as these reforms may impact the after tax returns on US investments as well as the structures used to make US investments.

ATO Interpretative Decision – regarding journal entries

In ATOID 2015/23, the Australian Taxation Office (ATO) considered whether simply debiting a deceased member's account and crediting the account of the spouse by way of journal entry in the fund's accounts is sufficient to result in the benefits being considered 'cashed' for the purposes of regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SISR).

In the ATO’s view, the simple debiting of the deceased member’s benefits to the account of the spouse does not constitute a payment and therefore a cashing of the deceased member’s benefits; unless there is a present and existing liability or a legal obligation to the other for certain monetary amounts to be payable and they agree to set off the liabilities against each other.

Although generally not applicable to large super funds, ATOID 2015/23 highlights some of the limitations of journal entries. This is particularly relevant when the tax law requires a ‘payment’ (eg to obtain anti-detriment deductions).

Notice of intention to claim a tax deduction for super contributions

On 19 August 2015, the ATO updated its website providing a link to the approved form and the information that a fund needs to obtain from a member in order to allow a member to claim a tax deduction.

There is also a link to the software requirements for funds that want to offer members the option to lodge the forms electronically.

Whilst there are no legislative changes, as a matter of prudence, funds may want to check their systems and processes relating to these notices.

ATO - Large fund industry report

On 10 August 2015, the ATO released results of its large super fund risk differentiation framework (RDF) report, covering 265 large funds.

A number of funds have received a tailored diagnostic report from the ATO which is intended to assist large funds assess how well they are meeting their superannuation reporting obligations to the ATO and to identify and improve any reporting issues before the next round of reporting is due.

The diagnostic report gives each fund an overall risk categorisation based on the consequence and likelihood of the fund’s compliance with its superannuation reporting obligations.

Funds can use the ATO assessment to evaluate their comparative status and potential areas for improvement.

Bill to amend thresholds for lost member accounts

Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015 was introduced into Parliament on 20 August 2015 and is currently waiting Royal Assent. Once enacted, Schedule 3 of the Bill will amend the Superannuation (Unclaimed Money and Lost Members) Act 1999 to increase the account balance threshold below which small lost member accounts will be required to be transferred to the ATO; from $2,000 to $4,000 from 31 December 2015, and from $4,000 to $6,000 from 31 December 2016. 

Given the changes are intended to apply from 31 December 2015, system changes may be required.

APRA-regulated superannuation funds

The Australian Prudential Regulation Authority (APRA) has released a consultation package on governance arrangements for APRA-¬regulated superannuation trustees (RSE licensees). The package proposes amendments to APRA’s governance prudential framework in light of the Government’s proposed legislative amendments (refer to Superannuation Legislation Amendment (Trustee Governance) Bill 2015 introduced into Parliament on 16 September 2015) to require boards of RSE licensees to have at least one-third independent directors, including an independent chair. Submissions on the draft prudential standards and prudential practice guides can be made by 23 October 2015.

National TIA Superannuation Conference 2015 - GST and Stamp Duty presentation

On 20 August 2015, Zoe Chung and Matt Strauch of PwC presented a session at the National TIA Superannuation Conference 2015 on the topic of Transaction Taxes, GST and Stamp Duty.

The presentation provided some practical insights into the ATO’s approach to GST compliance and recent State Revenue Office (SRO) compliance themes and the impact on superannuation funds and covered:

  • recent specific compliance activity undertaken by the ATO
  • stamp duty ‘hot spots’
  • the ATO’s and SROs’ broader approach to compliance and what it means for superannuation funds, their administrators and custodians.