ATO guidance released on propagation and asset parcel selection

The Australian Taxation Office (ATO) has released a draft Practical Compliance Guideline (the draft Guideline) PCG 2017/D16, which applies to registrable superannuation entities (RSEs) that contract with custodians to provide custodial and investment administration services for the RSE’s assets. The draft Guideline sets out the ATO’s compliance approach to the use of propagation to select assets for disposal, and the circumstances where propagation arrangements satisfy the asset identification principles and record keeping methodologies described in Tax Determination TD 33, and Taxation Rulings TR 96/4 and TR 96/7.

The draft Guideline will assist large superannuation entities to examine the characteristics of their propagation arrangements to determine the likelihood of an ATO review. It applies from 1 July 2016, and clarifies the ATO’s approach to these types of arrangements for the large superannuation industry. Comments on the draft Guideline are due by 2 October 2017.

Funds using or contemplating the use of propagation will need to review the ATO’s position.

Draft superannuation legislative instruments

The following draft superannuation legislative instruments have been issued:

  • Draft legislative instrument SPR 2017/D2: Reporting of event-based transfer balance account information in accordance with the Taxation Administration Act 1953 (Cth). This draft instrument sets out the way in which superannuation providers (in relation to superannuation plans), and life insurance companies (in relation to certain life insurance policies), are required to report transactions, enabling the ATO to determine if an individual has exceeded their transfer balance cap. Once finalised, the instrument is proposed to apply from 1 October 2017.
  • Draft legislative instrument OPS 2017/D5: PAYG Withholding Variation: Certain superannuation beneficiaries who have not quoted a tax file number (TFN). This draft instrument ensures that amounts of non-assessable, non-exempt income paid to a superannuation beneficiary are not subject to withholding when the payee has not quoted their TFN. Once finalised, it will repeal and replace legislative instrument Tax Administration Act 1953: Variation to the rate of withholding for certain superannuation beneficiaries who have not quoted a tax file number, which is due to sunset on 1 October 2017. Comments were due 1 September 2017.