Objective of superannuation
At the time of writing, the Superannuation (Objective) Bill 2016 was still before Federal Parliament. The Senate Economics Committee tabled its report on the Bill and recommended that it be passed. The Bill establishes a legislative framework to guide the development of future superannuation policy by enshrining the primary objective of the superannuation system in legislation and the subsidiary objectives of the superannuation system in regulation.
The subsidiary objectives of the superannuation system will be prescribed by regulation. They are to:
- facilitate consumption smoothing over the course of an individual's life,
- manage risks in retirement,
- be invested in the best interests of superannuation fund members,
- alleviate fiscal pressures on Government from the retirement income system, and
- be simple, efficient and provide safeguards.
Investment in infrastructure or privatisations
In February 2017, the Australian Taxation Office (ATO) released a draft framework covering its views on a range of tax issues related to privatisations and infrastructure investments. Since its release, and when combined with the ATO's subsequent Taxpayer Alert 2017/1, the overall result has been to generate a great deal of uncertainty around:
- infrastructure investments structures,
- the use of stapled structures more generally,
- the concept of 'control',
- the impact for foreign bidders on Australian infrastructure asset sales (eg FIRB's consideration of Australian tax consequence)
- the use of gearing; and the potential application for the tax law's general anti-avoidance provisions.
We expect this to continue to develop for some time.
The ATO has expressed some strong views in regards to these matters which many funds will need to consider when undertaking any transactions in this area. In addition, funds should consider the ATO's views in light of historical transactions.
ATO publishes guidance on the superannuation changes
The ATO has published new guidance for individuals regarding the recent superannuation changes, including guidance on determining which changes apply, examples, and actions that can be undertaken pre – and post-1 July 2017 in relation to the change to the concessional and non-concessional contributions caps.
Concessional contributions – defined benefit interests and constitutionally protected funds
The ATO has released Law Companion Guide LCG 2016/11 on 28 February 2017 (previously issued in draft on 9 December 2016) dealing with how the amendments to the calculation of concessional contributions and excess concessional contributions apply to contributions and amounts allocated by superannuation providers with defined benefit interests and constitutionally protected funds.
The various examples in LCG 2016/11 highlight the complexities that need to be taken into account by members with defined benefit interests.
Legislative instrument relating to reporting of new and closed member accounts
A new legislative instrument made on 1 February 2017, sets out the way in which superannuation funds (other than self-managed superannuation funds) need to report all new and closed member accounts from 31 March 2017.
The reporting, as a general rule, is required to be done daily or as soon as practicable after the event, but no later than five business days.
Fund administrators should be aware of these changes. However, funds may want to confirm this with their administrators.
CGT relief and the 2016 Budget measures
Another area of great uncertainty is the application of the Capital Gains Tax (CGT) relief provisions contained in the superannuation reform measures from the 2016-17 Federal Budget (relating to the transfer balance cap and assets of funds supporting Transition to Retirement Income Streams). For trustees of super funds, there is a great deal of uncertainty around how to consider the available elections in these provisions within the objective of acting in members' best interest. While the elections are formally required by the due date for lodgment of the 2017 income tax return, practically, the decisions need to be made a lot earlier than that.
There are a number of important questions funds need to address in regards to the CGT relief. Funds should start investigating these now.