Exposure Draft: Income tax relief for transfers within a fund to a MySuper product

On 13 April 2017, Treasury issued exposure draft legislation to extend the asset roll-over relief for mandatory transfers to a MySuper product within a super fund. The relief is also available to the interposed entities that transfer assets pursuant to the mandatory transfer.

Funds intending to rely on this roll-over relief should monitor the progress of this draft legislation. Submissions closed on 27 April 2017.

Exposure Draft: Technical corrections to the Sustainable Super measures

On 12 April 2017, Treasury issued exposure draft legislation to amend the transfer balance cap, the concessional contributions cap, transition to retirement income stream (TRIS) rules and the objectives of superannuation.

The proposed changes include:

·       Enabling additional transfer balance credits and debits to be prescribed through regulations.

·       Bringing forward the application date for the changes that were introduced in relation to death benefit roll-overs.

·       Clarifying that the concessional contributions cap refers to the ‘basic’ concessional contribution cap rather than the unused cap.

·       Enabling a TRIS to be in the retirement phase where the recipient of the income stream has satisfied a condition of release with nil cashing restrictions.

·       Extending the period for which an asset supporting a TRIS can cease to be a segregated current pension asset, to include 1 July 2017.

There are a number of technical issues that need clarification. These changes not only impact the taxation of funds but also members. Funds and, in particular, staff that provide advice to members should be aware of the changes and the impact on members. Submissions closed on 24 April 2017.

Implementation support – changes to TRIS

The ATO issued Practical Compliance Guideline (PCG 2017/3) which outlines the ATO’s compliance approach for some APRA regulated superannuation funds, pooled superannuation trusts (PSTs) and life insurance companies that hold segregated pension assets and are facing practical difficulties in complying with recent legislative amendments affecting various TRIS products during the transition period. Broadly, where a fund applies the methods outlined by the ATO in PCG 2017/3 to determine its assessable income or its PAYG instalment income, the ATO will not apply compliance resources to review these calculations for the 2017-18 income year. A similar approach will be applied where a fund continues to have co-mingled assets supporting the payment of both TRIS and income streams after the commencement of the 2017-18 income year.

Funds that have segregated assets will need to determine if the ATO’s concession is applicable to them. In any event, the system changes to comply with the new rules will need to be implemented by the end of 30 June 2018 in order to come within the ATO compliance concession.

Exposure Draft: Expanding the rate of capped defined benefit income streams

On 13 April 2017, Treasury issued draft regulations that expand the range of capped defined benefit income streams under the transfer balance cap to ensure pensions that cannot be practically commuted are treated as capped defined benefit income streams under the transfer balance cap. This allows large pensions to be subject to additional tax instead of forced commutation. Submissions closed on 4 May 2017.

Commutation of a death benefit income stream before 1 July 2017

The ATO has released Practical Compliance Guideline (PCG) 2017/6 which outlines the circumstances in which the ATO will not apply compliance resources to review whether a Self-Managed Superannuation Fund (SMSF) has satisfied the requirement to cash out a death benefit in this situation where the roll-over occurred prior to 1 July 2017.

New transfer balance cap - payment splits

From 1 July 2017, a $1.6 million cap applies to the total amount that can be transferred and held in the tax-free retirement phase for account-based pensions. Special rules apply for payment splits arising from a divorce or relationship breakdown. The ATO has provided guidance regarding this measure including information on what affected individuals might need to do and including examples.

SMSFs and compliance

At a recent superannuation conference, Assistant Commissioner Kasey Macfarlane presented and discussed key issues and developments for SMSFs in the context of their compliance obligations. The key areas of compliance focus for the ATO in relation to SMSFs that were discussed include:

·       New SMSF registrations

·       SMSFs with outstanding annual return lodgements

·       SMSFs with unrectified regulatory contraventions reported by registered SMSF auditors

·       SMSF auditor quality and independence, and

·       Tax planning arrangements and other non-commercial transactions involving SMSFs.

A number of initiatives that the ATO has undertaken to assist SMSF trustees to comply with their regulatory and income tax obligations were also discussed, along with issues particularly relevant to compliance with the new superannuation changes that come into effect on 1 July 2017.