Exposure Draft regulations: Treasury Laws Amendment (Innovative Superannuation Income Streams) Regulations 2017

On 21 March 2017 Treasury issued exposure draft regulations, which are intended to introduce a new set of design rules for lifetime superannuation income stream products that will enable retirees to better manage consumption and longevity risk in retirement. The overarching goal of the new rules is to provide flexibility in the design of income stream products and the new rules are intended to cover a range of innovative income stream products including deferred products, investment-linked pensions and annuities and group self-annuitised products. The proposed changes may assist funds with the development of innovative retirement products that may form part of the fund’s product offering and member retention strategies. Submissions are due by 12 April 2017

Superannuation reform: total superannuation balance

The ATO finalised Law Companion Guide LCG 2016/12 on 20 March 2017. This guide provides guidance on how a person’s total superannuation balance is calculated from 30 June 2017. The total superannuation balance is relevant for determining:

·       eligibility for unused concessional contributions cap carry forward

·       non-concessional contributions cap and for the bring forward of the non-concessional contributions

·       eligibility for the government co-contribution

·       eligibility for the tax offset for spouse contributions.

Although LCG 2016/12 relates to members, advisors and administrators are likely to find the ATO guidance useful in addressing member queries.

Transitional CGT relief for superannuation funds

The ATO finalised Law Companion Guide LCG 2016/8 on 8 March 2017. This LCG provides guidance on the transitional CGT relief available for superannuation funds because of the transfer balance cap and transition-to retirement reforms commencing on 1 July 2017. As mentioned in last month’s update, this is an area of uncertainty for large superannuation funds. Whilst the LCG is useful to some extent, trustees nonetheless need to assess the practical viability of accessing the rollover relief, including the costs and risks that may be involved versus the rollover benefit that may be available.

Qualifying recognised overseas pension schemes (QROPS) – UK Budget Changes

The UK government announced an introduction of a 25% charge on transfers QROPS as part of its measures against tax avoidance, which apply to individuals who request an overseas pension transfer on or after 9 March 2017. Whilst there are some exceptions, from an Australian funds perspective, it is important to note that the scheme administrator of the registered pension scheme or the scheme manager of the QROPS making the transfer is jointly and severally liable to the tax charge and where there is a tax charge, they are required to deduct the tax charge and pay it to the UK tax authority (HM Revenue and Customs or HMRC).

Funds that accept QROPS need to consider the changes and may need to review their procedures and processes to deal with these changes.