The major accounting bodies have highlighted further problems with the revised draft bills for the Division 296 tax noting it will impose additional and unnecessary work on small super funds to allocate earnings to members.
Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants stated in a joint submission to Treasury “there is not collective support for the Better Targeted Superannuation Tax Concession (BTSC) policy contained in the draft bills due to several significant concerns”.
“The complex design features of the policy will add considerable administration and system costs for the whole superannuation system, a cost that will be paid for by all members of the system including those who will never pay Division 296 tax,” the three bodies claimed.
The submission raised the issue of small superannuation funds, such as SMSFs, having to obtain actuarial certificates to perform “relevant calculations and provide the attribution share”.
“The additional guidance published as part of this consultation claims that the requirement to obtain an actuarial certificate ‘is consistent with the approach to calculating a small fund’s ECPI (exempt current pension income) under the proportionate method, and most small funds within the scope of BTSC, would already engage with an actuary each year for this purpose”,” the joint bodies stated.
“We believe the requirement to use an actuary to provide this information via a certificate is unnecessary for small superannuation funds without one or more members with only accumulation monies and/or account-based pensions, which currently are not required to obtain an actuarial certificate.
“The Income Tax Assessment Act 1997 does not currently require such funds to obtain an actuarial certificate for ECPI purposes in these circumstances.
“The proposed requirement would impose further administrative cost on these funds. If necessary, and in time, the Australian Taxation Office could provide administrative guidance negating the need for an actuary to be involved in these circumstances.”
The three professional organisations also indicated using the proportionate approach to determine a member’s attribution share would create additional problems where a member of a small super fund may have no beneficial interest in specific assets but have income or realised capital gains allocated to them for Division 296 purposes.
“Some funds use segregation of assets to specific members which differs from the standard pooled approach where all members share proportionally in the fund’s overall investment returns,” they pointed out.
“Trustees are required to act fairly between all fund beneficiaries, and allocating income to members in segregated funds from non-beneficially held assets is inconsistent with trustee covenants and common law obligations.”
Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants join the Institute of Financial Professionals Australia and the SMSF Association in stating the draft bill has flaws and needs further work before it can be introduced to parliament.
