SYDNEY September 2013 – Both APRA-regulated super funds and SMSFs will be hit with the ATO’s latest asset ruling, with SMSFs feeling it ‘more keenly’.
Michael Hallinan special counsel superannuation Townsends Business & Corporate Lawyers says the ATO’s draft determination on asset segregation supporting pension payments will apply to both MSFs and APRA-regulated funds, but ‘its effect is likely to be more keenly felt by SMSFs’.
‘Two warnings, two clever interpretations, and 12 key points arise from the draft Determination,’ says Hallinan. (The draft Determination, TD 2013/D7, was issued 7 August 2013 to apply from 1 July 2014 when issued in final form.)
The Determination answers the question as to when an asset of a super fund qualifies as a ‘segregated current pension asset’, Hallinan says.
Warning No 1 – ATO may seek to apply Part IVA to short segregations
The Determination raises the prospect that the ATO may seek to apply Part IVA to asset disposals where the asset was only recently segregated prior to the disposal. Possibly the ATO is concerned by ‘Friday segregation and Monday disposal’.
Warning No 2 – Lumpy assets supporting account-based pensions
The Determination notes that where the market value of segregated assets exceeds the pension account balance, the excess assets cannot qualify as segregated assets.
Clever interpretation No 1 – When ‘reserve’ does not mean ‘reserve’
An asset will be segregated when the asset is ‘invested, held in reserve or otherwise dealt with’ to support its liabilities in respect of superannuation income streams.
Clever interpretation No 2 – When does ‘to the extent’ not mean proportion?
If the market value of segregated assets exceeds the account balance of account-based pensions, then the relevant tax provision provides that, to the extent of the excess, those assets are not segregated assets.
The full paper is available at:
http://www.supercentral.com.au/uploads/general/SUPERCentral%20News%20Article%20%20Issue%20114.pdf
contact
Michael Hallinan special counsel superannuation
Townsends Business & Corporate Lawyers
02 8296 6222
michael@townsendslaw.com.au