Super transition raises compliance concerns

23-May-2017

By Daniel Paperny

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With the looming 1 July deadline for the federal government’s incoming superannuation regime, now was a good opportunity for advisers to revisit their client portfolios and restructure their accounts appropriately to ensure they complied with the imposition of the $1.6 million transfer balance cap, according to Dixon Advisory.

In a blog post yesterday, Dixon Advisory managing director Nerida Cole said that by using their accumulation account to hold excess super, clients could realise a variety of benefits from the perspective of tax, ease of administration and investment management.

However, Cole noted there were additional considerations in the realm of estate planning for Australians looking to pass on the benefits to the next generation – such as opting to close or reduce pension accounts that had higher taxable proportions as a hedging strategy for clients.

“If you’re aged 60 years or older, all pension payments you receive are tax-free and therefore the tax components make no difference to you,” she wrote.

“Because pension accounts lock in the proportions of tax-free versus taxable amounts at the date the account is started, it is desirable to try and retain your pension accounts with the highest tax-free proportion within the $1.6 million pension balance cap.”

Last month, the Australian Taxation Office (ATO) issued Practical Compliance Guideline (PCG) 2017/5 in a bid to assist with valuation issues in situations where a superannuation fund member is unable to determine what their balance is at June 30.

The guidance removes the need for trustees and advisers to attempt to estimate 30 June 2017 member account balances and then nominate a specific dollar value to be commuted prior to 1 July 2017.

Speaking to financialobserver, ATO deputy commissioner James O’Halloran said PCG 2017/5 had come in response to concerns raised by advisers who were looking for more guidance on how to navigate the super changes in order to provide the best advice for their clients.

O’Halloran noted some of the key concerns they had raised were on clarifying valuation requirements – such as how and when their clients needed to be valuing assets ahead of 1 July – as well as the concessional contributions and non-concessional contributions caps, which included the bring-forward and carry-forward provisions.

From the ATO’s perspective, he spoke of the importance of maintaining up-to-date, consistent valuation principles to help advisers better identify which of their clients might be affected under the new regime.

“Our objective from the start with the introduction of the laws was to provide early certainty in as many ways as we can to the community more broadly and to advisers,” he said.

“We think the use of the practical guidance guidelines is a real attempt to support the community and trustees in moving into the new caps as best as they can [while] recognising that there are ways in which the ATO can assist as part of the transition.”

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