The Association of Superannuation Funds of Australia (ASFA) has flagged serious concerns with the government's proposal to change tax deductibility arrangements for total and permanent disability (TPD) insurance held in super funds.
The government's insurance definitions used in its consultation paper were incomplete, while the deductible portion table was overly simplistic, ASFA said in a submission to Treasury published yesterday.
The superannuation body said two common add-ons were missing in the definitions, including mental/cognitive loss and the inability to perform normal domestic duties.
"As these items are included in regulation 4 of Income Tax (Transitional Provisions) Regulations 2010, which sets out a variety of TPD circumstances for the purposes of the transitional relief applicable until 30 June 2011, it seems logical that they would also be included in the new regulations," ASFA policy and industry practice general manager David Graus said.
"It should be noted that for some funds either or both of these are included in the inability to perform activities of daily living insurance definition."
Graus also pointed out the tables did not reflect the structure of policies.
"The table does not reflect the practical realities of the structure of insurance policies and the deductible portion is set too low," he said.
ASFA also said the review of the legislation provided the opportunity to address the current requirements for insurer and actuary certification, which the association considered impractical.
