ASFA provided a submission responding to Treasury’s recent Income Tax Assessment Amendment, raising concerns that “the unanimous recommendation of the industry associations about the most appropriate methodology for determining defined benefit contributions – modelled on the calculation of notional taxable contributions (NTC) – has been ignored.”
ASFA noted the new regulations are based loosely on those which operated under the superannuation contributions surcharge regime but pointed out this does not apply with respect to contributions made on or after 1 July 2005.
ASFA was also concerned the regulations would require the timely release of “extensive” interpretative material from the Australian Taxation Office (ATO) and a guidance note from the Actuaries Institute if they are to be implemented successfully.
“The cost of implementation will be borne by all members of a defined benefit fund, even though the Division 293 tax will be incurred by a limited number of members,” ASFA stated.
The regulations in their current form would also mean funds will be unable to meet their member contribution statement reporting deadline, potentially leading to general interest charge penalties on funds.
The association “strongly recommended” the proposed method for determining defined benefit contributions be replaced by the current method for determining notional taxable contributions, with an adjustment to exclude the grandfathering provision.
