ASFA also said there is a lack of member relief available in cases where automatic rollovers may trigger a capital gains tax (CGT) event.
In regards to personal contributions, ASFA said the information about contributions that is required to process the notice will not be available to the MySuper fund as it does not form part of the mandatory data set for a rollover.
This means the MySuper fund will need to seek the information from the original fund. ASFA said current Australian Taxation Office (ATO) interpretations of tax laws would make the process “almost unworkable” where the member has (since the contribution was made) effected a partial rollover or withdrawal, or has commenced a pension.
ASFA suggested Treasury review the guidance to understand the complex administration problems created by the ATO’s interpretation of the law, and suggested the relevant explanatory material be amended to reflect that in certain circumstances, the compulsory transfer of an accrued default amount will take place under the successor fund transfer rules.
Contribution splitting would also create problems because a member will be required to provide a notice to split contributions prior to the compulsory rollover being undertaken.
ASFA suggested the law be amended to allow the contributions splitting notice to be served on the member’s MySuper successor fund.
For funds that will offer both tailored and generic MySuper products, ASFA said current proposed amendments would prohibit a fund which offers a generic MySuper from preventing an existing member from joining that product. The example provided in guidance relates to a fund that only offers a tailored MySuper product, leading ASFA to request “a more realistic example”.
The association also expressed concern over the lack of relief where a member’s accrued default amount is moved within a fund to a MySuper product and the underlying investment is held in a pooled superannuation trust (PST) or life company.
To avoid a loss in member benefits, ASFA requested relief be provided for situations where the compulsory transfer to a MySuper product requires the realisation of an underlying investment, resulting in a reduction of the member’s benefit.
