The Self-Managed Super Fund Professionals' Association of Australia (SPAA) has called on the Australian Taxation Office (ATO) to make a definitive ruling on when a retirement savings income stream begins and when it ends.
"It's important the ATO finalises its draft ruling sent out for public comment last year as it has the potential to impact significantly on members' benefits," SPAA education and professional standards director Graeme Colley said.
"Certainly there is the potential for significant additional income tax to be paid if the trustees get it wrong."
The crux of the issue is the definition of what constitutes the provision of a pension within a superannuation fund and whether the income of the fund supporting a pension should be tax free or incur a 15 per cent tax liability.
An additional element clouding the matter is when the final ruling will come into effect. It had initially been proposed the ruling would take effect from 1 July 2007.
"Backdating to 1 July 2007 may be fine for funds that have happened to have done it right, according to the commissioner's ruling," Colley said.
"However, for those who have not met the requirements of the ruling due to other quite valid interpretations of the law, the result could be a very expensive exercise.
"Larger public offer funds that are in this boat may end up with a larger tax bill to pay. They may need to amend their systems and reduce the balances of members to pay the additional tax. This may impact unfairly on members who are new to the fund or those who have been in pension phase for a shorter period than the backdating requires."
It was understood by the professional body a final announcement was to have been made in June, but a directive has not been released yet.
