14 Oct 2021 This week in tax
In this week’s TaxVine, Kym Bailey, ATI, Chair of The Tax Institute’s Superannuation Technical Committee, provides her reflection’s following the National Superannuation Conference as a panellist on the Tax Policy and Advocacy (TPA) session.
2021 National Superannuation Conference
In its ninth year, The Tax Institute’s National Superannuation Conference is going from strength to strength. This year’s agenda included a broad range of sessions catering for delegates interested in large fund issues and self-managed superannuation funds (SMSFs), as well as those keen to hear about the impacts of legislative changes and regulator interpretations.
Tax Policy and Advocacy panel session on 8 October 2021
In the first session on Day 2, chaired by Scott Treatt, CTA, General Manager, Tax Policy and Advocacy (TPA) at The Tax Institute (TTI), I joined TPA team representatives in a panel discussion to discuss the National Superannuation Technical Committee’s key activities and initiatives that we have been undertaking with TPA, as well as delving into the various issues in the superannuation space.
Over the last few months, TPA have been engaging in reforming TTI’s committees, including the National Superannuation Technical Committee. TPA works closely with the committees, and they continue to support and encourage the involvement of our members in various activities and initiatives.
About the National Superannuation Technical Committee
The National Superannuation Technical Committee (Committee) is made up of a diverse cross-section of members who have various technical backgrounds and experience in the tax and superannuation professions. As a result, we get to work alongside a range of different views.
Meeting on a quarterly basis, our purpose is to take both a proactive and reactive role when looking at superannuation and how it interacts with taxation. Where we see something emerging on the horizon, the Committee will research the law and consider the practical implications.
TPA continues to explore new opportunities for our members to have a voice with key stakeholders. Our practitioner members bring live case studies, particularly where the law or the system is not working effectively.
We are always looking for new members to join our committees so that we can continue to ensure we maintain the diversity of knowledge and experience.
VIP Keynote Address
The VIP Keynote address on Day 2 was delivered by Senator the Hon. Jane Hume, Minister for Superannuation, Financial Services and the Digital Economy and Minister for Woman’s Security.
Andrew Mills, CTA (Life), posed some key questions to Senator Hume, as well as taking the opportunity to pass on our thanks for the recent exemption of SMSFs from the Retirement Income Covenant (see also below).
Senator Hume discussed the recent legislative changes including member superannuation stapling and described how this will benefit people by ensuring they have one superannuation fund throughout their working life. More information about this measure that commences on 1 November 2021 can be read in Robyn Jacobson’s preamble published in TaxVine 38 on 8 October 2021 — Superannuation stapled fund measure starting soon.
The Minister also mentioned how legacy products create inefficiencies and that we have to find ways to manage the legal and tax barriers to allow their conversion to contemporary products. She called on The Tax Institute to ensure we engage on this issue and provide input.
A highlight of the presentation was the Minister’s assurance that she understands the issues with the current drafting of the non-arm’s length income (NALI) rules in s 295-550 of the Income Tax Assessment Act 1997 (ITAA 1997) as they relate to non-arm’s length expenses (NALE), in particular, general expenses. Although the Minister indicated that she wasn’t prepared to ‘give much away’, she confirmed that it was being ‘looked into’.
This was music to our ears and was a great round-out to the previous day’s terrific session hosted by a panel including Daniel Butler, Alex Affleck, Tony Negline and Kai-Chen Lamb which dived into this vexed topic.
Key messages and superannuation issues
The key messages echoed the plethora of reference points associated with superannuation in our contribution to ‘The Case for Change’ which has been a significant project for The Tax Institute and, in particular, the TPA team over the past 18 months. Superannuation is understandably a significant component of this.
Andrew Mills, CTA (Life), spoke on the various NALI and NALE updates, highlighting some of the practical implications.
TTI’s Senior Advocate, Robyn Jacobson, CTA, then provided a focused discussion and shared her insights on the following aspects of the Superannuation Guarantee (SG) rules:
- SG Amnesty which ended in September 2020 and imposes a minimum 100% Part 7 penalty for SG shortfalls arising from 1 July 1992 to 31 March 2018 for those who did not come forward. For shortfalls arising for quarters starting after 31 March 2018, the ATO can fully remit the Part 7 penalty and is not prevented from reducing it below 100%;
- Fundamental design of the system, which harshly penalises employers for paying SG contributions just one day late but failing to advise the ATO of the SG shortfall;
- Proposed removal of $450 monthly income threshold rule (not before 1 July 2022); and
- Use of the ATO’s discretion (limited) to reduce the Part 7 penalty (the ATO’s guidance on remission is set out in Practice Statement PS LA 2021/D1).
Robyn also spoke about the indexation of the transfer balance cap (TBC) from $1.6 million to $1.7 million from 1 July 2021 and how this has resulted in proportionate increases in the personal TBC for many pension recipients:
- The Tax Institute tried to front run this legislative change;
- The ATO is constrained by the policy design and acknowledges the challenges facing taxpayers and practitioners.
- Issues include access to data by members, given the timing of when SMSFs report TBC information using the Transfer Balance Account Report (TBAR) on a quarterly or an annual basis, as well as those who are often associated with providing advice or services relating to superannuation income streams but who do not have access to Online Services for Agents (OSfA) such as lawyers, SMSF administrators and financial advisers.
Our future committee outlook and activities
Turning our sights to 2022, we aim to increase our interaction with key government stakeholders. Andrew Mills provided an update on the various interactions, including with the ATO and the Superannuation Stewardship Group. Other activities include one-off discussions (including a meeting with then Deputy Commissioner, Dana Fleming), engaging in open consultation on superannuation matters, and formal submissions.
One submission of particular note was the Retirement Income Covenant. This submission was developed in close consultation with the Committee to provide comments on key issues which should be considered as part of the Government’s introduction of a retirement income (RI) covenant in the Superannuation Industry (Supervision) Act 1993 that is intended to outline a fundamental obligation of trustees to formulate, review regularly and give effect to a RI strategy.
Our view is that the proposed RI covenant should not apply to trustees of SMSFs.
Superannuation is a key component of the tax system and the session left no doubt that we are likely to continue to see changes as the retirement income settings are adjusted over time.
The diversity of speakers at the National Superannuation Conference provided a rich tapestry of content for delegates and the ATO’s participation in a panel conversation augmented the great updates and insights relayed in the sessions they presented.
The conference was not only informative and entertaining; it also provided a chance to press the ‘reset button’ and reinvigorate our engagement with superannuation.
The Committee is active in its advocacy of taxation issues that obstruct, or deliver, unintended and/or intended consequences, and the broad cross-section of the expertise of the Committee members is instrumental in making a difference.
Over the coming months, the TTI website will contain more detail on our Committee membership and activities. The Committee takes feedback from members broadly through our various platforms and polls.
Our Tax Policy Assistant, Zoe Beesley, has posted in Community about this preamble. Join the conversation and share your thoughts and ideas on the key superannuation issues and provide your feedback on the TPA panel session.
As always, we welcome your views and thoughts, which you can provide here.
Kym Bailey, ATI
JBWere, Technical Services Manager