The Australian Taxation Office (ATO) has been taken to task for issuing a Draft Taxation Determination on the segregation of pension assets with self-managed superannuation funds (SMSFs) in mind — and therefore not taking into account the implications for major funds administered by the Australian Prudential Regulation Authority (APRA).
In a submission to the ATO dealing with the draft determination, the Association of Superannuation Funds of Australia (ASFA) said the determination "appears to have been written primarily with its applicability to an SMSF in mind" — something which was evidenced by all of the examples using funds with one or two members only.
However it said segregation, and what is necessary to constitute effective segregation, was a growing subject of interest to the large APRA-regulated superannuation funds and their advisers.
"Due to the increasing complexity of arrangements within the superannuation industry, ASFA welcomes the intention of the ATO to bring some clarity to the operation of the law in this area," the ASFA submission said.
However the submission added, "ASFA considers that if the ATO is proposing to issue a tax determination on this topic then it is critical that the determination also considers the subject matter from the perspective of large APRA-regulated funds, and the variety of arrangements such funds may have for the allocation of earnings (and the potential disconnection between these arrangements and the fund's actual investments for different sub-groups of members)".
The submission reinforced the fact that ASFA was concerned that the ATO's draft determination was based on the operation of an SMSF and "does not reflect the operations of a large APRA-regulated fund or a defined benefit fund".
Further, the submission argued that some of the interpretations contained in the draft determination could drive up complexity and costs for large APRA-regulated funds.
