SPAA labels ATO ruling unfair, inequitable

An Australian Taxation Office (ATO) draft tax ruling on the taxation of pensions after death has been described as “unfair, inequitable and against the spirit of the tax law”.

The Self-Managed Super Fund Professionals’ Association of Australia (SPAA) chair, Sharyn Long (pictured), criticised the ATO approach. She said the retrospective nature of the draft tax rulings on pensions from a super fund following the death of a retired member was not only inequitable, but would be applied retrospectively to 1 July, 2007.

“The SPAA believes the retrospective nature of this draft tax ruling is unfair and inequitable and against the spirit of the tax law,” she said.

“Take an example of a property that has been held in a fund for many years. The capital gains tax bill could be a substantial part of the superannuation fund balance,” Long said. “If the trustees were not expecting to have to pay capital gains tax because the member is in pension phase, typically no tax contingencies will have been made by the fund for this purpose.”

She said this posed questions for trustees and auditors signing off on annual accounts, since they had to determine the likelihood of the tax payments being due based on future events.

“Rulings like this should be forward-looking so people can plan ahead for their retirement with confidence and not be afraid of leaving crippling tax bills for their grieving families when a member has died,” Long said.

She said the SPAA hoped the ATO would seriously reconsider its position.