Submission from the Australian Taxpayers Association
SPECIFIC COMMENTS ON SUPERANNUATION LEGISLATION AMENDMENT BILL (NO.
3) 1999
1. Item 2 (2) Commencement date should be 1 July 2000.
Reason: to allow advisers time to assist their clients to get their affairs
in order should this be necessary.
2. Item 22 General Comments:
It appears that the `mischief' being addressed in restricting members
to those being linked to each other is that employers should not being
including unrelated employees as members of self-managed funds. However,
if this is the case there are many unintended consequences that are going
cause an unnecessary financial and time burden on self-managed funds.
This section could be simplified by excluding from membership of a fund
unrelated people where one or more of those people had significant influence
over one or more of the members.
We also suggest that the number of members permitted in a self-managed
fund should be increased. There is no logic to 'Fewer than 5'!
We recommend that this is amended to either fewer than 8 members
or that no number is prescribed and it is limited to `linked' parties
(including our additions to that definition, see below) so that where
desired close family members, close friends and same sex partners can
be part of the same self-managed fund.
Our reason: Many families have more than 2 children and each should be
able to be a member of the parent's fund as a minimum. In addition, where
a member dies and children of the deceased are to receive a pension, this
is not possible if the number of members will exceed 4. Hence our suggested
increase to the number of members.
The arbitrary restriction to 4 members or less does not have any rationale
and in some cases tends to the otherwise unnecessary setting up of multiple
funds by families or business partners who would prefer to all be in the
same fund.
This change will not affect many people, as only 15% of self-managed
funds have more than 2 members. However, it is an unnecessary restriction
for those who are affected. Therefore item 22 (1)(a) should be amended
to read 8 instead of 5.
3. Item 22 (3) Amend to spell out the treatment of members who become
non-residents for tax purposes.
Our reason: An anti-avoidance measure prevents non-residents from staying
as members in certain circumstances, or if they do the fund losses up
to 47% if its assets. This needs to be addressed to allow them to remain
as 'non contributing members' without affecting the complying status of
the fund for other members who wish to continue to contribute to the fund.
The non-resident could maintain control by granting a power of attorney
(not an enduring power of attorney) to their legal personal representative
in respect of the superannuation fund only.
4. Item 22 (3) Should have a further alternatives:
It should allow joint holders of an enduring power of attorney to be
trustees of single member funds
Our reason: to accord with estate planning structures, eg. where two
children are the joint executors of their parent's estate. This is especially
important, and will affect women more so than men, because women live
longer than men and so are likely to be widowed and not wishing to favour
one child over another, particularly when the situation is that she is
no longer able to competently look after her own affairs.
5. Item 22 (4) Should allow a member to elect in writing not to be
a trustee.
Our reason: the member may travel extensively and not be readily available
to carry out trustee duties, or may have no desire to be a trustee. This
avoids the problem of forcing people to be trustees where they have no
desire or ability to be a trustee. The measure as it is proposed fails
to prevent one or more trustees from dominating the fund.
6. Item 22 (6) Meaning of linked –
Insert an adult unrelated third party.
An adult unrelated third party should included in the meaning of `linked'.
Our reason: where all the members of the fund agree, consenting adult
friends should be able to be members and trustees of a self managed fund
We are aware of friends who are not in business successfully running their
joint superannuation funds for many years. There is no valid reason that
such arrangements should not continue or be prevented from being set up.
A friend of the member should be permitted to be the joint trustee.
Our reason: It is not always desirable, possible or practical to have
a linked party as a joint trustee at a particular time. For example where
the member does not have any relatives living in Australia or only child
of the single member is living overseas at the time and there is no other
appropriate person who fits into the definition of being linked to the
member.
Meaning of linked
Add to the meaning of relative a de facto partner (menaing a person who,
whether or not of the same gender as the person, lives with the person
on a genuine domestic basis as a partner of the person.
Our reason: to remove discrimination against members of same sex couple
in respect of superannuation by allowing:
- same sex couples to be joint members of a self-managed superannuation
fund; and
- a member of a same sex couple to be the joint trustee in the case
of a single member fund.
The cost of setting up a new fund or complying with APRA rules will cost
thousands of dollars for no reason. In addition, the CGT effect on transferring
assets to a new fund, where such assets are divisible will further reduce
retirement savings for adversely affected people.
7. Item 22 (8) A disqualified person could be included in (3) (b)
to avoid the need to appoint an approved trustee. This would save the
cost of breaking up assets where a member becomes disqualified to be a
trustee.
8. Item 32 (6) The period of retention should be 5 years in line with
other record keeping requirements by the ATO.
Reason: Consistency with other ATO record keeping requirements.
9. Item 32 (7) Penalties need to `fit the crime'
The maximum penalty of 50 penalty points ($5,500) for not keeping a piece
of paper for 10 years is totally unreasonable and should be reduced to
a much lower level for self-managed funds.
How such a penalty could be contemplated for a self-managed fund when
the penalty for example for late lodgment of a company tax return is $10
per week to a maximum of $200 is beyond our comprehension.
Descriptive Names: For ease of description names need to be developed
for the different categories of non-self managed funds to say what they
are, not what they are not. As a suggestion, these could be:
- Small APRA funds = funds with fewer than 8 members.
- Medium APRA funds = funds with 8 to 49 members. *
- Large APRA funds = funds with 50 or more members.*
(* or could collectively be Large APRA funds)
Reason: The cumbersome terminology is unhelpful in describing the different
levels of superannuation funds in plain English written material and cannot
easily be defined.
10. Items 38 and 41 Delete '5' and insert '8'. Reason: See (Item 22)
above.
11. Item 43 (2) Delete '21 days' and insert 'the due date of the next
annual return'.
Reason: To streamline processes for the trustee, advisors and the ATO.
And to align with s. 252A which is 21 days or more.
12. Item 43 (5) Penalty far too onerous.
Reason - $11,000 reduction in retirement savings for not sending in a
piece of paper on time is totally unreasonable! Superannuation funds should
not be subjected to fines which do not fit the crime.
How such a penalty could be contemplated for a self-managed fund when
the penalty for example for late lodgment of a company tax return is $10
per week to a maximum of $200 is incomprehensible.
13. Item 48 Delete '5' and insert '8'.
14. Item 52 - ditto -
15. Part 24B - ditto -
Div. 1 - ditto -
252A (1) - ditto -
252A (3) Penalty of $5500 far too high (see comments to (8) and (11)
16. 252 G (4) Delete 'other funds' and insert 'APRA funds'. Delete
'fund other than a self-managed superannuation fund' and insert 'APRA
fund'.
17. Item 131 (2) (b) Delete '31 March 2000' and insert '30 June 2000'.
131 (1) (c) Delete '5' and insert '8'.
18. There is no longer a rationale for an Audit, it is anti Wallis and
self-assessment should be the approach used.
19. Other matters that impose penalties on members
There should, where a restructure is required, be capital gains tax rollover
relief in cases where a fund has to transfer one or more members from
the fund as a result of this legislation. Where this legislation will
result in severe financial ramifications due the structure of assets,
those funds should be exempted from any change in the law.
The ATA is concerned about the size of penalties contained in this legislation.
The approach of any superannuation legislation should be to implement
the Government's retirement-incomes policy, not to use retirement income
as a revenue raising measure due to an onerouse penalty for an administrative
oversight. The legislative approach should be to protect members' retirement
savings in accordance with the previous prudential approach.
The ATA is concerned about the time and monetary cost involved in changing
title to all assets where trustees have to be changed due to the legislative
requirement relating to trustees. The process is cumbersome, costly and
can be a nightmare due to State Lands Office rules, Stamp Duty requirements
etc. Some companies have restrictions on the number of names that can
be registered.
The ATA is concerned about the amount of the registration fee for switching
from being a self-managed fund to a small APRA fund not being specified.
Legislation needs deeming rules so that the changes in this legislation
are deemed to be included in the deed and to deem the assets are held
in the names of all trustees to enable seamless transfer, eg. 1 trustee
as custodian holding assets on behalf of fund.
Members should have the right to be a trustee, but not compulsorily required
to be (horses for courses).
In summary, the proposed rules are an over-kill and will not lead to
efficiency. Rather they will result in more complexity and additional
costs.