As trustees commence planning for the practical implications of ‘simpler super’, we detail below a checklist of the major legal issues trustees might need to consider in the planning process. This list is, of course, not necessarily exhaustive.
- Greater importance will be placed on collecting information under the new regime which establishes new categories of contributions and new limits on contributions.
It will be critical for trustees to be able to ascertain whether a contribution is a personal or an employer contribution. Many systems will need to be updated to record this information.
Trustees will also need to ascertain with certainty the age of each member. Does your fund’s application form provide for collection of this information?
Collection of tax file numbers (TFNs) will no longer be optional. Voluntary post-tax contributions by members who have not provided their TFN must be repaid by the trustee within 30 days of becoming aware of receipt of such contributions.
Each trustee should thoroughly review their existing forms and systems to ensure that they can satisfy the new collection of information and record keeping requirements.
- Trustees of superannuation funds should take particular note of whether their fund’s trust deed needs to be amended before the simpler super regime takes effect. There are generally three aspects to consider:
- Will your fund offer a new product, or be unable to offer a current product, as a result of the new law?
- Does your trust deed contain an overriding compliance clause which provides sufficient power to comply with your new responsibilities and obligations?
- Will any further specific deed amendments be required? For example:
- Is there provision to allow for taxation to be calculated at the member level?
- Is there an ability to deduct taxation from other fund interests held by a member? The combination of fund interests (while required by law) is often difficult to accomplish in practice.
- Can the trustee be indemnified by the member or employer when incorrect taxation is deducted?
- Is there an ability to credit taxation offsets where a member quotes his or her TFN after tax has been deducted and an ability to pay any refunds received to ‘former members’?
- Can administration costs and any investment losses be applied to no-TFN contributions which are returned to members?
- Will the fund need (or want) to maintain a taxation reserve?
- Communication to members will need to be reviewed closely by trustees in preparation for 1 July 2007. This is a crucial (and complex) element of the planning process and should be well underway by now. The Australian Securities and Investments Commission has said that it would expect this to be completed by 31 July 2007. However, many funds believe it is preferable to communicate well in advance of that date.
For existing members, trustees will need to update members on the taxation reforms by a significant event notice.
For new members, the product disclosure statement (PDS) will need to be updated or a supplementary PDS prepared. Specific information should be given regarding the provision of TFNs, the limits on concessional contributions and the reform of benefit taxation. Further details will need to be included for defined benefit funds and funds which provide pensions.
- Trustees of defined benefit funds will need to consider the particular complexities which arise for them. Actuarial advice on the relevant new entrant rate and the benefit categories applicable to the fund will need to be obtained.
- Changes in portability also form part of the changes and trustees should start preparing to implement the new deadlines:
- a 30 day limit after receiving the rollover request on effecting a request for a rollover, and
- a 10 day limit after receiving the rollover request to seek additional information.
More information
For information regarding possible implications for your business, contact a member of the Financial Services team.