According to ASFA, the impending legislation is anticipated to have ramifications for comments within the ATO’s revised TR2013/5DC1. As such, to maintain consistency, ASFA has suggested a deferment of the finalisation of the revised taxation ruling (TR) until the approach outlined in the proposed legislation becomes clear.

The revised TR provides that, in relation to a successor fund transfer (SFT), the superannuation income stream from the original fund ceases at the time of the transfer to the successor fund, and a new superannuation income stream commences to be paid by the successor fund.

Further, the transfer results in an involuntary rollover superannuation benefit to the successor fund in respect of each member.

However, ASFA has argued that the ATO’s position in the revised TR is challenging to reconcile with the relevant provisions in the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994 (SIS). It noted that while these provisions allow for the transfer of a member’s interest in a superannuation fund without consent, they do not permit the commutation of an income stream without the member’s approval.

Two plausible interpretations of the SFT provisions appear open, it said – either each income stream member must provide consent for the commutation, rendering large SFTs unworkable or the relevant income streams do not cease and recommence, introducing uncertainty about the tax treatment of amounts transferred between funds.

“In light of this, ASFA considers that the ATO view as expressed in the revised TR represents an appropriate compromise,” it said.

“However, ASFA submits that, as part of finalising the revised TR, the ATO should liaise with APRA to provide broader guidance to the industry that better reconciles the SIS provisions and the tax legislation. This guidance could, for example, make clear that APRA considers that the member’s income stream in the closing fund can cease (or be commuted) without the member’s consent in the context of an SFT”.

In light of the views expressed, ASFA proposed that the ATO provides additional commentary in the revised TR, specifically addressing reporting implications and suggesting administrative relief for funds.

“In order to ensure consistency, we suggest that the ATO defers finalisation of the revised taxation ruling,” it concluded.