ATO out of step with APRA on pension treatment | Australian Markets

The main accounting teams have urged the Australian Taxation Office (ATO) to harmonise its regulatory method to pensions with that of the Australian Prudential Regulation Authority (APRA).

The accounting teams have pointed to inconsistencies between the method adopted by the ATO on the cessation of pensions as a consequence of a failure to make minimal pension funds.

In submission to an ATO suggestions discussion board, the joint account teams comprising CPA Australia, Chartered Accountants ANZ, the Institute of Public Accountants (IPA) and the SMSF Association mentioned massive segments of the industry “respectfully disagree with the ATO’s view that an underpayment of the minimum pension amount causes a pension to cease and cannot be rectified”.

It went on to quote an ATO letter to the industry associations earlier this 12 months which states: “it is not possible for a pension to comply with the standards in one year, not comply the next, and then comply again in subsequent years” pointing out that this was at odds with how APRA operates below the Superannuation Industry (Supervision) Act (SIS Act).

“…we are aware of non-ABPs being treated differently for SIS purposes, despite having the same fundamental pension principles and tax outcome,” it mentioned.

“We have additionally been informed that APRA has waived sure pension necessities, guaranteeing continued compliance below SIS and avoiding unintended tax penalties. This consists of eventualities the place trustees have miscalculated pension quantities or didn’t make a ultimate cost in a given financial 12 months.

“APRA’s actions in regulating large funds have direct income tax consequences, making it critical that both regulators maintain an aligned and consistent approach to the interpretation and application of SIS regulations. No segment of the superannuation sector should be unfairly disadvantaged when addressing annual pension underpayments,” the joint our bodies mentioned.