superannuation and trusts

Several prominent Australian accounting, bookkeeping, tax, financial advice, and superannuation bodies have jointly submitted a response to the Australian Taxation Office (ATO) regarding its consultation on Draft Practical Compliance Guideline (PCG) 2025/D5. This guideline outlines the ATO's compliance approach for the first year of the 'Payday Super' initiative.

A recent determination by the Minister for Social Services aims to provide greater clarity and prevent unintended consequences for individuals with 'legacy' pensions. The introduction of the legacy pension amnesty period, which commenced on December 7, 2024, inadvertently caused these pensions to lose their asset-test exemption for Centrelink purposes, even if not commuted. This was because the option to commute technically violated the original fund rules. The new guidelines empower the Secretary to deem these legacy pensions as still asset-test exempt if the sole reason for losing that status was the availability of the commutation option under the amnesty. This measure, alongside provisions for waiving debts related to commuted legacy pensions, addresses concerns about potential clawbacks of overpayments for social security recipients.

The SMSF Association has welcomed the ATO's new rulings on non-arm's length income (NALI) and contributions, particularly the clarification that NALI provisions will not apply when an SMSF trustee provides a service to their own fund without charging a fee. However, the Association points out missed opportunities, especially regarding the valuation of services and the rigid application of NALI to minor undercharging of capital expenses. They argue for a more pragmatic approach with safe harbour or de minimis thresholds to prevent disproportionate tax consequences for small, inadvertent errors. While acknowledging some welcome clarifications on tax affairs services and shifts in guidance for discount policies and employee share schemes, the Association stresses the need for practical examples and continued engagement with the ATO for clearer, more workable compliance settings.

The Australian federal government has identified improving the retirement phase of superannuation as a key immediate priority. Minister for Financial Services Daniel Mulino stated that while the accumulation phase of the superannuation system is robust, the retirement phase requires development in terms of product offerings and quality. To address this, the government is exploring ways to gather better data on retirement outcomes and collaborate with stakeholders on best practice principles. Concurrently, the government aims to streamline regulatory processes across the financial services sector to reduce administrative costs and enhance overall efficacy.

Leading accounting bodies, including CPA Australia and the SMSF Association, are urging the Australian Taxation Office (ATO) to extend transitional relief for employers facing the Payday Super reforms set to commence on 1 July 2026. They highlight the significant operational changes required across payroll, finance, and superannuation systems, particularly for small businesses, and are calling for an extended compliance period until 30 June 2028, from the current proposed 30 June 2027. Clearer guidance on concepts like 'reasonably practicable' and voluntary disclosure statements is also requested to aid employer adaptation. The reforms necessitate substantial system overhauls for approximately 250,000 employers currently using the Small Business Superannuation Clearing House, which will cease to operate. Professional bodies are also seeking ATO-led support, such as nudge messaging, to help employers monitor super payment timing and system performance, alongside clearer relief for those impacted by fund mergers, rejected contributions, and third-party delays.

Superannuation legal specialist Michael Hallinan suggests that Self-Managed Super Funds (SMSFs) are an effective vehicle for minor children receiving contributions from part-time work. Recent changes from July 1, 2022, removed the $450 per month minimum threshold for Super Guarantee (SG) contributions, meaning even teenagers working limited hours can now receive these payments if they exceed that threshold in any given week. For parents, directing these contributions into an existing SMSF offers potential benefits such as controlled administration costs, shared expenses with other fund members, and proportional cost allocation, which can be more economical than a child's small balance being eroded by fees in a public offer fund. The article also notes that while a minor can join an SMSF under parental guidance and depending on the trust deed, they will need to assume trustee responsibilities upon turning 18.