Lily Li, Senior Manager in KPMG's Tax Division, highlights key changes for superannuation fund financial reporting standards that are to come into effect.
AASB 1056 replaces Australian Accounting Standard (AAS) 25 Financial Reporting by Superannuation Plans with the intention to provide greater transparency and consistency in financial reporting for superannuation entities.
As there is a requirement for 2016 comparatives, superannuation funds will need to prepare their 2016 financial information based on AASB 1056. Which means in a few months’ time, tax managers of superannuation funds will find themselves being asked to calculate the tax balances to be disclosed under AASB 1056.
A key change under AASB 1056 is that financial statements will be reformatted to remove member transactions from the Income Statement to the Statement of Changes in Member Benefits. This raises a question about how to calculate the income tax expense disclosed in the Income Statement and member taxes disclosed in the Statement of Changes in Member Benefits. For example, should the tax adjustments in relation to anti-detriment deductions be included as ‘taxes on contributions’? Another example is that the deductible insurance premiums on a fund level (as well as the tax impact for these) are often different from the insurance payments charged to the members’ accounts (net of tax), and questions arise as to how the unreconciled amount should be addressed in the financial statements.
The changes are not necessarily intuitive and it will take time to identify new data requirements and reconstruct workpapers to drive the new income tax expense disclosures. Funds should now be planning whether their general ledgers and tax provision workpaper templates can deal with the changes under AASB 1056.