Societies May Challenge Tax Ruling
The Age
Sunday May 9, 1993
TWO friendly societies forced into closing their educational savings funds as a result a surprise tax office ruling late last month are considering joining forces to mount a legal challenge to the decision.
Ms Annette Ross, spokeswoman for Melbourne's Foresters Friendly Society, said on Friday that Foresters and South Australia's Lifeplan might jointly seek ``QC opinion" on the Australian Taxation Office ruling before preparing individual submissions to have the ruling reversed.
Ms Ross said both of the societies were concerned that the tax office ruling, made without any consultation with the industry, could have broader implications on the tax-exempt status of other friendly society products.
Foresters and Lifeplan, plus a third society, the Over 50s Friendly Society, have been forced to withdraw their educational savings funds after a decision by the tax office on 29 April 29 to disallow the funds' special tax-exempt status.
All three societies have expressed shock and disappointment at the ATO's decision, having previously obtained separate private tax rulings giving their products the go-ahead. The three funds have been open since mid-1992 and together manage more than $7 million in contributions.
While existing contributions and payments in these funds will remain exempt from tax, no new contributions can be accepted pending a review and final ATO ruling scheduled for 10 June.
Mr Don Clifton, who devised and developed Lifeplan's educator plan, said Lifeplan was yet to determine its plan of action as the society's legal and tax advisers were still trying to ``fathom out" the controversial draft ruling.
The Over 50s Society, meanwhile, looks unlikely to contest the ATO ruling and will instead revise its educational savings product with a view to re-entering the market as soon as possible. The managing director of the society, Mr Dennis Cartwright, said it had ``become clear" that the ATO was intent on confirming the draft ruling as a final ruling.
A fourth society, IPS, which manages the $120 million-plus Australian Scholarship Group, is claiming it is unaffected by the ruling and is continuing to accept contributions.
© 1993 The Age