Monthly technical roundup - April 2023

Amendments to Paid Parental Leave

On 10 March 2023, the Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Act 2023 (Cth) received Royal Assent.

The Act amends the Paid Parental Leave Act 2010 (Cth) to make the parental leave pay more accessible, flexible and gender neutral. The amendments include:

• extending the parental leave pay from 18 weeks to 20 weeks from 1 July 2023, with two weeks reserved on a ‘use it or lose it’ basis (per claimant);
• removing the notion of ‘primary’, ‘secondary’ and ‘tertiary’ claimants as well as the requirement for primary claimants to be the birth parent. This will allow families to decide who will claim first and how they will share the entitlement;
• allowing claimants to take their parental leave entitlements within two years of the birth or adoption in multiple blocks, as small as a day at a time, and remove the requirement to not return to work in order to be eligible;
• introducing a family income limit of $350,000, under which families can be assessed if they do not meet the individual income test. This limit will be indexed annually from 1 July 2024; and
• expanding eligibility to allow an eligible father or partner to receive the payment regardless of whether the birth parents meet the income test, residency requirements or is servicing a newly arrived resident’s waiting period.

Strengthen rights to pursue unpaid super and changes to unpaid parental leave

On 29 March 2023, the Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023 (Cth) was introduced to Parliament.

Strengthen rights to pursue unpaid super

Amendments to the Fair Work Act 2009 (Cth) to allow employees to take legal action to recover unpaid superannuation. This is achieved by adding superannuation contributions to the list of minimum entitlements in the National Employment Standards (NES). Any employer who contravenes the proposed entitlement could be subject to a civil penalty, as is the current position for all contraventions of the NES.  

This provision also complements the ATO’s existing process to recover unpaid superannuation and creates an additional enforcement mechanism which employees can use in the event the employee’s superannuation entitlements have been underpaid, or not paid at all.

If passed, the proposed changes will commence on the first 1 January, 1 April, 1 July or 1 October after the end of the period of six months beginning on the day the Act receives Royal Assent.

Amendments to unpaid parental leave (UPL)

Amendments to the Fair Work Act 2009 (Cth) aimed at strengthening an employee’s entitlement to flexible UPL by:

• allowing employees to take up to 100 days of flexible UPL (from 30 days), or a higher number as prescribed by regulations;
• allow employees to commence their UPL at any time in the 24 months following the birth or placement of their child; and
• allowing employees to take flexible UPL before and after a period of continuous UPL. Under the current provisions, when an employee takes a day of flexible UPL, they may forfeit any remaining continuous UPL entitlement.

If passed, the proposed changes will commence the later of 1 July 2023 and the day after the Act receives Royal Assent.

Changes to AFCA

On 27 March 2023, the Australian Financial Complaints Authority (AFCA) released a Consultation Paper seeking industry feedback on its proposed changes to its Rules and Operational Guidelines, aimed at enhancing the AFCA Scheme.

AFCA stated that the changes were in response to the Review of the Australian Financial Complaints Authority which was published in November 2021 and contained 13 recommendations (rec.) to AFCA and one to the Government.

The proposed changes in the Consultation Paper include:

• addressing the management of unreasonable and inappropriate conduct within the scheme, to strengthen AFCA’s ability to deliver procedural fairness (rec. 2), to manage the conduct of fee Paid Representatives who engage with the scheme (rec. 4), and to make the complaints handling process more efficient (rec. 5);
• ensuring only unresolved issues in dispute are progressed, and that matters do not progress to case management or decision status where an appropriate settlement offer has been made (rec. 1, 2, 5 and 7);
• excluding complaints lodged by professional/sophisticated investors unless an exemption applies (rec. 6);
• enhancing the visibility, accessibility and performance of the forward-looking review mechanism (rec. 9);
• providing clarity about the effect of AFCA determinations to provide greater transparency over AFCA’s decision making (rec. 2). This was designed to ensure complaints are finalised more efficiently and timely (rec. 5);
• minor amendments to the definition and language to improve clarity and transparency over AFCA’s operations.

The consultation period closes on 22 May 2023.

Tax on super earnings to increase for balances above $3 million

On 31 March 2023, the Government released a Consultation Paper seeking feedback on its proposed reform to introduce an additional 15 per cent tax rate for earnings corresponding to the proportion of an individual’s superannuation balance that is above $3 million from 1 July 2025.

The Consultation Paper contained an overview of how the tax would be calculated, who would be affected by this reform, and how the new rules could affect individuals and trustees of both SMSFs and APRA-regulated funds.

The consultation also seeks feedback on:

• how defined benefits are treated under the new tax reform;
• negative earnings and whether it could offset future earnings;
• the options available to the individual to fund the tax liability (e.g. funded by a superannuation interest or funds held outside of superannuation);
• how the additional tax is applied to Constitutionally Protected Funds (CPFs). CPFs are untaxed funds that do not pay income tax on concessional contributions or earnings; and
• the reporting process for funds and finding the most effective method for collecting the required information.

The consultation period closed on 17 April 2023.

Compensation for financial advice related misconduct – final update

On 10 March 2023, ASIC released its final update on the compensation for financial advice related misconducted.

The update covers six of Australia’s largest banking and financial services institutions, and it summarises the amounts paid or offered to customers who suffered loss or detriment because of fees for no service misconduct or non-compliant advice.

Below is a summary of the outcomes, as at 31 December 2022:

Fees for no service misconduct

Non-compliant advice

*Not included because ASIC accepted an enforceable undertaking in January 2013, which resulted in $24.7 million in compensation paid to 263 clients.

DDO conditional relief for reissuance of certain life insurance policies

On 17 March 2023, ASIC announced that it had registered the ASIC Corporations (Design and Distribution Obligations—Reissued Life Policies Class Exemption) Instrument 2023/183.

The Instrument provides a conditional relief from the design and distribution obligations (DDO) for life insurers when reissuing life insurance policies in limited circumstances.

To qualify for the relief, the reissued policy must:

• have originally been issued before 5 October 2021, except where the policy was reissued to correct an administrative error or reinstate a lapsed policy;
• have been reissued at the request of the policyholder, except where the policy was reissued to correct an administrative error;
• be reissued at the same terms and conditions without additional underwriting or individual loadings, apart from changes that were necessary to give effect to the transaction; and
• be issued to the same policyholder.

The instrument will expire on 16 March 2028.

February 2023 adviser exam results

On 27 March 2023, ASIC released the results of the financial adviser exam which was held in February 2023.

Of the 192 candidates who sat the exam, 67% passed. In releasing the results, ASIC has also stated that to date, 20,425 candidates have sat the exam and over 93% of those candidates have passed.

The next exam sitting will be held on 11 May 2023 and the last day to enrol for that sitting will be on 21 April 2023.