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Welcome to the August technical roundup, an update on reforms and announcements for the month of July. During July, Treasury released exposure draft legislation to implement a further 7 recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Other items of note include a position paper released by the Government to include a retirement income covenant for all superannuation trustees.
The Government committed to introducing a retirement income covenant for superannuation trustees (including SMSF and SAF trustees) in the 2018-19 Budget and released a position paper on 19 July 2021.
The position paper proposes the inclusion of a retirement income covenant in the Superannuation Industry (Supervision) Act 1993 where trustees will have a fundamental obligation to formulate, review regularly and give effect to a retirement income strategy.
The retirement income strategy will outline the trustee’s plan to assist their members to achieve and balance the following objectives:
The paper also highlights that retirees struggle to develop effective income strategies on their own and that much of their savings within the superannuation system are not used to provide an adequate retirement income. As a result, the covenant aims to improve these mechanisms by creating an obligation for superannuation trustees to assist their members to meet key retirement income goals.
Consultation is open until 6 August 2021 and the Government aims to have the changes come into effect from 1 July 2022.
On 19 July 2021, ASIC issued the ASIC Corporations and Credit (Reference Checking and Information Sharing Protocol) Instrument 2021/429 (ASIC Protocol) which is aimed at improving reference checking in the financial advice and mortgage broking industries.
These reforms, which were introduced in the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (the Act) aims at promoting better information sharing about the past performance of financial advisers and mortgage brokers – focusing on compliance, conduct and risk management.
Additionally, ASIC has prepared an information sheet as well as published examples of references as a guide, and aims to provide consequential updates to ASIC’s guidance to reflect the new requirement.
The legislative instrument and the ASIC Protocol will come into effect on 1 October 2021.
On 16 July 2021, Treasury released an exposure draft legislation to implement further recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry:
Consultation to closes on 13 August 2021.
On 29 July 2021, Treasury released exposure draft legislation and explanatory materials to implement the changes to regulatory and tax arrangements for employee share schemes.
These changes were announced in the 2021 Federal Budget and include:
Public consultations will close on 25 August 2021.
On 28 July 2021, the Government announced an increase to financial support to eligible workers who have lost hours of work due to state government lockdowns or public health orders.
The new payment amounts are as follows:
The Government noted that the new payment rates will commence from 2 August 2021 and this payment will also be available from day one of any potential lockdowns in the future.
More information can be found on the Services Australia website.
On 19 July 2021, ASIC released its internal dispute resolution (IDR) reporting documents (including a data dictionary and data glossary), which will be tested in a pilot involving financial firms from across relevant industry subsectors in late 2021.
The IDR data reporting is intended to improve transparency in the IDR system, assist consumers decision making and allow firms to compare themselves against their peers. This also assists ASIC in identifying emerging issues.
ASIC has also released REP 693 Response to submissions on ASIC’s internal dispute resolution data consultations that set out ASIC’s responses to submissions received on the data reporting requirements in Consultation Paper 311: Internal dispute resolution: Update to RG 165 (CP311) and the Addendum to CP311.
On 23 July 2021, ASIC announced that it has published its draft Cost Recovery Implementation Statement (CRIS) for 2020-21, which outlines ASIC’s estimated regulatory cost for 2020-21 and how the costs will be recovered under the industry’s funding model.
ASIC noted that the indicative levies published in the statement are based on ASIC’s planned regulatory work and associated costs in 2020-21 and the final industry levies will be based on ASIC’s actual regulatory costs. ASIC also noted that the final levies will be published in December 2021 and invoices will be sent out in January 2021.
Feedback on the draft CRIS will close on 13 August 2021.
On 14 July 2021, the ATO announced that updates were being made to the Australian Business Registry (ABR) to simplify the process to add a fifth and sixth member to an SMSF. The increase to the maximum allowable members in an SMSF was legislated in June.
The ATO expects the update to be completed by mid-August and recommends that individuals wait until the completion of the update prior to adding additional members.
The ATO suggests that individuals should consider the following prior to expanding the number of members within an SMSF:
On 28 July 2021, the ATO released Law Companion Ruling (LCR) 2021/2 Non-arm's length income - expenditure incurred under a non-arm's length arrangement.
This Ruling clarifies how the amendments to section 295-550 [meaning of non-arm's length income] of the Income Tax Assessment Act 1997 (ITAA 1997) operate in a scheme where the parties do not deal with each other at arm’s length and the trustee of a complying superannuation entity incurs non-arm’s length expenditure (or where expenditure is not incurred) in gaining or producing ordinary or statutory income.
The amendments apply in relation to income derived in the 2018–19 income year and later income years, regardless of whether the scheme was entered into before 1 July 2018.
On 29 July 2021, the ATO released PS LA 2021/D1 – remission of additional superannuation guarantee charge.
The draft Practice Statement sets out the criteria which the ATO considers when deciding whether to reduce the Part 7 penalty (either in full or part). For employers who fail to lodge a superannuation guarantee (SG) statement by the lodgement date, the Part 7 penalty may be applied where the SG charge may be increased to up to 200%.
The draft statement also highlighted that the ATO has end-to-end visibility and are able to uncover any employers who have failed to meet their SG obligations after the SG amnesty (which ended 7 September 2020).
Details of the SG charge and Part 7 penalty can be found on the ATO website.
On 19 July 2021, APRA announced further regulatory support for banks who offer temporary financial assistance to borrowers impacted by the COVID-19 pandemic.
The support package provides small businesses and home loan customers an option to defer their loan repayments, and not treat the deferral as a period of arrears or loan restructure. This will apply to loans that are granted a repayment deferral of up to three months before the end of August 2021.
The measures largely mirrors the temporary support measures which were announced by APRA in March 2020.
Following the recent announcement, APRA released a consultation paper on 30 July 2021 for feedback which closes on 6 August 2021.
On 20 July 2021, APRA issued a letter to Registrable Superannuation Entity (RSE) licensees on the implementation of the Your Future, Your Super (YFYS) reforms, which came into effect on 1 July 2021.
The letter outlines APRA’s plan for implementing the reforms and set expectation of RSE licensees to meet the new legislative requirements.
Additionally, given the changes have come into effect and are now law, all RSE licensees must have already:
On 8 July 2021, FASEA announced that all financial advisers who have yet to pass the Financial Advisers Exam will have the option to sit the November exam irrespective of the timing of their last sitting.
This will give financial advisers two opportunities to sit before the current transition period ends on 31 December 2021 (i.e. July and November sittings or September and November sittings).
Additionally, on 14 July 2021, FASEA released the Corporations (Relevant Providers Exam Standard) Determination 2019 Amendment for consultation to provide relief from the 3 month registration requirement.
Consultation closed on 28 July 2021.
On 19 July 2021, FASEA announced that it has now approved five current degrees, four bridging courses and one degree as recognition of prior learning.
In addition, FASEA released the draft amendments to the Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2020 to include approvals since September 2020 and other adjustments, such as:
Submissions closed on 30 July 2021.
On 8 July 2021, the FSC announced that the FSC and its members have collaborated to produce DDO templates to assist FSC and non-FSC members in meeting their obligations under the DDO regime, which starts on 5 October 2021.
The templates include:
The FSC has indicated that templates for Investor Directed Portfolio Services (IDPSs), investment bonds, education bonds and funeral bonds should be finalised shortly.
The templates and data standards can be found on the FSC website.
AFCA announced on 5 July 2021 that they received a total of 70,510 complaints in the 2020-21 financial year and have summarised their findings in a ‘snapshot’ document.
Some of AFCA’s findings include:
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