Recent developments

Welcome to the October technical roundup, which provides an update on reforms and announcements for the month of October. The Government handed down the 2020 Federal Budget, driving much of the legislative development during October. A revised draft of the Financial Planners and Adviser Code of Ethics 2019 Guide was also released by FASEA.

Acts

Personal tax changes

As part of the 2020 Federal Budget handed down on 6 October 2020, the Government proposed to bring forward the second stage of its Personal Income Tax Plan by two years to 1 July 2020, while retaining the middle income tax offset (LAMITO) for 2020-21.

These changes were made law under the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020, which received royal assent on 14 October 2020. As such:

  • the top threshold of the 19% personal income tax bracket has increased from $37,000 to $45,000
  • the top threshold of the 32.5% personal income tax bracket has increased from $90,000 to $120,000
  • the low income tax offset (LITO) has increased from $445 to $700.

Bills

JobMaker Hiring Credits

The Economic Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 was introduced to parliament on 7 October 2020.

The purpose of the Bill is to provide amendments to facilitate the JobMaker Hiring Credit Scheme that was announced by the Government as part of the 2020 Federal Budget. Under this scheme, the Government will provide funding to accelerate employment growth by supporting organisations to take on additional employees through a hiring credit. Eligible employers will receive $200 per week for hiring eligible employees aged 16 to 29, or $100 per week if they hire eligible employees aged 30 to 35 years. The JobMaker Hiring Credit will be available for up to 12 months from the date of employment.

On 8 October 2020, the Senate referred the provisions to the Economic Legislation Committee for inquiry and report by 6 November 2020.

 

Further Economic Support payments

The Social Services and other legislation amendment (Coronavirus and other measures) Bill 2020 was introduced to Parliament on 22 October 2020. The Bill seeks to make law various amendments including:

  • payment of two Further Economic Support payments of $250 to eligible recipients, as announced in the 2020 Federal Budget
  • temporarily amend circumstances in which a person may be regarded as independent for youth allowance purposes
  • create a temporary pathway for young people who are seeking to qualify as independent for the purposes of assessing Youth Allowance (student)
  • introduce a revised Paid Parental Leave work test period for a limited time
  • improve assistance for families affected by stillbirth and infant death in respect of payments for newborn children.

Exposure Drafts

Deductible Gift Recipients

Treasury is seeking feedback on a draft bill to require non-Government Item 1 Deductible Gift Recipients (DGRs) to register as charities. This reform is intended to strengthen the transparency and oversight of DGRs and help to ensure tax concessions are appropriately targeted.

The draft bill, explanatory memorandum and frequently asked questions were released on 12 October 2020, with consultation open until 4 December 2020.

Government announcements

Exempting granny flat arrangements from capital gains tax

On 5 October, the Government announced that it would provide a targeted Capital Gains Tax (CGT) exemption for granny flat arrangements where there is a formal written agreement in place.

Under the measure, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disability.

The measure may commence as early as 1 July 2021, subject to the passing of legislation.

 

Federal Budget 2020

On 6 October, the Government handed down the 2020 Federal Budget.

The announcement included bringing forward personal income tax cuts already legislated and a one-off additional benefit from the low and middle income tax offset.

The Treasurer also announced a range of taxation benefits for small and medium businesses, intended to stimulate the business sector leading to jobs growth.

In addition, further superannuation reforms were proposed, aimed at reducing duplicate accounts and improving efficiency, as well as several funding measures in the aged care sector.

More information is available on the Federal Budget 2020 page of our website.

Regulator views

ATO

Reporting and paying death benefit rollovers

Under section 207-290 of the Income Tax Assessment Act 1997 (ITAA 1997), when a death benefit lump sum is paid an untaxed element may be created where:

  • the member dies prior to age 65; and
  • the death benefit superannuation lump sum includes insurance proceeds, where the fund has claimed deductions for certain premiums.

Earlier this year the Treasury Laws Amendment (2019 Measures No. 3) Act 2020 amended the law retrospectively, with effect from 1 July 2017, to ensure any untaxed element determined in accordance with 307-290 of ITAA 1997 is not included in the receiving fund’s assessable income.

On 8 October the ATO provided clarification on reporting and paying death benefit rollovers to assist funds to correctly report death benefit rollovers.

 

SMSF real property valuations and COVID-19

SMSF trustees are required to report fund assets at market value, with evidence to support the valuation, to comply with regulation 8.02B of the Superannuation Industry (Supervision) Regulations 1994 (SISR).

The ATO has provided guidance for SMSF trustees to comply with this regulation as it applies to real property valuations, and which was updated on 15 October to include impacts of COVID-19.

During the 2020 and 2021 financial years, if the trustee has difficulty obtaining valuation evidence due to the impacts of COVID-19, the auditors can consider modifying Part B of the audit report and lodge an audit contravention report (ACR) if necessary, providing reasons on the ACR why the trustee was unable to obtain appropriate evidence. If the ATO is satisfied that this was due to the impact of COVID-19, the contravention will not result in penalties. 

AFCA

Complaint extension to end

On 16 October, the Australian Financial Complaints Authority (AFCA) reminded firms that the 6-month temporary time extension to provide responses to financial difficulty complaint and complaints that have already been through internal dispute resolution will come to an end.

From 1 November, AFCA’s process will revert to original response timeframes.

You can view AFCA’s detailed process map showing the response timeframes. 

Other

FSC - Future of Advice

On 20 October, the Financial Services Council (FSC) released a research report by Rice Warner which offers ideas for restructuring the model for financial advice to illicit policy debate on how to make advice more affordable and accessible. The proposed future financial advice model includes:

  • all advice to be one of two categories – strategic advice and financial product advice
  • new definitions of financial advice – general information; and personal advice separated into simple personal advice, complex personal advice, and specialised advice
  • new principles to refocus the system – simplification, affordability, accessibility, consistency, and quality of advice
  • less documentation – for example, allowing a Fact Find and a Record of Advice for the provision of Simple Personal Advice
  • realistic and less costly levels of compliance and
  • tax deductibility for financial advice.

The full report can be downloaded from the FSC website.


Draft Financial Planners & Adviser Code of Ethics 2019 Guide

Following consultation with stakeholders in 2019 and early 2020, FASEA released the draft Financial Planners & Adviser Code of Ethics 2019 Guide for consultation on 5 October 2020.

The draft guide provides an explanation of the intent and application of the Code’s values and standards, building on the preliminary response to submissions released in December 2019.

FASEA invites feedback on the draft by 2 November 2020.


FASEA November Exam

On 21 October, FASEA announced that it would not offer metropolitan physical location exams in Melbourne for the November sitting. Advisers who have registered for a Melbourne physical location exam will have the option to sit the exam online or defer to January or a later sitting.

The Geelong exam location will continue to be offered to advisers in regional Victoria.

Additional information

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The information provided is not personal advice. It does not take into account the investment objectives, financial situation or needs of any particular investor and should not be relied upon as advice.  Any examples are illustrations only and any similarities to any readers’ circumstances are purely coincidental. 

While the information provided here is given in good faith and is believed to be accurate and reliable as at the date of preparation, 23 May 2019, it is provided by MIML for information only.  We will not be liable for any losses arising from reliance on this information.

This information is intended only to provide a summary and general overview on matters and does not constitute legal advice. You should seek legal or other professional advice before relying on this information.

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