Monthly Technical roundup - March 2020

Financial sector reform – Protecting consumers

The Financial Sector Reform (Hayne Royal Commission Response - Protecting Consumers (2019 Measures)) Act 2019 received Royal Assent on 17 February 2020.

The Act addresses recommendation 4.7, 1.2 and 4.2 from the Royal Commission including:

• extending the existing protections of the unfair contract terms regime to insurance contracts (commencing 5 April 2021)
• ensuring consumer protection provisions apply to funeral expense policies (from 18 February 2020)
• requiring mortgage brokers to act in the best interest of consumers and addressing conflicted remuneration for mortgage brokers (effective 1 July 2020).

Financial Sector Reform – Stronger Regulators

The Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) Act 2019 also received Royal Assent on 17 February 2020. The Act grants ASIC new enforcement and supervision powers in response to the recommendations of the ASIC Enforcement Review Taskforce and the Royal Commission, and takes effect from 18 February 2020.

PSSAP membership

On 13 February 2020, the Government introduced the Superannuation Amendment (PSSAP Membership) Bill 2020 and explanatory materials to Parliament.

The Bill aims to amend the Superannuation Act 2005 to extend membership of the Public Sector Superannuation Accumulation Plan to certain current and former Commonwealth employees and statutory office holders who are not otherwise eligible.

Defence legislation amendments

The Defence Legislation Amendment (Miscellaneous Measures) Bill 2020 and explanatory memorandum were introduced to Parliament on 13 February 2020.

The proposed Bill includes three measures to:

• amend the Defence Home Ownership Assistance Scheme Act 2008, to extend the period after a member leaves the Australian Defence Force (ADF) within which they can access the Defence Home Ownership Assistance Scheme from two years to five years; and
• amend the Australian Defence Force Superannuation Act 2015 to enable former ADF members, who have provided at least 12 months of service, to continue to make contributions to their ADF Super accounts; and
• require ADF Super to obtain relevant insurance products for ADF Super members who are no longer servicing in the ADF and make associated amendments to the Superannuation Industry (Supervision) Act 1993.

Super Guarantee amnesty for employers

The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 was passed by both houses on 24 February 2020 and now awaits Royal Assent.

The Bill enables employers to self-correct historical underpayments of SG amounts without incurring additional penalties that would normally apply. It will apply to SG shortfalls as far back as 1 July 1992, and up until the quarter starting on 1 January 2018 (inclusive).

To qualify for the amnesty, a disclosure must be made to the ATO in the approved form (and must not have been previously disclosed). Employers who do not take advantage of the amnesty will face higher penalties when they are subsequently caught, including a minimum 100% penalty on top of the SG Charge.

The amnesty period will start from 24 May 2018 and run until 6 months after the day the Bill receives Royal Assent.

Buy-back or redemption of certain hybrid securities

On 13 February 2020, the ATO released a discussion paper regarding a potential practical compliance approach for determining the market value of certain hybrids securities when bought back or redeemed from an investor.

Feedback on the paper is welcome until 11 March 2020.

Foreign income tax offsets (FITO)

On 14 February 2020, the ATO welcomed the decision of the High Court not to grant an application for special leave to appeal a decision of the Full Federal Court, who had found in favour of the ATO in relation to foreign income tax offsets (FITO).

This decision reminds taxpayers that they can only claim FITO to the extent that a capital gain is assessable in Australia, rather than the full amount assessed in a foreign jurisdiction.

The ATO advises that now is the time to review any claims and make any necessary voluntary amendments, as they intend to commence compliance activity on this issue in the near future.

Law reform: superannuation regulator roles

On 14 February 2020, ASIC and APRA released a letter in support of the proposed superannuation regulator role reforms which were published by the Government on 31 January 2020.

Best interests’ duty for mortgage brokers

On 20 February 2020, ASIC released Consultation Paper 327 to consult on the draft regulation guidance for the new best interests’ duty for mortgage brokers.

ASIC is seeking public comment on the draft guidance by 20 March 2020, with the intention of publishing final guidance before the obligations commence on 1 July 2020.

Update on enforcement and regulatory work

On 26 February 2020, ASIC provided the latest six monthly update on its enforcement and regulatory work since September 2019.

The update covers implementation of the recommendations from the Royal Commission, and sets out key elements of their enforcement work, including process on referrals and case studies arising from the Royal Commission.

Superannuation statistics

On 25 February 2020, APRA released its Quarterly Superannuation Performance publication and Quarterly MySuper Statistics report for the December 2019 quarter.

Over the December 2019 quarter, there was an increase of 1% in total superannuation assets.

Life insurance statistics

On 27 February 2020, APRA released its Quarterly Life Insurance Statistics publication for the December 2019 quarter.

The statistics indicate that performance of the life insurance industry continues to decline, primarily caused by poor performance of risk business.