Recent developments

Welcome to the April technical roundup, an update on reforms and announcements for the month of March. In this timeframe, the Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020 and the Social Services Legislation Amendment (Strengthening Income Support) Bill 2021 received Royal Assent. ASIC also made three legislative instruments relating to the lack of independence disclosure and consent to deduct advice fees. Other items of note include the release of the final report of the Royal Commission into Aged Care Quality and Safety, which included 148 recommendations. 

Acts

Financial Sector Reform

The Treasury Laws Amendment (Reuniting More Superannuation) Act 2021 received Royal Assent on 22 March 2021. This Act makes the following changes to law:

  • amends the Superannuation (Unclaimed Money and Lost Members) Act 1999 to require the balance of all accounts less than $6,000 held by eligible rollover funds on 1 June 2021 to be transferred to the ATO by 30 June 2021 and the balance of all remaining accounts held by eligible rollover funds to be transferred by 31 January 2022;
  • allows the Commissioner to proactively reunite the amounts received from eligible rollover funds with a member’s active account;
  • amends the Superannuation Industry (Supervision) Act 1993 and Retirement Savings Account Act 1997 to prevent superannuation funds and retirement saving account providers from transferring new amounts to eligible rollover funds from 1 May 2021; and
  • applications cannot be made to operate a new eligible rollover fund from 22 March 2021. 

 

Social security changes

The Social Services Legislation Amendment (Strengthening Income Support) Act 2021 received Royal Assent on 22 March 2021.

Under this Act, the following changes to social security payments are made:

  • increase of $50 per fortnight to working-age social security payments from 1 April 2021;
  • permanent increase to the income-free earnings threshold to $150 per fortnight for JobSeeker and Youth Allowance recipients from 1 April 2021;
  • temporarily extends the waiver of the Ordinary Waiting Period for certain payments by another 3 months to 30 June 2021;
  • temporarily extends the expanded eligibility criteria for JobSeeker Payments and Youth Allowance for those required to self-isolate or care for others as a result of COVID-19 to 30 June 2021; and
  • temporary pension portability extensions for pensioners unable to return to their usual place of residence within 26 weeks due to circumstances beyond their control extended to 30 June 2021. 

Legislative Instruments

Advice fee consent and lack of independence disclosure legislative instruments

On 25 March 2021, ASIC made three legislative instruments that deal with advice fee consents and independence disclosure following Royal Assent of the Financial Sector Reform (Hayne Royal Commission Response No.2) Act 2021. These are:

Examples of written consent forms and frequently asked questions were also published by ASIC with the associated media release.

ASIC also released Report 687 Response to submissions on CP 329 on advice fee consents and independence disclosure which highlights the key issues raised in submissions to ASIC and details of ASIC’s responses to those issues. 

Government announcements

Royal Commission into Aged Care Quality and Safety

On 1 March 2021, the final report of the Royal Commission into Aged Care Quality and Safety was released, which included 148 recommendations.

Below are some of the recommendations which may have an impact on the financial planning industry:

  • replace the Aged Care Act 1997 with a new Act to address the findings from the Royal Commission (Recommendation 1);
  • increase the Basic Daily Fee by $10 per resident per day, subject to meeting several conditions (Recommendation 112);
  • phasing out Refundable Accommodation Deposits (RAD) from 1 July 2025 for new residents and establishing an aged care accommodation capital facility designed to create incentives for providers to develop small household models of accommodation (Recommendation 142);
  • changes to the means tested amounts and remove the lifetime caps on the means tested contributions (Recommendations 129 and 142); and
  • establish an aged care improvement levy of 1% of taxable personal income to fund the aged care costs (Recommendation 144).

Note that no draft legislation has been released and the recommendations are not law. 

 

End of conflicted remuneration (grandfathering) for mortgage brokers

Treasury has announced the introduction of the National Consumer Protection (Transitional and Consequential Provisions) Regulations 2021. Effectively, this takes away grandfathering on conflicted remunerations and the regulation commenced on 23 March 2021.

  • The Regulations apply the ban on conflicted remuneration for mortgage brokers and mortgage intermediaries to benefits given under arrangements made prior to 1 July 2020, regardless of when the arrangement under which the benefits are given was entered into.
  • The Regulations prescribe circumstances in which the ban on conflicted remuneration applies. In particular, the Regulations prescribe that the ban applies to any benefit given or received after the Regulations commence, even if the benefits are given under an arrangement made prior to 1 July 2020.

Regulator views

ATO

SMSF sector continues to grow

The ATO released the 11th edition of their annual statistical overview of self-managed superannuation funds (SMSFs).  The report provides key statistics of the SMSF sector for the 2018-19 and 2019-20 financial years, with the main source of data coming from SMSF annual returns. Highlights include:

  • as of 30 June 2020, SMSFs made up 26% of all super assets;
  • as of 30 June 2020, there were 593,000 SMSFs with more than 1.1 million SMSF members, holding $733 billion in total assets;
  • on average, SMSFs had assets of over $1.3 million each on average in the 2018-19 financial year, up 5% from the previous year and up 22% over five years;
  • as of 30 June 2019, 10% of SMSF members had a closing account balance of over $1.6 million;
  • 47% of SMSFs had assets between $200,000 and $1 million. This accounts for 20% of the total SMSF assets;
  • the median age of SMSF members of newly established funds in the 2018-19 financial year was 46, compared with age 61 for all members as at 30 June 2020; and
  • the average member balance for female members increased by 28% over the five years to 2018-19, while the average balance for male members increased by 22% over the same period.

AFCA

Draft Engagement Charter released

AFCA has released a draft Engagement Charter and consultation paper to summarise expectations on all users of AFCA’s service, including consumers, financial service providers, third-party services and AFCA itself, and to seek feedback from key stakeholders.

The Engagement Charter is intended to be a ‘living document’ to deal with the core principles in a changing financial landscape and will be amended and expanded on from time to time to consider industry developments and other changes.

AFCA are seeking comment on 5 specific questions outlined in the consultation paper (section 2.3) with the consultation period closing on 20 April 2021.

Other

FASEA

FASEA January Exam results

On 17 March 2021, FASEA released the results from the January 2021 Exam. Of the 1,079 candidates who sat the exam, 67% passed (compared with the average of 78% across all exams). In releasing the results, FASEA has also highlighted some areas for improvement, particularly amongst unsuccessful candidates. These are:

1. Financial Advice Regulatory and Legal Requirements:

  • demonstrating an understanding of different types of advice (e.g., personal advice, general advice and factual information) and how they apply to different client scenarios;
  • demonstrating knowledge of the components of key advice documentation that is provided to the client (i.e. FSG/SOA);
  • applying relevant sections of the Corporations Act when identifying responsible provider obligations, including breaches of those obligations;

2. Applied ethical and professional reasoning and communication:

  • demonstrating a practical application of due diligence in financial advice;
  • identifying sources of judgement and biases and their influence on financial advice;
  • applying best interest duty and associated ethical obligations when providing financial advice; and
  • effectively applying the FASEA code to various client scenarios.

3. Financial Advice Construction:

  • demonstrating an understanding of the context in which financial advice is given and requested and how this impacts decision making.

 

Additional information

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