Retirement income covenant, ESS and more
On 25 November 2021, the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 (Cth) was introduced to Parliament.
The Bill primarily focuses on the introduction of a new corporate collective investment vehicle (CCIV), which is a new type of company limited by shares that will be used for funds management.
The Bill also contains the following measures relevant to the financial services industry.
Retirement income covenant
A new covenant will require trustees of superannuation funds (excluding SMSFs) to develop a retirement income strategy for members who are retired or approaching retirement, from 1 July 2022.
The retirement income strategy will outline the trustee’s plan to assist members who are retired or approaching retirement to achieve and balance the following objectives:
- maximise their members’ retirement income;
- manage risks to the sustainability and stability of their retirement income; and
- have flexible access to funds during retirement.
Deferred taxing point for employee share schemes (ESS)
Under the current arrangements, when an employee leaves an employer, their ESS entitlements under a deferred tax arrangement may become taxable.
The Bill removes the cessation of employment taxing point for ESS interests and instead defers the taxing point to the earliest of:
- when the risk of forfeiture is removed, and the employee can sell the shares/rights, or
- 15 years after the acquisition of the shares/rights.
This measure will apply on or after the beginning of the financial year starting after Royal Assent, or if the Bill receives Royal Assent on 1 July, the ESS interest for which the ESS deferred taxing point occurs on or after that 1 July.
Temporary loss carry back rules extension
Under the current arrangements, eligible companies can utilise tax losses from the 2019/20, 2020/21 and 2021/22 financial years to offset previously taxed profits from the 2018/19 financial year.
If passed, this carry back rule will be extended by 12 months, allowing eligible companies to claim the loss carry back tax offset for the 2022/23 financial year.