Monthly technical roundup - January 2021

Extension of the Coronavirus Supplement

On 17 December 2020, the Social Services and Other Legislation Amendment (Extension of Coronavirus Support) Act 2020 was assented.

The Act extends the Coronavirus Supplement for both existing and new JobSeekers at a rate of $150 per fortnight from 1 January 2021 through to 31 March 2021.

It also extends the temporary COVID-19 qualification rules for JobSeeker payment and Youth Allowance to 31 March 2021.

The ordinary waiting period, newly arrived resident’s waiting period and seasonal work preclusion period will also continue to be waived until 31 March 2021.

Financial Sector Reform

The Financial Sector Reform (Hayne Royal Commission Response) Act 2020 was assented on 17 December 2020. This Act implements several recommendations made in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Some of the key changes include:

• Hawking of financial products (recommendations 3.4 and 4.1). Schedule 5 of the Act amends the Corporations Act 2001 to ban the hawking of financial products, to take effect on 5 October 2021.
• Trustees of registerable superannuation entities should have no other duty (recommendation 3.1). Schedule 8 of the Act amends the Superannuation Industry (Supervision) Act 1993. It imposes a new condition on licences held by a body corporate trustee of a registrable superannuation entity, prohibiting these trustees from having a duty to act in the interest of another person, to take effect from 1 July 2021.
• Adjustment of APRA and ASIC’s roles in superannuation (recommendations 3.8, 6.3, 6.4 and 6.5). Schedule 9 of the Act extends ASIC’s role in superannuation regulation to cover consumer protection and market integrity regulation. It also extends the Australian financial services licensing (AFSL) regime so that each registrable superannuation entities licensee must hold an AFSL authorising it to provide a superannuation trustee service, capturing all activities involved in operating a superannuation fund. It will also prevent superannuation trustees and directors from using trust assets to pay criminal, civil or administrative penalties. Schedule 9 took effect from 1 January 2021.

The Act also includes measures regarding financial adviser reference checking and information sharing between licensees, breach reporting and remediation and a number of insurance related changes.

Adviser education standards

On 15 December 2020, FASEA registered the Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Amendment Determination (No. 1) 2020.

This legislative instrument now includes all Bachelor’s degrees, Graduate Diplomas and bridging courses approved by FASEA since January 2020. It also includes:

• FASEA approved recognition of prior learning (RPL) for existing advisers;
• education undertaken to attain professional designations for SAFAA, FPA, AFA and CPA; and
• amendments to historical course/degree details provided to FASEA by higher education providers post January 2020.

Indexation of Transfer Balance Cap

On 28 January, the ATO advised that the transfer balance cap will increase from $1.6 million to $1.7 million from 1 July 2021.  When the transfer balance cap is indexed to $1.7 million, every individual with an existing transfer balance account will have their own personal transfer balance cap of between $1.6 million and $1.7 million, depending on their circumstances.

For individuals who start a retirement phase income stream for the first time on or after 1 July 2021, the applicable transfer balance cap will be $1.7 million.

For individuals who had a transfer balance account before 1 July 2021, the transfer balance cap will be:

• $1.6 million if, at any time between 1 July 2017 and 30 June 2021, the balance of that account was $1.6 million or more; or
• between $1.6 million and $1.7 million in all other cases, based on the highest ever balance of your transfer balance account.

Indexation of the general transfer balance cap changes other caps and limits that may apply:

• non-concessional contributions
• government co-contributions
• spouse contribution (receiving spouse).

Updates to RG246 – Conflicted remuneration

ASIC released technical updates to Regulatory Guide (RG) 246 Conflicted and other banned remuneration, on 10 December 2020, to reflect the recent changes to the law.

The updates reflect:

• the end of grandfathering provisions for conflicted remuneration for financial advice products (from 1 January 2021); and
• extending the ban on conflicted remuneration to stamping fees paid in relation to listed investment trusts (excluding real estate investment trusts) and listed investment companies that took effect on 1 July 2020.

Furthermore, the updated RG 246 also clarifies that the law does not prescribe a timeframe for repaying commissions that are clawed back where a life insurance policy has been cancelled or reduced in the first 2 years.

Further feedback on Internal Dispute Resolution (IDR) data reporting requirements

On 16 December 2020, ASIC announced it was seeking further feedback on proposed requirements for internal dispute resolution data reporting following ASIC’s earlier consultation through Consultation Paper 311 Internal dispute resolution: Update to RG165 (CP 311), published on 15 March 2019.

CP 311 outlines ASIC’s approach to implementing the internal dispute resolution data framework legislated in the Treasury Laws Amendment (Putting Customers First – Establishment of the Australian Financial Complaints Authority) Act 2018.

New IDR standards and requirements will apply to financial firms that deal with retail clients (including superannuation trustees) from 5 October 2021. This includes the requirement to record all complaints that a firm receives. 

Feedback is due by 12 February 2021. 

MySuper heatmap refresh

On 18 December 2020, APRA published its first full refresh of the MySuper product heatmap since it was first introduced a year ago, with the aim of increasing scrutiny of underperforming superannuation funds.

A paper released in conjunction with this refresh indicates that in the last 12 months:

• 11 of the MySuper products that underperformed the investment benchmarks have exited the industry;
• 71% of MySuper members have seen a reduction in disclosed total fees and costs; and
• an estimated $408m saving in total fees and costs have been achieved.

The new web-based, interactive heatmap tool is available at: MySuper Product Heatmap.