Recent developments

Welcome to the July technical roundup, an update on reforms and announcements for the month of June. During June, new legislation was passed to extend the bring forward rule for non-concessional contributions, increase the maximum allowable members in a self managed superannuation fund and the implementation of the Your Future, Your Super measures. Other items of note include the introduction of the Better Advice Bill.


NCC bring forward rule extended

The Treasury Laws Amendment (More Flexible Superannuation) Act 2021 received Royal Assent on 22 June 2021.

The Act increases the maximum age the bring forward rule for non-concessional contributions can be triggered to the financial year the individual turns 67. Prior to this change the last year the bring forward rule could be triggered was the financial year the individual turned 65.  This means that individuals aged 65 and 66 on 1 July of the relevant financial year, who were not previously able to access the bring forward rule due to their age, may now do so, starting in the 2020-21 financial year.

The Act also includes:

  • the removal of the excess concessional contributions charge from 1 July 2021.  The excess concessional contributions charge is a charge calculated on the additional tax liability that arises when someone exceeds their concessional contribution cap; and
  • a change to allow individuals who have accessed their superannuation benefits under the COVID-19 early release of super rule to re-contribute the funds back into superannuation without the amount counting towards the individual’s non-concessional contribution cap. In addition, the contribution cannot be claimed as a tax deduction. This change came into effect on 1 July 2021.


SMSF member limit increase to six

The Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2021 received Royal Assent on 22 June 2021.

The Act amends the Superannuation Industry (Supervision) Act 1993 to increase the maximum allowable members in a SMSF from four to six. This increase to membership also applies to small APRA funds.

This change took effect on 1 July 2021.


Your Future, Your Super

The Treasury Laws Amendment (Your Future, Your Super) Act 2021 received Royal Assent on 22 June 2021.

The Act amends the Superannuation Guarantee (Administration) Act 1992 and Superannuation Industry (Supervision) Act 1993 to enhance the superannuation system by:

  • limiting the creation of multiple super accounts for employees who do not choose a superannuation fund when they start a new job. Effective for new employment on or after 1 November 2021;
  • introducing an annual performance test to be conducted by APRA for MySuper products from 1 July 2021, and for ‘other products’, as specified in regulations, from 1 July 2022. Trustees will be required to give notice to its beneficiaries where their product has failed a performance test. Where a product has failed the performance test in two consecutive years, the trustee will be prohibited from accepting new beneficiaries into that product; and
  • increasing trustee accountability by ensuring trustees only act in the best financial interest of their members. Superannuation funds will also be required to provide better information regarding how their funds are managed and disclose all portfolio holdings from 1 July 2021.

The Government has indicated that supporting regulations are likely to be finalised in the next 2-3 months.


Better Advice Bill

The Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Bill 2021 was introduced into Parliament on 24 June 2021.

The Bill will implement recommendation 2.10 of the Financial Services Royal Commission by:

  • expanding the role of the Financial Services and Credit Panel (within ASIC) to operate as the single disciplinary body for financial advisers;
  • creating additional penalties and sanctions for financial advisers who have breached their obligations under the Corporations Act;
  • introducing a new registration system for financial advisers; and
  • transferring functions from FASEA to the Minister responsible for administering the Corporations Act and to ASIC (including administration of the adviser exam). Standard making functions will also be transferred to the Treasurer (supported by Treasury).

In addition:

  • the Minister will have the power to extend the cut-off date for certain existing financial advisers to pass the adviser exam. There will be a one-time limited extension offered in 2022 for advisers who have made two genuine attempts to pass the FASEA exam prior to 1 January 2022. If advisers have not sat the exam twice prior to 1 January 2022, no extension will be granted. Costs and timings for the 2022 period are yet to be confirmed, but the extension will not extend beyond 30 September 2022.
  • tax (financial) advisers will no longer be regulated by the Tax Practitioner Board but instead will be regulated under the Corporations Act.

The changes will take effect on the day after Royal Assent, with the new disciplinary and registration system for financial advisers to apply from 1 January 2022.

Legislative instruments

On 24 June 2021, Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2021 were made. These regulations extend the temporary 50 per cent reduction to the minimum superannuation income payments from account based income stream and market linked income streams (also referred to as term allocated pensions) by another year, to 30 June 2022.

The changes took effect on 1 July 2021.

Government announcements

Temporary COVID Disaster Payment

On 3 June 2021, the Government announced that individuals who have had their hours of work or income affected due to state lockdowns may be eligible to a temporary COVID Disaster payment.

This support payment will be available to eligible recipients who reside or work in a Commonwealth declared hotspot and are unable to work and earn an income as a result of state imposed health restrictions, which last for more than one week.

For eligible recipients, a payment of up to $500 per week will be payable for losing 20 hours or more of work, and $325 per week for losing under 20 hours of work. These recipients must not have liquid assets of more than $10,000.

The payment will be made in respect of the second and any subsequent weeks of restrictions. For more information in regards to the eligibility criteria, please refer to the  Service Australia website.

Regulator views


Guidance on ongoing fee arrangements

On 15 June 2021, ASIC released an information sheet (INFO256) on ongoing fee arrangements to provide clarity on financial advisers and advice licensees’ obligation when providing personal advice to retail clients under an ongoing fee arrangement.

The information sheet answers frequently asked questions about the obligations that apply to fee recipients in relation to ongoing fee arrangements, fee disclosure statements (FDSs) and ongoing fee consent.

ASIC also noted that INFO256 will replace RG245 Fee disclosure statement, which will be withdrawn. They also updated RG175 Licensing: Financial Product Adviser-Conduct and Disclosure, to reflect the new advice obligations introduced into the Corporations Act 2001, following the Royal Commission into Financial Services, and published a new Example lack of independence disclosure statement and annotations.

Regulations relating to FDSs issued during the transition year were also made on 24 June 2021 and the information sheet was updated to reflect those regulations.


Superannuation guarantee rate increase to 10%

On 8 June 2021, the ATO reminded employers that from 1 July 2021, the superannuation guarantee (SG) rate will increase from 9.50% to 10%.

The ATO also noted that the SG rate is scheduled to progressively increase to 12% by July 2025 and upcoming rates can be found on the ATO website.


Indexed transfer balance cap details from 15 July

With the indexation of the transfer balance cap on 1 July 2021, the ATO has advised that individuals will be able to view their personal transfer balance cap on ATO Online and their tax agents will be able to view this information on Online Services for Agents. The ATO has updated it’s guidance on when this information is likely to be available to 15 July 2021, rather than 5 July 2021 as announced earlier.

The ATO has noted that their records of the individual’s personal transfer balance cap may change if they receive subsequent information that changes the highest ever balance of their transfer balance account before 1 July 2021. This could occur if an SMSF has not completed its reporting of pre-1 July 2021 transfer balance account events.


Extension to make Division 7A loan repayments

On 21 June 2021, the ATO announced an extension of the repayment period for individuals who have a Division 7A loan in place and are unable to make their minimum yearly repayments (MYR) before the end of the lender’s income year due to the ongoing effects of COVID-19.

To apply for the extension, an application must be submitted to the ATO and the borrower must make up the shortfall of their 2020-21 MYR by 30 June 2022.

The ATO also noted that a similar extension was available for the 2019-20 MYR and if the extension was granted, any shortfall of the 2019-20 MYR must be met by 30 June 2021. For those who missed this deadline, you must either obtain a further extension from the ATO or amend your 2019-20 tax return to include a dividend.


FASEA May Exam results

On 6 July 2021, FASEA released the results from the May 2021 Exam. Of the 1,894 candidates who sat the exam, 69% passed. 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 knowledge of when practitioners are required by law to provide a retail client with key documentation i.e. FSG/SOA;
  • demonstrating knowledge of the components of key advice documentation that is provided to the client;
  • evaluating case studies and identifying breaches of financial disclosure obligations;
  • applying relevant sections of the Corporations Act when identifying responsible provider obligations, including breaches of those obligations; and
  • evaluating client scenarios in terms of legal requirements of privacy legislation.

2.     Applied ethical and professional reasoning and communication:

  • identifying sources of judgement and biases and their influence on financial advice; and
  • effectively applying the FASEA code to various client scenarios and identifying compliance and non-compliance.

3.     Financial advice construction:

  • demonstrating an understanding of advising on complex family structures in constructing the advice.


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