10 July 2020

Recent developments

Welcome to the June technical roundup, which provides an update on reforms and announcements from the beginning of February through to the end of June 2020. Over the past few months, the focus of Government, Parliament and the regulators has been on addressing the effects of COVID-19. In addition, some new laws around financial sector reform, superannuation and tax have been introduced

Legislative Instruments

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 (originally effective 1 July 2020 but deferred until 1 January 2021)

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.

Super Guarantee amnesty for employers

The Treasury Laws Amendment (Recovering Unpaid Superannuation) Act 2020 achieved Royal Assent on 6 March 2020.

The Act 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 started from 24 May 2018 and runs until 6 September 2020.

Economic Stimulus

The Coronavirus Economic Response Package Omnibus Act 2020 received Royal Assent on 24 March 2020 and is part of a package of 8 Acts to implement the Government’s response to the economic impacts of the coronavirus. Several temporary measures have been enacted under this package, including:

  • an increase to the instant asset write-off amount for small businesses from $30,000 to $150,000 from 12 March to 30 June 2020
  • temporarily allowing certain business to deduct capital allowances for depreciating assets at an accelerated rate
  • provision of a one-off tax-free stimulus payment of $750 to pensioners, social security, veteran and other income support recipients and eligible concessional card holders, paid automatically from 31 March 2020. Provide a second $750 payment after 13 July 2020 for income support recipients noted above who are not eligible for the coronavirus supplement
  • reduction of the superannuation minimum drawdown requirements for account based pension and similar products by 50% for 2019-20 and 2020-21 financial years
  • a time-limited coronavirus supplement of $550 per fortnight for existing and new recipients of JobSeeker payment, Youth Allowance JobSeeker, Parenting Payment, Farm Household Allowance and Special Benefit, commencing 27 April 2020
  • a temporary expansion of eligibility for income support payments
  • allowing individuals affected by the coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Amounts released will not be subject to tax nor will they affect Centrelink or Veterans’ Affairs payments.

Defence legislation amendments

The Defence Legislation Amendment (Miscellaneous Measures) Act 2020 achieved Royal Assent on 25 May 2020.

The Act 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;
  • 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.

The amendments to the ownership assistance scheme came into effect on 22 June 2020, with the other amendments coming into effect on 26 May 2020.

Testamentary trusts and deferral of education and training standards for existing financial advisers

The Treasury Laws Amendment (2019 Measures No. 3) Act 2020 received Royal Assent on 22 June 2020. Amongst other things, the Act:

  • Provides that tax concessions available to minors for income distributed from a testamentary trust only apply in respect of income generated from assets of the deceased estate transferred to the testamentary trust (or from the proceeds of the disposal or investment of those assets). Date of effect: applies to assets acquired by or transferred to the trustee of a testamentary trust estate on or after 1 July 2019.
  • Provides an extension to transitional timeframes for existing advisers to comply with the Corporations Act (2001) Education and training standards and to pass the exam. Existing advisers now have until 1 January 2022 to pass the exam and 1 January 2026 to meet the education requirements.

Other minor and technical amendments covered by this Act include:

  • An amendment to the definition of ‘inactive low balance account’ to exclude situations where a member elects to maintain insurance and the account becomes inactive. Date of effect: 30 June 2019.
  • Untaxed elements will not be taxable to the receiving fund where certain eligible beneficiaries (such as the deceased member’s spouse) roll over a death benefit. Date of effect: 1 July 2017.
  • Refinements to the downsizer contribution rules; and
  • provides a method for calculating the special value for the transfer balance debit for both partial and full commutations of term allocated pensions and lifetime income streams. Date of effect: 1 July 2017.

Exposure Drafts

Bring forward rule for under 67’s

The Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 was introduced to Parliament on 13 May 2020.

The Bill would amend the Income Tax Assessment Act 1997 to allow the non-concessional contribution bring forward rule to be used by members who are under age 67 at any time in the financial year, with the amendment effective from 1 July 2020 onwards.

Government announcements

Child care subsidy

On 5 April 2020, the Government registered the Child Care Subsidy Amendment (Coronavirus Response Measures No. 2) Minister’s Rules 2020. This instrument temporarily changes funding arrangements for the early childhood education sector. These arrangements applied from 6 April 2020 to 28 June 2020.

JobKeeper payment

The Coronavirus Economic Response Package (Payments and Benefits) Rules were registered on 9 April 2020.

This instrument introduces a JobKeeper payment to help business affected by coronavirus to cover the cost of their employees’ wages. Under this payment, eligible employers are paid a wage subsidy at a flat rate of $1,500 per employee per fortnight for up to six months.

In-house Asset Determination – Intermediary Limited Recourse Borrowing Arrangements

The Superannuation Industry (Supervision) In-house Asset Determination – Intermediary Limited Recourse Borrowing Arrangement Determination 2020 was registered on 19 May 2020, following a public consultation period that ended in March.

The purpose of the legislative instrument is to exclude an SMSF’s investment in the holding trust from being an in-house assets, but only if the intermediary LRBA meets certain requirements.

The instrument applies to intermediary LRBAs established from 24 September 2007 onwards.

Improving flexibility of superannuation for older Australians

The Superannuation Legislation Amendment (2020 Measures No.1) Regulations 2020 were registered on 29 May 2020 and implement the following 2019 Federal Budget proposals:

  • an increase to the age at which the work test starts to apply, from age 65 to age 67
  • an increase to the age at which the work test exemption is available, from age 65 to age 67; and
  • an increase to the cut-off age for eligibility to make spouse contributions from age 69 to 74 (with the receiving spouse not needing to meet the work test under age 67).

These amendments apply to contributions made from 1 July 2020.

Superannuation Guarantee and JobKeeper scheme

The Superannuation Guarantee (Administration) Amendment (Jobkeeper Payment) Regulations 2020 were registered on 2 June 2020.

These regulations confirm that employers are not required to make SG contributions in relation to additional amounts paid to satisfy the wage condition for JobKeeper payments.

The regulations commenced on 3 June and apply to an employer’s SG obligations from the commencement of the JobKeeper scheme on 30 March 2020.

CPD Relief

On 29 June 2020 FASEA released Corporations (Relevant Providers Continuing Professional Development Standard) Determination (Amendment) 2020 for consultation.

It proposes that where a relevant provider’s CPD year includes 18 March 2020, that an additional 3 months to meet the 40-hour CPD requirement will be granted.

The consultation period ended on 1 July 2020.

Regulator views


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 closed on 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.

Superannuation rates and thresholds for 2020-21

On 12 March 2020, the ATO released the key superannuation rates and thresholds and employment termination payment thresholds for 2020-21.

The below thresholds remain unchanged for 2020‑21.

  • Non-concessional contribution cap: $100,000
  • General concessional contribution cap: $25,000
  • General transfer balance cap: $1,600,000
  • Defined benefit income cap: $1,600,000

SMSFs and property development

The ATO has released SMSF Regulator’s Bulletin SMSFRB 2020/1: Self-managed superannuation funds and property development to outline concerns about new and emerging arrangements that pose potential risks to SMSF and their members from a regulator or income tax perspective.

In particular, the ATO has seen an increase in the number of SMSFs entering into arrangements with related or unrelated parties, involving the purchase and development of real property for subsequent disposal or leasing. This raises regulator concerns for some arrangements including:

  • where the arrangement amounts to the SMSF being maintained for a purpose outside those permitted by the sole purpose test
  • where the SMSF does not continue to meet relevant operating standards, including record-keeping requirements, valuations and keeping SMSF assets separate from members assets
  • where the arrangement includes the provision of a loan or financial assistance to a member or their relative (either directly or indirectly)
  • where the SMSF acquires assets from a related party
  • where the arrangement features the SMSF borrowing money
  • where the SMSF contravenes the in-house asset rules
  • where payments out of the SMSF are in fact payments of benefits contravening the relevant payment standards (i.e. illegal early release of superannuation)
  • where investment is not made and maintained on an arm’s length basis.

The ATO will continue to monitor property development arrangements involving SMSFs, particularly those that include LRBAs and/or related party transactions.

COVID-19 stimulus measures

The ATO has released a ‘one stop shop’ for essential tax and superannuation information on the COVID-19 stimulus measures.

The ATO’s Coronavirus page provides information about what people need to know or do to get access to the tax or superannuation measures as announced by the Government as part of its economic response to COVID-19.

Early release of super – integrity and compliance

On 18 June 2020 the ATO updated their advice on the COVID-19 early release of superannuation scheme. In some cases, the ATO has stopped applications and prevent super money from being released. The ATO will use a variety of data sources to check for claims that were made incorrectly. Behaviours the ATO states will attract their intention include:

  • applying where there is no change to regular salary and wages, or employment information
  • artificially arranging affairs to meet the eligibility criteria
  • making false statements or fraudulent attempts to meet the eligibility criteria
  • withdrawing and recontributing to super for a tax advantage.

No early access to superannuation for TTRs or TAPs

On 9 April 2020 the ATO confirmed that the Coronavirus early access to superannuation measures will not entitle members to access super from non-commutable income streams such as Transition to Retirement income streams or Term Allocated Pensions. However, a TTR can be rolled back to accumulation phase to use the early access measure.

SMSF benefits not listed on myGov

The ATO has published information to explain why some SMSF members requesting early release of super may not be able to see their SMSF in the list of available funds on myGov. This can happen if:

  • the SMSF is newly registered and the registration process is not yet complete;
  • has overdue annual returns
  • has a trustee that has been disqualified
  • has a de-registered corporation trustee.

If the SMSF is not showing in the members list of available funds on myGov, they are encouraged to telephone the ATO for assistance with their early release of super application.

Re-reporting of TAP commutations

The Treasury Laws Amendment (2019 Measures No. 3) Act 2020, which received Royal Assent on 22 June 2020, provided a new way of calculating the debit which arises in an individual’s transfer balance account when a member commutes a term allocated pension (TAP) which commenced prior to 1 July 2017.

Impacted funds will now need to review information already reported to the ATO and consider whether they need to amend any reporting in line with the legislation.

The ATO has announced that it intends to provide guidance to trustees and agents in August 2020 regarding the time frame in which they expect any review of the fund’s reporting to be completed, and will not take any compliance action against funds who do not review their reporting before this time.


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 was seeking public comment on the draft guidance, which closed on 20 March 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.

Letter to trustees on impact of COVID-19

On 1 April 2020 ASIC and APRA issued a joint letter to superannuation trustees reminding them of their trustee obligations for dealing with the impacts of COVID-19. Whilst the challenging circumstances may require trustees to amend priorities and adjust short-term investment strategies, the trustee’s duty to comply with the law, including the duty to act in the best interests of their members does not change.

ASIC also published a frequently asked questions page about issues impacting the financial advice industry as a result of the COVID-19 pandemic.

Temporary SOA Relief

The ASIC Corporations (COVID-19 – Advice-related Relief) Instrument 2020/355 was registered on 14 April 2020. This instrument is designed to facilitate the provision of affordable and timely financial product advice to clients and reduces the regulatory disclosure burden during the COVID-19 pandemic period.

The instrument allows an ROA, rather than an SOA, to be provided when financial product advice is given under the ‘Early Release of Superannuation’ and ‘ROA for an Existing Client’ measures.

It also provides a temporary relief to give advice providers up to 30 business days (instead of 5 business days) to give an SOA after time-critical advice is provided where certain conditions are met.

ASIC announced on 12 June 2020 that the instrument will be repealed on 15 October 2020 (six months after it commenced).


Data on temporary early release of superannuation scheme

In April, APRA began publishing industry-level data related to benefits paid to members through the Government’s COVID-19 temporary early release of superannuation scheme.

Data is published on a weekly basis, with the latest published dated 29 June 2020, for applications received between 20 April and 21 June 2020. The total number of payments to members is approximately 2.3 million since inception, with a total value of $17.1 billion.

MySuper heatmap

APRA has published its first update to the MySuper Product Heatmap.

More than 40% of MySuper members have seen a reduction in fees since APRA published its first MySuper Product Heatmap last December.

The heatmap uses a graduating colour scheme to provide clear and simple insights into MySuper products across three areas: investment performance, fees and costs, and sustainability of member outcomes.


Deferral of Federal Budget

On 20 March 2020 the Government announced the deferral of the 2020-21 Budget until 6 October 2020.

Social security deeming rates

Senator Anne Ruston, Minister for Families and Social Services, announced cuts to the Centrelink deeming rates 12 March 2020, with Prime Minster Scott Morrison announcing further cuts on 22 March 2020, and taking effect 1 May 2020.

As a result, the lower deeming rate has decreased from 1.0% to 0.25% for financial investments up to $51,800 for single pensioners and $86,200 for pensioner couples. The upper deeming rate has been cut from 3.00% to 2.25% for balances over these amounts.

Centrelink and Aged Care rates and thresholds

Some government payment rates and income limits rose on March 2020 as a result of indexation, with the indexation rates published by the Department of Social Services.

The Government also released the schedule of fees and charges for residential home care for March 2020.

Jobseeker Payment commenced

Legislation reducing the number of social security payments came into effect from 20 March 2020 with the aim of simplifying the income support system.

The new Jobseeker Payment will be the main income support payment available for people age 22 to age pension age and replaces Newstart Allowance.

In addition, Sickness Allowance and Bereavement Allowance closed to new claims, while Wife Pension payments stopped, and Widow B Pensioners were transferred to Age Pension.

On 2 April, the government decided to reduce the JobSeeker Payment Partner Income Test taper rate from 60 cents to 25 cents from 27 April 2020.

Amended guidelines for ancillary funds during COVID-19

The Federal Government announced amendments to ancillary fund guidelines that will change the way they are administered during the COVID-19 pandemic.

The announced amendments will provide a credit for ancillary funds that make distribution to deductible gift recipients (DGRs) of at least 4 percentage points above the minimum distribution in 2019-20 and 2020-21.

Ancillary funds will receive a credit of half of the total percentage points that exceed their minimum distributions for both financial years, and may use this credit to reduce their minimum annual distribution by up to 1 percentage point in 2021-22 and subsequent years until the credit is exhausted.

FASEA approves additional recognition of prior learning and bridging courses

On 18 February 2020, FASEA announced it has approved applications for the recognition of coursework to attain a professional designation from the Australian Financial Advisers (AFA) and Stockbrokers and Financial Advisers Association (SAFAA) as part of its education standards for financial advisers.

Then on 2 April 2020, FASEA had announced it has approved applications for the recognition of coursework to attain a professional designation from the Portfolio Construction Forum and CFA Societies Australia as part of its education standards for financial advisers.

The approved Recognition of Prior Learning courses have been added to FASEA’s Approved Recognition of Prior Learning List and will be added to a future Degree, Qualifications and Courses legislative instrument.

In addition to the above, FASEA has also approved additional historical and new degrees and bridging courses.

  • Financial Advice Regulatory and Legal Obligations and the Behavioural Finance Client and Consumer Behaviour bridging courses for Swinburne University were approved on 18 February.
  • The University of Canberra historical Graduate Diploma in Financial Planning was approved on 2 April 2020.
  • On 5 June 2020 FASEA also approved the University of Adelaide historical Graduate Diploma in Global Wealth Management.

FASEA exam results

The April exams were held exclusively using remote proctoring from 2 to 7 April. 470 advisers sat the exam with 79% of candidates passing the exam.

In comparison, the February exams held from 13 to 18 February saw 2,231 advisers sitting the exam, with 82% of candidates passing the exam.

The remaining exam sitting dates for 2020 are:

  • 13-18 August 2020, open for registration until 24 July with over 2,200 advisers registered to date
  • 8-13 October 2020
  • 5-10 November 2020

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