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10 July 2020
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
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:
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.
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.
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:
The Defence Legislation Amendment (Miscellaneous Measures) Act 2020 achieved Royal Assent on 25 May 2020.
The Act includes three measures to:
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.
The Treasury Laws Amendment (2019 Measures No. 3) Act 2020 received Royal Assent on 22 June 2020. Amongst other things, the Act:
Other minor and technical amendments covered by this Act include:
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.
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.
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.
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.
The Superannuation Legislation Amendment (2020 Measures No.1) Regulations 2020 were registered on 29 May 2020 and implement the following 2019 Federal Budget proposals:
These amendments apply to contributions made from 1 July 2020.
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.
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.
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.
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.
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.
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:
The ATO will continue to monitor property development arrangements involving SMSFs, particularly those that include LRBAs and/or related party transactions.
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.
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:
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.
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:
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.
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.
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.
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.
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.
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.
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).
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.
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.
On 20 March 2020 the Government announced the deferral of the 2020-21 Budget until 6 October 2020.
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.
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.
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.
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.
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.
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:
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The information provided is not personal advice. It does not take into account the investment objectives, financial situation or needs of any particular investor and should not be relied upon as advice. Any examples are illustrations only and any similarities to any readers’ circumstances are purely coincidental.
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