Recent developments

Welcome to the June technical roundup, an update on reforms and announcements for the month of May. During May, the Government handed down its 2021 Federal Budget and its response to the Final Report of the Royal Commission into Aged Care Quality and Safety. Other items of note include ASIC’s findings on the ‘general advice’ label and the Government’s announcement to extend the temporary 50% reduction to the superannuation minimum drawdown rates for a further 12 months.

Legislative developments

Bill

LMITO extension and more

The Treasury Law Amendment (2021 Measures No. 4) Bill 2021 was introduced to Parliament on 26 May 2021.  This Bill implements several proposals made in the 2021 Federal Budget including:

  • providing employers with exemption from FBT if they provide training or education to a redundant or soon to be redundant employee (on or after 2 October 2020) for the purpose of assisting that employee to gain new employment;
  • amending the CGT provisions to provide a targeted CGT exemption for granny flat arrangements under which an older person, or person with a disability, acquire, varies or disposes of a granny flat interest (to apply from 1 July after the Bill receives Royal Assent); and
  • extending the low and middle income tax offset (‘LMITO’) for another year to 30 June 2022.

The Bill also amends the Corporations Act to ensure ASIC is not prohibited from making a product intervention order with conditions relating to fees, charges or other consideration paid or payable as remuneration by a retail client in relation to a financial product or credit product (to apply the day after the Bill receives Royal Assent).

 

Exposure Drafts

Proposed financial institutions supervisory levies for 2021-22

On 18 May 2021, Treasury released for consultation a discussion paper to seek industry view on the proposed Financial Institutions Supervisory Levies (‘the Levies’) that will apply for the 2021–22 financial year.

The Levies are set to recover the majority of the operational costs of APRA and other specific costs incurred by certain Commonwealth Agencies, which include the ATO, ASIC and ACCC.

This paper sets out information about the total expenses for the activities undertaken in 2021-22 and some activities undertaken in 2020-21, to be funded through levies revenue to be collected in 2021-22.

Consultation period is open until 11 June 2021.

Government announcements

Federal Budget 2021

On 11 May 2021, the Government handed down the 2021 Federal Budget.

On the personal taxation front, the proposed changes include an extension to the low and middle income earner tax offset, modernising the tax residency rules and simplifying self-education deductions.

For businesses, there are proposed extensions to full expensing and loss carry back rules, as well as a number of employment boosting initiatives.

The superannuation changes include First Home Super Saver Scheme improvements, a reduction in the downsizer contribution minimum age, repeal of the work test and changes to the SMSF residency rules and legacy products.

There are also changes for not-for-profits, philanthropy, child-care, social security and significant expenditure on aged care.

More information is available on the Federal Budget 2021 page of our website.

 

Government response to Aged Care Report

On 11 May 2021, the Government also released its response to the Final Report of the Royal Commission into Aged Care Quality and Safety.

The Government announced its intention to allocate $17.7 billion to the aged care sector and confirmed that work has already begun on a new Aged Care Act.

The Government also intends to address the issues highlighted in the Royal Commission into Aged Care Report through a five pillar, five-year approach which addresses:

  1. Home care – at home support and care based on assessed needs;
  2. Residential aged care services and sustainability – improving service suitability aimed at meeting individual care needs and preferences;
  3. Residential aged care quality and safety – improving access to residential care;
  4. Workforce – growing a bigger, more skilled workforce; and
  5. Governance – new legislation and stronger governance.

 

Extension to the temporary 50% reduction super minimum drawdown rates

On 29 May 2021, the Government announced that the temporary 50 per cent reduction to the minimum superannuation income payments from account based pensions and market linked pensions (also referred to as term allocated pensions) will be extended by another year, to 30 June 2022.

This proposal is in response to the pandemic and is aimed at providing retirees with more flexibility and choice over their superannuation.

An amending regulation to implement this proposal is yet to be made.

Regulator views

ASIC

Findings on ‘general advice’ label

On 4 May 2021, ASIC released its findings from independent consumer research which found that changing the ‘general advice’ label alone is unlikely to prevent confusion about the nature of general advice.

In light of these findings, ASIC will not be making recommendations to the Government in relation to changing the label of general advice.

‘General advice’ is a financial product advice that is prepared without considering a consumer’s personal circumstances such as their objectives, financial situation and needs.

ASIC also highlighted that the research found no evidence to suggest that changing the general advice label to include the word ‘only’, will have any measurable effect on consumers’ perception about the nature of advice given. This includes perceptions about the personalisation of the advice, understanding the advice provider’s obligations and the importance of seeking additional information.

 

Expansion of role in superannuation

On 6 May 2021, ASIC released its quarterly update report covering the quarter to 31 March 2021.

The report highlights the expansion of ASIC’s role in superannuation to include conduct regulation while APRA retains its role as the prudential and member-outcomes regulator for superannuation.

The report also introduces ASIC’s new regulatory tools (introduced by recent law reform), including the product intervention power which enables ASIC to temporarily intervene in a range of ways, including to ban financial and credit products when there is a risk of significant consumer detriment.

ATO

FBT rates and thresholds for 2021-22

The ATO has released the rates and thresholds which will apply in the 2021-22 FBT year on their website. The updated rates include:

  • FBT rate: 47% (no change);
  • record keeping exemption threshold: $8,923;
  • car parking threshold: $9.25; and
  • statutory or benchmark interest rate: 4.52%.

TPB

Draft guidance on supervisory arrangements

The TPB released for feedback the exposure draft about the supervisory arrangement requirements under the Tax Agent Services Act 2009 (‘TASA’). 

TASA requires all partnerships and companies to meet the ‘sufficient number’ requirement, where entities must have a sufficient number of registered tax agents, BAS agents or tax (financial) advisers to provide services and carry out supervision. 

Currently, there is no formal guidance on this topic and the TPB intend to develop this document to help understand their views on the supervisory arrangement requirements.

The closing date for submissions is 28 June 2021.

Other

FASEA March Exam results

On 11 May, FASEA released the results from the March 2021 Exam. Of the 2,234 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 the components of key advice documentation that is provided to the client;
  • applying relevant sections of the Corporations Act when identifying responsible provider obligations, including breaches of those obligations; and
  • demonstrating an understanding of the Tax Agents Services Act 2009 requirements to scenarios and identifying compliance and non-compliance.
  1. Applied ethical and professional reasoning and communication:
  • demonstrating a practical application of due diligence in financial advice;
  • identifying sources of judgement and biases and their influence on financial advice;
  • applying best interest duty and associated ethical obligations when providing financial advice; and
  • effectively applying the FASEA code to various client scenarios.
  1. Financial advice construction:
  • demonstrating an understanding of the context in which financial advice is given and requested and how this impacts decision making.

FASEA approves additional bridging courses

On 14 May 2021, FASEA confirmed it has now approved the following degrees:

  • any bachelor with a major in Financial Services offered by Southern Cross University commencing March 2021; and
  • Graduate Diploma of Financial Planning offered by the Australian Institute of Management (‘AIM’) commencing May 2021.

Advisers who complete the above courses of study will meet the education standard.

In addition, FASEA approved the following bridging courses offered by the Australian Institute of Management from 2nd semester 2021:

  • Financial Advice Regulatory and Legal Obligations;
  • Ethics for Professional Advisers; and
  • Behavioural Finance.

Additional information

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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. 

While the information provided here is given in good faith and is believed to be accurate and reliable as at the date of preparation, 30 April 2021, it is provided by MIML for information only.  It does not constitute legal advice and should not be relied upon as such. MIML will not be liable for any losses arising from reliance on this information.

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