Monthly technical roundup - June 2022

Recent developments

Welcome to the June technical roundup, an update of the reforms and announcements for the month of May. During May, the leader of the Labor party, Anthony Albanese was sworn in as Australia’s 31^st Prime Minster following the federal election. A number of policy proposals relevant to the financial services industry were made as part of the election, however draft legislation is yet to be introduced to parliament.

The Government and APRA released a discussion paper seeking feedback on the proposed financial institutions supervisory levy for the 2022-23 financial year, and AFCA permanently adopted the ‘merit assessment’ feature, which makes the complaints handling process faster, cheaper and fairer for all parties.

Discussion paper

Financial institutions supervisory levies for 2022-23

On 31 May 2022, the Government, in conjunction with APRA released a Discussion Paper seeking feedback on the proposed financial institutions supervisory levies for the 2022-23 financial year.

The levies are set to recover the majority of the operational costs of APRA and certain Commonwealth agencies (including ASIC, ATO and ACCC). The updated Cost Recovery Implementation Statement (CRIS) will be released by APRA at the earliest possible date, but no later than 30 June 2022.

The submission period closed on 10 June 2022.

Government announcements

Regulations to halve minimum pension for 2022-23

The Australian Labor Party (ALP) made several policy announcements before and after the 2022 Federal Election, some of which support the outgoing Government’s proposals. The proposals which are relevant to the financial services industry include:

reducing the eligibility age to access the superannuation downsizer contribution from age 60 to 55 from 1 July 2022 (supporting the Liberal Party’s proposal);
increasing the Commonwealth Seniors Healthcare Card income thresholds from $57,761 to $90,000 for singles, and from $92,416 to $144,000 for couples;
freezing the deeming rates for two years, affecting access to the pension and social security payments, the part pension and the Commonwealth Seniors Health Card;
increasing the maximum Child Care Subsidy (CCS) rates to 90% for the first child in case and increasing the maximum household income threshold to $530,000 for families with one child in care, starting from July 2023; and
providing an exemption from certain education requirements (e.g. attaining a degree or higher) required under the Professional Standards for Financial Advisers, if an adviser has more than 10 years of experience and a good record.

The Government will need to introduce new legislation to put these proposals in place. As such, these proposals are not yet law at time of writing.

Regulator views

ATO
APRA

ATO

Updated guidance on trust reimbursement agreements

On 5 May 2022, ATO announced that they have received significant interest in its draft public advice and guidance on trust reimbursement agreements and unpaid present entitlement (section 100A reimbursement agreements). As a result, the ATO had extended their public consultation period, which ended on 29 April 2022.

The ATO also stated in the media release that they will not pursue taxpayers that entered into arrangements between 1 July 2014 and 30 June 2022 where, in good faith, they concluded that section 100A did not apply to them based on the previous 2014 guidance.

APRA

Superannuation statistics released for March Quarter

On 24 May 2022, APRA released its Quarterly Superannuation Performance publication and the Quarterly MySuper Statistic report for the March 2022 quarter.

Some key statistics (12 months to 31 March 2022) in the reports include:

total superannuation assets grew by 9.7% to $3,441.5 billion;
total SMSF assets grew by 12% to $892.0 billion;
total superannuation contributions grew by 16.9% to $141.6 billion; and
total benefit payments reduced by 23.8% to $83.9 billion.

AFCA

Merit assessment adopted

On 9 May 2022, AFCA announced that they have made the ‘merit assessment’ a permanent feature of its process, after its pilot program showed that the feature made complaints handling faster, cheaper and fairer for all parties.

This type of assessment at the initial stages of AFCA’s case management means that unmeritorious complaints (i.e. no clear errors or financial loss) can be identified early. If the complaint is found to be without merit, AFCA has discretion to exclude the complaint under its rules (specifically Rule A.8.3).

AFCA tested the process in a three-month pilot program which found that the time taken to resolve selected cases was half when compared with comparable cases, and the fees charged was as much as 75 per cent lower.

The merit assessment is part of AFCA’s response to Recommendation 4 and 7 of the Independent Review of AFCA as it:

addresses poor conduct by some paid advocates; and
ensures the funding model does not deter firms from defending complaints.

New funding model finalised

On 31 May 2022, AFCA finalised their new funding model after the model was approved by their independent board.

AFCA stated that the new model includes a single registration fee and a simplified complaints fee structure, where all AFCA members will qualify for five free complaints per year. Additionally, the superannuation levy has also been abolished and superannuation funds have been brought under the same fee structure as other scheme members, which has a positive or neutral impact to most super trustees.

As a result of the new scheme, AFCA noted that overall, 95% of licensed financial firm members of the AFCA external dispute resolution scheme will only pay the annual registration fee of $375.55 for the upcoming financial year, and 99.9% of authorised credit representatives will only pay $65.98 annually.

Additional information

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