Recent developments

Welcome to the May technical roundup, an update on reforms and announcements for the month of April. In this timeframe, ASIC extended the relief measure which allows financial advisers to provide ROAs rather than SOAs to existing clients who have been impacted by the COVID-19 pandemic. Other items of note include the release of the FSC’s Green Paper on financial advice, which proposes fundamental changes to the regulatory financial advice framework, in the context of rising compliance requirements and cost pressures.

Legislative developments

Legislative Instruments

Extension of a temporary financial advice relief measure (COVID-19)

On 14 April 2021, ASIC announced the extension of the relief measure that allows financial advisers to provide a record of advice (ROA) rather than a statement of advice (SOA) to existing clients who have been impacted by the COVID-19 pandemic and require financial advice.

The ROA relief measure has been extended to 15 October 2021 and is set out in a new legislated instrument ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2021/268.

ASIC will continue to monitor the appropriateness of the temporary relief measure and if deemed appropriate, ASIC may end the relief before the six-month period or extend it.

Exposure Drafts

Single disciplinary body for financial advisers

In response to the Financial Services Royal Commission Recommendation 2.10, Treasury released for consultation exposure draft legislation and explanatory material for implementing a single disciplinary regime for financial advisers on 19 April 2021.

The draft contains the following elements:

  • expanding the role of the Financial Services Credit Panel (FSCP) within ASIC to exercise the functions of the single disciplinary body for financial advisers;
  • creating new sanctions and penalties to apply to advisers who have breached their obligations;
  • introducing a new annual registration system for financial advisers;
  • winding up of the Financial Adviser Standards and Ethics Authority (FASEA) and transfer its standard functions to the minister and ASIC; and
  • removing duplicate regulations for tax (financial) advisers.

Submissions to close on 14 May 2021.

 

Your Future, Your Super regulations

On 28 April 2021, Treasury released for consultation the exposure draft legislation and explanatory material underpinning the Treasury Laws Amendment (Your Future, Your Super) Bill 2021.

The Your Future, Your Super package is scheduled to commence on 1 July 2021 and the regulations released for consultation:

  • outlines of the methodology for the annual performance test, as well as the requirements for notification to members;
  • prescribes the definition of a ‘stapled fund’, including tie-breaker rules for determining which fund is to be an employee’s stapled fund where multiple funds exist;
  • specifies how products are to be ranked on the YourSuper online comparison tool;
  • sets out the manner in which superannuation fund portfolio holdings are to be disclosed;
  • prescribes the information that must be included with the notice of an Annual Members’ Meeting; and
  • strengthens the prohibition of fund offering inducements to employers.

The consultation period closes on 25 May 2021.

 

CGT Exemption – Granny Flat Arrangements

On 16 April 2021, Treasury released an exposure draft and explanatory materials in relation to Supporting older Australians – exempting granny flat arrangements from Capital Gains Tax (CGT). The draft contains legislation to give effect to the targeted capital gains tax (CGT) exemption for granny flat arrangements announced by the Government on 5 October 2020. Under the proposed measures, CGT will not apply to a creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australian or individuals with disabilities.

Under current legislation, the creation of a formal and legally enforceable granny flat arrangement can give rise to CGT consequences. As a result, families often opt for informal arrangements which can potentially lead to financial abuse and exploitation in the event of a family relationship breakdown. This proposed measure aims to remove the CGT impediments and reduce the risk of potential abuse to vulnerable individuals. 

Consultation closed on 29 April 2021.

Regulator views

ASIC

Breach reporting reforms

On 22 April 2021, ASIC issued Consultation Paper 340, seeking stakeholder feedback on the proposed updates to its draft guidance on the upcoming breach reporting reforms, which are set to commence on 1 October 2021.

ASIC expects a significant increase in the volume of reports received as a wider range of entities will be required to report and a wider range of breaches will be subject to reporting.

ASIC is also seeking feedback on a draft information sheet on the new notify, investigate and remediate obligations set to apply to AFSLs who are financial advice providers and credit licensees who are mortgage brokers.

ASIC seeks public comment on the consultation paper and draft information sheet by 3 June 2021; and will publish final guidance before the obligations commence on 1 October 2021.

ATO

Key super rates and thresholds for 2021-22

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

  • concessional contribution cap: $27,500;
  • non-concessional contribution cap: $110,000;
  • lifetime CGT cap: $1,615,000;
  • super co-contributions: lower threshold of $41,112 and upper threshold of $56,112;
  • low rate cap: $225,000;
  • untaxed cap: $1,615,000; and
  • tax-free component of genuine redundancy payment: $11,341 (base amount) + $5,672 per full year of service.

 

Sufficient and appropriate audit evidence to support downsizer contributions

The ATO on 27 April 2021 released its minimum expectation of SMSF auditors to acquire sufficient and appropriate audit evidence to verify whether a fund has complied with the downsizer contribution requirements.

At a minimum, the auditor must obtain and check evidence of the following:

  • the member is above age 65 or older at the time of the contribution;
  • the tax file number of the member has been provided;
  • SMSF trust deed allows acceptance of a downsizer contribution;
  • a signed and dated downsizer contribution into super form (NAT75073);
  • the contribution was made either at the same time or after the form was received by the fund and the contribution does not exceed the $300,000 cap per member;
  • the member has not previously made a downsizer contribution from a previous sale of a property; and
  • the contribution has been correctly allocated to the member’s account.

Auditors are not required to check whether a member has met any other downsizer eligibility requirements as they can rely on the member making a correct declaration on the approved form (NAT75073).

Other

FSC

Green Paper on financial advice

On 19 April 2021, the Financial Services Council (FSC) issued the Affordable and Accessible Advice: FSC Green Paper on Financial Advice, to raise public policy debate on the restructure of financial advice in the context of increased regulatory requirements and cost pressures. Although the FSC supports the Best Interest Duty and agrees that this forms the foundation of financial advice, the FSC believes there are a number of opportunities to reduce the complexity and cost of providing financial advice.

The proposals in the green paper:

  • the abolishment of the ‘safe harbour’ steps so that the Code of Ethics is the single tool used by advisers to meet the Best Interest Duty;
  • replacing costly Statement of Advice (SOAs) with scalable and concise Letters of Advice; and
  • removing jargonistic advice categories to simplify the definitions and classification of financial advice.

The FSC is currently seeking feedback, with consultation open until 1 July 2021.

Additional information

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