Welcome to the February technical roundup. Parliament resumed sitting in the middle of the month with several bills passing through both houses. Significant updates include the Royal Commission final report which was released earlier in the month, increases to the work bonus from $250 to $300 per fortnight and the expansion of the Pension Loans Scheme to allow more people to access the scheme.
Another change of note is the prohibition on superannuation funds charging fees that exceed three per cent on balances below $6,000.
The following bills in this section were passed by Parliament this month and are now awaiting royal assent:
Low superannuation balance protection
- Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 makes the following amendments to the Superannuation Industry (Supervision) Act 1993, Superannuation (Unclaimed Money and Lost Members) Act 1999, Income Tax Assessment Act 1997 and the Taxation Administration Act 1953.
- Prevent trustees of superannuation funds from charging fees and costs that exceed three per cent of the account balance where the balance is below $6,000.
- Require superannuation accounts with a balance below $6,000 to be transferred to the Commissioner of Taxation where the account has been inactive for 13 months and enable the commissioner to consolidate these amounts, lost member accounts and unclaimed money into an active superannuation account where the combined balance would be greater than $6,000.
Retirement income amendments
- Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 makes the following amendments to the Social Security Act 1991, and the Veterans' Entitlements Act 1986
- Increase the Work Bonus from $250 a fortnight to $300 a fortnight and extends the application of the Work Bonus to include all income from self-employment and work undertaken as an independent contractor or consultant.
- Expand the Pension Loans Scheme (PLS) to allow people who have reached Age Pension age, income support supplement qualifying age or service pension age to participate in the PLS even if they are assessed as having a nil rate of payment through the asset and income tests.
- Establish a new set of means test rules for lifetime income streams purchased after 1 July 2019 with 60 per cent of payments from these products being assessed as income and 60 per cent of the purchase price of the income stream being assessed under the assets test until a threshold day based on life expectancy of a 65 year old, when the asset is assessed at 30 per cent of the purchase price thereafter.
Stronger corporate and financial sector penalties
- Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 makes the following amendments to the Corporations Act 2001, Australian Securities and Investments Commissions Act 2001, National Consumer Credit Protection Act 2009, and the Insurance Contracts Act 1984.
- Introduce a stronger penalty framework to combat misconduct within the corporate and financial sector
- Update the penalties for certain criminal offences in ASIC administered legislation
- Introduce a new test that applies to all dishonesty offences under the Corporations Act.
SMSF member limit increase
- Treasury Laws Amendment (2019 Measures No. 1) Bill 2019 increases the maximum number of members within an SMSF from four to six with additional amendments made to allow provisions to align with the increased maximum number of members for SMSFs.
Superannuation opt-out insurance prevention
- Treasury Laws Amendment (Putting Members' Interests First) Bill 2019 prevents trustees of superannuation funds from providing insurance on an opt out basis to members who are under 25 years of age and begin to hold a new product on or after 1 October 2019 and to members who have a superannuation balance below $6,000.
- The member may choose to opt in to insurance offered by the trustee at their discretion.
Adviser Professional Standards
- The Financial Adviser Standards and Ethics Authority (FASEA) has released the following legislative instruments regarding the Final Examination and Code of Ethics standards:
- Exam Legislative Instrument and Policy Statement which clarifies that the exam will open from mid-2019 which must be passed by existing advisers before 1 January 2021.
- Code of Ethics Legislative Instrument which addresses the values of trustworthiness, competence, honesty, fairness and diligence that underpin the code. FASEA have also stated that case studies to illustrate how the 12 standards of the Code should be applied will be provided in a forthcoming guidance document. Compliance with the code by financial advisers will be monitored and enforced by monitoring bodies in accordance with compliance schemes approved by ASIC.
Royal commission final report released
- The final report for the Royal Commission into the Misconduct in the Banking, Superannuation and Financial Services Industry was released on 4 February 2019. This report provides 76 recommendations on the categories of:
- financial advice
- culture, governance and remuneration
- other important steps.
- For financial advice, the recommendations examine topics such as:
- ongoing fee arrangements
- disclosure of lack of independence
- quality of advice
- remuneration conflicts
- the disciplinary regime for the financial advice profession.