Recent developments

Welcome to the first technical roundup for 2019. This month’s edition is a summary of technical news that occurred throughout December 2018 and January 2019.

It’s been relatively quiet in Parliament from a financial planning perspective. Throughout December and January, the Financial Adviser Standards and Ethics Authority (FASEA) began to release the final standards to give effect to the new Adviser Professional Standards Framework. The Government also released the 2018/19 Mid-Year Economic and Fiscal Outlook in December, which includes measures aimed at lowering company tax rates to 25 per cent by 2021/22.

Another item of note is the Productivity Commission released an inquiry report that assesses the efficiency and competitiveness of Australia’s superannuation system.

Legislative developments


Legislative instruments

Adviser Professional Standards

Regulator views


Productivity Commission
Treasury consultation

Australian superannuation system review

  • The Productivity Commission has released an inquiry report that assesses the efficiency and competitiveness of Australia’s superannuation and proposes alternative models for allocating default fund members to products.
    • the super system needing to adapt to meet the needs of a modern workforce with a growing number of retirees
    • mixed performance among superannuation funds
    • inadequate competition, governance and regulation throughout the industry
    • current policy initiatives addressing some of the problems, but a structural change is required.
  • The report also includes 31 recommendations to improve outcomes for members and system stability as well as reducing barriers to efficiency and competitiveness of the superannuation system.

Retirement income disclosure metrics


  • A consultation paper has been released seeking feedback on the presentation and calculation of proposed disclosure metrics for retirement income products.
  • The paper proposes a new document in a fact sheet format which would highlight:
    • the amount of income the product would be expected to provide
    • the likelihood that the income may fall short of the expectation for a given period
    • the degree of protection the product provides from running out of funds
    • the level of access to the underlying capital or for lump sum withdrawals.
  • Submissions on this paper are due by 28 March 2019.

Australian Securities and Investments Commission

Draft regulatory guide for disclosing fees in PDSs and periodic statements

  • ASIC has released a consultation paper seeking feedback on an updated draft of Regulatory Guide 97 (RG97). In the paper, ASIC makes 35 proposals to ensure that information about superannuation fees and costs are transparent with information that can help clients to:
    • make confident and informed value-for-money decisions
    • compare products
    • understand the fees and costs that they are charged.
  • Submissions on this paper are due by 2 April 2019.

Policy updates


Financial Adviser Standards and Ethics Authority
Government update

Foreign qualifications and education pathways

 

  • FASEA has released policy statements outlining how individuals who have obtained their qualification outside of Australia will be assessed to determine if they have met the education standard and detailing the range of education pathways for new and existing advisers with a defined recognition framework for existing advisers.
  • FASEA will approve a foreign qualification if they are satisfied that the qualification is equivalent to a degree or qualification approved by FASEA for the purposes of meeting the education standard.
  • The minimum and maximum education requirements for new and existing advisers is:
    • minimum for existing advisers – one subject being FASEA’s Bridging Course
    • maximum for existing advisers – a Graduate Diploma comprising of 8 subjects
    • minimum for new advisers – a Graduate Diploma comprising of 8 subjects
    • maximum for new advisers – an approved Bachelor’s degree of 24 subjects.
  • For more information on the CPD, education pathways, exam and code of ethics reforms please see our Adviser Professional Standards Reforms article.

 

Mid-Year Economic and Fiscal Outlook

  • The 2018/19 Mid-Year Economic and Fiscal Outlook (MYEFO) included proposals that are likely to be relevant to financial services professionals including:
    • retaining the age pension age at 67
    • raising the maximum age to access genuine redundancy payments from 65 to the age pension age
    • revising the measure to include outstanding balances of loan recourse borrowing arrangements (LRBA) in total superannuation balances only to those entered into from 1 July 2018 where the member can make tax-free lump-sum withdrawals and the LRBA is with a related party
    • amendment to the proposed work test exemption in the year a client turns 65 to access to up to three years’ non-concessional cap space
    • increasing the Family Tax Benefit (FTB) Part A High Income Free Area threshold and unpausing the indexation pause for FTB end of year supplements from 1 January 2019
    • deferral of the start date of the requirement for superannuation funds to offer a comprehensive income product in retirement (CIPR) to 1 July 2022.

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Additional information

This information is provided for the use of financial services professionals only.  In no circumstances is it to be used by a potential investor or client for the purposes of making a decision about a financial product or class of products.

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, 18 January 2019, it is provided by MIML for information only.  We will not be liable for any losses arising from reliance on this information.

This information is intended only to provide a summary and general overview on matters and does not constitute legal advice. You should seek legal or other professional advice before relying on this information.

MIML and MBL do not give, nor purport to give, any taxation advice. The application of taxation laws to each client depends on that client’s individual circumstances.  Accordingly, clients should seek independent professional advice on taxation implications before making any decisions about a financial product or class of products.