Recent developments

Welcome to the November technical roundup. It’s been relatively quiet in Parliament from a financial planning perspective. This month the Financial Adviser Standards and Ethics Authority (FASEA) began to release the much-anticipated final draft standards to give effect to the new Adviser Professional Standards Framework. The ATO have released some useful guidance on the operation of the downsizer contribution rules, and ASIC has released a consultation paper regarding proposed new requirements for advice licensees.

Another item of note is a Government policy announcement that the proposed retirement income covenant is to be delayed until 1 July 2022.

Legislative developments


Bills

Amending the law relating to corporate taxation

Stronger corporate and financial sector penalties

  • Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 makes the below amendments to the Corporations Act 2001, Australian Securities and Investments Commissions Act 2001, National Consumer Credit Protection Act 2009 and 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.

Financial product design and distribution obligations

  • Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 makes the below amendments to the Corporations Act 2001, Australian Securities and Investments Commissions Act 2001 and the National Consumer Credit Protection Act 2009:
    • Introduce design and distribution obligations in relation to financial products where the offeror must make disclosure under the Corporations Act.
    • Give ASIC powers to enforce these obligations including the ability to request necessary information, issue stop orders and to make exemptions and modifications to the new arrangements.

Regulator views


Australian Taxation Office

ATO guidance on downsizer contributions

  • The Australian Tax Office (ATO) has issued a Law Companion Ruling relating to downsizer contributions.
  • Law Companion Ruling LCR 2018/9provides guidance on downsizer contributions and discusses how the measure interacts with different concepts such as:
    • contribution caps
    • fund acceptance rules
    • capital gains tax (CGT)
  • This ruling is effective when the contract for the disposal of the relevant dwelling is entered into on or after 1 July 2018.

Australian Securities and Investments Commission

ASIC updated competence requirements for advice licensees

  • The Australian Securities and Investments Commission (ASIC) has released a consultation paper seeking feedback on proposing updates for Regulatory Guide 105 Licensing: Organisational Competence (RG 105).
  • ASIC is proposing to:
    • introduce a sixth option for demonstrating the knowledge and skills of responsible managers which will reflect the higher education and training standards for financial advisers
    • require advice licensees to have at least one responsible manager who satisfies option 6
    • require responsible managers who wish to satisfy option 6 to pass the financial adviser exam by 1 January 2021, satisfy the degree requirement that applies to financial advisers by 1 January 2024 and meet CPD requirements
  • Submissions on this consultation paper are due by 6 December.

Financial Adviser Standards and Ethics Authority

FASEA issues drafts of Adviser Professional Standards

Policy updates


Government policy announcement

Deferral of the retirement income covenant and technical amendments

  • The Assistant Treasurer, The Hon Stuart Robert MP, announced that following consultation the Government has decided to increase the threshold superannuation balance for offering a Comprehensive Income Product for Retirement from $50,000 to $100,000 and will delay the requirement for funds to offer these products to 1 July 2022.The Assistant Treasurer, The Hon Stuart Robert MP, has also announced some technical amendments to fix some unintended consequences from the 2017 super reforms. These include:
    • correcting an error for market-linked pensions that are commuted or rolled over. Currently, the formula creates a nil debit value for transfer balance cap purposes
    • ensuring death benefits that include life insurance are not subject to tax when they are rolled to another superannuation fund
    • amending the valuations of reverted defined benefit pensions under the transfer balance cap
    • maintaining the treatment of market linked pensions as capped defined benefit income streams under the transfer balance cap when they are rolled over of from a successor fund transfer.
  • These proposals are not yet law and any changes will require legislation to be passed by Parliament.

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