While the industry awaits developments from the banking, superannuation and financial services Royal Commission and the Productivity Commission’s report on the superannuation industry, a new suite of consultations, bills and rule changes is also demanding attention.
Reversionary transition to retirement income streams
On 12 February Treasury released a draft of legislation to ensure that a reversionary transition to retirement income stream (TRIS) will always be allowed to automatically transfer to eligible dependants upon the death of the primary recipient.
Currently, a reversionary TRIS requires that the dependant beneficiary satisfies a condition of release before the benefits are paid from the interest, otherwise the TRIS will cease. The inability for a TRIS to automatically revert where the dependant has not met a condition of release has resulted in administrative difficulties for funds and potentially requires recently bereaved dependant beneficiaries to engage with their superannuation quickly.
Submissions on the draft legislation closed on 23 February.
Super Guarantee, single touch payroll and fund reporting
On 24 January Treasury has released draft legislation setting out a range of ‘integrity measures’ around superannuation guarantee (SG) compliance and ATO reporting by employers and funds.
The proposed SG-related reforms include:
- enabling the Commissioner of Taxation to issue to a non-compliant employer a direction to pay outstanding SG amounts or undertake education in relation to their obligations
- permitting the Commissioner to disclose to an individual information relating to a failure by their employer or former employer to comply with SG obligations
- strengthening the director penalty provisions for directors who fail to comply with their SG and PAYG withholding obligations.
The draft legislation also proposes changes to the single touch payroll (STP) reporting requirements, to:
- bring small employers (less than 20 employees) within the STP regime—which involves employers providing payroll and superannuation information to the ATO at the time the amounts are paid or withheld—from 1 July 2019 (STP is already due to apply to larger employers from 1 July 2018)
- require employers to report salary sacrificed amounts paid to their employees’ superannuation funds under the STP reporting rules and removing a current requirement for employers to report the payment of SG contributions (these will now be reported by funds).
Finally, a number of amendments are proposed to funds’ ATO reporting obligations, including:
- allowing the Commissioner to give funds a grace period for correcting false or misleading statements in relation to member information statements (mandatory data reported to the ATO), without giving rise to penalties
- reintroducing a lapsed measure to remove the requirement for funds to lodge with the ATO bi-annual statements for lost members.
Submissions closed on 16 February.
Means testing of lifetime retirement income streams: consultation
On 16 January the Department of Social Services (DSS) released a consultation paper seeking views on proposed new social security means test rules for pooled lifetime retirement income stream products.
The government announced in its May 2016 Budget that it would address regulations that restrict the development of new retirement income products and impede innovation. The Treasury Laws Amendment (2017 Measures No. 1) Regulations 2017 were made in June 2017 to give effect to this announcement, and commenced from 1 July 2017. DSS conducted initial consultation on means test arrangements in late 2016 and early 2017.
The rules proposed in the latest DSS consultation paper involve:
- income testing a fixed percentage of all product payments as income (assessing 70 per cent of payments as income)
- assets testing a consistent asset value of 70 per cent of the nominal purchase price until life expectancy at purchase, and half that amount (35 per cent) from then on.
It is proposed that deferred products will receive the same asset test assessment as products that commence payments immediately, but income will only be assessed once payments from the product commence.
Submissions closed on 16 February.
New dispute resolution framework
The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017, which proposes substantial changes to external dispute resolution (EDR) and internal dispute resolution arrangements for superannuation, has now been passed by Parliament.
As outlined in the October 2017 rules and regs, the most substantial of the reforms will see a new body, the Australian Financial Complaints Tribunal (AFCA) replace the Superannuation Complaints Tribunal as the EDR scheme for superannuation. The Minister has indicated her intention that AFCA will commence receiving disputes no later than 1 November 2018. The SCT will continue to operate for a period – expected to be around two years to deal with existing cases.
With the passage of the Bill, it is expected that the establishment of AFCA will proceed quickly, with consultation on its proposed terms of reference to take place in coming months.
Tax relief for mergers, SuperStream funding, ATO-held super and compassionate grounds
The government has introduced into parliament the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018, proposing amendments to:
- extend tax relief for merging superannuation funds to cover mergers that occur before 2 July 2020, providing a continuation of relief that lapsed on 1 July 2017
- enable the government to recover the ongoing cost of the governance of the SuperStream superannuation transaction network from the supervisory levy paid by APRA-regulated funds
- transfer the regulator role for the early release of superannuation benefits on compassionate grounds from the Department of Human Services to the Commissioner of Taxation
- enable the Commissioner of Taxation to pay certain superannuation amounts including unclaimed money, claimed lost amounts and shortfall SG amounts directly to individuals with a terminal medical condition, without first transferring them into a superannuation account.
AML/CTF amendments
AUSTRAC has made two sets of amendments to the anti-money laundering and counter-terrorism financing (AML/CTF) rules that may impact superannuation funds.
The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2017 (No. 4), which commenced on 21 December, provides reporting entities with a temporary exemption from certain AML/CTF obligations in circumstances where compliance with those obligations could undermine law enforcement agencies’ investigations into a customer of the entity. The obligations covered by the exemption relate to carrying out of customer identification procedures, verification of a customer’s identity and ongoing due diligence.
The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2018 (No. 1), which commenced on 12 January, implements recommendations from a 2016 review of the law. The amendments seek to remove complexity and provide reporting entities with greater flexibility in complying with their obligations, and include:
- expanding the list of persons who can provide certified copies of documents
- inserting new procedures for reporting entities to follow in exceptional circumstances where a customer is unable to provide satisfactory evidence of their identity
- requiring inclusion in AML/CTF programs of processes to identify, mitigate and manage risk in respect of new designated services, new methods of delivering designated services and
new technologies.
