ASFA Action Issue 966, 1 October 2024
In this issue:
Miscellaneous amendments to Treasury portfolio laws Spring 2024: consultation
Treasury has released for consultation a package of exposure draft legislation and regulations that make a range of amendments to its portfolio laws to correct technical or drafting defects, remove anomalies and address unintended outcomes.
Of relevance to superannuation, the draft regulations propose to:
- Amend the exemptions that apply to the prohibition in section 68A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) on a trustee of a superannuation fund using goods or services to influence employers. The draft regulations will repeal paragraph 13.18A (1)(a) of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and the related sub-regulation 13.18A(2). Paragraph 13.18A (1)(a) provides an exemption to section 68A and allows the Fund to provide a business loan to an employer on a commercial arm’s length basis and on the condition that the employer be a member of the fund. According to the explanatory statement, this exemption does not align with revisions made to section 68A in 2019.
- Exclude transition to retirement (TTR) income streams from the meaning of ‘trustee-directed product’ (TDP). TDPs, as defined in regulation 9AB.2 of the SIS Regulations, are subject to the annual superannuation performance test run by APRA. A superannuation interest that supports a superannuation income stream in the retirement phase is excluded from the trustee directed product definition, and thus, also excluded from the annual superannuation performance test. The explanatory statement notes that APRA has not included TTR products when conducting the annual superannuation performance test to date. Amending the definition of TDP to exclude TTR products, which are more similar to a superannuation income stream in the retirement phase, will ensure the SIS Regulations are aligned with current practice and reflect the policy intent.
- Repeal a redundant regulation 2.36D from the SIS Regulations. Regulation 2.36D relates to information about an interest in a fund that must be provided in the context of a family law superannuation split. According to the explanatory statement, the SIS Regulations were amended in 2002 so that regulation 2.36D does not apply to funds that elected to operate under the Corporations Act 2001. As all funds must operate under the Corporations Act, regulation 2.36D is now redundant.
If you have any feedback you would like ASFA to consider in relation to the draft amendments, please forward it to Julia Stannard by close of business Monday 7 October.
Death Benefit Payments: ASFA Guidance Note and Policy Proposals
ASFA has release a Guidance Note on Death Benefit Payments along with complementary Policy Proposals, developed in collaboration with ASFA members and industry experts.
The Guidance Note sets out good practice for trustees to enhance communication, service and support for members and potential beneficiaries during the death benefit process.
The Policy Proposals recommend reforms aimed at improving the efficiency of death benefit nominations and payment process and ensuring there are no unintended consequences for members and beneficiaries. This includes the introduction of electronic submission for binding nominations, recognition of First Nations kinship structures in benefit distributions, and measures to prevent individuals convicted of violent crimes from claiming their victims’ death benefits.
ASFA encourages trustees to adopt the Guidance by 30 June 2025.
Record-keeping obligations of AFSLs, breach reporting: extension of legislative instruments
ASIC has extended the operation of three legislative instruments that were due to expire in October, for a further five years.
ASIC Corporations and Credit (Breach Reporting–Reportable Situations) Instrument 2024/620 replaces and extends relief previously provided under ASIC Corporations and Credit (Breach Reporting—Reportable Situations) Instrument 2021/716 . The instrument continues the modification of the Corporations Act 2001 to exclude certain forms of non-compliance from being deemed ‘significant’ breaches of core obligations, about which AFS licensees and credit licensees must lodge breach reports under the Corporations Act. Instrument 2024/610 also replaces and continues the relief previously provided under ASIC Credit (Breach Reporting—Prescribed Commonwealth Legislation) Instrument 2021/801, which dealt with breach reporting obligations in the National Consumer Credit Protection Act 2009.
ASIC Corporations Record-Keeping Requirements for Australian Financial Services Licensees when Giving Personal Advice) Instrument 2024/508 replaces and continues the effect of Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice. [CO 14/923] modified the Corporations Act to insert a section 912G that imposes specific record-keeping requirements when Australian Financial Services licensees (AFSLs) or their representatives (including advice providers) give personal advice to retail clients.
ASIC has also registered ASIC Corporations and Credit (Repeal) Instrument 2024/507 to repeal Instruments 2021/716 and 2021/801 as well as [CO 14/923].
ASIC consulted on drafts of the new legislative instruments in August-September – see ASFA Action issue 959 for background.
Deductibility of advice fees: ATO determination
The ATO has released TD 2024/7 Income tax: deductions for financial advice fees paid by individuals who are not carrying on an investment business. This determination sets out when an individual may be entitled to a tax deduction for fees paid for financial advice and outlines the requirements that need to be satisfied for an individual to claim a deduction for financial advice fees.
The determination includes examples regarding fees paid by individuals in relation to advice about superannuation but specifically does not consider circumstances where fees for financial advice are paid from a superannuation fund.
The determination replaces an existing determination (TD 95/60) as a result of regulatory reforms to the financial services industry in recent years. However, the ATO has indicated it does not represent a change in the Commissioner’s view on the deductibility of financial advice fees as outlined in TD 95/60.
The ATO consulted on a draft of the determination in Dec 2023 – Feb 2024 (see ASFA Action 927).
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
