Issue 977
In this issue:
- Draft AML/CTF Rules: consultation
- National Plan to End the Abuse and Mistreatment of Older People: consultation
- Productivity Commission inquiries: terms of reference
- Valuation and liquidity risk governance: findings from APRA review
- Mid-year Economic and Fiscal Outlook: superannuation announcements
- Bills update
- Australian Life Tables 2020-22 released
- Tax and superannuation guarantee ruling: who is an employee?
- Inquiry into Australia’s taxation system: Committee report
- Taxation of DB permanent incapacity benefits (reversal of Douglas decision) – transitional rules
- APRA Connect taxonomy: draft superannuation artefacts
Draft AML/CTF Rules: consultation
As noted in this ASFA Action, the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 has now received Royal Assent. The Act amends the anti-money-laundering and counter-terrorism (AML/CTF) laws to ensure more effective deterrence, detection and disruption of crimes like money laundering, terrorism financing and proliferation financing.
AUSTRAC is updating the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1) (‘the Rules’), to support the amendments. In particular, to:
- provide reporting entities with more detail on their AML/CTF obligations
- allow them greater flexibility in how they meet their obligations
- reduce regulatory impacts; and
- support them to better detect and prevent financial crime.
AUSTRAC has released an exposure draft of the new Rules covering the following:
- AML/CTF programs
- reporting groups (formerly ‘designated business groups’)
- customer due diligence
- travel rule
- compliance reports
- keep open notices (formerly ‘Chapter 75 notices’)
- correspondent banking relationships.
If you have any feedback you would like ASFA to consider in relation to the draft Rules, please forward it to Fiona Galbraith by close of business Friday 31 January.
National Plan to End the Abuse and Mistreatment of Older People: consultation
The Government is consulting on a draft of the National Plan to End the Abuse and Mistreatment of Older People 2024-2034.
The Plan is intended to provide the strategic architecture to unite action by governments, the sector and community over the next 10 years, to prevent, respond and ultimately end the abuse and mistreatment of older people.
Of potential interest for superannuation, the draft Plan refers to superannuation:
- in the context of older women retiring with less super than men (as part of a broader discussion about how the abuse of older people is a gendered issue)
- as a barrier to seeking/receiving help, as part of discussion about particular challenges faced by older First Nations people (noting the difference between the access ages for age pension & super)
- as part of a discussion about the Government’s responsibilities, including ‘national taxation and superannuation policy’.
The Attorney-General’s Department is seeking feedback on the draft Plan by close of business Monday 17 February.
Productivity Commission inquiries: terms of reference
As reported in ASFA Action issue 976, the Productivity Commission has been tasked with inquiries to make Australia more productive and prosperous, across five areas:
The terms of reference are now available on each inquiry’s webpage.
The Commission has been asked to provide an interim report for each inquiry in the middle of 2025, with the final reports to be provided to Government within 12 months.
The Commission is seeking pitches of ‘ideas’ by close of business Wednesday 15 January, with a call for detailed submissions to be made in February-March.
Valuation and liquidity risk governance: findings from APRA review
APRA has released findings from a review into superannuation trustees’ progress in implementing enhanced valuation governance and liquidity risk management requirements. The findings will help trustees in aligning their practices with Prudential Standard SPS 530 Investment Governance (SPS 530), including in relation to the use of independent external asset valuations and the effective management of potential conflicts of interest in valuation processes.
APRA has noted that the proportion of superannuation funds’ assets invested in unlisted assets as property, infrastructure, credit and equity continues to increase, with around $500 billion invested in unlisted assets such as property, infrastructure, credit and equity at 30 June 2024. Addressing risks related to valuation governance and liquidity risk management is a critical issue for the industry and a priority for APRA.
Since January 2023, APRA has updated SPS 530 to enhance requirements for valuations and liquidity management and undertaken a review examining the practices of 23 trustees. The review found that while trustee capability and approach have generally improved since APRA’s last unlisted asset review in 2021, a significant proportion of trustees still displayed material gaps in key areas. In particular, APRA found that 12 of the 23 in-scope RSE licensees require material improvements in either or both their valuation governance or liquidity risk management frameworks to meet the requirements of SPS 530.
In relation to unlisted asset valuation governance, particular weaknesses were observed in the areas of board oversight and conflict of interest management, revaluation frequency and triggers, valuation control, and fair value reporting. In relation to liquidity risk management, particular weaknesses were observed in the areas of liquidity stress trigger frameworks, unlisted asset liquidity risks and liquidity action plans.
APRA expects all trustees to review the findings, assess themselves against the prudential standard, and enhance their valuation governance and liquidity risk frameworks where needed. APRA will take further action within its regulatory remit to enforce the provisions of SPS 530 and related regulatory requirements, where necessary.
Mid-year Economic and Fiscal Outlook: superannuation announcements
The Government has delivered the Mid-Year Economic and Fiscal Outlook (MYEFO) for 2024-25.
The MYEFO statement confirms recent announcements in relation to:
- reforms to superannuation retirement products (including enhanced guidance on ASIC Moneysmart, a new reporting framework on retirement outcomes, changes to regulations around innovative income streams, and development of voluntary best practice principles to guide the superannuation industry in designing modern, high-quality income products that support Australians’ financial security in retirement) – see ASFA Action issue 973
- legacy superannuation product conversions and reserves, to enable individuals to exit certain legacy products (together with any associated reserves), making it easier for individuals to shift to more contemporary retirement products – see ASFA Action issue 976 for details of recently made regulations to give effect to this measure.
The MYEFO also announces additional funding of $404.1 million over four years from 2024–25 (and $11.2 million per year ongoing) to implement the 2023–24 Budget measure Securing Australians’ Superannuation Package, which includes Payday Super. The funding is to enable the ATO to build and improve data matching capabilities to match employers’ payroll data with superannuation contribution data, providing the ATO with near real‑time visibility as to whether employers have met their obligations. The Government will also redesign the Superannuation Guarantee charge legislation in line with the move to Payday Super. Penalties and charges will reflect the serious nature of unpaid or underpaid Superannuation Guarantee, and will be recalibrated to encourage prompt rectification of non‑payment, with scalable consequences to deter severe or repeated non‑compliance. The cost of this measure will be partially met from within the existing resourcing of the ATO.
Bills update
The remainder of the Bills that were passed by Parliament on 29 November have now received Royal Assent:
- Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 and Capital Works (Build to Rent Misuse Tax) Act 2024
As reported in ASFA Action issue 975, on 28 November the Treasury Laws Amendment (Better Targeted Superannuation Concessions & Other Measures) Bill 2023 (TLA (BTSC&OM) Bill) was split into two Bills. The measure implementing the Better Targeted Superannuation Concessions for total superannuation balances over $3 million remains in the TLA (BTSC&OM) Bill. Two other measures of interest to superannuation have now been moved into the new Treasury Laws Amendment (Miscellaneous Measures) Bill 2024, which is deemed to have been introduced into and passed by the House of Representatives, and introduced into the Senate, at the same time as the TLA (BTSC&OM) Bill. Those measures:
- reduce the frequency of reviews of APRA and ASIC by the Financial Regulator Assessment Authority to every five years (instead of every two years)
- update the Payments Systems (Regulation) Act 1988 to ensure regulators and government can address new risks related to payments as the provision of payments evolves and increases in complexity.
Australian Life Tables 2020-22 released
The Australian Government Actuary has released the Australian Life Tables 2020-22.
Updated versions of the Tables are issued every five years, based on three years’ information centred on each Census year. The Tables are used in a range of calculations in relation to superannuation, notably in determining life expectancy factors for superannuation income streams.
Tax and superannuation guarantee ruling: who is an employee
The ATO has issued an addendum, TR 2023/4A1, finalising an update to a tax ruling addressing when an individual is to be considered an employee for income tax and superannuation guarantee purposes.
TR 2023/4A1 amends TR 2023/4, previously titled ‘Income tax: pay as you go withholding – who is an employee?’, by:
- renaming it ‘Income tax and superannuation guarantee: who is an employee?’
- including guidance on when a person is considered to be an ’employee’ under section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA), by:
- confirming the ATO’s view in light of developments in case law in the context of the SGAA since SGR 2005/1W Superannuation guarantee: who is an employee? (withdrawn) was last updated
- consolidating the ATO’s view in respect of the common law definition of employee contained in SGR 2005/1 (withdrawn) and TR 2023/4
- providing a holistic ATO view of the common law meaning of employee and extended meaning of the word as contained in the SGAA.
Inquiry into Australia’s taxation system: Committee report
The Senate Economics References Committee has delivered the report from its inquiry into Australia’s taxation system.
The Committee’s report makes no recommendations. It “notes the last comprehensive review of the tax system undertaken by Dr Ken Henry was completed in 2010. This was a significant undertaking with substantial resources… The committee is of the view that a meaningful review of the matters covered by the very broad inquiry terms of reference would likely require a similarly resourced undertaking. However, the committee is not currently calling for such a review to be commissioned.”
Taxation of DB permanent incapacity benefits (reversal of Douglas decision) – transitional rules
The Government has registered a legislative instrument to extend, to 2023-24, transitional treatment of certain defined benefit (DB) pensions.
Amendments to address the 2020 decision of the Full Court of the Federal Court in Commissioner of Taxation v Douglas were legislated last year, via the Treasury Laws Amendment (2022 Measures No 4) Act 2023. Those amendments sought to clarify that all DB pensions paid from most DB funds (including permanent incapacity benefits) are superannuation income stream benefits and not superannuation lump sums for tax purposes (see ASFA Action issue 904). Some funds had treated some DB pensions (including permanent incapacity pensions) as superannuation lump sums, due to an interpretation of how the legislation applied given the specific features of the pensions.
The legislative amendments included a transition arrangement for years up to and including 2021-22. This applies to certain recipients of permanent incapacity benefits who had previously had their superannuation benefits assessed on the basis that they were a superannuation lump sum, and this assessment was first made before 4 December 2020 (the date of the Douglas decision).
In February, the Government registered the Income Tax (Transitional Provisions) (Permanent Incapacity Benefits) Rules 2024 (see ASFA Action issue 933). These rules continued, for 2022-23, transitional tax treatment for relevant permanent incapacity DB pensions that had previously been treated as superannuation lump sums rather than income streams.
The Government has now registered the Income Tax (Transitional Provisions) (Permanent Incapacity Benefits) Amendment Rules 2024, continuing the transitional treatment for 2023-24.
APRA Connect taxonomy: draft superannuation artefacts
APRA has updated the APRA Connect Taxonomy Artefacts webpage with draft superannuation artefacts, reflecting the recent finalisation by APRA of data collections covering investments, trustee licensee profile and trustee profile (see ASFA Action issue 975).
According to APRA, the draft reporting taxonomy artefacts are available now to enable early familiarisation in the APRA Connect test environment.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
