ASFA Action 3 December 2024

Issue 975

In this issue:

• • • Identification & management of financial abuse within the tax system: IGT review
    • Superannuation contributions: draft tax ruling
    • Bills update: objective, Better Targeted Superannuation Concessions and others
    • Internal Dispute Resolution reporting: ASIC observations
    • Financial Accountability Regime: observations from banking industry implementation
    • Modern slavery: Government’s response to review report

 

Identification & management of financial abuse within the tax system: IGT review

The Inspector-General of Taxation (IGT) is conducting a review into how the ATO identifies and manages financial abuse within the tax system. 

The key focus will be on the ATO’s frontline services, the associated policies, procedures, training and guidance available to aid them in identifying and addressing cases of financial abuse within tax administration. The review will examine administration (including information sharing powers) within current legislation, noting there are other government reviews considering future policy and legislation. 

Key areas of focus include: 

• how the ATO identifies instances of financial abuse 

• support and relief for victim-survivors 

• use of systems and data to identifying perpetrators and third parties involved 

• minimising the broader impact on other government services. 

The IGT is seeking initial input, including data, analysis, research, case studies or points of view by Tuesday 10 December. Further consultation will occur in late January and February, with the final report to be delivered in March. 

Superannuation contributions: draft tax ruling

The ATO is consulting on proposed changes to TR 2010/1 Income tax: superannuation contributions. 

According to the ATO, the proposed updates, set out in TR 2010/1DC2: 

• explain the interactions between the non-arm’s length income provisions and the rules concerning superannuation contributions 

• reflect the removal of the maximum earnings test for the purpose of deducting personal contributions, from 1 July 2017. 

The ATO has also withdrawn an earlier version of proposed updates to the ruling, via TR 2010/1DCW. 

If you have any feedback you would like ASFA to consider in relation to the draft ruling, please forward it to Julia Stannard by close of business Friday 10 January. 

Bills update: objective, Better Targeted Superannuation Concessions and others

A number of Bills that relate to or impact superannuation were passed by the Senate as part of a ‘guillotine’ motion on its last sitting day, 28 November – many with amendments which were agreed to by the House of Representatives on 29 November: 

• The Superannuation (Objective) Bill 2023 was passed without amendment. This Bill: 

• • enshrines in legislation the objective of superannuation: ‘to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way 

• • requires policy-makers to assess future changes to super for compatibility with this objective and include a statement of compatibility in the explanatory materials accompanying all Commonwealth Bills and regulations relating to super (unless an exception applies)

See ASFA Action issue 940 for background. 

• The Privacy and other Legislation Amendment Bill 2024 was passed with amendments. This Bill makes a range of significant reforms to Australia’s privacy laws (see ASFA Action issue 964 for background on this Bill).  
  
  The amendments to the Bill in the Senate were moved by the Government. According to the supplementary explanatory memorandum, these are intended to respond to recommendations arising from the Senate Legal and Constitutional Affairs Committee inquiry into the Bill and to make technical corrections and other minor changes, including to ensure the effective and efficient operation of the Bill on commencement.  

• The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 was passed with amendments. This Bill makes a range of amendments to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws (see ASFA Action issue 964 for background on this Bill).
  
  The amendments to the Bill in the Senate were moved by the Government. According to the supplementary explanatory memorandum, these are intended to respond to recommendations arising from the Senate Legal and Constitutional Affairs Committee inquiry into the Bill and to refine drafting and provide clarity to reporting entities. The amendments include bringing forward the commencement of the new ‘tipping off’ offence to 31 March 2025 and provide a bridging provision to clarify who would be captured by the tipping off offence ahead of the AML/CTF programs and business groups provisions that commence on 31 March 2026.  

• The Family Law Amendment Bill 2024 was passed with amendments. This Bill includes reforms to “make the family law system simpler, safer and fairer” and includes several amendments relevant to the family law superannuation splitting regime (see ASFA Action issue 964 for background on this Bill). 
  
  The amendments to the Bill in the Senate were moved by the Government. According to the supplementary explanatory memorandum, these are clarifying amendments to enhance the operation of the Bill, that respond to matters raised in submissions made to the Senate Legal and Constitutional Affairs Legislation Committee and give effect to two recommendations for amendments made by the Committee. There are also additional amendments identified by the Government to enhance or clarify the operation of the Bill. Of relevance to superannuation, the amendments: 

• • enable transitional arrangements to be made for the Family Law (Superannuation) Regulations 2001, by providing the Minister with the power to approve ‘transition factors’ to be applied when calculating a non-member spouse’s entitlement following a family law superannuation splitting order or agreement 

• • remove certain separation declaration requirements for parties seeking to split their superannuation by agreement, where the total value of a member’s superannuation interests is higher than the low rate cap. This reflects that the low rate cap – which applied to members that had reached their preservation age but were under age 60 – is no longer relevant for taxation purposes from 1 July 2024 (as the phasing up of preservation age to age 60 is now complete).  

• Build-to-Rent (BTR) tax concessions – the BTR measure proposes amendments including an increase in the rate for the capital works tax deduction for eligible BTR projects, which may be of interest to superannuation funds as investors in BTR housing. The BTR provisions had been split out from the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (TLA (RBNPL&OM) Bill) and moved to the Treasury Laws Amendment (Build to Rent) Bill 2024. Last week, that split was set aside by the Senate and the BTR measure proceeded as if it had never been removed from the TLA (RBNPL&OM) Bill. The TLA (RBNPL&OM) Bill was ultimately passed with some Government amendments. The related Capital Works (Build to Rent Misuse Tax) Bill 2024 was passed unamended. (See ASFA Action issue 953 for background on these Bills.) 

These Bills are now all awaiting Royal Assent. 

Better Targeted Superannuation concessions (Division 296 tax on balances over $3 million) 

The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures Bill) 2023 has not been passed (see ASFA Action issue 925 for background on this Bill). The Bill was not debated last week – it was part of an initial, unsuccessful guillotine motion by the Government, but was not included in the subsequent (successful) guillotine motion.  

However, it should be noted that the Opposition successfully moved that the parts relating to the proposed new Division 296 tax, and those relating to the ‘other measures’, should be split. This means that should reconsideration of the Bill resume, either the Division 296 measure or the ‘other measures’ will proceed in a separate Bill that will be taken to have been introduced and passed by the House of Representatives on the same dates as the original Bill. There is no guarantee this will occur though, as a motion to split a Bill can be set aside (see above regarding the BTR tax concession measure). 

Other: scams prevention, cyber security, FRAA reviews 

The reporting date for the Senate Economics Legislation Committee’s inquiry into the Scams Prevention Framework Bill 2024 has been extended from 30 January to 3 February (the due date for submissions is unchanged). See ASFA Action issue 972 for background. 

The Cyber Security Bill 2024, the Intelligence Services and Other Legislation Amendment (Cyber Security) Bill 2024 and the Security of Critical Infrastructure and Other Legislation Amendment (Enhanced Response and Prevention) Bill 2024 have received Royal Assent. See ASFA Action issue 968 for background on these Bills. 

As noted above, the Senate has resolved to split the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures Bill) 2023 to separate out the Division 296 tax measure from the ‘other measures’. The ‘other measures’ in this Bill include: 

• a reduction in the frequency of the reviews by the Financial Regulator Assessment Authority (FRAA) of APRA and ASIC to every five years (instead of every two years) 

• updates to the Payments Systems (Regulation) Act 1998 to ensure regulators and government can address new risks related to payments as the provision of payments evolves and increases in complexity. 

Internal Dispute Resolution reporting: ASIC observations 

ASIC has released its first publication of industry-wide data reported under the internal dispute resolution (IDR) data reporting framework. Under the IDR framework, most licensed financial firms – including APRA-regulated superannuation funds – are required to report IDR data to ASIC on a six-monthly basis. 

The observations – covering complaints reported by financial firms of all types for the period 1 July 2023 to 30 June 2024 – are published in REP 801 Insights from internal dispute resolution data reporting: July 2023 to June 2024. 

As relevant to superannuation, REP 801 notes: 

• financial firms reported 220,860 complaints relating to superannuation. Of these, approximately 54% of these complaints were resolved on the same day, three-quarters were resolved within seven days and almost all complaints (99%) were resolved within 51 days 

• the top three products for superannuation complaints were: superannuation account (73%), pension (11%), and death benefit (5%) 

• the top three issues for superannuation complaints were: service-related issues (26%), delay in following instructions (12%), and technical problems (10%) 

• the top three outcomes for superannuation complaints were: no remedy, or apology or explanation only (60%), service-based remedy (35%), and other remedy (2%).  

While ASIC does not verify that financial firms’ self-reported data accurately reflects their underlying complaints handling, it notes finding variations in the volume of complaints reported by comparable firms and gaps in the IDR data that indicate the data reported to ASIC may not fully reflect the complaints received by some firms. As a result, ASIC is concerned that some firms are not reporting IDR data as accurately as is possible. There was an unexpectedly high number of firms that reported no complaints. 

ASIC Commissioner Alan Kirkland said it is important for firms to foster a positive complaints management culture, including a focus on gathering accurate data, adding that firms should reflect on the detailed requirements and practical guidance outlined in ASIC’s IDR data reporting handbook. “While there may be reasonable explanations for some of these variances, we encourage firms to carefully review our report and guidance to assist in reporting complete and accurate IDR data. Starting from next year, we’ll be publishing data about complaints received by individual firms. It is crucial that firms act now to address any gaps in IDR reporting processes, because we will publish the data as it is reported to us.” 

Commissioner Kirkland said ASIC is closely examining the standard of IDR reporting and undertaking a range of activities to strengthen compliance with the regime. “Where we become aware of problems, we will engage with firms to understand the causes, and whether they stem from deficiencies in the firm’s underlying IDR processes or in IDR data reporting…. Our ongoing analysis of the IDR data will also inform our other regulatory activities, so industry can expect to hear more from ASIC on this issue.” 

Ahead of publishing firm-level data, ASIC will consult on its approach to contextualising and presenting the data. 

Financial Accountability Regime: observations from banking industry implementation

APRA and ASIC have published a letter containing observations on registration and notification lodgements made since the Financial Accountability Regime (FAR) commenced for the banking industry. 

The letter identifies areas that require further consideration by banking entities and reiterates specific aspects, consistent with previously released FAR guidance, to entities across the banking, insurance and superannuation industries (noting that the FAR will apply to the superannuation and insurance industries from 15 March 2025). 

The regulators’ observations address the following topics: gaps in the assignment or notification of prescribed responsibilities, including responsibilities associated with prescribed positions; consideration of general responsibilities; gaps in the assignment or notification of accountable persons of, and accountable persons with responsibility in relation to significant related entities; multiple accountable persons jointly holding prescribed responsibilities. 

The letter calls on entities to review the observations and areas for further consideration for the purposes of ensuring compliance with their obligations under the FAR. 

Modern slavery: Government’s response to review report  

The Government has released its response to the report from a recent statutory review of the Modern Slavery Act 2018.  

The Act requires large businesses and other entities operating in Australia – including many superannuation funds – to report annually on how they are addressing modern slavery risks in their domestic and global operations and supply chains. (See ASFA Action issue 901 for background on the review and report). 

The Government has agreed, or agreed in principle, to 25 of the 30 recommendations which is summarised below. In particular, the Government will progress four areas of focus: 

1. Compliance and enforcement: penalties for non-compliance, such as failing to submit or providing false statements, will be introduced. The compliance framework will including civil penalties and regulatory mechanisms.
2. Clarity and simplicity: guidance for reporting entities will be improved and reporting requirements streamlined. The Government will not lower thresholds for reporting to $50 million but will reconsider the threshold at the next review of the Act.
3. Support and guidance: guidance materials will be enhanced to help businesses understand obligations. This would include developing optional templates for reporting.
4. Continuous improvement: The Government agreed to conduct further reviews of the Act, and will consult on implementing due diligence systems and ensure alignment with global standards. 

The recommendation that the Act be amended to provide that an entity has the option of submitting a modern slavery report every three years, with a report submitted that updates the information in the full statement in the intervening two years, was noted but not agreed to. 

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