Issue 603, 12 May 2016
In this issue:
- Proposed financial institutions supervisory levies 2016/17: feedback required
- Release of the Retirement Income Streams Review
- Transfers from eligible rollover funds to active funds without consent
Proposed financial institutions supervisory levies 2016/17: feedback required
Treasury has issued a consultation paper seeking submissions on the proposed financial institutions supervisory levies that will apply for the 2016/17 financial year.
The financial institutions supervisory levies are set to recover the operational costs of the Australian Prudential Regulation Authority (APRA) and other specific costs incurred by certain Commonwealth agencies and departments, including the Australian Securities & Investments Commission (ASIC), the Australian Taxation Office and the Department of Human Services.
The paper reflects the announcements in the Budget on 3 May 2016 (see ASFA Action issue 601) regarding additional funding for:
- the Superannuation Complaints Tribunal, to address a backlog of complaints and improve internal processes
- APRA, to modernise its data capabilities
- ASIC, to enhance its consumer protection capabilities.
Treasury is seeking comments on the paper by Friday, 3 June 2016.
If you have any feedback on issues you would like ASFA to consider, including in our submission, please provide your comments to Julia Stannard by close of business Wednesday, 25 May 2016.
Release of the Retirement Income Streams Review
The Government has released the final report of the Retirement Income Streams Review, which was commenced in July 2014 as part of the Government’s commitments to review the minimum drawdown rules for account-based pensions and the regulatory barriers to the development of appropriate income stream products in the Australian market.
The Budget on 3 May 2016 essentially contains the Government’s response to the Review, detailing proposed changes to the tax treatment of deferred annuities and group self-annuitisation products from 1 July 2017 (see ASFA Action issue 601, and the factsheet which represents the Government’s response).
The Government has indicated it will accept the Review’s recommendations.
As well as the extension of the tax exemption on earnings in the retirement phase to products such as deferred lifetime annuities and group self-annuitisation products, the Review’s recommendations include:
- In regard to the existing minimum drawdown rules:
- the current annual minimum drawdown requirements are consistent with the objective of the superannuation system to provide income in retirement and should be maintained
- the Australian Government Actuary should be asked to undertake a review of the annual minimum drawdown rates every five years and advise the Government to ensure they remain appropriate in light of any increases in life expectancy
- any other changes to the minimum drawdown amounts should only be considered in the event of significant economic shocks and based on further advice from the Australian Government Actuary.
- In regard to the development of other annuity-style retirement income stream products:
- an additional set of income stream rules should be developed that would allow lifetime products to qualify for the earnings tax exemption provided they meet a declining capital access schedule
- the alternative product rules should be designed to accommodate purchase via multiple premiums but additions to existing income stream products should continue to be prohibited
- Self-Managed Superannuation Funds and small APRA funds should not be eligible to offer products in the new category
- a coordinated process should be implemented to streamline administrative dealings with multiple government agencies.
Transfers from eligible rollover funds to active funds without consent
The Government has finalised changes to the superannuation regulations to allow trustees of eligible rollover funds (ERFs) to transfer member account balances to active accounts in other superannuation funds without a member’s consent.
These amendments were first announced in last year’s Budget and released in draft in September 2015, however the Government had indicated in March 2016 that it would not proceed with the amendments at that time due to concerns raised during consultation (see ASFA Action issues 566, 581 and 594).
The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) provide that a member’s benefits in a superannuation fund must not be transferred from the fund without the member’s consent. This is subject to a number of exceptions, including for successor fund transfers and transfers of accrued default amounts to a MySuper product.
The Tax and Superannuation Laws Amendment (2016 Measures No. 2) Regulation 2016 (the ‘Amending Regulation’) now amends the SIS Regulations to provide for a new exception. In particular, the amendment provides that the trustee of an ERF may transfer a member’s account balance in the following circumstances:
- the member has a superannuation interest in the fund into which the benefits are to be transferred (the ‘receiving fund’); and
- the trustee of the receiving fund has received at least one contribution or rollover in respect of the member within the 12 month period ending when the transfer is to be made.
The explanatory material accompanying the Amending Regulation notes that the transfer would only be permitted if the trustee of the ERF believes, on reasonable grounds, that the exception applies, and it is envisaged that the trustee of an ERF taking advantage of this exception would have an agreement with the receiving fund to share information for this purpose.
The Amending Regulation also amends the Corporations Regulations 2001, to provide an exemption for this type of transfer from the requirement to disclose material changes and significant events in relation to superannuation products and retirement savings accounts in the Corporations Act 2001.
The amendments commenced on 10 May 2016 and apply to transfers of benefits made from that date.
The Amending Regulation also makes a number of minor, technical corrections to the SIS Regulations to address outdated references.
