Issue 809, 17 June 2021
In this issue:
- Your Future, Your Super: Bill amended
- Non-concessional contribution bring forward arrangements: Bill amended
- SMSFs and SAFs: membership limit: progress of Bill
- ASFA / Deloitte Target Market Determination (TMD) Template available for ASFA members
- Disclosure obligations for ongoing fee arrangements: transitional relief
- Ongoing fee arrangements: ASIC guidance
- AML/CTF Rules amended
Your Future, Your Super: Bill amended
The Treasury Laws Amendment (Your Future, Your Super) Bill 2021 was passed by the Senate earlier today with amendments.
The Bill will implement the Government’s Your Future, Your Super (YFYS) reforms, announced in the October 2020 Federal Budget (see ASFA Actions 808, 778 and 785 for background). The YFYS reforms contain:
- a requirement that where a new employee is ‘stapled’ to an existing superannuation fund and does not choose a fund to receive contributions, their employer is required to make contributions on behalf of the employee into the ‘stapled’ superannuation fund
- measures to address underperformance in superannuation, by requiring APRA to conduct an annual performance test for MySuper products and other products to be specified in regulations
- a ‘best financial interests duty’ requiring superannuation trustees to act in the best financial interests of their members when they undertake the many actions involved in operating a superannuation entity.
The Government successfully moved amendments to the Bill to:
- delay the application of the stapling amendments so that they apply to employees commencing employment on or after 1 November 2021 (rather than 1 July 2021)
- make technical corrections to the Bill in relation to the underperformance and best financial interests measures.
The Bill will now return to the House of Representatives for consideration of the Senate’s amendments.
Non-concessional contribution bring forward arrangements: Bill amended
The Senate has this morning passed, with amendments, a Bill increasing the cut-off age for the non-concessional contribution ‘bring forward’ arrangements from 65 to 67, as announced in the April 2019 Budget.
As reported in ASFA Action issue 773, the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 contains an amendment extending the bring forward arrangements for non-concessional contributions to individuals under age 67. The amendment is intended to commence from the start of the first quarter after the amending Act receives Royal Assent, with application to non-concessional contributions made on or after 1 July 2020.
As noted in ASFA Action issue 773, the One Nation party had circulated a number of amendments that it intended to move to this Bill in the Senate. The amendments ultimately moved by One Nation today differed from those previously circulated.
At a high level, the amendments moved today — and passed, with the support of the Government — appear to:
- allow individuals who have utilised the Coronavirus early release initiative to make ‘recontributions’ that do not count toward their non-concessional contributions cap
- repeal the excess concessional contributions charge for financial years starting on or after 1 July 2021. Currently, where an individual exceeds their concessional contributions cap for a financial year, the excess amount is included in their assessable income and taxed at their marginal rate (less an offset for the tax already paid within their superannuation fund). In addition, the ‘excess concessional contributions charge’ is imposed to address the fact the personal tax liability on the excess amount is collected later than normal income tax.
Ultimately, Senator Hanson did not proceed with previously circulated amendments that would have increased the concessional contributions cap for those aged over 67. An amendment proposed by the Opposition — that for every Bill or regulation relating to superannuation there must be a statement of its compatibility with the primary objective of the superannuation system — did not proceed.
The Bill will now return to the House of Representatives for consideration of the amendments made by the Senate.
(See ASFA Action issues 773, 760 and 755 for background in relation to this Bill.)
SMSFs and small APRA fund membership limit: progress of Bill
The Senate has this morning passed a Bill to increase the maximum number of members permitted in a self-managed superannuation fund (SMSF) or small APRA fund. The Bill now awaits consideration by the House of Representatives.
The Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 proposes an increase the number of members referred to in the definition of SMSF in the SIS Act from fewer than five members to “no more than six members”. As a result, the maximum number of members of an SMSF and a SAF is increased from four to six. The Bill also makes corresponding amendments to related tax legislation and the Corporations Act 2001. The amendments will apply from the start of the first quarter commencing after the Act receives Royal Assent.
The Opposition unsuccessfully moved an amendment that would have required a review of the operation of the amendments, considering the conduct of financial advisers and trustees and SMSF investment performance and governance.
As this Bill was introduced in the Senate, it will now proceed to consideration by the House of Representatives.
See ASFA Action issues 774, 766, 763 and 669 for background in relation to this Bill.
ASFA / Deloitte Target Market Determination (TMD) Template available for ASFA members
ASFA and Deloitte have developed a TMD template, with input from ASFA’s TMD Template Working Group, to assist members with their Design and Distribution Obligations (DDO) regime obligations.
The ASFA / Deloitte TMD Template can be accessed here.
Please contact Maggie Kaczmarska if you have any questions in relation to the TMD template.
Disclosure obligations for ongoing fee arrangements: transitional reliefs
The Government has indicated it will provide transitional relief to help financial advisers comply with new disclosure obligations for ongoing fee arrangements.
As part of its response to recommendation 2.1 from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Government recently amended the Corporations Act 2001 to require greater disclosure in relation to fees charged for financial advice. These reforms were part of the Financial Sector Reform (Hayne Royal Commission Response No. 2) Act 2021 (see ASFA Action issue 795 for background).
In particular, from 1 July 2021 financial advisers are required to report the fees paid under an ongoing fee arrangement and provide a reasonable estimate of the fees that will be paid in the subsequent 12 months. Advisers can issue this fee disclosure statement anytime between the transition period 1 July 2021 and 30 June 2022, and the date of issue will become the anniversary date for future fee disclosure statements.
The Government has acknowledged that it may be difficult for industry to generate an accurate fee disclosure statement during the transition period as fees are required to be reported up to the day before the statement is issued. To address this, the Government will make a regulation to allow advisers to report an estimate of fees for the 60 days prior to the statement being issued. The estimate would be reported alongside the actual fees charged for the remainder of the previous 12 months.
This regulation will only apply for the transition period. After the transition period, financial advisers will have 60 days from the anniversary date to issue their fee disclosure statements which must report all fees paid in the previous 12 months. The Government has indicated that the regulation will be made by 1 July 2021.
Ongoing fee arrangements: ASIC guidance
ASIC has released an information sheet on ongoing fee arrangements to provide greater clarity on obligations when providing personal advice to retail clients.
The information sheet takes into account responses to ASIC’s recent consultations, including Consultation Paper 332 Promoting access to affordable advice for consumers (see ASFA Action issue 784 for background).
The information sheet answers frequently asked questions (FAQs) about the obligations that apply to fee recipients who provide personal advice to retail clients under an OFA. These include questions relating to:
- ongoing fee arrangements (for example, who must comply with the OFA obligations, and what is an ongoing fee)
- fee disclosure statements (for example, when an adviser needs to give a fee disclosure statement and whether it can be given electronically)
- ongoing fee consents (for example, when an adviser needs to obtain written consent, what types of accounts written consent needs to be obtained for).
ASIC has also released consequential amendments to RG 175 Licensing: Financial Product Advisors-Conduct and Disclosure. The amendments include an example of the lack of independent disclosure statement to help advisers understand the requirements in ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125 (see ASFA Action issue 797 for background).
AML/CTF rules amended
AUSTRAC has registered amendments to the anti-money laundering and counter-terrorism financing (AML/CTF) regime, some of which may be relevant to the administration of superannuation funds.
The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2021 (No. 1) makes a number of amendments to the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules). Of particular relevance to superannuation funds, these include:
- requirements for a reporting entity when it has doubts about the veracity or adequacy of previously obtained ‘know your customer’ information
- amendments to support recent legislative changes that expanded the circumstances in which a reporting entity may rely on the applicable customer identification procedure (ACIP) undertaken by another person, including where a reporting entity has entered into an agreement or arrangement for reliance on another person. The amendments to the AML/CTF Rules prescribe procedures other than the ACIP that can be relied on under a reliance agreement or arrangement, and the requirements that must be satisfied in relation to reliance agreements or arrangements.
The amendments commence on 17 June.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
