Issue 780, 19 October 2020
In this issue:
- Budget 2020-21: personal tax cuts passed, withholding schedules updated
- COVID-19 Coronavirus: AFCA temporary time extension ceasing
- Death benefit rollovers: ATO clarification
- Approval to own or control an RSE licensee
- COVID-19 Coronavirus: early release of super – APRA data
Budget 2020-21: personal tax cuts passed, withholding schedules updated
As reported in ASFA Action issue 779, the Government’s 2020-21 Budget announced that the tranche of cuts to personal income tax rates legislated to apply from 1 July 2022 would be brought forward to apply from 1 July 2020.
The Government subsequently introduced into Parliament a bill to implement the COVID-19 economic support measures included in the Budget, including the acceleration of the tax cuts. That bill was passed by both Houses of Parliament and on 16 October it received royal assent as the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020.
The ATO has now registered the Taxation Administration Act Withholding Schedules No.2 2020. This updates fifteen tax withholding schedules to reflect the new personal tax scales. These include the following schedules specifically relevant to withholding by superannuation funds:
- Schedule 12 – tax table for superannuation lump sums
- Schedule 13 – tax table for superannuation income streams.
The updated withholding schedules commenced on 12 October.
The new withholding instrument replaces an instrument registered in June (see ASFA Action issue 760).
COVID-19 Coronavirus: AFCA temporary time extension ceasing
The Australian Financial Complaints Authority (AFCA) has announced that a temporary extension of time for financial firms to respond to complaints, granted due to the COVID-19 pandemic, will cease and its original response timeframes will resume from 1 November.
In April, AFCA granted financial firms – including superannuation trustees:
- an additional nine days to respond when AFCA notifies the firm that a complaint has been lodged – taking the time allowed to 30 days
- a standard 21-day timeframe for financial firms to provide an initial response once a complaint reaches the case management stage.
When announcing the extensions, AFCA indicated they would apply for up to six months (see ASFA Action issue 750).
AFCA has now confirmed that the temporary extensions of time will end on 31 October. From 1 November 2020:
- AFCA’s process will revert to the original response timeframes, giving financial firms 21 days to respond to complaints that have already been through internal dispute resolution
- AFCA will also require initial responses to complaints that have reached the case management stage within the requested timeframe (7, 14, or 21 days as appropriate).
Chief Ombudsman and CEO David Locke said AFCA is “appreciative of the way our members have dealt proactively with the challenges of COVID-19 and the resolution of complaints during this extended response timeframe”. AFCA will “continue to consider further extensions where they’re needed on a case by case situation” as part of its normal process.
Death benefit rollovers: ATO clarification
The ATO has published some guidance for superannuation trustees on how to apply recent retrospective amendments to the tax treatment of certain superannuation death benefit rollovers.
Under reforms contained in the Treasury Laws Amendment (2019 Measures No. 3) Act 2020, the tax treatment of superannuation death benefit rollovers containing an untaxed element was amended retrospectively with effect from 1 July 2017. In general terms, death benefit rollovers with an untaxed element can arise where the death benefit contains death and disability insurance proceeds and the transferring fund has claimed (or will claim) a tax deduction in respect of insurance premiums in relation to the benefit. The amendment to the law was intended to ensure that the rolled-over untaxed element was not included in the assessable income of the receiving fund. (See ASFA Action issues 760 and 730 for background.)
As a consequence of the amendment, it appeared that the receiving superannuation fund would be required to treat any pension payments made out of the rolled over benefit as containing an untaxed element, and to withhold tax accordingly.
The ATO has now published guidance indicating that:
- a transferring fund is still required to determine if there is an untaxed element in a superannuation lump sum death benefit being rolled over to another fund where it has claimed, or will claim, deductions for death and disability insurance premiums in relation to the benefit
- however, where a dependant beneficiary rolls over the death benefit to commence a new pension interest in the receiving fund, and the receiving fund does not claim any deductions for any death and disability insurance offered to the dependant beneficiary as part of the new pension interest, any lump sums paid from that interest will not be considered to include an untaxed element.
The guidance also sets out how death benefit rollovers containing an untaxed element should be reported by funds.
Approval to own or control an RSE licensee
APRA has advised superannuation licensees to review their current ownership structures for compliance with ‘controlling stake’ requirements that came into effect on 5 July 2019 as part of the ‘member outcomes’ reforms.
APRA has written to registrable superannuation entity (RSE) licensees, indicating that it has undertaken a review of licensees’ implementation of the controlling stake requirements and noted instances where licensees and the relevant persons acquiring the controlling stakes do not appear to have considered the application of the requirements to their particular circumstances.
APRA has reminded licensees that an application for approval to hold a controlling stake in an RSE licensee must be considered whenever there are changes to the ownership of shares in an RSE licensee. An application will always be required for a new RSE licence, and may also be required where any of the following occur:
- changes to the directors of an RSE licensee, where this involves a change in shareholdings
- a restructure of a corporate group
- an acquisition of shares in an RSE licensee or its holding company
- a successor fund transfer that results in the issue or transfer of shares to a director, employer organisation or employee organisation.
APRA notes that it has reviewed the application process for approval to hold a controlling stake in an RSE licensee and has updated its application form and instruction guide.
The letter sets out a number of steps that APRA requires RSE licensees to take as a matter of priority, to ensure compliance with the controlling stake requirements.
See ASFA Action issues 712 and 644 for background in relation to this issue.
COVID-19 Coronavirus: early release of super – APRA data
APRA has made its twenty-fifth weekly publication of industry-level data from its early release initiative data collection.
The data covers applications made from inception of the early release initiative on 20 April. The data shows that from 20 April to 11 October:
- payments totalling $34.3 billion had been made, with an average payment of $7,665
- 3.3 million ‘initial’ applications had been received, with an average application amount of $7,401
- 1.3 million ‘repeat’ applications had been received, with an average application amount of $8,363
- funds were taking an average of 3.3 business days to pay an application, with 95 per cent of applications paid within five business days.
APRA has also published the twenty-fourth tranche of fund-level statistics from its early release data collection, revealing the number and value of the payments processed by each fund, as well as the time taken to make payments.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
