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Issue 780, 19 October 2020 
In this issue: 

 

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: 

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: 

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: 

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: 

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: 

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: 

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.

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