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ASFA Action Issue 953, 2 July 2024
In this issue:  


Meaning of ‘employee’: draft update to ATO ruling

The ATO has issued for consultation a draft update to its tax ruling TR 2023/4 Income tax and superannuation guarantee: who is an employee?

The ruling addresses the meaning of ‘employee’ for the purposes of provisions in the Taxation Administration Act 1953 that require a paying entity to withhold tax from salary, wages, commissions, bonuses or allowances it pays to an ‘employee’, whether or not the paying entity is the employer. It also aids in the understanding of both the ordinary and extended meaning of ‘employee’ and ’employer’ for the purposes of subsection 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

The draft update, TR 2023/4DC1, will:

The ATO is seeking submissions on the draft update by close of business Friday 9 August.


Retirement covenant implementation: ASIC and APRA report

ASIC and APRA have released a report summarising the responses to a voluntary survey undertaken last year on the progress by registrable superannuation entities (RSEs) toward implementation of the retirement income covenant. Following assessment of the responses, the regulators have called on superannuation trustees to boost efforts to track and measure the impact of their strategies to improve retirement outcomes for members.

Report 784 Industry update: Pulse check on retirement income covenant implementation follows a report from a thematic review by the regulators in 2022-23 (Report 766 Implementation of the retirement income covenant: Findings from the APRA and ASIC thematic review).

Report 784 finds that while trustees have made good progress, some significant gaps remain.

ASIC and APRA asked trustees to share their response to the recommendations and findings from the thematic review to assist members who are retired or approaching retirement as required under the covenant introduced in 2022.

Key observations from 48 survey responses, representing all trustees invited to participate, include:

The responses pointed to challenges in implementing the covenant, including uncertainty around the financial advice framework, privacy, security, and cost concerns on collecting more member data, and a lack of member engagement and financial capability.

APRA Deputy Chair Margaret Cole said the lack of progress being made by trustees in tracking the success of their strategies was concerning, as this was highlighted as one of the key areas in need of improvement in the thematic review report.

ASIC Commissioner Simone Constant ASIC expects trustees to “assess gaps and identify opportunities to accelerate progress in closing these gaps, including by leveraging examples of progress outlined in this industry update”.

Recovery and exit planning readiness in the superannuation industry: APRA thematic review

APRA has written to registrable superannuation entity (RSE) licensees to outline initial observations from its targeted thematic review of the superannuation industry’s preparedness for Prudential Standard CPS 190 Recovery and Exit Planning.

For RSE licensees, CPS 190 will come into effect from 1 January 2025. The standard requires RSE licensees to contemplate events that may threaten their financial viability, develop plans to ensure they are able to successfully navigate these events, and maintain any capabilities needed to deploy these plans.

APRA conducted a thematic review of the industry’s preparedness for CPS 190 earlier this year, involving 16 RSE licensees that managed approximately 42% of APRA-regulated superannuation fund assets as of 30 June 2023.

APRA reports that while some RSE licensees are well progressed in meeting the minimum requirements of CPS 190, common areas of weakness where improvements are needed included:

APRA notes that the trustee Boards of RSE licensees are responsible for overseeing recovery and exit planning and should recognise that a well-developed recovery and exit plan will lead to better outcomes for all stakeholders when facing into stress. As the industry continues to experience significant growth and therefore impact to members, it is imperative that RSE licensees develop credible recovery and exit plans and ensure an ability to adapt as the environment changes. Robust governance and risk practices are RSE licensees’ first and most significant line of defence against the types of scenarios contemplated in CPS 190.

APRA will progress to supervise to CPS 190 from 1 January 2025, including RSE licensees’ adherence to the requirements measured against our Supervision Risk and Intensity (SRI) model.


Bill updates: non-arm’s length expenses, AFCA, build to rent

In Parliament’s final sitting week for the financial year, progress was made on a number of Bills of relevance to superannuation. Parliament is due to finish its Winter sittings on Thursday 4 July and will resume on 12 August.


Non-arm’s length expenses (NALE)

Amendments to the non-arm’s length expense rules for superannuation funds have now completed their passage through parliament and received Royal Assent on 28 June as part of the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024.

As reported in ASFA Action issue 915, the amendments provide a full exemption for large superannuation funds (large APRA-regulated funds, exempt public sector superannuation schemes, approved deposit funds and pooled superannuation trusts) from the non-arm’s length income rules as they relate to both general and specific non-arm’s length expenses. These funds will still be subject to the remaining non-arm’s length income rules for income derived on a non-arm’s length basis. (Different treatment will apply to self-managed superannuation funds and small APRA-regulated funds.)

The amendments will apply retrospectively with effect from 2018-19. Their passage had recently been delayed due to disagreement between the House of Representatives and the Senate on amendments to an unrelated measure in the same Bill. On 25 June, the Senate resolved not to further insist on its amendments, allowing the Bill to pass (refer ASFA Action issue 949 for background).


Jurisdiction of Australian Financial Complaints Authority (AFCA)

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024 also contains amendments to the jurisdiction of AFCA to hear superannuation matters (as reported in ASFA Action issue 915). Those amendments also received Royal Assent on 28 June.

The amendments seek to reverse the effect of the 2022 decision of the Full Court of the Federal Court in MetLife v Australian Financial Complaints Authority. That decision held that AFCA did not have jurisdiction to hear complaints relating to superannuation unless the complaint met the definition of ‘superannuation complaint’ specified in section 1053(1) of the Corporations Act 2001.

Under the amendments, a complaint relating to superannuation may be made to AFCA even if it does not meet the section 1053(1) definition of ‘superannuation complaint’.

If a complaint meets the section 1053(1) definition, it must be dealt with by AFCA in accordance with the legislative framework for superannuation complaints in Division 3 of Part 7.10A of the Corporations Act. That framework imposes additional legislative requirements on AFCA and provides it with additional powers for dealing with ‘superannuation complaints’. While any superannuation-related complaint that does not meet the section 1053(1) definition is not subject to that legislative framework, it is open to AFCA to deal with it as appropriate under its general (non-superannuation) jurisdiction.

The amendments commenced on 29 June (the day after Royal Assent) and will apply to complaints made, or purported to have been made, to AFCA before or on or after that date.


Build to rent tax concessions

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 and the Capital Works (Build to Rent Misuse Tax) Bill 2024 have been passed by the House of Representatives. As reported in ASFA Action issue 950, these Bills amend the tax concessions for build to rent developments and establish a ‘misuse tax’ penalty that will apply where the concessions are claimed but the development is ineligible.

On 27 June 2024, Senator McKim (Australian Greens) successfully moved a motion that, on introduction into the Senate, the build to rent amendments should be split out of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 into a separate Bill and that new Bill should be referred to the Senate Economics Legislation Committee for a separate inquiry and report by 4 September 2024 along with the Capital Works (Build to Rent Misuse Tax) Bill 2024. The Bills had previously been referred to the Senate Economics Legislation Committee for inquiry and report by 2 August. The Committee intends to call for submissions to the new, separate inquiry by 25 July (the inquiry webpage will be set up after the Bills have been introduced into the Senate and split in accordance with Senator McKim’s motion).


Digital ID

Senators Antic, Babet, Canavan, Rennick, Hanson and Roberts have introduced the Digital ID Repeal Bill 2024. This private Senators’ Bill proposes to repeal the recently enacted Digital ID Act 2024 and Digital ID (Transitional and Consequential Provisions) Act 2024.

Those Acts strengthen and expand Australia’s Digital ID system by putting in place the legislative framework to create an economy-wide Digital ID system in Australia. They are intended to strengthen an Accreditation Scheme for Digital ID service providers and enable the expansion of the Australian Government Digital ID System to states and territories and, in time, the private sector (see ASFA Action issue 949 for background). The Senators’ rationale for proposing their repeal relates to the adequacy of the time allowed for Senate consideration prior to the passage of the Acts and concern they will make it difficult to access key services without a digital ID.


When a superannuation income stream commences and ceases: ATO ruling

The ATO has finalised an addendum updating its tax ruling TR 2013/5 Income tax: when a superannuation income stream commences and ceases.

The Ruling has been updated to:

The ATO consulted on a draft of the updates in October-November 2023, see ASFA Action issue 917 for background.


AFCA: updated Rules and Operational Guidelines

AFCA has published an updated version of its Rules and Operational Guidelines that have effect from 1 July.

The Rules and Guidelines were updated following consultation in March-May last year, to:

ASIC approved the updates to the Rules earlier this year and AFCA published an outline of the relevant changes at that time (see ASFA Action issue 937 for background).


APRA supervisory levies for 2024-25

The Government has determined the supervisory levies to be collected from APRA-regulated entities, including superannuation entities, for 2024-25.

The levies recover the operational costs of APRA as well as other specific costs incurred by certain Commonwealth agencies and departments. These include:

As relevant to APRA-regulated superannuation entities, the Australian Prudential Regulation Authority Supervisory Levies Determination 2024 imposes the following levy amounts and rates:

 Entity   Maximum restricted levy amount ($)   Minimum restricted levy amount ($)  Restricted levy percentage  Unrestricted levy percentage 
 Pooled superannuation trust  450,000    12,500   0.00388  0.001226
 Small APRA fund or single member approved deposit fund   590   590   0.0   0.0 
 Other superannuation entity   900,000   12,500   0.00776  0.003272




ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations

and other regulatory announcements relevant to superannuation.

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