Issue 536, 21 May 2014
In this issue:
- Temporary ‘Budget repair levy’ Bills referred to Senate Committee
- ASIC consultation on deregulatory initiatives
- New regulations on calculation of defined benefit contributions for Division 293 tax
- Minor amendments to unclaimed superannuation regulations
- AML/CTF rules for customer due diligence
Temporary ‘Budget repair levy’ Bills referred to Senate Committee
In ASFA Action Issue No. 535, we outlined the impact that the proposed ‘Budget repair levy’ would have on a range of superannuation-related payments for the 2014/15, 2015/16 and 2016/17 financial years. Subject to the bills being passed by Parliament, trustees may potentially be required to withhold tax at the higher rate (inclusive of the levy) from certain benefit payments, such as a departing Australia superannuation payment and a benefit paid to a member who has not quoted their tax file number, from as early as 1 July 2014.
There are 15 bills in the package which gives effect to the levy, with 5 having a direct impact on superannuation. All 15 Bills have now been referred to the Senate Economics Legislation Committee for inquiry and report by 16 June 2014. Submissions to the inquiry close on 30 May.
If you have any comments which you would like ASFA to consider including in a submission to the Committee, please forward them in writing to Robert Hodge by midday, Tuesday 27 May.
ASIC consultation on deregulatory initiatives
As part of the Government’s red-tape reduction project, ASIC has released a report outlining its commitment to reduce compliance costs for those under its regulation.
The report highlights ASIC’s ongoing work to minimise compliance costs and red tape, as well as specific proposed initiatives, including:
- the streamlining of ASIC forms
- discussing possible legislative changes with Treasury
- removing barriers that inhibit innovation in disclosure
- strengthening ASIC’s engagement and communication with its regulated population.
ASIC is seeking feedback on the specific initiatives identified in the report and, more broadly, on particular areas where ASIC can make it easier for businesses and individuals to meet their obligations under the laws and regulations it administers, where doing so does not undermine ASIC’s strategic priorities of ensuring investors and financial consumers are confident and informed and markets are fair and efficient.
ASIC is seeking specific proposals that provide a net regulatory benefit, or a minimal regulatory detriment that is clearly outweighed by a demonstrated commercial benefit. In particular, ASIC is seeking views on:
- any changes that might be made to ASIC forms
- suggestions for regulatory change that ASIC might discuss further with Treasury and the Government
- any changes that might be made to ASIC processes or procedures.
If you have any comments that you would like ASFA to consider including in a submission to ASIC, please forward them in writing to Fiona Galbraith, by close of business Friday 6 June.
New regulations on calculation of defined benefit contributions for Division 293 tax
The Government has made regulations prescribing the ongoing methodology for determining defined benefit (DB) contributions for Division 293 tax purposes for 2013/14 and later financial years.
Division 293 tax applies to high-income earners, broadly those whose income and concessionally-taxed superannuation contributions exceed $300,000 in an income year. Individuals are liable to pay the tax, imposed at 15 per cent on that part of the person’s superannuation contributions that, when added to their income, cause their total income plus superannuation to exceed the $300,000 threshold. The tax has applied to taxable contributions made since 1 July 2012.
The legislative framework for Division 293 tax, set out in the Income Tax Assessment Act 1997 (ITAA 1997), provides that an individual’s concessionally-taxed superannuation contributions includes notional contributions in respect of DB interests (DB contributions).
The inclusion of DB contributions ensures that individuals with DB interests are treated in a similar way to individuals with accumulation interests. However, as the actual value of benefits received by an individual from a DB interest can only be known when the benefit is paid, it is necessary to estimate the value of the employer financed benefits that accrue in a financial year for the interest (notional employer contributions), in order to assess an individual’s liability to Division 293 tax each year. The ITAA 1997 provides that an individual’s DB contributions are to be determined in accordance with the regulations.
In March, the Government made regulations specifying an interim method for determining an individual’s DB contributions for the 2012/13 financial year (see ASFA Action Issue 527). These latest regulations specify the ongoing method for the 2013/14 and later financial years.
In particular, the regulations provide as follows:
- An individual’s DB contributions are an estimate of the amount of employer contributions that would be made if contributions to fund all the employer-provided benefits expected to be paid were made annually. Generally, this is the sum of: the actuarial value of the employer-provided benefits attributed to the individual for a financial year, the administrative expenses and the risk benefits attributable to the interest.
- The method for determining DB contributions averages the cost of employer-provided benefits across all DB members and all years of service. There are special rules for accruing members with unfunded DB interests (generally, these interests are in superannuation funds for Commonwealth, state and territory employees, including constitutionally protected funds and certain public sector superannuation schemes).
The regulations commenced on 17 May 2014.
Minor amendments to unclaimed superannuation regulations
The Government has made minor amendments to the Superannuation (Unclaimed Money and Lost Members) Regulations 1999 (SUMLM Regulations), to correct a technical issue with the unclaimed money rules and to provide for certain public sector superannuation schemes to pay their unclaimed money to the Australian Taxation Office (ATO).
The amending regulations:
- Prescribe a number of South Australian public sector superannuation schemes for unclaimed superannuation purposes. This enables the prescribed schemes to report and pay any unclaimed superannuation benefits to the ATO, rather than to a South Australian authority. It is considered that payment of unclaimed money to the ATO will increase the likelihood of reuniting individuals with their unclaimed superannuation.
- Re-insert into the SUMLM Regulations the definitions of ‘Treasury bond rate’ and ‘CPI’, which were inadvertently omitted during a previous amendment. These definitions are relevant to the calculation of the interest rate that is paid by the ATO on unclaimed money that is re-claimed by a member.
The amending regulations commenced on 17 May 2014.
New AML/CTF rules for customer due diligence
After an extensive consultation process over the last nine months, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has made a number of amendments to the Anti Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules), including enhancement of entities’ customer due diligence obligations. (See ASFA Action Issue 507 and Issue 520 for details of an earlier discussion paper and draft Rules.)
The amendments relate to areas including customer identification, AML/CTF programs, ongoing customer due diligence and disclosure certificates.
Of particular significance, the amending Rules:
- expand both the definition of ‘beneficial owner’ and the obligation on reporting entities to identify and verify beneficial owners of customers
- insert a new definition of ‘politically exposed person’, and new identification and verification measures that must be applied to such persons
- replace the current rules regarding customer identification and verification. Note that some important exceptions apply, so that many aspects of these new identification and verification requirements will not apply to:
- pre-commencement customers (that is, people who became customers and were first provided with designated services before 12 December 2007)
- customers who receive certain designated services, including acceptance of a superannuation contribution, rollover or transfer, or the purchase price of a superannuation pension or annuity)
- in addition, some aspects of the new rules regarding identification and verification, as they relate to beneficial owners and politically exposed persons, will only apply to people who became customers after 1 June 2014 (when the amendments commence)
- replace the current rules regarding ongoing customer due diligence
- replace aspects of the current rules regarding AML/CTF programs and disclosure certificates.
These amendments will commence on 1 June 2014.
In addition to the changes noted above, the Rules expand the definitions of ‘certified copy’ and ‘certified extract’ to ensure that a ‘notary public’ is able to certify a copy or extract of a document. These amendments commenced on 20 May 2014.
Additional information about the amendments, and AUSTRAC’s enforcement approach during the period 1 June 2014 – 31 December 2015, can be found on the AUSTRAC website.
