Issue 672, 28 May 2018
In this issue:
- Super prudential framework: APRA review and consultation
- Superannuation investment in agriculture: Parliamentary committee inquiry
- Super housing measures: consultation on draft ATO rulings
- New dispute resolution framework: upcoming consultation and AFCA webcast
- Super guarantee amnesty
- 2018-19 Budget: partial SG opt-out
- ASIC fees for service
- Integrity amendments for 2016-17 Budget reforms
- APRA governance arrangements
- Family law superannuation interest rate determination
Superannuation prudential framework: APRA review and consultation
APRA has launched a post-implementation review of the superannuation prudential framework introduced following the 2013 Stronger Super reforms.
The aim of the review is to ensure the prudential and reporting standards, and related guidance, have achieved their objectives and continue to remain fit for purpose. APRA has indicated that its objective, in conducting the review, is neither to weaken nor strengthen the prudential framework. APRA will, however, consider changes to the prudential framework to address any gaps identified or issues raised during the review process to improve its effectiveness.
APRA expects to release a final report on the superannuation post-implementation review by early 2019.
To commence the review, APRA has issued:
- an overarching discussion paper which outlines the purpose of the review and review process, and includes questions that seek feedback on the superannuation prudential framework as a whole
- two short topic papers on governance and risk management.
Over the next few months APRA will release short consultation papers covering the other four topic areas addressed in the prudential framework – financial requirements, operational risk and outsourcing; investments; insurance; and member flows and products. Submissions on all the consultation papers will be due by 26 September.
APRA has indicated it will hold roundtable discussions and bilateral meetings with stakeholders over the duration of the review.
If you have any feedback you would like ASFA to consider in relation to this first tranche of consultation papers—either to inform discussion in the roundtables or for consideration in developing our formal response to APRA—please forward it to Fiona Galbraith by close of business Monday 4 June.
Superannuation investment in agriculture: Parliamentary committee inquiry
A Parliamentary committee has commenced an inquiry into the barriers to increased investment in Australia’s agriculture sector by superannuation funds.
The House of Representatives Standing Committee on Agriculture and Water Resources will consider whether:
- there are any regulatory requirements imposed on superannuation funds by ASIC, APRA and any other relevant regulators, which are acting as a barrier to superannuation fund investment in Australian agriculture
- the information required by the superannuation funds in order to invest in Australian agriculture is readily available, and if not, what statistical performance reporting of the agricultural sector is necessary
- there are any other practical barriers to superannuation fund investment in Australian agriculture.
If you have any feedback you would like ASFA to consider including in a submission to the Committee, please forward it to Julian Cabarrus by close of business Friday 15 June.
Super housing measures: consultation on draft ATO rulings
The ATO has released drafts of two rulings on the First Home Super Saver Scheme (FHSSS) and ‘downsizer’ measures introduced following the 2017-18 Budget.
The FHSSS is designed to allow individuals who make voluntary contributions into the superannuation system on or after 1 July 2017 to withdraw those contributions (up to certain limits) and an amount of associated earnings for the purposes of purchasing their first home. The downsizer measure allows people aged 65 and older to make a non-concessional (post-tax) superannuation contribution of up to $300,000 from the proceeds of selling their home, from 1 July 2018. (See ASFA Action issues 654, 643, 638 and 627 for background).
The ATO is seeking comments on Draft Law Companion Ruling LCR 2018/D4 Housing affordability measures: Contributing the proceeds of downsizing to superannuation and Draft Law Companion Ruling LCR 2018/D5 First Home Super Saver Scheme by 21 June.
New dispute resolution framework: upcoming consultation and AFCA webcast
The new financial services external dispute resolution body, the Australian Financial Complaints Authority (AFCA), is preparing for consultation on its proposed operational rules ahead of its commencement on 1 November.
AFCA has indicated that it expects a draft of its proposed operational rules (previously referred to as ‘terms of reference’) to be available on its website from 1 June. AFCA is holding a webcast on the proposed rules on 13 June – interested stakeholders can register on the AFCA website.
The AFCA website also indicates that additional webcasts will be scheduled regarding the AFCA membership process and dispute resolution process.
Super guarantee amnesty
The government has announced a one-off 12 month amnesty to encourage employers to self-correct historical superannuation guarantee (SG) non-compliance.
The amnesty is provided for in Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018, and commenced on 24 May, the date the Bill was introduced into Parliament.
Under the amnesty, penalties applicable to historical SG non-compliance will be reduced to nil, and the ATO ‘administrative component’ of the SG charge will be waived, where an employer:
- voluntarily discloses the non-compliance to the ATO
- pays an employee’s full SG entitlement, including the employee’s individual shortfall plus the nominal interest component of the SG charge, and any related general interest charge that may have accrued on the unpaid SG.
In addition, employers will be able to claim a tax deduction for contributions made during the amnesty period.
The Minister has indicated that the amnesty builds on recent reforms, including measures in the Treasury Laws Amendment (2018 Measures No 4) Bill 2018 to strengthen penalties for SG non-compliance. That Bill is currently before the Parliament and has been referred to the Senate Economics Legislation Committee for report by 13 June (see ASFA Action issues 670 and 665).
2018-19 Budget: partial SG opt-out
The government has introduced into Parliament amendments to implement a partial opt-out from SG for higher income earners with multiple employers.
An individual who has multiple employers will be able to apply to the ATO for an SG exemption certificate, exempting an employer from SG liability for a particular quarter. A certificate can only be issued by the Commissioner of Taxation where a number of conditions are met, including:
- the ATO is satisfied that, unless the partial opt-out is approved, the individual is likely to exceed their concessional contributions cap
- at least one employer remains liable for SG in relation to the individual for the quarter covered by the certificate
- the Commissioner considers it is appropriate to issue the certificate.
The amendments are included in the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018, introduced into Parliament on 24 May, and will apply for SG quarters commencing on or after 1 July 2018.
The partial opt-out was announced in the 2018-19 Budget (see ASFA Action issue 669) and is intended to minimise reduce the likelihood of an individual inadvertently breaching their non-concessional contributions cap as a result of receiving mandated SG contributions from multiple employers. The explanatory material to the Bill notes that instead of receiving SG contributions, an individual who has taken advantage of the partial opt-out may negotiate with their employer to receive additional cash or non-cash remuneration.
ASIC fees for service
The government has introduced into Parliament a package of bills to implement the final phase of the ASIC industry funding model, its fees for service regime. The package includes the Corporations (Fees) Amendment (ASIC Fees) Bill 2018, the Superannuation Industry (Supervision) Amendment (ASIC Fees) Bill 2018 and Superannuation Auditor Registration Imposition Amendment (ASIC Fees) Bill 2018.
Under the regime, fees will be paid for ASIC’s demand-driven services such as processing a licence or registration application or variation, and applications for relief from regulatory requirements administered by ASIC.
The package of bills amend existing legislation permitting ASIC to charge fees to regulated entities, to reflect the new fee for service regime, including by expanding the definition of what constitutes a ‘chargeable matter’.
The fees to be charged are not prescribed in the bills, but will be specified separately, in regulations.
The amendments in the bills will commence the day after royal assent. The fees for service regime will apply from 1 July 2018.
The government consulted on the Bill in April (see ASFA Action issue 667).
Integrity amendments for 2016-17 Budget reforms
The government has introduced into Parliament amendments to support the integrity of the reforms introduced in the 2016-17 Budget.
The measures, included in the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018:
- ensure that the non-arm’s length income rules for superannuation entities apply in situations where an entity incurs non-arm’s length expenses in gaining or producing the income.
This measure is intended to prevent the inflating of superannuation fund earnings through non-arm’s length dealings, for example schemes involving non-commercial arrangements that stream income to the superannuation fund. The explanatory material accompanying the Bill indicates that this strategy has been used by some individuals to increase superannuation savings in a way that is not caught by the concessional and non-concessional contributions caps, particularly in light of changes to the contributions cap and the Division 293 tax on contributions following the 2016-17 Budget.
The amendments apply in relation to income derived in the 2018-19 and later income years, regardless of whether the scheme was entered into before 1 July 2018.
- amend the ‘total superannuation balance’ rules introduced following the 2016-17 Budget to ensure that, in certain circumstances involving limited recourse borrowing arrangements, the total value of a superannuation fund’s assets is taken into account in working out individual members’ total superannuation balances.
The amendments apply to borrowings arising under contracts entered into on or after 1 July 2018. They do not apply to borrowings arising under a contract that was entered into prior to 1 July 2018, or to refinancing of the outstanding balance of borrowings arising under contracts entered into prior to 1 July 2018.
These amendments were announced in the 2017-18 Budget (see ASFA Action issue 627) and were the subject of consultation earlier this year (see ASFA Action issue 657).
APRA governance arrangements
The government has introduced into Parliament a bill to strengthen the governance arrangements of APRA.
The Treasury Laws Amendment (APRA Governance) Bill 2018, introduced on 24 May, provides for the appointment of a second Deputy Chair.
The Bill follows the recent introduction of a bill to allow the appointment of a second Deputy Chair to ASIC (see ASFA Action issue 665).
Announcing the introduction of the Bill, the Treasurer, Scott Morrison MP, said the “appointment of up to two Deputy Chairs will provide greater flexibility in the way in which APRA is governed and the allocation of responsibilities to each APRA member. This helps to maximise the skills and capabilities available to APRA within its leadership”.
Family law superannuation interest rate determination
The Australian Government Actuary has made the Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2018. The Determination sets the interest rate for adjusting the superannuation entitlements of separated and divorced spouses under splitting orders and agreements made under the Family Law Act 1975.
The interest rate for the adjustment period that comprises the financial year beginning on 1 July 2018 is 4.9 per cent. The Determination also provides the method by which the interest rate is calculated for an adjustment period that includes a period within that financial year.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
