Issue 543, 3 July 2014
In this issue:
- New ASFA research: equity and sustainability of government assistance for retirement income in Australia
- FoFA amending regulations
- New bills: Budget Age Pension changes, pausing of SG increase, and repeal of LISC
- New choice form delayed
- APRA data reporting: FAQs, SRPG 700, and use of AUSkey with D2A
- ASIC derivative transaction reporting
- Section 29QB disclosure obligations: ASIC releases further Class Order relief
- SG not payable under Green Army Programme
- APRA supervisory levies for 2014/15
New ASFA research on the equity and sustainability of government assistance for retirement income in Australia
ASFA today released a new research paper on the equity and sustainability of government assistance for retirement income in Australia.
The first part of the report evaluates the superannuation system against the objectives under which it was established, finding that it is successfully raising retirement incomes, increasing national savings and decreasing government expenditure on the Age Pension. The report states that, over the coming years, the system will need to be adjusted to accommodate the demands posed by an ageing population and reducing tax base. However, the report also acknowledges that it is important that these decisions be made based on accurate information.
The second part of the report provides an analysis of the tax concessions applied to super, based on taxable income brackets. It finds that the tax concessions applied to concessional superannuation contributions are not significantly skewed towards high-income earners, and, in fact, support the bulk of the working community to save for their retirement.
However, when it comes to the tax concessions applied to superannuation investment earnings, a disproportionate amount flows to higher-income earners.
The report also makes a number of recommendations regarding where government policy could be adjusted in order to ensure the distribution of tax concessions is more equitable.
A media release about the report was sent out today (3 July 2014).
A full copy of the report can be found here. If you have any questions, please contact Ross Clare.
FoFA amending regulations
The government has released the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 (the Regulation), which implements the Coalition’s proposed changes to the FoFA regime.
The Regulation makes the following changes:
- broadening the circumstances when grandfathering arrangements for the ban on conflicted remuneration apply
- clarifying that benefits can be paid under a balanced scorecard arrangement
- clarifying that bonuses paid in relation to ‘permissible revenue’ are not conflicted remuneration
- clarifying the application of the stamping fee provision to capital raising activities and broadening its application to include investment entities
- amending the application of the existing brokerage fee provisions to include brokerage fees paid in relation to financial products traded on the ASX 24 (the financial market operated by Australian Securities Exchange Limited, formerly known as the Sydney Futures Exchange)
- ensuring that the wholesale and retail client distinction that currently applies in other parts of the Corporations Act 2001 also applies in respect of the FoFA provisions
- clarifying the operation of the ‘mixed benefits’ provisions.
The government had also announced that time sensitive FoFA amendments would be dealt with through regulations and then put into legislation. For this reason, the Regulation also makes the following changes, which will be repealed (to the extent appropriate) following the commencement of the Corporations Amendment (Streamlining of Future of Advice) Bill 2014:
- removing the need for clients to renew their ongoing fee arrangement with their adviser every two years (also known as the ‘opt-in’ requirement)
- removing the requirement to provide an annual fee disclosure statement to clients in ongoing fee arrangements prior to 1 July 2013
- removing the ‘catch-all’ provision from the list of steps an advice provider may take to satisfy the best-interests obligation, and facilitating scaled advice
- clarifying the treatment of ‘intra-fund advice’
- amending the application of the ban on conflicted remuneration, including:
- providing that benefits relating to general advice are not conflicted, subject to certain conditions
- amending the execution-only services provision
- clarifying the application of the existing client-pays provision
- broadening the training and education provision
- broadening the basic banking products provision.
ASFA members should note that the Opposition has indicated that it may seek to have these regulations disallowed by the Senate. Should the regulations be disallowed – which can occur within 15 sitting days of the Regulations being tabled – they will only be operative from 1 July 2014 to the date of the successful Senate disallowance motion.
New bills: Budget Age Pension changes, pausing of SG increase, and repeal of LISC
In the lead up to 30 June 2014, the government introduced two bills with significant implications for retirement incomes.
The first, Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 (No. 2), reintroduces amendments to repeal the Minerals Resource Rent Tax, and the measures which were to be funded from it. This follows the Senate’s failure to pass a previous version of the Bill earlier this year. Of particular relevance to superannuation, the amendments in this Bill:
- provide that the low income superannuation contribution (LISC) is not payable in respect of concessional contributions made after 1 July 2013
- change the currently legislated increase in the Superannuation Guarantee (SG) charge percentage (the rate at which contributions must be made to avoid a penalty). The amendments in the Bill would maintain the SG rate at 9.25 per cent for the years starting on 1 July 2014 and 1 July 2015, then increase it by half a percentage point each year until it reaches 12 per cent from 1 July 2021. ASFA members will note that this is inconsistent with the changes announced in the Federal Budget, under which the SG rate was to increase to 9.5 per cent on 1 July 2014, remain at that level until June 2018, then increase by 0.5 per cent each year until it reaches 12 per cent in 2022-23. The government has indicated that it will introduce further amendments to align the rates with its Budget announcement.
The second Bill, Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014, includes amendments to implement a number of changes to social security pensions and payments, as announced in the May 2014 Federal Budget. Of particular importance, the amendments in this Bill will:
- pause indexation of the eligibility tests for social security pensioners for three years, from 1 July 2017
- ensure that, from 20 September 2017, all social security pensions are indexed to the Consumer Price Index only, by removing benchmarking to Male Total Average Weekly Earnings and indexation to the Pensioner and Beneficiary Living Cost Index
- reset the deeming thresholds to $30,000 for single income support recipients, and $50,000 combined for pensioner couples, from 20 September 2017
- include untaxed superannuation income in the assessment of eligibility for the Commonwealth Seniors Health Card from 1 January 2015. Income from superannuation products purchased before 1 January 2015 by existing cardholders will be exempt from the new arrangements
- increase the Age Pension qualifying age for both men and women from 67 to 70 years at a rate of six months every two years, commencing on 1 July 2025 (this change will follow on from the existing phased increase in the pension age from 65 to 67 years by 2023).
Both Bills were before the Senate when Parliament rose on 26 June 2014. The Senate next sits on 7 July 2014.
New choice form delayed
The new choice of fund form, which the Australian Taxation Office (ATO) had previously advised would be released on its website on 1 July 2014, has been delayed.
The ATO advised the industry on Friday 27 June 2014 that a draft from would be released in the week beginning 30 June 2014, and the final form would be released before the end of July. As a result of the delay in issuing the revised form:
- the existing form remains in force
- the ATO will not be enforcing the new 1 July 2014 data collection requirements on employers until the form is released.
APRA data reporting: FAQs, SRPG 700, and use of AUSkey with D2A
In a recent industry roundtable about APRA data reporting, APRA asked ASFA to pass on a number of messages to those involved in the reporting process. The messages are as follows:
- APRA has recently made a number of updates to its Frequently Asked Questions (FAQs) webpage. In response to industry feedback, subscribers to APRA’s website update service will now be notified when the FAQs are updated. If you have not already subscribed to this service, you can do so on the APRA website.
- A new version of the electronic data submission system used for all data reporting, D2A, was released on 2 June 2014. The new version, v 5.3, supports the use of AUSkey only; digital certificates are no longer supported. Users who do not already use AUSkey will be required to obtain an AUSkey in order to view or submit data returns via D2A. More information about D2A and AUSkey can be found on the APRA website.
- When completing data forms SRS 700 (Product Dashboard), 702 (Investment Performance) and 703 (Fees Disclosed), users should refer to Reporting Guide SRPG 700 – Superannuation Disclosure Reporting, issued in September 2013, as well as to the FAQs.
ASIC derivative transaction reporting
As flagged in ASFA Action issue 537, ASIC derivative transaction reporting was due to commence 1 October 2014 for phase 3 reporting entities (which includes superannuation funds that hold an Australian Financial Services Licence and deal in over-the-counter derivatives). ASIC has now released a Class Exemption (ASIC Instrument 14/0633), which defers and staggers the start date for phase 3 reporting entities. ASIC has also released an explanatory memorandum and a summary of the Class Exemption.
Section 29QB disclosure obligations: ASIC releases further Class Order relief
As flagged in ASFA Action issues 540 and 541, ASIC has released Class Order 14/509 [CO 14/509], which clarified the requirement under section 29QB of the Superannuation Industry (Supervision) Act 1993 (SIS Act) that superannuation websites must be kept up to date at all times. To achieve this, that Class Order provided Registrable Superannuation Entity (RSE) licensees with a ‘safe harbour’ so that, if they update the RSE’s website within the time frames prescribed, they will be taken to comply with the updating obligations under section 29QB.
[CO 14/509] also modified regulations 2.37 and 2.38 of the Superannuation Industry (Supervision) Regulations 1994 (the Regulations) by clarifying how references to ‘financial year’ are to operate in various circumstances.
ASIC has now released Class Order 14/592 [CO 14/592]. The purposes of [CO 14/592] are to:
- amend [CO 14/509] so that information required under paragraphs 2.38(2)(j) and (k) of the Regulations is to be provided in relation to the financial year of the relevant RSE licensee, rather than the financial year of the RSE
- enable information required under paragraphs 2.38(2)(a), (b), (d), (e), (f) and (h) of the Regulations to be redacted to exclude personal information of fund beneficiaries and former beneficiaries
- defer the start date until 1 July 2015 for certain disclosures required, pursuant to subsection 29QB(1) of the SIS Act for standard employer-sponsored sub-plans. This will provide further time for consideration of the commercial sensitivity issues that arise in the context of these types of sub-plans.
SG not payable under Green Army Programme
The government has made regulations to ensure that SG contributions are not payable by Green Army service providers to participants in the Green Army Programme.
The Green Army Programme is a voluntary initiative designed to provide young people aged between 17 and 24 years with hands-on, practical skills, training and experience in environmental and heritage conservation. The Programme will be delivered by external service providers who will be responsible for recruiting, establishing and managing Green Army teams across Australia to engage in approved projects. These service providers will be directly responsible for the disbursement of Green Army allowances to participants.
The Tax and Superannuation Laws Amendment (Green Army Programme) Regulation 2014 amends the SG regime to ensure that Green Army service providers are not required to treat the payment of a Green Army allowance as ‘salary and wages’ for the purposes of calculating a participant’s entitlement to SG contributions.
APRA supervisory levies for 2014/15
The Minister for Finance has determined the annual supervisory levy that will be imposed on superannuation entities for 2014/15.
As it proposed in June 2014 (see ASFA Action issue 539), APRA will now levy pooled superannuation trusts separately to other superannuation funds and at a lower rate.
APRA has also changed the way that costs are allocated between the restricted component (based on the cost of supervision) and the unrestricted component (based on systemic impacts). In particular, APRA is now allocating the amount to be recovered for the ATO’s implementation of SuperStream to the unrestricted component of the levy.
| Type of entity | Minimum $ | Maximum $ | Restricted component % |
Unrestricted Component % |
| Pooled superannuation trust | 590 | 130,000 | 0.00257 | 0.001758 |
| Small APRA fund | 590 | 590 | 0.00000 | 0.00000 |
| Other superannuation fund | 590 | 260,000 | 0.00513 | 0.009841 |
