Issue 792, 4 February 2021
In this issue:
- NSW property tax proposals: consultation
- APRA policy and supervisory priorities
- Indexation of transfer balance cap
NSW property tax proposals: consultation
The NSW Government is consulting on proposed reforms to its property tax arrangements. The reforms aim to make home ownership more affordable for consumers and may therefore have a beneficial impact on consumers’ overall retirement outcomes. The reforms also have the potential, in the longer term, to impact superannuation funds in their role as investors in property.
The proposed reforms involve allowing eligible purchasers to choose between paying lump sum stamp duty and (where applicable) land tax or a new annual property tax:
- the property tax would consist of a fixed amount plus a rate applied to the unimproved land value of an individual property (similar to the approach used for council rates)
- once a property has become subject to the property tax regime, subsequent owners will be liable to pay the property tax
- different rates would apply depending on the type of property – residential owner occupied and primary production property would pay lower rates than investment properties, which would pay lower rates than commercial properties
- price thresholds will apply to limit the number of properties initially eligible to transition into the new arrangements – this is likely to mean the tax arrangements for most properties held as investments by superannuation funds will be unchanged in the short to medium term.
Submissions on the proposals may be made directly to NSW Treasury at taxreformtaskforce@treasury.nsw.gov.au by Monday 15 March.
APRA policy and supervisory priorities
APRA has released its policy and supervision priorities for 2021, with a key focus on further enhancing the resilience and crisis readiness of Australia’s financial system.
APRA has indicated that its key policy priorities include:
- finalising and implementing a revised prudential standard on remuneration
- strengthening crisis preparedness, including the development of a new prudential standard on resolution and recovery planning
- updating prudential standards on operational risk, governance and risk management, and consulting with industry on guidance for climate change financial risk
- supporting implementation of the Government’s Your Future, Your Super reforms to improve member outcomes
- progressing a range of enhancements recommended by APRA’s post-implementation review of the original superannuation prudential framework introduced in 2013.
APRA’s priorities in relation to supervision include:
- maintaining financial system resilience through increased action on crisis readiness, including recovery and resolution planning and stress testing
- increased scrutiny of entities’ cyber security capabilities
- embedding the new remuneration standard, conducting a risk culture survey, undertaking a range of governance, culture, remuneration and accountability related reviews, and working to close risk governance issues currently requiring capital overlays
- addressing areas of MySuper underperformance, taking enforcement action where appropriate and providing greater transparency through the expansion of the heatmaps to include choice products.
Indexation of transfer balance cap
The ATO has advised that the general transfer balance cap (TBC) will be indexed for the first time with effect from 1 July 2021, increasing from $1.6 million to $1.7 million. When that occurs, there will not be a single TBC that applies to all individuals – every individual will have their own personal TBC of between $1.6 and $1.7 million, depending on their circumstances.
The TBC is a limit on the total amount of superannuation that can be transferred into the retirement phase. It was introduced with effect from 1 July 2017 at $1.6 million, with indexation tied to movements in the Consumer Price Index (CPI).
The ATO has indicated that:
- If an individual starts a retirement phase income stream for the first time on or after 1 July 2021, they will have a personal TBC of $1.7 million
- If an individual had a transfer balance account before 1 July 2021, their personal transfer balance cap will be:
- $1.6 million if, at any time between 1 July 2017 and 30 June 2021, the balance of that account was $1.6 million or more
- between $1.6 and $1.7 million in all other cases, based on the highest ever balance of their transfer balance account.
The ATO has also noted that, from 1 July 2021, individuals will be able to view their personal TBC in ATO online.
While annual superannuation thresholds and caps—including in relation to superannuation contributions—are indexed to movements in Average Weekly Ordinary Time Earnings (AWOTE) rather than CPI, the indexation of the general TBC will have flow on effects for some contributions. In particular, the ATO has noted that when the general TBC is indexed on 1 July 2021:
- regardless of the annual cap, individuals will have a non-concessional contributions cap of nil and also will not be eligible for bring forward arrangements if their total superannuation balance was $1.7 million or more on 30 June 2021
- individuals will not be entitled to a Government co-contribution if their total superannuation balance was $1.7 million or more on 30 June 2021
- individuals will not be able to claim the tax offset for superannuation contributions made on behalf of a spouse or claim a deduction for contributions made on behalf of their spouse if the spouse’s superannuation balance was more than $1.7 million on 30 June 2021.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
