ASFA Action, Issue 528, 18 March 2014
In this issue:
- Third Asia-Pacific Pensions Forum
- APRA three-day rollover rule and breach reporting
- Tax Agent Services Act 2009 consultation
- ASFA report shows intra-fund advice is low cost and appropriate
- Foreign Account Tax Compliance Act update
Third Asia-Pacific Pensions Forum – opening address by ASFA CEO
ASFA held its third Asia Pacific Pensions Forum on 13 March 2014. Speaking in Beijing, China, ASFA CEO Pauline Vamos said governments across the world will be faced with challenges as the demographics of their populations change, and as we enter a new era of the global economy.
The delegates were asked to start thinking about the delivery of private pensions and governance as a ‘global brand’ and as a global conversation. The theme of working together was reinforced to foster, build and protect that brand.
Eight points were presented to the delegates as areas the global conversation should address. These included pension system design, the role of pension capital in both local and global economies, the regulatory and supervisory frameworks under which pensions operate and ensuring we have informed, advised and engaged fund members.
A full copy of the speech is available on the ASFA website here.
APRA three-day rollover rule and breach reporting
At ASFA Discussion Group meetings in Melbourne last week APRA indicated its approach with respect to non-compliance with the rollover rules under regulation 6.34A of the Superannuation Industry (Supervision) Regulations 1994.
APRA wrote to trustees in April 2013 advising that they recognised the need for a transition-in process up until December 2013, and that it would not expect a failure to comply with the rollover requirements would be reported as a breach before 1 January 2014. Now it is post 1 January APRA expects that breaches of the three-day rule would be regarded as significant, and therefore reportable to APRA.
In the April 2013 letter APRA indicated that, while it considered that the frequency of breaching regulation 6.34A would be likely to be the most common reason to warrant breach reporting, a delay in even a single rollover by significantly more than the legislated period could also give rise to an actual, or potential, financial loss to the member and hence trigger a breach reporting requirement.
APRA advised in that letter that RSE licensees should determine appropriate materiality thresholds, considering both volume and value, for reporting of rollover breaches, as well as ensure that they have adequate compliance systems in place to meet their benefit payment obligations.
Tax Agent Services Act 2009 consultation
From 1 July this year, Australian Financial Services Licence (AFSL) holders who provide a tax (financial) advice service can notify the Tax Practitioners Board (TPB) to become a tax (financial) adviser.
Under the notification process, there are no application fees payable, and currently no new education requirements. There will, however, be insurance requirements (policies renewed after this date will need to comply with the new professional indemnity (PI) insurance requirements upon renewal) and code of conduct requirements.
From 1 July, if an AFSL holder does not notify the TPB to become a tax (financial) adviser, they will have to provide a disclaimer when they provide tax (financial) advice. AFSL holders who provide tax (financial) advice have until 30 December 2015 to notify the TPB.
Superannuation funds that hold an AFSL and provide financial advice are likely to be caught by the Tax Agent Services Act 2009 (TASA) requirements – see the information sheet referred to below.
On 7 March the TPB released exposure drafts of:
- TPB Information Sheet – What is a tax (financial) advice service?
- Explanatory Paper – Proposed professional indemnity insurance requirements for tax (financial) advisers
- Explanatory Paper – Proposed continuing professional education policy requirements for registered tax (financial) advisers.
The closing date for submissions on the exposure drafts is 6 April 2014.
For more information and copies of the exposure drafts click here.
We understand the TPB is settled on the big picture setting for the issues contained in the exposure draft documents, and would only consider changes to technical or unworkable matters.
If you have concerns about the exposure drafts that you would like us to pass on to the TPB, or require further information, contact David Graus.
ASFA report shows intra-fund advice is low cost and appropriate
ASFA today released a new report demonstrating that intra-fund advice is provided at a relatively low cost per member per year. The report found that the median cost for intra-fund advice equates to $2.81 per member per year, with an average per member per year cost of $9.65.
The bulk of the cost of scaled advice (87 per cent) is covered by general administration fees charged to members by funds, or a combination of general administration fees, and a specific fee for the service provided.
The report also found people prefer simple advice about their superannuation such as that provided by the current definition of intra-fund advice. According to research from ASIC, around one-third of fund members prefer to receive financial advice as required, as opposed to a comprehensive plan.
ASFA believes that intra-fund advice is cost effective because it is limited to the very simple end of full financial advice, and, while it does not replace full advisory services, it does enhance them.
For a copy of the full research report click here.
Foreign Account Tax Compliance Act update
ASFA has recently been in touch with Treasury regarding the current status of the proposed intergovernmental agreement (IGA) with the United States and its application to Australian superannuation funds.
Treasury advice is that they are very mindful that the Australian industry is anxious for the IGA’s finalisation, and is particularly keen to obtain certainty about its Foreign Account Tax Compliance Act (FATCA) treatment, via IGA Annex II listing of Australian superannuation entities. Treasury is currently working to arrange signature of the proposed IGA as soon as possible.
We also understand that, pending the signature of the IGA, the Australian Tax Office is also beginning to develop guidance on the IGA’s application in Australia, pending its signature.
Should the IGA come into force, it is anticipated that Australian superannuation funds will be exempted from the FATCA reporting obligations.
Please contact Robert Hodge for further information.
