Welcome to the latest issue of the KHQ Super Alert. This week, Treasury released the Government’s final response to the Quality of Advice review and commenced consultations in relation to the role of superannuation in retirement. Also, Parliament introduced legislation to implement the previously announced measure of increasing the tax rate for accounts with balances above $3 million and the ATO issued tax guidance relating to trustee risk reserves.
Treasury – Government’s final response to Quality of Advice review
On 7 December 2023, Treasury released the Government’s final response to the Quality of Advice review. See our Super Alert of 16 June 2023 on the Government’s initial response in which most recommendations from the review were accepted in principle.
In the final response, the Government has committed to:
- ‘introduce a modernised and flexible best interests duty which will apply to all providers of advice to ensure the provision of high quality advice that meets consumers’ needs’ (and remove the existing safe harbour steps);
- ‘introduce a new class of financial advice provider to support an increase in the availability and affordability of simple personal advice’ (these advisers will not be able to charge a fee or receive a commission);
- legislate ‘consistent rules on what advice topics can be paid for via superannuation’ and allow ‘funds to consider a broader range of a member’s personal and household circumstances such as debt, spouse’s income, or age pension eligibility’; and
- replace ‘Statements of Advice…with a more fit-for-purpose, principles-based, advice record’.
In an associated media release, the Hon Stephen Jones MP announced that ‘[l]egislation will be developed to implement this model in 2024’.
Click here and here for details.
APRA – Results of industry survey about life insurance
On 7 December 2023, APRA published a letter that was sent to all trustees in relation to the results of a survey that was conducted in 2022 to ‘assess how the [superannuation and insurance] industries are responding to the issue of sustainability of group life insurance in superannuation’. See our Super Alert of 12 March 2021 in relation to the original APRA letter that was issued to all trustees about the sustainability of group life insurance.
According to APRA, the survey indicated the following:
- ‘premium volatility is still evident…[due to] legislative changes…and uncertainty arising from the recent pandemic’;
- ‘there has been minimal progress in relation to the availability and provision of data, noting that RSE licensees continue to experience challenges in obtaining member data from employers’; and
- there have been improvements to tenders as ‘the time provided for insurers and reinsurers to engage in tenders was, in most instances, adequate’.
Click here for details.
ATO – Draft determination in relation to payments made to trustee risk reserves
On 6 December 2023, the ATO issued draft taxation determination 2023/D3 called Income tax: trustee risk reserves – deductibility of payments made by a superannuation fund to its trustee. The determination has been released for public comment and sets out the ATO’s preliminary view about the deductibility of payments made out of a fund, to a trustee in their personal capacity, in order to establish a trustee risk reserve having regard to the restrictions in section 56 of the SIS Act.
The determination proposes that these payments will not be deductible to the fund in certain circumstances such as where ‘the amount is charged by the trustee as a lump sum or a number of lump sum instalments or an ongoing amount that is separate and distinct from its existing ongoing and recurrent charges for trustee services’. Two examples of the application of the ATO’s position are given.
The consultation period closes on 19 January 2024.
Click here for details.
Treasury – Government response to payment times reporting scheme review
On 5 December 2023, Treasury published the Government’s response to the statutory review of the Payment Times Reporting Act 2020 (Cth). The Government has advised that it ‘agrees with all recommendations of the Review and is…[committed to] ensure continuous improvement of payment practices by large businesses operating in Australia’.
See our Super Alert of 8 September 2023 for further information about the final report that was issued.
Click here for details.
Treasury – Consultation in relation to superannuation in retirement
On 4 December 2023, Treasury released a discussion paper seeking views from the public ‘on how the superannuation system can best provide the security and income Australians need as they live longer and healthier lives in retirement’.
Some of the consultation questions include:
- ‘What role should industry or other groups in the community play to support consumer protections and competitive products and services in retirement?’;
- ‘What actions are industry or other participants in the community taking to assist retirees to better manage the risks for retirement income?’; and
- ‘What policy approaches should be taken to support the use of lifetime income products to address the risks to retirement income?’.
In an associated media release, the Hon Jim Chalmers MP and Hon Stephen Jones MP noted that there was a ‘need for better information, support and well-rounded income products to help retirees make the most of their super’. However, ‘84 per cent of retirement savings are held in account-based or allocated pensions…[and] funds need to do more to understand their members’ retirement needs and provide products and services tailored for their retirement’.
The consultation period closes on 9 February 2024.
Click here and here for details.
Parliament – Bill introduced to adjust concessional tax rates for high balances
On 30 November 2023, the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 and Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 were introduced to the House of Representatives.
According to the Explanatory Memorandum, the purpose of these Bills is to:
- increase the tax rate applying to investment earnings on superannuation balances above $3 million, from 15% to 30% (see our Super Alert of 3 March 2023 relating to the announcement of this measure); and
- ‘reduce the frequency of [the Financial Regulator Assessment Authority’s] reviews of ASIC and APRA to every five years’ (the current frequency is every two years).
Click here and here for details.
Parliament – Senate Committee to consider Bill introducing objective for superannuation
On 30 November 2023, the Superannuation (Objective) Bill 2023 was referred to the Senate Economics Legislation Committee for review. The report is due 28 March 2024. See our Super Alert of 17 November 2023 which provides further background to the Bill.
Click here for details.
Parliament – Senate inquiry in relation to Australia’s retirement system
On 27 November 2023, the Senate Economics References Committee released the terms of reference in relation to an ‘inquiry into improving consumer experiences, choice, and outcomes in Australia’s retirement system’. The Committee will consider matters such as:
- ‘regulatory and tax impediments to innovation and uptake of insurance products in retirement’;
- ‘the economic costs and opportunities of innovation in our retirement income system’;
- ‘progress on implementing the Retirement Income Covenant’; and
- ‘the impact of climate change on the value of assets (e.g., houses, investments) of retired people’.
The report is due 30 June 2024.
Click here for details.
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