With the election well and truly decided, it is interesting to consider what changes the industry could be facing under the new Labor Government. Labor supported the 'Better Super' changes so it is not expected that these will be wound back. However, based on statements while in opposition, particularly by Senator Nick Sherry, Labor's superannuation spokesman in opposition and now Minister for Superannuation and Corporate Law, the following changes affecting superannuation may be implemented under the new Government:
- The various oversight responsibilities currently shared by ASIC and APRA may be brought under one regulatory structure
- the Financial Services Authority – in an effort to make regulation more streamlined, simple and cost-effective. Labor's policy is to have a greater focus on the areas of the industry it identifies as being at a higher risk, e.g. the SMSF sector, and to reward those entities who use best governance with less oversight and lower regulatory fees.
- The introduction of further regulation to address concerns over losses suffered by super fund members through theft and fraud, and business insolvency. Labor's intention appears to be to expand the Federal Government's General Employee Entitlements and Redundancy Scheme (GERS) to include unpaid super.
- The introduction of pro-competition measures in the financial advice industry.
- A project to simplify and shorten disclosure documents to two to four pages in length and the inclusion of standard comparison tables.
- The expansion of the co-contribution scheme, to provide additional incentives to low and middle income earners to top up their super to achieve a total 15 per cent savings target. In addition, Labor has been considering reducing the 15 per cent contributions tax for low-income earners.
- The inclusion of a universal forecasting model in periodic statements, as used in the UK and Sweden, to help members understand how much they will have saved by the age of retirement and to encourage them to increase voluntary contributions.
- Ensuring that SG contributions are based on pre-salary-sacrifice income.
- Funds may be required to report additional income and gender data to APRA to enable it to publish data designed to identify areas of inadequate superannuation savings.
- The establishment of a clearing house to assist small businesses to comply with choice legislation more cost effectively, and to assist employees to keep their superannuation entitlements together in the one fund.
- Lost accounts to be automatically rolled together into members' most recently chosen fund, using tax file numbers to match accounts. Defined benefit funds and funds with significant exit fees would be excluded.
- Changes to address the viability of the 30 per cent of self-managed funds which hold less than $100,000 in assets, and the level of supervision of trustee standards of these funds.
- The establishment of First Home Saver Accounts – which can be provided via superannuation funds. The main features are:
- account holders to be over 18 years old
- $10,000 p.a. contributions cap – $5,000 tax deductible, $5,000 post tax caps to be indexed
- tax at 15 per cent on tax deductible contributions on the way in no tax on withdrawal for 'eligible first home purchase' after a minimum of four years
- tax on earnings at 15 per cent.
SIS Amendment Regulations 2007 (No. 5)
The fifth set of updates to the regulations, to support the Better Super legislation, came into effect on 8 October 2007. They modified the regulations in the following ways:
Part 8 – Financial Reporting (in relation to s 35C of SIS)
An RSE must ensure that an auditor is appointed for each year of income no later than the last day of that year. For an SMSF, the Trustee must ensure an Auditor is appointed no later than 30 days before the date the Auditor must give its report to the Trustee. The Audit Report must be given to APRA no later than four months after the year of income to which it relates.
Part 11 – Prescribed Information to be given to APRA
APRA will no longer record the ACN of an RSE licensee. Therefore, from 24 September 2008, there will no longer be a requirement to provide the ACN of the RSE licensee to APRA when a new fund is established. The ABN of the RSE licensee will be the identifying number recorded by the Regulator.
A new operating standard has been inserted relating to a change in the RSE licensee of an entity. Where there is to be a change, the retiring Trustee must give a notice to APRA before it retires, while the incoming trustee must give a notice to APRA no later than five days after commencement.
On 20 November 2007, Modification Declarations commenced, providing relief to RSEs and RSAs in relation to Government co-contribution payments. For member contributions made or due prior to 1 July 2007, when the requirement to quote a TFN commenced, the Trustee no longer has to return any Government co-contribution it receives, even if the member has not provided a TFN to the fund.
On 3 December 2007, APRA issued Modification Declaration No. 4 of 2007, under which APRA has given relief to all RSE licensees from the requirement to quote their RSE licence number and/or RSE registration number on relevant documents where their ABNs are already disclosed. The relief will lapse on 24 September 2008, when the requirement is removed altogether.
AU STRA C Format For AML /CTF Compliance Report Released
Regulated entities covered by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML /CTF Act) are required to lodge their first AML/CTF compliance report by 31 March 2008, covering the period 13 December 2006 to 31 December 2007. AUSTRAC has made a compliance report template available on its website to assist with reporting obligations.
To view the AML/CTF Compliance Report, click here.
Access To Super For The Terminally Ill
Interim measures, effective until 1 July 2008 were introduced with bi-partisan support on 11 September 2007, to allow lump sum superannuation to be paid from complying superannuation funds, ADFs, or RSAs, to members with a terminal illness. The rate of withholding tax on such payments is nil, even where the member has not quoted a TFN. There is no requirement for the payer to provide a payment summary with the benefit payment and the member will not be required to declare the amount in an income tax return. Any tax already withheld should be refunded to the member and the activity statement for the period revised.
A member will be taken to be terminally ill, if two medical practitioners, including at least one specialist, certify that the member is suffering from an illness which, in the normal course, would result in death within 12 months. A member must satisfy an existing condition of release as well as be terminally ill for the changes to apply.
The change in legislation is anticipated to proceed, despite the change in Government, as indicated in Labor's Media Statement of 12 September 2007.
Reminder - Breach Reporting Arrangements
The new breach reporting arrangements for AFS and RSE licensees come into effect on 1 January 2008. Here's a snapshot of the new arrangements:
- breaches must now be reported within 10 business days
- dual-regulated institutions will be able to combine breach notifications required to be lodged with both regulators in a single online report to APRA
- a significant breach test will be introduced for RSE licensees
- all APRA regulated institutions to report breaches online.
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