Regulatory updates

ATO advice under development – superannuation issues (5 April 2022)

The ATO is developing advice and guidance on the following superannuation issues:

  • Taxation Ruling TR 2013/5 update: The ruling, which focuses on when a superannuation income stream commences and ceases, will be updated to ensure it reflects recent superannuation legislative updates. The changes are expected to occur by mid-2022
  • super benefits in breach of rules: The ATO is developing a practice statement to provide guidelines on the Commissioner's discretion to deal with superannuation benefits received in breach of legislative requirements. The practice statement is expected to be completed by June 2022
  • ordinary meaning of the term 'employee': The ATO has published a decision impact statement considering the High Court's judgement of the ordinary meaning of ‘employee’.

ASIC statement: ASIC surveillance of investment switching (6 April 2022)

ASIC released a statement following its recent surveillance of 23 trustees which found significant deficiencies in trustees’ conflict management arrangements relating to investment switching. ASIC stated it had expected robust systems to prevent directors and senior executives from potentially misusing price sensitive information for personal gain but, instead, found significant deficiencies in trustees’ conflict management arrangements relating to investment switching.

ASIC also outlined steps trustees had taken, following the surveillance, to improve their conflict management, including:

  • updating or establishing policies and practices to address the deficiencies ASIC highlighted by:
    • identifying switching as a potential conflict of interest
    • incorporating steps to prevent inappropriate trading (such as introducing blackout periods or trading windows)
    • expanding conflict arrangements to cover trading by related parties of directors and senior executives.
  • increasing board-level engagement to ensure greater board oversight, input and direction, such as increased monitoring of staff transactions, which include switching activity
  • increasing staff awareness of the conflict policies and their obligations through greater internal communication and training
  • undertaking an independent review of the trustee’s broader conflict management framework.

ASIC to allow COVID-19 temporary relief for financial advice to automatically repeal on 15 April 2022 (7 April 2022)

ASIC confirmed that it will not extend ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2021/268, which provided relief to financial advisors to provide statements of advice during the COVID-19 pandemic. ASIC believes the Instrument’s repeal is appropriate considering the current status of COVID-19.

Key superannuation rates and thresholds (11 April 2022)

The following key superannuation rates and thresholds will apply at the start of the 2022 financial year:

  • contribution caps:
    • concessional contribution cap: $27,500
    • non-concessional cap $110,000
    • CGT cap amount: $1,650,000.
  • payments from super:
    • low-rate cap amount: $230,000
    • untaxed plan cap amount: $1,650,000.
  • Division 293 threshold: Unchanged at $250,000
  • superannuation guarantee percentage: 10.5%
  • maximum superannuation guarantee contribution base: $60,220
  • government co-contributions:
    • lower income threshold: $42,016
    • higher income threshold: $57,016.
  • transfer balance caps:
    • general transfer balance cap: $1,700,000
    • defined benefit income cap: $106,250.

ATO statement: Paying super to those under the age of 18 (13 April 2022)

The ATO has reminded employers that, from 1 July 2022, they must make superannuation guarantee contributions for employees under 18 years old if they work more than 30 hours a week. The ATO is reminding employers of this upcoming requirement in light of the recent repeal of the legislated minimum monthly salary threshold that applies to superannuation guarantee contributions.

APRA Prudential Standard CPS 226 – Margining and risk mitigation for non-centrally cleared derivatives (18 April 2022)

APRA registered Banking, Insurance, Life Insurance and Superannuation (prudential standard) determination No. 1 of 2022 (Cth) (CPS 226), which sets out the non-centrally cleared derivatives margining requirements for trustees.

Under Attachment D of CPS 226, new foreign body margin requirements have been inserted predominantly due to the impact of Brexit. These changes respond to new regulatory jurisdictions resulting from the United Kingdom’s withdrawal from the European Union.

ATO statement: Reporting account balances following a successor fund transfer (19 Apr 2022)

The ATO released a statement on the importance of prompt account balance reporting following a successor fund transfer (SFT). The ATO advised that:

  • trustees should not reuse the previous 30 June date when reporting a new account balance following an SFT
  • trustees should report 30 June annual balances on or before 31 October following the end of the relevant financial year
  • trustees should ensure that member account information reported through the member account attribute service (MAAS), including Australian business numbers, unique superannuation identifiers, and member account identifiers, is identical to those reported for member account transaction services.

AUSTRAC works with businesses to target ransomware and criminal use of digital currencies (21 April 2022)

AUSTRAC released two financial crime guides on preventing ransomware attacks and criminal abuse relating to digital currencies.

The guides contain practical information and indicators to help trustees identify and report if a payment could be related to ransomware attacks or if someone could be using digital currencies to commit money laundering, scams, or terrorism financing.

APRA’s letter to trustees: ‘Crypto-assets: Risk management expectations and policy roadmap’ (21 April 2022)

APRA outlined its policy roadmap and initial risk management expectations in respect of trustees engaging in activities associated with crypto-assets. In particular, APRA expects trustees will:

  • conduct appropriate due diligence and comprehensive risk assessments before engaging in activities associated with crypto-assets
  • consider the principles and requirements of Prudential Standard CPS 231 Outsourcing or Prudential Standard SPS 231 Outsourcing when relying on a third party to conduct activities involving crypto-assets
  • apply robust risk management controls with clear accountabilities and relevant reporting to the board on the key risks associated with new ventures.

APRA also expects trustees to consult with it and ASIC when trustees are unclear on prudential, disclosure or conduct requirements and expectations when undertaking activities associated with crypto-assets.

Legislative updates

Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2022 (Cth) (1 April 2022)

This Regulation amends the SIS Regulations to extend the temporary 50% reduction in minimum payment amounts for account-based pensions, allocated pensions and market-linked pensions for the 2022 financial year.

Treasury Laws Amendment (Allowing Commutation of Certain Income Streams) Regulations 2022 (Cth) (4 April 2022)

The Regulations make minor and technical amendments to the SIS Regulationsand Income Tax Assessment (1997 Act) Regulations 2021 to ensure commutations of certain products, as specified in subsection 294-10(1) of theIncome Tax Assessment Act 1997 (Cth), that result in amounts being paid in excess of the transfer balance cap, can be completed. Previously, the SIS Regulations did not permit such commutations to occur.

Cases and other recent developments

ASIC suspends Dixon Advisory AFS licence (19 April 2022)

ASIC released a statement on its suspension of Dixon Advisory’s AFSL following Dixon Advisory moving into voluntary administration on 19 January 2022. The terms of the suspension:

  • allow Dixon Advisory’s AFS licence to continue to operate until 9 May 2022 so that existing clients who have not yet transitioned to an alternate provider can continue to access financial services
  • require Dixon Advisory to maintain dispute resolution arrangements, including Australian Financial Complaints Authority membership, until 8 April 2023
  • require Dixon Advisory to maintain compensation arrangements that comply with section 912B of the Corporations Act 2001 until 8 April 2023.

The suspension and former voluntary administration arose after ASIC commenced civil penalty proceedings (which have now been stayed) against alleged conflicts, best interest failures, and inappropriate advice to retail clients.

ASIC statement on Westpac being penalised $113 million (22 April 2022)

ASIC released a statement in relation to the recent Federal Court proceedings ordering Westpac to pay penalties of $113 million in respect of widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management and insurance brands.

The penalties that related to superannuation included:

  • inadequate fee disclosure: Westpac and its advice businesses charged ongoing contribution fees for financial advice to retail customers without disclosing or properly disclosing those fees. It is estimated that over a period of eight years, at least 25,000 customer accounts were charged at least $10.6 million in fees that were not disclosed or properly disclosed. The penalty ordered by the Court was $6 million
  • insurance in super: Westpac subsidiary, BT Funds Management, charged members insurance premiums that included commission payments, despite commissions being banned under the Future of Financial Advice reforms. Some members also paid fees to financial advisers, via their premiums, even though they had elected to have the financial adviser fee component removed from their superannuation account. Over 9,900 BT Funds members were affected. The penalty ordered by the Court was $20 million.