Financial Services eBulletin - 26 June 2014
The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.
- On 18 June 2014, the Social Services and Other Legislation Amendment (2014 Budget Measures No 2) Bill 2014 was introduced into the House of Representatives. The Bill seeks to implement budget savings measures announced in the 2014-2015 Federal Budget, including changes to various Government payments and benefits. The measures proposed in the Bill include the incorporation of untaxed superannuation income in the assessment for the Commonwealth Seniors Health Card (with products purchased prior to 1 January 2015 exempt from the new arrangements) and the increase of the qualifying age for the age pension and the non-veteran pension to 70 (the qualifying age is to increase by six months every two years starting on 1 July 2025).
- As at 19 June 2014, the Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014 passed both houses of Parliament and awaits Royal Assent. The Bill implements the FATCA Agreement between the governments of Australia and the United States, under which Australia agrees to give effect to the requirements of the US Foreign Account Tax Compliance Act. Among other things, the FATCA legislation requires certain Australian financial institutions to report some financial account information to the ATO. According to the Explanatory Memorandum to the Bill, the FATCA reporting requirements generally do not apply to Australian superannuation entities.
- On 19 June 2014, the Chair of the Senate Select Committee into the Abbott Government's Commission of Audit presented its final report to the Senate. The recommendations in the report include that the Government's proposed Tax Reform White Paper include a review of all government tax expenditures and concessions. The report notes that a major component of tax expenditure is in superannuation concessions, such as the 15% concessional tax rate on superannuation contributions, which the report states "cost government $31.8 billion in 2012-2013, and will increase to around $45 billion in 2015-2016."
- On 20 June 2014 Acting Assistant Treasurer Matthias Cormann announced that the Government intends to proceed with its proposed amendments to the FoFA (Future of Financial Advice) legislation, with certain amendments to be implemented by regulation with effect from 1 July 2014, pending consideration by Parliament of the Government's final FoFA package. The announcement states that the FoFA amendments to be implemented by regulation effective 1 July 2014 include the removal of:
- the "opt-in" requirement (which provides that an on-going fee arrangement between an adviser and a client must be renewed by the client every 2 years, or the arrangement is terminated);
- the "catch all" provision of the "best interest duty" (this requires a financial adviser to - in addition to various other steps required to show that the adviser has satisfied the general duty to act in the best interest of his or her client, which will remain unchanged - also take "any other step that…would reasonably be regarded as being in the best interests of the client, given the client's relevant circumstances"); and
- the requirement for fee-disclosure statements to be sent to pre-1 July 2013 clients.
- On 20 June 2014, APRA revised superannuation reporting standards SRS 530.0 Investments and SRS 532.0 Investment Exposure Concentration.
- On 23 June 2014 the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No 2] was introduced to the House of Representatives. The Bill repeals the Minerals Resource Rent Tax (MRRT) and certain measures linked to the tax, including the low income superannuation contribution (which is a government superannuation contribution of up to $500 per year on behalf of low income earners). Also linked to the MRRT was the previously legislated increase to the superannuation guarantee (SG) charge percentage from 9.25% to 9.5% for the year commencing 1 July 2014 with a further gradual increases of half a percentage each year until the SG rate reaches 12% on 1 July 2019. Under the amendments contained in the Bill the SG charge percentage will remain at 9.25% until 1 July 2016, at which time it will increase to 9.5% and then gradually increase by half a percentage each year until it reaches 12% on 1 July 2021.