Need to know

Stuart Sheary, Senior Technical Manager

Outlined below is all the latest news you 'need to know'.

IssueWhat it means?What do you need to be thinking about?
Australian Government - Treasury

Exposure draft bill and Regulations relating to recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The Government has released draft legislation addressing ongoing fee arrangements and disclosure of lack of independence as raised in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

As the proposals are not yet legislated it’s important that advisers should continue to follow licensee guidelines until updated ones are provided.

Please also see this article in the Monthly TechConnect Bulletin: Proposed changes to ongoing advice fees.

Address to SMSF Association Annual Conference, Gold Coast

Senator Jane Hume reaffirms the Government’s commitment to the 2019/20 Federal Budget announcements for which legislation has not yet been introduced. These include:

  • People age 65 and 66 will be able to make voluntary contributions without meeting the work test.
  • People age 65 and 66 will be able to make up to three years of non-concessional contributions under the bring-forward rule.
  • People below age75 will be able to receive contributions from their spouses.

The Minister also reaffirmed the Government’s commitment to increase the maximum number of SMSF members from four to six. This was proposed in the 2018/19 Federal Budget.

As legislation for these proposals has not yet been introduced into Parliament there is an element of uncertainty when advising affected clients.

Advisers should review the progress of this legislation in March 2020 to decide on the timing of contributions to super.

For further information see this past article: ‘Voluntary super contributions: is 67 the new 65?

Department of Social Services

Several Government payments to be replaced from 20 March 2020

From 20 March 2020, several working age payments will cease and will be replaced with new payments.

These changes follow the passage of the Social Services Legislation Amendment (Welfare Reform) Act 2018.

The Department of Social Services provides more details of the changes in their fact sheet.

Advisers may wish to communicate affected clients of the change before 20 March to avoid confusion.

Please also see this article in the Monthly TechConnect Bulletin:  The Centrelink payments that disappear from 20 March 2020 for strategies to maximise client payments.

Update from the Australian Taxation Office

Your self-managed superannuation fund (SMSF) investment strategy

The Australian Taxation Office (ATO) has provided updated guidance on SMSF investment strategies on their website: Your self-managed superannuation fund (SMSF) investment strategy.

The question and answer style guide reviews several investment strategy issues, including:

  • What needs to be included in an SMSF’s investment strategy?
  • Is it possible to invest all retirement savings in one asset or asset class?
  • How often should an SMSF investment strategy be reviewed?

Regulation requires trustees to consider the following factors when developing their investment strategy.

  • The risks involved with, and the potential return from, investments.
  • The level of diversification within the SMSF’s investments.
  • The liquidity of the SMSF’s investments.
  • The ability for the fund to meet its liabilities.
  • Whether the fund should hold insurance for the benefit of its members.
Bills awaiting Royal Assent

Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019

The legislation introduces a one-off amnesty to employers who come forward and rectify historical non-compliance with their superannuation guarantee (SG) obligations.

The amnesty period will start retrospectively from 24 May 2018 (when the proposal was first announced) and will end six months after the day the Bill receives Royal Assent. It is anticipated that the amnesty period will extend to the end of August 2020.

Employers who have underpaid SG contributions and disclose and rectify the underpayment to the ATO within the amnesty period will have administration fees and penalties waived. In addition, employers will be able to claim a tax deduction on contributions to the extent they relate to the shortfall. Administration fees and penalities are also waived.

After the amnesty period ends late contributions will not be deductible and higher penalties will apply if employers have not voluntarily come forward with unpaid super.

Bills in the Senate

Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019

The new legislation amends the Superannuation Guarantee (Administration) Act 1992 to give employees under workplace determinations or enterprise agreements the ability to chose their super fund.

This change applies to employees under an enterprise agreement made on, or after, 1 July 2020.

This change applies to employees under a workplace determination or enterprise agreement made after 30 June 2020. This means employers may not extend choice of super to existing employees.

Social Services and Other Legislation Amendment (Simplifying Income Reporting and Other Measures) Bill 2020

It is proposed that from 1 July 2020, employment income will be assessed for Centrelink payments such as the Age Pension once it is paid rather than when it has been earned, derived, or received.

Services Australia (previously known as Department of Human Services) will use data collected by the Australian Taxation Office from Single Touch Payroll system to assess employment income when it is paid.

Advisers should communicate the changes to impacted clients.

The change will make reporting easier, particularly for casual employees with variable income.

The Government’s use of sharing and data matching means any client misreporting to Centrelink is more likely to be identified.

Federal Court decision

The Federal Court rules that land used to store work tools, equipment and materials did not satisfy the active asset test.

In Commissioner of Taxation v Eichmann [2019] FCA 2155 the Federal Court ruled that land used to store work tools, equipment and materials did not satisfy the active asset test meaning it was not eligible for small business Capial Gains Tax (CGT) concessions.

The active asset test is satisfied if the asset being sold is actively used or held ready for use in the entity’s or related entity’s business, and:

  • the asset is owned for 15 years or less and it was an active asset for half of the test period
  • the asset is owned for more than 15 years and it was an active asset for at least 7.5 years of the test period.

Please note, the asset does not have to be active just before the CGT event.

The active asset test is one of the basic conditions necessary to qualify for the Small Business CGT concessions.

Eligibility for the small business CGT concessions can be very complex and clients must confirm their eligibility with a qualified tax agent.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.