New low for SMSF establishments in September 2018 quarter

The number of new SMSFs being started has reached a new low, with only 5,580 funds set up in the September 2018 quarter according to the latest ATO statistics.

The total number of SMSFs continues to grow – there were 596,059 as at the end of September 2018 – but growth is slowing. Each of the last four quarters has made a new low for SMSF establishments.

For the September 2018 quarter the ATO statistics have 5,580 SMSFs established, with 148 winding-up, resulting in 5,432 net establishments. The September 2018 quarter is the lowest for SMSF establishments since at least the June 2008 quarter.

Newspoll finds only 30% support stopping refunds of franking credits

Newspoll finds that only 30% support Labor’s policy of largely stopping refunds of franking credits.

Labor has announced a policy of stopping refunds of franking credits, with exemptions for Age Pensioners and some SMSFs.

The Australian reports that the Newspoll found 30% support for the policy, with 48% opposed and 22% uncommitted.

Government consults on new retirement income disclosure fact sheet

The Government is consulting on a retirement income disclosure fact sheet – a simplified document with key figures and metrics to help consumers compare products.

“These fact sheets will cut through to the key features that matter when making retirement income decisions,” said Assistant Treasurer Stuart Robert.

“Currently, when people approach retirement they are confronted with complex legal and financial information and long and complex documents. Typically, these documents do not provide clear information on the expected level, variability and duration or retirement income,” he said.

12 month superannuation work test exemption to apply from 1 July 2019

Older Australians will have a limited exemption from the superannuation ‘work test’, with the Government making regulations to implement the measure.

The ‘work test’ limits the ability of older people to make superannuation contributions to those that are working more than a certain amount.

The Coalition had announced the complete repeal of the work test in the 2016/17 Budget, but this was later dropped. In the 2018/19 Budget a much more limited exemption from the work test was announced, and has now been implemented.

From 1 July 2019 Australians aged 65 to 74, and with a Total Superannuation Balance under $300,000, will be able to make voluntary super contributions for 12 months from the end of the financial year in which they last passed the work test, says Assistant Treasurer Stuart Robert.

“Total superannuation balances will be assessed for eligibility at the beginning of the financial year following the year that they last met the work test. Once eligible, there is no requirement for individuals to remain under the $300,000 balance cap for the duration of the 12 month period,” he said.

The existing concessional and non-concessional contribution caps with continue to apply to contributions made under this work test exemption. The concessional contribution cap carry forward rules can also be used during the 12 months, according to the Minister.

“Following feedback from stakeholders on the draft legislation, the Government has decided to allow those who use the work test exemption in the year they turn 65 to access bring forward arrangements for non-concessional contributions,” said Minister Robert.

“These individuals will be able to make up to $300,000 in contributions from after-tax income, providing extra flexibility to get their affairs in order as they prepare for retirement.”

“This change will also align the contribution rules for the work test exemption with those that apply under the work test, making the system simple to understand for members.”

This is a change from the draft rules, the draft materials to which said: “It is not intended that the work test exemption be used to provide benefits equivalent to providing an additional three years to make voluntary superannuation contributions.”

However this would have required passing legislation, it appears, whereas the final version of the rules can simply be made with regulations. The Government has had difficultly in getting the votes for its superannuation legislation in the Senate.

The Explanatory Statement to the regulations say that stakeholders involved in the consultation on the draft rules were “generally supportive of the proposed changes”. Though Treasury has yet to publicly release the submissions.

Meaning of a superannuation income stream benefits

The Government also made regulations to confirm the meaning of ‘superannuation income stream benefit’.

“The determination of whether a superannuation benefit is a superannuation lump sum or superannuation income stream benefit is a key factor in determining the tax treatment of the superannuation benefit,” said Minister Robert.

“This amendment allows superannuation funds to continue to claim the earnings-tax exemption on certain assets.”

“The Government has made amendments to ensure the superannuation tax law continues to operate as intended when originally drafted and is consistent with existing industry practice.”

“The amendments will ensure that the provisions concerning superannuation income stream benefits have always operated, and will continue to operate, as intended.”

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Jail for employers not paying Super Guarantee Bill doesn’t go far enough

A Government Bill, which may become an Act in early 2019, has been welcomed but also criticised for not doing enough about unpaid superannuation.

The Treasury Laws Amendment (Measures No.4) Bill 2018 could result in employers going to jail for not paying Super Guarantee they owe. The Bill passed the Senate last week, but as it was amended it needs to go back to the House of Representatives. Parliament has risen for 2018, with the first sittings scheduled for February 2019. Given the amendments were moved by the Government its passage seems likely, time allowing – there are few sitting days and the Budget has been brought forward.

Industry Super Australia (ISA) welcomed the Bill passing through the Senate, but said it doesn’t go far enough to help the “one in three workers routinely short-changed their super entitlements”.

ISA Deputy Chief Executive Matt Linden said the best way to stop Super Guarantee being unpaid was to address the “outdated laws” that only require employers to pay super quarterly, instead of at the same time as wages.

“Despite these new laws passing through the Senate that have potential to improve reporting of super, employers are still under no obligation to actually pay super contributions at the time they are disclosed on payslips,” he said.

“While progress to stop the unpaid super epidemic is always welcome, anything less than stopping it at the source is just a band-aid approach.”

Research by ISA found that employees didn’t receive $5.9 billion in superannuation entitlements in 2015/16.

“The vast majority of good employers that do the right thing by their workers are being undercut by a handful of rogue employers that are not following the law,” Linden said.

The Australian Institute of Superannuation Trustees (AIST) welcomed the Single Touch Payroll aspects of the Bill – it expands the real-time reporting system to all employers, instead of just those with 20 or more employees.

“For too long some businesses have been able to avoid their obligations to pay super because of outmoded laws,” said AIST CEO Eva Scheerlinck

“Workers have suffered, while non-compliant employers have had an unfair advantage over the majority of employers who are good corporate citizens.”

AIST said it was important that the legislation would shift the burden of identifying unpaid super from individual workers to the ATO

“Up until now, the ATO has largely relied on employees to make complaints to alert them to the non-payment of super – at a very real risk to the jobs of the employees who do this,” said a statement by AIST.

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Government fails to advance its superannuation legislation in 2018

The Government has failed to substantially advance its superannuation legislation in 2018, potentially creating issues with the start dates for measures.

With Parliament now adjourned for 2018, the Government’s superannuation agenda is largely where it started the year – stalled before the Senate.

The Government did pass some superannuation-related legislation – it changed the rules around terminal medical conditions, created the Australian Financial Complaints Authority, and moved ASIC to a fee-for-service model. But the core superannuation Bills are still stalled.

The Government almost passed the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018, which includes potential jail sentences for employers who don’t pay their Super Guarantee entitlements, and expanding Single Touch Payroll to all employers, amongst other measures. However the Bill was amended in the Senate (relating to deductible gift recipients) and the House didn’t vote on these, government, amendments. So the Bill remains before the Parliament.

Other superannuation Bills before the Parliament are:

Some of the Bills were debated in June 2018, but others haven’t been debated since 2017. The Superannuation (Objective) Bill was last debated in November 2016.

The Protecting Your Superannuation Bill was announced in the 2018/19 Budget, but several others are from the 2016/17 Budget. With the 2019/20 Budget brought forward to April 2 2019 it is likely the next Budget will be released before these Bills are passed.

These Bills were often initially scheduled for debate, but weren’t accorded enough priority to reach a vote – likely because the Government lacked enough support to pass them through the Senate. Assistant Treasurer Stuart Robert had said the Government would amend some of the Bills, but these amendments haven’t been published – though they were reportedly circulated to the crossbench.

Failing to pass this legislation is not simply a matter of moving the agenda forward, but could create substantial issues in 2019. This is compounded by the small number of sitting days ahead of an election in the first half of the year.

Some of the measures in the Bills start on 1 July 2019, though arguably the most time sensitive is the proposed 12 month amnesty for employers who haven’t paid Super Guarantee. As drafted the amnesty would run from 24 May 2018 to 24 May 2019, if the Bill passes. There are only three Senate sitting days in February 2019, followed by more in April – though time for the amnesty Bill may be tight with the Budget on April 2, the need to pass supply Bills and the likely calling of a May election.

There would be even less time to pass any of these Bills if the Government went to an election earlier than May.

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47% increase in financial complaints received since start of AFCA

Financial complaints to the newly operational Australian Financial Complaints Authority (AFCA) have soared compared to complaints to the bodies it replaces.

AFCA started accepting complaints on 1 November, taking over from the Superannuation Complaints Tribunal (SCT), Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO). Since then it has seen an increase of 47% in complaints received, compared to the three earlier bodies.

In its first month of operation AFCA has received over 13,000 phone enquiries and received 6,522 complaints from consumers and small business – averaging 310 complaints per business day.

AFCA CEO and Chief Ombudsman said the number of calls and complains was on par with what was expected.

“We want to make sure that members of the public know where to go for help when they have a financial complaint they can’t resolve directly with their financial firm,” he said.

“AFCA provides quick and easy access to fair resolutions. This is part of our role in rebuilding trust in the financial services sector. In fact, while we have only been operating for a month, 15% of the complaints we received in the month of November have already been finalised.”

“Our streamlined processes and systems have dealt well with the level of calls and complaints received. 80% of complaints have been lodged online, meaning consumers and small businesses have been able to access our service whenever and wherever they need it.”

AFCA says that while there have been a “high number” of complaints, they relate to less than 6% of AFCA’s licensee members.

45% of the complaints received so far have been about credit, with 21% about general insurance, 10% deposit taking and 8% about superannuation.

84 “definite system issues” are currently being investigated by AFCA, with 4 “potential serious contraventions and other breaches”.

“Systemic issues are identified in a complaint or several complaints, and have an effect on people beyond the parties to a complaint. Because of this, we take our responsibility to identify and investigate systemic issues very seriously. Financial firms should be in no doubt that we will be referring and reporting these to the appropriate regulator,” said Mr Locke.

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Jail for employers not paying super guarantee may pass Parliament today

Legislation which could result in employers who don’t pay Superannuation Guarantee being sent to jail may pass Parliament today – the last sitting day for 2018.

Update: The House of Representatives has adjourned, seemingly without voting on the amendments – so the Bill has not yet passed.

The Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 has passed both Houses of Parliament, but as it was amended in the Senate it will need to return to the House of Representatives. The amendments were moved by the Government and so would likely be agreed to in the House, but that depends on there being time for a vote.

The amendments to the Bill deal with deductible gift recipients.

The (potentially) soon-to-be Act will enable the ATO to issue directions to employers requiring them to pay Superannuation Guarantee that they owe. Failing to comply with the direction has a maximum penalty of 12 months jail, 50 penalty units ($10,500 at current rates), “or both” according to the Explanatory Memorandum to the Bill.

The ATO will also be able to direct employers, where the Commissioner “reasonably believes the employer has failed to comply with a superannuation obligation”, to undertake an approved education course, according to the Explanatory Memorandum to the Bill. Employers will have to provide proof they have completed the course to the ATO.

Failing to comply with the education direction “can result in administrative and/or criminal penalties,” says the EM.

Another Government Bill before the Parliament would create a 12 month amnesty for employers who haven’t paid their Super Guarantee obligations.

Single Touch Payroll to be extended to all employers

The legislation also extends Single Touch Payroll to all employers from 1 July 2019. Currently the payroll and superannuation reporting system only applies to employers with 20 more employers, who have had to use Single Touch Payroll since 1 July 2018.

The Bill also allows for Transition to Retirement Income Streams to revert to a spouse without them having to satisfy a condition of release. Additionally the legislation makes changes to super fund reporting requirements, amongst other measures.

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Over 90,000 retirees to benefit from changes introduced to Parliament

The Government says that over 90,000 older Australians will benefit from changes it recently introduced to Parliament.

The Government has introduced the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 to the House of Representatives. The measures it contains were announced in the 2018/19 Budget as the ‘More Choices for a Longer Life — finances for a longer life’ package.

If the Bill passes, the measures are set to take effect on 1 July 2019.

Increase and expand Pension Work Bonus

The Bill would increase the Pension Work Bonus – an exemption from the pension income test for employment income – from $250 to $300 per fortnight, allowing pensioners to earn up to $7,800 a year without impacting their pension. The measure will also be expanded to self-employed retirees and independent contractors or consultants

Minister for Families and Social Services Paul Fletcher said the change to the Pension Work Bonus would give over 90,000 older Australians a “better deal”.

“The increased Pension Work Bonus will mean that pensioners who work will be able to keep more of their pension. The self-employed will be eligible for the Pension Work Bonus for the first time,” he said.

Expand Pension Loans Scheme eligibility to everyone of Age Pension age

The Pension Loans Scheme (PLS) would also be expanded to everyone over age pension age. The PLS allows those eligible to increase the rate of their pension by borrowing the difference, secured against real estate – usually recovered when the property is sold or from their estate.

Currently the PLS is open to people of eligible age who cannot receive the Age Pension because they don’t pass either the income or asset test. The Bill would open the PLS to those people who don’t pass both tests.

The maximum amount that can be borrowed per fortnight would be increased to 150% of the full pension – allowing people already receiving the Age Pension to access the PLS.

“By expanding the Pension Loans Scheme pensioners will be able to enjoy a higher standard of living in retirement by receiving additional fortnightly payments in the form of a loan,” said Minister Fletcher.

“The expanded Pension Loan Scheme offers pensioners a higher living standard because you can borrow against your home and receive a fortnightly payment through Centrelink.”

“For the many senior Australians who own a home but would like a higher income to live on in retirement, this scheme offers a way to draw on the value of their home to fund that higher income, conveniently delivered through Centrelink rather than needing to enter into a reverse mortgage through a bank.”

New means and asset tests for pooled lifetime income streams

The Government brought in regulations starting on 1 July 2017 allowing for the development of new retirement income products. The Government now wants to change the social security asset and means tests so they are more appropriate to these new products.

“The existing means test rules for lifetime income streams were made for simple income stream products, such as lifetime annuities. Continuing to use them for the wide possible range of complex products that are expected to emerge under the changes to the SIS Regulations in the near future would leave the income support system open to exploitation, and could distort people’s financial decisions in retirement,” says the Explanatory Memorandum (EM) to the Bill.

Minister Fletcher said the new rules would make sure that pooled lifetime retirement income streams “are fairly and consistently assessed”.

“These changes will encourage the development of new types of financial products in the superannuation system, improving choice and flexibility for retirees.”

Under the rules, 60% of the payments from a pooled lifetime income stream will be means tested as income.

“This reflects that part of the payments made by the income stream are a return of a person’s initial investment amount, and therefore not income,” says the EM.

For the assets test, 60% of the purchase amount will be assessed at first, decreasing to 30% when the ‘threshold day’ is reached – which is calculated based on life expectancy.

The Bill is currently still before the House of Representatives. Today, Thursday 6 December, is the last sitting day for 2018. The first sitting of 2019 is on 12 February.

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Stopping refunds of franking credits has more support than opposition: poll

More people support stopping refunds of franking credits than oppose it, according to a new poll.

The latest Guardian Essential poll found 39% total support for stopping refunds of dividend franking credits. 30% in total oppose the measure, with 31% answering ‘don’t know’. Included in these figures are 15% who ‘strongly support’ stopping the refunds, and 14% who ‘strongly oppose’. Labor has a policy of stopping franking credit refunds for many taxpayers, though there are differences between Labor’s policy and the question asked.

Support and opposition to stopping refunding of franking credits

50% of those who vote Labor either support or strongly support the measure, compared to 32% of Coalition voters.

Support and opposition to stopping refunding of franking credits, by major political party

Comparing voters, only the Coalition had higher levels of opposition to stopping refunding of credits (44%) than support. Labor, Greens and Other voters all had more support for the measure than opposition.

Those most likely to oppose stopping refunds of franking credits were those aged over 55 (42%), while people under age 34 were most likely to support it (54%).

Respondents with a household income over $78,000 support stopping refunds 48%, and those with a university education 46%.

The poll asked:

When companies pay dividends to Australian shareholders out of after-tax profit, shareholders receive franking credits, which they can claim as a tax deduction. If the shareholder does not pay any tax, they receive a cash refund from the tax office. This system is known as “dividend imputation” and these cash payments cost the Government about $8 billion per year. The Labor Party has proposed to end the cash refunds for imputation credits. Taxpayers will still be able to claim a tax deduction. Do you support or oppose ending the cash refunds?

The question does not state that, under Labor’s policy, Age Pensioners will be exempt (also, technically, franking credits aren’t a tax deduction).

The same poll found that, Federally, Labor is ahead of the Coalition 54% to 46% on a 2 Party Preferred basis.

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