Monthly technical roundup - December 2024

Objective of super

Legislation was passed on 28 November 2024 that enshrines the objective of superannuation in legislation.

The objective is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way (the Objective). It also requires policy makers to assess future changes to superannuation legislation for compatibility with the Objective.

The Explanatory Memorandum expands on the key aspects, some of which include:

• the Objective includes the key principles policy-makers should consider in delivering on its purpose, and that the system should operate in an equitable and sustainable way, whilst recognising the interaction of superannuation with the various forms of government support, such as the Age Pension
• the Objective should not be considered in isolation and policy-makers will need to consider and make informed decisions on the potential trade-offs between the different concepts to ensure superannuation policy delivers on the broader objective in a cohesive manner
• the intent of the Objective is to require policy-makers to demonstrate how future changes to superannuation law are consistent with the legislated objective, and it is not intended to change the operation or interpretation of existing superannuation laws.

The legislation will commence 28 days after the Bill receives Royal Assent (not received at the time of writing).

The Bill can be found here: Superannuation (Objective) Bill 2023

A new framework for the delivery of Aged Care

On 25 November 2024, the Aged Care Bill 2024 was passed by Parliament. The bill contains a new Aged Care Act which implements fundamental reforms to the aged care system. Most of the reforms come into effect on 1 July 2025.

The changes in the bill, which address around 60 recommendations of the Royal Commission into Aged Care Quality and Safety, are split into eight chapters addressing the following areas:

• Introduction – introductory and framing provisions, as well as definitions which underpin the new aged care system
• Entry to the Commonwealth aged care system - the requirements for an individual to access funded aged care services, such as establishing clear age limit thresholds and a single assessment pathway for approvals
• Registered providers, aged care workers and aged care digital platform operators – outlines the conditions of registration and key obligations for providers of funded aged care services, as well as obligations that apply to aged care workers and responsible persons of registered providers
• Funding of aged care services – includes details of the funding arrangements, such as what the Government will fund, what an individual can be asked to pay, and where means testing rules apply. This chapter also outlines the various types of contributions such as means tested residential accommodation, accommodation payments and refundable accommodation deposits
• Governance of the aged care system – establishment of the underlying governance and administration of the broader aged care system
• Regulatory mechanisms - the framework which enables those governing the system (e.g. the Commissioner, System Governor) to access regulatory powers which support the exercise of their powers and performance of their respective functions
• Information management - includes a revised information management framework to improve system transparency, including whistleblower protections
• Miscellaneous – matters not addressed in the other chapters.

A notable amendment made by Parliament is the inclusion of a requirement that the Government seek an independent review of accommodation pricing and table the report in Parliament no later than 1 July 2026.

The Bill can be found here: Aged Care Bill 2024

Commonwealth penalty unit increases to $330

Legislation has been passed that increases the Commonwealth penalty unit value from $313 to $330. The change took effect from 7 November 2024 and applies to infringements from that date.

Penalty units are used to describe the amount payable for monetary penalties imposed for criminal offences in Commonwealth legislation and territory ordinances.

An example of where penalty units can be used to determine a penalty amount are the administrative penalties (section 166 of the Superannuation Industry (Supervision) Act 1993) for trustees/directors of a corporate trustee of self managed superannuation funds (SMSFs). For instance, the penalty for lending an SMSF’s funds to a member or relative is 60 penalty units. For a fund with individual trustees, the penalty equates to $19,800 per trustee.

According to the explanatory material to the amending legislation, this increase reflects community expectations that courts have appropriate sanctions available to them when sentencing individuals and corporations.

The Bill can be found here: Crimes and Other Legislation Amendment (Omnibus No. 1) Bill 2024

Increase to the maximum accommodation payment for residential aged care

The Government has issued a legislative instrument to raise the ceiling on the maximum accommodation payment that aged care providers can charge without requiring approval from the Independent Health and Aged Care Pricing Authority (Pricing Authority).

The change increases the maximum amount from $550,000 to $750,000 and applies from 1 January 2025.

The legislative instrument can be found here: Aged Care (Subsidy, Fees and Payments) Amendment (Maximum Accommodation Payment) Determination 2024

Delivering Better Financial Outcomes (DBFO)

On 4 December 2024, the Government issued a fact sheet and media release titled Ensuring access to quality and affordable financial advice which provide further details of the next round of DBFO reforms.

The Government has indicated the next tranche of reforms will:

• Introduce a new class of financial adviser to deliver simple advice that is quality, helpful, and safe for consumers. Features of the new class of adviser include:
  • licensees will be wholly responsible for the advice provided by this new class of financial adviser they employ
  • completion of an Australian Qualifications Framework (AQF) level 5 diploma
  • limited to providing advice on products issued by prudentially regulated entities and prevented from providing advice on more complex and high-risk areas such as establishing a self-managed superannuation fund
  • limited to advising existing clients of a licensee, and new clients where the new client initiates the advice request, and
  • licensees can choose to charge a fee for the advice provided by the new class of adviser. They will not be permitted to charge ongoing fees or receive commissions.
• Modernise the best interests duty into an outcomes-focused duty and remove the existing process-based safe harbour steps. This will ensure customers receive more tailored and helpful advice that is in their best interests and meets their needs, including on single issue or limited scope issues. The existing concessional treatment for personal advice on basic banking and general insurance products will be maintained.
• Replace statements of advice with a principles-based record that is in plain English and addresses the client’s needs.
• Clarify the rules on what advice topics can be paid for via superannuation and the member circumstances that can be considered to support more access to helpful financial advice.
• Allow superannuation funds to provide ‘nudges’ to members to drive greater engagement with superannuation at key life stages, such as approaching the transition to retirement.
• Review and update the Financial Planners and Advisers Code of Ethics following the implementation of the Delivering Better Financial Outcomes package, to ensure that the Code aligns with the new regulatory framework and remains fit-for-purpose.
• Review the education pathway for professional advisers with a view to increasing flexibility in support of the growth and continuing professionalisation of the financial advice industry. The pathway will be aligned with the education requirements for the new class of adviser.

Further information can be found here:

• Fact sheet
• Media release

Improving the retirement phase of superannuation

In a media release issued by Treasury, the Albanese Government has unveiled a plan to reform the retirement phase of superannuation, aiming to provide a more secure and dignified retirement for Australians. As the economy evolves and the population ages, these reforms are designed to ensure that retirees can make the most of their superannuation savings.

The areas the reforms will be targeted at are:

• Enhanced independent guidance: The Government will expand and refresh resources on the Moneysmart website, ensuring retirees have easy access to independent, reliable information on superannuation and retirement options.

ASIC will lead a consumer education campaign to raise awareness amongst people approaching retirement and in retirement. New resources will start rolling out in the first half of 2025.

• Better retirement products: By improving the innovative income stream regulations, the reforms will support innovation in quality retirement products, giving members more options that meet their needs and helping them make the most of their super. The updated regulations will commence from 1 July 2026, with consultation on draft regulations ahead of this.

The changes include allowing funds to offer product features that members want, such as money back guarantees and instalment payments instead of an upfront lump sum.

• Best practice principles: A new set of voluntary best practice principles will guide the superannuation industry in designing modern, high quality income products that support Australians’ financial security in retirement. Consultation on draft principles to begin in 2025.
• Increased transparency: A new reporting framework on retirement outcomes will offer members greater transparency and create common understanding for success in the retirement phase.

The new Retirement Reporting Framework will commence from 2027 and enable monitoring of the outcomes delivered to members in retirement in a consistent and transparent way.

APRA will collect and publish data on an annual basis, so progress can be measured over time. The design of metrics and process will be informed by a Treasury led consultation.

Consultation with the industry will commence in the first half of 2025.

Improving the retirement phase of superannuation resources can be found here:

• Media release
• Fact sheet

New and updated guidance in response to the financial advice reforms

ASIC has announced the release of new regulatory guidance and updates to existing guidance following the reforms introduced by the Treasury Laws Amendments (Delivering Better Financial Outcomes and Other Measures) Act 2024 (DBFO Act).

The new information sheets are:

• Information Sheet 286 FAQs: Ongoing fee arrangements and consents (INFO 286), which answers frequently asked questions (FAQs) for financial advisers who must get a client’s written consent to enter into or renew an ongoing fee arrangement
• Information Sheet 287 FAQs: Non-ongoing fee requests or consents (INFO 287), which answers FAQs for financial advisers who must get a client’s written request or consent to charge non-ongoing fees to client superannuation accounts
• INFO 291 FAQs: FSGs and website disclosure information (INFO 291), which answers FAQs about obligations relating to Financial Services Guides (FSGs) and website disclosure information, and
• INFO 292 FAQs: Informed consents for insurance commissions (INFO 292), which answers FAQs about the obligation to obtain informed consent before receiving certain insurance commissions to avoid them being conflicted remuneration.

The updated regulatory guides are:

• Regulatory Guide 246: Conflicted and other banned remuneration (RG 246), contains updated guidance in response to the DBFO Act
• Regulatory Guide 175: AFS Licensing: Financial product advisers – Conduct and disclosure (RG 175), includes the removal of the FSG guidance as it is now contained in INFO 291

Early release of superannuation data

On 15 October 2024, the ATO released new statistics concerning the volume of requests and approvals for the release of super benefits on compassionate grounds.

The 2023-24 year saw a significant increase in applications received when compared to the prior year.

Of the 90,700 applications received in 2023-24, 53,100 were approved, representing an approval rate of approximately 59 per cent, which was similar to the prior years’ approval rate of 55 per cent.

The average value of funds released in 2023-24 was around $20,000, slightly up on the average of around $18,000 for the prior year.

Meeting medical costs was the main reason for the release of funds, as can be seen from the following top four reasons for the release of funds:

Of the applications approved for medical treatment, the items listed by the ATO were:

Note: Percentages are approximate and calculated using the figures provided by the ATO in the link below and rounded to the nearest tenth of a percentage point.

The ATO’s statistics can be found here.