Monthly technical roundup - August 2024

Social security Budget measures

On 9 July 2024, the Social Services and Other Legislation Amendment (More Support in the Safety Net) Act 2024 (Cth) received Royal Assent.

The Act implements several social security measures which were announced in the 2024-25 Federal Budget, some of which include:

• increasing the maximum rates of Commonwealth rent assistance by 10 per cent from 20 September 2024
• increasing the jobseeker payment amount for single recipients who have a partial capacity to work (less than 15 hours per week) from 20 September 2024
• expanding the paid work participation limits for Carers Payment recipients by allowing them to participate in paid work of up to 100 hours over a four week period (instead of 25 hours per week) and removing the restrictions on education and volunteering activities from the participation limit. Additionally, recipients can continue to qualify for the payment if they temporarily cease providing constant care, as long as the cessation of care does not exceed a total of 63 days in a calendar year. This measure will come into effect from 20 March 2025.

Transfer balance cap issues relating to capped defined benefit income streams

On 4 July 2024, the Government registered the Income Tax Assessment Amendment (Superannuation) Regulations 2024.

The Regulations address the unintentional transfer balance cap (TBC) issues that may arise when a member’s capped defined benefit income stream is moved to another superannuation fund due to a merger or successor fund transfer.

Prior to this change, where a capped defined benefit income stream ceases and a new one commences, the value of the new capped defined benefit income stream that is credited to the member’s transfer balance account may be higher than the original income stream, and this could be detrimental to some individuals.

The changes came into effect from 6 July 2024 and are applied retrospectively from 1 July 2017.

Changes to FSG requirements

On 11 July 2024, ASIC acknowledged that the Treasury Law Amendments (Delivering Better Financial outcomes and Other Measures) Act 2024 (Cth) had received Royal Assent and summarised the reforms in the media release.

One of the measures contained in the Act was to provide more flexibility in how financial services guide (FSG) requirements can be met, and ASIC stated that it had registered ASIC Corporations (Amendment) Instrument 2024/554 which made consequential amendments to ASIC’s instruments to reflect the changes to the FSG requirements. ASIC had also amended condition 52 of Pro Forma 209 Australian financial services licence conditions (PF 209) to ensure technology neutrality in the FSG record keeping requirements.

ASIC also stated that it will update its regulatory guidance impacted by the Act in the coming months and more information about the reforms can be found on ASIC’s Delivering Better Financial Outcomes package website.

Withholding tax on foreign capital gains tax (CGT)

On 27 July 2024, the Government released exposure draft legislation and explanatory materials seeking industry feedback on its proposal to amend the foreign resident capital gains withholding (FRCGW) regime.

The proposed measures include:

• increasing the withholding rate for relevant CGT assets from 12.5 per cent to 15 per cent
• removing the $750,000 threshold before withholding applies so that disposals of relevant CGT assets by a foreign resident are subject to the FRCGW requirements regardless of the market value of the CGT asset.

The consultation period closed on 5 August 2024.

TPB registration requirements for tax practitioners

On 17 July 2024, the Government released a consultation paper seeking industry feedback on its proposed reforms to the Tax Practitioners Board’s (TPB) registration framework for tax practitioners to align with a strengthened, modernised and fit-for-purpose framework. The Government also stated that its goal for the reform was to realign the registration framework with the contemporary tax practitioner services landscape, modernising the existing registration criteria and equip the TPB with the flexibility to appropriately respond to emerging industry trends.  

The areas of improvements for the registration pathway contained in the paper include:

• strengthening company and partnership registration eligibility requirements
• reviewing the professional association ‘recognition’ and registration pathways
• broadening the TPB’s ability to accept alternative forms of ‘relevant experience’.

Additionally, the Government stated that it was also seeking feedback on:

• whether the TPB should be given greater flexibility to accept other qualifications outside of traditional tax practitioners course of study
• whether the current ‘fit and proper person’ test adequately protect consumers without imposing a disproportionate barrier to entry
• other proposals to modernise the registration framework and/or address potential challenges.

The consultation period closed on 7 August 2024.

Australian Taxation Office (ATO) joins the Australian Financial Crimes Exchange

On 5 July 2024, the Government announced that the ATO will be the first government agency to become a full member of the Australian Financial Crimes Exchange (AFCX) to support efforts across the economy to detect and prevent financial crime and fraud activity.

The AFCX coordinates data and intelligence sharing across the public and private sector to combat financial crime, and the Government intends to legislate tough obligations on banks, telcos and social media companies to remove scammers from their services.

Commencement of the Administrative Review Tribunal

On 19 July 2024, the Government announced that the Administrative Review Tribunal (ART) will commence its operations from 14 October 2024. The ART is a new federal review body that independently reviews the Government’s decisions (e.g. access to certain social security benefits) and will replace the Administrative Appeals Tribunal (AAT).

The media release also confirmed that all matters before the AAT will continue as usual and will be transitioned to the ART upon its commencement. Existing applicants who have an application with the AAT will not be required to submit a new application.

Additional time to meet uplift professional standards for tax practitioners

Following the registration of the Tax Agent Services (Code of Professional Conduct) Determination 2024 on 1 July 2024 which imposes eight new obligations aimed at strengthening the integrity and accountability of the tax profession, the Government announced on 1  August 2024 that it intends to insert a transitional rule into the Determination to provide affected firms with additional time to meet the new obligations.

The transitional rule would allow firms with 100 employees or less until 1 July 2025 and larger firms with 101 employees or more until 1 January 2025 to comply with the new obligations, as long as they take genuine steps towards compliances during this transition period.

June 2024 adviser exam results

On 5 July 2024, the Australian Securities and Investments Commission (ASIC) released the results of the financial adviser exam held in June 2024.

Of the 235 candidates who sat the exam, 70% passed. In releasing the results, ASIC has also stated that 21,260 candidates have sat the exam to date, and over 92% of those candidates have passed.

Industry funding: 2023-24 Cost Recovery Implementation Statement

On 8 July 2024, ASIC published its Cost Recovery Implementation Statement (CRIS) for 2023-24.

The CRIS contains information on how ASIC implements the industry funding model to recover the costs associated with their regulatory activities for each industry subsector, as well as its user-initiated and transaction-based regulatory costs via fees for service for the 2023-24 financial year.

The figures in the CRIS are indicative only and ASIC will publish the final levies in December 2024 and issue the invoices between January and March 2025.

FAR - final rules and information for super and insurance entities issued

On 11 July 2024, the Australian Prudential Regulation Authority (APRA) and ASIC jointly published new information to help insurers and superannuation trustees prepare for the commencement of the Financial Accountability Regime (FAR).

The FAR, which will take effect for the insurance and superannuation industries from 15 March 2025 imposes a strengthened responsibility and accountability framework aimed at improving the risk governance cultures of APRA-regulated entities, their directors and most senior executives.

The new information contained in the package includes:

• amendments to the regulator rules which prescribes key functions information for inclusion in the FAR register of accountable persons
• a joint letter from ASIC and APRA summarising the key issues raised during the consultation and their response, including the concept and application of key functions.  

APRA also stated that the new information completes the total package of FAR guidance materials and further details of its proposed industry engagements and timeframes can be found on APRA’s website.

No change to macroprudential settings

On 29 July 2024, APRA announced it will keep its macroprudential policy settings on hold and its decisions was based on its latest quarterly assessment of domestic and international economic conditions.

APRA explained that its macroprudential policy was aimed at promoting the stability (at the systemic level) of financial institutions to ensure they can continue to supply the credit and payment systems required for the economy to grow sustainably, and their decision was due to the uncertainty in interest rates, economic outlooks, the high levels of household debt, inflation and geopolitical instability.

NALI changes for SMSFs

On 5 July 2024, the ATO announced that the non-arm’s length income (NALI) provisions that were contained in the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024 (Cth) took effect from 1 July 2024.

The changes relating to the NALI provisions include:

• limiting the amount of income that is taxed as NALI for small superannuation funds to twice the difference between the actual expense and the expected market rate of the expense
• exempting large APRA regulated funds from non-arm’s length expenditure (NALE) provisions for both general and specific expenses, and confirming that the remaining NALI rules continue to apply
• exempting the application of the NALE provisions (amended by the Act) for expenditure that occurred prior to the 2018-19 income year.

The ATO confirmed the changes apply retrospectively from 1 July 2018 and trustees will need to consider any impacts to their funds and report any non-arm’s length general expenses in accordance with the new law.

Small business energy bonus incentives

On 5 July 2024, the ATO published a reminder that businesses with an aggregated turnover of less than $50 million may be able to claim a bonus 20% tax deduction for the cost of eligible assets or improvements to existing assets that support more efficient use of energy.

Under the scheme, up to $100,000 of the business’s total expenditure may be eligible under the incentive, with a maximum bonus tax deduction of $20,000 per business. The ATO noted that eligible businesses could claim both the ordinary deduction for the expense as well as the bonus deductions and highlighted the importance of keeping accurate records to evidence of the expenditure claimed.

New SMSF interactive courses

On 22 July 2024, the ATO announced it had released two new interactive courses to provide self managed superannuation fund (SMSF) trustees an opportunity to build their knowledge and learn about navigating an SMSF.

The two new courses include:

• setting up a SMSF
• winding up a SMSF

The new courses formed part of the ATO’s suite of educational products aimed at supporting SMSF trustees with their regulatory and reporting obligations, and the ATO noted that the final course on running a SMSF will be launched later in the year.

Financial complaints for 2023-24

On 1 August 2024, AFCA announced that it had received 105,454 complaints in 2023-24 and this was an increase of 9 per cent on the previous year.

Below is a summary of the highlights contained in the media release:

• Scam-related complaints, which was a key driver to the increase in complaints rose by 81 per cent to 10,951
• Complaints relating to comprehensive motor vehicle insurance increased by 21 per cent and this type of cover was the most complained about insurance product for the 2023-24 year
• The products with the most complaints were personal transactions accounts (16,365 complaints), followed by credit cards (11,841 complaints).

AFCA stated that the full set of the data will be made available in their annual review later this year and the preliminary data may change after they conduct further analysis.