Monthly technical roundup - February 2024

Amendments to Stage 3 tax cuts

On 6 February 2024, the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 (Cth) and the Treasury Laws Amendment (Cost of Living—Medicare Levy) Bill 2024 (Cth) were introduced to Parliament.

The Cost of Living Tax Cuts will amend the previously legislated Stage 3 tax cuts that were due to come into effect on 1 July 2024. The proposed amended tax rates (excluding Medicare Levy) are as follows:

The new rates, if legislated, will apply from 1 July 2024.

An increase to the Medicare levy low income thresholds has also been proposed. If passed, the following thresholds will apply to the current income year (2023-24):

Standard taxpayers

• Single: nil if income is equal to or less than $26,000, or 2% if income is equal to or greater than $32,501
• Couple/family: nil if income is equal to or less than $43,846*, or 2% if income is equal to or greater than $54,808**

Senior and pensioner tax offset recipients

• Single: nil if income is equal to or less than $41,089, or 2% if income is equal to or greater than $51,362
• Couple/family: nil if income is equal to or less than $57,198*, or 2% if income is equal to or greater than $71,498**

*$4,027 increase per dependent
**$5,034 increase per dependent

If income is between the lower and upper thresholds, the levy will be limited to 10% of the amount of taxable income in excess over the lower threshold.

Changes to the financial adviser exam

On 14 December 2023, the Government released for consultation exposure draft legislation aiming to improve the delivery and accessibility of the financial adviser exam.  The consultation period closed on 10 January 2024, and the Corporations (Relevant Providers—Education and Training Standards) Amendment (2024 Measures No. 1) Determination 2024 was subsequently registered by the Government on 18 January 2024. The amendments came into effect the following day and included:

• removing the short answer questions from the exam and increasing the number of multiple-choice questions
• removing the requirement that only provisional relevant providers and existing advisers can sit the exam

To allow sufficient time to ensure all candidates are held to the same standard and to implement the changes, ASIC announced it had revised the date for the first financial exam sitting in 2024. The revised date of the next exam is 26 March 2024.

On 24 January 2024, ASIC announced it had updated guidance on its website for financial advisers and Australian Financial Services licensees, to align with the legislative changes to the financial adviser exam.

ASIC extends deadline for financial adviser registrations

On 18 January 2024, ASIC announced it had extended the due date by two weeks for AFS licensees to register relevant providers, confirming 16 February 2024 as the final date for the commencement of the registration requirement.

From this date, all relevant providers, including time-share advisers, must be registered. Provisional relevant providers cannot be registered.

The ASIC Corporations (Amendment) Instrument 2024/23 was registered on 23 January 2024, implementing the announcement.

On 6 February 2024, ASIC issued a final reminder that financial advisers who are not registered with ASIC before 16 February 2024 will need to cease providing personal advice to retail clients. ASIC’s records as at 9.00am on that day showed that 757 (4.9%) individual relevant providers (including time-share advisers) were still not registered with ASIC.

No further extensions will be granted by ASIC after the new deadline.

Aged Care Bill

On 14 December 2023 an exposure draft of the Aged Care Bill 2023 was released by the Department of Health and Aged Care, for public consultation.

The draft aims to improve the ways services are delivered to older people in their homes, community settings and approved residential aged care homes. Whilst Chapter 4 of the exposure draft (Fees, Payments and Subsidies) is not yet available, it will include changes to funding arrangements, including means testing.

The consultation period closes on 16 February 2024 and, subject to the Bill being passed in Parliament, the new provisions are expected to start on 1 July 2024.

Minor amendments to financial adviser education requirements

On 30 January 2024, the Government released for consultation draft legislation proposing minor changes to the education requirements for financial advisers.

The amendments to the Corporations (Relevant Providers Degrees, Education and Training Standards) Determination 2021 contained in the exposure draft include:

• greater flexibility for financial advisers to demonstrate they have met the conditions of an approved degree with:
  • an academic transcript issued by the provider of the approved degree and/or
  • a statement issued by the provider of the approved degree confirming they have met the condition(s) for the approved degree.
• changing the transitional arrangements for tax (financial) advisers such that an adviser will be taken to have met the education requirements to be a qualified tax relevant provider if they were registered with the Tax Practitioners Board or had a registration application pending before 1 January 2022, regardless of whether they were authorised as an adviser on that day

The consultation period closes on 27 February 2024.

If legislated, the amendments will come into effect the day after the instrument is registered.

November 2023 adviser exam results

On 14 December 2023, ASIC released the results of the financial adviser exam held in November 2023.

Of the 219 candidates who sat the exam, 66% passed. In releasing the results, ASIC has also stated that to date, 20,875 candidates have sat the exam and over 92% of those candidates have passed.

Tax deductions for financial advice fees

On 13 December 2023, the ATO released Draft Taxation Determination TD 2023/D4 Income tax: deductions for financial advice fees paid by individuals who are not carrying on a business. 

The draft determination sets out the requirements that need to be satisfied for an individual who is not carrying on a business to be eligible to claim a deduction under sections 8-1 (general deduction) or 25-5 (tax-related expense) of the Income Tax Assessment Act 1997 (Cth) for fees paid for financial advice.

The draft determination does not apply to individuals carrying on a business and it does not consider circumstances where fees for financial advice are paid from a superannuation fund.

Super fund and IDPS eligibility to claim reduced input tax credits on adviser fees

On 13 December 2023, the ATO issued a document notifying superannuation funds and investor-directed portfolio services (IDPS) investment platforms (collectively referred to as Funds) of certain matters relating to claims for reduced input tax credits (RITC) for adviser service fees.

After reviewing some examples of current arrangements, the ATO’s view is that Funds are not eligible to claim RITCs for adviser services fees, as they are not recipients of a supply for which the fees are charged. As a result, the ATO recommends Funds:

• review their arrangements for the payment of adviser fees to ensure RITCs are not being claimed when there is no entitlement, and
• consider the application of the compliance approach set out in the document to past periods

The document relates to arrangements where a fund member or investor engages a financial adviser to provide them with personal advice. Arrangements where Funds engage an adviser to provide non-ongoing, simple advice to its members (where a fee is collectively charged) are not considered.

On 1 February 2024, the ATO extended the compliance approach to 1 July 2024.

2024 supervision and policy priorities outlined

On 31 January 2024, APRA released its policy and supervision priorities for the first six months of the year. The interim update is to bridge the gap until the 2024-25 Corporate Plan is released, which is due by the end of August.

After reprioritising its supervision and policy agendas last year in response to the risks that emerged, and progressing a range of important policy reforms, one of APRA’s key focuses is to lift superannuation trustees’ practices on retirement incomes by implementing recommendations from the Financial Regulator Assessment Authority (FRAA) review, enhancing transparency and aligning APRA’s heatmaps with the performance test.

The Superannuation Initiatives in the Detailed Supervision and Policy Priorities include:

• Investments: superannuation licensees to ensure investment governance practices are sound, particularly in relation to asset valuation and liquidity management practices
• Super transparency: holding registrable superannuation entity (RSE) licensees accountable for addressing underperformance with urgency to improve outcomes to members. APRA will continue its focus on ensuring trustees responsible for under-performing choice products are taking steps to improve or exit them
• Retirement outcomes: as more Australians enter the retirement phase, RSE licensees will need to uplift practices to support better retirement incomes. APRA’s engagement with targeted entities will take place in the second quarter of 2024 to address gaps identified in RSE licensees’ approaches
• Financial resilience: ensure trustees are well-placed to manage the impact of operational risks and provide confidence that sufficient financial resources would be available to implement contingency plans if needed.

Compensation caps and monetary limits adjusted

On 8 January 2024, the Australian Financial Complaints Authority (AFCA) announced adjustments to its monetary limits and compensation caps for complaints.

Covered in the new limits are:

• the maximum value of a claim for compensation AFCA can consider
• the maximum amount AFCA can award a consumer or small business for complaints about banking and finance, general insurance, life insurance and investments and advice.

Known as the monetary restriction on AFCA’s jurisdiction, under the new limits, AFCA can consider disputes where the amount being claimed by a consumer does not exceed $1,263,000 or where the credit facility does not exceed $6,317,000 for small businesses and primary producers.

Additionally, there is a limit on the amount of compensation AFCA can order, per claim and the limits vary based on the type of claim.

The changes apply to all complaints received by AFCA from 1 January 2024.

Under the AFCA Rules, AFCA is required to adjust its monetary limits every three years, in line with the higher of the percentage increase in the Consumer Price Index and the Male Total Average Weekly Earnings.

Record complaints received in a calendar year

On 9 January 2024, AFCA announced that in 2023, it recorded over 100,000 complaints in a calendar year for the first time, which was an increase of 23% on 2022.

Highlights from the media release include:

• 8,987 complaints relating to scams were registered, almost double those registered in 2022
• Complaints involving financial hardship totalled 5,396, up 29% on the previous year
• $304 million in compensation was secured by complainants, which is 38% higher than in 2022.

In 2023, the top five products complained about were:

• Personal transaction accounts (64 per cent increase)
• Credit cards (33 per cent increase)
• Comprehensive vehicle insurance (39 per cent increase)
• Home building insurance (8 per cent decrease)
• Home loans (17 per cent increase).

Consumer Price Index (CPI) data released

On 31 January 2024, the Australian Bureau of Statistics (ABS) released the CPI figure of 136.1 for the December 2023 Quarter.

The superannuation general transfer balance cap (TBC) is indexed in line with increases in CPI but only increases in increments of $100,000. The December 2023 quarter CPI was not high enough to trigger an increase in the TBC for 2024-25. As such, the cap will remain at $1.9 million from 1 July 2024.

Any changes to the concessional contribution (CC) caps cannot be determined at this stage, as they are indexed by average weekly ordinary time earnings (AWOTE), which have not yet been released. While the non-concessional contribution cap is not indexed, it is four times the CC cap.