Monthly technical roundup - June 2024

Preservation of social security means testing military invalidity payments

On 30 May 2024, the Social Services and Other Legislation Amendment (Military Invalidity Payments Means Testing) Act 2024 (Cth) received Royal Assent.

The Act amends the Social Security Act 1991 (Cth) and the Veterans’ Entitlements Act 1986 (Cth) to confirm the income support treatment of certain military invalidity pensions in response to the Full Federal Court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220 (Douglas).

The decision in Douglas found that military invalidity benefits paid under the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme that commenced on or after 20 September 2007 should be taxed as “superannuation lump sums” instead of “superannuation income streams”. 

As a result of the decision, affected payments could no longer be assessed as “asset-test exempt income streams” and this may have a detrimental effect to the veterans and/or their partners’ income support payments. 

The act provides for the assessment of the affected payments within the means test by inserting a new income stream classification and assessment regime for them under the Social Security Act 1991 (Cth) and the Veterans’ Entitlements Act 1986 (Cth). 

The new provisions were designed to produce the same assessment of income as the historical assessments of the affected invalidity payments, as well as to ensure the invalidity payments continue to be exempt from the assets test. This ensures veterans and/or their partners receive a level of support consistent with the intent of legislation and policy before the unexpected findings of the Douglas decision.

The act came into effect the day after it received Royal Assent.

Federal Budget social security measures

On 29 May 2024, the Social Services and Other Legislation Amendment (More Support in the Safety Net) Bill 2024 was introduced to Parliament. 

The bill contains amendments to implement income support measures announced in the 2024-25 Federal Budget, including:

• increasing the maximum rates of Commonwealth Rent Assistance by 10 per cent. This is in addition to the existing CPI indexation
• increasing the JobSeeker payment rate for certain recipients who have a partial capacity to work of 0 – 14 hours per week
• provide greater flexibility to recipients of Carer Payments who are undertaking study or paid work, so that they do not lose eligibility for the payment when they temporarily cease providing care.

If passed, the amendments contained in the bill will come into effect at various times after it receives Royal Assent.

Proposed Financial Institutions Supervisory Levies for 2024–25

On 28 May 2024, the Government released the Proposed Financial Institutions Supervisory Levies for 2024-25 discussion paper seeking industry feedback on the proposed Financial Institutions Supervisory Levies (‘the levies’) that will apply for the 2024–25 financial year.

The levies are set to recover the majority of the operational costs of the Australian Prudential Regulatory Authority (APRA) and other specific costs incurred by certain Commonwealth agencies.

The paper, which was prepared in conjunction with APRA, sets out information about:

• the total expenses for the activities to be undertaken by APRA and certain Commonwealth agencies (including Treasury and the ATO) in 2024-25. This expense will be funded through commensurate levies revenue to be collected in 2024–25;
• The levy impact on each industry; and 
• APRA’s areas of focus in 2024-25, which includes assessing the operational resilience of all supervised entities across all industries in responding to cyber security events. 

The consultation period closed on 11 June 2024.

Information issued for unlicensed entities making unsolicited contact with consumers 

On 15 May 2024, ASIC announced it had published Information Sheet 282 Unsolicited contact leading to financial advice (INFO 282), which outlines how financial services laws are applied to unlicenced entities referring consumers to a third party for the provision of financial advice, and how those entities must comply with financial services laws.

The publication is also relevant to financial advisers and Australian financial services (AFS) licensees that receive consumer details through unsolicited contact.

INFO 282 sets out requirements:

• under the law and penalties for any contravention
• when making unsolicited contact
• when making digital contact.

ASIC stated that the information sheet was released as part of their broader work to minimise consumer harm caused by cold calling business models using high-pressure sales tactics and online click-bait advertisements to lure consumers into receiving potentially inappropriate superannuation switching advice.

National Anti-Scam Centre releases its first Investment Scam Fusion Cell Report

On 22 May 2024, ASIC announced the release of The National Anti-Scam Centre’s (NASC) first Investment Scam Fusion Cell Report, designed to identify and block investment scam campaigns and their enablers, and to identify barriers to better coordinate scam prevention and disruption.

The Fusion Cell, which was co-led by ACCC and ASIC, ran for six months to February 2024 and it brought together 43 organisations across government and industry to share data and case studies for analysis, and identify strategies and proof-of-concept exercises for further development by participants.

Key Fusion Cell outputs include:

• a direct referral process to be created for the takedown of scam advertisements, advertorials, and videos. There were more than 1,000 instances being removed by digital platforms
• 220 investment scam websites were taken down
• diversion of 113 attempted calls to confirmed scam phone numbers to a recorded warning, leading to the prevention of potentially millions of dollars in imposter bond and term deposit scam losses.

The Fusion Cell also provided improvements which extend beyond the term of the Fusion Cell itself, including:

• creation of a Scamwatch feature so that individuals can more easily report scam advertisements visible on social media and search platforms such as Microsoft, Google, and Meta
• recorded warnings expanded to more telecommunication providers in cooperation with Optus and Telstra
• development of technology so that relevant reports are automatically referred to Scamwatch so that ASIC can take down investment scam websites
• a 3-month data sharing trial on investment scam payments proposed, which concludes in June 2024 after it commenced in April 2024
• creation of a handbook of disruption strategies so that artificial intelligence trading platform scams can be identified. The handbook helps to establish consistency in industry understanding of indicators and responses to these scams.

The NASC stated it will provide updates on the impact of the Fusion Cell’s initiatives in future reports and confirmed that work is also underway to identify areas of focus for the next fusion cell, which is due to commence in June 2024.

Guidance released on the experienced provider pathway for financial advisers

On 22 May 2024, ASIC announced it had released Information Sheet 281 FAQS: Relevant providers – Accessing the experienced provider pathway (INFO 281) to provide guidance to Australian financial services (AFS) licensees and financial advisers on the experienced provider pathway following the legislative changes made by the Treasury Laws Amendment (2023 Measures No. 3) Act 2023 (Cth).

Since 1 January 2019, financial advisers have been subject to professional standards, including the qualifications standard and the professional year standard.

Financial advisers are deemed as having met the qualifications and professional year standards under the experienced provider pathway, without needing to undertake further education and training if they have:

• at least 10 years’ (cumulative) experience as an authorised financial adviser between 1 January 2007 and 31 December 2021
• a clean disciplinary record as at 31 December 2021.

If an adviser wishes to rely on the pathway, they should have also passed the financial adviser exam by 1 January 2022 (or 1 October 2022 if they were eligible for an extension) if they were authorised to provide personal advice to retail clients on relevant financial products on that date. They will also need to make a written declaration and provide their authorising AFS licensee with a copy before 1 January 2026 to continue to provide personal advice from that date.

From 1 July 2024, licensees will be required to notify ASIC where they have received a declaration from a financial adviser who is eligible to access the experienced provider pathway, including where they received a declaration from a financial adviser before this date.

New Professional Registers Search to be launched

On 28 May 2024, ASIC announced the launch of a new streamlined Professional Registers Search (PRS) in late June 2024, which will allow users to search all of the professional registers databases with just one search, and provide them the ability to filter search results to see more specific information, such as finding a licence or registration in their own state or territory.

To make it easier for anyone to find the information they need themselves, a ‘user-first’ approach has been taken for the design, providing a more intuitive experience for users to access information and make sure the person or company they are dealing with is licensed.

The ASIC Connect registers moving across to the PRS in the first release include (but is not limited to):

• Australian Financial Services (AFS) licensees
• AFS authorised representatives
• credit licensees
• credit representatives
• registered managed investment schemes
• approved self-managed super funds (SMSF) auditors.

All professional register extracts and documents will be made available in a second update of the PRS, which is scheduled for late 2024.

Clarification of expectations on cyber security and adequacy of backups

On 3 June 2024, APRA announced it has written to all APRA-regulated entities to emphasise the critical role of data backups in cyber resilience as part of its ongoing commitment to supervising cyber resilience across industry, outlined in its Interim Policy and Supervision Priorities update.

The letter details the common issues observed in backup practices that could hinder system restoration during an incident. 

A key topic where APRA observed weakness is the use of data backups to protect an entity against data loss. 

APRA noted through recent supervisory activities, although many entities have backup practices in place, it had observed common problems that could limit the usefulness of these backups in restoring systems during an incident.

The summary of common issues observed from APRA’s Prudential framework include:

• insufficient segregation between production and backup environments
• insufficient control testing coverage and rigour to ensure backups are protected from compromise
• insufficient testing of capability to recover systems and data within tolerance levels from backups.

The letter stated that given the fast-moving nature of cyber threats, APRA will continue to share information on any common areas of weakness in the future. APRA also expects regulated entities to review their backup arrangements and address any identified gaps promptly. 

Australians still intending to retire between 65 and 66

On 22 May 2024, the Australian Bureau of Statistics (ABS) announced the release of statistics on retirees and the retirement plans of people aged 45 and over, where the reference period for the data is the 2022-23 financial year.

The data also shows that while expectations around retirement haven’t changed much recently, on average, people are retiring later. The ABS also noted that in 2022-23, the most common factors influencing older workers’ decision to retire were financial security (36%) and personal health or physical abilities (22%). Additionally, approximately one in eight retirees (14%) said reaching the eligibility age for an age or service pension was one of the main factors.

Some key statistics for the period include:

• there were 4.2 million retirees
• the average age at retirement (of all retirees) was 56.9 years
• 130,000 people retired in 2022, with an average age of 64.8 years
• the average age people intend to retire is 65.4 years. 

Income at retirement

Between 2020-21 and 2022-23:

• the Government pension remained the main source of income for most retirees
• more people retired with superannuation as a source of income, but the increase was greater for women than men
• retirees with no personal income dropped to around 18% for women, but increased to 4% for men.

In 2022-23:

• 31% of retired women relied on their partner’s income to meet their living costs at retirement (compared to 8% of retired men)
• for people intending to retire, the main factor that will influence their decision about when to retire was financial security.