Monthly technical roundup - March 2024

Cost of living tax cuts passed

On 5 March 2024, the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 (Cth) and the Treasury Laws Amendment (Cost of Living—Medicare Levy) Act 2024 (Cth) received Royal Assent.

The tax rates (excluding Medicare Levy) that will apply from 1 July 2024 are as follows:

Additionally, the Medicare levy low income thresholds were also amended. The thresholds that will apply to the current income year (2023-24) are as follows:

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.

Commencement date for Compensation Scheme of Last Resort

On 26 February 2024, the Government announced that consumers can start lodging claims for compensation under the Financial Services Compensation Scheme of Last Resort (CSLR) from 2 April 2024.

Under the scheme, consumers with unpaid Australian Financial Complaints Authority (AFCA) determinations relating to the provision of personal financial advice, credit intermediation, securities dealing and credit provision may be eligible for up to $150,000 in compensation.

The Government also stated that it intends to make amendments to the CSLR legislation to broaden the scope of the scheme to include financial services firms that were licensed to provide the relevant product or services. In the interim, AFCA’s authorisation has been amended so that, to the extent possible, complaints that may be eligible under the CSLR are progressed only if the financial services firm was licensed to provide the relevant product or service.

These changes will remain in place until the amendments to the CSLR legislation are made, and AFCA’s Rules will require changes to implement the amendment to its authorisation.

Superannuation to be paid on government- funded paid parental leave

On 7 March 2024, the Government announced that it intends to amend the Paid Parental Leave (PPL) scheme to include contributions to superannuation from 1 July 2025, and details of the amendment will be released in the upcoming Federal Budget.

This proposal builds on initial changes to the eligibility criteria to the PPL scheme which commenced in July 2023, and a second tranche of changes which are contained in the Paid Parental Leave Amendment (More Support for Working Families) Bill 2023 (Cth). If legislated, the maximum entitlement of the PPL scheme would be extended by two weeks each year from 1 July 2024, reaching a total of 26 weeks from 1 July 2026.

Call on industry to improve oversight of Choice super performance

On 21 February 2024, ASIC announced the release of Report 779 Superannuation and choice products: What focus is there on performance? (the Report), which reviewed the conduct of super trustees, financial advisers and financial services licensees by examining how certain members continued to invest in persistently underperforming investment options in choice ­­superannuation products.

Some of the key findings that were contained in the Report include:

• there was a lack of evidence of trustees communicating to members who were invested in underperforming investments, and financial advisers were not always addressing the underperformance of Choice products appropriately
• trustees, advice licensees and financial advisers should undertake performance-based due diligence before offering investment options to members, approving options for use by advisers (e.g. approved product list) and recommending those investments to members
• financial advisers should treat performance as a primary consideration and consider information from a range of sources to develop and support their recommendations
• advice licensees must have adequate risk management in place to detect and manage underperforming investment options when approving products for use by their advisers and address issues in a timely manner.

ASIC also stated that it was considering a range of regulatory responses where there was an indication that clients were at risk of detriment as a result of personal advice and will work with APRA to ensure fund members are achieving good investment outcomes.

Changes to AFCA scheme approved by ASIC

On 7 March 2024, AFCA announced that ASIC has formally approved material changes to the AFCA scheme with respect to its Rules and Operational Guidelines.

AFCA confirmed that a total of 13 changes will come into effect from 1 July 2024, which include:

• increasing AFCA’s ability to manage unreasonable or inappropriate conduct within the scheme from complainants and paid representatives
• allowing AFCA to deal with complaints where an appropriate offer of settlement has been made or where issues in dispute have been previously settled
• amendments to clarify that AFCA will exclude investment-related complaints from sophisticated or professional investors, unless special circumstances apply
• enhance the visibility, accessibility and performance of AFCA’s forward looking formal review mechanism.

Super contribution caps to increase following AWOTE data release

On 22 February 2024, the Australian Bureau of Statistics (ABS) released the Average Weekly Ordinary Time Earnings (AWOTE) figure for the December 2023 quarter.

The result, being an annual increase of 4.5%, triggers indexation of the concessional contribution (CC) cap to $30,000 for the 2024-25 financial year, while the non-concessional contribution cap, which is four times the CC cap, will increase to $120,000.