Monthly technical roundup - November 2023

Work Bonus and Employment income nil rate update

On 18 October 2023, the Social Security and Other Legislation Amendment (Supporting the Transition to Work) Bill 2023 (Cth) was introduced to Parliament.

The Bill proposes to implement two changes to the Social Security Act 1991 (Cth) and Veterans’ Entitlements Act 1986 (Cth)  that would affect pension and income support recipients. Those changes include:

• permanently increasing the maximum Work Bonus income bank balance for new and existing recipients from $7,800 to $11,800 from 1 January 2024. Additionally for new recipients, they will have a starting Work Bonus income bank balance of $4,000 (rather than $0)
• doubling the employment income nil rate period from 12 weeks to 24 weeks for income support recipients who enter full-time employment from 1 July 2024, allowing them to retain concession cards or other supplementary benefits (e.g. childcare subsidies) during this period.

Regulating digital and crypto assets platforms

On 16 October 2023, the Government announced the release of the Regulating Digital Asset Platforms Proposal paper seeking feedback on its proposal to introduce a regulatory framework for entities providing access to crypto exchanges and digital asset platforms.

The reforms contained in the paper seek to reduce the risk of collapse of crypto platforms by increasing the standard of the operation of platforms, as well as improve oversight. Some of the measures contained in the paper include:

• subjecting crypto exchanges and digital asset platforms to the existing Australian financial services law and requiring operators to obtain an Australian Financial Services License
• requiring digital asset platforms to meet specific obligations that take into account the nature of the platforms
• setting minimum standards for holding tokens, standards for custody software and standards when transacting in tokens.

The consultation period will close on 1 December 2023 and the Government has stated that further consultation will be held next year on the draft legislation.

AFCA’s approach to determine compensation

On 6 November 2023, AFCA announced that it had released a draft Approach document seeking industry feedback on AFCA’s approach to determining compensation in complaints involving financial advisers and managed investment schemes (MIS).

In the draft Approach document, AFCA listed four factors that AFCA would consider in determining compensation in complaints involving financial advisers and MIS. Those factors include:

• liability and compensation in relation to financial advice firms and Responsible Entities, where advice on an interest in a MIS (including those that have subsequently failed or become insolvent) was provided
• proportionate liability statues in relation to complaints involving financial advisers and MIS
• its power to join a party to a complaint if the party is an AFCA member
• fairness when apportioning loss in those complaints.

AFCA stated that the way AFCA handles these types of complaints have not changed, and that purpose of the Approach document is to publish its existing procedures and principles to help complainants and financial firms better understand how AFCA considers investment and advice complaints involving financial advisers and MIS.

The consultation period closes on 1 December 2023.

Reportable situations regime: ASIC modifies licensees’ obligations

On 20 October 2023, ASIC announced that it had registered ASIC Corporations and Credit (Amendment) Instrument 2023/589 which adjusted the reportable situation regime for Australian financial services licensees and Australian credit licensees.

Under the reportable situation regime, licensees are required to notify ASIC about some reportable situations, which include breaches of ‘core obligations’ which are deemed ‘significant’ under the Corporations Act 2001 (Cth) and National Consumer Credit Protection Act 2009 (Cth).  

The Instrument modifies this requirement by excluding certain breaches of the misleading or deceptive conduct provisions from the reporting. To qualify for the exclusion, the relevant breach must:

• only impact a single individual or, if it relates to a financial product, credit product, consumer lease, mortgage or guarantee that is, or is proposed to be held jointly by more than one person
• not result (or unlikely to result) in any financial loss or damages to any person
• not give rise (and unlikely to give rise) to any other reportable situation.

Additionally, the Instrument extends the timeframe for licensees to notify ASIC of a reportable situation from 30 days to 90 days.

More regular reviews of aged care fees

On 26 October 2023, Services Australia announced that regular reviews of aged care and home care fees will occur monthly from late October 2023, replacing the current quarterly review process.

Changing the review period to monthly will allow Services Australia to update the care recipient’s fees closer to when changes happen and calculate any applicable refund amounts as part of the next monthly claim process.

This means that care recipients may receive more regular correspondence from Services Australia advising them of fee changes or refunds.

Transfer balance cap amendments for defined benefit income streams

On 26 October 2023, the Government announced it intends to make amendments to the transfer balance cap legislation to address unintentional transfer balance cap 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.

Under the current legislation, where a capped defined benefit income stream ceases and a new one recommences, 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 members.

The Government stated that if the proposed measure is implemented, the amendments will apply retrospectively from 1 July 2017.