Monthly technical roundup - October 2024

Super to be paid on Government-funded paid parental leave

On 1 October 2024, the Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Act 2024 (Cth) received Royal Assent.

The act amends the Paid Parental Leave Act 2010 (Cth) to establish the Paid Parental Leave Superannuation Contribution (PPLSC) for recipients of Parental Leave Pay (PLP), in relation to children born on or after 1 July 2025.

The PPLSC, to be paid annually, comprises two components:

• core component - calculated by multiplying the total amount of PLP paid to an individual in an income year by the superannuation guarantee rate for that income year
• nominal interest component - so that individuals are not disadvantaged by the PPLSC payment being made annually, it addresses the foregone returns that may result from the annual payment.

A separate claim will not be required for PLP recipients to access the PPLSC entitlement. It will be payable for all recipients of PLP, regardless of their gender or period of PLP taken during the income year.

The PPLSC will be treated as a concessional contribution when it is received by the superannuation fund, meaning it will generally be subject to 15 per cent concessional contributions tax in the fund and will count towards the individual’s concessional contributions cap in the year it is received by the fund.

The amendments came into effect on 2 October 2024.

Proposed new framework for the delivery of Aged Care

On 12 September 2024, the Aged Care Bill 2024 was introduced to Parliament. The bill contains the Government’s proposal to establish a new Aged Care Act which would implement fundamental reforms to the aged care system. If passed, the reforms would come into effect on 1 July 2025. On 16 September 2024, the bill was referred to the Senate Community Affairs Legislation Committee for inquiry, with the report due by 31 October 2024.

The proposals contained in the bill, which address around 60 recommendations of the Royal Commission into Aged Care Quality and Safety, are split into eight chapters addressing the following areas:

• Introduction – introductory and framing provisions, as well as definitions which underpin the new aged care system
• Entry to the Commonwealth aged care system - the requirements for an individual to access funded aged care services, such as establishing clear age limit thresholds and a single assessment pathway for approvals
• Registered providers, aged care workers and aged care digital platform operators – outlines the conditions of registration and key obligations for providers of funded aged care services, as well as obligations that apply to aged care workers and responsible persons of registered providers
• Funding of aged care services – includes details of the funding arrangements, such as what the Government will fund, what an individual can be asked to pay, and where means testing rules apply. This chapter also outlines the various types of contributions such as means tested residential accommodation, accommodation payments and refundable accommodation deposits
• Governance of the aged care system – establishment of the underlying governance and administration of the broader aged care system
• Regulatory mechanisms - the framework which enables those governing the system (e.g. the Commissioner, System Governor) to access regulatory powers which support the exercise of their powers and performance of their respective functions
• Information management - includes a revised information management framework to improve system transparency, including whistleblower protections
• Miscellaneous – matters not addressed in the other chapters.

In conjunction with the introduction of the bill, the Government also released fact sheets about some of the proposed changes to fees and charges for Home Care and Residential Aged Care. Some of the key changes include:

Residential Aged Care - Accommodation Reform

• twice-yearly indexation of the Daily Accommodation Payments for residents entering residential care from 1 July 2025
• maximum accommodation price (indexed to CPI annually) – the amount providers can charge without approval will increase to $750,000 (currently $550,000) from 1 January 2025
• Refundable Accommodation Deposits (RAD) and Refundable Accommodation Contributions (RAC) annual retention amount – where a resident enters care on or after 1 July 2025, aged care providers will retain 2% p.a. of a resident's lump sum RAD or RAC accommodation payment up to a maximum of 5 years
• phasing out RADs by 2035, subject to an independent review in 2029-30.

Aged care – contributions reform

• Basic Daily Care Fee – to remain at 85% of single base rate Age Pension. From 1 July 2025, an additional means tested Hotelling Supplement of up to $12.55 per day will be charged. Not payable by fully or partially supported residents
• the existing means-tested care fee to be replaced by a new means-tested non-clinical care contribution (NCCC), which will have a daily limit of $101.16 and will only need to be paid in the first four years. The requirement to pay the NCCC will cease once a resident has paid $130,000, or after four years
• no change to assessment of family home.

Home care

• Support at Home Program - 10 new funding classifications will replace the four packages currently available through the Home Care Packages program
• depending on a participant’s income and assets and the type of service received, their contributions will vary. No fees will be charged for clinical care as the Government will fund these services. The percentage contribution for services categorised under ‘Independence’ will range from 5% to 50%, while the ‘Everyday living’ services contribution will be 17.50% to 80%
• prices for each service must not exceed price caps set by the government.

The provisions in the bill will commence on a single day to be fixed by Proclamation. However, if no day is fixed by Proclamation before 1 July 2025, the provisions will commence on 1 July 2025. Grandfathering arrangements may also apply to ensure existing Residential Aged Care residents and Home Care participants are not overly disadvantaged as a result of the changes.

Government consults on Scams Prevention Framework

On 13 September 2024, the Government released for consultation exposure draft legislation implementing the Scams Prevention Framework (SPF).

The SPF establishes scam prevention principles in legislation to protect Australian consumers against scams. The features contained in the framework include:

• overarching principles (SPF principles enforced by the ACCC) that apply to all regulated entities
• sector-specific codes (SPF codes) that apply to regulated sectors, which will include a set of minimum standards
• a multi-regulator framework which will deliver a whole-of-ecosystem approach to enforcement, leveraging existing regulatory relationships, supervision and surveillance frameworks that have already been established by regulators
• dispute resolution mechanisms, which will require regulated entities to have access to internal dispute resolution schemes for consumers to complain about scams and to become a member of the external dispute resolution scheme that is authorised by the Treasury Minister for that sector.

The consultation period closed on 4 October 2024.

Option to exit certain legacy retirement products

On 17 September 2024, the Government announced the release of exposure draft regulations and explanatory material seeking feedback on its proposed expansion and implementation of the 2021–22 Federal Budget measure to allow individuals to exit certain legacy retirement products, such as lifetime, life expectancy and market-linked super income stream products that commenced before 20 September 2007, or were commenced as a result of a conversion of an earlier legacy product.

The draft regulations:

• enable individuals to exit a specified range of legacy retirement products for up to 5 years from the day the regulations commence
• provide more flexible ways to make allocations from a reserve, by:
  • providing that where a reserve supported an income stream that has ceased, and the reserve is allocated to the former recipient of that income stream, it will be exempt from both contribution caps
  • allowing other reserve allocations to be counted towards the member’s non-concessional contributions cap instead of their concessional contribution cap.

The consultation period closed on 8 October 2024.

Payday superannuation design details released

On 18 September 2024, the Government announced that it had released a fact sheet which contained further policy design details on its proposal to require employers to pay employees’ Superannuation Guarantee (SG) contributions at the same time as their salary from 1 July 2026.

The updated policy design details include:

• imposing a seven calendar day timeframe in which the employee’s superannuation fund must receive the contribution, before the employer is liable for the new SG charge
• changes to the SG charge framework, and how the ATO would assess and calculate the additional interest and penalties that would be imposed to the employer
• increased ATO visibility of SG contributions across employers by matching employer Single Touch Payroll data and superannuation fund reporting, in order identify missing or late SG payments.

The Government stated that legislative design will progress through the second half of 2024 and further draft legislation will be released for consultation.

Response to consultation on enhancements to superannuation data collections

On 20 September 2024, APRA announced that it had released a letter in response to feedback from its recent consultation on superannuation data collections relating to indirect investment costs, trustee financial statements reporting and its investments.

APRA stated that whilst the submissions received were largely supportive of its proposal, they contained suggestions to reduce reporting burden, as well as concerns on the clarity of reporting scope and instructions. In response to the feedback, APRA has updated reporting instructions and, where appropriate, revised its reporting standard to reduce the burden on supervised entities.

APRA also stated that it had split its response into two releases so that the data required on investment costs and financial statements can be prioritised. APRA intends to release the second response later in 2024 which will address the remaining topics.

Performance metrics and insights package to improve transparency in superannuation

On 24 September 2024, APRA announced it had  released its Comprehensive Product Performance Package (CPPP) of product performance metrics and insights to increase transparency and sharpen superannuation trustees’ focus on improving member outcomes.

The package examined 876 MySuper and choice products, which represented most investment offerings for accumulation members, and found a significant reduction in the number of products that failed the performance test in 2024 (37 down from 97), with 52 products that failed the 2023 test exiting the market. 

More information on the package, which includes an insights paper, statistical publications, and interactive product performance lookup tools can be found on APRA’s Superannuation product performance website.

Deductions for financial advice fees

On 25 September 2024, the ATO released Taxation Determination TD 2024/7 Income tax: deductions for financial advice fees paid by individuals who are not carrying on a business, which outlines the conditions under which an individual who is not operating an investment business may be entitled to a tax deduction under sections 8-1 (general deductions) or 25-5 (tax-related expenses) of the Income Tax Assessment Act 1997 (ITAA 1997) (Cth) for fees paid for financial advice.

The determination replaces TD 95/60 (now withdrawn) which outlined the ATO’s view on deductibility of fees paid for ongoing investment management (as a result of regulatory reforms to the financial services industry).

The ATO also stated that while the new determination outlines the requirements which must be satisfied to claim a deduction for financial advice fees, it does not represent any change in the ATO’s view on the deductibility of financial advice fees outlined in TD 95/60, nor does it consider circumstances where fees for financial advice are paid from a superannuation fund. However, it does include new content on the deductibility of financial advice fees under section 25-5 where the advice service was provided by a qualified tax relevant provider.