Abandoned legislation
Assistant Treasurer Arthur Sinodinos, Media release, 14 Dec 2013
The previous government left a backlog of 92 announced but unlegislated tax and superannuation measures. One of the early tasks of the new government has been to decide which measures will continue and which will be abandoned. In particular, proceeding measures that impact on SMSFs include:
- wider administrative penalties and directions to allow the Australian Taxation Office (ATO) more flexibility in dealing with breaches by trustees (from 1 July 2014), and
- look-through tax treatment on instalment warrants (and similar arrangements) so that the investor is considered the owner of the underlying asset for tax purposes.
Measures not proceeding include:
- taxing pension phase earnings over $100,000, and
- contribution tax refund for low-income earners (legislation needed to remove this concession).
A number of measures announced were to be funded from SMSF levy increases. The government has decided not to proceed with these measures, but will review this decision when the levy is next considered:
- changes to off-market acquisitions and disposals,
- measures to ensure super money is transferred to a valid SMSF bank account, including a register that Australian Prudential Regulation Authority-regulated funds can check, and
- including rollovers to SMSFs as a designated service under anti-money laundering legislation.
Any legislation required to finalise the 92 measures is expected before 1 July 2014.
Deeming of account-based pensions
Social Services and Other Legislation Amendment Bill 2013
Legislation has been introduced to remove income test advantages for account-based pensions from 1 January 2015, with grandfathering to protect certain arrangements already in place. Account-based pensions are currently fully assessable under the assets test, but are pension-friendly under the Centrelink/Department of Veterans’ Affairs (DVA) income test. Only income received above the deductible amount is included as assessable income.
Clients who receive a Centrelink/DVA pension as at 31 December 2014 will continue to be assessed under the current income test rules, but only on account-based pensions also in existence at that date. This may lock clients into existing products as switches to a new account-based pension from 1 January 2015 will see the new pension assessed under the deeming rules.
Age pension age (women)
The last step in the alignment of the age pension age for men and women occurred on 1 January.
The Centrelink age pension age is now 65 for both men and women. Veterans’ Affairs recipients continue to qualify at age 60 although partners of veterans who do not have qualifying service in their own right are subject to the Centrelink age.
The Centrelink qualifying age will rise again from 1 January 2017 when it starts its increase to 67. A paper issued by the Productivity Commission, “An aging Australia: preparing for the future”, has ignited debate on whether the age should be even higher.
Reasonable care guidance for tax agents
Tax Practitioners Board information sheets
In the code of professional conduct (items 9 and 10) under the Tax Agent Services Act 2009, registered tax agents are required to take reasonable care in determining a client’s state of affairs as well as ensuring that tax laws are correctly applied.
The Tax Practitioners Board has released two final information sheets to provide guidance on the principles and elements of the code.
Allocating super contributions
ATO Tax Determination TD 2013/22
Clients making contributions to an SMSF in June can claim the tax deduction in that financial year (where eligible), but have the contribution assessed against the following year’s cap. This strategy is effected by paying the contribution into a contribution reserve/account and then allocating to the member’s account in July by the 28th. The application of this strategy was confirmed in this tax determination.
ASIC warning on real estate property recommendations
ASIC media release 13-304
The increased popularity of SMSFs investing in property has raised Australian Securities and Investments Commission (ASIC) concerns that real estate agents may be unaware of the boundaries on financial product advice.
A statement of opinion or recommendation to use an SMSF to invest in property is considered advice and agents need to be licensed under the Corporations Act. ASIC has provided warnings to the real estate industry and is working with the Real Estate Institute of Australia to ensure real estate agents understand their legal obligations.
The corporate regulator is also aware some real estate agents are offering commissions or benefits to financial advisers for recommending that investors use an SMSF to purchase the real estate agents’ properties, which may be conflicted remuneration under the Future of Financial Advice reforms.
