Penalty unit value increases
The value of each commonwealth penalty unit increased by $30 on 1 July 2017 to $210. This increases the cost of fines for specified breaches. The value will increase each three years in line with the consumer price index, starting from 1 July 2020.
Transfer cap and death benefits
ATO Law Companion Guideline 2017/3
The ATO’s Law Companion Guideline 2017/3 clarifies the impact of the transfer balance cap when a death benefit is paid to a dependant beneficiary. The payment of the pension triggers a credit in the recipient’s transfer balance account.
If the pension is paid as an automatic reversionary pension, the credit is applied 12 months from the date of death of the original owner. If non-reversionary, the credit is applied 12 months from the date the beneficiary becomes entitled and includes any interest accrued from the date of death.
This 12-month delay allows time to rearrange income streams if the transfer balance cap is exceeded. The beneficiary can choose whether to commute existing income streams or the death benefit pension.
A death benefit pension can no longer be commuted and rolled back into accumulation phase, but can be rolled over to a death benefit pension with another provider.
Transfer cap and defined benefit pensions
ATO Law Companion Guideline 2017/1
It would be difficult to assess defined benefit pensions against the new transfer balance cap so, instead, a defined benefit income cap applies.
The ATO’s Law Companion Guideline 2017/1 provides clarification on how the defined benefit income streams, that is, non-commutable life expectancy or market-linked products, are assessed against the income cap.
Converting TRIS to a standard pension
Treasury Laws Amendment (2017 Measures No 2) Bill 2017
From 1 July 2017, the earnings in a transition-to-retirement income stream will no longer be tax exempt. When the member turns 65, and meets an automatic condition of release, the income stream will automatically transfer to an exempt income stream and be assessed against the transfer balance cap.
This bill introduced legislation to specify that when an earlier condition of release is met, the member must notify the trustees of the release condition to transfer to an exempt income stream.
Practical Compliance Guidelines
The ATO has issued Practical Compliance Guidelines (PCG) that outline its compliance approach for regulating certain aspects of legislation. These guidelines provide a useful outline for advisers. In particular, for superannuation the important guidelines released so far include:
• PCG 2017/3 – taxation of transition-to-retirement income streams,
• PCG 2017/5 – requests made before 1 July 2017 to commute an income stream, and
• PCG 2017/6 – commutation of death benefit income streams before 1 July 2017.
Short-term SOA relief
ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530The 1 July changes to superannuation created a significant volume of work for financial planners.
To help manage workloads and allow timely advice to be provided, the Australian Securities and Investments Commission has allowed the statement of advice (SOA) for urgent superannuation advice to be provided up to 30 days after the advice has been provided. The SOA should still be provided as soon as practicable after the advice has been provided.
This concession will only apply if the client has expressly requested the planner to provide advice and the advice was provided before 1 July 2017.
Increasing age pension age
Eligibility for the age pension is increasing up to the age of 67 for both men and women. The first stage of this increase was applied on 1 July 2017 when the eligibility age rose to 65.5. This applies for anyone born on or after 1 July 1952.
The ATO is working to update and consolidate its range of public rulings to ensure the opinions are in line with current business practice. The aim is not to change the opinion, but to update and consolidate the rulings. This process is being conducted in consultation with relevant parts of the industry.