Which pending items will pass Parliament in 2021? - SMSF Bingo: FEBRUARY 2021
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SMSF Bingo:
Which pending items will
pass Parliament
in 2021?
FEBRUARY 2021
Table of contents
Introduction ............................................................................................................................................................. 3
Legislative measures that are still pending .................................................................................................. 4
The Superannuation (Objective) Bill ................................................................................................................................................................. 4
The Treasury Laws (More Flexible Superannuation) Bill 2020 ..................................................................................................................... 4
Treasury Laws Amendment (Self-Managed Super Funds) Bill 2020 .......................................................................................................... 5
The Superannuation (Objective) Bill .............................................................................................................................................................. 5
Items still to be legislated ................................................................................................................................... 6
SMSF Exempt Current Pension Income deduction simplifications .............................................................................................................. 6
De Minimus Test for Non-arm’s Length Expenditure .................................................................................................................................... 6
Possible delay in SuperStream rollovers for SMSFs due to SMSF bank account validation ...................................................................... 7
2020 Federal Budget announcements ........................................................................................................... 8
Stapling your super ........................................................................................................................................................................................ 8
Empowering members .................................................................................................................................................................................. 8
Holding funds to account ............................................................................................................................................................................... 9
Increased accountability and transparency .................................................................................................................................................. 9
The SuperConcepts SMSF legislation checklist ......................................................................................... 10
2 | Legislative Checklist 2021Introduction A raft of legislative and policy changes, which shape the SMSF landscape, hinge on decisions set to be made in Federal Parliament early in 2021. Several items were left hanging when Federal Parliament broke over the Christmas holiday period and are set to be addressed in the coming weeks and months - which ones will be passed and which ones will fail to make it through? 2021 will be an interesting year to see what gets enacted. Turn to the last page of this paper for your own checklist on the items still pending or yet to be tabled in Parliament. You could even start your own office sweep or a game of legislative bingo. Philip La Greca, Executive Manager, SMSF Technical and Strategic Services, SuperConcepts In this paper we will cover: 1. The legislative measures that have been announced - either in draft or currently before parliament 2. Budget measures; whilst they do focus on the APRA funds, there are some consequences that will flow to regulations which may affect SMSFs 3. The ‘Productivity Commission Report’ from 2020; and the focus on how the Government is dealing and addressing superannuation. 3 | Legislative Checklist 2021
Legislative measures that are still pending
Federal Parliament resumed on February 2 and there are several items of legislation relating to
SMSF Trustees and advisers that have carried over from last year. It had been anticipated that
these items would have been finalised in 2020 but COVID-19, amendments proposed in the
Senate and other factors created delays. This report will outline the legislation that is still pending
and what they mean for SMSFs in 2021.
The Superannuation (Objective) Bill
1
The first big-ticket item is the Superannuation (Objective) Bill . This is not new with the proposed
legislation first surfacing in the Financial Services Review completed by Murray Financial Services2.
The purpose of the Bill is to “establish the primary objective of the superannuation system, and
to provide that subsidiary objectives can be prescribed by regulation. The Bill will also require the
preparation of a ‘statement of compatibility’ for future Bills or regulations relating to changes in
superannuation.”
This will become critical to the SMSF landscape because it will then mean that any legislative
change that occurs in the future will have to be measured against this benchmark or objective.
If the objective is passed and is about providing a certain level of benefit for superannuation,
then any changes that are counter to what is set out will result in changes being difficult for the
Government to pass or legislate.
The understanding of the draft legislation is that the primary objective of superannuation is to
provide income in retirement to substitute or supplement the Aged Pension. This is an area where
the Government is talking about a baseline objective. However, with the superannuation industry
asking for something more aspirational, the real question will become; how does the Government
quantify something more aspirational?
The Treasury Laws (More Flexible Superannuation) Bill 2020
Another critical item on the agenda is the Treasury Laws Bill 2020 3which was meant to
commence from July 2020 but is still outstanding. When and if this Bill is passed; it will have
bearing on contributions, particularly for those entering retirement age.
The Bill is about extending the Bring-Forward Rule for Non-Concessional Contributions. So that
instead of having to trigger that Bring-Forward rule before age 65, superannuation members will
be able to trigger the Bring-Forward rule when they are age 66 or up to age 67 so it is quite an
important change.
This measure is about creating alignment, between the acceptance rules and aged pension
ages which is being phased up to age 67. When this bill passes, which most of us expect that it
will, there may be some questions about trying to tweak additional measures. Hopefully, these
hypothetical measures don’t result in this Bill being delayed.
1
See: Federal Register of Legislation, Superannuation (Objective) Bill 2016, available at
www.legislation.gov.au/Details/C2016B00182
2
See: Australian Government Treasury Publications, Financial System Inquiry Final Report, available at
https://treasury.gov.au/publication/c2014-fsi-final-report
3
See: Parliament of Australia, Treasury Laws Amendment (2020 Measures No. 6) Bill 2020, available at
https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6633
4 | Legislative Checklist 2021When passed, the legislation will mean that between the ages of 65 and 67 there will be new
strategy opportunities for superannuation members to review re-contribution strategies, estate
planning and tax component changes.
Treasury Laws Amendment (Self-Managed Super Funds) Bill 2020
The Treasury Laws Amendment (Self-Managed Super Funds) Bill4 is a simple one and introduces
the measure to increase the number of members allowed in an SMSF from four to six.
The current legislation lists that SMSFs are capped at less than five members and this amendment
seeks to change that to less than seven. This measure was first proposed before the last Federal
election but did not progress and is now being introduced as a separate bill.
This may result in some benefits for SMSFs because, with more members, Trustees can get a
bigger scale which could potentially help in the cost elements of SMSFs.
Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020
The Treasury Laws Amendment Bill5 is a relatively new bill introducing the facilitation to the
closure of eligible rollover funds by 30 June 2021. Given the law is yet to pass, it is anticipated that
there will be some tweaking to allow sufficient time for the eligible rollover funds to be shut down.
With the potential for someone to have duplicate inactive member balances, this Bill will remove
eligible rollover funds as an option.
Eligible rollover funds were designed as a temporary parking vehicle, so if someone left their fund
or where no longer able to stay in a particular fund, it shifted them to an eligible rollover fund.
The intention was that the person would check their eligible rollover funds through a variety of
mechanisms and could therefore consolidate their superannuation. These little bits of super that
became inactive, would be effectively moved in with their active accounts. This did require action
by the individual for this consolidation.
This Bill is to try and streamline this process. Once passed, instead of inactive accounts basically
being lodged with these sorts of funds, all inactive accounts will be lodged with the ATO. This
will allow the ATO to match it with an active member account and proactively send those monies
to that fund which will reduce the number of accounts and therefore produce better outcomes
for members.
4
See: Parliament of Australia, Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, available at
https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=s1269
5
See: Parliament of Australia, Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020, available at
https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6491
5 | Legislative Checklist 2021Items still to be legislated
There have been several announcements in regard to legislation, but no actual introduction of
legislation to date. From an SMSF viewpoint, there are three big-ticket items that the industry is
waiting to see.
SMSF Exempt Current Pension Income deduction simplifications
1. Removal of the Actuarial Certificate requirements for SMSFs that have disregarded small fund
assets even though they are 100% in pension phase.
2. Allowance to use the unsegregated method where an SMSF has 100% segregated assets for
part of a financial year.
Changes in 2017 meant that SMSFs are currently in a situation where now where a fund can be
segregated for part of the year as distinct from the whole of the year. This has changed the rules
significantly and it has also made things more complex.
Currently an SMSF may still need to provide an Actuarial Certificate if they have disregarded small
fund assets despite the fact, they are 100 per cent in pension phase. There has been a proposal to
remove that requirement that we may see put before Parliament in the future as this is a bit of red
tape that the government may want to remove.
Secondly, it has been proposed that funds may be able to use the unsegregated method if they
are not always 100 per cent segregated for a full financial year. This would allow Trustees to use
one calculation instead of splitting two sets of calculations and two methods for determining their
exempt current pension income.
De Minimus Test for Non-arm’s Length Expenditure
The ATO released draft guidelines 6for a new compliance approach in terms of applying the non-
arm’s-length income (NALI) provisions to non-arm’s-length expenditure in October 2020.
This ruling has not been finalised and the SMSF Association has proposed a further round of
consultations as there has been extensive industry feedback. These guidelines could extend the
De Minimus Test (from the Latin de minimis non curat lex which translates to the law does not
concern itself with trifles) from non-arm’s length income to non-arm’s length expenditure.
While the ATO draft guidelines are finalised, the final form of how this compliance will be applied
including whether there is a threshold and how much that will be are yet to be determined and
there is still likely to be a lot of consultation to come.
6
See: Draft ATO Guidance PCG2019/D6
https://www.ato.gov.au/law/view/pdf/cog/pcg2019-d006.pdf
6 | Legislative Checklist 2021Possible delay in SuperStream rollovers for SMSFs due to SMSF bank account
validation
From October 1, 2021 it will become mandatory to use SuperStream to roll any amount to or
from an APRA regulated fund to an SMSF which is designed to speed up the process which has
previously been slowed down by the identification process.
SuperStream has been used for businesses to pay employee superannuation guarantee
contributions to super funds since 2015 with all contributions and identifying data sent
electronically. Now, to roll over any amount to or from your fund you will need an electronic
service address (ESA) to allow these funds to be transferred through SuperStream.
APRA funds already use SuperStream and the timeframe is seven working days but to roll funds
from an APRA regulated fund to an SMSF it is 30 days - although anyone that has had to roll
any amount over has found it is usually considerably longer. The use of SuperStream has been
designed to speed up this process.
The big stumbling block is bank account verification procedures and how APRA regulated funds
will be able to know that the bank account nominated belongs to the SMSF.
Hopefully, with the introduction of the new Open Banking regime7 where parties can check details
with banks, APRA funds could potentially ask banks to confirm who the actual owner is based on
the account number and BSB number. This sort of electronic mechanism, whether facilitated by
the APRA provider, the SMSF funds or even possibly the ATO, would solve this problem.
7
See: Australian Banking Association, What is Open Banking?, available at
https://www.ausbanking.org.au/policy/the-future/open-banking/
7 | Legislative Checklist 20212020 Federal Budget announcements
The focus of the 2020 Federal Budget was heavily on jobs and economic growth in the heart of
the COVID-19 pandemic so that meant, from a budgetary viewpoint, we saw a lot of things not
happen. We did not see them attack contribution caps, tax on funds, tax on benefits. Given the
fact that the budget is in such a large deficit, the opportunity - or should we say the temptation -
to look at super as a potential source of some new revenue were ignored - which is a
good outcome.
So, what are the measures that have been announced? There has basically been a range of
measures that have been announced that have been focused on APRA funds, but we will look
at measures that are still important from an SMSF viewpoint including.
• Stapling your super account
• Empowering members
• Holding funds to account
• Increasing accountability and transparency
Stapling your super
One of the big problems in Australia is that when people change jobs, they often end up with a
new superannuation account which results in people have several inactive accounts. A range of
measures have been announced to prevent this and get more people to consolidate their super
accounts including:
• From 1 July 2021 employers will check an ATO portal to find out any new employee’s existing
superannuation fund
• Contributions will then be remitted to that fund unless the employee advises a different fund
• For first time employees, they must either advise a nominated fund or use the employer default
fund
Effectively once an employee selects a fund with their first job, it will follow them until the select
another fund.
Empowering members
From 1 July 2021, the ATO will provide a new online portal called YourSuper which will provide all
employees with a single portal to compare all MySuper products. This will likely sit as a subsection
of the MyGov account for an individual rather than a separate login. The new portal will contain
information about a person’s existing super accounts, quarterly updated performance tables for
existing MySuper products and a comparison tool.
This will take some of the existing super elements that are already in the MyGov portal such as
things about individuals contribution caps, transfer balance caps and superannuation balances -
which will also show how many funds an individual has and shift these into YourSuper.
What it will contain over and above what the existing MyGov super information will be is quarterly
updated performance tables for existing MySuper products. These performance tables will not be
the fund’s calculation, these will be APRA’s calculations.
It will also contain a comparison tool so individuals can compare not only the existing funds they
have but other funds that are in the MySuper space. Individuals will also be actively prompted
here to consider consolidation.
8 | Legislative Checklist 2021Holding funds to account
At present, APRA has the MySuper Product Heatmap8 which uses a graduating colour scheme
to provide clear data on products and their investment performance, fees, and costs. What APRA
does is they measure funds on both their investment performance, their costs, their liquidity, their
cash flow, and their new member status. They measure funds against themselves, but they do not
actually measure them against each other.
APRA will now compare how MySuper funds’ investments in asset classes against the asset
classes as a whole.
One of the key changes will be that funds will have an obligation to inform members if APRA says
their funds are underperforming. If a fund underperforms for two consecutive years, then no new
members will able to join that fund.
Other changes will include a redesign of these Heatmaps that will include improved colour co-
coordination to make them easier to read as well as the introduction of standard performance
measure being put across all these funds - specifically an eight-year rolling average.
Increased accountability and transparency
The Federal government also announced a range of measures that ensure trustees only use
members’ money to maximise member benefits. They include:
• Reversal of onus of proof9 on expenditure so that the trustee and each director of a corporate
trustee of a registrable superannuation entity must provide evidence to show that they per-
formed their duties and exercised their powers in the best financial interests of the beneficiaries.
• Trustees will need to provide information about expenditure to members as part of an Annual
Member Meeting
• Expenditure disclosed will include key executive remuneration, marketing expenditures, political
donations, direct or indirect sponsorships and payments to related parties
Theses measures are targeted to MySuper accumulation initially with a proposed expansion to
other superannuation funds where the trustee constructs the investment strategies:
• Conservative, balanced or growth style options.
• A different approach will need to be devised for member constructed portfolios & SMSFs
This measure will ensure that when trustees of an APRA regulated super fund use members
money it must be to maximise member benefits. Part of that is via the reversal of the onus of
proof for trustees on expenditure. Trustees have got to be able to justify why they spent the
money and show that it had a positive outcome.
Under the measure Trustee would be required to provide information about expenditure to
members as part of an annual member meeting.
8
See: APRA MySuper Product Heatmap available at https://www.apra.gov.au/mysuper-product-heatmap
9
See: Treasury Laws Amendment (Measures for a Later Sitting) Bill 2020: Best Financial Interests Obligation, available at
https://treasury.gov.au/sites/default/files/2020-11/c2020-124304_bfidem.pdf
9 | Legislative Checklist 2021The SuperConcepts SMSF legislation checklist
Legislative measures that are still pending
The Objective Bill
Extending the Bring-Forward Rule for Non-Concessional Contributions
Extending the number of members from four to six
Shutting down eligible rollover schemes
Items still to be legislated
Removal of the actuarial certificate requirements for SMSFs that are 100% in pension phase
with disregarded small fund assets
Allowance to use the unsegregated method where an SMSF has 100% segregated assets for
part of a financial year
De-minimus test and finalisation of non-arm’s length expenditure guidance by the ATO
Introduction of SuperStream for SMSF rollovers
Budget 2020 superannuation announcements
Stapling you Super
Empowering members
Holding super funds to account
Increased accountability and transparency
10 | Legislative Checklist 2021Find out more Call us
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Disclaimer
This document is for general information only. Every effort has been made to ensure that it is accurate, however, it
is not intended to be a complete description of the matters described. The document has been prepared without
taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken
as containing any securities advice, securities of financial product recommendation.
Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment of financial
product decisions and is not a replacement of the requirement for individual research or professional tax advice.
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