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This month we look at what support is available to Australians affected by the bushfires, changes to legislation allow high earners to opt out of some SG payments, warnings from the ATO and ASIC on early release of super schemes, the price of medications for pensioners has come down, FASEA’s ethics rules are now in place and APRA launches a new sustainability standard.
Financial relief for the bushfire-ravaged
A raft of financial recovery support is slowly becoming available as catastrophic bushfires continue to devastate communities across the country.
The Australian Financial Complaints Authority (AFCA) has set up an online support hub at afca.org.au/bushfiresupport where families and small businesses impacted by the ongoing crisis can find relevant information and have their financial issues addressed quickly.
AMP is offering free financial assistance to anyone who has suffered major financial loss due to the fires, including rural fire brigades, and AMP disaster relief packages are available for clients. Call 13 30 30 or visit amp.com.au/disaster-relief for more information.
The Australian Tax Office has a list of impacted postcodes and will automatically grant deferrals for lodgements and payments due without residents from those areas needing to apply. Call the ATO Emergency Support Infoline on 1800 806 218 for more details.
AFCA’s Executive General Manager Rob Guest says that beyond problems relating to insurance and claims, many thousands will be facing financial hardship.
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“Thousands of people have been affected, homes destroyed, people who can’t access their cash or who have lost their credit cards, or who can’t make loan repayments because they have no job to go to anymore, and small businesses will have been lost or are currently inoperable,” Mr Guest says.
“If you are having trouble with your insurer or financial provider about your claim or request for hardship assistance, you can talk to AFCA to get help.”
However, the Self-Managed Super Funds Alliance stresses that access to funds from superannuation accounts where members are not retired after preservation age, over 65, terminally ill, disabled or deceased will generally be unsuccessful.
Opting out of super guarantee
Workers with multiple employers can now apply to opt out of receiving the super guarantee from some of their employers.
The change, which came into effect on 1 January 2020, is of particular interest to high income earners who may be unwittingly going over the concessional contributions cap.
According to the Australia Taxation Office (ATO), you may be eligible to opt out if you have more than one employer and expect your employers’ mandated concessional super contributions to exceed your concessional contributions cap for a financial year.
Concessional contributions are made into your super fund before tax and include compulsory employer contributions and salary sacrifice payments. Caps apply on these contributions and if you exceed them you may need to pay extra tax.
The exemption certificate means employers will not be liable for the super guarantee charge if they don’t make super guarantee contributions on your behalf for the quarters covered by the certificate.
Learn more about the superannuation guarantee in our simple guide to Superannuation Guarantee (SG) contributions.
Beware promises of early super
Promoters of schemes that promise early access to your super continue to crop up despite Australian Tax Office warnings.
As the festive season got underway late last year, the ATO, which regulates self-managed super funds, took one promoter of an illegal early-release scheme to the Federal Court.
The Australian Securities and Investments Commission (ASIC) claims some promoters charge fees amounting to a fifth or more of the withdrawn super amount and in worst cases, can even steal the lot.
Dodgy promoters will be fined and banned from providing financial services, but clients can also end up in trouble. As well as having to pay tax on the money, along with interest and possible financial penalties, if a promoter persuades a client to sign false statements, the client could even face prison time.
Problems of illegal early access usually arise where members have not yet triggered a condition of release between the ages of 60 and 65. It may be triggered if a member loses their job, leaves it voluntarily or is working at both a full time and part time job and ceases either of them.
It is far more difficult for members under the age of 60 to receive their super, although funds may still be accessed on compassionate grounds or due to severe financial hardship.
Price of meds are down
The new year brings some good news for pensioners buying medications. From January 1, 2020, the Pharmaceutical Benefit Scheme (PBS) Safety Net thresholds were lowered from $390 to $316 for concessional patients and from $1550.70 to $1486.80 for general patients.
Federal Minister for Health, Greg Hunt, says the threshold to receive free or discounted medicines through the PBS has been lowered by 12 scripts for pensioners and concession card holders and the equivalent of two scripts for non-concession card holders.
“With these price reductions, a trip to the pharmacist will be cheaper for thousands of Australians, and more life-saving drugs can be listed on the PBS,” My Hunt says.
For more information on the lower thresholds visit humanservices.gov.au.
Financial advisers now bound by ethics
In the wake of the Royal Commission, financial advisors in Australia must now comply with a new set of principles and core values intended to shape every aspect of their professional conduct.
Issued by the Financial Adviser Standards and Ethics Authority (FASEA), the Code of Ethics came into effect on January 1 and will be supervised by the Australian Securities and Investments Commission (ASIC).
The FASEA standards will be phased in between now and 2024. The Code of Ethics is now in place and other standards will address education and professional development, including trust, competence, honesty, fairness and diligence.
While the industry has focussed on the educational standards, it’s the ethical standards, and the regimes to enforce them, that have the potential to revolutionise financial advice. These will impact planners, as well as licensees and funds.
Planning for sustainability
APRA’s new standard SPS 515, which requires all superannuation trustees to commit to a business performance review and outcomes assessment, was launched on January 1, 2020.
It follows the release of the Australian Prudential Regulation Authority’s MySuper Heatmap last December and provides additional transparency on current and future member outcomes.
Along with fees, costs, and investment performance, sustainability is one of the three areas to be assessed. In an industry where retirement outcomes are delivered over decades, rather than months or years, funds need to deliver value-for-money member outcomes in the long-term.
Two measures will provide the baseline for considering future fund sustainability: the net assets available for members’ benefits and the total number of member accounts.
While not a guarantee to good performance, size does matter when it comes to superannuation. Big funds are likely to do better at negotiating discounts with service providers, accessing investment markets, and spreading the cost of operations over their larger membership base.
APRA expects trustees to consider their outcomes to better understand the factors that drive them and to then put a plan in place for any sustainability concerns the new standard reveals.