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- Pensioners allowed to work more to boost labour market
- Separating de facto couples in WA can now split super
- Vanguard Super on track for 2022 launch
- Biggest SMSF in Australia has over $400 million in FUM
- SMSFs become more popular with younger investors
- Quality of advice review proposes removal of Statement of Advice requirements
- November deadline looming for Director IDs
- Superannuation’s role in nation building and infrastructure on the table
Pensioners allowed to work more to boost labour market
The federal government has increased the amount that age and veteran pensioners can earn in a year and still receive a pension by $4,000, effective this financial year.
“Following the successful Jobs and Skills Summit in Canberra, an immediate $4,000 income credit will be added to the income banks of Age Pensioners from December to be used this financial year,” Prime Minister Anthony Albanese said in a statement.
The total amount pensioners can earn in a year before it impacts their pension, known as the Work Bonus, would be $11,800, instead of $7,800.
The measure is designed to boost the labour supply by reducing financial disincentives for pensioners who want to work more.
The $4,000 will be available until June next year, subject to legislation being passed.
Separating de facto couples in WA can now split super
De facto couples in Western Australia will now be covered by superannuation splitting laws, bringing the state in line with the rest of Australia.
“For too long outdated arrangements meant de facto partners in WA could not split their superannuation in the event of a separation,” WA attorney general, John Quigley, said.
“Instead, each partner walked away with their individual superannuation account balance – no matter how disproportionate they were – leaving women overwhelmingly disadvantaged.
“This often created severe injustices where there were not enough other assets to help make a fair division of property between the splitting de facto partners.”
There are currently 200,000 West Australians currently in de facto relationships.
Vanguard Super on track for 2022 launch
Index manager Vanguard is on track to launch its super fund by the end of the year after the Australian Prudential Regulation Authority (APRA) licensed it as a Public Offer Registrable Superannuation Entity licensee on 25 August 2022.
Vanguard says its new super offering is designed to keep super simple, transparent and effective for its future members.
Vanguard has over $11 trillion globally in assets under management and is one of the largest providers of exchange traded funds in Australia.
Biggest SMSF in Australia has over $400 million in FUM
The largest self-managed superannuation fund in Australia had over $400 million in funds under management in 2020, according to data requested by Crikey and released under the Freedom of Information Act by the Australian Taxation Office.
The top 10 funds, by size, all had over $170 million in funds under management, and the top 100 SMSFs in Australia all had assets over $50 million in 2020. That compares to average assets per SMSF of $1.3 million and median assets of $733,926 for the 2020 financial year.
In the same year, the average taxable income of all SMSF members was $116,000, while the median taxable income was $65,000.
The earnings on the investments of the largest 100 SMSFs, just like the smallest SMSFs, are all concessionally taxed at 15%.
SMSFs become more popular with younger investors
Younger Australians are increasingly realising the benefits of having an SMSF, with 35–44 year olds responsible for approximately 30% of all SMSFs established during the last financial year, according to Class’s latest annual benchmark report for the SMSF industry.
“SMSF establishment appears to have caught the eye of younger and more engaged trustees who are using them to make their own investment decisions around retirement. The average age at establishment has fallen from 51 years between 2006 and 2014 to 46 years between 2020 and 2022,” Class said in the report.
The report also found that 15% more females than males are making downsizer contributions and attributes that to women taking more ownership when it comes to household finances and seeking their own financial independence. Downsizer contributions overall have risen by 6% since the 2019 financial year.
Female balances have been growing faster than male balances since 2017 – and also outperforming them by 4% – while women’s balances have also risen from being 80% of male balances to 84%.
In terms of where SMSFs are investing, exchange traded funds (ETFs) are one of the most popular investments with a 5% increase since June 2022. There was a 3% increase in their popularity in the 35–44 age group.
“SMSF investors are seeing the inherent competitive advantage of ETFs compared to more traditional unlisted managed funds, as with ETFs, they can transition from low-performing to high-performing funds quickly and more easily,” Class said in the report.
Quality of advice review proposes removal of Statement of Advice requirements
The Quality of Advice Review interim report, recently released by Treasury, has outlined sweeping changes to the laws governing financial advice.
Review chair Michelle Levy proposes an obligation to provide ‘good advice’ to replace the ‘best interests’ duty, the appropriate advice duty, the duty to warn the client and the duty of priority in Chapter 7 of the Corporations Act.
The paper also outlines a proposal to remove statements of advice (SOAs), with Levy querying “whether consumers want written advice at all, especially when the advice is simple or limited or when they have a regular relationship with the provider”.
“As to consumer harm, I am not persuaded SOAs provide any real protection to consumers,” she said.
Levy proposes the Corporations Act be amended to remove requirements for providers of advice to provide SOAs and ROAs, and instead only require a provider of personal advice to maintain complete records of their advice.
November deadline looming for Director IDs
Any SMSF with a corporate trustee needs their directors to obtain a Director Identification Number under new framework introduced last year. Existing directors need to have applied by 30 November this year.
Class estimates that there are potentially 850,000 directors of corporate trustees of SMSFs that will need to obtain a Director ID. The government estimates that overall, 2.7 million directors will need to be onboarded to the new regime.
At June 2022, Director ID applications processed were around 600,000, representing just 18.67% of necessary completed Director IDs.
Class acknowledges the benefits of the system, which further deters the rogue practice of setting up SMSFs for the illegal early release of super but calls on the government to allow professionals such as accountants and financial advisers to help corporate trustees meet the compliance deadline.
Superannuation’s role in nation building and infrastructure on the table
Federal treasurer Jim Chalmers has said that while the Labor government won’t be “messing” with superannuation’s fundamentals of sole purpose and preservation, they are looking at what role the industry could take in some major infrastructure initiatives.
“I want to push the boat out a bit and see what you think about three things,” the treasurer said in his address to the Superannuation Lending Roundtable.
Those three things were: funding and financing the energy transition; recognising and responding to the shortage of housing; and a “Treasurer’s Investor Round Table”.
“Infrastructure investment’s gone from 3.7% of super assets to 6.6% in the last eight years, but housing’s only gone from 7.4% to 8.5%. My question for you is, how do we do better here?” he asked attendees, including chairs and CEOs of the largest super funds, along with CEOs of two major banks.
Meanwhile, Industry Super Australia released its report into how industry super funds are supporting the Australian economy, which highlights a number of case studies of funds investing in major infrastructure projects.
“Industry funds have more than $3.3 billion invested in Australian agriculture and over $29.5 billion invested in Australian companies with manufacturing capability,” the report highlighted.
Heaven forbid that we’re seeing socialist kite-flying in the topic: “Superannuation’s role in nation building and infrastructure on the table”.
One hopes that, if that is the intention, it plays a distant second fiddle to the prime objective of Australian Superannuation: “To act in the best financial interests of super fund members”.