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The ATO has flagged a growing number of cases where individuals are attempting to access their superannuation early under compassionate grounds using inappropriate or fraudulent methods.

These include:

-  Altering or fabricating documents to falsely demonstrate eligibility

-  Engaging with illegal promoter schemes that offer early access

-  Providing misleading information in supporting documents, such as medical reports

-  Using super funds for expenses that aren’t approved under compassionate grounds

-  Creating fake ATO approval letters to present to super funds

In a media release, the Prime Minister announced that the expansion to the 5% deposit scheme for First Home Buyers is commencing on 1 October 2025, instead of next year.

Through the expanded 5 per cent deposit scheme, the Government guarantees a portion of a first home buyer’s home loan, so they can purchase with a lower deposit and not pay Lenders Mortgage Insurance.

The media release also states ‘Under the changes, all first home buyers will have access, with no caps on places or income limits. Property price caps will also be set higher in line with average house prices, providing access to a greater variety of homes.’

The ATO released its corporate plan 2025-26, including key areas of focus for SMSFs, including:

-  Outstanding SMSF annual returns

-  Compliance with release authorities

-  Compliance with commutation authorities

-  Illegal early access

-  Fraud prevention

The Government has tabled a legislative instrument Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025  to provide social security debt relief for any debts that may arise due to people commuting legacy pensions under new rules that apply from 7 December 2024. However,  a disallowance period applies to this legislative instrument, meaning it doesn't officially commence until it is tabled and a further 15 sitting days pass.

It is FirstTech’s understanding that these debt-waiver provisions are intended to apply from the same time legacy pension commutations commenced on 7 December.  We await confirmation of this from Centrelink, as well as details of their administrative treatment of these rules prior to the commencement date.

The Government has tabled a legislative instrument Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025  to provide social security debt relief for any debts that may arise due to people commuting legacy pensions under new rules that apply from 7 December 2024. However,  a disallowance period applies to this legislative instrument, meaning it doesn't officially commence until it is tabled and a further 15 sitting days pass.

It is FirstTech’s understanding that these debt-waiver provisions are intended to apply from the same time legacy pension commutations commenced on 7 December.  We await confirmation of this from Centrelink, as well as details of their administrative treatment of these rules prior to the commencement date.

The ATO has released detailed guidance for individuals and superannuation funds around:

1. Commuting a legacy retirement product – what products can be commuted, what happens after commutation and possible tax consequences.

2. Changes to reserve allocations – the correct contribution treatment for allocations from reserves, how excluded allocations have changed and the definition of a pension reserve. 

The ATO has released a comprehensive list of myths and misunderstandings in relation to Division 7A to assist taxpayers in avoiding mistakes. It covers common misunderstandings around Division 7A loans including the ability for shareholders to use company money, record keeping requirements and payments to other entities.  

Division 7A of the Income Tax Assessment Act 1997 is designed to prevent private companies from making tax-free distributions of profits to shareholders or their associates in the form of payments, loans or debts that are forgiven. 

The Government is delaying the start date to 1 November 2025 to allow the sector more time to prepare and implement the changes.

Centrelink have released the rates and thresholds that apply from 1 July to 19 Sept 2025.

For a summary, see the updated FirstTech Quick Reference Guide

The ATO have issued a reminder that the SG rate is set to increase from 11.5% to 12% on 1 July 2025 and will need to apply for all salary and wages paid to eligible workers on and after 1 July 2025. 

With the general Transfer Balance Cap (TBC) indexing to $2 million on 1 July 2025, those who have commenced a retirement phase pension prior to 1 July 2025 and haven’t previously reached or exceeded their TBC will receive a proportional increase in their personal TBC from 1 July 2025.

The ATO advises members and their tax agents will be able to view their updated personal TBCs in their ATO Online services from 11 July.

In November 2024, the Government announced that it would reduce HELP or student loan debt by 20% and make HELP and student loan repayments fairer from 1 June 2025. The Government has reconfirmed its commitment to this measure, promising it will be the first piece of legislation it introduces in the next Parliament when it returns from 22 July 2025. Once the legislation is passed, the ATO will apply the one-off 20% reduction in student loan accounts based on what a person’s HELP debt was on 1 June 2025 before indexation was applied. Indexation would apply only on the remaining loan debt balance, after the HELP debt has been reduced by 20%.

The FAQ provides further detail.  

ATO will pay super on government-funded Parental Leave Pay – known as a Paid Parental Leave Super Contribution (PPLSC) for eligible persons who receive Parental Leave Pay from Services Australia for a child born or adopted from 1 July 2025.

The PPLSC is based on the Super Guarantee rate and will include an interest component. It will be paid as a lump sum after the end of the financial year in which Parental Leave Pay was received and is paid to the individual’s super fund.

The PPLSC will be taxed at 15% in the super fund and count towards the individual’s concessional contribution cap for the year it is received by the fund.

The ATO has issued a checklist to help trustees and their advisers to be clear about their trust obligations as the 30 June deadline for trust resolutions approaches. The top 5 EOFY items for trustees are:

1.    Understand how income is defined for the trust estate

2.    Identify the trust’s beneficiaries

3.    Understand resolutions and present entitlement

4.    Identify any family trust elections or interposed entity elections

5.    Maintain clear and accurate records. 

The ATO has become aware of a “proliferation” of “dodgy websites” sharing misinformation about changes to the superannuation preservation and withdrawals rules said to be starting on 1 June, and is warning the community to always consider the source of information they see, and if in doubt go to trusted sources such as the ATO website, their super fund, their registered tax agent or their licensed financial adviser.

ATO Deputy Commissioner Emma Rosenzweig confirmed the maximum preservation age (the age when you can access your superannuation savings on retirement) is 60 for anyone born from 1 July 1964 and warns taxpayers to beware of websites that might be trying to harvest personal information such as TFNs, identity details or myGov login details. 

In a joint press conference on 14 May 2025, the Treasurer appears to have recommitted to the proposed tax on earnings on balances over $3 million, outlined in Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 which was prorogued when the Federal Election was called.

Businesses with an aggregated annual turnover of less than $10 million and using the simplified depreciation rules may be able to use the instant asset write-off to immediately deduct the business part of the cost of eligible assets. The ATO explains when the instant asset-write off can apply. 

The ATO has released an article regarding the ATO’s current position on the Bendel decision.

The article discusses some common questions regarding the Commissioner of Taxation v Bendel [2025] FCAFC 15 (Bendel) case decision and court process. Taxpayers are strongly encouraged to review the ATO Interim Decision Impact Statement, and to seek advice about their individual circumstances.

The ATO has reminded SMSF trustees of the requirement to pay the minimum payment for any account based pensions by 30 June.

The ATO stated 'If the minimum payment is not made by 30 June, this could result in adverse taxation consequences for the member.'

Practice Compliance Guideline PCG 2023/1 sets out the ATO’s compliance approach to claiming a tax deduction for additional running expenses incurred while working from home. Tax payers who work from home have a choice between two methods – claiming actual expenses or alternatively using a fixed-rate method outlined in the PCG.

The fixed-rate method allows work from home taxpayers who meet certain criteria to claim a deduction at a fixed rate for each hour worked from home during the year to cover additional energy, internet, mobile and home phone expense and stationery and computer consumables.

The ATO has updated the PCG to set a new rate when using the fixed-rate method. From 1 July 2024 the fixed rate is 70 cents for each hour worked from home during the income year.  Previously it was 67 cents per hour.

Taxpayers can still choose to claim actual expenses instead of using the fixed rate method. 

A release authority is a document issued by the ATO to superannuation funds to authorise the release of a member’s super for various reasons including:

-  Excess concessional contributions

-  Excess non-concessional contributions

-  Division 293 amounts payable

-  First Home Super Saver scheme release amounts

SMSF trustees can incur penalties if they fail to meet their release authority obligations. The ATO guidance provides information on release authorities and how trustees should respond to one if received. 

The Government has registered a legislative instrument Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025  to provide social security debt relief for any debts that may arise due to people commuting legacy pensions under new rules that apply from 7 December 2024. However,  a disallowance period applies to this legislative instrument, meaning it doesn't officially commence until it is tabled and a further  15 sitting days pass of the next parliament. Due to the election process, the next Parliament is not expected to sit until July 2025 at the earliest.

Despite the uncertainties, it is FirstTech’s understanding that these debt-waiver provisions are intended to apply from the same time legacy pension commutations commenced on 7 December.  We await confirmation of this from Centrelink, as well as details of their administrative treatment of these rules prior to the commencement date.

The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025 has passed parliament and awaits royal assent.

Amongst other things, the legislation extends the $20,000 instant asset write-off available to eligible small businesses by 12 months until 30 June 2025.

The Government has released the Mid-Year Economic and Fiscal Outlook (MYEFO) for 2024–25.

The mid-year update restated a number of previously announced measures, including:

-  5 year window to commute legacy pensions

-  Introduction of payday super from 1 July 2026

-  Reforms to the retirement phase of super 

The Assistant Treasurer, Stephen Jones issued a media release on 14 December 2024 titled ‘A pathway out of legacy retirement products’.

Regarding the social security treatment of legacy pension commutations, the media release states:

“… social security treatment will not be preserved for those who choose to transition out of their legacy retirement product. However, no debts will arise from the re‑assessment of these products’ asset values for the period before conversion.

Individuals who want to exit their legacy retirement product should consider seeking financial advice before taking action.”

The Government has finalised regulations which relax commutation restrictions on legacy lifetime, life expectancy and market-linked income streams.  

Part 1 covers commutation of legacy income streams  - the relaxation of commutation restrictions on legacy products allows them to be exited and the resulting capital used to commence another retirement income stream, left in an accumulation account, or withdrawn from superannuation entirely. The commutation must occur within a 5-year window (beginning 7 December 2024).
 
Part 2 covers allocations from reserves - it provides more flexible pathways to make allocations from a reserve, by:

-  Providing several situations in which allocations from reserves supporting an income stream are exempt from counting towards contributions caps.  This includes where a reserve supported an income stream that is ceased or commuted, and the reserve is allocated to the former recipient of that income stream.

-  Allowing other reserve allocations that would have previously counted towards a member’s concessional contributions cap, to count towards their non-concessional contributions cap, if the allocation is made after the commencement of the regulations.

It's important to note that the Regulations do not cover the social security implications of commuting a legacy income stream - it is unknown at this stage whether further legislation will be released.

FirstTech will provide a Strategic Update on this topic early in the new year.

The bill implementing changes to the annual indexation for study and training loans has received Royal Assent.

Indexation is now based on either the Consumer Price Index (CPI) or Wage Price Index (WPI) – whichever is lower, with effect from 1 June 2023. This means the indexation rate applied on 1 June 2023 of 7.1% will be reduced to 3.2%, and the indexation rate applied on 1 June 2024 of 4.7% will be reduced to 4%.

The ATO will automatically make adjustments and provide the indexation credit to individuals, which will reduce their outstanding loan amount, or result in a refund for the excess amount on debts that are completely repaid after the application of 2023 or 2024 indexation.

How much people with a HELP debt will benefit can be estimated using the HELP Indexation Credit Estimator here.

More information can be found in this FAQ.

The Superannuation (Objective) Bill 2024 passed Parliament on 28/11/2024 and awaits Royal Assent.
 
The new legislation enshrines the objective of superannuation in legislation, requiring policy makers to assess future changes to superannuation legislation for compatibility with this objective.

The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way (the objective). 

The Aged Care Bill 2024 passed Parliament on 25/11/2024 and awaits Royal Assent.
 
The new legislation includes major changes to both Home Care and Residential Aged Care including fees and charges. 

The legislation implements various recommendations made by the Royal Commission into Aged Care Quality and Safety, and is aimed at improving the quality and viability of the aged care system.

Most proposed reforms commence 1 July 2025.  Grandfathering applies to existing Residential Aged Care residents and Home Care participants.

Some details of the new reforms are still unknown as they are contained in subordinate legislation known as the 'Rules' which have only been partially released for consultation.

See media release by the Minister for Aged Care, Anika Wells

The ATO has released data on the number of applications approved for the release of superannuation on compassionate grounds, for the period 2018-19 to 2023-24.

In 2023-24, the total amount approved for release was $1.040 billion.

The ATO have released Tax Determination TD 2024/7 Income tax: deductions for financial advice fees paid by individuals who are not carrying on an investment business.

This Determination sets out when an individual may be entitled to a deduction under sections 8-1 or 25-5 of the Income Tax Assessment Act 1997 for fees paid for financial advice.

The Determination replaces TD 95/60 (now withdrawn) which outlined the ATO’s view on the deductibility of fees paid by a taxpayer to an investment adviser for drawing up an investment plan, and the ongoing management of the investments.

The ATO has stated that the new Tax Determination TD 2024/7 was implemented as a result of regulatory reforms to the financial services industry, however it does not represent a change in the ATO’s view on the deductibility of financial advice fees.

The Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024 has passed both houses and awaits royal assent.

The legislation provides a superannuation contribution for people receiving Parental Leave Pay (PLP) in respect of children born on or after 1 July 2025.

Under the legislation, the ATO will pay the super contribution which is treated as a concessional contribution when received by the person’s super fund. The amount of the super contribution is the sum of all PLP payments during the financial year multiplied by the superannuation guarantee charge percentage (12% from 1 July 2025).  The contribution will also include an additional interest component to compensate for forgone returns resulting from the annual payment.

Treasury have released a fact sheet providing more detail on the proposal requiring employers to pay their employees' superannuation guarantee contributions on every pay cycle from 1 July 2026.

The fact sheet provides a number of proposed changes including:

• A new 7 calendar day ‘due date’ from the employee’s payday for super guarantee contributions
• -  Changes to the SG charge to create an incentive for employers to address unpaid super quickly
• -  Changes to SuperStream data and payment standards to allow payments via the New Payments Platform
• -  The ATO Small Business Clearing House will be retired from 1 July 2026

Aged care rates and thresholds for 20 Sept 2024 to 31 Dec 2024 have been released.

For a summary, see the updated FirstTech Quick Reference Guide

The Government introduced new Aged Care legislation to Parliament on 12/9/24.   The new legislation includes major changes to both Home Care and Residential Aged Care including fees and charges. 

The new Aged Care Bill 2024 implements various recommendations made by the Royal Commission into Aged Care Quality and Safety, and replaces the existing Aged Care Act 1997.

Most proposed reforms commence 1 July 2025.  Grandfathering applies to existing Residential Aged Care residents and Home Care participants.

The Government has stated that the new reforms have bipartisan support however it is draft legislation which has not passed as yet.

Key announcements

As the legislation has just been released we have only key announcements at this stage including:

Residential Aged Care - Accommodation Reform

Centrelink have released the rates and thresholds that apply from 20 Sept to 31 Dec 2024.

For a summary, see the updated FirstTech Quick Reference Guide

Legislation has been introduced to Parliament to pay a superannuation contribution for people eligible for the Commonwealth-funded Paid Parental Leave (PPL) scheme for births and adoptions on or after 1 July 2025.

Under the proposed legislation, the ATO will pay the  super contribution which is treated as a concessional contribution when received by the persons super fund. The amount of the super contribution is the sum of all PPL payments during the financial year multiplied by the superannuation guarantee charge percentage (12% from 1 July 2025).

The contribution will include an additional interest component to compensate for forgone returns resulting from the annual payment.

We've improved the way you access the FirstTech Pocket Guide (mobile version).  

Rather than having to download the FirstTech app which required periodic updates, now you can just add a bookmark to your mobile phone or tablet.   

The bookmark provides access to the FirstTech Pocket Guide and Age Pension calculator, with the same look and feel as the FirstTech app, but without having to make regular updates.

Note: If you already have the FirstTech app, you will need to delete it and replace it with the bookmark.

How to add bookmark

Simply open this webpage on your mobile phone or tablet
www.cfs.com.au/firsttech/campaigns/firsttech-app.html and follow the instructions to download the bookmark on your iSO (Apple) or Android device.

Following the release of the June quarter 2024 CPI figure of 138.8, it appears likely that the general transfer balance cap (TBC) is likely to rise from $1.9 million to $2 million from 1 July 2025.

While indexation of the general TBC is based on December quarter figures, the increase in the June quarter was high enough now to increase the TBC on 1 July 2025, unless deflation occurs.

The December CPI figure would need to reduce back down to 137.4 for the general TBC not to increase to $2 million on 1 July 2025. This would be the equivalent to a negative inflation rate of 1.01 per cent on the six months from the June to December quarter.

You can order printed copies of the following FirstTech Guides:

- FirstTech Super and Retirement Income Streams Guide

- FirstTech Pocket Guide

You can now pre-order free copies for delivery in August.

- Go to: cfs-first-tech.qponline.com.au

- Log in using your User Name and Password if you already have these details, otherwise select 'New User' under the blue 'Log In' button

- Complete the online ordering process

FirstTech has been contacted by a number of advisers asking about the announcement of a $750 Centrelink payment. Please be warned this appears to be a scam. The Australian Government has not announced any such payment.

The scam is supported by websites that outline fake eligibility rules and include buttons to "Apply here".

Clients asking about the payment should be informed that it is a scam and be warned against visiting any websites promoting the payment.

In a media release by the Attorney General, it was announced that the Administrative Review Tribunal (ART) will commence on 14 October 2024.

The ART is a new federal review body that will replace the Administrative Appeals Tribunal (AAT).

The media release states ‘All matters currently before the AAT will continue as usual and will automatically transition to the ART upon its commencement. People who have applied to the AAT for review of a decision do not need to submit a new application, and all AAT decisions that have already been finalised will not be considered again by the ART.’

The ATO has issued Tax Determination TD 2024/5 which outlines the ATO’s views as to how the non-arm's length income (NALI) and capital gains tax (CGT) provisions interact in determining the amount of statutory income that is NALI where a capital gain arises as a result of non-arm's length dealings.

9/7/2024   Social security Budget measures legislated

The Social Services and Other Legislation Amendment (More Support in the Safety Net) Bill 2024 received royal assent on 9 July 2024.

This legislation implements the following measures originally announced in the 2024/25 Federal Budget:

·         Increase in the maximum rate of rent assistance by 10% from 20 Sept 2024

·         Higher rate of JobSeeker Payment payable to single recipients with a partial capacity to work (less than 15 hours per week) from 20 Sept 2024

·         Improved flexibility for Carer Payment recipients, by replacing the 25 hour per week participation limit to 100 hours over 4 weeks.  In addition, the participation limit will no longer capture study, volunteering activities and travel time and will only apply to employment.  This will apply from 20 March 2025

Regulations have been registered which will prevent Capped Defined Benefit Income Stream (CDBIS) recipients from having their transfer balances negatively impacted by an involuntary rollover to a successor fund.

Previously, where a CDBIS was involuntarily transferred from one superannuation provider to another via a Successor Fund Transfer (SFT), the value of the new income stream would often be different from the value of the old income stream for transfer balance account purposes. Therefore, in such situations, an SFT could have caused an individual’s transfer balance account to increase or decrease.

Under the new regulations, which apply to SFTs that occur on or after 6 July 2024, when an SFT occurs, the transfer balance credit for commencing the new CDBIS must equal to the transfer balance debit from commuting the old CDBIS.

This amendment will also apply retrospectively in instances where a CDBIS recipient was adversely affected by the previous rules (i.e. the CDBIS recipient’s transfer balance account had increased due to an SFT that occurred before 6 July 2024.)

The ATO has issued Addendum TR 2013/5A1, updating taxation ruling TR 2013/5 Income Tax: when a superannuation income stream commences and ceases.

Taxation Ruling TR 2013/5 has been updated to:

-  include the ATO view on when a superannuation income stream ceases and commences under a successor fund transfer,

-  reflect legislative changes, including the transfer balance cap provisions and the concept of retirement phase for superannuation interests,

-  the sunsetting on 1 April 2021 of the Income Tax Assessment Regulations 1997 (including removing the requirement for a person to make an election for a payment to be treated as a lump sum commutation in regulation 995-03), and replacement with the Income Tax Assessment (1997 Act) Regulations 2021, and

-  contains an appendix on historical legislative changes that have applied in intervening years since the original publication of the ruling in 2013.

The Addendum was issued in draft form in September 2023 and some changes have been made in response to industry feedback. 

The ATO has issued for public comment a draft update TR 2023/4DC1, outlining a proposal to consolidate the meaning of “employee” for SG purposes in taxation ruling TR 2023/4. 

Taxation Ruling TR 2023/4 explains when an individual is an “employee” for pay-as-you-go withholding purposes. 

As a result of the draft update, SGR 2005/1 Superannuation guarantee: who is an employee? was withdrawn on 25 June 2024.

The draft update inserts guidance in Appendix 2 of TR 2023/4, on when a person is an employee under the expanded meaning of the term in s 12(2)-(10) of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

The draft update:

-  confirms the ATO’s view in light of case law developments in the context of SGAA since the last update of SGR 2005/1 Superannuation guarantee: who is an employee?

-  consolidates the ATO’s view in respect of the common law definition of employee in the withdrawn SGR 2005/1 and TR 2023/4, and

-  provides a holistic ATO view of the common law meaning of employee and extended meaning of the word as contained in SGAA.

The proposed date of effect is retrospective and comments on the draft update can be made until 9 August 2024

The Treasury Laws Amendment (Support for Small business and Charities and Other Measures) Bill 2023 has passed both houses of parliament and now awaits royal asset.  It contains the following measures:

-   Temporary increase to instant asset write-off threshold – For small businesses with an aggregated annual turnover of less than $10 million:

-  The instant asset write-off threshold will increase from $1,000 to $20,000 from 1 July 2023 to 30 June 2024.  The higher threshold will apply to the cost of eligible depreciating assets, second element costs and general small business pools.

-  Extend deferral of the 5 year “lock-out” rule for the small business simplified depreciation rules to 30 June 2024.

-  Small business energy incentive – For small and medium businesses with an aggregated annual turnover of less than $50 million:

-  A 20% bonus deduction to be made available for eligible expenditure that supports electrification or more efficient energy use, incurred from 1 July 2023 until 30 June 2024.

-  The bonus deduction applies to the cost of eligible assets and improvements up to maximum amount of $100,000, with the maximum bonus deduction being $20,000.

-  Super fund non-arm’s length expense rules – The following amendments were made to the non-arm’s length income (NALI) provisions that applies to non-arm’s length expenses (NALE) incurred by SMSFs and small APRA funds

-  Limit the income of SMSFs and small APRA funds that is taxable as NALI due to a NALE which is a general expense to twice the difference between the amount actually charged and the arm’s length expense amount that would have been charged for a general expense.  Note this amendment does not apply to NALE that are specific expenses.

-  Fund income taxable as NALI will be limited to taxable income of the fund (not including assessable contributions or deductions against assessable contributions).

-  NALE that were incurred or might have been expected to be incurred before the 2018–19 income year are not taken into account when determining whether NALI arises.

Under these changes, large APRA-regulated funds and exempt public sector superannuation funds are exempt from the NALE rules for both specific and general expenses.

The amendments will apply to income derived in the 2018–19 income year or a later income year, and to expenses incurred or expected to have been incurred in the 2018–19 or later income years.

-  Expand AFCA powers to hear superannuation related complaints – The Corporations Act 2001 was amended to ensure complaints relating to superannuation that do not meet the definition of a “superannuation complaint” under the legislation may be heard by the Australian Financial Complaints Authority (AFCA).  This reverses the effect of the Full Federal Court decision in MetLife v Australian Financial Complaints Authority [2022] FCAFC 173 which led to the AFCA being unable to consider complaints about insurance policies held inside superannuation. This amendment is proposed to apply retrospectively to ensure an individual is not disadvantaged by the Metlife decision.

PCG 2016/5 provides “safe harbour” terms on which SMSF trustees may structure their related party LRBA’s to be consistent with an arm’s length dealing. Those terms include the interest rate the SMSF must pay on related party loans for both real property and listed shares.

The interest rates are based on the Reserve Bank of Australia Indicator Lending Rates for banks and uses the rate for the May before the relevant financial year.

The May 2024 rates have now been issued so the expected safe harbour rates for 2024/25 are:

- Real Property: 9.35%

- Listed Shares or units: 11.35% (the real property rate used plus 2%). 

Centrelink have released the rates and thresholds that apply from 1 July 2024 to 19 Sept 2024.

For a summary, see the updated FirstTech Centrelink Quick Reference Guide - 1 July 2024 to 19 Sept 2024.

The House of Reps has, for the second time, voted against proposed Senate amendments to the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023. The Bill will go back to the Senate which is not due to sit again until 24 June 2024. As a result, the measures in the Bill remain in limbo including the 2023 Federal Budget proposal to amend the Non-Arm’s Length Expense (NALE) rules for general expenses incurred by SMSFs and Small APRA funds.

Under the current law, where a SMSF or Small APRA fund incurs a non-arm’s length general expense, all income derived in the fund can be considered Non-Arm’s Length Income (NALI) and taxed at the highest marginal rate. The Bill amends the NALI rules from the 2018–19 year for SMSFs and Small APRA funds to limit the amount of income that will be taxed as NALI where a fund incurs a non-arm’s length general expense to 2 times the level of the expenditure breach, calculated as the difference between the amount that would have been charged to the fund as an arm’s length expense and the amount that was actually charged.

The Bill also ensures that expenses incurred or expected to have been incurred before 1 July 2018 cannot result in the application of the NALE rules.

The ATO’s compliance approach outlined in PCG 2020/5 to not allocate compliance resources to determine whether NALI applies where non-arm’s length general expenses were incurred applied up to 30 June 2023 and at the time of writing has not been extended beyond then, leaving SMSFs and Small APRA funds uncertain on how non-arm’s length general expenses will be treated from 1 July 2023. 

The Social Services and Other Legislation Amendment (Military Invalidity Payments Means Testing) Bill 2024 passed both houses and awaits royal assent.

The purpose of the Bill is to confirm the assessment of certain military invalidity pensions affected by Douglas case (Commissioner of Taxation v Douglas [2020]).

The decision in Douglas found that certain military invalidity benefits paid under the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme (MSB, DFRDB, the affected payments) that commenced on or after 20 September 2007 should be taxed as “superannuation lump sums” rather than “superannuation income streams”. Prior to Douglas, the affected payments were taken to be superannuation income streams for tax purposes.

The affected payments have previously been treated as “asset-test exempt income streams” and “defined benefit income streams” under the Social Security Act and the Veterans’ Entitlements Act. However, the Douglas decision also found the affected payments may not be “taken to be a pension” for the purposes of the SIS Act 1994 and therefore could not be defined as a “defined benefit income stream”.

The new provisions are designed to produce the same assessment of income as the historical assessments of the affected invalidity payments, and to ensure the invalidity payments continue to be treated as exempt from the assets test. These arrangements are intended to ensure veterans and/or their partners receive a level of support that is consistent with the intent of legislation and policy before the unexpected findings of the Douglas decision.

The Senate Economics Legislation Committee has recommended that legislation implementing a new Division 296 tax be passed.

The Committee “strongly supports the reforms to superannuation tax concessions that will ensure they are fairer, more sustainable, and better targeted.”

The new Division 296 tax will impose a tax rate of 15% on superannuation "earnings" corresponding to superannuation balances that exceed $3m for an income year commencing 1 July 2025.

The Government handed down the Federal Budget on 14 May 2024.

Labor’s third Budget was widely expected to focus on cost of living. This was delivered in the form of energy bill relief for all households, along with Stage three tax cuts that had already been legislated.

Social security proposals included freezing deeming rates at their current levels for a further 12 months, increases to Commonwealth Rent Assistance, and more flexibility for Carer Payment recipients.

Super was largely left unchanged although the Treasurer announced plans for eligible parents to receive 12 per cent super on of their government-funded Paid Parental Leave. For small businesses, the government announced it would extend the $20,000 small business instant asset write-off by 12 months until 30 June 2025.

For a detailed summary see the FirstTech briefing paper.  Additional resources such as client information flyers are available on the Firsttech Federal Budget page.

The Government has issued a media release announcing a change to the way HELP/HECS debts are to be indexed, with effect from 1 June 2023.

The HELP indexation rate will be capped to the lower of either CPI or the Wage Price Index (WPI).

The Government has stated that backdating the indexation method to all HELP, VET Student Loans, Australian Apprenticeship Support Loans and other student loan accounts that existed on 1 June last year wipes off around $3 billion in student debt. Under the current indexation method, student loans would have been indexed by 7.1% last year, whereas the new indexation method using WPI would only be 3.2%.

An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year once the legislation is passed.

Australians with a HELP debt can find out how much this is estimate to benefit them using the HELP Indexation Credit Estimator here.

ASIC have commenced a review of superannuation industry practices and compliance with laws in relation to the administration of death benefit claims.

ASIC has released guidance from the first phase of the review, which  'revealed areas for improvement in trustees’ public communications'.

The ATO have issued guidance on factors that a trustee should consider to ensure that trust distributions are effective and compliant.

Includes a checklist for trustees.

Division 7A of the Income Tax Assessment Act 1936 can apply to loans, payments or other benefits when a shareholder or their associate accesses money from their private company. When not managed correctly, this can result in the transfer of funds out of private companies being treated as an unfranked dividend with larger than expected tax outcomes.

To avoid these outcomes, payments and outstanding loans can be placed on a complying Division 7A loan.

In a series of articles and webinars titled “Decoding Division 7A”, the ATO aim to highlight the rules around complying Division 7A loans, the common mistakes that are made and how to avoid them. Articles issued so far are:

• 8/4/24: Decoding Division 7A – avoid common mistakes
• 22/4/24: Decoding Division 7A – managing loans

The articles link to the ATO’s detailed content on private company benefits – Division 7A dividends.

The ATO advises that they will continue to provide more information aimed at helping understand Division 7A and avoiding mistakes over the coming months. The next article will focus on the rules for minimum yearly repayments on complying loans.

The government has issued draft regulations that will amend the transfer balance cap provisions to ensure that a member with a capped defined benefit income stream is not adversely impacted if they move to a new fund under a successor fund transfer.

Under current legislation, a member’s transfer balance may be unintentionally impacted due to the original income stream ceasing and a new one beginning.

The draft legislation would amend the transfer balance credit provisions so that the credit and debit arising due to a successor fund transfer for individuals with a capped defined benefit income stream are equal. This would ensure the amounts cancel each other out and the member’s transfer balance account is not impacted by the successor fund transfer.

The amendments would apply to successor fund transfers occurring from the day after registration of the regulations, but would also apply retrospectively to successor fund transfers from 1 July 2017 where the member was disadvantaged by the current rules.

The Minister for Aged Care has issued a media release regarding a delay in the commencement date of the new Aged Care Act which was proposed to commence on 1 July 2024.

In the media release, the Minister states ‘The Government is now considering the extensive and valuable feedback to refine and finalise the draft legislation before it is introduced to Parliament.

We will update the commencement date of the legislation following these updates and before the bill is introduced to the Parliament.’

While the new commencement date is yet to be announced, there is speculation it may be 1 July 2025.

The government has issued a commencement proclamation for changes to the First Home Super Saver (FHSS) scheme.

The changes to the FHSS scheme are aimed at improving access to the scheme and received royal assent on 20 Sept 2023, see Treasury Laws Amendment (2023 Measures No. 3) Act 2023, Schedule 4.

The commencement date of these reforms has now been confirmed as 15 Sept 2024.

For more information on the reforms, see the FirstTech article FHSS scheme flexibility Changes pass parliament, yet to commence

FirstTech quick references guides are now available updated for 20 March 2024:

-  Centrelink rates and thresholds

-  Aged care quick reference guide

This FirstTech quick references guide sets out the super rates and thresholds for 2024/25.

The Government  has released draft regulations Treasury Laws Amendment (Measures for Future Instruments) Instrument 2023: Better Targeted Superannuation Concessions to support implementation of the calculation of Division 296 tax for defined benefit interests. 

This includes:

-  outlining methods to value defined benefit interests

-  making modifications to the Division 296 earnings formula to appropriately capture notional contributions to defined benefit interests.

-  updating existing methods to calculate notional contributions for defined benefit interests to reflect up-to-date economic parameters.  The government stated, “these methods have not been updated for many years and do not reflect the correct social and economic climate”.

The Government welcomes feedback from all interested parties, with submissions open until 26 April 2024.

The Government has released a consultation paper seeking input to improve the annual superannuation performance test. 

The Government is seeking feedback on the following four options to fine-tune and improve the sophistication of the performance test in the longer term, should the government decide to do so in the future:

1. Status quo – retain the current testing framework but improve it.

1. Alternative single-metric – consideration of a different single-metric framework that would better assess performance. Three specific examples included are the Sharpe ratio, a peer comparison, and a simple-reference portfolio frontier.

1. Multi-metric framework – consideration of a multiple metric framework that provides a more fulsome assessment of performance. Two specific examples included are a framework that aligns with the APRA heatmaps, and a targeted three-metric test.

1. Alternative framework – an opportunity for stakeholders to put forward an option they see as most fitting to improve the operation of the performance test.

All interested parties are encouraged to provide input, with submissions open until 19 April 2024.

The Minister for Social Services, Amanda Rishworth has issued a media release today announcing the Government will pay superannuation on Paid Parental Leave (PPL) from 1 July 2025.

The media release states that “this reform is an investment in women’s economic security and in the broader economy” and was also a key recommendation of the Women’s Economic Equality Taskforce.

It is expected eligible parents with babies born or adopted after 1 July 2025 will receive an additional 12% on their PPL paid into their super account.  

This announcement builds on the Government’s measures to modernise and expand the PPL scheme, which was first announced as part of the October 2022-23 Budget. 

The first tranche of changes to the PPL scheme commenced in July 2023, including an increase of the PPL family income test to $350,000 and making it easier for both parents to share care.

Implementing the second tranche of changes, the Paid Parental Leave Amendment (More Support if Working Families) Bill 2023 is currently before the Senate.  If legislated, PPL payments will be extended by 2 weeks each year from 1 July 2024 to reach 26 weeks from 1 July 2026.

Legislation implementing the Government's changes to the Stage 3 tax cuts has passed both houses of parliament without amendment and awaits royal assent.

The Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024, will give effect to the following changes to marginal tax rates from 1 July 2024:

-  reduce the current 19% tax rate to 16%

-  reduce the current 32.5% tax rate to 30%

-  increase the current threshold above which the 37% tax rate applies from $120,000 to $135,000

-  increase the current threshold above which the 45% tax rate applies from $180,000 to $190,000

The Treasury Laws Amendment (Cost of Living - Medicare Levy) Bill 2024  increases the Medicare levy low income thresholds from 2023/24.   For example, the threshold for single taxpayers (not eligible for SAPTO) increases from $24,276 to $26,000.

For more information see the FirstTech article Changes to stage 3 tax cuts pass parliament - advice implications

Following today’s release of the latest average wages data for the December 2023 quarter, the concessional and non-concessional contribution caps will increase on 1 July 2024 as follows:

• Concessional contributions cap                 $30,000
• Non-concessional contributions cap        $120,000

The increase in the annual non-concessional contributions (NCCs) cap also means a person’s NCC cap under the bring forward rules will increase to a maximum of $360,000 from 1 July 2024.

For further information including advice implications and the impact on other thresholds, see this FirstTech NewsFlash.

Following the release today of the December 2023 quarter CPI figure, it is expected that the general transfer balance cap (TBC) will remain at $1.9 million for 2024-25.

The general TBC is indexed in line with increases in CPI but only increases in $100,000 increments.  The Dec 2023 quarter CPI figure of 136.1 was not high enough to trigger an increase in 2024-25.

Likely impact on non-concessional cap thresholds

Eligibility to make non-concessional contributions (NCC) is based on a client's total super balance (TSB) on 30 June of the previous financial year.  As the general TBC is expected to remain at $1.9 million in 2024-25, a client will be able to make a standard NCC if TSB is below $1.9 million at 30 June 2024.

However, the ability to make NCC under the bring forward rule is also impacted by the standard NCC cap.  As both the concessional and non-concessional caps are expected to increase in 2024-25 to $30,000 and $120,000 respectively, this will likely impact total super balance thresholds.

Strangely, if the standard NCC threshold increases to $120,000, it will cause the TSB thresholds for the NCC bring forward rule to reduce as the thresholds are calculated by subtracting the NCC cap from the general transfer balance cap.  This is demonstrated in the following tables:

Total super balance thresholds for NCC - 2023/24

Total super balance thresholds for NCC - 2024/25

Assuming the standard non-concessional cap increases to $120,000

As the NCC cap is indexed to AWOTE, and the NCC cap is 4 x the concessional cap, we need to wait for the Dec quarter AWOTE figure to be released in late February 2024 to confirm.  However, clients considering triggering either a two or three year bring-forward period in 2024-25 may need to be aware of the lower TSB thresholds that may apply.