SMSF transfer balance cap reporting

The ATO recently affirmed its position around SMSF reporting rules, expected to come into effect by 1 July 2018. Under the new regulations, SMSFs with balances of less than $1 million must transition to an annual events-based reporting framework. SMSF members with higher balances will adhere to a quarterly reporting timeframe.  

What this means is an SMSF with a lower superannuation balance is only required to report if events impact their transfer balance account (TBA), falling under the following:

• SMSFs that begin a new income stream in their superannuation;
• SMSFs that suspend an income stream in their superannuation;
• Structured settlement contributions that are received on or after 1 July 2017; and
• Pension commutations.

These changes come off the back of a push from the ATO to minimise administrative burdens for SMSFs, with the ATO deputy commissioner, James O’Halloran, predicting that this amended approach will see up to “85 per cent of the SMSF population not being required to undertake any additional reporting outside of current annual reporting timeframes for the foreseeable future”.

Reduction of upfront commissions for life insurers

Under the recent implementation of the Life Insurance Framework (LIF), from 1 January 2018 upfront commissions for providers of life insurance advice for new policies will be phased to a capped rate of 80 per cent, reduced again to 70 per cent the following year and settling at 60 per cent from 1 January 2020.

ASIC has noted that the introduction of these commission caps is a measure to deter advisers from providing ineffective and sub-par advice to their clients.

Financial advice education standards

Professional and education standards are under constant review, and regulations will continue to be scrutinised as upcoming changes are implemented. As it stands, planners have varying levels of qualification, different levels of experience and different backgrounds and pathways – this is set to change dramatically and the quick-and-cheap avenues to become a financial planner, such as online short courses will become a thing of the past. 

While changes won’t come into effect next year, from 1 January 2019 new advisers will be required to hold a ‘relevant’ degree and there will be four key criteria that will need to be addressed in order to be deemed able to practice under the new regulations: 

1. A degree as approved by the independent body;
2. Completion of a professional year, as prescribed by the independent body;
3. Complete or pass a registration exam; and
4. Be subject to an approved code of ethics.

For existing planners, key criteria will need to be met, including adherence to continuing professional development and being subject to a code of ethics.

This will be a space that new and existing planners should watch with interest as details are still being worked out and it is likely that changes will be made in the lead up to implementation.

The way in which financial planners and advisers pre-empt and respond to these key regulatory changes as they come into effect will be important for success in the new year.

It is vital that you are up to date with incoming changes affecting not only the areas in which you operate, but also your own professional development, as the financial services industry is at the forefront of great change.

Richard Liverpool, head of sales and marketing, Ignition Wealth