Super news for October 2024

Tougher Payday super reforms announced

The government has released further design details of its Payday super reform, set to go live on 1 July 2026.

An updated super guarantee (SG) charge framework will ensure employees are fully compensated for any delay in receiving their super, incentivise employers to catch up on any missed payments quickly, and increase the severity of consequences for employers that deliberately or repeatedly do the wrong thing.

Businesses will become liable for this updated super guarantee charge if super contributions are not received by their employees’ super fund within seven days of payday.

“This allows time for payment processing to occur, as well as for swift action to be taken against those employers that are not meeting their obligations,” Treasurer Jim Chalmers and Assistant Treasurer and Minister for Financial Services, Stephen Jones, said in a statement.

SMSFs more likely to be in retirement phase post 65

SMSFs are much more likely than APRA fund members to have moved their super into retirement phase once they turn 65, according to the latest Class Annual Benchmark Report for 2024.

The report found 93% of Class members aged 65 and over have moved their balances into retirement phase compared to just 48.8% of APRA fund members. There are benefits in doing this, as members in retirement phase have no tax on their super fund earnings.

The report analysed 181,862 of the total 625,609 Australian SMSFs on the Class platform, or close to 30%, making it a meaningful sample of the SMSF sector.

In addition, in the 2023 financial year, Class SMSF members aged 60–64 were 2.7 times more likely to use Transition to Retirement Income Streams (TRIS) or Retirement Phase Income Streams (RPIS) than members of APRA-regulated funds.

Vanguard ordered to pay $12.9 million greenwashing penalty

Vanguard Investments Australia has been ordered by the Federal Court to pay a $12.9 million penalty for making misleading claims about environmental, social and governance (ESG) exclusionary screens.

“This is an important decision, and the penalty imposed is the highest yet for greenwashing conduct. Greenwashing is a serious threat to the integrity of the Australian financial system, and remains an enforcement priority for ASIC,” ASIC deputy chair, Sarah Court, said.

“Vanguard admitted it misled investors that [the Vanguard Ethically Conscious Global Aggregate Bond Index Fund] would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case,” Court added.

ASIC hopes the size of the penalty will send a strong deterrent to the market against misleading investors in ESG.

In his judgement, Justice O’Bryan said: “Vanguard’s contraventions should be regarded as serious. Vanguard’s misrepresentations concerned the principal distinguishing feature of the fund, being its ‘ethical’ characteristics.”

Tax deductibility of financial advice fees clarified

The Australian Taxation Office (ATO) has confirmed that financial advice fees relating to tax (financial) advice can be deductible if the advice is provided by a Qualified Tax Relevant Provider (QTRP) in its final determination regarding the tax deductibility of advice fees (TD 2024/7).

The ATO maintained its view that other fees relating to initial advice are capital in nature and thus not deductible, and that ongoing financial advice fees are deductible.

“With the added clarity surrounding deductions under section 25-5, we believe a significant portion of a typical advice fee will be deductible for the clients of many advisers and practices. Increased deductibility of advice fees should help make advice more affordable for many Australians,” Financial Advice Association of Australia (FAAA) CEO Sarah Abood said.

Abood said the FAAA would now start developing clear guidance for its members on the ATO’s view and how to engage with their clients and accountants around the issue.

Super balances fall as many Australians underprepared for retirement

The most recent data for average super balances shows they have dropped slightly, according to research by the Association of Superannuation Funds of Australia (ASFA). The average balance for men aged 15 and over was $182,667 in 2022, with a median balance of $66,159. For women, the average balance was $146,146, with a median balance of $52,075.

Gender disparities in super outcomes were present in every age cohort. The median balance in June 2022 for men aged 60–64 was $205,385, compared to $153,685 for women the same age. That compared to a median of $211,996 for men and $158,806 for women in June 2021.

Additional research by ASFA found only 51% of adult Australians, including around 60% of those aged over 65, have consulted any source of information on preparing for retirement.

 “It’s concerning to see such a lack of engagement with information about retirement. It means many Australians may end up worse off than they should be in their post-working lives, simply because they haven’t been empowered with the relevant guidance,” ASFA CEO Mary Delahunty said.

Report slams super for housing scheme

Using super for housing would make homes more expensive, hindering the home ownership aspirations of young Australians, a Corinna Economic Advisory report authored by Saul Eslake and commissioned by the Super Members Council, has found.

It would also reduce retirement incomes and lead to a significant long-term cost to the Budget.

“We have 60 years of history, which unambiguously tells us, anything that allows Australians to pay more for housing than they otherwise could leads to more expensive housing and not more homeowners,” Eslake said.

“Of all the demand-fuelling housing policies, the Coalition’s super for housing policy would be the biggest – it can only lead to higher prices.”

Over $17 billion in lost super

The Australian Taxation Office (ATO) says there is still almost $17.8 billion in lost super waiting for people to claim.

“We’re urging Australians to check if some of the $17.8 billion in lost and unclaimed super belongs to them,” Deputy Commissioner Emma Rosenzweig said.

Since 2021 the ATO has reunited or paid out almost $6.4 billion of ATO held super.

“If you’ve changed job, moved house or simply forgotten to update your details, you may have lost or unclaimed super… Even if you’ve retired you could have lost or unclaimed super. The ATO is holding $471 million on behalf of people aged 65 plus,” Rosenzweig said.