4 Industry Changes Financial Professionals Need to Know

A Market Update: Jan ’21

It’s already looking like 2021 is going to be another year of change and a dynamic time for our Industry.

Although the pandemic seems to be relatively under control in Australia, unfortunately this is not the case for much of the World.  

At this stage, restrictions upon travel and the impact of COVID-19 upon the economy seem likely to continue some form into 2022 and beyond.

Australian legislators and financial industry regulators have also been very busy, some of the key initiatives worthy of note:

1. The Financial Adviser Standards and Ethics Authority (FASEA) is Axed

The Government’s decision in December to disband the FASEA has effectively killed two birds with one stone.

By reallocating the responsibility of setting standards to Treasury and putting code monitoring under Australian Securities and Investments Commission (ASIC), Hume has defused discontent in the industry and effectively made ASIC the single disciplinary body for financial advisers.

“The financial advice sector has wound itself up in red tape and was becoming inaccessible, so this is part of our mission to make financial advice more affordable and accessible to more people,” Senator Jane Hume said.

2. New SMSF Audit Rules Are Coming Into Play

The ATO’s new guidelines regarding SMSF Audits take effect from July 1 2021.

Based on the Accounting Professional & Ethical Standards Board (APESB) 110 Code of Ethics for Professional Accountants released last year, the ATO has ruled that a firm or network can no longer perform both the audit and accounting functions for a SMSF.

This change is seeing a groundswell of activity as accounting firms begin the process of forming new relationships with their auditors.

For more information on the ATO’s new Independence Guide and how it addresses in-house audits, click here.

3. New Mandatory Disclosure on Outsourcing

The Accounting Professional and Ethics Standards Board Limited (APESB) has overhauled APES 305 Terms of Engagement. SMSF professionals will soon be required to include details of any outsourced services and cloud computing in their SMSF Engagement Letters.

The revised standard has practical implications for SMSF firms, especially those using outsourced services. 

The change is required due to the fact some Engagement Letters describe outsourced services simply as “third parties” to avoid specifying the offshore processing of their client’s personal and confidential financial information.

It’s worth noting that Intello Solutions is an outsourced service provider, but we don’t offshore processing or client data. As is our engagement with ASF Audits – our independent auditor.

4. General Transfer Balance Caps to Be Indexed to $1.7M

The Australian Bureau of Statistics (ABS) announced mid-January  that the All Groups Consumer Price Index (CPI) was up 0.9% to 117.2 for the December 2020 quarter. With the figure above 116.9, the general transfer balance cap will be indexed to $1.7 million on 1 July 2021.

So, what does this mean?

In an online update, the ATO reminded SMSF Professionals that when the general transfer balance cap is indexed to $1.7 million, there won’t be a single cap that applies to all individuals.

“Every individual will have their own personal transfer balance cap of between $1.6 million and $1.7 million, depending on their circumstances,” the Tax Office said. “If you start a retirement phase income stream for the first time on or after 1 July 2021, you will have a personal transfer balance cap of $1.7 million.”

Despite the best intentions and efforts of most people trying to explain how personal transfer balance cap indexes work as a percentage of original unused cap, I believe there will be people who get it wrong.

If you require assistance or explanation on this change, or any other recent industry updates, contact Intello.