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{{label}}28 May 2020
This month, the TECE team discuss ASIC’s temporary relief measures to assist advisers in providing advice to clients during the COVID-19 pandemic. Included are some statistics around the early superannuation access relief measure plus a FAQ on whether withdrawing funds from superannuation under the early release rules will impact a client’s insurance arrangements.
ASIC has announced three temporary relief measures to assist licensed advisers and registered tax agents to help clients receive affordable and timely financial advice during the COVID-19 pandemic.
The three temporary relief measures include:
To assist the provision of affordable advice on early access to superannuation, ASIC has:
Advice provided under this exemption by advisers and tax agents must meet the following conditions:
There are content requirements that an ROA must include, such as:
The advice provider must also give the client the following:
A number of financial services industry groups have created ROA templates for advisers to use when providing advice about early access to superannuation.
Advisers who are members of the Financial Planning Association (FPA), the SMSF Association (SMSFA), Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia and the Institute of Public Accountants (IPA) can access the ROA template from the association they are a member of.
Advisers will have up to 30 business days (instead of the usual five days) to provide an SOA to a client if they have provided urgent (time-critical) advice in response to the COVID-19 pandemic.
An advice provider may only rely on this temporary relief measure in circumstances where:
Advisers will be able to issue an ROA to existing clients even though clients' personal circumstances have changed as a result of COVID-19 and the client sees another adviser from the same AFS licensee or practice, not their original adviser.
This relief measure is temporary and subject to the following conditions:
A financial adviser may only rely on this relief if they keep a record of the advice and give this ROA to the client.
The ROA must set out:
The temporary relief measures will continue to be monitored by ASIC, where ASIC will consider market developments and consult with key stakeholders before revoking the relief measures and provide 30 days’ notice to the industry.
Further information regarding the temporary relief measures can be found on the ASIC website.
ASIC has released a frequently asked questions page on their website with answers to questions about issues impacting the financial advice industry as a result of the COVID-19 pandemic.
Some of the questions addressed include:
ASIC will be updating this information regularly.
The ATO has warned individuals against taking advantage of the early superannuation access relief measure unless there was a genuine financial need.
ATO client engagement group second commissioner Jeremy Hirschhorn warned that the ATO is aware of superannuation recontribution schemes relating to COVID-19.
The ATO has asked that “individuals, tax agents and businesses be mindful that it is not acceptable to apply for relief payments or benefits where eligibility may be questionable. Applications for relief through stimulus measures based on artificial arrangements will see the ATO take swift action”.
Did you know, at the time of writing, the ATO has approved 456,000 applications from individuals wanting to withdraw up to $10,000 of their superannuation under the early superannuation access relief measure?
Treasurer Josh Frydenberg also confirmed that the average withdrawal is around $8,000 and the withdrawal applications (which total $3.8 billion) are now with superannuation funds who will begin to pay individuals over the next 5 business days.
Q: Will withdrawing up to $20,000 under the early superannuation release rules impact my client’s insurance arrangements?
A: Withdrawing benefits under this new condition of release will generally not impact a client’s life insurance cover in their fund unless the withdrawal results in the full balance being withdrawn, which would result in the account being closed and the insurance cover being cancelled.
Note, under the ‘Protecting members interests first’ (PMIF) changes that apply from 1 April 2020, trustees must cancel any life insurances held for a member where their balance has been less than $6,000 at any time between 1 November 2019 and 1 April 2020 (unless member has elected to maintain their insurance).
Therefore, even where a member accessing their benefits causes their benefits to reduce to less than $6,000 they will not have their insurance cancelled so long as the value of their account balance was $6,000 or more at some time between 1 November 2019 and 1 April 2020.
However, in this case members need to be aware that the insurance premiums will continue to be drawn from their account and may further erode the balance of their account over time.
Do you have a technical question about a financial advice strategy or need to find technical resource material? Don’t hesitate to email us at tece@aia.com
Kind regards,
The AIA Technical and Education Centre of Excellence (TECE) Team
Copyright © 2020 AIA Australia Limited (ABN 79 004 837 861 AFSL 230043). All rights reserved. This information is intended for financial advisers only and is not for wider distribution. This information is current at the date of distribution and is subject to change. This is general information in summary only, without taking into account the objectives, financial situation, needs or personal circumstances of any individual, and may not be exhaustive. It is not intended as financial, legal, medical, tax or other advice.