SUPERCentral Governing Rules update February 2022

The SUPERCentral Governing Rules have been updated with effect from 17 February 2022.  The updated rules automatically apply to all SMSFs currently on the SUPERCentral system.

Some (but not all) of the key details of the changes to the Governing Rules deal with:

1.    The restructure of legacy pensions
2.    The extension of the minimum pension payment relief
3.    Investing in crypto-assets

1.    Restructure of Legacy Pensions

What is the change all about?

The Government has proposed significant simplification of legacy pensions, which are lifetime, life expectancy or market linked pensions which prevent access to pension capital and generally have little flexibility as to pension payments.  The proposal is that from 1 July 2022 there will be a 2 year window during which these pensions can be restructured into account-based pensions.

The restructuring of a legacy pension will permit access to the reserves supporting these pensions.  Currently, if the reserve is released, the reserve will be subject to tax at up to 47%.  The proposal is to tax the released reserve at 15% and permit the relevant member to use the after-tax amount of the reserve to be cashed out, held in accumulation phase for the member or used to commence an account-based pension (subject to the transfer balance account rules).

There is no obligation to restructure legacy pensions.  There could be good reasons not to restructure, such as the asset test exempt status of the legacy pension which will be lost upon restructure.  

What is the impact of the change on the members?

There will be no negative impact on the members who have legacy pensions.  They can restructure the legacy pension if the restructure would be beneficial compared to the continuation of the current pension.  There is no obligation to restructure.  However, if restructuring the legacy pension is not beneficial or if the reserves supporting the legacy pension can be managed by other means, the legacy pension simply continues.

How has the change been implemented?

Rule 24 has been extensively redrafted in anticipation of the proposal being implemented.  Once the legislation to implement this proposal has been released, any necessary additional changes to Rule 24 will then be made.

2.    The Extension of the Minimum Pension Payment Relief

What is the change all about?

As part of the economic response to COVID-19, the Government reduced the minimum pension payment amount which must be paid from account-based, transition-to-retirement and market-linked pensions.  In short, the Government halved the minimum pension amount.  This reduction applied to the 2019-20 and to the 2020-21 financial years.
 
The Government then subsequently extended the halving of the minimum pension amount to the 2021-22 financial year.  This change simply ensures that the Governing Rules do not impose a higher minimum pension amount than that required by relevant regulations.

What is the impact of the change on the members?

There is a beneficial impact on the members who are receiving or will be receiving account-based, transition to retirement and market-linked pensions during 2021-22 financial year.  

How has the change been implemented?

Rules 28.1 and 28.2 have been amended to include a reference to “2021-22” financial year.

3.    The Crypto-Asset change

What is the change all about?

Crypto-Assets are a digital representation of value or contractual rights that can be transferred, stored or traded electronically where the ownership of the value or rights is either determined by or substantially affected by cryptographic proof such as distributed ledger technology (such as blockchain). Crypto-Assets are a new form of intangible assets - such as bitcoin, tokens - both fungible and non-fungible and stablecoins - where both the existence, ownership, uniqueness (if applicable) and provenance of the thing is and can only be established by distributed ledger technology and cryptographic proof.

It is possible that crypto-assets may become a sought-after investment in the manner of art works (without the inconvenience of being a tangible thing and capable of deterioration or being damaged or destroyed).

What is the impact of the change on the members?

There is no adverse impact on members. The change merely permits investments in crypto-assets if desired (and in accordance with the fund’s investment strategy and satisfying the other superannuation investment rules).

How has the change been implemented?

Rule 3.2 has been amended to include a new paragraph (ga) which refers to Crypto-Assets and exchanged traded funds where the underlying assets are Crypto-Assets.  Additionally, a definition of “Crypto-Asset” has been included in Rule 1.2.

For any further information regarding this article please call SUPERCentral on 02 8296 6266 or email info@supercentral.com.au.