In addition, we caught up with Mercer’s Rick Bendelle to understand more about the legislative changes and how Mercer has been implementing these for clients. Here is everything you need to know in less than five minutes.
Could you briefly provide some background to the legislative changes and why they were made?
Rick: The Federal parliament passed legislation to make changes to the to the superannuation system which commence from 1 July 2017. These changes are designed to improve the sustainability, flexibility and integrity of Australia's super system.
What are the significant changes and what impact will they have on the administrative processes and reporting?
Rick: Mercer has been required to update our processes, systems and reporting to reflect the legislative changes. A good example of a key change is the TTR process, where we need to ensure members have their excess pension assets transferred to their super account in order to optimise the taxation treatment of their retirement benefit.
Also, the new taxed / non-taxed structure of investment options has necessitated a significant change to the way in which Mercer reports the Fund assets to custodians.
Mercer has focussed on ensuring that all systems and processes are updated to reflect the legislative changes as of 1 July 2017. The combined effect of this focus is we will experience a peak in our processing requirements across the June July period.
What are some of the known requirements Mercer has been analysing from a broader operational perspective?
Rick: Based on the extensive list of legislative changes, Mercer has completed a detailed analysis or each of these changes to determine the impact on our people, process, systems, clients and members.
Understanding the impact for each of the legislative changes has enabled us to prioritise and action the required activities to update systems and processes, prepare and train our people and inform our clients and members of the key activities we have and will continue to complete.
The scale of these changes has required a review of over 1000 Forms, letters and operating procedures.
Examples of where we are focussing in superannuation are:
- Removal of Anti-detriment payment for death benefits
- Limit on annual concessional contributions to be reduced to $25,000 for all ages
- Increased DASP tax for working holiday visa holders
- Division 293 tax income threshold to reduce to $250,000 (currently $300,000)
Examples of where we are focussing in pensions are:
- TTR pensions to be a taxed product from 1/7/16 (i.e. tax exemption on investment earnings will no longer apply)
- Transfers to investment earnings tax exempt pension accounts limited to general transfer balance cap ($1.6m)
- Changes to DB pension accounts re general draw down cap ($100,000 p.a.)
What information is Mercer providing now and ongoing to clients who are affected by these changes?
Rick: Mercer has been providing regular updates and information to clients in relation to the legislative changes. These updates have provided in-depth detail on the various changes, the resulting impacts (both fund and member) and Mercer’s approach to each change.
Mercer will continue to provide regular updates to all clients in relation to the legislative changes.
For more information on how legislative change will affect you or your members and employees, please contact your Mercer representative.