THE Government’s positive response to the Financial System Inquiry’s (FSI) recommendation (11) requiring superannuation trustees to pre-select a comprehensive income product for members’ retirement, has been welcomed by the Institute of Public Accountants (IPA).

“There is extensive legislation that regulates how much and the manner in which Australians contribute to superannuation, but limited rules relating to how they can withdraw superannuation,” said IPA chief executive officer, Andrew Conway.

“Many retirees take either a partial or total lump sum, with a high percentage of these using a lump sum to pay off a mortgage or purchasing other non-income supporting assets.  A smaller percentage of retirees are investing in a pension product such as an annuity or life pension, or an income earning product such as a bank account.

“While the IPA supports choice in superannuation, the current use of retirement funds is not always appropriate and does little to diminish the future pension burden faced by a shrinking workforce and aging population.

“The IPA therefore believes there should be suitable incentives which encourage retirees to invest in income streams such as pension and annuity products.

“Annuities may be the missing link in people’s thinking between drawing down from their existing superannuation and finding sustainable income streams that support their retirement.

“This would mean that people need to opt out in order to receive a lump sum payment, which is the more common method of withdrawing super currently.

“Annuities support the policy intentions of the superannuation system and will generally better provide for the longer term needs of retirees and protect against cost of living risks,” said Mr Conway.

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THE Institute of Public Accountants (IPA) has welcomed the Government’s rejection of the Financial System Inquiry (FSI) proposal to reinstate the banning of limited recourse borrowing arrangements (LRBA) within an SMSF.

“The IPA has advocated that rather than a ban on LRBAs, there should be more targeted measures to address inappropriate use of gearing linked to poor quality advice,” said IPA chief executive officer, Andrew Conway.

"The IPA believes that the issue is not SMSF borrowing per se, but inappropriate advice provided by unlicensed advisers.

“A sledgehammer approach was never going to be an appropriate way to eliminate the use of poor quality advice relating to SMSF related gearing.

“We agree with the Government’s observation that while some anecdotal concerns over LRBAs exist, there is insufficient data to justify a ban.

“We need better analysis of ways to address the risks surrounding borrowing before merely imposing an outright ban.

“Interestingly, there are also no alternative measures other than an outright ban to mitigate some of the concerns raised.  For example, if they are worried about the diversification, why not consider excluding LRBAs for funds with small balances.

“We welcome the Government’s common-sense approach to this measure,” said Mr Conway.

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SUPERANNUATION organisations are concerned that the Tax Expenditures Statement overstates the tax concessions for super.

The Statement attempts to measure the value of tax concessions received by taxpayers, or the revenue forgone by government. Its publication increases the transparency and scrutiny of tax exemptions.

The 2014 Statement provides that the cost of the tax concession for employer superannuation contributions is $16.3 billion, and for superannuation entity earnings is $13.4 billion.

If taxpayer behaviour and the effects of other government programs are taken into account, the estimates become $15.6 billion and $11.8 billion. This reflects taxpayers attempting to use their money in other tax effective ways.

Mercer Consulting and the SMSF Owners’ Alliance will appear today at a public hearing into the Statement.

Some of the issues raised about how the Statement treats superannuation are:
• it does not consider the long run savings from reduced use of the means-tested pension
• many commentators incorrectly add together the superannuation figures in the Statement, which overstates their combined cost
• the Statement uses an income tax benchmark, which gives a much higher tax expenditure than an expenditure tax benchmark (used in some other countries).

Committee Chair, Bert van Manen MP, said that the Statement’s treatment of superannuation was an important issue in the inquiry.

“Many Australians have a major investment in superannuation. We need to make sure that we have the right information so that we can have the best policies for people to get the most out of their retirement,” he said.

Public hearing
Date: Wednesday, 21 October 2015
Time: 4.10 – 4.40 pm  Mercer Consulting
         4.40 – 5.10 pm  SMSF Owners’ Alliance
Location: Committee Room 1R5, Parliament House, Canberra

For information about the inquiry: contact the committee secretariat by telephone (02) 6277 4821, e-mail This email address is being protected from spambots. You need JavaScript enabled to view it., or visit the committee website http://www.aph.gov.au/taxrev.

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VICTORIAN businesses forecast strengthening sales and employment in what is anticipated to be a positive end to 2015, according to the quarterly VECCI Survey of Business Trends and Prospects released today.

“Following a tough second quarter of 2015, it is pleasing to see key business indicators rebound and the Victorian economy poised to round-out 2015 on a healthy note,” said VECCI Chief Executive Mark Stone.

In an encouraging sign for business, sales performance improved for one in three (35 per cent) surveyed businesses during the September quarter. This is an improvement on the June 2015 quarter, when sales trends were comparatively flat across surveyed industries.

Sales are expected to continue to improve in the lead up to Christmas, with 34 per cent of respondents anticipating growth in the December 2015 quarter.

The VECCI survey of nearly 450 businesses across seven major industry sectors also found that selling prices are expected to increase, with almost one in five (17 per cent) surveyed businesses predicting a rise. The positive sales and selling price outlook indicates business expects stronger consumer spending over the next three months.

In a further sign of confidence, following a sharp decline in employment levels last quarter, almost one in five (17 per cent) surveyed businesses reported a rise in employment during the September quarter and a similar share forecast further jobs growth in coming months.

“It is positive to see both business trading conditions and confidence on the rise, however the underlying soft job market and intense international competition remain headwinds to a sustainable lift in business performance,” said Mr Stone.

“In this environment, policy makers must do what they can to ensure business confidence remains positive. Action is needed to lower business costs and encourage job creation.”

The Victorian Employers Chamber of Commerce and Industry (VECCI), established in 1851, is the most influential business organisation in Victoria, informing and servicing more than 15,000 members, customers and clients around the state.

vecci.org.au

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THE House of Representatives Agriculture and Industry Committee will conduct a public hearing tomorrow for the inquiry into agricultural innovation.

Appearing at this first hearing for the inquiry will be the Rural Industries Research and Development Corporation.

Committee Chair, Rowan Ramsey MP, said, “The Committee is pleased to commence hearings for this important inquiry. Australian farmers are renowned for their pioneering attitude to agricultural technology. Submissions to the inquiry have highlighted exciting prospects for Australia to continue leading the world in agricultural innovation.

“We are keen to hear from the Rural Industries Research and Development Corporation (RIRDC), which supports small rural industries and undertakes cross-sectoral rural research. RIRDC will be able to offer compelling insights into the opportunities and challenges which emerging technology will pose to the agriculture sector over the decades to come.”

The hearing will be held in Committee Room 1R1, Parliament House, Canberra:
 
Thursday, 22 October 2015
12.30 pm (approx.) Rural Industries Research and Development Corporation
1.30 pm close

The public hearing will be webcast live at: http://www.aph.gov.au/News_and_Events/Watch_Parliament

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THE Australian Retailers Association (ARA) says retailers support the Federal Government’s Financial System Inquiry (FSI) recommendations to ensure excessive credit card surcharging is legislated and cease exorbitant merchant fees by unregulated payment systems through regulation.

ARA Executive Director and Chair of the Australian Merchant Payments Forum (AMPF), Russell Zimmerman, said the recommendation will benefit both retailers and consumers, allowing retailers to reduce surcharging on high cost payment systems.

The ARA believes there are flaws in the current system, the biggest of which being the lack of regulation of the plethora of high cost and new payment systems coming into the market.

American Express co-branded cards, Diners Club, China Union Pay, and Bitcoin, are not regulated, and all carry greater costs for retailers and consumers alike.

It costs retailers twice as much to accept these unregulated cards as Visa and MasterCard, which is why so many retailers are forced to pass costs onto customers via a surcharge.

As the banks are able to charge more for these cards, they are issuing more of them, placing pressure on Australian retailers to accept unregulated cards.

“The devil will be in the detail. Where retailers do surcharge it is often a blended rate, including the high cost payment systems to simplify the payment for the customer,” Mr Zimmerman said.

“Will retailers need to break out low cost cards they don’t usually surcharge on such as Visa and MasterCard and surcharge the high cost systems separately, or will there be a blended rate for ease of use by customers?

“The ARA and AMPF firmly believes that there is an unequal playing field, with some card systems able to decide their own pricing model and choose if they wish to allow surcharging by the merchant.

“Both Visa and MasterCard are regulated to ensure that merchants are rightfully not charged more than a reasonable Merchant Service Fee, and we believe this should be the case for all cards.”

As noted in the Murray report, proposals for surcharging standards should make surcharging standards simpler and more accurate, while encouraging system providers that are not subject to interchange fee standards to reduce their cost.

“All participants in the payments system must be treated fairly and equally. Legislation and regulation needs to include three party schemes (where banks issue co-branded cards allowing systems like Diners Club and American Express to avoid rules), which are significantly hitting retailers’ bottom lines, alongside the currently regulated four party schemes (Visa and MasterCard).

“In principle, retailers do not believe in surcharging, and in the vast majority of cases they don’t for the regulated low cost three major card schemes (including eftpos).

“Where they do need to surcharge is on the unregulated high cost schemes, which gives the consumer the choice of whether they use a high cost, unregulated, surcharged card,a or a no cost regulated card,” Mr Zimmerman said.

The ARA is pleased to see that many of our submission recommendations have been included in the Government’s final recommendations and that both the small and large retailers that provided input into this process have been heard.

Key points in the ARA’s recommendations are:

Surcharging

• Principles-based surcharging, where there is no surcharging allowed for low cost systems (eftpos and debit) and businesses are permitted to apply a surcharge which reflects the cost of acceptance for credit
• To ensure that there is no cross subsidisation, blended surcharging not permitted
• ACCC given powers to enforce this policy, particularly excessive surcharging. Consumers able to report excessive surcharging to ACCC.

Level Playing Field

• Any regulation must apply equally to all payments systems including American Express, Diners Club, Union Pay, JCB, PayPal
• A threshold set at 1.5 percent of retail payment transactions marketshare before regulation is applied
• Regulation to capture new forms of payment systems under this model as they emerge.

Interchange

• A significant and meaningful reduction in the disparity which currently exists between large and small merchants
• A defined range of interchange rates applied to industries and products
• An annual reset to ensure regular compliance with a weighted average of 50 basis points for interchange rates
• Allowance of ‘special rates’ for a defined period of time, to allow schemes to incentivise new technologies and innovations in the market (to recognise that large merchants can assist with early adoption through leverage of their scale)
• Acquirers to separate debit and credit rates in their provision of pricing to all merchants.

About the Australian Retailers Association:

Founded in 1903, the Australian Retailers Association (ARA) is the retail industry’s peak representative body representing Australia’s $284 billion sector, which employs more than 1.2 million people. The ARA works to ensure retail success by informing, protecting, advocating, educating and saving money for its 5,000 independent and national retail members throughout Australia.

For more information, visit www.retail.org.au or call 1300 368 041.

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WHILE the Government’s “inner revolutionary” approach shows positive signs to drive economic growth and productivity, cooperation across government, business and academic sectors will be critical, according to the Institute of Public Accountants (IPA).

“Our research tells us there is insufficient cooperative behaviour between Australian businesses, creating a barrier to the spread of existing innovations to a wider cross-section of firms; this represents a significant lost opportunity to the economy,” said IPA chief executive officer, Andrew Conway.

“Australia needs action to promote increased innovation across the Australian SME sector including more government support for research and development by small and medium-sized firms; and government support for firms to adopt existing technologies and innovation.

“We also believe there needs to be better linkages between cutting-edge research universities and industry.

“Firms should also be encouraged to adopt continuous improvement methodology to embed incremental innovation as this will generate large productivity improvements more quickly.

“To help facilitate this, the Government could provide tax breaks for companies acquiring new technologies not developed in-house, along with a tax allowance for companies investing in intellectual property protection in-house, and a tax allowance for companies that generate licensing income from in-house new technologies,” said Mr Conway.

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JUST under two weeks remain to get applications in for the 2016 RIRDC Rural Women’s Award - Australia’s top award for rural women.

The closing date for applications is Friday, 30 October.

The RIRDC Rural Women’s Award identifies and supports emerging leaders across rural Australia. More than just an award that recognises rural women, it also offers mentoring, resources and support via its nation-wide network of business and community leaders for selected state winners.

Rural women are encouraged to enter themselves or to nominate someone with a commitment and desire to making a real difference to their industry or their community. The Award is open to all women involved in primary industries.

State and Territory winners receive $10,000 to implement their Award idea and will be offered skill development opportunities, including participation in the Company Directors Course run by the Australian Institute of Company Directors (AICD).

A national winner and runner-up will be selected from the state winners with a further $10,000 awarded to the winner and $5,000 to the runner-up to support their professional development and contribution to primary industries.

Sarah Powell from South Australia was recently announced as the national winner of the 2015 RIRDC Rural Women’s Award. Sarah will use the bursary to help support rural communities through her ‘Champions Academy’ pilot program, which will foster personal development and leadership through sport and mentoring, and teach aspiring leaders how to lead by example, act with integrity, think selflessly and demonstrate commitment.

The Award is an initiative of the Rural Industries R&D Corporation in partnership with the state and territory agencies responsible for agriculture, primary industries and resources. The RIRDC Rural Women’s Award is proudly supported by the Award’s Platinum Sponsor, Westpac Agribusiness; National Partner, the Australian Government Department of Agriculture and Water; and Media Partners, RM Williams OUTBACK Magazine, ABC Radio and Fairfax Agricultural Media.

Application forms can be downloaded from the RIRDC website: www.rirdc.gov.au/rural-women’s-award.

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