Issue 693, 11 December 2018
In this issue:
- Insurance in super code transition plans: reminder
- Retirement income framework: disclosure metrics
- Social services legislation: Budget measures bill
- Fee and cost disclosure: further deferral
- Contribution work test exemption for recent retirees
- Meaning of ‘superannuation income stream benefit’
- Transitional superannuation regulations: repeal
- APRA regulations remade
- Status of superannuation bills
- Appointment of ASIC deputy chair
- Audit quality survey: reminder
Insurance in super code transition plans: reminder
Funds that have signed up to the Insurance in Superannuation Voluntary Code of Practice (the Code) are reminded that they are required to publish their transition plans on their website by 31 December.
As noted in ASFA Action issue 678, the Code Transition Committee has developed guidance material for funds to adopt and implement the Code.
This guidance material and information about the preparation of transition plans and the discussion register are available at the insurance section of the ASFA website.
If you have any questions about the preparation or publishing of transition plans please contact Byron Addison, Senior Policy Adviser by email or on 02 8079 0834.
Retirement income framework: disclosure metrics
Treasury has released a consultation package on proposed disclosure metrics for retirement income products. This represents the next step toward development of a retirement income framework, which will include the offering of comprehensive income products for retirement (CIPRs).
The package includes a consultation paper proposing a range of metrics to help consumers assess how a product aligns with their own preferences in relation to potential income, flexibility and risk management. These will be presented as factsheets to enable people to compare products. The paper sets out how the options for these metrics and features could be presented, to help consumers make decisions and improve transparency in the industry.
In addition to the consultation paper, the Australian Government Actuary has produced a technical paper outlining the retirement income risk measure and the method of calculation.
The Government announced its intention to require providers of superannuation income streams to adopt standardised disclosure metrics in its May 2018 Budget (see ASFA Action issue 669).
The consultation package builds on a consultation on the retirement income covenant in May-June (see ASFA Action issue 671) and forms part of the Government’s broader work on the retirement income framework.
If you have any feedback that you would like ASFA to consider including in a response to Treasury, please forward it to Ross Clare by close of business, Thursday 7 March.
Social services legislation: Budget measures bill
The Government has introduced into Parliament a bill to amend the social services legislation to implement changes announced in its May 2018 Budget.
The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 proposes to introduce amendments to the social services legislation to:
- introduce new means testing rules to encourage the development and take-up of lifetime retirement income stream products
- expand the Pension Loans Scheme
- increase and expand the Pension Work Bonus.
For more information refer ASFA Action issues 692 and 669.
The Bill remains before the House of Representatives. It has been referred to the Senate Economics Legislation Committee for inquiry and report by 11 February, with a closing date for submissions of 18 January.
If you have any feedback you would like ASFA to consider in relation to the Bill, please forward it to Ross Clare by close of business Tuesday, 8 January.
Fee and cost disclosure: further deferral
ASIC has made ASIC Corporations (Amendment) Instrument 2018/1088, to further defer aspects of the fees and costs disclosure regime.
On 1 November 2017 ASIC announced an external expert review of the fees and costs disclosure regime (see ASFA Action issue 652). The review was completed in July 2018 and released as ASIC Report 581 Review of ASIC Regulatory Guide RG 97: Disclosing fees and costs in PDSs and periodic statements (see ASFA Action issue 681).
ASIC is considering the recommendations made in the Review and expects to release a Consultation Paper in January, advising ASIC’s response to the Review Recommendations. The consultation will also seek input in relation to proposed changes to Schedule 10 to the Regulations and a new draft version of RG 97.
Schedule 10 to the Corporations Regulations 2001, as modified by ASIC Class Order [CO 14/1252], was already subject to interim arrangements (see ASFA Action issue 656). These currently provide for:
- certain disclosure obligations arising in relation to periodic statements for reporting periods ending before 30 June 2019 to operate differently to the disclosure obligations applying for reporting periods ending on or after 30 June 2019
- superannuation trustees to deal with property costs in PDSs given before 30 September 2019 by disclosing these in the additional explanation of fees and costs rather than including these as part of investment fees (as would occur for PDSs given on or after 30 September 2019).
Instrument 2018/1088 amends [CO 14/1252] to further extend these interim arrangements for an additional 12 months.
Contribution work test exemption for recent retirees
The Government has finalised regulations to provide a one-year exemption from the contributions work test for eligible recent retirees, as announced in the May 2018 Budget. Significantly, the Government has also announced that it will not proceed with a proposed restriction on access to the ‘bring forward’ arrangements for individuals who utilise the exemption.
The Treasury Laws Amendment (Work Test Exemption) Regulations 2018 introduce a new exemption into the contributions acceptance rules in the Superannuation Industry (Supervision) Regulations 1994. Under the exemption, retirees aged 65-74 with a total superannuation balance under $300,000 will be exempt from the contributions work test for 12 months from the end of the financial year in which they last met the work test. The exemption will apply to voluntary contributions made in the 2019-20 and later financial years.
The work test exemption was announced in the May 2018 Budget, and draft regulations were released for consultation in October (see ASFA Action issues 669 and 688). That consultation package also included proposed amendments to the tax legislation to restrict access to the bring forward arrangements for non-concessional contributions where an individual had made contributions in reliance on the work test exemption.
Following feedback from stakeholders on the draft legislation (including from ASFA), the Government has decided to allow those who use the work test exemption in the year they turn 65 to access the ‘bring forward’ arrangements for non-concessional contributions.
Meaning of ‘superannuation income stream benefit’
The Government has amended the tax regulations to confirm the meaning of ‘superannuation income stream benefit’.
The determination of whether a superannuation benefit is a superannuation lump sum or superannuation income stream benefit is a key factor in determining the tax treatment of the superannuation benefit. The amendment to the regulations allows superannuation funds to continue to claim the earnings-tax exemption on certain assets.
The Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2018 amend the Income Tax Assessment Regulations 1997 to ensure the provisions concerning superannuation income stream benefits have always operated, and will continue to operate, as intended.
The amendments generally commenced on 8 December, however some aspects effectively apply retrospectively from 2007, when significant reforms to simplify the superannuation system commenced. According to the explanatory material, the intention of the existing provisions is clear and taxpayers have been applying the provisions as intended.
Transitional superannuation regulations: repeal
The Government has made regulations in preparation for the repeal of arrangements that related to the transition of superannuation funds into the Superannuation Industry (Supervision) (SIS) regime from 1993.
The Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2018 provide for the repeal of the Superannuation Industry (Supervision) (Transitional Provisions) Regulations 1993 (Transitional Regulations).
The Government has indicated that it intends to introduce amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act) to ensure that those aspects of the transitional arrangements that remain relevant will continue to apply. That amending Bill has not yet been introduced into Parliament, however once enacted, those amendments will mean the SIS Transitional Regulations are no longer required.
The repeal of the Transitional Regulations will commence from the day on which the relevant amendment to the SIS Act commences, however if that amendment never commences, the repeal will not take effect. The Government had previously deferred the sunsetting (expiry) date of the Transitional Regulations to allow time for the introduction and passage of the amendments to the SIS Act (see ASFA Action issue 684).
APRA regulations remade
The Government has remade regulations that support the legislation establishing APRA.
The Australian Prudential Regulation Authority Regulations 2018 (2018 Regulations) remake the Australian Prudential Regulation Authority Regulations 1998 (1998 Regulations), which were due to sunset (expire) on 1 April.
According to the explanatory material, the 2018 Regulations remake the 1998 Regulations by restructuring provisions to align with current drafting practices, without changing the substantive meaning or operation of the provisions. The 2018 Regulations also update the list of agencies prescribed for the purposes of disclosing protected information or producing protected documents.
The 2018 Regulations commenced on 8 December.
Status of superannuation bills
Parliament has now risen for its summer break and will not sit again until 12 February.
As noted above, the Government recently introduced into Parliament the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018, to amend the social services legislation to implement changes announced in its May 2018 Budget.
A number of older superannuation-related Bills also remain before Parliament, including Bills intended to implement some of the Government’s major superannuation reforms:
- Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 has been passed by the House of Representatives and is before the Senate. This Bill implements major reforms to insurance and fees within superannuation and consolidation of low-balance, inactive accounts. The ‘protecting your super’ package of reforms was announced by the Government in its May 2018 Budget. See ASFA Action issue 677 for more details.
- Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Bill 2017 – this Bill includes amendments to strengthen APRA’s powers in relation to registrable superannuation entity (RSE) licensees and provide APRA with the ability to obtain information on expenses incurred by RSEs and RSE licensees in managing or operating the RSE. It also introduces an annual ‘member outcomes’ test for MySuper products, requires RSE licensees to hold annual members’ meetings, and amends the portfolio holdings disclosure rules. The Government has placed debate on this Bill on hold in the Senate. The Bill is yet to come before the House of Representatives. Refer ASFA Action issues 644, 642, 639 and 638 for background.
- Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 – this Bill amends the superannuation guarantee (SG) law to provide that employees under workplace determinations or enterprise agreements made on or after 1 July 2018 have the right to choose their superannuation fund. It also provides that salary sacrificed amounts will not reduce an employer’s mandated superannuation guarantee contributions. The Bill has been passed by the House of Representatives and remains before the Senate. Refer ASFA Action issues 644, 639 and 596 for background.
- Treasury Laws Amendment (2018 Measures No 4) Bill 2018 – this omnibus amendment Bill makes a number of amendments in relation to SG compliance and penalties, single touch payroll (extension to small employers from 1 July 2019), fund reporting, employee commencement, Superannuation Complaints Tribunal secrecy provisions, and the taxation treatment of deferred annuities and reversionary transition to retirement income streams. The Bill has now been passed by the Senate with amendments unrelated to superannuation and awaits reconsideration by the House of Representatives. See ASFA Action issue 672 for more details.
- Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018 has been passed by the House of Representatives and remains before the Senate. This Bill provides a one-off 12-month amnesty for unpaid superannuation guarantee (SG), allows a partial opt-out from SG for higher income earners with multiple employers, and makes integrity measures to support the 2016-17 Budget reforms. See ASFA Action issue 672 for more details.
- Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 – this Bill seeks to impose design and distribution obligations on issuers of financial products and provide ASIC with a product intervention power. Refer ASFA Action issue 686 for background.
- Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 – this Bill amends the whistleblower protections in the Corporations Act 2001 so a single, strengthened whistleblower protection regime covers the corporate, financial and credit sectors – including superannuation funds. It also brings the whistleblower laws in other financial system statutes into the Corporations Act 2001 and inserts a comprehensive regime into the tax legislation for the protection of individuals who report breaches of the tax laws or misconduct. The Bill passed the Senate with amendments during December 2018 but is yet to come before the House of Representatives. See ASFA Action issue 654 for more details.
- Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 – this Bill proposes amendments to the Corporations Act 2001 to deter behaviours that prevent, avoid or significantly reduce the recovery of employment entitlements―including superannuation contributions―in insolvency. Refer ASFA Action issue 686 for background.
- Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 – this Bill seeks to strengthen penalties for corporate and financial sector misconduct. Refer ASFA Action issue 689 for background.
- Treasury Laws Amendment (2018 Measures No 2) Bill 2018 had been passed by the House of Representatives and remains before the Senate. This Bill creates the framework for an enhanced ‘regulatory sandbox’ to support innovation in financial services. See ASFA Action issue 659 for more details.
- Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 – this Bill introduces a requirement that superannuation trustees have at least one third independent directors. The Government has placed debate on this Bill on hold in the Senate. The Bill is yet to come before the House of Representatives. Refer ASFA Action issue 644 for background.
- Superannuation Objective Bill 2016 – this Bill, which sought to legislate primary and subsidiary objectives for the superannuation system, has not been debated since November 2016. It has been passed by the House of Representatives but remains before the Senate. Refer ASFA Action issue 612 for background.
- National Disability Insurance Scheme Funding Bills – this package of 11 Bills were intended to increase the Medicare levy, and certain tax rates that are tied to the top marginal tax rate, to fund the National Disability Insurance Scheme (including some superannuation amounts – refer ASFA Action issues 641 and 627). The Bills were to be withdrawn given the Government’s announcement that it would not proceed with the increase to the Medicare levy (see ASFA Action issue 668), however this has not yet formally occurred.
Appointment of ASIC deputy chair
The Government has appointed Ms Karen Chester as the new Deputy Chair of ASIC.
Ms Chester has been the Deputy Chair of the Productivity Commission since May 2016, having been appointed a Commissioner in December 2013. During this time, Ms Chester presided over a number of inquiries and projects including the Commission’s three stage review of the superannuation system.
Ms Chester will commence with ASIC for a five year period from 28 January 2019, replacing Peter Kell.
Audit quality survey: reminder
As reported in ASFA Action issue 690, the Financial Reporting Council (FRC) is conducting a survey on audit quality in Australia and is keen to obtain the views of ASFA members.
The survey is being undertaken in conjunction with the Australian Auditing and Assurance Standards Board. It seeks to gather the views of stakeholders—including users of financial reports—on their perceptions of audit quality, the value of audit, and what influences this.
The FRC would appreciate the assistance of ASFA members in completing the survey, as soon as possible. The target audience for the survey is those people who use audited financial reports as part of decision making in their role – for example, folio/investment managers and research analysts. The survey can be completed by multiple people within an organisation.
The survey can be accessed here. See ASFA Action issue 690 for background on the survey.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
