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Issue 838, 11 January 2022 
In this issue: 

 

Superannuation co-contribution regulations: consultation 

Treasury is consulting on a draft replacement version of regulations to support the Government co-contribution for low-income earners, with the existing regulations due to sunset (expire) on 1 April. 

According to Treasury, the draft Superannuation (Government Co contribution for Low Income Earners) Regulations 2022 will improve upon the existing Superannuation (Government Co contribution for Low Income Earners) Regulations 2004 by omitting redundant provisions, simplifying language and restructuring provisions for ease of navigation. This includes minor changes to increase the use of headings and references to ‘section’ rather than ‘regulation’ in accordance with modern drafting practice. 

Treasury has indicated that the only substantive changes in the draft regulations are: 

Treasury is seeking submissions on the draft regulations by close of business Friday 14 January. 

 

Royal Commission implementation: consultations on advice review and adviser education 

The Government is consulting on two reform packages to support its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in relation to financial advice. 

 

Quality of Advice Review 

Treasury has released draft terms of reference for a review of the quality of financial advice. The Review will consider how the regulatory framework could better enable the provision of high quality, accessible and affordable financial advice for retail investors. In particular, it will investigate: 

 Treasury has noted that submissions should focus on the draft Terms of Reference — there will be opportunities to comment on substantive policy issues once the review is underway. 

If you have any feedback you would like ASFA to consider in relation to the terms of reference (or the Review more broadly), please forward it to Byron Addison by close of business Friday 28 January. 

 

Financial adviser education standards 

The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 winds-up the Financial Adviser Standards and Ethics Authority (FASEA) and moves its function of setting education and training standards for financial advisers to the Minister for Superannuation, Financial Services and the Digital Economy. The Act received Royal Assent in October (see ASFA Action issue 830 for background). 

Treasury has now released Education Standards for Financial Advisers. This policy paper seeks feedback on the education standards and whether they remain fit for purpose including by ensuring that they adequately recognise on-the-job experience of advisers. Unless the standards made by FASEA are amended or replaced, the existing standards continue to set the requirements for financial advisers. 

Treasury is seeking comments on the policy paper by close of business Tuesday 1 February. 

 

Australian Data Strategy: consultation 

The Government has released Australia’s first Data Strategy, to set “a clear path for Australia’s data system over the next four years”. The Data Strategy also complements the Government’s broader Digital Economy Strategy and the Digital Government Strategy. 

The Strategy signposts the Australian Government’s data intent and efforts over the period to 2025. It focuses on three key themes: 

  1. maximising the value of data – why data is important, its economic and social value, its use in responding to priority issues, and the benefit that can be gained through using and safely sharing data. Data can create new value when shared between different levels of government, and the private and non-government sectors. 
  2. trust and protection – the settings that can be adopted in the private and public sectors to keep data safe and secure, and the frameworks available to protect Australians’ data and ensure its ethical use through the entire data lifecycle. 
  3. enabling data use – approaches and requirements to leverage the value of data, such as capabilities, legislation, management and integration of data, and engaging internationally. 

The Strategy considers both public sector data, which is managed by the government, and data in the broader economy, where the Australian Government both enables data users and regulates its use and sharing to provide greater certainty in how people deal with their data.  

The Strategy is supported by an Action Plan which sets out tangible measures the Government is implementing to improve our data settings across the economy. The Action Plan will be regularly reviewed to ensure it evolves to meet the changing priorities of Australians and continuously raises the bar to meet the Government’s goal of being a leading digital economy and society by 2030. 

While the Data Strategy and Action Plan do not introduce new regulations or legislation, they align with a range of existing legislation, strategies, policies, and reviews which regulate data. 

The Government is seeking feedback on the Data Strategy by close of business Thursday 30 June. The Government will respond to submissions by the end of 2022. 

 

Super benefits paid in breach of legislative requirements: ATO consultation 

The ATO is consulting on two draft instruments relating to the treatment of superannuation benefits paid in breach of legislative requirements. 

Superannuation benefits received by members of a superannuation fund are generally taxed at a more concessional rate than ordinary assessable income. Payments from a superannuation fund lose their concessional tax treatment if they are paid in breach of relevant superannuation regulations. The amounts are instead included in the member’s assessable income under Division 304 of the Income Tax Assessment Act 1997 and taxed at the relevant marginal tax rate. This may occur where members access amounts before they meet a condition of release (such as retirement). However, a superannuation benefit is not included in a member’s assessable income under Division 304 if the Commissioner is satisfied that this would be unreasonable, having regard to the matters in subsection 304-10(4). 

The ATO has now issued: 

The ATO is seeking feedback on TD 2021/D6 and PS LA 2021/D3 by close of business Friday 4 February. 

 

APRA MySuper and Choice heatmaps 

On 16 December, APRA published its third annual heatmap for MySuper products along with its first heatmap for Choice superannuation products. In aggregate, the two heatmaps cover 60 per cent of member benefits in the APRA-regulated superannuation sector. 

The MySuper heatmap has been expanded to include each product’s assessment result received under the new Your Future, Your Super (YFYS) performance test. The inaugural Choice heatmap focuses on multi-sector investment options in open, accumulation products (excluding platform products), representing 40 per cent of total member benefits in the APRA-regulated choice sector. APRA intends to leverage its Superannuation Data Transformation project to further refine and expand its Choice heatmap over coming years to cover more of the sector. 

Key insights from the latest refresh of the MySuper heatmap include: 

 APRA’s analysis of the Choice heatmap shows: 

Alongside the heatmaps, APRA has also published an insights paper highlighting key findings plus technical and methodology papers for each of the MySuper and Choice heatmaps. 

 

Proxy advice: regulations 

The Government has made regulations “strengthening the transparency and accountability of proxy advice services, and improving the disclosure of superannuation funds’ voting records on company resolutions”. 

The Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021, registered on 17 December, amend the Corporations Regulations 2001 to specify: 

The Regulations also amend the Superannuation Industry (Supervision) Regulations 1994 to expand the range of information that Registrable Superannuation Entity (RSE) licensees must make publicly available on the registrable superannuation entity’s website. The new information requirements include a summary of how voting rights attaching to shares in listed companies that the trustee of the RSE holds, or in which the trustee holds beneficial interests, have been exercised. 

The Regulations commenced on 18 December 2021, however the amendments have a range of commencement dates: 

The Regulations follow consultation on the adequacy of the current regulatory regime for proxy advice, undertaken last year (see ASFA Action issue 802 for background). 

 

Miscellaneous and technical amendment regulations 

The Government has registered regulations making miscellaneous and technical amendments to a range of Treasury portfolio regulations, including some of relevance to superannuation. 

According to the explanatory material, the Treasury Laws Amendment (Miscellaneous and Technical Amendments No. 2) Regulations 2021 make minor and technical changes that correct typographical and referencing errors, address unintended outcomes, update out of date references, and repeal inoperative provisions. The changes ensure that the Treasury regulations are fit for purpose and operate as intended. These Regulations also incorporate certain instruments which modify the law directly into the text of the law to improve readability and reduce the incidence of laws being modified via legislative instrument. 

Of particular relevance to superannuation, the Regulations: 

 The amendments were included in a package of draft regulations that were the subject of consultation late last year (see ASFA Action issue 826). That consultation package also included several other amendments, relevant to superannuation, that are not included in these Regulations. 

 

Family law super splitting: extension to de facto couples in Western Australia 

The Government has made regulations supporting recent legislation that provided for separating de facto couples in Western Australia (WA) to access the superannuation splitting regime set out in the Commonwealth Family Law Act 1975 (FL Act). 

The Commonwealth Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Act 2020 (the WA Superannuation Splitting Act) gives effect to a referral of power from Western Australia to the Commonwealth in respect of superannuation matters in family law proceedings for separating de facto couples in Western Australia. The Act received Royal Assent in December 2020 (see ASFA Action issue 786 for background). 

Rather than applying the existing provisions dealing with superannuation splitting in Part VIIIB of the FL Act to WA de facto couples, the WA Superannuation Splitting Act replicates the relevant provisions in an entirely new Part VIIIC. This is because — unlike other states and territories — the WA government limited its referral of power so the Commonwealth could legislate only in relation to superannuation interests of de facto couples and not in relation to all financial matters. 

The WA Superannuation Splitting Act made consequential amendments to 21 pieces of primary Commonwealth legislation. These amendments generally provide that any reference to definitions of terms that apply to Part VIIIB of the FL Act (which provides for splitting superannuation interests) will also apply to the new Part VIIIC (which will provide specifically for superannuation splitting for separating WA de facto couples). 

The Government has now made the Superannuation Legislation Amendment (Western Australia De Facto Superannuation Splitting) Regulations 2021 to support the WA Superannuation Splitting Act. These amend various Commonwealth regulations to ensure consistency with the 21 amended Acts. The Regulations ensure that any provisions in regulations which deal with superannuation splitting under the FL Act will also apply to superannuation splits made by de facto couples in Western Australia in accordance with Part VIIIC of the FL Act. 

Despite the registration of these Regulations, it should be noted that the commencement date for the WA Superannuation Splitting Act has not yet been proclaimed. As a result, it is not yet possible for separating WA de facto couples to access the Commonwealth family law superannuation splitting regime. 

In addition to amendments arising from the WA de facto superannuation splitting reform, the Regulations also update references to outdated FL Act provisions contained in a number of regulations, to ensure they are correct. 

 

Royal Commission implementation: Financial Services and Credit Panel 

The Government has registered regulations dealing with the operation of the Financial Services and Credit Panel (FSCP), a new disciplinary body to be established as part of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

Under reforms implemented via the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021, the role of the FSCP within ASIC was expanded, to operate as a single disciplinary body for financial advisers. The powers of the FSCP under the Act include the power to direct financial advisers to undertake specified training, counselling or supervision and to report certain matters to ASIC. The FSCP may also suspend or cancel a financial adviser’s registration, issue infringement notices in specified circumstances, recommend that ASIC commence civil penalty proceedings, and enter into enforceable undertakings with financial advisers. The reforms also require that ASIC must issue a warning or reprimand in relation to certain misconduct. The reforms commenced on 1 January 2022. 

On 20 December, the Government registered the Financial Sector Reform Amendment (Hayne Royal Commission Response—Better Advice) Regulations 2021. These set out the circumstances in which ASIC must convene an FSCP, including where it reasonably believes a financial adviser is not a fit and proper person to provide advice or becomes aware that a financial adviser has become an insolvent under administration. 

ASIC has indicated that it will consult on guidance regarding the operation of the FSCP and also release guidance about how it will exercise its new power to issue warnings/reprimands, in early 2022. 

 

MYEFO: superannuation-related measures 

The Government’s Mid-Year Economic and Fiscal Outlook 2021-22 (MYEFO), released on 16 December, contained new or additional funding for three measures that may impact superannuation funds or fund members, and confirmed a number of previously announced superannuation measures. 

The Government has indicated it will provide funding: 

The MYEFO statement also confirmed these superannuation measures, which have been previously announced and, in some cases, already implemented: 

 

 

ASFA REGULATORY WATCHLIST

ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations

and other regulatory announcements relevant to superannuation.

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