Issue 783, 12 November 2020
In this issue:
- Protecting critical infrastructure and systems of national significance: consultation
- Remuneration requirements for APRA-regulated entities: consultation
- Royal Commission: bills introduced into Parliament
- Outcomes assessment: new APRA FAQs
- Senate Committee inquiry on FinTech and RegTech: second issues paper
- Family law super splitting: extension to de facto couples in Western Australia
- Payment of ATO-held super amounts to KiwiSaver schemes
- COVID-19 Coronavirus: early release of super – ATO processing update
- COVID-19 Coronavirus: early release of super – APRA data
- ATO SuperStream rollover version 3 webpage
- ATO superannuation funds survey
Protecting critical infrastructure and systems of national significance: consultation
The Department of Home Affairs is seeking views on exposure draft legislation designed to provide an enhanced regulatory framework in relation to critical infrastructure and systems of national significance.
The draft Security Legislation Amendment (Critical Infrastructure) Bill 2020 follows the release of a consultation paper in August (see ASFA Action issue 771). It builds on existing requirements under the Security of Critical Infrastructure Act 2018, and includes:
- a positive security obligation for critical infrastructure entities, supported by sector-specific requirements
- enhanced cyber security obligations for those entities most important to the nation
- Government assistance to entities in response to significant cyber-attacks on Australian systems.
The explanatory material indicates that rules will be made to support the new legislative framework, and these will be “co-designed between industry and government”. These detailed rules are not part of the current consultation.
Of particular relevance to superannuation:
- the draft Bill introduces a definition of ‘critical superannuation asset’ in recognition of the significant role superannuation funds play in the Australian economy and includes it as part of the critical infrastructure sector asset definition
- the rules may prescribe specified assets that are critical to the security and reliability of operating a registrable superannuation entity and the requirements for such an asset
- the rules may also set a threshold to capture only those entities that are critical to the security and reliability of the superannuation industry. For example, the threshold may capture only those superannuation entities with total assets above $20 billion
- the rules may be used to define the responsible entity for a critical superannuation asset beyond those registrable superannuation entities by APRA under the Superannuation Industry (Supervision) Act 1993.
If you have any feedback you would like ASFA to consider in relation to the draft Bill, please forward it to Byron Addison by close of business Friday 20 November.
Remuneration requirements for APRA-regulated entities: consultation
APRA has released an updated prudential standard for remuneration for a second round of consultation (see ASFA Actions 734 and 717 for background). APRA has also released an accompanying response paper which sets out APRA’s response to industry’s feedback on the initial consultation proposals released in July 2019.
The revised Draft Prudential Standard CPS 511 Remuneration includes the following changes:
- replacing the 50 per cent cap on financial measures for variable remuneration with a requirement that material weight be assigned to non-financial measures
- a reduction in the minimum deferral periods for variable remuneration
- streamlining the remuneration requirements for non-significant financial institutions (SFIs) by not subjecting non-SFIs to minimum deferral periods, clawbacks and material weight for non-financial measures for variable remuneration.
The remuneration prudential standard is expected to come into effect for superannuation SFIs on 1 July 2023 and for superannuation non-SFIs on 1 January 2024.
Specific disclosure requirements of remuneration practices are expected to be consulted on in late 2021.
If you have any feedback you would like ASFA to consider in relation to the prudential standard, please forward it to Maggie Kaczmarska by close of business Monday 1 February.
Royal Commission: bills introduced into Parliament
The Government has today introduced into Parliament a bill to implement a number of recommendations from the Royal Commission into Misconduct in the Banking, Superannuation & Financial Services Industry.
The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 addresses a number of Royal Commission recommendations that are directly or indirectly relevant to superannuation, including:
- enforceable code provisions (recommendation 1.15)
- hawking of financial products (recommendations 3.4 and 4.1)
- claims handling and settling services (recommendation 4.8)
- trustees of registrable superannuation entities to have no other duty (recommendation 3.1)
- adjustment of APRA’s and ASIC’s roles in superannuation (recommendations 3.8, 6.3, 6.4 and 6.5)
- breach reporting and remediation (recommendations 7, 2.8, 2.9 and 7.2)
- removal of barriers to efficient co-operation and information sharing between APRA and ASIC (recommendations 6.9 and 6.11).
These measures were the subject of consultation earlier this year (see ASFA Action issue 735).
The Government has also introduced the Corporations (Fees) Amendment (Hayne Royal Commission Response) Bill 2020. This Bill does not appear to be relevant to superannuation. It amends the Corporations (Fees) Act 2001 to allow ASIC to charge a fee for an application by an entity to be exempted from the deferred sales model for the sale of add-on insurance products. Provision for ASIC to implement that model is included in the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020.
Outcomes assessment: new APRA FAQs
APRA has published new frequently asked questions (FAQs) to support registrable superannuation entity licensees in completing their outcomes assessment by the end of February 2021.
The FAQs address common areas of weakness identified from APRA’s targeted review of trial outcomes assessments.
Senate Committee inquiry on FinTech and RegTech: second issues paper
A Senate committee inquiring into matters in relation to financial technology (FinTech) and regulatory technology (RegTech) has released a second issues paper.
As reported in ASFA Action issues 774 and 726, the Senate Select Committee on Financial Technology and Regulatory Technology released an issues paper late last year that posed some questions about the extension of the consumer data right (CDR) to superannuation.
Of particular relevance to superannuation, the Committee’s second issues paper notes that the Government’s 2020-21 Budget proposals include a new online YourSuper comparison tool. Given this development, the Committee is “interested in whether the CDR could still assist and facilitate choice in the superannuation sector”.
The Committee is seeking submissions on the second issues paper by 11 December.
Family law super splitting: extension to de facto couples in Western Australia
A bill to allow separated de facto couples in Western Australia (WA) to split their superannuation interests as part of their property settlements has been passed by the House of Representatives.
The Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019 was introduced into Parliament in November 2019. The Bill contains amendments that will enable separating de facto couples in WA to access the superannuation splitting regime set out in the Commonwealth Family Law Act 1975. All other aspects of property splitting for separated WA de facto couples will continue to be dealt with under WA law rather than the Commonwealth FL Act. (Separated de facto couples in all other states and territories are already able to access the family law superannuation splitting regime.)
The Bill was passed by the House of Representatives with some minor amendments addressing technical matters that were raised in the report of the Senate Legal and Constitutional Affairs Committee following its inquiry into the Bill. The Bill is now awaiting consideration by the Senate.
See ASFA Action issues 729 and 689 for background in relation to this Bill.
Payment of ATO-held super amounts to KiwiSaver schemes
The Government has introduced amendments into Parliament that will allow ATO-held superannuation amounts to be transferred directly into an individual’s KiwiSaver account.
Under an intergovernmental arrangement and supporting legislation (including provisions in the Superannuation Industry (Supervision) Regulations 1994), a scheme exists to allow the transfer of retirement savings between Australian complying superannuation funds and New Zealand (NZ) KiwiSaver schemes.
This ‘trans-Tasman portability’ scheme only covers transfers directly between Australian superannuation funds and KiwiSaver schemes, and does not apply to superannuation amounts that are held by the ATO – for example, amounts transferred to the ATO by funds under the Superannuation (Unclaimed Money and Lost Members) Act 1999. As a result, NZ residents who wish to recover ATO-held amounts must first transfer them to an Australian complying fund and then request a transfer to a KiwiSaver scheme.
In its 2015-16 Budget, the Government announced it would amend the law to allow the Commissioner of Taxation to pay ATO-held superannuation amounts directly to an individual’s KiwiSaver scheme (see ASFA Action issue 566). The measure was intended to commence from 1 July 2106, but the necessary legislative changes were never introduced into Parliament.
In late July, as part of its Economic and Fiscal Update, the Government announced that the commencement date for the measure would be deferred until six months after the date of Royal Assent of the necessary legislative amendments (see ASFA Action issue 766).
The Government has now introduced those amendments into Parliament, as part of the Treasury Laws Amendment (2020 Measures No 5) Bill 2020.
Under the amendments, the Commissioner of Taxation will be required to pay relevant amounts held by the ATO in respect of an individual to a KiwiSaver scheme if directed by the individual to do so, provided any matters prescribed by the regulations are satisfied. The Bill also amends the relevant income tax legislation to provide that—consistent with payments made from complying superannuation funds to KiwiSaver scheme providers—payments made by the Commissioner to a KiwiSaver scheme provider are non-assessable non-exempt income of the individual in respect whom the payment was made.
It should be noted that the commencement date for the measure differs from the Government’s announcement in July. The measure will now commence 12 months after Royal Assent, unless an earlier commencement date is proclaimed. The explanatory material indicates that this 12-month period is considered “necessary and appropriate” to ensure sufficient time for corresponding legislation to be implemented in NZ and for amendment of the intergovernmental agreement.
COVID-19 Coronavirus: early release of super – ATO processing update
The ATO has released details of how its end of year shutdown will impact its processing of applications for the Coronavirus early release of superannuation.
CRT Alert 043/2020 notes that while the ATO’s offices will generally be closed from midday 24 December to start of business 4 January, staff will be available on 29, 30 and 31 December to assist individuals with submitting their applications and provide support to funds. Electronic files of applications will be sent on 24 December (approvals up to 22 December) and 30 December (approvals for 23-28 December) then recommence on 5 January (the remainder of approvals for applications made up to 31 December).
The ATO has also noted that while applications for the Coronavirus early release close at 11.59pm AEDT on 31 December, funds may still receive a small number of approval files into January, relating to applications that require remediation.
COVID-19 Coronavirus: early release of super – APRA data
APRA has made its twenty-eighth weekly publication of industry-level data from its early release initiative data collection.
The data covers applications made from inception of the early release initiative on 20 April. The data shows that from 20 April to 1 November:
- payments totalling $34.8 billion had been made, with an average payment of $7,658
- 3.3 million ‘initial’ applications had been received, with an average application amount of $7,401
- 1.3 million ‘repeat’ applications had been received, with an average application amount of $8,336
- funds were taking an average of 3.3 business days to pay an application, with 95 per cent of applications paid within five business days.
APRA has also published the twenty-seventh tranche of fund-level statistics from its early release data collection, revealing the number and value of the payments processed by each fund, as well as the time taken to make payments.
ATO SuperStream rollover version 3 webpage
The ATO has launched a new webpage as a central repository for materials in relation to implementation of the new SuperStream Rollover standard, version 3 (Rollover v3).
Rollover v3 will involve some significant changes to the scope of the existing SuperStream reporting for rollovers, in particular the inclusion of self-managed superannuation fund (SMSF) rollovers and the reporting of certain release authorities. As outlined in ASFA Action issue 770, the ATO recently advised trustees that it had extended the transition period for implementation of Rollover v3 from 31 March 2021 to 30 September 2021.
The new webpage is designed to assist APRA-regulated funds and digital service providers (DSPs) in the transition to SuperStream Rollover v3 and SMSF DSPs in implementing SuperStream Rollover v3. The web page includes onboarding and implementation approach information, news updates and links to technical artefacts. The ATO will update the webpage throughout the transition period.
ATO superannuation funds survey
The ATO is currently conducting its twice-yearly survey of the large superannuation fund community and has asked ASFA to bring it to our members’ attention.
According to the ATO, the survey is intended to help it understand how it can improve its services and is part of its routine research program.
The survey seeks input from funds about their experience and preferences when interacting with the ATO. Topics included in the survey include the COVID-19 early release of super, ATO consultation groups and fund income tax.
Survey responses are anonymous (unless respondents choose to identify themselves at the end of the survey) and completion time is approximately ten minutes. The survey closes at 5pm Tuesday 24 November.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
