Issue 882, 13 December 2022
In this issue:
Climate risk disclosure: consultation + ASFA working group
The Government has launched consultation on the development of an Australian climate risk disclosure framework.
The internationally aligned framework is intended to provide business and investors with the clarity and certainty they need to manage climate risks and invest in new opportunities. It will ensure large business and financial institutions provide more information and greater transparency on how they are responding to climate change and supporting the transition to net zero.
The reporting requirements are expected to be mandatory for large entities and phased in over time. The consultation paper states:
“It is proposed that mandatory climate-related financial risk disclosure requirements would also apply initially to large financial institutions (such as banks, insurers, credit unions and superannuation funds), to provide consistency across the economy and to support the management of prudential risk. This could require legislative changes to other relevant Acts. Views are sought on appropriate size thresholds to determine this initial requirement.”
The Government also intends to apply appropriately tailored requirements to comparable Commonwealth public sector corporate entities and investment funds.
Treasury is seeking comments by close of business Friday 17 February. ASFA will make a submission to the consultation and is convening a Working Group process as the key mechanism to glean ASFA member views. If you would like to be involved in the Working Group, please contact Andrew Craston or Harvey Russell by close of business Thursday 15 December. Given the tight timeframe for responding, ASFA will hold a short meeting of the Working Group early next week.
The Government has also tasked Treasury with “developing a comprehensive sustainable finance strategy, encompassing a range of measures to improve transparency, deepen Australia’s green finance markets, and seize opportunities presented by surging global momentum in sustainable finance”. The strategy will be developed in close co-ordination with the financial regulators, other Commonwealth departments and industry, and will be considered by Government in early 2023 before a period of public consultation on key measures.
The strategy will include the development of new standards or taxonomies for sustainable investment, further initiatives to reduce greenwashing and strengthen ESG labelling, and more ambitious participation in global forums to support climate and sustainable finance frameworks and investment.
Bills referred to Senate Committee: extension of submission period
The due dates for submissions to the Senate Economics Legislation Committee for inquiries into two Bills relevant to superannuation have been extended.
As reported in ASFA Action issue 880:
- the Treasury Laws Amendment (2022 Measures No 4) Bill 2022 (2022 Measures No 4 Bill) contains proposed reforms to financial reporting and auditing requirements for superannuation funds and amendments to the tax treatment of some defined benefit pensions (to reverse the impact of the ‘Douglas’ decision).
- the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022 (‘Modernising Business Communications Bill’) includes a range of miscellaneous amendments to financial services laws, including some minor and technical amendments in relation to superannuation.
The Senate Economics Legislation Committee has extended the closing date for submissions on the 2022 Measures No 4 Bill to 31 January (previously it was 7 December) however its website is still indicating it is due to report on the Bill by 25 January.
- If you have any feedback you would like ASFA to consider in relation to financial reporting and auditing aspects of this Bill, please forward it to Fiona Galbraith by close of business Friday 20 January
- If you have any feedback you would like ASFA to consider in relation to the defined benefit pension aspects of this Bill (reversing the Douglas decision), please forward it to Julia Stannard by close of business Friday 20 January.
The Committee has extended the due date for submissions on the Modernising Business Communications Bill to 31 January (previously 10 January) and will now report by 3 March (previously 25 January). If you have any feedback you would like ASFA to consider in relation to this Bill, please forward it to Helena Gibson by close of business Friday 23 December.
Further improvements to corporations and financial services laws: consultation
Treasury has released for consultation exposure draft legislation to reduce the complexity of Australia’s corporations and financial services laws by making these laws more adaptive, efficient, and navigable within existing policy settings.
The draft legislation seeks to implement several recommendations Interim Reports A and B from the ongoing review by the Australian Law Reform Commission (ALRC) of the legislative framework for corporations and financial services regulation – see ASFA Action issues 871 and 836 for background. It follows the introduction of several measures from Interim Report A in the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022, which is currently before Parliament (see ASFA Action issue 880).
The draft legislation proposes amendments to:
- create a single glossary of defined terms in section 9 of the Corporations Act 2001
- ‘unfreeze’ the Acts Interpretation Act 1901 (AI Act) as it applies to the Corporations Act and Australian Securities and Investments Commission Act 2001, so the most current version of the AI Act applies to both Acts.
- repeal definitions that are no longer used, cross-references to repealed provisions and other redundant provisions
- amend the law to address unclear or incorrect provisions
- simplify unnecessarily complex provisions, with a particular focus on terms defined as having more than one meaning and definitions containing substantive obligations.
Treasury is seeking comments on the exposure draft legislation by close of business Sunday 15 January.
Payment Times Reporting Act 2022: Statutory review
The Government has announced an independent review of the Payment Times Reporting Act 2020, which commenced on 1 January 2021.
Under the Act, large businesses and government enterprises – including some superannuation funds must submit payment times reports to the Payment Times Reporting Regulator every 6 months. This includes information on their standard payment terms, actual payment performance, and the use of supply chain financing arrangements.
The review will be conducted by Dr Craig Emerson and will include a public consultation process. A written report will be provided to the Government by 30 June 2023.
Bills update: Royal Assent to Bills
Three Bills relevant to superannuation received Royal Assent on 12 December, after each concluded their passage through Parliament in late November:
- Treasury Laws Amendment (2022 Measures No 2) Bill 2022 – this reduces the eligibility for downsizer contributions from 60 to 55 years. See ASFA Action issue 863 for background
- Privacy Legislation Amendment (Enforcement and Other Measures) Bill 2022 – this increases the maximum penalties for serious or repeated privacy breaches and provides for enhancements to the enforcement powers of the Australian Information Commissioner and the information sharing powers of the Commissioner and the Australian Communications and Media Authority. See ASFA Action issue 876 for background
- Crimes Amendment (Penalty Unit) Bill 2022 – this increases the amount of a Commonwealth penalty unit from $222 to $275. See ASFA Action issue 878 for background.
Underlying dealing of RSE: legislative instrument
The Government has registered a legislative instrument relevant to superannuation as part of a program of amendments intended to simplify and improve the navigability of Treasury legislation.
The Treasury Laws Amendment (Rationalising ASIC Instruments) Regulations 2022 move into the Corporations Regulations 2001 an existing exemption that provides ongoing relief to a trustee of a registrable superannuation entity (RSE) for dealing in a financial product (other than an interest int the entity) in the ordinary course of operation of the entity. This exemption is currently located in ASIC Corporations (Superannuation and Schemes: Underlying Investments) Instrument 2016/378. The Regulations will commence on 1 January.
Consultation on this amendment was undertaken in August-September as part of the ‘rationalising ASIC instruments’ package (see ASFA Action issue 866 for background.)
Miscellaneous and technical amendments: regulations made
The Government has registered the Treasury Laws Amendment (Miscellaneous and Technical Amendments) Regulations 2022 to amend a range of regulations in the Treasury portfolio.
Of relevance to superannuation, the regulations prescribe:
- matters that must be satisfied before the Commissioner of Taxation can pay amounts of ATO held superannuation to a KiwiSaver provider
- the public sector superannuation schemes that can voluntarily pay unclaimed superannuation to the ATO.
The amendments were part of a consultation package from September this year (see ASFA Action issue 867). Several other measures from that package are included in the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022, which is currently before Parliament (see ASFA Action issue 880.
Compensation for victims of child sex abuse – access to perpetrator’s superannuation
The Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones, has indicated that the Government is examining ways to prevent perpetrators of child sex abuse from impeding victims’ compensation claims by moving their assets into superannuation.
According to the Minister, the Government “is committed to having legislation in the Parliament in the first half of next year” to address this issue.
The previous Government consulted on the early release of superannuation for victims of crime compensation more broadly from December 2017 to June 2018, however no reforms were implemented (see ASFA Action issues 654, 665 and 673 for background).
Complaints handling by superannuation funds: ASIC report
ASIC has released the results of a detailed review of superannuation fund trustees’ compliance with the internal dispute resolution (IDR) requirements set out in Regulatory Guide RG 271, following a more high-level report earlier this year. The review concluded that some trustees had ‘sub-standard’ arrangements for managing complaints.
ASIC’s initial review examined the compliance of trustees for 38 superannuation funds over the period 5 October 2021 (the commencement of RG 271) and 28 February 2022. The results from that review were released in August (see ASFA Action issue 864). Stage 2 of ASIC’s review involved a sub-set of 10 trustees, reviewed in more detail for the period 5 October 2021 to 30 June 2022.
Report 751 Disputes and deficiencies: A review of complaints handling by superannuation trustees (REP 751) outlines ASIC’s findings on compliance by a selection of trustees with the obligations in Regulatory Guide 271 Internal dispute resolution (RG 271). ASIC selected 35 trustees for an initial review, followed by a more detailed review of a subset of 10 trustees.
ASIC Commissioner Danielle Press said the review revealed “examples of trustees’ failure to comply with fundamental obligations, which could lead to poor outcomes, such as consumers abandoning a complaint rather than seeing it through. While a few trustees did the right thing, in many cases there were serious deficiencies in trustees’ dispute resolution processes and how they monitored and responded to complaints”.
Key concerns reported by ASIC include:
- a number of trustees did not respond to a significant portion of their complaints in a timely manner – that is, they did not issue a written response to a complaint within the maximum timeframe set by RG 271 of 45 days for complaints about superannuation that are not an objection to the distribution of a death benefit (with limited exceptions)
- most trustees failed to ensure all complainants were kept informed when their response to the complaints exceeded the maximum timeframe, which could delay complainants exercising their right to go to the Australian Financial Complaint Authority (AFCA)
- many written responses to complaints omitted mandatory content related to a consumer’s right to take their complaint to AFCA
- there were gaps in how most trustees managed systemic issues that could be identified through member complaints or how they used intelligence from complaints to improve their products and services
- trustees’ internal reporting often lacked sufficient detail to identify, much less remedy, deficiencies in complaint handling.
ASIC is writing to these trustees about issues specific to their compliance with RG 271. The trustees will be required remedy the issues identified and the majority will need to report to ASIC on improvements made. ASIC is also considering other regulatory action where more serious concerns were identified.
ASIC has encouraged all superannuation trustees to critically examine their dispute resolution arrangements based on its findings, make timely improvements and ensure they are fit-for-purpose going forward. Commissioner Press indicated ASIC will continue to closely monitor trustee compliance with RG 271. Where it identifies serious compliance failures impacting consumers, ASIC will take regulatory action, including enforcement action where appropriate, to address harm.
ASIC has also released Report 752 Review of written responses to superannuation complaints. This contains insights and practical tips for writing consumer-centric responses to complaints.
Customers without standard forms of ID: new AUSTRAC guidance
AUSTRAC has released new guidance to superannuation funds and banks to support people from diverse backgrounds and in challenging circumstances access financial services.
The guidance reflects that while financial institutions require customers to provide identity documents to access their services, some members of the community cannot access traditional forms of documentation to prove their identity. This may be due to emergency, personal circumstances, location or structural barriers. It may include Aboriginal and Torres Strait Islander peoples; those in remote communities; the incarcerated or recently released; intersex, trans and gender diverse people whose documentation may not reflect their identity, and those fleeing domestic violence or evacuated from their home due to a natural disaster.
Under anti-money laundering laws, if a customer cannot produce standard identification documents such as a driver’s licences or birth certificate, banks and other regulated businesses can use alternative ways to verify their customer’s identity. ASIC’s guidance is designed to help financial institutions adopt flexible and compassionate approaches to customer identity processes, while still maintaining due diligence processes.
AUSTRAC consulted on a draft of the guidance earlier this year – see ASFA Action issue 852).
SMSF advice: updated ASIC guidance
ASIC has issued an updated version of its guidance on the provision of advice about self-managed superannuation funds (SMSFs).
Information Sheet 274 Tips for giving self-managed superannuation fund advice (INFO 274) is designed to help Australian financial services (AFS) licensees and their representatives comply with their obligations when providing personal advice about SMSFs.
Key changes made in INFO 274 and on ASIC’s Moneysmart’s SMSF webpage include:
- highlighting SMSF risks and the importance of seeking professional advice
- ensuring comparisons about SMSFs and APRA-regulated funds remain relevant and up to date
- removing guidance about a minimum balance for an SMSF, reflecting that balance alone is not the driving indicator of suitability.
The new version of INFO 274 also consolidates and replaces ASIC’s previous guidance in:
- Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205)
- Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206).
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
