Issue 841, 15 February 2022
In this issue:
2021-22 Budget measures Bill passed by Parliament
The Bill to implement several of the superannuation-related measures announced in the May 2021 Budget has been passed by Parliament.
Of relevance to superannuation, the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 proposes amendments to:
- remove the current $450 per month earnings threshold that applies before an employer is required to make Superannuation Guarantee (SG) contributions for an employee
- remove the work test for voluntary (non-concessional) and salary sacrificed contributions for individuals under age 75, so the work test will only apply to individuals aged between 67 and 75 years who claim a deduction for their personal contributions, and allow individuals under age 75 (rather than age 67) to ‘bring-forward’ non-concessional contributions in a particular financial year
- increase the maximum releasable amount for the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000
- reduce the eligibility age for downsizer contributions from age 65 to age 60
- reform the ‘segregated current pension assets’ rules under which a fund calculates its exempt current pension income.
While the Australian Greens had tabled amendments opposing the reforms to the work test, downsizer contribution and FHSSS, the Bill was passed by the Senate on 10 February without amendment.
See ASFA Action issue 831 for background in relation to this Bill.
Retirement income covenant Bill passed by Parliament
The Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021, which contains provisions to establish the retirement income covenant (RIC), was passed by both the House of Representatives and the Senate on 10 February without amendment.
The RIC is an obligation on trustees of registrable superannuation entities to develop a retirement income strategy for beneficiaries who are retired or approaching retirement. Trustees are required to have their strategy formulated in writing with a summary publicly available from 1 July 2022, but are not required to give effect to all components of their strategy by this date.
See ASFA Action issue 835 for background in relation to this Bill.
Proxy advice regulations disallowed by Parliament
Regulations that would have imposed new requirements on the providers and users of proxy advice services have been disallowed by the Senate.
As reported in ASFA Action issue 838, the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021, registered on 17 December, sought to amend the Corporations Regulations 2001 to specify:
- circumstances in which voting advice is proxy advice (a kind of financial service). The new definition would have included advice relating to the exercise of voting rights attaching to a security or an interest in a managed investment scheme where the security or interest (or a beneficial interest therein) is held by an APRA-regulated superannuation fund (excluding a small APRA fund), the advice addresses how to vote on a particular resolution, and a fee, charge or other amount is paid or payable in connection with the provision of the advice
- obligations for financial services licensees who provide proxy advice to:
- provide any proxy advice to the entity that is the subject of the proxy advice on the same day it is provided to the client; and
- be independent of their clients.
The Regulations also sought to 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 would have included 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.
Following a motion moved by Senators Rex Patrick (Rex Patrick Team) and Nick McKim (Australian Greens), the Senate voted on 10 February to disallow the Regulations.
Virtual and hybrid meetings and electronic document execution: Bill passed by Parliament
Parliament has passed a Bill to make permanent relief provided on a temporary basis, as a result of the COVID-19 pandemic, allowing companies to use technology to meet certain requirements under the Corporations Act 2001 around meetings and documents.
As reported in ASFA Action issue 830, the Corporations Amendment (Meetings and Documents) Bill 2021 includes amendments to:
- create a permanent statutory mechanism for the electronic execution of company documents, allowing certain documents (including deeds) to be signed in flexible and technology neutral manners
- allow companies, registered schemes and disclosing entities to sign and provide meeting-related documents electronically, regardless of whether the meeting is virtual, physical or hybrid
- allow companies and registered schemes to use technology to hold meetings, including hybrid meetings, on a permanent basis
- implement miscellaneous amendments to ensure that meetings are conducted effectively.
The amendments to be made by the Bill will apply to meeting-related documents sent and meetings held on or after 1 April 2022, and to documents executed on or after the day after the Bill receives Royal Assent. The current temporary relief will remain in place until 31 March 2022.
The Bill was amended by the Government in the House of Representatives in November, to effectively require a review of the operation of the amendments permitting wholly virtual meetings within 30 months of their commencement.
The Bill was passed by the Senate on 10 February without further amendment.
As reported in previous ASFA Actions, the relief measures are not specific to superannuation but will be relevant to the way superannuation trustee companies discharge their general obligations under the Corporations Act.
Tax Integrity Bill with superannuation amendments introduced
The Government has introduced into Parliament a Bill dealing with tax integrity measures that includes some amendments of relevance to superannuation.
The Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022, introduced into the House of Representatives on 9 February, contains amendments including amendment to:
- the Corporations Act 2001 requirement that trustees of a regulated superannuation fund make publicly available on its website a product dashboard for each of its MySuper and choice products, to ensure this requirement does not inadvertently apply to self-managed superannuation funds (SMSFs) and small-APRA regulated funds (SAFs). This consequential amendment reflects the recent increase in the maximum number of members in SMSFs and SAFs from four to six members.
- the Social Security Act 1991 and the Veterans’ Entitlements Act 1986, in relation to the asset-test exempt status of certain commutations of market-linked and life expectancy income streams that occur for the purposes of not exceeding the transfer balance cap
- the Taxation Administration Act 1953 and the Income Tax Assessment Act 1997, in relation to the education directions — including a superannuation guarantee education direction — that the Commissioner of Taxation can issue to an entity where the Commissioner reasonably believes there has been a failure to comply with a specified record-keeping obligation under a taxation law.
Critical infrastructure: Bill introduced
The Security Legislation Amendment (Critical Infrastructure Protection) Bill 2022 was introduced to the House of Representatives on 10 February (see ASFA Action issue 830 for further background).
The Bill is the second part of a critical infrastructure package that was split in two last October. The first part, the Security Legislation Amendment (Critical Infrastructure) Act 2021, received Royal Assent on 2 December.
Superannuation trustees are included in the reforms through the concept of a ‘critical superannuation asset’ and the definition contained in the Security of Critical Infrastructure (Definitions) Rules. The reforms give the Minister discretion to effectively switch obligations on and off as is deemed necessary in changing circumstances.
In simple terms the Bill proposes further amendments to the Security of Critical Infrastructure Act 2018 in relation to:
- a framework for risk management programs
- declarations of systems of national significance
- enhanced cyber security obligations.
The Department of Home Affairs has indicated in the consultation process that, to avoid duplication, certain requirements may not be ‘switched on’ where an existing regulatory regime, such as that administered by APRA for registrable superannuation entity licensees, matches the requirements under the Bill.
If you have any questions about the Bill please contact Senior Policy Adviser, Byron Addison by email or on (02) 8079 0834.
APRA policy priorities 2022-23
APRA has released its policy priorities for 2022-23, detailing several initiatives relevant to superannuation. These include:
- Conclusion of consultation on proposed amendments to prudential standard SPS 310 Audit and Related Matters in March 2022, with final requirements to come into effect from 30 June 2022.
- Conclusion of consultation on proposed amendments to SPS 530 Investment Governance in February 2022. APRA intends to finalise changes to the standard and consult on refreshed guidance in 2022, with the standard expected to come into effect from 1 January 2023.
- Refreshing the superannuation prudential framework to ensure there are appropriate requirements and guidance in place to inform merger and exit activity across the superannuation industry. This will involve APRA reviewing Prudential Practice Guide SPG 227 Successor Fund Transfers and Wind-ups and looking to develop new requirements to apply in the event of cancellation of an authority to offer a MySuper product. (No timeframe has been specified for this activity.)
- Supporting Government reforms requiring RSE licensees to develop and implement a retirement income strategy. The timing of changes to the prudential framework will be determined in 2022, subject to legislative timeframes.
- A review of prudential standard SPS 515 Strategic Planning and Member Outcomes and associated guidance, to strengthen business planning practices and ensure rigorous expenditure management. APRA’s review of SPS 515 will incorporate the findings from the benchmarking review of current practices and the outcomes of related consultations, including financial resilience. APRA expects to consult on this review and proposed enhancements in the second half of 2022, with the standard finalised in 2023 and transition time provided before any revised requirements commence.
- Gaining a better understanding of current and evolving financial resource management practices. The current consultation will conclude in March 2022 and will be used as the basis for developing potential enhancements to the prudential standards for superannuation. Enhanced requirements and guidance will be subject to further consultation and transition time would be provided before any standards come into effect.
- Finalising cross-industry standards on contingency and resolution planning, and developing guidance on better practice, during 2022. The new prudential standards — CPS 190 Financial Contingency Planning and CPS 900 Resolution Planning — are expected to come into effect from 2024, with an additional one-year transition period for registrable superannuation entity licensees to meet CPS 190.
- Consultation during 2022 on enhanced requirements for operational risk management, including minimum expectations for systems, controls and remediation, business continuity and arrangements with third parties. The new cross-industry standard CPS 230 Operational Risk Management will update and replace existing requirements in CPS 231 Outsourcing and CPS 232 Business Continuity Management, and the equivalent superannuation standards SPS 114, SPS 231 and SPS 232. The new standard is expected to come into effect from 2024.
- Publication, with ASIC, of a joint administration agreement setting out principles for administering the Financial Accountability Regime (FAR), regulator rules and implementation guidance. APRA also plans to review the cross-industry prudential standard CPS 520 Fit and Proper to update requirements for fit and proper policies in light of the FAR, and provide consistency in expectations. (It is unclear what impact this may have on the equivalent superannuation prudential standard SPS 520.)
- Consulting, in the first half of 2022, on disclosure requirements for remuneration, following the release of prudential standard CPS 511 Remuneration and the accompanying prudential practice guide. APRA plans to finalise the requirements by the end of the year. Transition time will be provided before the requirements come into effect.
- Commencing a review of the cross-industry prudential standards CPS 510 Governance and CPS 220 Risk Management, and the equivalent superannuation standards SPS 510 and SPS 220 in 2023. New requirements would not be expected to come into effect until 2025.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.