Issue 864, 16 August 2022
In this issue:
Multinational tax integrity and tax transparency: consultation
The Government has released a consultation paper seeking views on the implementation of proposals to strengthen multinational tax integrity arrangements. These proposals may be of interest to superannuation funds in their capacity as investors.
As part of its election commitment platform, the Government announced a multinational tax integrity package to address the tax avoidance practices of multinational enterprises (MNEs) and improve transparency through better public reporting of MNEs’ tax information. These changes form part of the Government’s commitment to ensuring that MNEs pay their fair share of tax in Australia to help fund vital services, repair the Budget, and level the playing field for Australian businesses.
In particular, the consultation paper seeks views on the implementation of proposals to:
- amend Australia’s existing thin capitalisation rules to limit interest deductions for MNEs in line with the Organisation for Economic Cooperation and Development (OECD)’s recommended approach
- introduce a new rule limiting MNEs’ ability to claim tax deductions for payments relating to intangibles and royalties that lead to insufficient tax paid
- ensure enhanced tax transparency by MNEs.
The changes contemplated in the paper seek to target activities deliberately designed to minimise tax, while also considering the need to attract and retain foreign capital and investment in Australia, limit potential additional compliance cost considerations for business, and continue to support genuine commercial activity.
If you have any feedback you would like ASFA to consider in relation to the discussion paper, please forward it to Julia Stannard by close of business Friday 26 August.
Operational risk management: ASFA Working Group
As reported in ASFA Action issue 862, APRA is consulting on a new prudential standard designed to strengthen the management of operational risk in the banking, insurance and superannuation industries. APRA expects to release the final version of CPS 230 Operational Risk Management early next year and will then consult on draft guidance. The new standard will take effect from 1 January 2024.
ASFA will be convening a working group to provide input for our response to CPS 230 and, subsequently, the draft guidance. If you, or a member of your organisation, are interested in joining ASFA’s Operational Risk Management Working Group, please contact Julia Stannard by close of business Wednesday 24 August. (Please note, participation is available for representatives of ASFA corporate members only.)
Internal dispute resolution: findings from ASIC surveillance
ASIC has reported on findings from the first stage of its surveillance of superannuation trustees internal dispute resolution (IDR) arrangements, noting that it observed “significant compliance issues”.
ASIC’s surveillance examined trustees’ compliance with the new enforceable requirements in Regulatory Guide RG 271 Internal dispute resolution, which took effect on 5 October 2021. For the first stage of the surveillance, ASIC gathered and analysed data on the status and timeliness of complaints handling (excluding objections to death benefit distributions) from a selection of 35 trustees of 38 funds covering 49,029 complaints received between 5 October 2021 and 28 February 2022.
ASIC has raised concerns about:
- recording of complaints – in particular, whether the low complaint rate of some funds may be the result of them failing to record all member complaints or adopting an inappropriately narrow definition of ‘complaint’
- response timeframes – in particular, whether trustees may be over-applying the limited exceptions to the maximum timeframe or not sufficiently monitoring how long complaints take to resolve
- informing complainants of delays – in almost 50 per cent of complaints reviewed, trustees had failed to notify complainants of delays and their right to go to the Australian Financial Complaints Authority when a written response to a complaint is not sent within 45 days
- process failures – including identifying or capturing complaints correctly, omitting mandatory content from IDR response letters or failing to send out IDR responses for some complaints.
ASIC Commissioner Danielle Press said the surveillance “has identified some problem areas that need fixing. We want trustees that have fallen behind to strengthen their internal dispute resolution arrangements to make sure that member complaints are handled in an effective, fair and timely way”. Commissioner Press said ASIC expects “all trustees to have in place effective arrangements that support expressions of dissatisfaction from their members and deliver fair, transparent and timely member outcomes. Trustees should continually monitor and update their processes to ensure these remain fit-for-purpose”.
In the next stage of the surveillance, ASIC will select some trustees from among those already reviewed and check they are addressing the concerns identified so far, as well as closely examining a smaller sub-set of trustees. ASIC will also consider regulatory action where appropriate and intends to communicate the outcomes once the surveillance is complete.
Breach reporting: ASIC approach and publication of information
ASIC has indicated that its priorities for 2022-23 include a focus on improving the operation of the reportable situations regime, which applies to all Australian Financial Services (AFS) licensees – including superannuation funds and commenced on 1 October 2021.
ASIC Commissioner Sean Hughes said “We are aware that the regime has led to a number of implementation challenges. However ASIC remains committed to the successful implementation of this regime and we have developed a comprehensive plan of work to ensure that it meets its objectives for ASIC, industry and consumers.”
ASIC will continue to engage with industry on reporting practices adopted by licensees to further understand any issues that are placing unnecessary compliance burden on industry. This will include considering whether enhancements are required to the approved form on the Regulatory Portal for lodging reports and whether further practical guidance should be developed to help licensees meet their obligations. ASIC has acknowledged the significant investment made across industry in the implementation of the reforms to date and indicated it will seek to minimise further impacts.
ASIC will communicate clear expectations for compliance with the new regime and design solutions to ensure the consistency and quality of reporting meets the policy objectives of the regime, as well as improve the efficiency of ASIC’s data collection and analysis.
ASIC has also noted that its first annual report on information provided under the reportable situations regime is due to be published in October. This will include high-level insights into trends observed across the reports lodged by licensees during the period 1 October 2021 to 30 June 2022. This report will not name licensees nor refer to the nature or number of reports lodged by specific licensees.
Given that ASIC will not be publishing data or insights at a licensee level in this first report, ASIC will not consult with stakeholders on the information to be published in this first year of public reporting. However, ASIC will consider its approach to the 2023 public report early next year, including whether it should include a list of all licensees who have reported to ASIC during the period. ASIC will consult with stakeholders in advance of the commencement of licensee-level granular public reporting (likely in 2024).
Financial adviser professional standards: upcoming consultation
The Government has flagged an upcoming consultation on reforms to professional standards for financial advisers.
Prior to the election, the Government committed to removing the tertiary education requirements for financial advisers who had passed the exam, had 10 years’ experience and a clean record of financial practice. The Minister for Financial Services, Stephen Jones MP, has asked Treasury to develop a consultation paper on options to streamline the education requirements for financial advisers, including for new entrants. Consultation is expected to commence shortly.
The Minister has also asked Treasury to:
- consult on potential changes to the Code of Ethics in 2023, after the Government has considered its response to the Quality of Advice review
- explore whether there are areas where delivery of the exam for financial advisers could be improved. This will take place after 30 September 2022, which is the current date by which advisers must pass the exam and continue to provide financial advice.
Superannuation Bills receive Royal Assent
As reported in ASFA Action issue 863, two Bills relevant to superannuation completed their passage through Parliament in early August. Both Bills received Royal Assent on 9 August and have become law:
- Treasury Laws Amendment (2022 Measures No. 1) Act 2022 – this:
- contains transitional arrangements for the closure of the Superannuation Complaints Tribunal and its replacement by the Australian Financial Complaints Authority
- includes minor and technical reforms to:
- ensure the product dashboard disclosure rules do not inadvertently apply to self-managed or small APRA funds
- amend social security legislation 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
- Public Sector Superannuation Salary Legislation Amendment Act 2022 – this retrospectively addresses an issue in relation to the superannuation entitlements of certain public servants who, prior to 1 March 2022, received rent-free accommodation.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
