Issue 796, 16 March 2021
In this issue:
- Breach reporting reforms: consultation on draft regulations
- Review of the Australian Financial Complaints Authority: reminder
- ESG factors: expressions of interest for ASFA ESG Working Group
- Sustainability of insurance in superannuation: APRA concerns
- Tax and superannuation regulations remade
Breach reporting reforms: consultation on draft regulations
Treasury is consulting on draft regulations to support changes to the breach reporting rules for financial services licensees, implemented as part of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Schedule 11 of the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 implemented the Government’s response to the Royal Commission recommendations 1.6, 2.8 and 7.2 by:
- clarifying and strengthening the breach reporting regime for financial services licensees in the Corporations Act 2001
- introducing a comparable breach reporting regime for credit licensees
- requiring financial services licensees and credit licensees to report serious compliance concerns about financial advisers and mortgage brokers respectively.
Of relevance to superannuation, the draft regulations amend the Corporations Regulations 2001 and the Corporations (Fees) Regulations 2001 to:
- prescribe civil penalty provisions that are not taken to be significant (and therefore may not be reportable) under the relevant breach reporting regime if those provisions are contravened
- ensure certain breach reporting offences and civil penalty provisions are subject to an infringement notice
- make minor and technical amendments, including updating references to the Corporations Act.
The Financial Sector Reform (Hayne Royal Commission Response) Act 2020 was passed by Parliament in December. See ASFA Action issues 789, 788, 787, 783 and 735 for background.
If you have any feedback you would like ASFA to consider in relation to the draft regulations, please forward it to Fiona Galbraith by close of business Friday 26 March.
Review of the Australian Financial Complaints Authority: reminder
As reported in ASFA Action issue 794, Treasury is conducting a statutory review of the external dispute resolution body for the financial services industry, the Australian Financial Complaints Authority (AFCA).
The terms of reference note that the review provides an opportunity for feedback on the operation of AFCA since its establishment and to consider whether further enhancements should be made to ensure the scheme is appropriately calibrated and operating effectively. The framework legislation requires the review to consider whether AFCA has been effective in resolving complaints in a way that is fair, efficient, timely and independent.
If you have any feedback you would like ASFA to consider in relation to the review of AFCA, please forward it to Julia Stannard by close of business Thursday 18 March.
ESG factors: expressions of interest for ASFA ESG Working Group
In October 2019 ASFA released a discussion paper titled “Environmental, Social and Governance (ESG) Factors in a Superannuation Context”. ASFA will be convening a working group to provide input for ASFA’s subsequent response to October’s discussion paper while considering the current discourse, and any upcoming regulatory updates, relating to ESG within superannuation.
If you, or a member of your organisation, are interested in joining ASFA’s ESG Working Group, please contact Maggie Kaczmarska by close of business Wednesday 31 March. Please note participation is available for representatives of ASFA corporate members only.
Sustainability of insurance in superannuation: APRA concerns
APRA has written to life insurers and registrable superannuation entity (RSE) licensees, urging them to address what it considers to be “concerning trends and practices” in the provision of insurance to superannuation members.
APRA has noted significant deterioration in group life insurance claims experience in 2019 and 2020, with the potential for the re-emergence of unpredictability and volatility in insurance premiums. APRA is concerned that, if the observed trends and practices continue, members are likely to be adversely affected by further substantial increases in insurance premiums and/or reductions in the value and quality of life insurance offered through superannuation.
APRA has indicated it expects life insurers and superannuation funds to take steps to ensure that insurance offerings and benefits are sustainably designed and priced, provide appropriate value for members, and adequately reflect the underlying risks. In particular, APRA has identified the need for:
- superannuation trustees to maintain, and make available to insurers, high quality and sufficiently granular data to facilitate sustainable insurance design and pricing
- clear insurance strategies, developed and maintained by trustees, that reflect a scheme design for default insurance which carefully considers and appropriately balances their members’ needs and the cost of insurance
- tender processes that provide adequate information and time to all participants, to enable them to consult on scheme design and appropriately price the risks and benefits.
APRA Deputy Chair Helen Rowell said:
“It’s critical that these issues are addressed so sustainable and affordable insurance is available to members through their superannuation fund over the medium to long-term.
APRA will continue to engage closely with life insurers and superannuation trustees to monitor their progress as they respond to these issues, with a focus on the interests of current and future superannuation members“.
Tax and superannuation regulations remade
Regulations supporting the income tax laws—including many rules relevant to the taxation of superannuation—have been remade.
The Income Tax Assessment Regulations 1997 (ITAR 1997), which were due to sunset (expire) in April, include a number of operational rules for income tax calculations and liabilities for individuals and superannuation funds. These include, for example, rules about:
- deduction of personal contributions and the calculation of excess concessional or non-concessional contributions
- the transfer balance cap and the tax treatment of various superannuation benefits
- taxation of superannuation entities.
The Government has now registered the Income Tax Assessment (1997 Act) Regulations 2021 (ITAR2021) to remake the ITAR 1997. According to the explanatory material, the ITAR 2021 remake and improve the ITAR 1997 by repealing redundant provisions, simplifying language and restructuring provisions for ease of navigation. These changes do not affect the substantive meaning or operation of the provisions except in a limited number of cases that are specifically identified.
A draft of the ITAR 2021 was the subject of consultation late last year (see ASFA Action issue 776).
The Government has also registered the Treasury Laws Amendment (Income Tax Assessment Repeal and Consequential Amendments) Regulations 2021 (Consequential Amendment Regulations). These repealed the ITAR 1997 at the same time as the ITAR 2021 came into operation. These Regulations also make consequential amendments to the Retirement Savings Accounts Regulations 1997 and the Superannuation Industry (Supervision) Regulations 1994 that are required to update cross-references to various legislative instruments and reflect changes in numbering of provisions in the Consequential Amendment Regulations and the ITAR 2021.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
