Issue 695, 19 December 2018
In this issue:
- Mid-Year Economic and Fiscal Outlook (MYEFO): superannuation-related measures
- Section 29QC consistency of disclosure: deferral
- AUSTRAC: AML/CTF guidance for superannuation sector
- Family law super splitting: technical amendments
- Opposition superannuation policy announcements
- ASFA-Thomson Geer Regulatory Update: December 2018
Mid-Year Economic and Fiscal Outlook (MYEFO): superannuation-related measures
The Government’s Mid-Year Economic and Fiscal Outlook 2018-19 commits funding for a Treasury taskforce to support implementation of the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. MYEFO also confirms a number of announcements relevant to superannuation made since the May 2018 Budget.
- Royal Commission: implementation and record keeping – the Government will provide funding to Treasury to establish a taskforce to support its engagement with the Royal Commission and develop responses to the Commission’s interim and final reports. The Government will also provide funding to manage the records of the Royal Commission.
- Miscellaneous amendments: ongoing care and maintenance of Treasury portfolio legislation – the Government is making a series of minor amendments to Treasury portfolio legislation to clarify the law, correct technical or drafting defects, remove anomalies and address unintended outcomes. As relevant to superannuation, the MYEFO document indicates that these include:
- minor amendments to the detail of the ‘protecting your super’ package that was announced in the May 2018 Budget. These amendments include adjusting the application of the fee cap and providing a limited exception from the changes for members who hold insurance through superannuation via an employer-paid scheme, and are already reflected in the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018. See ASFA Action issue 677 for more information.
- amendments to ensure that first home buyers can benefit from the First Home Super Saver Scheme (FHSSS) even if they enter into contracts prior to receiving their FHSSS money. First home buyers will have a maximum of two weeks from the exchange of contracts to apply to the ATO for a release of their money. The MYEFO document states that further information can be found in the Explanatory Memorandum to the Treasury Laws Amendment (2018 Measures No. 6) Bill 2018 and the Explanatory Statement to the Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2018. [ASFA note: This Bill has not yet been introduced and while regulations with that name were made earlier in December, they do not include this measure.]
- Technical and minor superannuation taxation fixes to clarify the law, correct technical defects and address unintended outcomes relating to implementation of the 2016-17 superannuation tax reform package. These technical changes amend the valuation of capped defined benefit income streams when commuted for the purposes of the transfer balance cap, and an anomaly to ensure that life insurance proceeds are not taxed when death benefits are rolled over to a new fund. See ASFA Action issue 690 for more information.
- Comprehensive income products in retirement (CIPRs) – the Government will require superannuation trustees to develop and offer a CIPR to members from 1 July 2022 as well as provide information and guidance to help members choose suitable retirement income products from 1 July 2020. See ASFA Action issue 690 for more information.
- Simplifying the work test exemption for recent retirees – the Government has amended its May 2018 Budget measure to allow recent retirees to use the work test exemption to access up to three years’ non-concessional cap space in the year they turn 65. The measure will take effect from 1 July 2019. See ASFA Action issue 693 for more information.
- Superannuation guarantee (SG) amnesty – the Government will provide a 12 month amnesty from 24 May 2018 for employers who voluntarily repay historical SG shortfalls to their employees. Employers who come forward during this period will receive remission of the usual penalties. In addition, a minimum penalty will apply to employers that could have come forward during the amnesty period but did not and are subsequently caught. See ASFA Action issue 672 for more information.
- SG amnesty: stronger penalties – the Government will increase the minimum penalty from 50 per cent to 100 per cent of the superannuation guarantee (SG) charge for employers who could have come forward under the SG amnesty but did not and were subsequently caught. See ASFA Action issue 691 for more information.
- Victims of Crime: access to perpetrators’ superannuation – the Government will allow victims of certain crimes, such as serious violent crimes, with unpaid or partially paid compensation orders to access their perpetrator’s superannuation. This measure will commence 12 months after the relevant legislation receives Royal Assent. See ASFA Action issues 692 and 691 for more information.
- Women’s Economic Security Package – the Government will provide funding for a package of measures focused on improving women’s workforce participation, economic independence and earning potential. As relevant to superannuation these include:
- allowing victims of family and domestic violence the opportunity to access part of their superannuation on compassionate grounds, before their preservation age, consistent with other compassionate access arrangements (see above)
- developing and implementing an electronic information sharing mechanism to allow family law courts to access superannuation information held by the ATO.
See ASFA Action issue 691 for more information.
- Integrity of limited recourse borrowing arrangements (LRBAs) – the Government will amend its May 2018 Budget measure on integrity of LRBAs, which required outstanding balances to be included in a member’s total superannuation balance from 1 July 2017. The measure will now apply only to LRBAs entered into from 1 July 2018 and only to members who are able to make tax-free, lump-sum withdrawals or whose self-managed superannuation fund has an LRBA with a related party. The amendment is reflected in the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018. See ASFA Action issue 672 for more information.
- APRA: new and expanded functions – the Government will provide additional funding to APRA for new and expanded activities. This is designed to enhance APRA’s supervision across regulated industries, enhance its ability to identify and address new and emerging risk areas, improve its data collection capabilities and provide for a review of its enforcement strategy including its use of formal enforcement powers across supervised industries. The cost of this measure will be fully offset by an increase in the APRA financial institutions supervisory levies from 2019-20 ongoing, with capital funding to be met initially from within APRA’s current reserves and recovered over the useful life of the assets. See ASFA Action issue 690 for more information.
- ASIC: additional funding – the Government will provide additional funding to support ASIC to combat misconduct in corporations and in the financial services industry. The cost of this measure will be partially offset by revenue received through ASIC’s industry funding model. See ASFA Action issue 682 for more information.
- Federal Court: increased civil cases – the Government will provide additional funding to the Federal Court of Australia to manage the expected increase in case load as a result of increased enforcement action by ASIC, including cases highlighted by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. See ASFA Action issue 691 for more information.
- Strengthening enforcement capability for corporate crime – the Government will provide additional funding to the Commonwealth Director of Public Prosecutions to pursue a greater number of prosecutions of those responsible for misconduct in the Banking, Superannuation and Financial Services Industry. See ASFA Action issue 691 for more information.
- Legislative drafting: additional funding – the Government will provide additional funding to procure drafting services from legal services providers to progress Treasury portfolio legislation.
Section 29QC consistency of disclosure: deferral
As foreshadowed in ASFA Action issue 691, ASIC has further deferred the commencement date for the ‘consistency of disclosure’ requirements in section 29QC of the Superannuation Industry (Supervision) Act 1993, until 1 January 2024.
To promote systemic transparency, subsection 29QC(1) requires a registrable superannuation entity licensee to ensure that, where it is required to give information to APRA under a reporting standard that requires the information to be calculated in a particular way, and where the same or equivalent information is given to other persons, the information given to the other person is calculated in the same way as the information given to APRA.
While subsection 29QC(1) was originally intended to commence on 1 July 2013, ASIC subsequently issued a number of extensions to ensure that the requirements appropriately aligned with APRA’s reporting standards, the proposed choice product dashboard rules and the expanded fee and cost disclosure rules. The most recent extension deferred commencement until 1 January 2019.
ASIC has now made ASIC Superannuation (Amendment) Instrument 2018/1080, further deferring the commencement of section 29QC(1). ASIC has noted that:
- the resolution of the policy position in relation to superannuation product dashboards “would now be capable of being influenced by Government consideration of recommendations made in the final report on the Productivity Commission’s review of the efficiency and competitiveness of the superannuation system”, which is due in late December 2018. The Productivity Commission’s review may also make other recommendations that can influence the data that may be required under APRA’s reporting standards.
- ASIC expects to publish a consultation paper in relation to amendments to the fee and cost disclosure requirements for superannuation funds and managed investment schemes. These amendments will follow on from the recent expert review of the fee and cost disclosure requirements.
As a result, Instrument 2018/1080 extends the exemption from the requirement in subsection 29QC(1) of the SIS Act until 1 January 2024. ASIC notes that this will defer the commencement of the subsection 29QC(1) requirement to a time ASIC expects will allow for the requirements for the choice product dashboards and in relation to fee and cost disclosure requirements to be settled.
ASIC notes that the new five-year deferral does not represent a policy view by ASIC in relation to section 29QC or a view as to the time likely to be taken in settling related policy positions or finalising any impacts on APRA reporting standards. The five-year deferral is subject to change, pending and according to the progress of those matters.
AUSTRAC: AML/CTF guidance for superannuation sector
AUSTRAC has released anti-money laundering and counter-terrorism financing (AML/CTF) guidance to educate Australia’s superannuation sector of the risks they face from criminal exploitation and how they can proactively combat financial crime.
The publication, Industry specific guidance: superannuation sector, focuses on specific risks and potential scenarios relating to money laundering, terrorism financing and serious financial crime specific to superannuation companies. It also gives examples of methods these organisations can use to mitigate these risks and combat criminal threats.
The release of the guidance follows AUSTRAC’s publication of the Superannuation Money Laundering and Terrorism Financing Risk Assessment in July 2016.
AUSTRAC CEO Nicole Rose PSM said that while the superannuation sector is not traditionally associated with financial crime exploitation, AUSTRAC’s assessments show there is a higher than perceived risk and it is important that the sector understands these risks so that they can combat the threats.
Family law superannuation splitting: technical amendments
New legislation that makes widespread reforms to the Family Law Act 1975 has also made minor, technical amendments relevant to superannuation, by renumbering key provisions of the superannuation splitting regime.
The Civil Law and Justice Legislation Amendment Act 2018 renumbers Part VIIIB of the Family Law Act, which gives a court the power to deal with the superannuation interests of separating married or de facto couples, including making orders as to how superannuation should be split between the couple. According to the explanatory material, the amendments rectify discontinuous numbering and improve the readability and ease of use of Part VIIIB.
The Act received Royal Assent on 25 October and the amendments commenced on 22 November.
According to the explanatory material, the amendments rectify discontinuous numbering and improve the readability and ease of use of Part VIIIB. A reference to any of the renumbered provisions appearing in a Commonwealth law, a notice or other document given under Commonwealth law, or a contract, agreement, deed, judgment or other instrument that was in force immediately before the renumbering commenced is to be treated as a reference to the renumbered provision. Accordingly, superannuation splitting orders and agreements made prior to 22 November will continue to be valid despite referencing the previously applicable numbering of legislative provisions. Orders and agreements made from 22 November should refer to the renumbered provisions.
Opposition superannuation policy announcements
The Opposition has made a number of superannuation-related policy announcements during its 2018 National Conference.
In particular, the Shadow Treasurer Chris Bowen MP and the Shadow Minister for Financial Services Clare O’Neil MP announced that, if elected, Labor will:
- amend the Fair Work Act 2009 to include a right to superannuation within the National Employment Standards, which will give all employees the power to pursue their unpaid superannuation through the Fair Work Commission or the Federal Court
- strengthen the ATO compliance regime and increase penalties for employers for underpayment or non-payment of superannuation. Employers who underpay superannuation to their staff because of a false or misleading statement will face fines equal to 100 per cent of the unpaid super. Employers who fail to tell the ATO about unpaid superannuation when asked will face fines equal to 300 per cent of the unpaid super.
The Conference also reportedly voted to “urgently prioritise” ending the freeze on superannuation guarantee (SG) contributions at 9.5 per cent and increase super to 12 per cent “as soon as practicable”. Reportedly, “Once the important goal of 12 per cent has been achieved Labor will set out the pathway to its original objective of 15 per cent to further enhance retirement income adequacy for workers”.
ASFA Thomson Geer Regulatory Update: December 2018
Delivered in partnership with Thomson Geer, the latest edition of the ASFA Thomson Geer Regulatory Update has been released and is now available for members to download from the Regulatory Update section of the ASFA website.
This free ASFA member service seeks to keep you up to date with the changing superannuation environment, and provides essential information for those wanting to stay abreast of the challenges and issues facing superannuation funds. This edition of the Update focuses on legislation and pertinent case law developments for the period October – December 2018.
The information will be of particular use to:
- trustees
- compliance managers
- risk managers
- operations managers
- administrators and self-managed superannuation fund (SMSF) service providers
- members of investment committees
- government and regulatory liaison managers.
Members wishing to discuss the Update can contact Julia Stannard.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.