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Issue 731, 19 December 2019 
In this issue: 


Insurance in super code implementation: ASIC review 

ASIC has released a report on the progress of the industry in improving consumer outcomes in relation to life insurance provided through superannuation. 

Report 646 Insurance in superannuation: Industry implementation of the Voluntary Code of Practice (REP 646) comments on industry’s implementation of the Insurance in Superannuation Voluntary Code of Practice (Code). 

The Code sets standards of practice with the aim of improving industry practices in benefit design, claims handling and communications to members. 70 per cent of superannuation trustees are adopting the Code in whole or part but full implementation is not due for completion until 30 June 2021. 

ASIC’s report observes that while some improvements in practices are being introduced as a result of adoption of the Code by a significant number of trustees, further work needs to be done to achieve the high industry standards consumers expect. 

Commissioner Danielle Press said ASIC has identified a number of inconsistencies in implementation of the Code, some relating to fundamental aspects such as which members are covered by the Code, the controls around balance erosion, and calculation of timeframes for claims processes. Ms Press said trustees are also “continuing to leave vulnerable members behind” and need to have better defined policies and processes for those with unique needs. 

Ms Press noted that REP 646 follows on from the recent release of Report 633Holes in the safety net: a review of TPD insurance claims (see ASFA Action issue 724). ASIC also plans further work looking at issues relevant to consumer outcomes in relation to insurance in superannuation. It is anticipated that this work will lead to the release of additional reports this financial year containing observations about the extent to which existing market practices concerning insurance in superannuation are delivering good outcomes for consumers. 



Eligible rollover funds: proposed timeframe for exit from industry 

The Government has announced that it will introduce legislation to facilitate the exit of eligible rollover funds (ERFs) from the superannuation industry by 30 June 2021. 

The Government has noted that while ERFs are subject to the Government’s Protecting Your Super reforms—which require them to transfer inactive low balance accounts to the ATO—they are unable to voluntarily transfer other amounts to the ATO. This restricts their ability to exit the market. 

To address this, the Government will introduce legislation into Parliament early next year to: 

The proposed steps are consistent with the Productivity Commission’s recommendation, in its report Superannuation: Assessing Efficiency and Competitiveness, that ERFs be wound up within three years. 



Capital gains tax rollovers: Board of Taxation review 

The Government has requested the Board of Taxation to undertake a review of capital gains tax (CGT) rollover rules. While it has not been directly specified, this may potentially include the application of the rollover rules in relation to superannuation funds, for example as part of the tax relief provided to merging funds, which the Government has proposed to make permanent. 

The terms of reference for the review note that the taxation law currently allows certain CGT events to occur without crystallising liabilities to tax in circumstances where it is considered appropriate for the CGT liability to be deferred until a later time (that is, the CGT liability is ‘rolled over’). Over time, the provisions catering for these circumstances have multiplied to the point where navigating the law is difficult. 

The terms of reference require the Board of Taxation to: 

The Board will hold roundtable consultations with stakeholders commencing in late February and is due to report back to the Government by 30 November. 



Decommissioning of AUSkey: impact on APRA data collection 

APRA has advised that it will be making changes to its existing data collection system, Direct to APRA (D2A) and the APRA Extranet ahead of the decommissioning of AUSkey on 31 March. APRA is reminding its regulated entities—including registrable superannuation entity licensees—that they will need to take steps in February and March to ensure continued access to APRA systems. 

While its new data collection solution was originally due to go live in March 2020, APRA recently advised that implementation will now be later in 2020 (see ASFA Action issue 726). As a result, regulated entities will need to ensure they can continue to submit data to APRA via D2A from April onwards. 

AUSkey, the current authentication credential for D2A and the APRA Extranet, will be replaced with myGovID, Relationship Authorisation Manager (RAM) and machine to machine (M2M) credentials. 

APRA will provide technical and support information in early 2020 to enable entities to transition. APRA is working with the ATO to facilitate the transition. Entities should prepare now by following ATO published materials to set up users with myGovID and manage business authorisations in RAM. 

APRA has indicated that in order to be ready by the end of March 2020, regulated entities will need to do the following for D2A: 

Users of APRA extranet will need to set up a myGovID and link it to the APRA Extranet service when available in RAM. 

APRA has also provided a further update on recent developments in relation to its new data collection solution, including the outcomes of engagement with stakeholders. 



Mid-Year Economic and Fiscal Outlook: superannuation-related announcements 

The Government has released its Mid-Year Economic and Fiscal Outlook (MYEFO) statement for 2019-20. 

This year’s MYEFO does not contain any substantial new policy announcements for superannuation, although it does include: 

In addition, MYEFO reflects the following superannuation-related policy announcements and developments since the Budget in April: 

(See ASFA Action issues 721 and 715 for details.) 



Royal Commission implementation: timing of upcoming consultations 

The Government has provided ASFA with an update in relation to the timing of upcoming consultations in relation to implementation of its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

In its Implementation Roadmap, released in August, the Government indicated it would introduce legislation to implement its response to a number of recommendations by 30 June 2020 (see ASFA Action issue 718). 

The Government has now indicated to ASFA that it intends to consult on most of the relevant exposure draft legislation as part of a single process, releasing the exposure draft legislation in late January for public consultation. Roundtables with consumer and industry peak bodies will be held in mid-February, prior to the close of the consultation period. 



2020 Intergenerational report: timing 

The Government has announced that the next Intergenerational Report (IGR) will be released in July 2020. 

Every five years, the Government releases an IGR, assessing the long-term fiscal sustainability of Government policies. IGRs provide a basis for considering the Commonwealth’s fiscal outlook over the next 40 years and identifying the implications of demographic, population and workforce participation changes over time. 

Previous IGRs were released in 2002, 2007, 2010 and 2015. 

The Government has now indicated that it will release the next IGR in July 2020, following the 2020-21 Budget (scheduled for 12 May). The July release date will also allow the IGR to be informed by the findings of the Retirement Income Review, which is due to report in June (see ASFA Action issues 728 and 722 for background). 



Tax treatment of income streams: minor amendments and corrections 

The Government has registered regulations giving effect to minor and technical amendments relevant to the tax treatment of superannuation income streams. 

The Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2019 make a wide range of amendments to legislation in the Treasury portfolio, to make minor and technical changes – including correction of typographical errors and unintended outcomes and repeal of inoperative provisions 

As relevant to superannuation, the Regulations amend the Income Tax Assessment Regulations 1997 to: 

These amendments were part of a package of draft regulations and legislation released for consultation in February-March this year (see ASFA Action issue 700). That package also included draft legislative amendments related to ensuring that: 

These amendments were recently introduced into Parliament as part of the Treasury Laws Amendment (2019 Measures No. 3) Bill 2019 (see ASFA Action issue 730). The Bill is awaiting debate in the House of Representatives. 



Design and distribution obligations: regulations made 

The Government has registered regulations supporting the new design and distribution obligations (DDO) in relation to financial products. 

The Corporations Amendment (Design and Distribution Obligations) Regulations 2019 (the Regulations) complement the operation of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (the Act), which amended the Corporations Act 2001 to introduce the DDO (see ASFA Action issues 704 and 686). 

The Regulations alter the products and persons in relation to which the DDO regime applies, extend the DDO to additional persons and products and exclude certain persons and products from its operation. 

Of particular relevance for superannuation, the Regulations exclude from the DDO regime interests in eligible rollover funds and defined benefit interests. 

The Regulations also exempt an employer complying with certain SG obligations from the DDO regime. The exempted conduct relates to: 

The Regulations commence 5 April 2021, in alignment with the commencement of the DDO amendments in the Act. 

Drafts of the Regulations were released for consultation in October 2018 and September 2019 (see ASFA Action issues 721 and 689). 



Unclaimed super and lost member regulations remade 

The Government has remade regulations in relation to unclaimed superannuation money and lost members, replacing the existing regulations that were due to sunset (expire) on 1 April. 

The Superannuation (Unclaimed Money and Lost Members) Regulations 2019 (2019 Regulations remake and improve the operation of the Superannuation (Unclaimed Money and Lost Members) Regulations 1999 (the 1999 Regulations) by: 

According to the explanatory material, these changes do not affect the substantive meaning or operation of the provisions. 

A draft of the 2019 Regulations was released for consultation in late September (see ASFA Action issue 722). As proposed in the draft, the registered version of the 2019 Regulations specify that interest will apply to the payment of unclaimed amounts in relation to inactive low balance accounts. The draft also prescribed a list of conditions of release which, if satisfied, would mean an account would no longer be considered an inactive low balance account. The registered version of the 2019 Regulations prescribes conditions of release in relation to retirement, death, terminal medical condition, permanent incapacity, attaining age 65 and attaining preservation age. Severe financial hardship, termination of gainful employment and temporary incapacity, which were specified in the draft regulations, are not included as prescribed conditions of release in the registered version of the 2019 Regulations. 

The Government has also registered the Superannuation (Unclaimed Money and Lost Members) and Other Laws (Repeal and Consequential Amendments) Regulations 2019 (Repeal and Consequential Regulations) to repeal the 1999 Regulations and make minor amendments to other regulations—including the Superannuation Industry (Supervision) Regulations 1994—to replace references to the 1999 Regulations with the 2109 Regulations. 

Both the 2019 Regulations and the Repeal and Consequential Regulations commence on 17 December. 



Social security treatment of superannuation income streams transferred on closure of fund 

The Government has registered a legislative instrument relevant to the social security treatment of superannuation income streams that are transferred to a new fund due to the closure of the original fund. 

The Social Security Legislation Amendment (2019 Measures No. 1) Determination 2019 (the Amendment Determination) amends the following existing legislative instruments: 

In each case, the Amendment Determination inserts into the existing legislative instrument new provisions to allow an income support recipient to retain the asset test exemption for their income stream where it is transferred to a new regulated superannuation fund due to the closure of the original regulated superannuation fund (or sub-fund). Where an income support recipient satisfies one of the new provisions, their new income stream will retain its asset test exemption and have no impact on their rate of income support. 



Social security treatment of income streams: life tables 

The Government has registered a legislative instrument specifying new life tables to be used when calculating certain values in relation to an asset-tested lifetime income stream for social security purposes. 

The Social Security (Value of Asset-tested Income Streams (Lifetime)) Determination 2019 (Principal Determination) provides methods for calculating the current or future surrender value and death benefit values for asset-tested income streams (lifetime) products for social security purposes, as at the recipient’s ‘assessment day’. It ensures that the social security means test rules for income streams appropriately assess products with high surrender values or high death benefits, reflecting their greater value and potential to be used for self-support. 

The Principal Determination uses a person’s ‘life expectancy period’ when determining the surrender and death benefit values for asset-tested income streams (lifetime) products. A person’s life expectancy is currently determined using the Australian Life Tables 2010-12. 

The Government has now made the Social Security (Value of Asset-tested Income Streams (Lifetime)) Amendment Determination 2019 to specify that the Australian Life Tables 2015-17 are to be used when calculating the surrender value and death benefit value where a person’s assessment day is on or after 1 January 2020. 



Total superannuation balance: ATO ruling amended 

The ATO has updated a guideline dealing with the calculation of the total superannuation balance for an individual, to reflect recent legislative changes. 

Law Companion Guideline LCG 2016/12: Superannuation reform: total superannuation balance has been amended by Addendum LCG 2016/12A5 to: 




ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations

and other regulatory announcements relevant to superannuation.

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