Issue 599, 20 April 2016
In this issue:
- Trio Capital: update on investigation and compensation
- Amendment to contribution rules: small business CGT concessions
- SuperStream: trustee responsibilities
Trio Capital: update on investigation and compensation
APRA has released a report on its investigation into the failure of Trio Capital Limited (Trio), which resulted in the removal of 13 former Trio directors from the superannuation industry.
APRA has noted the wide interest in this matter over a number of years, and is of the view that the outcomes of the investigation provide important lessons for trustees more broadly. In particular, APRA considers that the significant investment losses suffered by Trio can be attributed to a number of key factors:
- inadequate investment governance processes
- failure to adequately manage conflicts of interest from dealings with related parties
- failure to have adequate controls to mitigate fraud-related investment risk.
Since the Trio matter, there have been a number of enhancements to the regulation of the superannuation industry, which impact directly on these areas. These include the introduction of prudential standards in superannuation, additional statutory duties imposed on trustees and directors, and further guidance provided by APRA on fraud risk management.
As well as its investigation report, APRA has written a letter to all registrable superannuation entity licensees outlining important lessons for trustees arising from the investigation.
Compensation exceeding $70 million has been provided to eligible investors in Trio, under the compensation framework under the Superannuation Industry (Supervision) Act 1993. This has effectively been funded by the APRA regulated superannuation sector via a special levy.
Direct investors and self-managed superannuation fund (SMSF) trustees are not covered by this compensation framework. According to the Assistant Treasurer, Kelly O’Dwyer, the government has considered whether there were any other relevant contributing factors to the losses suffered by these investors, which would call for compensation to be paid: “The Government considered the action taken by the financial regulators, ASIC and APRA, and is satisfied that in relation to the collapse of Trio, both regulators carried out their roles and responsibilities appropriately, in accordance with the law and the regulatory framework.” As a result, the government has now announced that no compensation will be paid to direct investors or SMSF trustees impacted by the Trio collapse.
Amendment to contribution rules: small business CGT concessions
The government has made a minor amendment to the rules for acceptance of superannuation contributions, to reflect recent changes to the capital gains tax (CGT) rules, which impact the small business retirement concessions.
The Tax and Superannuation Laws Amendment (2015 Measures No. 6) Act 2016 recently amended the CGT treatment of rights to future payments linked to the performance of a business or business assets following the sale of the business (‘earnout rights’). The amendments broadly treat these payments as being part of the original transaction for the sale of a business rather than relating to a separate asset for CGT purposes.
As the potential future payments can affect the size of the capital gain or loss from the sale, the amendments also broadly allow taxpayers to wait until all such payments have been finalised before accessing some CGT concessions. These include the small business retirement concession that permits taxpayers to place the proceeds of the sale of their business into superannuation despite the normal contribution caps. However, in some circumstances, delaying making contributions may result in taxpayers being unable to make contributions, due to the restrictions in the Superannuation Industry (Supervision) Regulations 1994 on when funds can accept contributions.
The government has now registered the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Regulation 2016, which creates an exception to the contribution restrictions for such circumstances. The exception allows funds to accept a contribution of an amount of the proceeds of the sale of a business to which the small business retirement concession applies, provided:
- the sale involved an earnout right
- the contribution would not have been affected by the contribution restrictions had it been made during the financial year in which the business was sold.
The regulations commenced on 16 April 2016, but apply in relation to look-through earnout rights created on or after 24 April 2015, consistent with the commencement of the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Act 2016.
SuperStream: trustee responsibilities
APRA and the ATO have jointly written to all registrable superannuation entity (RSE) licensees to advise them of their obligations with regard to upcoming changes to the Superannuation Data and Payment Standards 2012 (the ‘SuperStream Standard’) and supporting services. In particular, the letter outlines compliance dates for completion of error messaging and requirements for changes to the SuperStream Standard for rollovers during the 2016/2017 financial year.
Matters covered in the letter include:
- an update to the SuperStream Standard later this year to facilitate ATO transfers and refunds of unclaimed monies, along with some improvements identified by industry
- associated changes to ATO systems to improve the quality and timing of member information exchanged with RSE licensees. These will include requiring RSE licensees to report all newly opened and closed accounts through the SuperTICK service by no later than 31 January 2017, and an update to the Fund Validation Service (FVS) will also be updated in July 2016
- associated changes to ATO systems to improve the quality and timing of member information exchanged with RSE licensees. These will include requiring RSE licensees to report all newly opened and closed accounts through the SuperTICK service by no later than 31 January 2017, and an update to the Fund Validation Service (FVS) will also be updated in July 2016
- a reminder that RSE licensees must complete their implementation of contributions error messaging by no later than 31 May 2016
- advance notice of a major upgrade to the contributions standard in April 2017, which will introduce the payment of ATO-sourced contributions, refunds and amendments, and incorporate improvements recommended by industry.
