Issue 699, 22 February 2019
In this issue:
- Protecting your super package: bill passed by Parliament, consultation on regulations
- Opt-in insurance for under 25’s and low-balance accounts: ‘putting members’ interests first’
- Fee and cost disclosure – ASIC roundtables and reminder about feedback
- Status of superannuation bills
- Royal Commission: Government, Opposition and ASIC responses
- Superannuation reporting: single touch payroll legislative instrument
Protecting Your Super Package: bill passed by Parliament, consultation on regulations
The revised Bill to implement the ‘Protecting Your Super’ reforms has now completed its passage through Parliament, and the Government has now commenced a very short consultation on regulations to implement the reforms.
The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (PYS Bill) reforms the circumstances in which insurance can be offered to members, imposes caps and a prohibition on the charging of certain fees, and expands the circumstances in which inactive, low-balance accounts must be transferred to the ATO for consolidation.
The House of Representatives agreed to extensive amendments made by the Senate (see ASFA Action issue 698), including the removal of provisions that would have made insurance opt-in for members under age 25 and low-balance accounts. The Government has now introduced a separate Bill to progress those reforms (see later item in this ASFA Action). The PYS Bill now awaits royal assent.
Treasury has this afternoon released a draft of regulations to implement the PYS reforms for a very brief consultation, with submissions closing next Friday, 1 March. The draft regulations address:
- further detail on when a trustee must notify members about certain matters, including:
- where an account has been inactive and insurance may no longer be offered or maintained without a direction from the member
- how a member who has directed the trustee to take out or maintain their insurance coverage can later cancel their insurance
- the information that must be included in those notices
- additional detail needed to administer the fee cap including the percentage of the cap
- rules to direct the ATO as to which fund an amount should be paid to when consolidating amounts held by the ATO and the member has more than one active fund.
If you have any feedback that you would like ASFA to consider in relation to the draft regulations, please forward it to Byron Addison by close of business, Wednesday 27 February.
Opt-in insurance for under 25’s and low-balance accounts: ‘Putting Members’ Interests First’
The Government has introduced into Parliament a new bill to progress insurance reforms that were removed from its ‘Protecting Your Superannuation Package’ legislation by the Senate.
The Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 (PMIF Bill) seeks to implement provisions making insurance opt-in for members under age 25 and low-balance accounts, that were removed from the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (PYS Bill) when that Bill was considered by the Senate. The PYS Bill has now been passed by both houses of Parliament, with extensive amendments (refer above item in this ASFA Action, and issue 698).
The PMIF Bill includes amendments that prevent trustees from providing insurance on an opt-out basis to members who are under 25 years old and begin to hold a new product on or after 1 October 2019, and to members who hold products with balances below $6,000. In all circumstances, the member may opt-in to insurance by making a direction to the trustee. The new measure builds on reforms implemented by the PYS Bill.
According to the explanatory material:
- generally, the amendments apply to members who are under 25 years old and who start to hold a choice or MySuper product on or after 1 October 2019
- a person who is under 25 years old and who began to hold a MySuper product or choice product before 1 October 2019 will not be impacted unless on 1 July 2019 the product had either been inactive for 16 months or the balance of the product had not been more than $6,000 since that date
- however, the measure will apply to members who hold a product on 1 October 2019 which has not had a balance of $6,000 or more since 1 July 2019.
- obligations are placed on trustees to notify members who have insurance arrangements in place before 1 October 2019 and who might be affected by the new measure to provide these members with an opportunity to elect for their insurance to continue.
The PMIF Bill remains before the House of Representatives, awaiting debate.
Fee and cost disclosure: ASIC consultation and reminder re feedback
As advised in ASFA Action issue 696, ASIC has released a consultation package on proposed changes to the fee and cost disclosure regime for superannuation funds and managed investment schemes. Comments on the consultation package are due by 2 April 2019.
As part of ASIC’s consultation on the proposed changes, ASIC is holding roundtable meetings in Sydney (4 March) and Melbourne (5 March). Details of the roundtables are available on ASIC’s website. The roundtable meetings are an opportunity to hear ASIC describe their proposed changes and to ask ASIC any questions you may have about their proposals. It is not intended to replace providing a written submission.
If you have any feedback that you would like to provide to ASFA please forward it to Fiona Galbraith by close of business, Monday 11 March 2019.
Status of superannuation bills
Parliament concluded its current sitting on 21 February and is not scheduled to sit again until 2 April (the date of the Federal Budget).
As noted above, the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (PYS Bill) has now been passed by Parliament (with extensive amendments) and is awaiting Royal Assent. The Government has introduced into Parliament the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 (PMIF Bill) to implement provisions making insurance opt-in for members under age 25 and low-balance accounts, that were removed from the PYS Bill by the Senate. The PMIF Bill remains before the House of Representatives, awaiting debate.
The status of other superannuation-related bills, when Parliament rose, was as follows:
- Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Bill 2017 – this Bill includes amendments to strengthen APRA’s powers in relation to registrable superannuation entity (RSE) licensees and provide APRA with the ability to obtain information on expenses incurred by RSEs and RSE licensees in managing or operating the RSE. It also introduces an annual ‘member outcomes’ test for both MySuper and choice products, requires RSE licensees to hold annual members’ meetings, and amends the portfolio holdings disclosure rules. The Bill was extensively amended in the Senate (see ASFA Action issue 698) and is yet to be debated by the House of Representatives.
- Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 – this Bill seeks to strengthen penalties for corporate and financial sector misconduct. The Bill was extensively amended in the Senate (see ASFA Action issue 698), with the House of Representatives subsequently accepting those amendments. The Bill now awaits Royal Assent.
- Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 – this Bill amends the whistleblower protections in the Corporations Act 2001 so a single, strengthened whistleblower protection regime covers the corporate, financial and credit sectors – including superannuation funds. It also brings the whistleblower laws in other financial system statutes into the Corporations Act 2001 and inserts a comprehensive regime into the tax legislation for the protection of individuals who report breaches of the tax laws or misconduct. The Bill has now been passed by both houses of Parliament and awaits Royal Assent. ASIC has welcomed the passage of the Bill. See ASFA Action issue 654 for more details.
- Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 – this Bill proposes to introduce amendments to the social services legislation to implement announcements in the May 2018 Budget, including new means testing rules to encourage the development and take-up of lifetime retirement income stream products. The Bill has now been passed by both houses of Parliament and awaits Royal Assent. See ASFA Action issues 698 and 693 for background.
- Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 – this Bill amends the superannuation guarantee (SG) law to provide that employees under workplace determinations or enterprise agreements made on or after 1 July 2018 have the right to choose their superannuation fund. It also provides that salary sacrificed amounts will not reduce an employer’s mandated superannuation guarantee contributions. The Bill has been passed by the House of Representatives but is yet to be debated by the Senate. Refer ASFA Action issues 644, 639 and 596 for background.
- Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018 - this Bill provides a one-off 12-month amnesty for unpaid superannuation guarantee (SG), allows a partial opt-out from SG for higher income earners with multiple employers, and makes integrity measures to support the 2016-17 Budget reforms. The Bill has been passed by the House of Representatives and is yet to be debated by the Senate. See ASFA Action issue 672 for more details.
- Treasury Laws Amendment (2019 Measures No. 1) Bill 2019 – this Bill bring forward the time that an individual can enter into a contract to purchase or construct their first home under the First Home Super Saver Scheme, increases the maximum number of members for a self-managed superannuation fund or small APRA fund from four to six, and repeals redundant rules that related to the transition of funds to the Superannuation Industry (Supervision) Act 1993. The Bill remains before the House of Representatives. Refer ASFA Action issue 698 for background.
- Treasury Laws Amendment (Consumer Data Right) Bill 2019 – this Bill provides for introduction of the Consumer Data Right (CDR) with intended effect from 1 July 2019. The CDR will initially apply to the banking and energy sector however the Productivity Commission recently recommended it be extended to superannuation. The Bill remains before the House of Representatives. Refer ASFA Action issue 698 for background.
- Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 – this Bill seeks to impose design and distribution obligations on issuers of financial products and provide ASIC with a product intervention power. The Bill remains before the House of Representatives. Refer ASFA Action issue 686 for background.
- Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 – this Bill proposes amendments to the Corporations Act 2001 to deter behaviours that prevent, avoid or significantly reduce the recovery of employment entitlements―including superannuation contributions―in insolvency. The Bill has been passed by the House of Representatives and is yet to be debated by the Senate. Refer ASFA Action issue 686 for background.
- Treasury Laws Amendment (2018 Measures No 2) Bill 2018 – this Bill creates the framework for an enhanced ‘regulatory sandbox’ to support innovation in financial services. The Bill has been passed by the House of Representatives and is yet to be debated by the Senate. See ASFA Action issue 659 for more details.
- Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 – this Bill introduces a requirement that superannuation trustees have at least one third independent directors. The Government placed debate on this Bill on hold in the Senate. The Bill has not come before the House of Representatives. Refer ASFA Action issue 644 for background.
- Superannuation Objective Bill 2016 – this Bill, which sought to legislate primary and subsidiary objectives for the superannuation system, has not been debated since November 2016. It has been passed by the House of Representatives but remains before the Senate. Refer ASFA Action issue 612 for background.
- National Disability Insurance Scheme Funding Bills – this package of 11 bills were intended to increase the Medicare levy, and certain tax rates that are tied to the top marginal tax rate, to fund the National Disability Insurance Scheme (including some superannuation amounts – refer ASFA Action issues 641 and 627). The Bills have been passed by the House of Representatives, but were to be withdrawn given the Government’s announcement that it would not proceed with the increase to the Medicare levy (see ASFA Action issue 668). This withdrawal has not yet formally occurred, and the Bills therefore remain before the Senate.
Royal Commission: Government, Opposition and ASIC responses
In the last few days, the Government, Opposition and ASIC have all released detail about their responses to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
In particular, the Government has announced that it has given a direction extending the remit of the Australian Financial Complaints Authority’s (AFCA) to consider financial complaints dating back to 1 January 2008, providing expanded access to redress for consumers and small businesses harmed by financial misconduct. This action is being taken in the context of the Commission’s recommendations about establishing a compensation scheme of last resort (recommendation 7.1) but goes beyond that recommendation.
As a result of the Government’s direction, AFCA will be able to consider disputes dating back to 1 January 2008 (the start of the timeframe considered by the Royal Commission) that have not previously been heard and which fall within AFCA’s current monetary limits and compensation thresholds. AFCA will run a limited consultation regarding required changes to its ules, which will need to be approved by ASIC. AFCA has indicated it will issue guidance prior to 1 July 2019 to explain how impacted individuals can raise their matters, and will consider eligible complaints between 1 July 2019 and 30 June 2020. It is not presently clear what—if any—impact this may have on superannuation-related complaints.
After making a number of statements about specific recommendations of the Royal Commission, the Opposition has now released a consolidated outline of its proposed responses to each of the 76 recommendations.
ASIC has issued an outline of its proposed response to the 12 Royal Commission recommendations that are directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change. ASIC has indicated that it is committed to fully implementing each of these recommendations. The action to be taken by ASIC includes:
- working with industry in anticipation of the Parliament legislating reforms in relation to codes—including the Insurance in Superannuation Voluntary Code—and ASIC’s powers to provide for ‘enforceable code provisions’
- monitoring and reporting on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration for the period 1 July 2019 to 1 January 2021
- continuing to implement its commitment toward a stronger enforcement policy, including a ‘why not litigate?’ stance, and creating a separate Office of Enforcement within ASIC during 2019
- working with APRA to enhance their cooperation arrangements.
Superannuation reporting: single touch payroll legislative instrument
The ATO has made a legislative instrument impacting the reporting of superannuation-related amounts under the Single Touch Payroll (STP) regime. The STP regime provides for mandatory and voluntary reporting of employee payroll and superannuation information by employers to the ATO.
The ATO has provided an exemption for all employers from a STP requirement, that they report superannuation contribution amounts paid to complying superannuation funds that count toward reducing the employer’s superannuation guarantee liability.
Since 1 July 2018, the ATO has received information about contributions received by funds directly via funds’ reporting under the Member Account Transaction Service (MATS). As a result of the MATS reporting, the separate STP reporting of contributions by employers was considered unnecessary. The Taxation Administration – Single Touch Payroll – Exemption for Employers from Reporting Contribution Amounts Paid to a Superannuation Fund therefore effectively removes the reporting requirement under STP.
The instrument is taken to have commenced on 1 July 2018.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
