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Issue 686, 24 September 2018 
In this issue: 

 

Parliamentary inquiry into removal of refundable franking credits 

A Parliamentary committee has commenced an inquiry into the implications of removing refundable franking credits. 

The House of Representatives Standing Committee on Economics will inquire into and report on the use of refundable franking credits, their benefits and the implications of their removal, including: 

The Committee is seeking submissions by 2 November. A reporting date for the inquiry does not yet appear to have been set. 

If you have any feedback that you would like ASFA to consider in relation to the inquiry, please forward it to Ross Clare by close of business Wednesday 17 October. 

 

 

Royal Commission insurance hearings: issues related to group insurance in super 

The Royal Commission into misconduct in the banking, superannuation & financial services industry has now concluded its sixth round of hearings. These focused on insurance, including group insurance. 

On the final day of hearings, Senior Counsel Assisting Ms Rowena Orr QC and Counsel Assisting Mark Costello delivered closing addresses highlighting a number of matters raised during this round of hearings. As relevant to the case studies focused on group life insurance within superannuation, these matters included: 

Counsel Assisting indicated that evidence presented to the Commission may suggest that some misconduct has occurred in relation to these matters. On Friday, 28 September the Commission will publish a document setting out the questions and other issues arising from the case studies examined during the hearings. Parties who wish to make submissions in relation to the general questions raised in this document arising may do so by Friday, 26 October. 

Counsel Assisting did not make any closing address in relation to the regulatory regime for insurance. 

A seventh and final round of public hearings will be held from 19 – 30 November, and will focus on policy questions arising from the first six rounds of hearings. 

The Commission is due to provide an interim report to the Government by the end of September, covering issues raised during the first four rounds of hearings (excluding the hearings on superannuation and insurance). 

 

 

Improving women’s superannuation security: Opposition policy announcement 

The Opposition has announced that, if elected, it will implement a package of measures to strengthen the superannuation system and, in particular, boost women’s superannuation balances. 

The package includes: 

 

 

AFCA: extension of time to advise ASIC of membership, superannuation forums and webcasts 

Superannuation trustees and other financial services providers (‘financial firms’) were required to become members of the Australian Financial Complaints Authority (AFCA) by last Friday, 21 September (see ASFA Action issues 685 and 682). 

On 20 September, ASIC warned that financial firms that were not members of AFCA by 21 September would be in breach of the law. ASIC has indicated that it is closely monitoring membership lists with AFCA and will be following up with firms who fail to meet this deadline. 

ASIC has also issued a legislative instrument allowing financial firms an extended period to comply with the condition on their notice to notify ASIC about their AFCA membership details. ASIC Corporations and Credit (Transition to AFCA) Instrument 2018/814 extends the statutory notification periods from 10 or 15 days to 30 days (1 November to 30 November 2018). This transitional relief does not affect the obligation to have become a member of the AFCA scheme by 21 September 2018. 

AFCA has invited participants in the superannuation industry to attend its upcoming superannuation forums. The forums will focus on the AFCA process, timeframes, approach to common superannuation complaints and guidance for external dispute resolution responses. The forums will be held in Melbourne on 1 October and Sydney on 4 October, with the Sydney forum also being covered via webcast. Registration closes on 26 September. 

As noted in ASFA Action issue 684, AFCA is also holding a webcast on the complaint resolution process tomorrow, 25 September. 

Industry participants interested in attending any of the forums or webcasts can register directly via links on the ‘events and engagement’ section of the AFCA website. 

 

 

Design and distribution obligations and product intervention power: bill introduced 

The Government has introduced into Parliament a bill to impose design and distribution obligations on issuers of financial products and provide ASIC with a product intervention power. 

The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 seeks to implement the Government’s response to recommendations made by the Financial System Inquiry. 

The proposed design and distribution obligations will require issuers of financial products to: 

In addition, distributors of financial products will be required to: 

Some financial products will be exempt from the design and distribution obligations, including MySuper products. Other products may be exempted by regulation – the Government has indicated that it intends to exempt a range of products, including interests in defined benefit superannuation funds and eligible rollover funds. 

The design and distribution obligations are intended to apply to all financial products two years after the bill receives royal assent. (Under the original exposure draft of the bill, the obligations would have applied to new financial products one year after royal assent and to existing financial products two years after royal assent.) 

The proposed intervention power will allow ASIC to regulate, or if necessary, ban potentially harmful financial and credit products where there is a risk of significant consumer detriment. The power is intended to enable ASIC to take action before harm, or further harm, is done to consumers. 

The intervention power is intended to apply from the day after the bill receives royal assent, but it is not retrospective – it applies only in relation to products that may be acquired by consumers on or after the commencement date. 

The bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 9 November. 

The reforms have been the subject of a number of rounds of consultation previously – see ASFA Action issues 680, 656, 617. 

 

 

Superannuation guarantee regulations remade 

The Government has remade regulations supporting the superannuation guarantee regime. 

The Superannuation Guarantee (Administration) Regulations 2018 remake the Superannuation Guarantee (Administration) Regulations 1993, which are due to sunset (expire) on 1 October 2018. 

According to the explanatory material, the remade regulations make no alteration to the substantive meaning or operation of the existing regulations. Minor technical changes have been made to adopt current drafting practices and to remove redundant references. Consequential amendments have also been made to reflect updates to the Migration Regulations 1994, which changed the visa classes to which the existing regulations referred when identifying certain employees or payments that are excluded for superannuation guarantee purposes. 

The remade regulations, which commenced on 15 September, were released in draft form in July (see ASFA Action issue 680). 

 

 

Statutory declarations: regulations remade 

The Government has remade rules relating to the prescribed form and witnessing of Commonwealth statutory declarations. 

Commonwealth statutory declarations are frequently used for a range of purposes including verification of personal information and as substantiating document for some types of superannuation claims. In addition, those authorised to witness a Commonwealth statutory determination are typically also able to certify documents, for example as proof of a person’s identity. 

The Statutory Declaration Regulations 2018 (2018 Regulations) repeal and replace the Statutory Declaration Regulations 1993 (1993 Regulations), which are due to sunset (expire) on 1 October. 

In particular, the 2018 Regulations: 

The 2018 Regulations commenced on 18 September. 

 

 

Protection of employee entitlements: bill introduced 

The Government has introduced into Parliament a bill to strengthen enforcement and recovery options to deter behaviours that prevent, avoid or significantly reduce the recovery of employment entitlements―including superannuation contributions―in insolvency. 

The Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 makes amendments to the Corporations Act 2001 to: 

Of particular relevance to superannuation, the bill amends Part 5.8A of the Corporations Act to strengthen the protections provided for the recovery of employee entitlements in insolvency. This will enable the Part to operate more effectively to deter and penalise parties entering into or facilitating agreements or transactions to prevent or avoid the recovery of, or significantly reduce the amount that can be recovered of, those entitlements. 

The amendments specifically provide that a superannuation contribution which is payable to a superannuation fund by an employee’s corporate employer is an entitlement protected by Part 5.8A. Such contributions could include compulsory superannuation contributions payable by the corporate employer, or voluntary additional superannuation contributions of the employee deducted from their salary by the employer but not remitted to a fund. 

The amendments made by the bill will apply from the day after Royal Assent. 

 

 

ASIC update: capabilities, resignation of deputy chair 

The Treasury Laws Amendment (Enhancing ASIC’s Capabilities) Bill 2018 has been passed by Parliament and awaits royal assent. The bill provides ASIC with greater operational flexibility by allowing it to employ staff outside the Public Service Act 1999, and makes express provision for the regulator to consider competition in its decision-making processes. 

The Government has announced the resignation of Mr Peter Kell as deputy chair of ASIC, with effect from 6 December. The Government had previously announced the appointment of Mr Sean Hughes and Ms Danielle Press as commissioners. 

 

 

ASFA REGULATORY WATCHLIST

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

and other regulatory announcements relevant to superannuation.

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