Issue 712, 25 June 2019
In this issue:
- APRA approval of changes in control of super trustees: consultation
- Fee and cost disclosure rules amended for protecting your super
- AFCA: rules and guidelines for legacy complaints
- Family law superannuation interest rate determination
- Lifetime income streams: means test
- Some important superannuation changes commencing 1 July 2019
APRA approval of changes in control of super trustees: consultation
APRA has released consultation drafts of a form and guide for applications to acquire a controlling stake in a registrable superannuation entity (RSE) licensee
Under reforms contained in the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019, from 5 July, any party seeking to acquire greater than a 15 per cent stake in an RSE licensee must apply to APRA for approval.
Deputy Chair Helen Rowell said APRA actively sought these powers to better protect the interests of superannuation members. “APRA has held longstanding concerns about the ability of parties to gain control of a superannuation licensee through the ‘back door’, without meeting the requirements of a stringent approval process”. Mrs Rowell said these concerns were “heightened after this loophole contributed to the fraud that precipitated the collapse of Trio Capital in 2009. The closure of this legislative gap will ensure anyone seeking to acquire a substantial stake in an APRA-regulated superannuation licensee is subject to rigorous regulatory scrutiny.”
Before granting approval to a new applicant, APRA must be satisfied the revised ownership structure will not impede the ability of the RSE licensee to meet its obligations under the Superannuation Industry (Supervision) Act 1993, including by prioritising the best interests of members.
APRA is seeking submissions on the draft application form and accompanying guide by 5 July.
Fee and cost disclosure rules amended to reflect protecting your super reforms
ASIC has amended the legislative instrument prescribing fee and cost disclosure rules for superannuation funds to reflect the element of the protecting your super (PYS) reforms that bans exit fees from 1 July 2019.
Class Order 14/1252 modifies the Corporations Act 2001 and Corporations Regulations 2001 to set out requirements for the disclosure of fees and costs in Product Disclosure Statements (PDSs) for superannuation and managed investment products. From 1 July 2019, the reforms implemented by the Treasury Laws Amendment (Protecting Your Super Package) Act 2019 and associated regulations prohibit superannuation funds from charging exit fees.
ASIC has now made ASIC Corporations (Amendment) Instrument 2019/599 to reflect the ban on exit fees, by eliminating the line allowing for disclosure of exit fees. According to ASIC, the amendment does not otherwise make any change to the requirements set out in CO 14/1252.
ASIC has also reminded product issuers that as part of their implementation of the PYS reforms, they must take care that, from 1 July 2019, PDSs do not suggest that exit fees will be charged on superannuation products. Product issuers should also implement any changes necessary to ensure that no exit fees are charged in practice. ASIC has indicated that it understands some issuers may have difficulty implementing changes to delete the line about exit fees from their template by 1 July (although it will be blank) and encourages them to make this change as soon as possible.
ASIC’s broader review of the fees and costs disclosure regime for superannuation and managed investment schemes (see ASFA Action issue 696) is continuing and will not affect the requirement to comply with the PYS amendments and CO 14/1252. ASIC has been considering its response to submissions made in relation to its proposed disclosure changes and expects to provide a report addressing its final position in the second half of 2019.
AFCA: rules and guidelines for legacy complaints
ASIC has approved changes to the governing rules of the Australian Financial Complaints Authority (AFCA), expanding AFCA’s jurisdiction to cover complaints dating back to 1 January 2008 (‘legacy complaints’).
Under the extension of jurisdiction, AFCA will be able to deal with certain complaints about conduct by current member financial firms, which AFCA, its predecessor schemes, courts, or tribunals have not previously dealt with. In particular, the amended Rules specify that an eligible legacy complaint:
- relates to a compulsory member of the AFCA scheme who is a member of the AFCA scheme at the time the complaint is made;
- is not an excluded complaint; and
- is made during the lodgment period, 1 July 2019 to 30 June 2020.
The concept of ‘excluded complaint’ specifically excludes complaint in relation to a superannuation death benefits, but does not exclude any other types of superannuation complaints (for example, disability complaints).
The extension of AFCA’s jurisdiction represents part of the Government’s response to the Royal Commission (see ASFA Action issues 699, 700 and 701).
AFCA has noted that it will accept legacy complaints from 1 July 2019 and follow its usual practice of referring them back to the financial firms to resolve them. CEO David Locke said AFCA expects that financial firms—including superannuation trustees—“will proactively resolve these legacy matters themselves where possible, as part of their commitment to justly remediate the misconduct of the past and meet the community’s expectations of fairness.” Where firms are unable to satisfactorily resolve the complaints, AFCA will start investigating these matters from 1 October 2019.
The updates to AFCA’s rules and operational guidelines are expected to be available on its website shortly.
Family law superannuation interest rate determination
The Australian Government Actuary has made the Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2019. The Determination sets the interest rate for adjusting the superannuation entitlements of separated and divorced spouses under splitting orders and agreements made under the Family Law Act 1975.
The interest rate for the adjustment period that comprises the financial year beginning on 1 July 2019 is 4.8 per cent. The Determination also provides the method by which the interest rate is calculated for an adjustment period that includes a period within that financial year.
Lifetime income streams: means test
The Department of Social Services (DSS) and the Department of Veterans’ Affairs (DVA) have made a package of determinations relevant to determining the value, for social security purposes, of lifetime income streams.
In the May 2018 Budget, the Government announced that it would implement new means test rules for lifetime income streams, to assess a fixed 60 per cent of all pooled lifetime product payments as income. Under the proposed rules, 60 per cent of the purchase price of the product would be assessed as assets until the age of 84 years, or a minimum of 5 years, and then 30 per cent for the rest of the person’s life. Grandfathering would apply for income streams purchased before 1 July 2019.
The DSS and DVA have now made the following legislative instruments to give effect to the new means test rules, with effect from 1 July 2019:
Some important superannuation changes commencing 1 July 2019
While superannuation trustees have understandably been focused on the commencement of the ‘protecting your super’ reforms, a number of other superannuation changes also take effect from 1 July. These include:
- Carryover of unused concessional contributions cap – if a member has a total superannuation balance of less than $500,000 on 30 June of the previous financial year, then they may be entitled to contribute more than the general concessional contributions cap and make “catchup” concessional contributions for any unused amounts. The first year there is an ability to carry forward unused amounts is the 2019–20 financial year. Unused amounts are available for a maximum of five years, and after this period will expire. See ASFA Action issues 613, 612 and 601 for background.
- Work test exemption – from 1 July 2019 this allows an individual’s super fund to accept voluntary contributions made by individuals ages 65 to 74 for an additional 12-month period (once only) from the end of the financial year in which they last met the work test, subject to their total super balance being less than $300,000. See ASFA Action issues 693, 688 and 669 for background.
- Means test rules for lifetime income streams – the new means test rules will apply to both Social Security and Veterans’ Affairs payment recipients. The new rules will apply to all lifetime income streams purchased on or after 1 July 2019. Lifetime income streams purchased before 1 July 2019 will continue to be assessed under the current rules for long-term asset-tested income streams. See ASFA Action 692 and 669 and earlier in this ASFA Action for background
- The annual member meeting – the new requirements in regard to funds holding annual member meetings apply to financial years commencing after Royal Assent to the legislation. For most funds this will be financial year 2019-20, commencing on 1 July 2019. However, a meeting does not have to be held until after the financial year has concluded. Notice of a meeting has to be given no more than 6 months after the end of the financial year, and the meeting date can be up to 3 months after that notice is given. This translates to the first meeting having to be held no later than 9 months from 30 June 2020. See ASFA Action issues 704, 698, 644, 642, 639 and 638 for background.
- AFCA consideration of legacy complaints – during the period 1 July 2019–30 June 2020, AFCA will have jurisdiction to consider eligible complaints dating back to 1 January 2008. See ASFA Action issues 701, 700 and 699 and earlier in this ASFA Action for background.
- First home super saver scheme – a number of changes to this come into effect on 1 July 2019. They also apply retrospectively to valid FHSS release requests and contracts entered into on or after 1 July 2018. See ASFA Action issues 704 and 694 for background.
- Preservation age – for a person born on 30 June 1962 the preservation age is 57 but for those born on 1 July 1962 to 30 June 1963 it is 58.
- Superannuation maximum contribution base – the maximum superannuation contributions base for the SG is $55,270 in 2019-20, up from $54,030 in 2018-19.
- Co-contribution income thresholds – the lower income threshold rises to $38,564 in 2019-20 from $37,697 the year before, with the higher income threshold rising to $53,564 from $52,697.
- Low rate cap amount – the low rate cap amount is $210,000 in 2019-20, up from $205,000 in 2018-19.
- The untaxed plan cap amount – this limits the concessional tax treatment of benefits that have not been subject to contributions tax in a super fund. It is $1,515,000 in 2019-20, up from $1,480,000 in 2018-19.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
