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Issue 861, 26 July 2022 
In this issue: 

 

Treatment of faith-based super products under YFYS performance test: consultation 

Prior to the election, the Government committed  to allowing APRA to consider the religious affiliation of a superannuation fund when applying the Your Future, Your Super (YFYS) performance test. 

Treasury has now released for consultation draft amendments  to the legislated YFYS rules, to adjust how faith-based superannuation products are treated under the annual performance test. 

The draft amendments: 

If you have any feedback you would like ASFA to consider in relation to the draft amendments, please forward it to Fiona Galbraith  by close of business, Friday 5 August.  

 

Taxation of defined benefit pensions: consultation 

Treasury is consulting on an exposure draft Bill to amend the tax treatment of certain invalidity pensions paid from military superannuation schemes since 2007. 

In its Mid-Year Economic and Fiscal Outlook for 2021-22, the former Government committed to amend the tax treatment of invalidity super pensions paid under the Military Superannuation and Benefits (MSB) and Defence Force Retirement and Death Benefits (DFRDB) schemes which commenced on or after 20 September 2007. The treatment of these pensions was impacted by a 2020 decision by the Full Federal Court (Commissioner of Taxation v Douglas), which found that they should be treated as superannuation lump sums for tax purposes, rather than superannuation income stream benefits (see ASFA Action issue 838). 

The draft Bill confirms the lump sum tax treatment for affected members of the DFRDB and MSB. According to the explanatory material, as a result of the approach adopted: 

The explanatory material notes that the draft Bill also contains retrospective and prospective amendments to ensure defined benefit pensions commenced since 20 September 2007 in schemes other than the DFRDB and MSB schemes, that may have been within the wider scope of the Douglas decision, will continue to be taxed as income stream benefits. This “confirms the original policy intent to tax all other similar defined benefit pensions as superannuation income streams.” 

IF you have any feedback you would like ASFA to consider in relation to the draft Bill, please forward it to Julia Stannard by close of business Monday 1 August. 

 

Payment Times Reporting regime: consultation on updated guidance 

Treasury has released a consultation package seeking feedback on updated guidance to support the Payment Times Reporting Scheme. The Scheme requires large businesses—including superannuation funds—to report on their small business payment terms and times, via a public Payment Times Reports register (see ASFA Action issues 799, 786 and 781 for background). 

Treasury has indicated the updated guidance is intended to help reporting entities meet their obligations and understand the expectations of the Payment Times Reporting Regulator when undertaking compliance activities. The need for updated guidance was identified after reviewing enquiries and reports from the first year of operation of the scheme. 

The consultation package includes a consultation paper along with three draft guidance notes. Treasury is seeking feedback using a particular template provided in the consultation paper. Treasury is particularly interested in whether: 

If you have any feedback on the draft guidance, please forward it to Julia Stannard by close of business, Friday 19 August. 

 

Investment governance: revised prudential standard 

APRA has released a revised version of its prudential standard SPS 530Investment Governance, following consultation on proposed amendments (see ASFA Action issue 827 for background). 

According to APRA, its “final revisions are aimed at ensuring better member outcomes through updated requirements that enhance stress testing, valuation and liquidity management practices”. 

As well as the updated version of SPS 530, APRA has released a marked-up version showing the revisions and a response  to the submissions it received as part of consultation undertaken between September 2021 and February this year. The major changes involve: 

The revised version of SPS 530 will commence on 1 January 2023. APRA has indicated that it plans to release draft Prudential Practice Guide SPG 530 Investment Governance and draft Prudential Practice Guide SPG 531 Valuations for consultation later in 2022, to assist in the implementation and application of the revised standard. 

 

Superannuation funds’ use of derivatives: CFR review 

The Council of Financial Regulators (CFR) has completed an examination of the current use of derivatives by superannuation funds, undertaken at the request of the previous Government. 

In November 2021, the then Treasurer asked the Council of Financial Regulators to examine whether the current use of derivatives by superannuation funds raised any concerns (see ASFA Action issue 833). The CFR’s examination was to focus particularly on concerns in terms of: 

The Council provided has now provided its advice to the current Treasurer. Importantly, the CFR’s assessment “is that derivatives usage by superannuation funds is predominantly for risk management purposes and is supported by appropriate financial and operational risk management regulator standards and frameworks. It raises no particular concerns at this time.” 

 

Definition of ‘significant financial institution’: revised prudential standards 

In April, APRA commenced a cross-industry consultation on minor amendments to align and centralise the definition of a significant financial institution (SFI) within the prudential framework (see ASFA Action issue 849 for background). 

APRA has now issued its response  to the feedback received as part of the consultation. APRA has also released several updated prudential standards – of these, only CPS 511 Remuneration is applicable to superannuation. 

APRA advised that it has adopted its proposed amendments without revision. As a result, the SFI definition that will be adopted is: 

Significant financial institution means an APRA-regulated entity that is either: 

    1. AUD $20 billion in the case of an ADI; 
    2. AUD $10 billion in the case of a general insurer or life company; 
    3. AUD $3 billion in the case of a private health insurer; 
    4. AUD $30 billion in the case of a single RSE operated by an RSE licensee, or if the RSE licensee operates more than one RSE where the combined total assets of all RSEs exceeds this amount; or 

APRA will publish a list of SFIs for all regulated industries on its website later this year. 

 

New APRA superannuation publications 

APRA has announced  that it will launch a series of new superannuation data publications from September 2022, to enhance the quality and breadth of information available to industry stakeholders. The new publications will include data collected under reporting standards introduced in phase 1 of the Superannuation Data Transformation (SDT) project. 

The quarterly and annual publications will comprise new and expanded data on an industry, fund and product basis. The expanded data will include information on fees and costs, asset allocation and performance data for all products and investment options as well as information on insurance arrangements, expenses, member. 

The first of the new publications will be issued in September and will cover aggregate quarterly data on the industry’s structure and profile, member demographics and investments. Quarterly publications covering product level data will be launched in Quarter 4 2022. Annual data publications on the industry, funds and products will be released in early 2023. 

As part of the announcement, APRA has also released its response  to consultations undertaken earlier this year on publication and confidentiality of the data collected under phase 1 of the SDT project (see ASFA Action issue 842 for background on the consultation). 

 

 

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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