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Issue 728, 26 November 2019 
In this issue: 

 

Retirement income review: consultation paper 

Following the announcement of the Retirement Income Review by the Treasurer in September, the Government has now released a consultation paper seeking submissions by 3 February. 

The consultation paper confirms that the review will involve a broad assessment of Australia’s retirement income system. The terms of reference note that the review will establish a fact base regarding the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians. The review will identify: 

The paper outlines some of the issues the review panel will consider and includes a number of consultation questions in this regard. 

ASFA will produce a broad-based submission in response to the consultation paper. While ASFA will directly address issues raised in the paper—including consultation questions—ASFA considers that the review also provides an opportunity to assess the broad impacts of superannuation, including on the living standards of Australians, the Commonwealth’s finances, domestic financial markets and the Australian economy. The consultation paper notes that submissions need not be limited to the issues raised in the paper. 

The ASFA Secretariat will convene a Working Group comprised of ASFA members to provide guidance and feedback in relation to the submission and is seeking nominations for involvement in the Working Group. 

The Working Group will be chaired by ASFA director Peter Carrigy-Ryan and will hold two meetings, with dates yet to be confirmed. 

The key purpose of the first meeting will be to discuss the scope of the submission, specific issues to be covered in the submission and the prioritisation of those issues, and the identification of material and research that Working Group members (or their organisations) can provide. The second meeting will focus on providing final Working Group feedback on ASFA’s draft submission prior to its approval and sign-off by the ASFA Board. 

To nominate yourself or a representative from your organisation to be involved in the Working Group, please contact Andrew Craston by close of business Friday 29 November. Participation will be limited to one person per organisation. 

ASFA will provide periodic updates on the submission process via ASFA Action. 

 

 

Insurance in super prudential standard: consultation on revisions 

APRA has released for consultation its proposed revisions to its prudential standard SPS 250 Insurance in Superannuation. 

According to APRA, the revisions aim to improve member outcomes by helping trustees to select the most appropriate policies for members, and to monitor their ongoing relationship with insurers. These changes are in response to APRA’s post-implementation review of the superannuation prudential framework and relevant recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

The proposed changes essentially require that: 

APRA proposes that certain transitional requirements will commence on the date of registration of the revised SPS 250 (anticipated to be in July 2020), with the remaining requirements to commence on 1 January 2021. 

If you have any comments you would like ASFA to consider in preparing its submission on the revisions to SPS 250, please forward them to Byron Addison by close of business Thursday 23 January. 

 

 

Complaints handling: update on ASIC consultation 

ASIC has indicated to ASFA that it now intends to publish an updated version of its complaints handling regulatory guide in February 2020, rather than December 2019 as previously advised. 

As reported in recent ASFA Actions, ASIC has been consulting on substantial proposed reforms to the complaints handling standards for its regulated entities, including superannuation fund trustees. See ASFA Action issue 708 for background and issue 726 for ASIC’s most recent update. 

ASIC has now advised that the release of RG 165 and the associated legislative instrument will now be postponed until February, to allow more time to consider and resolve some of the more complex issues raised during the consultation process. ASIC has also indicated that: 

 

 

Governance, culture and accountability: APRA regulatory approach 

APRA has outlined its plans to scale up significantly its efforts to lift standards of governance, culture, remuneration and accountability (GCRA) across its regulated industries, including superannuation. 

In an information paper, Transforming governance, culture, remuneration and accountability: APRA’s approach, APRA has set out a more intensive regulatory approach to GCRA practices, in line with a key commitment made in APRA’s 2019-2023 Corporate Plan (see ASFA Action issue 719). 

APRA has indicated that its intensified approach to GCRA aims to strengthen the resilience of financial institutions, including addressing, and ideally preventing, issues such as poor risk governance, misaligned incentives and misconduct that have undermined public confidence in the financial sector over recent years. The key attributes of the new approach are: 

 

 

Contributions to Small Business Super Clearing House: draft ATO guidance 

The ATO has released draft guidance relevant to determining an employer’s eligibility for contributions made through the Small Business Superannuation Clearing House (SBSCH). 

The SBSCH is an approved clearing house administered by the ATO. The SBSCH is a free service that small businesses with 19 or fewer employees or an annual aggregated turnover of less than $10 million may use to make Super Guarantee contributions. 

Under the tax law, an employer can only claim a tax deduction for a superannuation contribution on behalf of an employee in the year in which the contribution is made (among other conditions), and contributions are deemed to be made when the payments are received by the fund trustee. The superannuation guarantee law specifies that employer contributions paid through an approved clearing house are taken to be made on the day they are accepted by the clearing house, but this does not determine when the employer is entitled to claim a deduction. 

The ATO has now addressed the latter issue in PCG 2019/D8Superannuation contributions made to the Small Business Superannuation Clearing House – compliance approach to timing of income tax deductions. 

PCG 2019/D8 notes that there may be a period of time between an employer’s payment to the SBSCH and the trustee of a complying super fund receiving the contribution and, in particular, payments made towards the end of one income year may not be received by the fund trustee until the next. This may impact on when an employer is entitled to an income tax deduction for the superannuation contributions. 

PCG 2019/D8 proposes that the ATO will not apply compliance resources to consider whether an employer’s contribution was received by the fund trustee in the same income year in which the payment was made to the SBSCH, provided the employer made the payment before close of business on the last business day on or before 30 June and a number of detailed conditions are satisfied. Where those conditions are met, the employer will not need to check with its employees’ fund(s) to determine in which income year the contributions were received from the SBSCH prior to claiming an income tax deduction. 

The proposed approach will not apply where an employer deducts a contribution in an income year where the payment is made through a clearing house other than the SBSCH (a commercial clearing house). 

When finalised, this Guideline is proposed to apply both before and after its date of issue. The ATO is seeking comments on PCG 2019/D8 by 17 January. 

 

 

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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