Issue 728, 26 November 2019
In this issue:
- Retirement income review: consultation paper
- Insurance in super prudential standard: consultation on revisions
- Complaints handling: update on ASIC consultation
- Governance, culture and accountability: APRA regulatory approach
- Timing of contributions to Small Business Super Clearing House: draft ATO guidance
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:
- how the retirement income system supports Australians in retirement;
- the role of each pillar in supporting Australians through retirement;
- distributional impacts across the population and over time; and
- the impact of current policy settings on public finances.
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:
- the registrable superannuation entity (RSE) licensee obtains independent certification, where a related party is engaged to provide group life insurance, to confirm that the arrangement is in the best interests of members and otherwise satisfies legal and regulatory requirement
- such certification be provided to APRA within five business days of its receipt or no later than one calendar month prior to the RSE licensee entering into a new insurance arrangement with a related party
- RSE licensees are satisfied that:
- the rules by which a particular status is attributed to a member in connection with insurance are fair and reasonable
- they have adequate processes for allowing members to opt easily out of insurance
- they have given adequate consideration to the cost of insurance so that it does not inappropriately erode the retirement income of beneficiaries.
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:
- the transitional timeframes that will apply to the updated RG 165 requirements will be “significantly longer” than those outlined in recent Consultation Paper 311 Internal Dispute Resolution: Update to RG 165, and ASIC does “not propose that any of the updated requirements will come into force on the day that RG 165 is published”
- requirements relating to internal dispute resolution data recording and reporting will not be included in the updated RG 165 to be published in February but will be the subject of further consultation in the first half of 2020
- the carved-out sections will include the requirements to:
- record all complaints, including those resolved immediately or within 5 business days
- record a unique identifier for each complaint
- collect and record prescribed data for each complaint
- report prescribed data to ASIC in accordance with ASIC’s requirements.
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:
- strengthening the prudential framework in areas such as remuneration and risk management, and incorporating the wider use of risk governance declarations and self-assessments
- sharpening APRA’s supervisory focus by increasing internal resourcing and capabilities for GCRA supervision, adopting new tools to assess GCRA practices and holding entities more forcefully to account when deficiencies are identified
- sharing APRA’s insights to better inform industry and the public about APRA’s work, promote better GCRA practices, and drive greater accountability among boards and management.
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/D8 Superannuation 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.