Issue 830, 26 October 2021
In this issue:
- PMIF and PYS: revised APRA FAQs
- APRA data FAQs
- Member outcomes assessment: new APRA FAQs
- Your Future, Your Super: stapling, choice of fund penalty instruments
- Critical infrastructure reforms: Bill substantially amended
- Royal Commission implementation: Better Advice Bill
- Virtual and hybrid meetings and electronic document execution: Bill introduced
- Australian Corporate Bond Market: Parliamentary Committee report
- Closure of SCT: transitional provisions Bill
PMIF and PYS: revised APRA FAQs
APRA has published revisions to its frequently asked questions (FAQs) in relation to the Putting Members’ Interests First (PMIF) and Protecting Your Super (PYS) reforms.
The updated information clarifies that members who were not required to elect for insurance, as a result of the historical provisions in sections 68AAB and 68AAC of the Superannuation Industry (Supervision) Act 1993, can have their insurance continued in a successor fund without needing to elect for insurance. The Government intends to amend the SIS Act to give effect to this change in due course.
Sections 68AAB and 68AAC relate to the provision of insurance to fund members with low-balance accounts and members under 25 years old.
APRA has updated its FAQ pages in relation to PMIF and PYS.
APRA data FAQs
APRA has published two additional frequently asked questions (FAQs) for registrable superannuation entity (RSE) licensees to provide further guidance on meeting the Reporting Standards for Phase 1 of the Superannuation Data Transformation project.
This update includes a clarification to an existing FAQ regarding the use of excel files as a submission format. APRA has also archived 20 FAQs that contain guidance on matters that have now been incorporated into the reporting standards.
Member outcomes assessment: new APRA FAQs
APRA has published a new set of frequently asked questions (FAQs) and an update to an existing FAQ on the outcomes assessment under section 52(9) of the Superannuation Industry (Supervision) Act 1993.
The new information provides information to RSE licensees about how the outcomes assessment must consider the performance test, and outlines APRA’s expectations on the publication of the outcomes assessment.
APRA has also updated guidance on how RSE licensees may undertake the outcomes assessment for lifecycle products.
Your Future, Your Super: stapling, choice of fund penalty instruments
The ATO has made two legislative instruments relevant to an employer’s penalties under the choice of fund provisions, following the commencement of the stapling component of the Your Future, Your Super reforms.
Under the YFYS reforms, generally employees who do not make a choice of fund when commencing a new employment arrangement from 1 November 2021 will be ‘stapled’ to a single default account. Under stapling, employers request a notification from the Commissioner of Taxation identifying if there is a stapled fund for a new employee. The stapling requirements are contained in the Superannuation Guarantee Administration Act 1992 (SGA Act). (See ASFA Action issues 817 and 810 for background.)
The ATO has now registered:
- Superannuation Guarantee (Administration) – Stapled Fund – Guidelines for the Reduction of an Employer’s Individual Superannuation Guarantee Shortfall for Late Contributions Due to Non-acceptance by Notified Stapled Fund Determination 2021 This instrument sets out the guidelines the Commissioner of Taxation must have regard to when deciding whether or not to reduce an employer’s shortfall where late superannuation guarantee (SG) contributions were made to a fund for an employee because the employee’s most recently notified stapled fund did not accept the contributions from the employer. The instrument notes that in the ‘introductory period’ 1 November 2021 to 31 October 2022, the Commissioner recognises that non-compliance by employers with the stapled fund requirements under the choice of fund rules during the introductory period may have been caused by a lack of knowledge and/or business readiness rather than a non-compliant attitude. It is acknowledged that genuine mistakes and misunderstandings may occur. Accordingly, employers will be provided with help and assistance as a first step to improving compliance with the stapled fund requirements under the choice of fund rules. Any shortfalls will be reduced to nil unless there is evidence that an employer has not made reasonable attempts to comply with the stapled fund requirements. The Commissioner will adopt a ‘business as usual’ approach to the administration of the stapled fund requirements under the choice of fund rules from the quarter beginning 1 November 2022. In determining the level of reduction to the amount of the employer’s shortfall, the Commissioner will have regard to:
- whether an employer made the late superannuation guarantee contributions to a fund for the employee that complies with the choice of fund rules when the most recently notified stapled fund did not accept the contributions
- other mitigating factors or exceptional circumstances that affected the employer in making the superannuation guarantee contributions or their compliance with the choice of fund rules.
The Commissioner will also have regard to whether there are circumstances to support an increase to the employer’s shortfall.
- Superannuation Guarantee (Administration) – Choice of Fund – Written Guidelines for the Reduction of an Increase in an Employer’s Individual Superannuation Guarantee Shortfall Determination 2021 This instrument replaces the Superannuation Guarantee (Administration) Act 1992 – Written Guidelines for the Reduction of an Increase in an Employer’s Individual Superannuation Guarantee Shortfall, registered in June 2006.Under the SGA Act, an increase on the amount of an employer’s individual superannuation guarantee shortfall for a quarter applies where the employer makes contributions to a superannuation fund or retirement savings account but does not comply with the choice of fund requirements. This is known as the ‘choice shortfall’. The Commissioner may reduce the choice shortfall in full or in part. This instrument provides the revised written guidelines (general guidelines) the Commissioner must have regard to when making a decision to reduce the choice shortfall. The instrument also provides transitional arrangements from 1 November 2021 to 31 October 2022 whereby the Commissioner can reduce the choice shortfall to nil if it is the employer’s first occasion of non-compliance with the stapled fund requirements and that non-compliance was due to the employer’s lack of knowledge of those requirements. The general guidelines will apply when the Commissioner considers any reduction of the choice shortfall for the existing choice requirements or for any non-compliance with stapled fund requirements after the first instance of non-compliance, and from 1 November 2022.Each instrument commences on 1 November 2021.
Critical infrastructure reforms: Bill substantially amended
The Government has substantially amended the Security Legislation Amendment (Critical Infrastructure) Bill 2020. The amended Bill, the Security Legislation Amendment (Critical Infrastructure) Bill 2021, was passed by the House of Representatives on 20 October and will now be considered by the Senate. The updated supplementary explanatory memorandum can be found here. See ASFA Action issues 771, 783, 790, 800 and 827 for further background.
As reported in recent ASFA Actions, the Bill will amend and build on the existing regulatory regime created by the Security of Critical Infrastructure Act 2018 (the Act) to enhance security and resilience of critical infrastructure assets. This will include introducing the concept of a ‘critical superannuation asset’.
The amendments address some of the recommendations made by the Parliamentary Joint Committee on Intelligence and Security (PJCIS) in its Advisory Report on the Security Legislation Amendment (Critical Infrastructure) Bill 2020.
As outlined in the supplementary explanatory memorandum the amendments would:
- omit the proposed new Parts of the Act relating to critical infrastructure risk management programs, enhanced cyber security obligations and declaration of systems of national significance
- amend the proposed regime requiring the mandatory reporting of a cyber security incident by an entity to a relevant Commonwealth body to allow for the written report to be made within 84 hours (instead of 48 hours) of an oral report being made, and to empower a relevant Commonwealth body to exempt an entity from the requirement to provide a written report
- require the Secretary to give a written report to the PJCIS about a cyber security incident in relation to which directions or requests in relation government assistance measures are given or made under certain provisions of the Act
- allow the PJCIS to conduct a review of the operation, effectiveness and implications of the security of critical infrastructure legislative framework in the Act, to begin not more than three years from when the Bill receives the Royal Assent
- require any draft rules relating to the mandatory reporting obligations be provided directly to any entities which would reasonably be impacted by the draft rules and include an obligation that the Minister must formally respond to any submissions made by responsible entities
- insert a definition of ‘significant impact’
- include an example of where a person is not entitled to ‘cause access, modification or impairment of computer data or a computer program’. This indicates that if a person (including employees or agents of a responsible entity) exceeds their authority, this will amount to such unauthorised access, modification or impairment for the purpose of the Act
Preventative measures and the design of the Risk Management Programs, Systems of National Significance and Enhanced Cyber Security Obligations will be proposed in a separate Bill that the Government intends to bring back to the Parliament for consideration at a later date.
Royal Commission implementation: Better Advice Bill
A Bill to support reforms in relation to financial advisers, introduced as part of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, completed its passage through Parliament on 21 October without amendment.
As reported in ASFA Action issue 817, the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Bill 2021 proposes to:
- expand the role of the Financial Services and Credit Panel within ASIC to operate as the single disciplinary body for financial advisers
- create additional penalties and sanctions for financial advisers who have breached their obligations under the Corporations Act 2001
- introduce a new registration system for advisers to improve the accountability and transparency of the financial services sector
- transfer functions from the Financial Adviser Standards and Ethics Authority (FASEA) to the Minister responsible for administering the Corporations Act and to ASIC to streamline the regulation of financial advisers.
The Bill is now awaiting Royal Assent.
Virtual and hybrid meetings and electronic document execution: Bill introduced
The Government has introduced into Parliament a Bill to make permanent relief provided on a temporary basis, as a result of the COVID-19 pandemic, allowing companies to use technology to meet certain requirements under the Corporations Act 2001 around meetings and documents.
The Corporations Amendment (Meetings and Documents) Bill 2021 includes amendments to:
- create a permanent statutory mechanism for the electronic execution of company documents, allowing certain documents (including deeds) to be signed in flexible and technology neutral manners
- allow companies, registered schemes and disclosing entities to sign and provide meeting-related documents electronically, regardless of whether the meeting is virtual, physical or hybrid
- allow companies and registered schemes to use technology to hold meetings, including hybrid meetings, on a permanent basis
- implement miscellaneous amendments to ensure that meetings are conducted effectively.
The amendments to be made by the Bill will apply to meeting-related documents sent and meetings held on or after 1 April 2022, and to documents executed on or after the day after the Bill receives Royal Assent. The current temporary relief will remain in place until 31 March 2022.
As reported in ASFA Action issue 819, the relief measures are not specific to superannuation but will be relevant to the way superannuation trustee companies discharge their general obligations under the Corporations Act.
The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 18 November. The Committee is seeking submissions by close of business 8 November.
An exposure draft of the Bill was the subject of consultation in September (see ASFA Action issue 822).
Australian Corporate Bond Market: Parliamentary Committee report
The House of Representatives Standing Committee on Tax and Revenue has released its report into the Australian corporate bond market entitled The Development of the Australian Corporate Bond Market: A Way Forward.
The Committee has made a number of recommendations the primary aim of which is to remove barriers to the issuance of corporate bonds as well as raising awareness about the benefits of corporate bonds for investors and issuers.
Of particular relevance to superannuation is recommendation 12: The Committee recommends that the Australian Government investigate options to remove barriers inhibiting the investment of superannuation in the Australian corporate bond market.
Closure of SCT: transitional provisions Bill
As reported in ASFA Action issue 821, the Government has introduced into Parliament a Bill containing transitional provisions addressing the closure of the Superannuation Complaints Tribunal (SCT) and its replacement by the Australian Financial Complaints Authority (AFCA) as the external dispute resolution body for superannuation.
The Treasury Laws Amendment (2021 Measures No. 7) Bill 2021:
- provides for the transfer of records and documents from the SCT to ASIC
- provides for the remittal of matters on appeal by the Federal Court
- introduces a rule-making power to allow the Minister to prescribe other matters of a transitional nature.
The Senate Economics Legislation Committee recently held an inquiry focused on other aspects of the Bill and recommended that it be passed.
The Bill has now been passed by the House of Representatives and awaits debate in the Senate.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.