ASFA Action Issue 961, 27 August 2024
In this issue:
- Superannuation on Government Paid Parental Leave: Bill introduced
- Update on other Bills
- ASIC corporate plan and strategic priorities
- Greenwashing: ASIC interventions, recommendations and good practice examples
Superannuation on Government Paid Parental Leave: Bill introduced
The Government has introduced into Parliament the Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024. This Bill will add a superannuation contribution to the Commonwealth-fund Paid Parental Leave Scheme, for eligible recipients of Parental Leave Pay (PLP) under the Scheme.
Recipients will receive the Paid Parental Leave Superannuation Contribution in respect of children born on or after 1 July 2025. The contribution will comprise:
- a core component, calculated by multiplying the total amount of PLP paid for the person in an income year by the superannuation guarantee rate for that income year
- a nominal interest component to address the foregone returns resulting from the annual payment of the contribution.
Recipients will not be required to make a separate claim to access the contribution – the ATO will calculate and disburse the contribution based on information it will receive from Services Australia about PLP payments. The process for claiming PLP will not be altered.
According to the Government, the Bill and the administration of the contribution have been designed to broadly align with existing processes under super and tax law, including in relation to payments, obligations of superannuation funds, and the treatment of over and under-payments.
The Government announced in March that it would pay superannuation on Government funded Paid Parental Leave and its announcement was confirmed in the Budget in May – see ASFA Action issues 946 and 937.
In addition to the introduction of a Bill to add a superannuation contribution to Government Paid Parental Leave (see earlier item), there have been developments in relation to several other Bills of direct relevance or potential interest to superannuation entities.
Family law superannuation splitting
The Government has introduced the Family Law Amendment Bill 2024. This contains a number of reforms to “make the family law system simpler, safer and fairer”. It also includes several amendments related to the family law superannuation splitting regime:
- a new power to make regulations requiring trustees to review the actuarial formulas used to value superannuation interests for family law property matters, in response to a direction from the Minister. This will apply only where there is an approved method or factor for a superannuation interest in an eligible superannuation plan. It is intended to create a mechanism by which the Minister can direct a trustee to review and, if necessary, submit updated methods or factors for approval
- in provisions about unreasonably denying financial autonomy, examples have been added of behaviour that may constitute economic or financial abuse – including forcibly controlling a person’s “money or assets, including superannuation”
- a new duty of disclosure for separated de facto couples, under which each party in the proceeding must give all relevant information and documents in a timely manner to the family law courts and each other party. The duty applies to ‘any other party to the proceeding’ to ensure that a third party who is joined to the proceeding is under the duty of disclosure. The explanatory memorandum notes that third parties that may be joined and subject to this duty might include superannuation trustees
- minor amendments to language/ technical amendments and insertion/correction of cross-references and definitions.
The measures will commence six months after Royal Assent with the exception of the regulation-making power around review of actuarial formulas, which will commence the day after Royal Assent.
Climate-related financial disclosure
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 has been passed by the Senate with amendments that now await consideration by the House of Representatives.
The Bill sets out mandatory requirements for large businesses and financial institutions – including superannuation funds – to make disclosures relating to climate in accordance with sustainability standards made by the Australian Accounting Standards Board. The requirements will be phased in, with registrable superannuation entities with assets of $5 billion or more required to prepare sustainability reports for financial years commencing from 1 July 2026. (See ASFA Action issue 940 for background.)
The amendments made the Senate primarily relate to other aspects of the Bill. The sole amendment to the climate-related disclosure provisions relates to the use of global average temperature increase scenarios.
Separately, ASIC has acknowledged the “significant changes ahead” with the proposed introduction of mandatory climate-related financial disclosure requirements for large businesses and financial institutions. ASIC notes that once the Bill receives Royal Assent, ASIC will:
- take a pragmatic and proportionate approach to the supervision and enforcement of this new regime
- engage closely with industry as it develops appropriate guidance to help it build the capability required to meet the new obligations
- throughout the transition to the proposed mandatory climate reporting regime, act to ensure current disclosure and governance standards are maintained and that entities comply with their existing legal obligations, including the longstanding prohibition against misleading and deceptive conduct.
ASIC corporate plan and strategic priorities
ASIC’s corporate plan for 2024-25 updates its strategic priorities for the next 12 months, with a continued focus on superannuation.
ASIC’s strategic priorities, with focus areas of direct or indirect relevance to superannuation are:
- improving consumer outcomes – the design and distribution of financial products; insurance claim handling; dispute resolution
- addressing financial system climate change risks – climate-related disclosure; greenwashing; integrity and fairness in energy and carbon credit markets
- better retirement outcomes and member services – improved services for superannuation fund members; driving industry progress towards improving the retirement outcomes and service experience of members through implementation of the retirement income covenant; compliance by superannuation trustees, and providers of managed investments and financial advice
- advancing digital and data resilience and safety – technology-enabled scams and misconduct and the poor use of artificial intelligence; business, cyber and operational resilience
- driving consistency and transparency across markets and products – existing and emerging financial products and services, including new market participants.
In relation to the ‘better retirement outcomes and member services’ priority, some key activities ASIC will undertake include:
- acting against misconduct resulting in the inappropriate erosion of superannuation – ASIC will take targeted enforcement action against cold-calling superannuation switching models that result in the inappropriate erosion of superannuation. The expected timeframe for this activity is ongoing.
- acting against member services failures in the superannuation sector – ASIC will take action to target misconduct in the superannuation sector, with a particular focus on member experience, including superannuation trustees’ provision of services to members, and harms arising from complaints handling and claims handling. The expected timeframe for this activity is ongoing.
- reviewing member services – ASIC will continue its multi-year project reviewing industry compliance with laws relevant to contact centres and trustee administration practices. ASIC will complete its surveillance on death-benefit claims handling. Where poor conduct is identified, ASIC will take enforcement or other regulatory action. ASIC will publish the findings from the review of member services, to drive improvement in industry behaviour.
- driving industry progress towards improving retirement outcomes – ASIC will continue to monitor trustees’ implementation of the retirement income covenant. This will help drive compliance with regulatory obligations and improve retirement outcomes for superannuation members. Where poor conduct or practices are identified, ASIC will take enforcement or other regulatory action as appropriate. The expected timeframe for this activity is ongoing.
- reviewing SMSF establishment advice – ASIC will conduct surveillance of personal advice provided to retail clients about the establishment of SMSFs. The surveillance will assess the quality of advice by financial advisers and consider the role of AFS licensees. Where appropriate, ASIC will take enforcement or other regulatory action against misconduct.
In relation to the strategic priority around digital and data resilience and safety, it should be noted that ASIC’s key activities will include publishing “findings on scams practices by non-major banks and superannuation trustees”.
Greenwashing: ASIC interventions, recommendations and good practice examples
ASIC has released a report outlining its regulatory interventions to address greenwashing misconduct during the 15-month period up to 30 June 2024.
The report, REP 791 ASIC’s interventions on greenwashing misconduct: 2023–2024 highlights ASIC’s actions aimed at stamping out misleading and deceptive conduct in relation to sustainable finance-related products and services, including:
- insufficient disclosure on the scope of ESG investment screens and investment methodologies,
- underlying investments that are inconsistent with disclosed ESG investment screens and investment policies, and
- sustainability-related claims made without reasonable grounds or without sufficient detail.
The Report also details findings, recommendations and good practice examples from its surveillance activities.
ASIC Commissioner Kate O’Rourke said combating greenwashing is critical to maintaining trust in sustainable finance-related products and services: “Our surveillance indicates there is ample room for improvement and we strongly encourage product issuers and their advisers to focus on the quality of disclosures and the data underpinning them. Sustainability-related information, like any other, should be accurate, based on reasonable grounds and be easily understood by investors”.
ASIC has urged entities to consider the findings and recommendations in this REP 791 as well as Information Sheet 271 How to avoid greenwashing when offering or promoting sustainability-related products and Report 763 ASIC’s recent greenwashing interventions to reduce the risk of greenwashing.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
