Issue 797, 31 March 2021
In this issue:
- AFCA engagement charter: consultation
- Royal Commission implementation: advice fee consents, lack of independence disclosure
- Royal Commission implementation: responsible managers
- APRA Superannuation Data Transformation project
- APRA Connect update
- Eligible rollover funds and Trustee Voluntary Payments: ATO guidance
- Early access to super for victims of domestic violence: changes not proceeding
- SuperStream standards: release authorities and SMSF rollovers
- Virtual meetings, electronic document execution: partial relief
- Cessation of Superannuation Complaints Tribunal: amending Bill
- How super trustees supported members during COVID-19: ASIC findings
- APRA: new Member responsible for superannuation
AFCA engagement charter: consultation
The Australian Financial Complaints Authority (AFCA) is consulting on an engagement charter.
AFCA has released a consultation paper and a draft engagement charter outlining:
- the service standards parties can expect of the dispute resolution services that AFCA provides
- the expectations of how participants will conduct themselves in AFCA’s complaint handling and systemic issues processes.
If you have any feedback you would like ASFA to take into account in relation to AFCA’s draft engagement charter, please forward it to Julia Stannard by close of business Tuesday 13 April.
Royal Commission implementation: advice fee consents, lack of independence disclosure
ASIC has made three legislative instruments that deal with advice fee consents and independence disclosure following Royal Assent of the (RC Response No. 2 Act) earlier this month (see ASFA Action issues 795 and 741 for background). That Act implemented a number of aspects of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in relation to advice.
- ASIC Corporations (Consent to Deductions – Ongoing Fee Arrangements) Instrument 2021/124) This instrument forms part of the implementation of the Royal Commission recommendation 2.1 — ongoing fee arrangements should be renewed annually by the client and ongoing fees cannot be deducted without the client’s consent.
The Instrument outlines requirements for giving written consent to deductions of ongoing fees, such as:
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- the client must sign or other agree in writing to the terms of a written consent
- the information that must be included in the written consent (for example, the name of the account holder)
- ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125)
This instrument forms part of the implementation of the Royal Commission’s recommendation 2.2, relating to the introduction of disclosure of lack of independence if a financial adviser would contravene section 923A of the Corporations Act 2001 if they used terms “independent”, “unbiased” and “impartial”.F - ASIC Superannuation (Consent to Pass on Costs of Providing Advice) Instrument 2021/126)
This instrument forms part of the implementation of the Royal Commission’s recommendation 3.3, prohibiting the deduction of any advice fees from superannuation choice accounts unless the requirements under recommendation 2.1 are met. The Instrument outlines requirements for giving written consent to pass on advice costs to member, such as:
- the member must sign or other agree in writing to the terms of a written consent
- the information that must be included in the written consent (for example, the name of the member, name and contact details of the fund)
Each instrument commences on 1 July.
ASIC has also provided example written consent forms for fees to be deducted under non-ongoing and ongoing fee arrangements.
ASIC also released a report that highlights key issues raised in submissions to ASIC on Consultation Paper 329 Implementing the Royal Commission recommendations: Advice fee consents and independence disclosure and details ASIC’s responses on those issues.
ASIC expects to provide a follow up, in the next few months, to the April 2019 joint letter from ASIC and APRA on superannuation fees.
Royal Commission implementation: responsible managers
ASIC has updated its website with some information about its temporary arrangements for trustees notifying ASIC of new responsible managers.
The temporary arrangements follow a recent letter from ASIC to superannuation trustees who, from 1 January 2021, are authorised to provide a superannuation trustee service by their Australian financial services (AFS) licence. The AFS licensing regime was extended to cover superannuation trustee service under reforms made by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020. (See ASFA Action issues 788, 787, 783 for background.)
As a temporary measure, ASIC will not require trustees notifying ASIC of the appointment of new responsible manager(s) — for the provision of a superannuation trustee service — to provide the following proof documents that would usually be required at the time of notification:
- qualification certificates
- two business references.
ASIC will also extend the temporary arrangements to non-public offer trustees applying to ASIC:
- for a new AFS licence
- to vary their existing AFS licence for authorisations to provide a superannuation trustee service and to deal in superannuation.
Trustees must ensure that the remainder of the proof documents are submitted in accordance with ASIC’s requirements.
The temporary arrangements will end on 1 July.
ASIC has indicated that it has dedicated email addresses for queries in relation to the reforms: SuperRegRoles@asic.gov.au and NPOtrustees@asic.gov.au
APRA Superannuation Data Transformation project
APRA has finalised Phase 1 of its multi-year Superannuation Data Transformation project.
As outlined in ASFA Action over the last 18 months, the project aims to support improved member outcomes by increasing the breadth, depth and quality of APRA’s superannuation data collection. Phase 1 of the project (breadth) was scoped to address the most urgent gaps (as identified by APRA) in the data reported to APRA by superannuation trustees. This included expanding the data collection to include all products and investment options, and collecting improved data on insurance arrangement, expenses, member demographics and asset allocation classifications.
APRA has now released a response paper and ten finalised reporting standards:
- SRS 101.0 — Definitions for superannuation data collections
- SRS 251.0 — Insurance
- SRS 332.0 — Expenses
- SRS 550.0 — Asset Allocation
- SRS 605.0— RSE structure
- SRS 606.0 — RSE profile
- SRS 611.0 — Member accounts
- SRS 705.0 — Components of net return
- SRS 705.1 — Investment performance and objectives
- SRS 706.0— Fees and costs.
APRA notes that the reporting framework has also updated to facilitate proposed legislative amendments to be introduced under the Treasury Laws Amendment (Your Future Your Super) Bill 2021.
APRA Deputy Chair Helen Rowell said:
“Our significantly enhanced reporting framework will deliver more accurate, consistent and comparable data on fund performance, especially in areas where data is currently lacking or inadequate.
Armed with new and deeper insights into aspects of the industry that have long been difficult to scrutinise, APRA supervisors will be in a stronger position to hold trustees to account for their decisions and the outcomes they deliver to all their members.”
While the bulk of the new data will be submitted from September 2021, APRA has amended the implementation timeframe in response to industry feedback to allow trustees to defer submission of some less critical data for a year.
Consultation on Phase 2 (depth), which will further increase the granularity of the superannuation data collections and identify data collections that may be discontinued, is due to commence in late 2021. Once that is complete, APRA will commence Phase 3 (quality), which will assess the quality and consistency of the outcomes from Phases 1 and 2 and address any implementation issues.
APRA Connect: update
APRA has updated its regulated entities about preparations for the launch of its new data collection solution, APRA Connect, which will replace the current Direct to APRA (D2A) tool.
As reported in ASFA Action issue 790, APRA Connect will go-live in September 2021, with a test environment available from the end of June 2021 to assist entities in their transition.
APRA has now:
- published draft technical information relating to superannuation taxonomies to help superannuation entities prepare data for submission on APRA Connect.
This follows the release by APRA of a response paper and 10 final reporting standards for the first phase of its multi-year Superannuation Data Transformation project (see previous item in this issue of ASFA Action). These new collections will be reported through APRA Connect. Final versions of the taxonomy artefacts will be available prior to the release of the external test environment in June. Additional taxonomy information will be progressively released for other new collections on APRA Connect.
- confirmed that a superannuation pilot will commence in late April.
To assist entities in their transition to APRA Connect, APRA will make a test environment available from the end of June a permanent feature. APRA is also conducting a pilot in the external test environment for a small number of superannuation entities to highlight any system questions or to advance preparations that may require additional attention. The pilot will take place in late April/May and participants in the pilot will provide feedback on readiness activities, communication and guidance to support a smoother transition experience for all entities accessing the test environment in June.
- provided a recap of the implementation approach and getting ready for APRA Connect.
Early access to super for victims of domestic violence: changes not proceeding
The Government has confirmed it will not be proceeding with a proposed measure to allow early access to superannuation on domestic violence grounds.
As reported in ASFA Action issue 691, the Government’s Women’s Economic Security Statement 2018 set out measures to support women’s economic independence. Of relevance to superannuation, these included extending early release of superannuation for victims of domestic and family violence and improving the visibility of superannuation assets in family law proceedings.
During Senate Estimates on 22 March, Senator Marise Payne provided confirmation that the Government will not proceed with the first of those reforms, on the basis of concerns raised by some stakeholders that it would be “difficult to square the requirements of readier access to funds through early release of super with the sorts of appropriate protections from potential financial abuse and coercion”. Ms Payne said:
“Given that we can’t be sure that those applying for early release of superannuation might not be at increased risk of financial insecurity or abuse in doing so, it’s not appropriate to pursue that. We had absolutely no intention in 2018, when the matter was raised and advanced, of worsening outcomes which we are committed to improving. They include ensuring that more women retire with money in a superannuation fund and that we continue to narrow the gap between women’s and men’s superannuation. So we won’t be proceeding with that measure”.
SuperStream standards: release authorities and SMSF rollovers
The ATO has registered an amendment to the SuperStream standards reflecting measures around SMSF rollovers and electronic release authorities that apply from 31 March.
The Superannuation Data and Payment Standards (Release Authorities, and SMSF Rollovers) Amendment 2021 (the SMSF Standard) amends the primary SuperStream standard instrument, the Superannuation Data and Payment Standards 2012 (SuperStream Standard).
Currently, rollovers and transfers of superannuation to and from SMSFs, and release authority requests issued by the Commissioner of Taxation are excluded from the SuperStream Standard.
In 2018 the Government announced that the SuperStream Standard would be extended to include rollovers and transfers of superannuation monies to and from SMSFs. This change will require APRA-regulated superannuation entities and SMSFs to send and receive rollover information and payments using the SuperStream framework. This amendment will apply to rollovers and transfers, to and from SMSFs, requested on and after 31 March 2021.
Further, as part of the 2019–20 Budget it was announced that electronic release authorities issued by the Commissioner of Taxation would also be brought into the SuperStream framework from 31 March 2021.
See ASFA Action issues 786, 770, 718, 703, 688, 680 and 668, for background in relation to these reforms.
The SMSF Standard requires:
- trustees of SMSFs to comply with the SuperStream Standard in relation to rollovers and transfers that are requested on or after 31 March 2021
- trustees of SMSFs and APRA-regulated superannuation entities to comply with the Superannuation Data and Payment Standards 2012 in relation to release authorities issued by the Commissioner on or after 31 March.
The SMSF Standard will not apply to:
- trustees of SMSFs in relation to payments or information required under Superannuation (Unclaimed Money and Lost Members) Act 1999
- an APRA-regulated superannuation entity in relation to a closed product
- a rollover or transfer from a regulated superannuation fund or approved deposit fund if, when the transaction occurs, the superannuation entity is non-complying
- trustees of SMSFs and APRA-regulated superannuation entities who have received a release authority issued by the Commissioner on or after 31 March outside of the SuperStream Standard, for example where the Commissioner has sent a paper release authority by mail.
Eligible rollover funds and Trustee Voluntary Payments: ATO guidance
The ATO has issued some guidance in relation to aspects of recent legislation that will facilitate the closure of eligible rollover funds (ERFs) and allow trustees to voluntarily make payments to the ATO in relation to their members’ superannuation as a new category of unclaimed superannuation money.
TheTreasury Laws Amendment (Reuniting More Superannuation) Act 2021, which received Royal Assent on 22 March, facilitates the closure of ERFs and allows super providers to make what the ATO describes as Trustee Voluntary Payments (TVPs). See ASFA Action issues 795, 736 and 731 for background in relation to these reforms.
The ATO has issued CRT Alert 003/2021, noting that ERFs are required to identify all accounts they hold on 1 June 2021 and transfer low balance accounts (less than $6,000) to the ATO by 30 June 2021. The balances of all remaining ERF accounts must be paid to the ATO by 31 January 2022.
In relation to TVPs, CRT Alert 003/2021 notes as follows:
- Although the legislative provisions allow for TVP reporting and payment to occur at any time, the ATO is coordinating the transfer of this new category of unclaimed super money (USM) for an interim period.
- The ultimate reporting solution for this new category is a new USM code that will be delivered in the SuperStream Rollovers version 3 project which all funds will transition to by 30 September 2021.
- The ATO is close to finalising an interim reporting solution that will be used until that time, so the ATO can identify amounts that are reported and paid as TVPs.
- Superannuation providers should not transfer any TVP amounts until the interim solution has been advised.
The ATO has now also confirmed the details of the interim reporting solution for TVPs. For funds that have not yet onboarded to SuperStream Rollovers version 3, the interim solution involves a fund pre-advising the ATO and then lodging TVPs within a specified two-week window, the first running from 17-28 May. Funds that have onboarded to Rollovers version 3 can make ad hoc TVPs at any time.|
Virtual meetings, electronic document execution: partial relief
ASIC has issued a no-action position in relation to the expiry of temporary relief allowing companies to hold virtual meetings, but not in relation to expired relief allowing electronic execution of documents. A Bill to extend relief for virtual meetings and electronic execution of documents has not yet passed Parliament and has been referred to a second committee for review.
As reported in ASFA Action issue 794, the Government has introduced into Parliament the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021. This will extend from 21 March 2021 to 15 September 2021 the expiry date of temporary relief granted during the COVID-19 pandemic to ensure companies can validly execute documents electronically and can conduct virtual meetings. The Government had also indicated it will finalise permanent changes to allow electronically signing and sending documents prior to the expiry of these temporary arrangements on 15 September.
While not specific to superannuation, these reforms are relevant to the way in which superannuation trustee companies manage their general obligations under the Corporations Act 2001.
The Bill also includes unrelated reforms to the continuous disclosure obligations for listed companies. These are intended to ensure a company will only face civil penalty actions for a continuous disclosure breach if it has have acted with knowledge, recklessness or negligence.
The Bill has passed the House of Representatives without amendment. In February the Bill was referred to the Senate Economics Legislation Committee. In early March the Government members of the Committee recommended its passage. The Labor members recommended that the reforms regarding virtual meetings and electronic execution of documents should proceed with some amendments, but the continuous disclosure amendments should not proceed.
In mid-March the Bill was referred again, to the Senate Economics References Committee, for report by 30 June. Given the Parliamentary sitting schedule, this means the Bill will not be considered by the Senate until at least August.
The temporary relief in relation to virtual meetings and electronic execution of documents which the Bill is designed to extend is set out in the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination No. 3). This expired on 21 March.
ASIC has advised that in order to provide certainty, it has adopted a temporary ‘no action’ position in relation to the convening and holding of virtual meetings. However, ASIC has indicated it will not be providing a no action position in relation to electronic signatures, even though that relief has also expired, as it does not have the power to modify the legislative requirements from which relief had been provided.
Cessation of Superannuation Complaints Tribunal: amending Bill
A bill containing amendments to facilitate the closure of the Superannuation Complaints Tribunal (SCT) has been passed by the House of Representatives and now awaits consideration by the Senate.
As reported in ASFA Action issue 782, the Treasury Laws Amendment (2020 Measures No. 4) Bill 2020 includes amendments that:
- provide for the transfer of records and documents from the SCT to ASIC, and for access to those records and documents by the Australian Financial Complaints Authority (AFCA) or the Federal Court where necessary in order to undertake their functions
- specify that matters on appeal to the Federal Court from the SCT can instead be remitted to AFCA
- introduce a rule-making power enabling the Minister to prescribe other matters of a transitional nature.
Amendments were made to the Bill by the House of Representatives, however these did not impact the superannuation-related measures.
How super trustees supported members during COVID-19: ASIC findings
ASIC has reported on the findings from its review of the support provided by superannuation trustees to their members during COVID-19.
The review, conducted during 2020, looked at how trustees communicated to members about issues related to COVID-19, and the provision of intra-fund advice. ASIC found that:
- trustees were quick to resolve any issues ASIC raised with them about their public COVID-19 communications, including projection tools
- intra-fund advice provided during this time was “consistent with previous assessments of the quality of intra-fund advice provided by superannuation funds”.
APRA: new Member responsible for superannuation
The Government has appointed Ms Margaret Cole as a full-time member of APRA for a five-year period, commencing 1 July . Ms Cole will join the APRA Executive Board alongside the Chair, Mr Wayne Byres, and the Deputy Chairs, Mr John Lonsdale and Ms Helen Rowell.
The Government has indicated Ms Cole has extensive experience in regulatory and legal fields across both the private and public sectors, in particular having worked as Managing Director of Enforcement and Financial Crime and a Board Member of the UK Financial Services Authority.
APRA Chair Wayne Byres welcomed Ms Cole’s appointment and indicated she will take on primary responsibility for overseeing APRA’s activities in relation to superannuation. APRA Deputy Chair Ms Helen Rowell will assume primary responsibility for overseeing APRA’s activities in relation to general, life and private health insurance.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
