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Issue 700, 4 March 2019 
In this issue: 

 

Technical superannuation tax amendments: consultation 

Treasury is consulting on draft legislation and regulations to implement a number of technical amendments to the taxation treatment of superannuation. 

According to the explanatory material, the proposed amendments: 

The amendments were announced by the Government last October (see ASFA Action issue 690). 

If you have any feedback that you would like ASFA to consider in relation to these amendments, please forward it to Julia Stannard by close of business, Wednesday 20 March. 

 

 

Insurance claims handling: consultation 

Treasury has released a consultation paper regarding insurance claims handling in relation to the Government’s proposed response to a recommendation from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission). Separately, the Minister has issued a direction to ASIC to investigate the extent to which product issuers are acting to end the grandfathering of conflicted remuneration. 

The Royal Commission recommended that the definition of ‘financial service’ be expanded to specifically include handling and settlement of insurance claims (recommendation 4.8) and stated that it should not be unreasonable to ask an insurer to handle claims efficiently, honestly and fairly (see ASFA Action issue 697). 

The Government has accepted this recommendation but acknowledges there are industry concerns with the removal of the exemption leading to a number of unintended consequences. For example, claims handling staff may be deemed as providing personal financial advice. 

The consultation paper, Insurance claims handling – taking action on recommendation 4.8 of the Banking, Superannuation & Financial Services Royal Commission, addresses a number of issues, including: 

If you have any feedback you would like ASFA to consider in relation to this consultation paper, please forward it to Byron Addison by close of business, Friday 22 March. 

 

 

Ending grandfathered conflicted remuneration: consultation and ASIC investigation 

Treasury is consulting on draft legislation to remove grandfathering arrangements for conflicted remuneration and other banned remuneration from 1 January 2021, in line with the Government’s response to a recommendation of the Royal Commission. Separately, the Government has directed ASIC to investigate the extent to which product issuers are acting to end the grandfathering of conflicted remuneration before 1 January 2021. 

The Royal Commission recommended that the grandfathering arrangements for conflicted remuneration in relation to financial advice provided to retail clients should be removed as soon as is reasonably practicable (recommendation 2.4, see ASFA Action issue 697). 

In its response to the Royal Commission, the Government announced that it would end grandfathering of conflicted remuneration to financial advisers effective from 1 January 2021. 

The exposure draft legislation: 

Submissions are due to Treasury by 22 March. 

The Government’s response to the Royal Commission also indicated that it would commission ASIC to monitor industry renegotiation of current arrangements to remove grandfathered conflicted remuneration to ensure that any benefits flow through to clients ahead of 1 January 2021. ASIC would monitor and report on the extent to which product issuers are: 

The Treasurer has now issued the Australian Securities and Investments Commission (Investigation into Grandfathered Conflicted Remuneration for Financial Advice) Direction 2019 to give effect to this response. The Direction commences on 1 July 2019. 

 

 

AFCA: extension of remit for ‘legacy complaints’ 

The Government has commenced the process to enable the Australian Financial Complaints Authority (AFCA) to consider disputes dating back to 1 January 2008 (‘legacy complaints’), as announced as part of its response to the Royal Commission. ASFA is liaising with AFCA to determine the potential impacts for superannuation complaints. 

In ASFA Action issue 699, we noted that the Government had announced it had given a direction extending AFCA’s remit to consider financial complaints dating back to 1 January 2008, providing expanded access to redress for consumers harmed by financial misconduct. This action is being taken in the context of the Royal Commission’s recommendations about establishing a compensation scheme of last resort (recommendation 7.1) but goes beyond that recommendation. 

The Government’s direction to AFCA has now been registered and made publicly available: AFCA Scheme (Additional Condition) Amendment Authorisation 2019. The direction requires AFCA to permit an eligible person to make a complaint if that complaint: 

The definition of ‘excluded complaint’ specifically excludes complaints about conduct that occurred and ended before 1 January 2008, as well as complaints in relation to which a decision or determination has been made by a court or tribunal or under a predecessor scheme or AFCA. Importantly, the definition also excludes “a complaint in relation to a superannuation death benefit”, but no other types of superannuation complaints (for example, disability complaints). 

To implement the direction, AFCA will need to amend its rules and have that amendment approved by ASIC. AFCA has indicated it will issue guidance prior to 1 July 2019 in relation to its acceptance of legacy disputes. 

ASFA is currently discussing with AFCA the potential implications for superannuation complaints and will provide a further update when we are able. 

 

 

APRA: policy priorities 2019 

APRA has announced its policy priorities for 2019. 

In relation to superannuation, APRA has indicated that its plans include: 

More broadly, APRA notes that its near-term policy agenda will be heavily shaped by its response to the Royal Commission and other major developments. 

APRA Chair Wayne Byres said much of APRA’s focus in 2019 would be on strengthening the prudential framework to lift the bar for industry in terms of governance, remuneration practices, and the management of non-financial risks. APRA will further strengthen its prudential requirements on executive remuneration, with consultation on a revised prudential standard due to start mid-year. It will also review its cross-industry governance and risk management standards this year to ensure they encourage a sharper focus on non-financial risks. 

Separately, APRA is reviewing its approach to enforcement with the outcomes from its review to be presented to APRA Members by the end of March (see ASFA Action issue 691). APRA intends to publish a new enforcement strategy shortly afterwards. 

 

 

APRA: Withdrawal of MySuper transition standard 

APRA has withdrawn its prudential standard on transitioning to the MySuper regime, on the basis it is redundant. 

Superannuation Prudential Standard SPS 410 MySuper Transition sets out minimum processes for responsible superannuation entity (RSE) licensees in relation to their election to attribute accrued default amounts to a suitable MySuper product before 1 July 2017 

As the transition period to 1 July 2017 has passed, and the requirements of SPS 410 have been complied with by all affected RSE Licensees, SPS 410 is now redundant. Accordingly, APRA has made Superannuation (prudential standard) determination No. 1 of 2019, revoking SPS 410. 

 

 

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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