Issue 690, 5 November 2018
In this issue:
- Retirement income framework: changes to Government’s proposals
- Super pensions and rollovers of death benefits: proposed technical amendments
- Strengthening member outcomes: APRA timing
- Audit quality: Financial Reporting Council survey
- AFCA update
- APRA: reappointment of Chair and additional funding
- First home super saver scheme: ATO guidance
Retirement income framework: changes to Government’s proposals
The Government has announced some changes to its proposed retirement income framework, which includes the introduction of comprehensive income products for retirement (CIPRs).
In its May 2018 Budget, the Government announced that it would introduce a retirement income covenant into the superannuation legislation. The covenant will require trustees to consider their members’ retirement income needs, by developing a retirement income strategy. A position paper released in mid-May indicated that the Government would legislate the covenant by 1 July 2019 but delay its commencement until 1 July 2020. The Government had also previously consulted on a framework for the offering of CIPRs by trustees, in December 2016 and May 2018. (See ASFA Actions issues 617, 669 and 671 for background.)
Following consultation on its retirement income framework and CIPRs proposals, the Government has indicated that it will:
- increase the threshold superannuation balance for offering a CIPR from $50,000 to $100,000
- extend the timeframe for implementation so that trustees must have a retirement income strategy in place from 1 July 2020 but are not required to offer CIPRs until 1 July 2022.
Super pensions and rollovers of death benefits: proposed technical amendments
The Government has announced a number of technical changes to address issues in the tax treatment of superannuation pensions and rollovers of superannuation death benefits.
The Assistant Treasurer, the Hon Stuart Robert MP, has indicated that the Government will amend relevant legislation and regulations to:
- correct an error in the way that market-linked pensions are valued under the transfer balance cap when they are commuted or rolled over, resulting in a nil debit
- maintain the capped defined benefit treatment of market linked pensions under the transfer balance cap where they have been rolled over as a result of a successor fund transfer
- ensure that death benefit lump sums that include life insurance proceeds are not subject to tax when they are rolled over to a new superannuation fund and will remain tax-free for dependants
- change the definition of the life-expectancy period for innovative income streams to account properly for the number of days in a leap year
- provide transfer balance cap credits and debits for innovative income stream products that are paid-off in instalments.
- amend the valuation of defined benefit pensions under the transfer balance cap to reflect when pensions are permanently reduced following an initial higher payment, such as for some public sector defined benefit reversionary pensions or reclassification of invalidity pensions.
The Government has not indicated a proposed implementation timeframe for these amendments.
Strengthening member outcomes: APRA timing
In response to a number of member enquiries, ASFA has sought clarification regarding the start date of APRA’s Strengthening member outcomes package.
The package outlined a number of proposed changes to the prudential framework for superannuation, with a scheduled commencement date of 1 January 2019 (see ASFA Action issue 655 for background).
APRA has provided the following update:
APRA has conducted extensive industry consultation on the proposed prudential framework changes since December 2017 and is well progressed in the development of the new framework.
In order to ensure that any changes to the framework will be consistent with announced and implemented Government policy, APRA will release the final package of changes once the status of the Member Outcomes Bill, which is currently before the Parliament, is known.
APRA’s reference to the ‘Member Outcomes Bill’ relates to the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017.
If you have any further questions about the Strengthening member outcomes package please contact Byron Addison, Senior Policy Adviser.
Audit quality: Financial Reporting Council survey
The Financial Reporting Council (FRC) is conducting a survey on audit quality in Australia, and has asked ASFA to invite our members to contribute their views.
The survey is being undertaken in conjunction with the Australian Auditing and Assurance Standards Board (AUASB). It seeks to gather the views of stakeholders―including users of financial reports―on their perceptions of audit quality, the value of audit, and what influences this.
The FRC would appreciate the assistance of ASFA members in completing the survey by 19 November. The target audience for the survey is those people who use audited financial reports as part of decision making in their role – for example, folio/investment managers and research analysts.
The survey can be accessed via https://www.orima.com.au/investorsurvey and should take approximately 15 minutes to complete. A number of the questions have been replicated from a similar survey conducted internationally and the results will be compared. The FRC has advised that all responses are confidential and will not be attributed to any individual or organisation – the results of this survey will be published in aggregate only. If you have any questions about the survey, please contact Anne Waters from the AUASB directly via awaters@auasb.gov.au or contact the AUASB on 03 8080 7400.
AFCA update
The new Australian Financial Complaints Authority (AFCA) commenced receiving financial sector complaints, including superannuation complaints, on 1 November.
AFCA’s website has recently been upgraded and now includes a range of guidance material. This includes factsheets, frequently asked questions, and a transitional complaint approach that explains how AFCA will manage cases moving forward, where it receives a complaint that has already been dealt with by one of the AFCA predecessor schemes.
Now that AFCA has commenced, the Superannuation Complaints Tribunal (SCT) can no longer receive new superannuation complaints. The SCT will continue to operate to clear its existing caseload (the SCT is currently anticipated to wind up in 2020). The SCT’s website has now been updated to make it clear that new superannuation complaints must be lodged with AFCA.
As outlined in ASFA Action issues 686 and 688, ASIC recently extended the period for Australian Financial Services licensees to notify ASIC of the change of their external dispute resolution details in relation to the commencement of the AFCA. This notification must be made during November 2018. The appropriate format for this notification is ASIC’s form FS20 Change of details for an Australian financial services licence. ASFA understands that the form has now been updated to reflect the establishment of AFCA.
APRA: reappointment of Chair and additional funding
The Government has announced that it has reappointed Mr Wayne Byres as chair of APRA for a further five years. The Government will also increase APRA’s funding by $58.7 million over four years.
The Treasurer, the Hon Josh Frydenberg MP, said the new funding will allow APRA to reinforce the resilience and soundness of Australia’s financial system at a time of significant reform. The funding, to be provided over four years from 2018-19, is intended to:
- enhance APRA’s supervision across regulated industries by increasing the number of frontline supervisors for the largest and most complex financial institutions
- enhance APRA’s ability to identify and address new and emerging risk areas, such as cyber, fintech and culture, by building internal expertise and increasing access to technical specialists outside APRA
- improve APRA’s data collection capabilities in order to leverage the benefits of inter-agency intelligence sharing
- provide a review of APRA’s enforcement strategy and its use of formal enforcement powers across the industries it supervises, including superannuation.
First home super saver scheme: ATO guidance
The ATO has released new guidance on the First home super saver scheme (FHSS scheme).
GN 2018/1 First home super saver scheme covers a range of topics including: eligibility for the scheme, eligible contributions, applying for a FHSS determination, release and taxation of amounts under the FHSS scheme, and the requirement to purchase a home within 12 months.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
