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Issue 849, 6 April 2022 
In this issue: 

 

APRA data collection: phase 2 consultation and five-year roadmap 

APRA has commenced consultation on phase 2 of its Superannuation Data Transformation (SDT) project and published a discussion paper outlining a five-year roadmap for transforming its approach to collecting financial industry data from its regulated entities. 

SDT phase 2 

As reported in previous issues of ASFA Action, SDT is a multi-year project to enhance the breadth, depth and quality of data collected from the superannuation industry. Phase 1, which dealt with the breadth of the data collection, was completed in March 2021. In phase 2 of the project, APRA will focus on lifting the depth/granularity of the data it collects across the superannuation industry’s business operations. It aims to deliver more comprehensive data on: 

APRA will also identify and discontinue redundant data collections. 

APRA has released a discussion paper  setting out the objectives, scope and consultation process for Phase 2. If you have any feedback that you would like ASFA to consider in relation to the SDT phase 2 discussion paper, please forward it to Fiona Galbraith  by close of business Friday 29 April. 

In addition, APRA proposes to conduct industry consultation across three periods from September 2022 to June 2023 on the following topics:  

Five-year roadmap 

APRA has released a discussion paper, Direction for data collections , outlining its plans to collect “richer data” through its new data collection system, APRA Connect. The proposed collections will “enable APRA and peer agencies to deliver deeper insights, while ultimately reducing the burden for industry”. 

This will be enabled by a transition away from APRA’s current data collection system, D2A (Direct to APRA). All new collections will be created in APRA Connect and, by 2027, APRA expects to have all collections on APRA Connect and be in a position to decommission D2A. 

The discussion paper sets out a roadmap for each industry that has been tailored to reflect the work already underway on new data collections, the expected regulatory policy agenda, and the industry’s capacity to accommodate change. 

APRA has indicated that it will engage closely with entities and other key stakeholders on the proposed roadmap, and will begin to schedule industry webinars and roundtable discussions in coming weeks. 

If you have any feedback that you would like ASFA to consider in relation to the five-year roadmap discussion paper, please forward it to Fiona Galbraith by close of business Friday 10 June. 

 

Definition of ‘significant financial institution’: APRA consultation 

APRA has released a cross-industry consultation on minor amendments to align and centralise the definition of a significant financial institution (SFI) within the prudential framework. 

The proposed amendments are outlined in a letter to regulated entities with accompanying draft prudential standards. The letter notes that, for superannuation, “SFIs would be defined in each prudential standard that uses the concept.” However, the only draft prudential standard released by APRA that applies to superannuation is the cross-industry standard CPS 511 Remuneration. 

If you have any feedback that you would like ASFA to consider in relation to the SFI discussion paper, please forward it to Fiona Galbraith by close of business Friday 22 April. 

 

Quality of advice review: issues paper consultation 

As reported in ASFA Action issue 847, Ms Michelle Levy, the independent reviewer leading the Quality of Advice Review, has released an issues paper seeking feedback on how the regulatory framework can better enable the provision of high quality, accessible and affordable financial advice for retail investors.  

The issues paper: 

If you have any feedback that you would like ASFA to consider in relation to the issues paper, please forward it to Julia Stannard by close of business Friday 6 May.  

 

Internal audit: draft code of conduct 

The Institute of Internal Auditors (IIA) is seeking feedback on a draft Code of professional conduct for internal auditors. The draft code is intended to enhance the effectiveness of the application and practice of internal audit and its role in the governance process, in all organisations, in the private and public sectors. 

The IAA has asked ASFA to bring the draft code to our members’ attention. Any feedback can be provided directly to the IAA at draftcode@iia.org.au, by 31 May. 

 

Superannuation income streams: minimum drawdown regulations 

The Government has made regulations giving effect to its announcement that it would extend the temporary reduction in the minimum drawdown rates for certain superannuation income streams. 

The 2022-23 Budget confirmed the Government’s intention to extend, for one additional year, the 50 per cent reduction of the minimum drawdown rates for some types of superannuation income streams (see ASFA Action issue 848). 

This relief was originally introduced in response to the COVID-19 pandemic, and applies to account-based pensions, allocated pensions and market linked pensions (and equivalent annuity products). The relief initially applied for the 2019-20 and 2020-21 income years, then was extended to also apply to the 2021-22 income year (see ASFA Action issues 811, 807 and 743  for background). 

The Government has now registered the Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2022 , to further extend the relief to apply to the 2022-23 income year. 

 

Superannuation caps and thresholds indexed 

The ATO has published the indexed superannuation caps and thresholds for 2022-23. 

Some of the key indexed caps and thresholds are as follows: 

The concessional and non-concessional contributions caps and the general transfer balance cap are all unchanged (that is, they have not been indexed). 

 

Internal dispute resolution: ASIC reporting requirements finalised 

ASIC has released the final requirements for its internal dispute resolution (IDR) data reporting framework, following the commencement of Regulatory Guide RG 271  Internal dispute resolution on 5 October last year. 

ASIC has indicated that the reporting requirements will be implemented in phases: 

Since the commencement of RG 271, financial firms have been required to record all complaints received and have an effective system for recording information about complaints. 

ASIC will begin publishing IDR data once all financial firms have commenced reporting after 31 August 2023. The first report will cover all complaints received by financial firms during the period between 1 January and 30 June 2023. In the coming months ASIC will consult on its approach to publishing the IDR data. 

The requirements for firms to report IDR data under the framework are outlined in ASIC’s IDR data reporting handbook and are given effect by a legislative instrument, ASIC Corporations (Internal Dispute Resolution Data Reporting) Instrument 2022/205. The handbook includes the data dictionary and data glossary published as part of the IDR data reporting pilot.  

The reporting requirements are the culmination of a substantial consultation process and successful IDR reporting pilot completed in late 2021 with seven financial firms (see ASFA Action issues 814 and 789  for background). 

 

Retirement income estimates: extension of ASIC relief, IOPS ‘good practices’ 

ASIC has extended until 31 December existing relief for superannuation trustees who give their members retirement estimates on a periodic statement. 

Class Order [CO 11/1227] Relief for providers of retirement estimates gave conditional relief from the licensing, conduct and disclosure obligations relating to personal advice in the Corporations Act 2001 (the Act) that might otherwise apply to a superannuation trustee providing retirement estimates to its members. [CO 11/1227] was due to sunset (expire) on 1 April. 

In November, ASIC released Consultation Paper CP 351Superannuation forecasts: Update to relief and guidance, which outlined ASIC’s proposals to update the relief for retirement estimates and superannuation calculators (see ASFA Action issue 834). ASIC is currently considering stakeholder feedback on CP 351 and intends to make a new legislative instrument for both superannuation calculators and retirement estimates before the end of June 2022. 

In the meantime, ASIC has issued ASIC Corporations (Repeal and Transitional—Relief for Providers of Retirement Estimates) Instrument 2022/204 to extend the relief given by [CO 11/1227]. ASIC has indicated that the release of the new instrument in June “will not prevent trustees relying on the existing relief for retirement estimates in 2021-22 annual statements to members. There will be a transitional period to enable industry to continue relying on existing relief for both superannuation calculators and retirement estimates even after the new instrument is made.” 

Separately, APRA has published an announcement by the International Organisation of Pension Supervisors (IOPS) outlining good industry practices when forecasting and communicating future retirement benefits. 

 

Bills update 

Neither the House of Representatives nor the Senate is sitting this week. The House is scheduled to sit from 11-14 April, but this will not occur if Parliament is prorogued (terminated) for the election in the meantime. 

In last week’s sitting, there was little progress on any of the outstanding Bills that include superannuation-specific reforms. There was some debate on the Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022, however the Bill remains before the House of Representatives. As reported in ASFA Action issue 841 the Bill proposes minor and technical reforms to: 

In terms of Bills that are not superannuation-specific, but have the potential to impact superannuation, there were some developments in relation to critical infrastructure protection and the sharing of data between government agencies: 

 

Commutation of non-capped defined benefit income streams: regulations 

The Government has made regulations impacting the transfer balance cap treatment of certain non-capped defined benefit income streams. 

The Treasury Laws Amendment (Allowing Commutation of Certain Income Streams) Regulations 2022 amend the Income Tax Assessment (1997 Act) Regulations 2021, the Retirement Savings Accounts Regulations 1997, and the Superannuation Industry (Supervision) Regulations 1994. 

According to the explanatory statement, the regulations address unintended outcomes arising from the inability of recipients of certain non-capped defined benefit income streams (that were commenced on or after 1 July 2017) to address excess transfer balance amounts. These changes ensure that the relevant regulations operate as intended. The regulations commenced on 5 April. 

The regulations were previously released for consultation in December – see ASFA Action issue 836 for background. 

The explanatory statement notes that it was identified during the consultation process that there is a need for further amendments to legislation to ensure commutations resulting from these amendments do not result in the loss of asset test exempt status for veterans and social security entitlements. These further amendments have not yet been made. 

 

Social security treatment of income streams: sunsetting legislative instruments remade 

The Government has re-made three legislative instruments that deal with the social security and veterans’ entitlements treatment of income streams, as the existing instruments were due to sunset (expire) on 1 April. 

According to the explanatory material: 

The Principles ensure that an income stream split under the family law superannuation regime is assessed appropriately with other income and assets under the social security means test. 

 

Family law superannuation splitting: legislative instrument affecting specific interests 

The Government has made a legislative instrument updating existing instruments to address the family law superannuation splitting treatment of interests held in the South Australian Local Government Superannuation scheme (the Scheme). 

The Family Law Legislation Amendment (Superannuation Valuation and Information) Instrument 2022 updates two legislative instruments made under the Family Law (Superannuation) Regulations 2001, following a merger between Statewide Superannuation Pty Ltd (Statewide) and Host-Plus Pty Ltd (Host-Plus), by way of a successor fund transfer. The amendments relate to interests held in the  Scheme. 

The amending instrument updates definitions and terminology to reflect changes to the Scheme following the merger. It does not have any broader impact — that is, it does not affect the splitting of interests in any other superannuation fund. 

 

Faster and fairer split of superannuation in family law proceedings 

On 1 April the Government announced the commencement of a new facility improving the visibility of superannuation assets in family law proceedings. The facility is intended to make it harder for parties to hide or under-disclose their superannuation assets. 

Under the new facility, parties to family law property proceedings can apply to family law court registries to request their former partner’s superannuation information, held by the ATO. The ATO has worked with the courts to ensure the appropriate integrity measures are in place for the information to be disclosed securely. This will enable parties to use this information to seek up-to-date superannuation information from their former partner’s superannuation fund. 

Information about how to make an application has been published on the websites of the Federal Circuit and Family Court of Australia, the Family Court of Western Australia, and the ATO. 

 

Governance over third-party data: ATO guidance on tax controls 

The ATO has published a guide outlining its approach to tax controls for the collection and reporting of third-party data for large superannuation funds, managed investment trusts and insurance companies. The Governance over third party data – Supplementary Guide for superannuation funds, managed funds and insurance companies on third party data tax controls builds on the ATO’s Tax risk management and governance review guide. 

The ATO has indicated that: 

“Investment industry entities should use this supplementary guide to develop and implement third party data tax controls tailored to their business. We expect entities to fully implement appropriate tax controls over the next 18-24 months. 

To do this, we encourage entities to document a self-assessment of their third-party data tax controls against the guide, identifying any gaps. With this assessment, entities can then develop an implementation plan.  

In our future engagement with investment entities, we will look at the steps undertaken to design and implement these controls.” 

The guide does not apply to self-managed superannuation funds and small APRA-regulated funds. 

 

Repeal of work test for voluntary contributions: ATO guidance 

As reported in ASFA Action issue 844, the Government recently made regulations supporting legislative amendments to implement superannuation-related measures announced in last year’s Budget. 

Of particular relevance, those reforms effectively remove the work test for voluntary (non-concessional) and salary sacrificed contributions made in 2022-23 and later years for individuals under age 75. As a result of the reforms, the work test will only apply to individuals aged between 67 and 75 years who claim a deduction for their personal contributions. 

The ATO has published some guidance on the impact of the reforms for individuals making contributions, and for the superannuation funds receiving those contributions. 

 

COVID-19 re-contribution amounts: ATO reporting 

The ATO has published some guidance regarding superannuation funds’ reporting obligations where a fund member has re-contributed an amount they withdrew under the COVID-19 early release program. 

The re-contribution initiative, implemented via the Treasury Laws Amendment (More Flexible Superannuation) Act 2021, allows individuals who received a COVID-19 early release of superannuation amount to re-contribute up to that amount back into super without it counting towards their non-concessional contributions cap. Recontributions under this measure can be made between 1 July 2021 and 30 June 2030. (See ASFA Action issues 811, 810 and 809  for background.) 

The ATO has now released CRT Alert 003/2022, outlining how funds need to report amounts received under the re-contribution initiative. 

 

Review of the financial services legislative framework: risk & reform 

As reported in recent ASFA Actions, the Australian Law Reform Commission is conducting a multi-year review of the legislative framework for corporations and financial services regulation. The terms of reference for the review set out three sub-topics: 

Risk and Reform in Australian Financial Services Law (FSL5). According to the Commission, this paper: 

 

Unlawful underpayment of employee’s remuneration – Parliamentary Committee report 

The Senate Economics References Committee has tabled the report from its inquiry into unlawful underpayment of employees’ remuneration. 

Of particular relevance to superannuation, a majority of the Committee recommended: 

The Government Senators on the Committee made a dissenting report, noting the initiatives undertaken by the Government to address SG non-compliance.  

 

Total superannuation balance: addendum to ATO ruling 

The ATO has issued an addendum to a ruling dealing with calculation of an individual’s total superannuation balance. 

Law Companion Ruling LCR 2016/12A6 makes minor amendments to LCR 2016/12 Superannuation reform: total superannuation balance to reflect the increase in the maximum number of allowable members for self-managed superannuation funds and small APRA funds from four to six. This change was introduced under the Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2021 (see ASFA Action issues 811 and 810 for background). 

 

Crisis preparedness: APRA speech 

APRA has published a speech on crisis preparedness, Failing to plan is a plan to fail. 

The speech, by Executive Director Policy and Advice Division Renée Roberts, describes how APRA balances the need for appropriate risk-taking by financial institutions while minimising the potential for disorderly failures that might harm bank depositors, insurance policyholders or superannuation members. 

 

Whistleblower policies: ASIC compliance review 

ASIC has published an article noting that its priorities for this year include a sample review of whistleblower programs, to assess how entities are handling whistleblower disclosures, how they use the information from disclosures to address issues or change their operations, and the level of board and executive oversight of the program. 

Reforms that commenced on 1 July 2019 require public companies, large proprietary companies and corporate trustees of registrable superannuation entities to have a whistleblower policy that reflects the strengthened whistleblower protection regime. This includes clearly setting out the legislated protections for whistleblowers and how they can report misconduct. Throughout 2020 ASIC conducted a review of 102 whistleblower policies and noted deficiencies including incomplete or inaccurate information and obsolete, out-of-date policies. ASIC wrote to entities last October to urge them to review their whistleblower policies to ensure they comply with the law. (See ASFA Action issues 829 and 732 for background.) 

ASIC has also noted that, while not legally required, it was concerned to see many policies did not include details of the oversight arrangements for the whistleblower policy and program. ASIC has reminded company directors of the importance of maintaining oversight over their entity’s whistleblower program and highlighted its Information Sheet 247Company officer obligations under the whistleblower protection provisions. 

 

 

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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