Issue 836, 7 December 2021
In this issue:
- Retirement Income Covenant: Bill referred to Parliamentary committee
- Miscellaneous amendments to Treasury portfolio laws 2022: consultation
- Strengthening crisis preparedness: APRA consultation
- Review of the financial services legislative framework: interim report
- ASFA Tax Committee: call for expressions of interest
- Miscellaneous amendments Bill passed by Parliament
- Superannuation Bills update
- APRA data FAQs
- Limited advice: ASIC guidance and examples
- Remuneration: final APRA standard determined
- 2022 Parliamentary sittings, 2022-23 Budget date
Retirement Income Covenant: Bill referred to Parliamentary committee
The Bill containing provisions to establish the retirement income covenant has been referred to a Parliamentary committee.
The Senate Economics Legislation Committee will inquire into the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 and report by 3 February.
Submissions to the inquiry are due by 7 January. If you have any feedback you would like ASFA to consider in relation to the Bill, please forward it to Fiona Galbraith by close of business 24 December.
The Bill was introduced into the House of Representatives on 25 November (see ASFA Action issue 835) and has not yet been debated in Parliament.
Miscellaneous amendments to Treasury portfolio laws 2022: consultation
Treasury has released a consultation package comprising a draft Bill, Regulations and Rules proposing “minor and technical” amendments to a range of Treasury portfolio laws.
Of relevance to superannuation, the draft Regulations outline amendments to the Superannuation Industry (Supervision) Regulations 1994, Retirement Savings Account Regulations 1997 and Income Tax Assessment (1997 Act) Regulations 2021 in relation to the non-capped defined benefit income streams.
According to the explanatory material, the proposed amendments will “make minor and technical changes that 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.”
Treasury is seeking submissions by close of business 15 December.
Strengthening crisis preparedness: APRA consultation
APRA has released a discussion paper and two proposed new prudential standards to strengthen the preparedness of banks, insurers and superannuation trustees to respond to future financial crises. The new standards are aimed at ensuring entities are prepared to deal with threats to their viability, thereby reducing the negative consequences resulting from failure.
- CPS 190 Financial Contingency Planning would ensure all APRA-regulated entities have plans for responding to severe financial stress. These plans would set out actions that an entity would take in stress to restore financial resilience or exit the industry safely, while protecting depositors, insurance policyholders and superannuation fund members. Smaller entities will be subject to less onerous requirements, in line with their size, complexity and business models.
- CPS 900 Resolution Planning would require large or complex APRA-regulated entities to take pre-emptive actions so that, in the event of their failure, APRA can resolve them with limited adverse impacts on the community and the financial system. This includes ensuring that critical financial services can continue to be provided with minimal disruption.
Deputy Chair John Lonsdale said the disorderly failure of an APRA-regulated entity could have a significant impact on the economy and society. “APRA-regulated entities have made substantial improvements in contingency planning over recent years, however there remain large gaps in capabilities between entities and across industries. By laying out a consistent, transparent and enforceable framework, APRA will be better able to strengthen crisis preparedness and close those gaps.”
APRA proposes that CPS 900 would apply from 1 January 2024, while CPS 190 would come into force from 1 January 2024 for banks and insurers and from 1 January 2025 for superannuation trustees. APRA will also consult on supporting guidance material in 2022.
The consultation on CPS 190 and CPS 900 will close on 29 April. If you have any feedback you would like ASFA to consider in relation to the proposed standards, please forward it to Byron Addison by close of business Friday, 15 April 2022.
Review of the financial services legislative framework: interim report
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:
- the use of definitions
- regulatory design and hierarchy of laws
- the framing or structuring of Chapter 7 of the Corporations Act 2001.
The Commission has published its first interim report from the review, Financial Services Legislation: Interim Report A (ALRC Report 137). The report concludes that the laws regulating corporations and financial services are uniquely and unnecessarily complex.
The Commission is seeking feedback on proposals and questions to address complexity in financial services legislation. The Commission has also made several recommendations, which it considers “relate to matters of consensus” and could accordingly be implemented prior to the conclusion of the inquiry, if accepted by the Government.
The matters addressed in the Commission’s proposals, questions and recommendations include:
- complexity - the report includes reforms relating to a simpler and more coherent use of defined terms. For example, the Commission seeks feedback on guiding principles for the use of defined terms in legislation, including whether defined terms should bear only a single meaning and should be used only to clarify words or phrases, rather than to impose obligations or for other substantive purposes. The Commission also recommends the repeal of numerous terms that are not used, or which are defined unnecessarily.
- simplification of the definitions of ‘financial product’ and ‘financial service’, adoption of an outcomes-based standard for financial product disclosure should be adopted and simplification in relation to conduct obligations by, for example, clarifying the core obligation on financial services providers to act ‘efficiently, honestly and fairly’ and reducing the number of provisions that proscribe unconscionable conduct.
- navigability - within the Corporations Act, the Commission recommends the inclusion of a single glossary of defined terms and the development of drafting guidance to draw attention to defined terms when they are used. In relation to navigability between the Act and other ‘layers’ of the legislative hierarchy, the Commission proposes reforming powers to grant exemptions from obligations in the Act and removing powers to create ‘notional amendments’. The Commission suggests that a more principled legislative hierarchy could be created by locating exclusions and exemptions in a consolidated legislative instrument and placing much of the prescriptive detail currently spread across the legislative hierarchy into thematically consolidated ‘rules’ made by ASIC.
Submissions to the Commission are due by close of business Friday 25 February.
ASFA Tax Committee: call for expressions of interest
ASFA is seeking expressions of interest for membership of its Tax Specialist Advisory Committee.
The Committee comprises senior tax professionals from ASFA’s superannuation fund and service provider members. It actively supports ASFA’s advocacy on tax matters, including by identifying issues of concern, participating in meetings with relevant agencies including the ATO and Treasury, and drafting responses to technical tax consultations.
If you, or a colleague, are interested in being considered for membership of the Committee, please contact Julia Stannard by close of business Friday 14 January. Please note that membership of the Committee is limited to suitably qualified and experienced representatives of ASFA’s organisational members.
Miscellaneous amendments Bill passed by Parliament
A Bill making a range of minor and technical amendments, including to superannuation and superannuation-related tax laws, was passed by Parliament in its last week of sitting and now awaits Royal Assent.
In particular, the Treasury Laws Amendment (2021 Measures No 5 Bill) 2021 includes:
- amendments to the Income Tax Assessment Act 1997 to ensure that a fee refund paid by a trustee to an individual’s low-balance superannuation account is not considered to be a concessional contribution and therefore does not count toward the individual’s concessional contribution cap. (A fee must be refunded to an individual if the account is a low-balance account and the total fees for the year are above the prescribed maximum level.)
- amendments to the Superannuation (Unclaimed Money and Lost Members) Act 1999 (SUMLM Act) to ensure that New Zealand (NZ) sourced amounts of superannuation held by the ATO cannot be paid out under that Act to self-managed superannuation funds, funds which have not notified the ATO that they accept NZ-sourced amounts or, in certain circumstances, persons who do not satisfy the NZ eligibility age.
- amendments to the SUMLM Act to ensure amounts held by the ATO can be paid directly to a NZ KiwiSaver scheme provider, consistent with amendments made by the Treasury Laws Amendment (202 Measures No 5) Act 2020 (see ASFA Action issues 835 and 783 for background) and require the ATO to administer amounts it receives under the SUMLM Act in a way that allows any NZ-sourced amounts to be identified separately.
- Amendments to the SUMLM Act to clarify the ATO’s ability to recover overpayments of ATO-held superannuation amounts paid to superannuation providers.
Superannuation Bills update
Parliament concluded its sittings for 2021 on 2 December and will not sit again until 8 February.
As noted above, the Treasury Laws Amendment (2021 Measures No 5 Bill) 2021 has been passed by both houses and awaits Royal Assent.
The status of other superannuation-related bills, when Parliament rose, was as follows:
- The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 - this Bill will implement several superannuation-related commitments from the May 2021 Budget. The Bill remains before the House of Representatives. See ASFA Action issue 831 for background.
- The Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 – this Bill includes amendments which establish the retirement income covenant for registrable superannuation entities. The Bill remains before the House of Representatives. See ASFA Action issue 835 for background.
- The Financial Accountability Regime Bill 2021 – this Bill — together with consequential amendments in the Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021 — will implement the Financial Accountability Regime. The Bills remain before the House of Representatives. See ASFA Action issue 821 for background.
- The Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021, the Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2021, and the Financial Services Compensation Scheme of Last Resort Levy Bill 2021. Together, these Bills will establish the compensation scheme of last resort for the financial services industry and the levy framework to fund it. The Bills remain before the House of Representatives. See ASFA Action issue 821 for background.
- The Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 – this Bill includes amendments relevant to the closure of the Superannuation Complaints Tribunal (SCT) and its replacement by the Australian Financial Complaints Authority (AFCA). It provides for the transfer of records and documents from the SCT to ASIC, provides for the remittal of matters on appeal by the Federal Court and introduces a rule-making power to allow the Minister to prescribe other matters of a transitional nature. The Bill remains before the Senate. See ASFA Action issue 821 for background.
- The Corporations Amendment (Meetings and Documents) Bill 2021 – this Bill will make permanent relief provided on a temporary basis, as a result of the COVID-19 pandemic, allowing companies to use technology to meet certain requirements under the Corporations Act 2001 around meetings and documents. The Bill was passed by the House of Representatives with amendments requiring a report on the operation of the measures to be tabled in Parliament within 30 months of commencement. The Bill remains before the Senate. See ASFA Action issue 830 for background.
- The Treasury Laws Amendment (2020 Measures No 4) Bill 2021 (previously titled Treasury Laws Amendment (2020 Measures No 4) Bill 2020) – this Bill includes amendments relevant to the closure of the SCT and its replacement by AFCA. The Bill remains before the Senate, however identical amendments were introduced in a subsequent Bill, the Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 (see above).
- The Superannuation Guarantee (Administration) Amendment 2021 – this private member’s Bill proposes an exclusion to the stapling measure introduced as part of the Your Future, Your Super (YFYS) reforms for workers employed in dangerous occupations. The Bill remains before the House of Representatives and has not been debated.
APRA data FAQs
APRA has published six additional frequently asked questions (FAQs) to provide further guidance to registrable superannuation entity licensees on the reporting standards and the reporting of historical data for Phase 1 of the Superannuation Data Transformation (SDT) project.
The new FAQs address issues in relation to:
- Historical data collection
- Reporting ad hoc submissions for particular forms
- The process for resubmitting a reporting form in APRA Connect
- Reporting of foreign exchange derivatives held in SRF 550.0.
Limited advice: ASIC guidance and examples
ASIC has released an information sheet on limited advice and an example statement of advice (SOA) to assist financial advisers and advice licensees comply with their obligations when providing limited personal advice to retail clients.
INFO 267: Tips for giving limited advice provides tips and summarises the relevant guidance from Regulatory Guide 175 Licensing: Financial product advisers-Conduct and disclosure and Regulatory Guide 244 Giving information, general advice and scaled advice. The information sheet includes details of what advice providers can do to meet their obligations under the law, including the best interests duty and related obligations as well as the Financial Adviser Standards and Ethics Authority (FASEA) Financial Planners and Advisers Code of Ethics (Code of Ethics) when giving limited advice.
ASIC Commissioner Danielle Press said:
“ASIC recognises that many consumers prefer to seek limited and specific advice rather than comprehensive advice. We also understand that industry faces some barriers to providing limited advice, including a lack of clarity about the regulatory requirements.
We expect this guidance will provide regulatory certainty to industry and help reduce compliance costs. It will assist financial advisers in their efforts to make these forms of advice more available to consumers and assist them in delivering quality advice in a timely, affordable, and compliant manner.
ASIC’s SOA example is annotated to help advisers understand the relevant requirements under the Corporations Act 2001 and follows the recent release of ASIC’s guidance and example records of advice (see ASFA Action issue 832 for background).
The release of INFO 267 and the related examples also follows consultation last November regarding access to affordable advice, through Consultation Paper CP 332 (see ASFA Action issues 812 and 784 for background).
Remuneration: final APRA standard determined
APRA has formally determined its new prudential standard CPS 511 Remuneration. CPS 511 applies to all APRA-regulated entities, including superannuation registered superannuation entity licensees.
The Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 1 of 2021 gives formal effect to CPS 511, which will commence on 1 January 2023.
APRA published the final version of CPS 511 in late August and more recently finalised supporting guidance for CPS 511 — see ASFA Action issues 822 and 829 for details.
2022 Parliamentary sittings, 2022-23 Budget date
Parliament’s sitting schedule for 2022 has now been approved by both houses.
According to the schedule, Parliament will resume on 8 February and the 2022-23 Budget will be delivered on Tuesday 29 March.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
