Issue 774, 7 September 2020
In this issue:
- Insurance in superannuation ASFA policy: working group
- Superannuation bills update
- COVID-19 Coronavirus: early release of super – 31 December 2020 cut-off date
- COVID-19 Coronavirus: early release of super – APRA data
- COVID-19 Coronavirus: referral of early release initiative to Auditor-General
- APRA Corporate Plan
- Commutations of market-linked pensions: timeframe for review of ATO reporting
- Senate Committee inquiry on FinTech and RegTech: interim report
Insurance in superannuation ASFA policy: working group
ASFA is seeking expressions of interest for participation in an Insurance in Superannuation ASFA Policy working group.
Given the prospect of a further review by the Government of the role of insurance in superannuation, ASFA is establishing a working group to review its existing policy positions towards insurance in superannuation to ensure they are comprehensive and up to date.
The working group will look specifically at the following issues:
- the roles of total and permanent disability, income protection and death cover as benefits in superannuation
- whether the current insurance settings within superannuation remain fit for purpose
- affordability of insurance cover
- the potential for enhanced member data to support appropriate levels and types of cover
- the interaction of insurance in superannuation with other disability, social security, or accident benefits
- the degree to which insurance in superannuation complements or supports return to work strategies.
Representation is available to corporate members only and we would appreciate if nominations could be limited to one representative or delegate per organisation.
If you—or a colleague—are interested in participating or have any queries about this working group, please contact Byron Addison, Senior Policy Adviser via our contact form or 02 8079 0834 by close of business Friday, 18 September.
Superannuation bills update
Parliament has now concluded the first sitting fortnight of the Spring sessions.
A new bill was introduced to increase the maximum number of members permitted in a self-managed superannuation fund (SMSF) or small APRA fund from four to six – see below. No progress was reported on the other superannuation-related bills before Parliament.
Parliament will resume on 6 October, when the 2020-21 Budget—which was delayed due to the COVID-19 pandemic—is due to be delivered.
SMSFs and small APRA funds – membership limit
On 2 September, the Government introduced amendments to give effect to its 2018-19 Budget commitment to increase the maximum number of members permitted in a self-managed superannuation fund (SMSF) or small APRA fund from four to six.
The Superannuation Industry (Supervision) Act 1993 (SIS Act) currently includes a definition that requires a SMSF to have fewer than five members. The SIS Act also contains provisions dealing with small superannuation funds, with the threshold for small funds set at the same level as the member limit for SMSFs (that is, fewer than five members). Some of these provisions apply to all superannuation funds that have fewer than five members (including SMSFs). Others are limited to small funds that are not SMSFs. Small funds that are not SMSFs are regulated by APRA and are usually referred to in general terms as ‘small APRA funds’, or SAFs.
Amendments in the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 increase the number of members referred to in the definition of SMSF in the SIS Act from fewer than five members to “no more than six members”. As a result, the maximum number of members of an SMSF and a SAF is increased from four to six. The Bill also makes corresponding amendments to related tax legislation and the Corporations Act 2001. The amendments will apply from the start of the first quarter commencing after the Act receives Royal Assent.
The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 4 November.
See ASFA Action issues 766, 763 and 669 for background in relation to this measure, which was originally intended to apply from 1 July 2019. The amendments were previously introduced as part of the Treasury Laws Amendment (2019 Measures No. 1) Bill 2019, but removed prior to the passage of that Bill (see ASFA Action issues 704 and 698).
COVID-19 Coronavirus: early release of super – 31 December 2020 cut-off date
The Government has registered regulations confirming the extension of the 2020-21 application period for the Coronavirus early release initiative from 24 September to 31 December.
The Treasury Laws Amendment (Release of Superannuation on Compassionate Grounds) Regulations (No. 3) 2020 confirm the extension of the application period that was announced by the Government as part of its Economic and Fiscal Update in late July (see ASFA Action issue 766). The regulations do not make any other amendments to rules for the early release initiative.
COVID-19 Coronavirus: early release of super – APRA data
APRA has made its nineteenth weekly publication of industry-level data from its early release initiative data collection.
The data covers applications made from inception of the early release initiative on 20 April through to 30 August.
The data shows that from 20 April to 30 August:
- payments totalling $32.6 billion had been made, with an average payment of $7,680
- 3.1 million ‘initial’ applications had been received, with an average application amount of $7,402
- 1.2 million ‘repeat’ applications had been received, with an average application amount of $8,439
- funds were taking an average of 3.3 business days to pay an application, with 95 per cent of applications paid within five business days.
APRA has also published the seventeenth tranche of fund-level statistics from its early release data collection, revealing the number and value of the payments processed by each fund, as well as the time taken to make payments.
COVID-19 Coronavirus: referral of early release initiative to Auditor-General
In ASFA Action issue 770 we reported that the Opposition had requested that the Auditor-General review the integrity and performance of the Coronavirus early release initiative.
The request, from the Shadow Assistant Treasurer and Shadow Minister for Financial Services, Stephen Jones MP, cited concerns about the initiative including:
- theft and fraud issues
- the lack of a verification mechanism for access to the initiative
- (allegedly) inaccurate and misleading promotion of the scheme
- a ‘blowout’ in estimates of how much superannuation would be withdrawn.
The Auditor-General has now indicated that he has “decided not to commence an audit of the Government’s early release superannuation scheme at this time”. This is based on his assessment that the matters raised are “not a higher priority” than other topics already included in the ANAO’s annual audit work program for 2020-21.
APRA Corporate Plan
APRA has published its 2020-2024 corporate plan, which has been updated to account for the impact of the COVID-19 pandemic.
APRA has indicated that its corporate plan continues to be founded on delivering four key community outcomes over the planning horizon:
- maintaining financial sector resilience
- improving outcomes for superannuation members
- transforming governance, culture, remuneration and accountability across all regulated institutions
- improving cyber resilience across the financial system.
APRA remains committed to delivering on these outcomes, as well as the recommendations of the Royal Commission and Capability Review, as soon as is practicable. However, COVID-19 has necessitated a rescheduling of planned activities to allow APRA and its regulated entities to address the most immediate challenges. According to APRA, its 2020-2024 corporate plan reflects this uncertain environment, with priority being given to protecting the financial stability and soundness of regulated entities, fostering their operational resilience, and enhancing contingency planning for adverse events. At the same time, APRA will continue its work in other areas with a view to ensuring the longer-term objectives will still be achieved over the four-year planning horizon.
Commutations of market-linked pensions: timeframe for review of ATO reporting
In ASFA Action issue 760 we reported about the passage of the Treasury Laws Amendment (2019 Measures No.3) Bill 2019, and the ATO’s CRT Alert 031/2020, which set out its approach to one set of amendments in that omnibus bill. Those amendments change the transfer balance cap calculation where an individual commutes a market linked pension which is a capped defined benefit income stream. The amendments apply retrospectively from 1 July 2017.
CRT Alert 031/2020 confirmed that funds would be expected to review any information they had already reported to the ATO where a member had commuted a market linked pension, which was a capped defined benefit income stream, and then restarted the market linked pension. The ATO intended to provide guidance in August regarding the timeframe within which it expected funds to complete that review.
The ATO has now published CRT Alert 042/2020, which:
- highlights updated guidance to funds on how to calculate the transfer balance cap debit
- indicates that, given the delay in publishing that guidance, the ATO does not expect funds to begin to commence their retrospective reporting until November 2020.
Senate Committee inquiry on FinTech and RegTech: interim report
A Senate committee inquiring into matters in relation to financial technology (FinTech) and regulatory technology (RegTech) has delivered its interim report.
As reported in ASFA Action issue 726, the issues paper released by the Senate Select Committee on Financial Technology and Regulatory Technology posed some questions of direct relevance in relation to superannuation:
- Following the implementation of the consumer data right (CDR) in the banking sector, how quickly should government seek to implement CDR reforms in related financial sectors such as superannuation?
- What specific considerations need to be given to the implementation of CDR in the superannuation sector?
The interim report recommends that the Government:
- expand the Consumer Data Right to include other financial services, starting with the superannuation sector and then including sectors such as general insurance (recommendation 23).
- “foster a culture where superannuation funds invest more widely, including in Australian startups, without undermining the sole purpose test” (recommendation 27).
The Committee has also recommended that the Corporations Act 2001 and other relevant legislation and regulations be amended in order to allow for the electronic signature and execution of legal documents (recommendation 3). While not specific to superannuation, this recommendation is relevant to the way that trustee companies discharge their general legal obligations. The Government has already made some relief of this nature available on a temporary basis due to the COVID-19 pandemic (see ASFA Action issue 769).
Other noteworthy recommendations include:
- accelerating the Digital Identity reforms led by the Digital Transformation Agency “in order to deliver a national, economy-wide framework for the operation of a federated digital identity ecosystem as soon as possible” (recommendation 7)
- providing the Council of Financial Regulators (CFR) with a competition mandate as advice to the Government and that the CFR regularly report on competitive dynamics in the Australian financial services market (recommendation 13)
- establishing a framework for the CFR to regularly consider and report on Australia’s external competitive position in financial services, including measuring technology adoption and innovation (recommendation 14)
- establishing a market basis for determining the success of Australia’s financial regulators in supporting a pro-innovation and pro-competition culture in financial services (recommendation 15)
- establishing a culture of innovation and competition in financial services by supporting self-regulation where innovative products emerge, whilst ensuring strong consumer protection (recommendation 16).
The Committee is due to present its final report by 16 April.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
