Summer may have given way to Autumn but it is still consultation season for financial services. The government and regulators have launched a new flurry of discussion papers across issues including information security, dispute resolution and data collection.

Information security: APRA consultation on new prudential standard

APRA has released a discussion paper and proposed new cross industry prudential standard on information security.

The discussion paper notes that information security management requires ongoing vigilance, improvement, investment and oversight, while technological developments continue to expand the scope and sophistication of potential malicious activity against financial institutions. APRA considers there is no ‘end-state’ for information security, therefore a continuous cycle of investment in sound practices is required of APRA-regulated entities.

APRA’s proposed requirements are set out in a new cross-industry prudential standard, draft Prudential Standard CPS 234 Information Security. Once finalised, CPS 234 will apply to all APRA regulated entities, including licensees of registrable superannuation entities.

Submissions close on 7 June.

APRA is aiming to finalise the new standard in November, with a view to it commencing 1 July 2019. APRA will consult separately on updates to its existing guidance on information security to reflect the final version of CPS 234.

This consultation forms part of a wider APRA project to update its prudential framework in relation to the qualitative management of operational risk. During the second half of 2018 APRA will consult on cross-industry requirements for operational risk management and revised standards for business continuity and outsourcing.

New dispute resolution framework: ASIC consultation

ASIC has released a consultation package in relation to its oversight of the new external dispute resolution (EDR) scheme for the financial services industry, the Australian Financial Complaints Authority (AFCA).

The legislation to establish AFCA is now in place and the Minister has announced that AFCA will begin to hear complaints no later than 1 November 2018, with the Superannuation Complaints Tribunal continuing to operate for a period to clear its existing caseload. The Minister has also announced that the government will appoint the Hon Helen Coonan as AFCA’s inaugural Chair. Ms Coonan was Minister for Revenue and Assistant Treasurer between 2001 and 2004.

Transitional steps that need to take place before AFCA commences include formal authorisation of AFCA by the Minister, and consultation by the AFCA board on the scheme’s terms of reference.

As part of the transition work, ASIC has now released a consultation paper focused on some specific issues to support the transition to AFCA, including the timing of reports to be made by AFCA to ASIC and the role of AFCA’s independent assessor. ASIC is also asking whether the transition period for the commencement of AFCA allows sufficient time for financial firms—including trustees of APRA regulated funds—to comply with their EDR disclosure obligations.

ASIC has also released a draft updated version of Regulatory Guide RG 139: Oversight of the Australian Financial Complaints Authority. ASIC intends to finalise its update to RG 139 to coincide with AFCA’s commencement.

Submissions on the consultation package close on 6 April. ASIC will also consult on new internal dispute resolution (IDR) standards and mandatory IDR reporting requirements after the commencement of AFCA.

APRA to replace D2A data collection tool

APRA has written to all APRA reporting entities seeking industry input on plans to replace its current data collection tool, Direct to APRA (D2A), with a new data collection solution.

APRA intends to align the new data collection solution with Standard Business Reporting (SBR) reporting taxonomies. APRA has been progressively adopting SBR since 2011and intends to develop the new system fully based on SBR.

APRA is seeking feedback by 20 April.

ATO administration of compassionate grounds release: consultation

Treasury has released draft regulations to support the transfer of the regulatory responsibility for the early release of superannuation benefits on compassionate grounds from the Department of Human Services (DHS) to ATO. The transfer is provided for by the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018, introduced into Parliament in February.

The draft Treasury Laws Amendment (2018 Measures No. #) Regulations 2018 provide the necessary administrative changes to reflect the transfer of responsibility from the DHS to the ATO and are also intended to improve the current process for early release on compassionate grounds. In particular, the draft regulations require the ATO to directly notify a member’s superannuation trustee when it has authorised the early release of funds, removing the need for the trustee to independently confirm the amount authorised for release.

Submissions closed on 23 March.

Remaking of SMSF and super holding accounts regulations

Treasury is proposing to re-make three sets of regulations that are due to expire in the next 18 months. The regulations relate to the levies payable by self-managed superannuation funds and the operation of the Superannuation Holding Accounts Special Account (SHASA).

The regulations to be remade are the:

  • Superannuation (Self-Managed Superannuation Funds) Taxation Regulations 2018, which remake the Superannuation (Self-Managed Superannuation Funds) Taxation Regulations 1999 (due to expire on 1 April 2019)
  • Superannuation (Self-Managed Superannuation Funds) Supervisory Levy Imposition Regulations 2018, which remake the Superannuation (Self-Managed Superannuation Funds) Supervisory Levy Imposition Regulations 1991 (due to expire on 1 October 2018)
  • Small Superannuation Accounts Regulations 2018. These remake the Small Superannuation Accounts Regulations 2002, which are due to expire on 1 October 2019 and relate to the operation of SHASA. Prior to 1 July 2006, an employer who was unable to find a fund to accept contributions on behalf of an employee could discharge their Superannuation Guarantee obligations by making a deposit to the SHASA, to be held by the ATO.

Submissions closed on 23 March.

First home super saver scheme and downsizer contributions

The government has made regulations finalising the First Home Super Saver Scheme (FHSSS) and ‘downsizer’ measures announced in its May 2017 Budget and implemented by the First Home Super Saver Tax Act 2017 and Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017.

The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Regulations 2018:

  • prescribe the withholding amount for amounts paid to an individual under the FHSSS, with effect from 1 July 2018 (the first date a withdrawal from the FHSSS can be made)
  • amend the contribution acceptance rules to ensure superannuation entities are able to accept downsizer contributions from 1 July 2018.

Franking credits: ATO concerns about structured arrangements

The ATO has issued a taxpayer alert about a review it is conducting of certain structured arrangements involving the transfer of shares in the period around the shares’ ex-dividend date.

TA2018/1 – Structured arrangements that provide imputation benefits on shares acquired on a limited risk basis around ex-dividend dates explains the ATO’s concern that these arrangements involve taxpayers inappropriately receiving franking credits in breach of rules designed to maintain the integrity of the imputation system.

The arrangements of concern involve an Australian taxpayer with an existing investment in shares acquiring an additional parcel of the same shares, where the additional shares are held for a short period over the ex dividend date but the taxpayer has little or no economic exposure. The arrangements have typically been marketed to investors such as equity funds and large superannuation funds.

‘Rules and regs’ provides a snapshot of key regulatory developments. ASFA members also have access, via the ASFA website, to the ASFA Thomson Geer Regulatory Update. Delivered in partnership with Thomson Geer, this comprehensive quarterly Update seeks to keep members informed on the changing superannuation environment across new legislation, developing policy and pertinent case law developments.