The past month has been one like no other, with the industry focused entirely on the impacts of the COVID-19 Coronavirus pandemic. Amongst a flood of regulatory developments, this rules and regs highlights the most significant developments as at 30 April.

COVID-19 Coronavirus: new compassionate ground for early release of super

Last month’s rules and regs reported on the swift implementation of a new Coronavirus compassionate ground for early release of individuals’ superannuation benefits. As part of this, the Coronavirus Economic Response Package Omnibus Act 2020 amended the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and the Income Tax (Transitional Provisions) Act 1997  to create the new condition of release and ensure that amounts released would be received tax free.

Extension to temporary residents

During April, the Government made the Treasury Laws Amendment (Release of Superannuation on Compassionate Grounds) Regulations 2020 and the Treasury Laws Amendment (Release of Superannuation on Compassionate Grounds) Regulations (No. 2) 2020. These extend the new early release to cover most temporary visa holders with work rights. Under the amendments:

  • temporary residents who hold a student visa may apply to the Commissioner of Taxation for release if they have held a student visa for 12 months or more and are unable to meet immediate living expenses
  • temporary residents who hold a Subclass 457 or 482 (Temporary Work (Skilled)/Temporary Skill Shortage) visa may apply to the Commissioner for release if they are employed and unable to meet their immediate living expenses
  • other temporary visa holders may apply for release if they are unable to meet their immediate living expenses.

There is one important point to note in relation to the extension of the early release – eligible temporary residents may apply for release of up to $10,000 in the financial year ending 30 June 2020 only. In contrast, Australian citizens and permanent residents may apply for a payment of up to $10,000 in each of the 2019-2020 and 2020-2021 financial years.

Regulator action on early release

AUSTRAC has registered a legislative instrument to ensure that funds making payments under the new Coronavirus early release will not have to conduct additional customer verification under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) regime. The exemption, in the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2020 (No. 1), applies to payments resulting from applications made to the ATO during the period 15 April to 24 September and is limited to identification requirements. AUSTRAC has made it clear that trustees will still have suspicious matter reporting and ongoing customer due diligence obligations relating to the benefit payment and has provided some guidance on complying with these obligations.

APRA has set out its expectations for registrable superannuation entity (RSE) licensees in relation to the new early release initiative. New frequently asked questions (FAQs) indicate that:

  • APRA expects payments to generally be made within five business days of receipt of a determination from the ATO where a licensee’s automated checking has not identified a ‘red flag’. The process for making a payment may take longer in “exceptional circumstances”—including where automated checking has identified a red flag and additional fraud or other verification steps are required, or the payment is being made from defined benefit interests—but payments must still be made as expeditiously as possible. These timeframes may extend slightly where a licensee experiences a high volume of applications at any particular time.
  • the process for determining and paying the early release amounts is different to the usual process. Given the security controls around the application process and the RSE licensee appropriately acting on red flags identified by their automated checking process, it will be reasonable for RSE licensees to depart from their usual fraud control measures for the majority of applications in order to ensure payments are made as soon as practicable. Where a licensee is “able to satisfactorily demonstrate to APRA that it has followed the approach set out in these FAQs, APRA would be unlikely to take action against an RSE licensee should a fraudulent payment/s occur.”

APRA has also launched a new data collection to assess the progress and impact of the Government’s temporary early release of superannuation initiative. Funds will be required to report to APRA weekly from 29 April until further notice, including data about the number and value of early release payments and the time taken for processing. APRA intends to publish the data at both the industry and fund level.

To assist the provision of affordable advice on the Coronavirus early access to super, ASIC has issued a temporary no-action position for superannuation trustees to expand the scope of personal advice that may be provided by, or on behalf of, the superannuation trustee as ‘intra-fund advice’. ASIC has also registered the ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2020/355 to allow advice providers not to give a statement of advice to clients when providing advice about early access to superannuation and permit registered tax agents to give advice to existing clients about early access to superannuation without needing to hold an Australian financial services licence. The relief and no-action position are temporary and subject to a number of conditions. Recognising that the demand for time-critical advice has increased as a result of the pandemic, ASIC has also introduced additional relief to help financial advisers— see below.

ASIC has also:

  • written to the Real Estate Institute regarding reports that some real estate agents have been encouraging tenants to apply for early release of their superannuation if they are unable to pay their rent or anticipate finding themselves in that situation in the future. ASIC’s letter notes its concern that this conduct may contravene the Corporations Act 2001 as it may constitute unlicensed financial advice and may not be in the best interests of individuals
  • published a new FAQ setting out its views on how trustees should communicate the potential long-term impacts of the early release on retirement balances
  • provided updated information about early access to superannuation on its MoneySmart website.

The ATO has continued to issue updated information regarding the application and approval process for the early release initiative.

The ‘JobKeeper’ wage subsidy

The Government recalled Parliament on 8 April to introduce and pass the framework legislation necessary for its JobKeeper wage subsidy. The subsidy will be a payment of up to $1,500 per fortnight for eligible employees of businesses that have suffered a reduction in revenue of at least 30 per cent (50 per cent for businesses with an annual turnover exceeding $1 billion) since 1 March.

The Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020:

  • includes amendments to the Fair Work Act 2009 that apply where an employer has issued a ‘JobKeeper enabling direction’—a direction providing for increased flexibility around employees’ hours of work, performance of duties, location of work and annual leave arrangements
  • requires JobKeeper qualifying employers to meet minimum payment obligations to employees under these arrangements. These include ensuring that the employer passes on to eligible employees at least the value of the JobKeeper payments the employer receives through the Commissioner of Taxation, or the amount those employees would receive for the work they have performed, whichever is greater.

The Coronavirus Economic Response Package (Payments and Benefits) Act 2020 creates a general framework for the Commissioner of Taxation to provide financial support to assist businesses and their employees through the downturn caused by the pandemic. The JobKeeper payment is intended to be delivered under this framework. In broad terms, the Act provides for rules to be made by the Treasurer allowing the Commissioner to make payments, and for further rules setting out administrative arrangements and record-keeping obligations.

Subsequently, the Government registered the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020, to set out detail in relation to the JobKeeper payment. The explanatory material notes that the Government will make regulations under the Superannuation Guarantee (Administration) Act 1992 to address the Superannuation Guarantee implications of the JobKeeper scheme. In particular, the regulations will ensure that an employer will only need to make superannuation contributions for any amount payable to an employee in respect of their actual employment, disregarding any extra payments made by the employer to satisfy the wage condition for getting the JobKeeper payment.

The regulators and AFCA

In addition to addressing the specific implications of the Coronavirus early release of super (see above), the regulators and AFCA each made further statements during April about changes to their scheduled work programs and their expectations of regulated entities given the pandemic.

APRA

APRA announced that in light of the COVID-19 pandemic:

  • the issue of new APRA licences would be temporarily suspended, except where the granting of a licence is necessary for APRA to carry out its mandate
  • the timeframe for the Superannuation Data Transformation project, and the collection of data required in Phase 1 of the project, would be deferred by one year to September 2021
  • commencement of several prudential and reporting standards that have been finalised but are yet to fully come into effect will be deferred. Of relevance to superannuation trustees:
  • the third-party arrangements transition provision for CPS 234 Information Securitywas due to apply from 1 July 2020. APRA will consider requests for a six-month extension (to 1 January 2021) by regulated entities on a case-by-case basis
  • the next two phase-in periods of initial margin requirements for non-centrally cleared derivatives—as set out in CPS 226 Margining and Risk Mitigation for Non-Centrally Cleared Derivatives—will be deferred by 12 months.

ASIC

ASIC has provided further detail on some of its regulatory activities that have been impacted by the pandemic. Items of particular relevance for superannuation funds include:

  • confirmation that the release of updated complaints handling standards is deferred “until further notice”
  • confirmation of the relief provided in relation to financial advice
  • indication that ASIC is considering amending the transitional fee and cost disclosure (RG 97) arrangements for Product Disclosure Statements (PDSs) “to allow entities to come into the new disclosure regime from 30 September 2020 and requiring any PDS given after 30 September 2022 to comply with the new disclosure regime”
  • indication that ASIC will defer (to a date yet to be advised) the first reporting date for portfolio holdings disclosures, “recognising that current conditions may make it difficult for trustees to prioritise the development of appropriate disclosures”.

ASIC has updated its FAQs about superannuation regulatory issues that have arisen from the COVID-19 pandemic and published some new FAQs about issues impacting the financial advice industry.

As well as effectively extending the scope of intra-fund advice (see above), ASIC has also announced relief to help financial advisers meet the increased demand for time-critical advice resulting from the pandemic. The ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2020/355 provides advisers with temporary relief to give advice providers up to 30 business days (instead of 5 business days) to give a statement of advice after time-critical advice is provided. It also allows for the provision of a record of advice in certain circumstances.

ATO

In early April, the ATO advised that it would defer the scheduled statement and payment day for unclaimed superannuation money as at 31 December 2019. This effectively means the statements and payments to the ATO for this period, which were due by 30 April, will be deferred to 31 October. The deferral is to let funds focus on assisting their members during the COVID-19 pandemic, but will also avoid confusion and complexity where amounts were transferred to the ATO and therefore could not be readily accessed by individuals under the Coronavirus early release initiative.

The ATO has also advised that it is now providing an electronic lodgment option for First Home Super Saver Scheme, Division 293 and Excess Contributions Release Authority Statements and End Benefit Notices, to assist superannuation funds and administrators during the COVID-19 pandemic.

AFCA

The Australian Financial Complaints Authority (AFCA) has announced it will give consumers and financial firms extra time to respond to complaints due to the COVID-19 pandemic. Financial firms currently have 21 days to respond when AFCA notifies them that a complaint has been lodged; this will be extended to 30 days. AFCA is also providing, as standard, a flat 21-day timeframe to provide an initial response once the dispute reaches the case management stage. The changes are a temporary measure which AFCA anticipates will be in place for up to six months and will be reviewed and adjusted as appropriate.

AFCA has also released a factsheet about income protection benefits in superannuation in response to a volume of queries received from consumers—many of whom are out of work due to the COVID-19 pandemic—about whether they can access income protection benefits.

AUSTRAC

AUSTRAC has updated its website to include some general information about how its reporting entities—including superannuation funds—can comply with their Know Your Client requirements during the pandemic. This includes discussion of alternative processes to verify customer identity and some practical examples.

Parliament to resume sitting

Despite initially cancelling Parliament’s remaining Autumn sittings and all its Winter sittings, Parliament was recalled on 23 March and 8 April to pass legislation necessary for the Government’s COVID-19 economic support package.

The Prime Minister has indicated he will recall Parliament for a ‘trial week’ on 12-14 May, to address “a couple of COVID-related bills” and also a return to the Government’s legislative program, with “many bills already on the docket” and “a lot more bills that will be introduced over the course of that week”. The Prime Minister also anticipates that there will be “further weeks of sittings between now and the end of the financial year”.