While still dealing with the immediate impacts of COVID-19 continues to be a major focus for the industry, attention is now also being drawn back to the pre-pandemic regulatory agenda. In the last month, ASIC has made major announcements about its deferred work program –including Royal Commission implementation and its new internal dispute resolution standards. The Government has moved to implement measures from last year’s Budget, and progress has been made on some of the superannuation-related bills before Parliament.
The COVID-19 response
Coronavirus early release of super
APRA has continued to publish weekly statistics from its early release initiative data collection, at both an industry-wide and fund level. The latest data—published on 29 June and covering applications up to 21 June—showed that:
- 2.3 million applications had been paid, for a total of $17.1 billion in payments
- the average payment has been $7,492
- a total of 2.4 million applications had been received
- payments to eligible members have taken an average of 3.3 business days after receipt of the application from the ATO, with 95 per cent made within five business days.
Superannuation fund members will be able to lodge applications to release up to a further $10,000 between 1 July and 24 September. This will not apply to temporary residents, who were only permitted to make a single application, during the 2019-20 financial year.
APRA has written to registrable superannuation entity (RSE) licensees about a new COVID-19 Pandemic Data Collection (PDC), comprising monthly and quarterly reporting components. Lodgments will be due on 31 July, then 15 business days following the end of each month/quarter “until issues that are being faced by RSE licensees relating to the COVID-19 pandemic have abated”. The PDC is designed to:
- provide APRA with enhanced data surrounding the early release of superannuation, enabling analysis of impacted demographics
- provide APRA and ASIC with monthly data on complaints, member accounts with insurance that have been cancelled, insurance claim activity and intra-fund advice provided
- provide APRA with quarterly data on investment options, foreign currency exposure and hedging, and member switching
- allow APRA to understand the impact of the COVID-19 pandemic on the superannuation industry and provide reporting to the Government and other agencies.
The ATO has outlined its approach to ensuring the integrity of the Coronavirus early release of super program. In particular, the ATO has noted that it has a variety of data sources allowing it to check for claims that were made incorrectly, and its compliance approach is based on ensuring that people have not exploited the measure. Behaviours that will attract ATO attention include where individuals have had no change to their regular salary and wage, or employment information, made false statements or fraudulent attempts to meet the eligibility criteria, or withdrew and recontributed superannuation for a tax advantage.
The Government has made the Superannuation Guarantee (Administration) Amendment (Jobkeeper Payment) Regulations 2020 to ensure that employers are not subject to additional Superannuation Guarantee (SG) obligations as a result of their participation or anticipated participation in the JobKeeper wage subsidy scheme.
The regulations provide that amounts of salary or wages that do not relate to the performance of work, and are only paid to an employee to satisfy the wage condition for receiving JobKeeper payment, are excluded salary or wages for SG purposes. The effect is that these amounts are excluded from the calculations of an employer’s SG shortfall and the minimum superannuation contribution an employer is required to make in respect of an employee to avoid a SG charge liability.
ASIC has published a number of materials in relation to activities that have been impacted by the COVID-19 pandemic, including an important update in relation to the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and ASIC’s new internal dispute resolution (IDR) standards. Some key points to note include:
- Royal Commission implementation:
- Hawking recommendations 3.4 and 4.1—no hawking in superannuation/insurance—ASIC will consult in late 2020 on changes to Regulatory Guide 38 The hawking prohibitions, to expand the hawking prohibition to superannuation and insurance products.
- Advice recommendations 2.1, 2.2, 3.2 and 3.3—annual renewal and payment, disclosure of lack of independence, no deducting of advice fees from MySuper accounts and limitations on deducting advice fees from choice accounts—ASIC will release an update to Regulatory Guide 245 Fee disclosure statementsand make the relevant legislative instruments in December 2020, subject to passage of legislation.
- Enforceable code provisions—recommendation 1.15—ASIC will consult publicly on a draft update to Regulatory Guide 183 ;Approval of financial services sector codes of conduct in Q2 2021, with earlier targeted consultation.
- IDR standards: ASIC will publish a new regulatory guide, RG 271 Internal dispute resolution, outlining updated IDR standards and requirements. The guide will be published in July 2020 to allow industry to make the necessary changes ahead of commencement on 5 October 2021. Given the new commencement date for the standards, ASIC has also registered the ASIC Corporations, Superannuation and Credit (Amendment) Instrument 2020/99 to extend the transitional application of the current IDR standards until 5 October 2021. ASIC will undertake targeted consultation on IDR data collection and reporting in Q3 2020.
- Insurance in super:ASIC has continued with its review of industry’s progress on improving insurance outcomes for consumers and anticipates it will be in a position to publish a report by December 2020.
- Product design and distribution obligations (DDO) regime: ASIC has registered the ASIC Corporations (Deferral of Design and Distribution Obligations) Instrument 2020/486 to give effect to its announcement deferring the commencement date of the DDO regime for six months, to allow industry participants to focus on immediate priorities and the needs of their customers during the COVID-19 pandemic (see rules and regs June 2020). As a result of the Instrument, industry participants will now only be required to comply with the DDO regime from 5 October 2021. ASIC intends to publish regulatory guidance on DDO in Q3 2020
- Financial advice: ASIC has registered ASIC Corporations (Amendment) Instrument 2020/565, which specifies that the relief given by ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2020/355 will cease to have effect on 15 October 2020. That relief related to extending the timeframe for providing time-critical statements of advice and enabling a record of advice to be given in certain circumstances, to help the industry provide consumers with affordable and timely advice during the COVID-19 pandemic.
- Frequently Asked Questions (FAQs): ASIC has updated its FAQs addressing current superannuation regulatory issues that have arisen from the COVID-19 pandemic. The new and updated FAQs:
- reflect ASIC’s revised timetable of ongoing work released on 11 June (updated FAQ 2D)
- outline ASIC’s expectations of how trustees should communicate with their members about the Government’s temporary reduction to the minimum drawdown rates for superannuation pensions for the 2020-21 financial year (new FAQ 1F)
- confirm that ASIC will be amending the transitional arrangements for the fee and disclosure cost rules for Product Disclosure Statements (PDSs) in Regulatory Guide RG 97, to allow entities to come into the new disclosure regime from 30 September 2020 and require any PDS given on or after 30 September 2022 to comply with the new disclosure regime (new FAQ 2E).
- Board oversight of executive variable pay: ASIC has released information sheet 245 Board oversight of executive variable pay decisions during the COVID-19 pandemic that draws on the factual findings from ASIC’s review of board oversight of variable remuneration schemes. The final report on ASIC’s findings is intended to be released later this year.
- Interim corporate plan: ASIC has published an Interim Corporate Plan for 2020-21, outlining the strategic priorities that will guide ASIC’s work in responding to the impact of the COVID-19 pandemic.
There are now clear signs that the Government and the regulators are resuming something close to normal business—or, at least, business in the ‘new normal’ environment, with a resumption of the Government’s legislative program and some non-COVID-19 related releases from the regulators.
Superannuation bills update
Parliament has risen for its Winter break and will not sit again until 4 August. A number of superannuation-related bills progressed, while others—including some that include amendments intended to have effect from 1 July 2020—are yet to be finalised. A snapshot of the status of key super-related bills is as follows:
The Treasury Laws Amendment (2019 Measures No.3) Act 2020 has now become law. This omnibus Act amends several aspects of the superannuation and related tax legislation, including in relation to:
- protecting your superannuation, unclaimed superannuation and lost members
- superannuation pensions and rollover of death benefits
- employer reporting of salary sacrificed contributions
- downsizer contributions
- extending the timeframe within which existing financial advisers must meet certain new educational and training standards.
A package of amendments to the framework for the financial institutions supervisory levy (the APRA levy) has also become law. The package includes the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Act 2020, the Superannuation Supervisory Levy Imposition Amendment Act 2020 and the Retirement Savings Account Providers Supervisory Levy Imposition Amendment Act 2020.
The Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 remains before the House of Representatives. This Bill contains an amendment extending the bring forward arrangements for non-concessional contributions to individuals under age 67, as announced in the April 2019 Budget. The amendment is intended to commence on the first 1 January, 1 April, 1 July or 1 October after Royal Assent and (once law) will apply to non-concessional contributions made on or after 1 July 2020. Related amendments to increase the age at which the work test starts to apply to voluntary contributions and increase the cut-off age for spouse contributions were implemented during June by regulation (see Regulations and legislative instruments, below).
The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 remains before the Senate. This Bill extends the ‘choice of fund’ rules to new workplace determinations and enterprise agreements made on or after 1 July 2020. A number of amendments have been proposed to the Bill by the Opposition, the Australian Greens and the Centre Alliance. These include amendments in relation to how the measure would apply to defined benefit funds, as well as an amendment proposing removal of the $450 per month income threshold for SG contributions.
The Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020 has been passed by the House of Representatives and awaits consideration by the Senate. This Bill will facilitate the exit of eligible rollover funds (ERFs) from the superannuation industry by 30 June 2021.
The Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019 has not progressed since its introduction in November. This Bill allows separating de facto couples in Western Australia to access the Commonwealth family law superannuation splitting regime.
The Treasury Laws Amendment (2020 Measures No.2) Bill 2020 has been passed by the Senate with amendments that were not accepted by the House of Representatives. The Senate has insisted on its amendments and the Bill awaits reconsideration by the House. Of relevance to superannuation, this Bill includes a provision making Superannuation Consumers’ Centre Ltd a deductible gift recipient.
Regulations and legislative instruments
The Government has registered the Superannuation Legislation Amendment (2020 Measures No. 1) Regulations 2020, giving effect to part of its April 2019 Budget announcement that it would make superannuation more flexible for older Australians.
The Regulations amend the Superannuation Industry (Supervision) Regulations 1994 and the Retirement Savings Account Regulations 1997, to increase the:
- age at which the work test starts to apply for voluntary concessional and non-concessional contributions from age 65 to age 67
- cut-off age at which individuals can receive voluntary superannuation contributions from their spouse, from age 70 to age 75.
The amendments apply for the 2020-21 and later financial years. Related changes to the ‘bring forward’ rules for non-concessional contributions were enacted during June – see the superannuation bills update above.
AUSTRAC has registered the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2020 (No. 3). This amends the anti-money laundering and counter-terrorism financing (AML/CTF) rules, providing clarity around how reporting entities can complete identity verification processes where a customer is experiencing family and domestic violence.
The Australian Government Actuary has made the Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2020. This sets the interest rate for adjusting the superannuation entitlements of separated and divorced spouses under splitting orders and agreements made under the family law superannuation splitting regime.
The Government has made the Corporations (FinTech Sandbox Australian Financial Services Licence Exemption) Regulations 2020. These approve conditional exemptions from the Australian financial services licence regime to make it easier for fintech businesses to trial new products and services—including in relation to superannuation products—under the enhanced regulatory sandbox.
ASIC has released new Regulatory Guide 272 Product intervention power (RG 272). The product intervention power allows ASIC to intervene and take temporary action where financial and credit products have resulted in or are likely to result in, significant consumer detriment. RG 272 outlines matters including the scope of the power, when and how ASIC may exercise the power, and the process for making an intervention order.
APRA’s latest Insight publication contains a feature article on the ‘myths and misconceptions’ about superannuation fund mergers. The article addresses topics including the ‘equivalent rights’ test, weighing up the costs and benefits of a merger and selection of a merger partner. The article notes that: “APRA takes a facilitative approach to mergers and urges trustees to approach APRA early to discuss their merger plans – to work together to address any perceived barriers. Given the diversity of fund structures and product offerings across the APRA regulated population of funds, APRA’s view is that there is a merger partner for all funds – it’s just a matter of finding the right one.”