In the short space of a month, the industry has moved from a focus on implementation of the Royal Commission recommendations to dealing with the extraordinary impacts of the COVID-19 Coronavirus pandemic. In the midst of an ever-evolving situation and a flood of information, this rules and regs highlights the most significant developments as at 1 April.
COVID-19 Coronavirus: new compassionate ground for early release of super
In response to the COVID-19 Coronavirus pandemic, the Government has quickly implemented a new compassionate ground for early release of individuals’ superannuation benefits.
The Coronavirus Economic Response Package Omnibus Act 2020 received Royal Assent on 24 March, after the Bill was introduced into and passed by Parliament on 23 March as part of the Government’s COVID-19 economic support package. The Act contains the amendments to the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and to the Income Tax (Transitional Provisions) Act 1997 necessary to establish the new condition of release.
In order to apply for early release under the new ground, an individual must certify that they satisfy any one or more of the following requirements when they apply:
- they are unemployed; or
- they are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance; or
- on or after 1 January 2020:
- they were made redundant; or
- their working hours were reduced by 20 per cent or more; or
- if they are a sole trader – their business was suspended or there was a reduction in their turnover of 20 per cent or more.
An individual will be able to make one application in the 2019-20 financial year and one application in the 2020-21 year prior to 24 September 2020, when the measure will end.
Applications for the early release will be made to the ATO. Individuals will authenticate themselves through MyGov and complete the application form in ATO Online from 20 April.
The ATO’s CRT Alert 004/2020 provides information about the application and payment process for applicants and for superannuation funds. Importantly, this advises that individuals will provide their bank account details as part of the ATO application process and give authorisation for the ATO to provide these to the individual’s nominated fund(s) and for the fund(s) to release the money into that account. According to the ATO, funds can expect to start receiving notifications from 21 April, in an electronic file format.
AUSTRAC has indicated that it will introduce a rule under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) to ensure that superannuation funds making payments to their members under the early release initiative, where the payment is approved by the ATO and processed through MyGov and ATO online, will not have to conduct additional customer verification under the AML/CTF regime. AUSTRAC will update its website with further information in due course.
The Government has indicated it expects funds to process the payments and release the amounts to the individual as soon as possible. Under amendments contained in the Coronavirus Economic Response Package Omnibus Act 2020, the payments will not be subject to tax.
Treasury has published a factsheet on this measure.
Impact on superannuation income streams
The Coronavirus Economic Response Package Omnibus Act 2020 has amended the SIS Regulations to temporarily reduce superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
The Government has indicated this will give retirees more flexibility as to how they manage their superannuation assets. Treasury has published a factsheet on this measure.
Services Australia has written to providers of superannuation income streams asking whether they are in a position to report updated income stream balances to reflect the unforeseen downturn in the share market due to the pandemic. Services Australia has noted that the changes to the values of many members account balances can mean that some recipients of social security pensions are not receiving their full entitlement because their assessment was based on their superannuation income stream account balance as last reported in February, before the market downturn.
The ‘JobKeeper’ wage subsidy
On 30 March the Government announced that it will introduce a wage subsidy 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 subsidy will be known as the ‘JobKeeper’ payment.
According to the Prime Minister, the enabling legislation is still being drafted and arrangements to reconvene Parliament are yet to be finalised. While the Prime Minister indicated “there will be no superannuation guarantee levy on this payment”, it appears this may not fully describe the potential outcomes. A factsheet released by Treasury indicates that whether superannuation guarantee (SG) is payable will depend on factors including whether the JobKeeper payment is used by the employer to subsidise an employee’s existing earnings level or to increase their earnings, or is paid in circumstances where the employee has been stood down without pay and is not performing work-related duties for the employer. This is one aspect of the subsidy that will require further clarification.
The ATO has established an online form for businesses to register to receive updates on the JobKeeper payment but is advising it cannot provide any further information at this time.
The regulators and AFCA
Due to the exceptional circumstances surrounding the COVID-19 pandemic, the regulators and AFCA have each made statements about changes to their scheduled work programs and their expectations of regulated entities.
APRA
APRA has suspended the majority of its planned policy initiatives until at least 30 September, to allow regulated e
ntities to dedicate time and resources to maintaining their operations and supporting customers, while also enabling APRA to intensify its focus on monitoring and responding to the impact of a rapidly changing environment on entities’ financial and operational capacity.
APRA has indicated it is suspending all substantive public consultations and actions to finalise revisions to the prudential framework that are currently underway or upcoming, including consultations on prudential and reporting standards. It will keep the situation under review, but presently does not plan to recommence consultation on any non-essential matters before 30 September.
APRA may continue to progress certain data reporting initiatives where they are critical to meeting its mandate in the current environment, including new data collections related to the impacts of COVID-19. APRA is also reconsidering the implementation dates and transition timeframes for prudential and reporting standards that have been recently finalised but not yet implemented. Further details on any adjustments will be provided shortly.
The suspension will specifically include APRA’s program to replace the current data collection tool Direct to APRA (D2A) with a new solution, APRA Connect. APRA Connect was previously expected to go live in September.
APRA and ASIC have jointly written to registrable superannuation entity (RSE) licensees to provide guidance to help them manage the financial and operational challenges associated with COVID-19, while continuing to meet their obligations to look after members’ best interests. The letter addresses issues in relation to liquidity, communication with members, insurance, and monitoring for scams and fraud.
APRA has published answers to the following superannuation-related frequently asked questions (FAQs) about COVID-19:
- In light of the additional pressures on the administration of superannuation funds, what action should trustees be taking?
- Will APRA continue with the Super Data Transformation project?
- Is APRA providing trustees relief from complying with SPS515 Strategic Planning and Member Outcomes, in particular the requirement to undertake a business performance review (BPR) by 31 December 2020?
- APRA has some data queries underway with certain trustees – are these continuing?
- Should trustees continue to undertake a trial outcomes assessment?
- Will APRA’s superannuation publications be released as planned?
- Will APRA publish the updated MySuper Product Heatmap with updated fee data in June 2020?
- Will APRA proceed with thematic activity relating to outsourcing and conflicts management, which had been planned for 2020?
- Will APRA take action against trustees for breaching the three-day portability rule?
- Will the publication of the industry level findings from the joint work on trustees’ oversight of fees and other charges be deferred?
APRA’s announcements in relation to COVID-19 are available on its website.
ASIC
ASIC has indicated it is focusing its regulatory efforts on challenges created by the COVID-19 pandemic until at least 30 September 2020. Other matters where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters will also be prioritised.
ASIC has immediately suspended a number of near-term activities which are not time-critical, including consultation, regulatory reports and reviews. Of relevance to superannuation, these include the ASIC report on executive remuneration and the updated guidance on internal dispute resolution (RG 165).
ASIC has stated that it is committed to working constructively and pragmatically with the firms it regulates, mindful they may encounter difficulties in complying with their regulatory obligations due to the impact of COVID-19. Where warranted, relief or waivers from regulatory requirements will also be provided.
In addition to its joint letter with APRA (see above), ASIC has also published answers to the following superannuation-related FAQs about COVID-19:
- Will the publication of the industry level findings from the joint work on trustee’s oversight of fees and other charges be deferred?
- Will ASIC be amending ASIC Class Order [CO 14/443] to extend relief for portfolio holdings disclosure obligations?
- Will ASIC be providing any relief from the requirement to hold an annual members’ meeting under section 29P of the Superannuation Industry (Supervision) Act 1993?
More information about COVID-19 is available on ASIC’s website.
ATO
The ATO has published information about the application process for early release of superannuation under the new compassionate ground (see above) and also made available additional information about implementation of the COVID-19 measures on its website.
AFCA
The Australian Financial Complaints Authority (AFCA) has advised financial firms it will modify its approach to dispute resolution to take into account all regulatory and legislative changes announced as part of Australia’s COVID-19 response.
Complaints about COVID-19 will be prioritised to ensure those impacted have their issues resolved as quickly as possible. AFCA will take into account the circumstances and context in which financial firms are currently operating when considering complaints. AFCA understands firms may be putting in place alternate staffing arrangements and may not be in a position to quickly act on requests for information.
AFCA is encouraging financial firms to continue to:
- work constructively and reasonably with affected consumers during any period of disruption
- openly and transparently communicate with consumers about any delays they may experience in decision making, claims or complaints handling caused by the impact of COVID-19 on their business.
AUSTRAC
As noted above, AUSTRAC will introduce an AML/CTF rule to ensure superannuation funds making payments to their members under the new Coronavirus compassionate ground early release initiative will not have to conduct additional customer verification.
AUSTRAC has indicated it will continue to accept lodgements of compliance reports by reporting entities until 30 June, without risk of compliance action. The AML/CTF Compliance Report 2019 would ordinarily have been due by 31 March.
In addition, AUSTRAC has stated that it will constructively work with reporting entities as they manage their money laundering and terrorism financing risks during this disruptive period. This includes considering the entity’s circumstances when applying the AML/CTF laws.
AUSTRAC has more information about its approach to COVID-19 on its website.
Impacts on Parliamentary sittings, Budget and Intergenerational Report
After sitting on 23 March to pass the legislation necessary for the Government’s COVID-19 economic support package, Parliament’s remaining Autumn sittings and all its Winter sittings were cancelled. Under a revised schedule Parliament was due to resume on 11 August however an earlier sitting will be necessary to pass legislation for the JobKeeper wage subsidy announced on 30 March.
The 2020-21 Budget, which was to have been held on 12 May, has been deferred until 6 October.
The Coronavirus Economic Response Package Omnibus Act 2020 has amended the Charter of Budget Honesty Act 1998 so that the next Intergenerational Report, which was due in the middle of this year, will now be due for release on or before 30 June 2021.
