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Legislation to ban the grandfathering of conflicted remuneration paid to financial advisers has been introduced to Parliament today, however AIST has concerns that it does not fully address recommendations from the Financial Services Royal Commission.
Rather than introducing a complete ban on conflicted remunerations, the legislation proposes a rebate scheme to be administered by product issuers. AIST is concerned that this scheme could entrench the incentive for advisers to recommend that clients stay in existing, often poor performing and costly, products.
AIST seeks a complete ban on the payment of conflicted remuneration through immediate rebates to clients, whether that conflicted remuneration can be attributed to a particular client or paid to a client group. This is the only way to ensure that members’ best interests are met and that advisers are not tempted to game the system through an ill-defined and difficult to monitor rebate system.
We are also advocating for the ban on conflicted remuneration to commence in 2020, rather than the proposed start date of 2021.
It is expected that regulations to implement this bill will also be introduced with no substantive changes from the draft regulations which were consulted on by Treasury earlier in the year.
To read more about AIST’s response to draft regulations on grandfathering click here.
Time is running out for the passage through Parliament of the Putting Members’ Interests First Bill, creating growing uncertainty for funds who will need to implement insurance changes and communicate this to members.
This Bill contains measures to change insurance to an opt-in basis for new members under 25 or active account balances under $6,000.
The Putting Members' Interests First Bill was the subject of a report issued last week by the Senate Economics Legislation Committee, which recommended that the Bill be passed with an amended effectiveness date of 1 December 2019.
As the proposed implementation date in the Bill is presently 1 October 2019, and with only two sitting weeks of Parliament left prior to that date, amending this Bill would provide some relief to funds needing to prepare for this measure’s implementation. Nevertheless, AIST is still calling for a commencement date of June 2020, to ensure that adequate preparation can be undertaken by trustees prior to implementation.
Other Bills in front of Parliament include a Bill to implement the SG opt-out for high income members with multiple employers (the “Super Measures No. 1 Bill”), the Bill to remove the salary sacrifice loopholes which can reduce SG contributions (the “Tax Integrity No. 1 Bill”) and, as outlined above, a Bill is being introduced to ban grandfathered commissions on super and investment products.
The Tax Integrity No. 1 Bill - which passed through to House of Representatives this morning - contains the measure to remove the salary sacrifice loopholes which can reduce SG contributions for affected members. This was previously in a bill which lapsed prior to the election, which also contained a measure to impose choice of fund requirements on enterprise agreements. Although the Government has committed to that measure, it has not yet been reintroduced to Parliament.
The latest Household, Income and Labour Dynamics in Australia (HILDA) Statistical Report released this week shows the proportion of people aged 65 years and over who qualify for the Age Pension has dropped significantly since the early 2000s.
The proportion of people aged 65 years and over and that were new retirees on the Age Pension has fallen:
While the data reveals a fall in median household incomes since 2001, data on earnings inequality shows a convergence between earnings of full time male employees and female employees in recent years. There has also been a growth in dual earner couple households as a share of all working age couple households. There has been little net change in overall income inequality between 2001 and 2017.
Other key findings include:
The Morrison government has removed the proposed 12 month amnesty for employers on unpaid super from the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 following an amendment made last week.
The amendment would have seen employers who have unpaid superannuation given a period of 12 months during which they could rectify this with their employees without penalty.
The amendment had also proposed to increase the penalty on employers for not complying with superannuation payments, a move supported by AIST in order to deter employers who fail to pay SG on behalf of employees.
The Australian Prudential Regulation Authority (APRA) has released a revised implementation plan for its new data collection solution.
APRA is extending the implementation timeline for the solution replacing D2A (Direct to APRA) until later in 2020. Proposals to update data collection have been afoot for many years, and have been continually delayed, and are yet to come to fruition.
APRA has promised additional information in coming months on:
APRA has stated it will ensure entities can continue to report using (D2A) after March 2020 until the new solution is finalised.
Fund readiness is key to the successful implementation of the new solution, and AIST hopes APRA will provide the industry with sufficient information and consultation opportunities to prepare for the new solution.
The report of the recent APRA Capability Review noted concerns that APRA was slow in providing guidance on new technologies.
More information about the revised implementation plan can be read here.
The Australian Tax Office is hosting a webinar on lost members and unclaimed super money including inactive low-balance account reporting obligations on Wednesday 14 August 2019 from 11am – noon (AEDST).
The webinar is primarily aimed at staff involved in reporting these obligations to the ATO, and will:
Further details about the webinar can be found here.
As reported in our policy alert yesterday, the Australian Investments and Securities Commission (ASIC) has released an information sheet on recent amendments to the SIS ACT which ban trustees from influencing employers in regards choosing default funds.
The release of this information follows calls from industry stakeholders for more clarity and guidance about the application of the amendments, which also prohibit trustees from engaging in conduct that could influence an employer to encourage employees to choose or retain membership of a fund.
The amendments to section 86A of the SIS Act came into force on 6 April 2019 and apply to all conduct on or after this date. Additionally, they apply to all arrangements entered into prior to this date that have not yet occurred.
The seven-page information sheet includes a background to the amendments; the prohibition against particular conduct by a trustee or its associates; exemptions from section 68A; the penalties that apply for a breach.
ASIC has also provided six case studies that include common scenarios and issues to help trustees and their associates understand their obligations under section 68A. The cases studies include cases where a breach would occur and those where no breach would occur.
The cases cover:
AIST is seeking further clarity with ASIC on what we see as several remaining grey areas of amendments and will provide updates in further policy alerts or our regular policy news.
For further information, please contact AIST’s senior policy advisor, Karen Volpato at email@example.com
For more information on the background to the amendments, AIST has produced a webinar: ‘Treating’ employers – what you need to know.
The webinar - recorded ahead of ASIC's information sheet release - is available here.
This webinar presented by AIST and Lincoln Rodgers, Lawyer, Thomson Geer, discusses the Royal Commission’s findings and recommendations regarding the treating of employers by trustees.
01 August 2019