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AIST’s pre-budget submission – released earlier this week - has called on the Government to reiterate its commitment to the legislated timeline to increase the SG of 12%. We argue this is fundamental to ensuring that ordinary working Australians, especially low income earners and casual workers, can achieve financial security in retirement.
Our submission also recommends a one-off Government contribution to repair depleted low-income superannuation balances after the 2020 COVID-19 relaxation of early release provisions, of a quarter of the amount withdrawn capped at $5000.
AIST’s submission says that rather than frame superannuation as a magic pudding to be raided to solve all ills, the government has a responsibility to ensure the system was sustainable and fair for all Australians. It argues that reducing tax concessions on high super balances (such as those over $10 million) would raise government revenue that could be re-directed to improving retirement outcomes for less well-off Australians. The additional revenue could also reform the Age Pension taper rate, which is widely recognised as being too harsh on middle-income households.
Other recommendations in AIST’s pre-budget submission include:
In a much-needed victory for ASIC that also helps clarify the difference between general and personal advice, the High Court yesterday confirmed that Westpac Bank subsidiaries, Westpac Securities Administration and BT Funds Management, breached financial services laws, including the requirement to act in their clients’ best interests and the requirement to act honestly, efficiently and fairly.
The unanimous High Court judgment upheld the Full Federal Court decision regarding the conduct of Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM), dismissing their appeal and holding that they breached the Corporations Act by providing personal financial product advice in calls made to 14 customers. Neither company was licensed to provide personal financial advice.
The decision of the High Court, which confirms the Full Federal Court decision, clarifies the difference between general and personal advice for consumers and financial services providers.
On 28 October 2019, ASIC won an appeal in the Full Federal Court against WSAL and BTFM with respect to two telephone campaigns by the Westpac companies which recommended that customers roll out of their other superannuation funds into a Westpac-related superannuation account. As a result of the campaigns, Westpac increased its funds under management by almost $650 million between 1 January 2013 and 16 September 2016.
ASIC Commissioner Danielle Press said: “The High Court has provided clarity concerning the differences between personal advice and general advice. Westpac were actively conducting a sales campaign aimed at rolling customers into Westpac products under the banner of general advice.”
“By clarifying the distinction between tailored, quality, personal advice in the customer’s interest, and general advice given via a sales campaign, today's judgment will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients,” Ms Press added.
The matter will now return to the Federal Court for a hearing on relief on a date to be advised. ASIC will seek orders for pecuniary penalties in relation to WSAL and BTFM’s conduct.
This is an important decision for superannuation trustees as the Court confirmed the pre-existing relationship of trustee/member was relevant to whether a member might expect that their personal circumstances were taken into account and noted the limited effect of a once off general advice warning.
Click here to read the full judgement.
RBA Governor Philip Lowe has confirmed Australia’s recovery is stronger than expected, with unemployment ending the year at 6.6 per cent, compared to the bank’s August forecast of 10 per cent.
In a speech to the National Press Club this week, Mr Lowe said while the upswing would continue, the level of GDP would not return to pre-COVID levels due to lower population growth. Predictions are that inflation will stay below 2 per cent over the next couple of years, with wage growth to pick up from its current low rate, but only very gradually. He also stated that JobSeeker should be increased permanently and that the cuts scheduled for 31 March would impact the Australian economy through lower spending.
Maurice Blackburn has joined calls from other commentators for urgent action on outstanding banking Royal Commission recommendations, with this week marking two years since the final report into the financial services industry was handed down by Commissioner Kenneth Hayne.
Maurice Blackburn Principal Kim Shaw said crucial recommendations made by the Royal Commission to protect consumers had stalled, with many requiring urgent implementation in 2021.
“Commissioner Hayne’s final report provided a roadmap for changes that were needed right across the financial services industry to protect consumers from poor behaviour, much of which was well-documented throughout the banking Royal Commission,” Ms Shaw said.
“Yet as recent reports have noted, it is now two years since that time and more than half of Commissioner Hayne’s recommendations are still yet to be acted on in full or have been abandoned altogether.
“The Federal Government has pointed to COVID-19 as the reason for delay on a number of recommendations, but the fact remains that many of these recommendations are now more important than ever in ensuring consumers are properly compensated for harm caused and protected from poor behaviour.
“It abandoned key recommendations from Commissioner Hayne to protect consumers against unfair or irresponsible lending and to ban commissions for mortgage brokers – both of which were crucial measures that have become even more important in the wake of COVID-19.
“As the Royal Commission demonstrated, banks’ relaxed lending standards and brokers’ involvement in loan sales resulted in widespread debt over-commitment, and our firm has represented hundreds of consumers who have fallen victim to these issues through irresponsible lending.
“Yet rather than act on the recommendations from Commissioner Hayne to address these issues, the Federal Government continues to try and make it easier for banks to lend money and provide credit without further necessary protections – measures that risk causing considerable problems for consumers when they can least afford it.
Mr Shaw said the delay in implementing a Compensation Scheme of Last Resort (CSLR) was another key recommendation that must be acted on.
“Commissioner Hayne’s report makes clear such a scheme is badly needed to compensate victims of negligent financial advisors who have gone bust, yet the Federal Government is still to introduce legislation to Parliament for this,” he said.
The ATO has released an updated roadmap of changes impacting the superannuation industry that involve the ATO.
The roadmap includes items which are already in train such as SuperStream Rollovers version 3 which includes SMSFs in the process, and those that are proposed but yet to be legislated including Your Future, Your Super, Reuniting More Superannuation and changes to KiwiSaver.
The roadmap can be found here.
The current status of superannuation Bills currently before Parliament can be found here.
04 February 2021