Superannuation Legislation Update - 1 December 2022

Financial Accountability Regime Bill 2022

The Financial Accountability Regime Bill 2022 introduces a new accountability regime for the banking, insurance and superannuation industries.

Schedules 1 and 2 to the Financial Sector Reform Bill 2022 make consequential amendments to relevant Acts to support the Financial Accountability Regime.

The Bill commences on Royal Assent. For superannuation, the regime commencement date is 18 months after the commencement of the FAR Bill.

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate).

We understand that these Bills will NOT now progress in the Spring Sitting but may be debated instead in a later sitting.

Financial Services Compensation Scheme of Last Resort Levy Bill 2022

The CSLR is intended to support confidence in the financial system’s external dispute resolution framework.

The scheme will provide compensation where a determination issued by AFCA remains unpaid and the determination relates to a financial product or service within the scope of the scheme.

The Commonwealth will fund the establishment of the scheme and its operation in the first year. A levy will be imposed on the financial services industry to fund the scheme in future years.

The establishment of the scheme and the supporting levy framework commences on the day after Royal Assent.

The operator of the scheme can begin to make compensation payments under the scheme from 1 July 2023.

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate).

We understand that these Bills will NOT now progress in the Spring Sitting but may be debated instead in a later sitting.

Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2022

As above.

The CSLR Bills were introduced in October last year but were prorogued on 11 April 2022 with the declaration of the election.

AIST made a submission last year re the CSLR.

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate).

We understand that these Bills will NOT now progress in the Spring Sitting but may be debated instead in a later sitting.

Financial Sector Reform Bill 2022

This Bill deals with consequential amendments to various Acts and transitional matters arising from the enactment of the Financial Accountability Regime Act 2022 and to establish the financial services compensation scheme of last resort (CSLR).

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate).

We understand that these Bills will NOT now progress in the Spring Sitting but may be debated instead in a later sitting.

Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022

The purpose of this Bill is to improve the workplace relations framework by:

• Restoring fairness and integrity to workplace relations institutions
• Boosting bargaining
• Encouraging bargaining for single enterprise agreements
• Remove unnecessary limitations on access to the low-paid bargaining stream and the single-interest employer authorisation stream and provide enhanced access to Fair Work Commission support for employees and their employers who require assistance to bargain
• Restoring balance and fairness to the system
• Improving job security and gender equity by including both concepts in the objects of the Fair Work Act
• Improving workplace conditions and protections by providing stronger access to flexible working arrangements, stronger protections for workers, including victim survivors of sexual harassment, and enhancing small claims procedures to enable unpaid entitlement recovery and
• Updating the workers’ compensation presumptive liability provisions for firefighters in the Safety, Rehabilitation and Compensation Act 1988 (SRC Act).

The provisions in this Bill have various start dates.

Introduced into the HoR 27 October 2022.

The Bill progressed to the Senate on 21 November 2022.

The Senate Committee of the Whole debated this Bill on 30 November and 1 December 2022. A (large) number of amendments are expected to be made before this Bill is Passed.

Treasury Laws Amendment (2022 Measures No. 4) Bill 2022

The principle provisions relating to superannuation are contained in Schedule 6 of the Bill.

Schedule 6 to the Bill amends the Corporations Act, the ASIC Act and the SIS Act to extend and adapt the financial reporting and auditing requirements in Chapter 2M of the Corporations Act to apply to registrable superannuation entities.

This Bill was previously known as the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 and was introduced to Parliament earlier this year. However, it lapsed upon dissolution of Parliament prior to the Federal election.

The context of the proposed legislation, a comparison between the current and proposed laws and a detailed explanation of the provisions are in the Explanatory Materials from Pages 85 to 148.

It is intended that the proposed amendments in Schedule 6 will commence on and from 1 July 2023.

The Bill was immediately referred to the Senate Economics Legislation Committee for report on 25 January 2023.

The Bill was debated in detail and Read for a 3^rd time on 30 November 2022.

Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022

A Bill with a very similar title [Treasury Laws Amendment (Modernising Business Communications) Bill 2022], which had lapsed at the dissolution of Parliament at 11 April 2022, has been tabled by the Assistant Treasurer on 23 November 2022.

While this Bill covers similar topics such as the execution of documents electronically and the electronic holding of meetings (Schedule 1, Parts 1 & 2), it also updates the payment provisions in the Treasury Laws (Schedule 1, Part 3) and replaces the requirements to give notice of certain events in Treasury Laws in newspapers and government gazettes to “[in an] accessible and reasonably prominent manner” (Schedule 1, Part 4).

Further, Schedule 2 of the Bill proposes that amendments be made as a result of the Australian Law Reform Commission’s recommendations to simplify and improve the navigability of Australia's financial services laws.

Schedule 3 to the Bill amends the Corporations Act to transfer longstanding and accepted matters currently contained in ASIC legislative instruments into the primary law.

The amendments will improve navigability of the law and provide industry and consumers with greater certainty and clarity when interacting with Treasury laws.

Schedule 4 to the Bill makes a number of miscellaneous and technical amendments to Treasury portfolio legislation. The amendments reflect the Government’s ongoing commitment to the care and maintenance of Treasury portfolio legislation.

The amendments correct drafting errors, repeal inoperative provisions, address unintended outcomes and make other technical changes.

The Commencement Dates of the provisions are various and are described at Item 2 of the Bill.

The Bill was immediately referred to the Senate Economics Legislation Committee for report also on 25 January 2023.

The Bill was tabled and Read for the 1^st and 2^nd times on 23 November 2022.

Superannuation Industry (Supervision) Amendment (Annual Members’ Meetings Notices) Regulations 2022

This regulation amends the requirements, in the SIS Regulations (particularly r2.10), relating to the content of Annual Member Meeting Notices.

In-Force: Amending Regulations registered 1 September 2022

9 September 2022

On 21 November, Senator Lambie indicated that she would move a Motion to Disallow also. While Sen. Lambie was scheduled to move the Disallowance on 1 December however it is now expected that the Debate on the Motion will be postponed until 6 February 2023.

Senator McKim, on 23 November 2022, indicated that he would move a Disallowance Motion within 10 days.

AIST believes that the passage of the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 (see above), the proposed transparency measures of that Act and the undertaking from the Assistant Treasurer that ASIC will assemble and publish a “Super Transparency Report” is likely to stop the lodgement of Disallowance Motions in relation to this Regulation.

Previously, Senator David Pocock had moved to disallow the Regulation however that motion was defeated – and the Regulation NOT disallowed – on 25 October 2022.

Superannuation (prudential standard) determination No. 2 of 2022

&

Superannuation (prudential standard) determination No. 3 of 2022

The Government published two determinations on 22 November. The purpose of these two Determinations is to:

Determination No. 2: withdraw SPS 530 (Investment Governance) and replace it, effective 1 January 2023, with SPS 530. The Prudential Practice Guide in relation to SPS 530 will not be published/take effect until mid-year.

Determination No. 3: withdraw SPS 510 (Governance) and replace it, effective 1 January 2023, with SPS 510.

The changed SPS 510 also reflects CPS 511 (for those superannuation entities determined to be Significant Financial Institutions (SFIs) at that date).

APRA will be engaging with RSE licensees on their approach to implementing SPS 530 in the second half of 2023.

In-Force: BOTH Determinations were registered 22 November 2022.

1 January 2023

Treasury Laws Amendment (2022 Measures No. 2) Bill 2022

Among other provisions, this Bill (Schedule 5) reduces the minimum age from which ‘Downsizer Contributions’ can be made from 60 to 55 by amending s292-102(1)(a) of the ITAA97. Changes in SIS Regulation 7.04 regarding contributions acceptance rules will be made by Regulation. Regulation made 29 September 2022.

This Bill/Act and the legislation described below (Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Act 2022) complement each other and ensure that the downsizer contribution provisions are enacted equitably.

Passed by both Houses 28 November 2022 without amendment.

It awaits Royal Assent.

For Schedule 5, 1 January 2023.

Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022.

Eligible income support recipients (including Age Pension recipients) realise a sum of money via the sale of their principal place of residence that would adversely affect, via the deeming rate of 2.25% of assets over a certain threshold, any Age Pension (and other Commonwealth Income Support sources) they receive.

There is currently a 12 month window where a new principal residence can be bought and, during that period, a deeming rate of 0.25% will apply to those assets.

This Bill/Act proposes to extend that 12 months to 24 months (with a further 12 month extension available under certain circumstances).

On 25 November 2022 this Bill passed both Houses without amendment and has been given Royal Assent.

Act No. 62 of 2022

The provisions of the Act will take effect on 1 January 2023.

Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022

The effect of this Act is to:

•              allow for the suspension (rather than cancellation), up to two years, of Age Pension entitlements if any income they receive would otherwise preclude them (via the Income Test) from receiving the Pension

•              allow working pensioners, and their pensioner partners, to retain their pensioner concession card for up to two years (despite their having a nil current Social Security pension entitlement as above) and

•              enable eligible social security pensioners over age pension age to earn up to another $4,000 before the income test is applied and their payments affected. This will occur through a $4,000 increase in the work bonus unused concession balance for each eligible recipient, and a $4,000 increase to the maximum unused concession balance, until 31 December 2023.

Passed by both Houses 22 November 2022 and, it having received Royal Assent on 23 November 2022, became Act No. 55 of 2022.

1 December 2022

Treasury Laws Amendment (2022 Measures No. 3) Bill 2022

Schedule 5 to the Bill amends the SIS Act to provide for an alternative annual performance test for faith-based products. APRA may determine that a product is a faith-based product if a trustee for the product provides APRA with a valid application.

This Schedule was to take effect on the day of the Bill’s Royal Assent.

AIST made a submission re: the draft legislation, on 23 August 2022.

The Bill was passed with amendments on 28 November 2022.

Schedule 5 was removed, by the Government and it was put that it was more-appropriate that these provisions form part of the review of the YFYS.

As this Bill has passed with amendments, those amendments have now been approved by the HoR.

Royal Assent will now be sought.

No longer applicable (the commencement date has also been removed from the Bill).

Privacy Legislation Amendment (Enforcement and Other Measures) Bill

The Bill amends the Privacy Act, the Australian Information Commissioner Act 2010 (AIC Act) and the Australian Communications and Media Authority Act 2005 (ACMA Act) to

• increase penalties under the Privacy Act
• provide the Australian Information Commissioner with greater enforcement powers, and
• provide the Commissioner and ACMA with greater information-sharing powers.

Passed by both Houses 28 November 2022.

This Bill has passed with an amendment, which has now been approved by the HoR.

Royal Assent will now be sought.

The day after this Act receives Royal Assent

ASIC Corporations (Financial Services Guides) Instrument 2022/910

This Instrument grants relief to authorised representatives of a financial services licensee who deal in general insurance products and bundled consumer credit insurance products and provide claims handling and settling services (CHSS) from the requirement to provide a Financial Services Guide (a FSG).

In-Force: Instrument registered 28 November 2022.

29 November 2022

Review (Treasury)

Quality of Advice Review

Consistent with recommendations 2.3, 2.5 and 2.6 of the Final Report of the Hayne Royal Commission, the Government is commissioning this Review which will consider how the regulatory framework could better enable the provision of high quality, accessible and affordable financial advice for retail clients.

The Review (‘QAR’) will not make recommendations on:

• professional standards for financial advisers
• Royal Commission Recommendations 2.7 to 2.10
• changes to the definitions of ‘retail client’, ‘wholesale client’, and ‘sophisticated investor’
• financial services redress arrangements or
• the application of taxation and privacy laws to financial advice

Released 11 March 2022.

A report will be provided to the Government by 16 December 2022.

AIST has provided a submission for this consultation.

A further consultation, to which AIST will be making a Submission, relates to Conflicted Remuneration in the context of the provision of Financial Advice.

Review (Treasury)

Quality of Advice Review – Proposals Paper

A Proposals Paper, for consultation, as a part of the Quality of Advice Review, was issued on 29 August 2022. Among other proposals, Review Lead, Michelle Levy proposed:
 

• that the current ‘Best Interests’ and other financial advice duties were to be consolidated into the provision of ‘good advice’,
• that a number of consumer protections were to be removed and
• that annual fees disclosures for ongoing financial advice would no longer be required.

The Consultation Paper – Proposals for Reform was issued on 29 August 2022, for comments and further submissions. This Consultation will close on 23 September 2022.

As 23 September 2022 was a Public Holiday in Victoria, AIST was permitted to provide a submission for this consultation on 26 September 2022.

Review (Treasury)

Quality of Advice Review – Conflicted Remuneration Paper

This Conflicted Remuneration Paper provides a high-level snapshot of the key findings from the data collected by the Review on general insurance and life insurance and puts forward a series of proposals for reform.

This paper is for information only and there is no invitation for consultation or feedback re these proposals.

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Consultation (APRA)

Strengthening Crisis Preparedness

On 6 September 2022, APRA released for consultation draft guidance on financial contingency and resolution planning. The objectives of the guidance re: the proposed new prudential standards: CPS 190 Financial Contingency Planning and CPS 900 Resolution Planning are set out below:

• CPG 190 is intended to assist entities in meeting the key requirements of the proposed new prudential standard. It provides further explanation of the outcomes that APRA expects, so that entities can meet these expectations through their actions. It is principles-based, rather than prescriptive, and includes examples of better practice.

• CPG 900 sets out a framework for how APRA expects to engage with entities in developing and implementing a resolution plan. The proposed draft guidance explains what is expected of entities in the resolution planning process and sets out the factors that APRA will have regard to in developing resolution plans for individual entities.

• The detailed Consultation description is linked here.

• The 6 September APRA letter to Trustees is linked here.

Consultation will close 6 December 2022 (and opened 6 September 2022).

AIST made a submission re the first ‘round’ of consultation on 10 May 2022.

APRA is planning to finalise CPS 190 later this year and CPS 900 in the first half of 2023.

Consultation (Treasury)

Measuring what matters

The Treasury invites views on Budget Statement #4: Measuring What Matters and the adoption and development of a Measuring What Matters Statement in 2023.

The Budget Statement’s goal is:

In 2023, the Government will release a new stand-alone Measuring What Matters Statement tailored to Australia. Treasury will continue to research and consult experts and other stakeholders on what the Statement should measure, how the Statement should link to other frameworks and goals – including at the state and territory level – and how the Statement should be communicated.

The 2023 Measuring What Matters Statement will be an important next step in facilitating a more informed and inclusive policy dialogue on how to improve the quality of life of all Australians. Treasury looks forward to working with stakeholders and experts on this important project.

Consultation closes 31 January 2023 (and opened 25 October 2022).

Enquiry (PJC, Corporations and Financial Services)

Inquiry into ASIC's capacity and capability to respond to reports of alleged misconduct

The Parliamentary Joint Committee on Corporations and Financial Services has commenced an inquiry into the capacity and capability of the Australian Securities and Investments Commission (ASIC) to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct.

An Enquiry, which is identical but for one additional item in the Terms of Reference of the PJC Enquiry, is also being conducted by the Senate Economics References Committee, Senator Bragg (the Chair of this Committee, who is also a Member of the PJC, Corporations and Financial Services  Committee) having garnered the votes to conduct an enquiry.

On 27 October 2022, the Committee began an inquiry into ASIC’s capacity and capability to respond to reports of alleged misconduct.

The committee currently intends to table a report in both Houses of the Parliament by the last sitting day in June 2024.

Consultation (FRAA)

Effectiveness and capability review of the Australian Prudential Regulation Authority

the Consultation Paper itself.

The first Financial Regulator Assessment Authority (FRAA) review on the effectiveness and capability of APRA is a targeted assessment of its supervision and resolution functions, focusing on superannuation.

The scope of the review excludes matters that are under  consideration in other reviews or consultations, such as the review of the Your Future, Your Super laws.

Consultation closes 15 December 2022 (and opened 3 November 2022).

Consultation (AUSTRAC)

Consultation on guidance on enhanced customer due diligence and employee due diligence and training

AUSTRAC has released for consultation two draft updated guidance products – one on enhanced customer due diligence and the other on employee due diligence and training.

The Proposed updated guidance on Employee due diligence and Employee AML/CTF risk awareness training, discusses when and how a reporting entity should screen employees to make sure they do not pose a money laundering or terrorism financing (ML/TF) risk to the business.

The Proposed updated guidance on Enhanced customer due diligence (ECDD) program provides further insights into reporting entities ECDD program including outlining the relevant procedures, policies, systems and controls (including the role of senior management), to be applied in situations when ECDD, or customer identification and verification obligations, can and cannot be successfully conducted.

Consultation closes 15 December 2022 (and opened 3 November 2022).

Consultation (Treasury)

Multinational tax integrity: Public Beneficial Ownership Register

The Government is seeking comments on the design features for the first phase of a publicly available beneficial ownership register. The Government committed to introducing the register as part of its multinational tax integrity package.

The Government proposes to exempt regulated entities from the requirement to disclose trust beneficiaries if the relevant trust is a registrable superannuation entity (RSE). RSEs are subject to significant oversight and regulation through superannuation and prudential laws.

Additional disclosure is likely to impose a large regulatory burden on relevant trustees and the additional transparency is unlikely to give rise to significant benefits.

Regulated entities would only be expected to provide a RSE’s Name, Unique Superannuation Identifier, date of creation, and details of the RSE’s trustees.

Consultation closes 16 December 2022 (and opened 7 November 2022).

Consultation (APRA)

Superannuation Data Transformation Project Minor Amendments

APRA has today commenced consultation on minor amendments to reporting standards introduced under Phase 1 of the Superannuation Data Transformation (SDT) project. These amendments clarify investment option reporting and expenses reporting; reduce frequency of reporting for some requirements; and increase the time for submission of data for some requirements.

The proposed amendments are described on Page 5 of the Discussion Paper. Drafts of the amended Reporting Standards are available on the Consultation Homepage.

Consultation closes 2 December 2022 (and opened 7 November 2022).

Consultation (APRA)

Transfer planning in superannuation: proposed enhancements

On 10 November 2022, APRA released a discussion paper seeking feedback from superannuation trustees and other industry stakeholders on a series of measures to enhance planning by superannuation trustees in the event they need to transfer members out of – or into – their fund.

The prudential framework enhancements include new requirements for trustees to be prepared for a transfer of members and an update of the transfer planning guidance contained in Prudential Practice Guide SPG 227 Successor Fund Transfers and Wind-ups to strengthen and simplify the guidance.

Consultation closes 10 March 2023 (and opened 10 November 2022).

Consultation (APRA)

Financial resources for risk events in superannuation

This is “Part 2” of the Strengthening Financial Resilience in

Superannuation Consultation.

On 14 November 2022, in response to significant industry evolution, supervisory insights and industry feedback, APRA released a discussion paper that proposes to replace the existing Prudential Standard SPS 114 Operational Risk Financial Requirement (SPS 114) with enhanced obligations for trustees (to quote the Paper: “with materially reshaped requirements”).

On 19 November 2021, APRA released a discussion paper seeking feedback from superannuation trustees and other industry stakeholders on the current and emerging approaches for RSE licensees to maintain the financial resilience needed to protect members’ best financial interests.

AIST made a submission in relation to this Discussion Paper on 11 March this year. This Discussion Paper ‘spoke about’ Trustees’ management of financial resources, including the ORFR and other reserving practices – more-specifically in relation to SPS 515 (Strategic Planning and Member Outcomes).

This consultation relates, specifically, to the modification of SPS 114 (and SPG 114) – which supports SPS 515  - and is prompted by the changing environment and responses to the first ‘round’ of Consultation.

The proposed enhancements include widening the scope of permitted use of financial resources held to manage operational risks, reducing barriers to efficient use of these resources, and requiring trustees to adopt a more sophisticated risk-based approach to determining how much to hold.

The most-significant proposal is that RSE licensees would now be permitted to address potential problems before they adversely affect members.

Consultation closes 17 March 2023 (and opened 14 November 2022).

The Annual Report 2021-2022 of the ATO has been published.