Superannuation Legislation Update - 13 October 2022

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 (see below).

The amended provisions of the Bill commence on the first day of the first quarter after the day the Bill receives Royal Assent.

The Bill was Read for the 3^rd time on 26 September 2022 and sent to the Senate.

Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022

This Bill amends the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to increase the Commonwealth Seniors Health Card income test limits to $90,000 a year for a single person (from $57,761) and $144,000 a year for couples (combined) (from $92,416).

If passed, these new thresholds will apply from 7 days after this Bill receives Royal Assent. These new thresholds will be again indexed on 20 September 2023 and annually, on 20^th September, thereafter.

20 September 2022 (if passed). That date now having passed, the Bill has now been amended to substitute “20 September 2022” to “the day this item commences”.

Amendments proposed by Opposition: Committee of the Whole Debate 28 September 2022. Amendments (7 Government, 10 Opposition) agreed to. Third Reading agreed to.

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).

Introduced into HoR 7 September 2022.

Third Reading agreed to 28 September 2022 (after Federation Chamber’s Second Reading).

Was sent to the Senate for concurrence when the Senate next sits but has now (28 September 2022) been referred to the Senate Community Affairs Legislation Committee for response by 20 October 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.

AIST made a submission on 12 August last year in response to Consultation and on 22 December 2021 re the Financial Accountability Regime and will analyse these again-introduced (and perhaps revised) Bills.

Introduced into HoR 8 September 2022.

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate) in the HoR on 28th September and, the Third Reading having been agreed to, passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

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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) in the HoR on 28th September and, the Third Reading having been agreed to, passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

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 and will analyse these again-introduced (and perhaps revised) Bills.

Introduced into HoR 8 September 2022

The FAR Bill, FSR Bill and the CSLR Bills were debated (via Cognate Debate) in the HoR on 28th September and, the Third Reading having been agreed to, passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 2022.

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) in the HoR on 28th September and, the Third Reading having been agreed to passed to the Senate whereupon it has now been referred to the Senate Economics Legislation Committee for response by 20 October 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 will take effect on the day of the Bill’s Royal Assent.

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

This Bill has now been referred to the Senate Economics Legislation Committee for response by 17 November 2022.

Amendments to remove the Faith-based exception from the Bill and add AMM Notice requirements have been proposed by Mr Stuart Robert MP.

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

Regulation amends the requirements, in the SIS Regulations (particularly r2.10), relating to the content of Annual Member Meeting Notices. The key changes from the original regulations are:

• The one page short form summary no longer must be the only information on the page, allowing funds to provide some explanations to accompany the short form summary, however it is not intended to allow promotional material or information that will detract from the aggregated expenditure information

• Only aggregate expenses in each category must be disclosed, not line-by-line expenses

• The definition of related party now aligns with accounting standards (AASB 124 Related Party Disclosures)

• Political donations (i.e. ‘gifts’) will need to be itemised as the section they are contained within (r2.10(1)(f)) has not been repealed.

In-Force. Amending Regulations registered 1 September 2022

9 September 2022

On 6 September, Senator David Pocock (Independent, ACT) issued his intention to disallow this Regulation under Section 42 of the Legislation Act 2003. As at 26 September 2022, this Motion to Disallow was postponed until 25 October 2022. AIST will continue to keep funds apprised of the progress of this issue.

On 28 September 2022, an updated version of the SIS Regulations – incorporating these AMM Amendments – was issued.

Amendments to the Telecommunications Regulations 2021

Amendments to the Telecommunications Regulations 2021 have been made via the Telecommunications Amendment (Disclosure of Information for the Purpose of Cyber Security) Regulations 2022.

The amendments enable telecommunications companies to temporarily share approved government identifier information (such as drivers licence, Medicare and passport numbers of affected customers) with regulated financial services entities to allow them to implement enhanced monitoring and safeguards for customers affected by the data breach.

In addition, Optus will be able to share identifiers to assist Commonwealth, and state and territory agencies, to detect and assist in preventing fraud.

In-Force. Amending Regulations registered 11 October 2022.

12 October 2022

Social Security Amendment (Family Law—Western Australia De Facto Superannuation Splitting) Determination 2022

This determination makes necessary consequential amendments to a number of instruments relating to valuing superannuation income streams for the purposes of the social security means test.

This reflects amendments made to the Family Law Act 1975 (Family Law Act) to give effect to a referral of power from Western Australia to the Commonwealth in respect of superannuation matters in family law proceedings for separating de facto couples in Western Australia.

In-Force. Amending Determination registered 7 October 2022

8 October 2022

Consultation (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.

Consultation (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.

Consultation (APRA)

Proposed prudential standard designed to strengthen the management of operational risk

APRA has released for consultation a new prudential standard designed to strengthen the management of operational risk in the banking, insurance and superannuation industries.

APRA proposes to introduce a new cross-industry Prudential Standard CPS 230 Operational Risk Management (CPS 230) which will set out minimum standards for managing operational risk, including updated requirements for business continuity and service provider management.

The proposed Prudential Standard CPS 230 Operational Risk Management (CPS 230) is attached to the Consultation materials.

Consultation opened 28 July. Submissions will be accepted until 21 October 2022.

Discussion paper (APRA)

Strategic planning and member outcomes: Proposed enhancements

Recognising that SPS 515 is relatively new and RSE licensee practices continue to mature, APRA is now seeking to move beyond the ‘documentation-focus’ of the implementation period – where supervisory engagement focused on the business plan, the member outcomes assessment and the business performance review, to one where member outcomes considerations are embedded and integrated across an RSE licensee’s business operations.

Recent benchmarking of RSE licensee implementation of SPS 515 has made clear there remain opportunities for improvement and enhancement. This discussion paper reflects APRA’s view on how SPS 515 and associated guidance must evolve and seeks input from the superannuation industry in pursuit of the common goal of delivering better outcomes to all members.

In undertaking this review of SPS 515, APRA’s approach is informed by plans to modernise the prudential architecture to deliver a simplified and more cohesive framework that provides RSE licensees clarity on their obligations and flexibility to meet them. APRA’s objective is that the superannuation prudential framework, anchored by revised SPS 515, will be more integrated, have a greater focus on outcomes and be easier to understand and navigate. This discussion paper also describes how connected reforms will be pursued consistent with this objective of a simple and forward-looking framework.

Consultation opened on 1 August 2022 and will close on 11 November 2022.

Information provided in response to this paper will inform revisions to SPS 515 and associated guidance, with consultation on the draft standard and guidance expected to commence in 2023.

AIST will make a submission in relation to this discussion paper.

Consultation (Attorney-General)

Review of Australia’s Modern Slavery Act 2018

The Australian Government is undertaking a statutory review of the Act’s operation and compliance over the first three years since commencement.

The A-G’s office is interested to know whether additional measures are necessary to improve the Act’s operation and compliance in the Australian context.

The review commenced on 31 March 2022 and is to be completed within one year, followed by a report to be tabled in Parliament. Professor John McMillan, AO, is leading the review, supported by the Attorney-General’s Department.

The reporting obligations of the Modern Slavery Act apply to entities, including superannuation entities, with a consolidated annual revenue of at least AU$100 million over its twelve month reporting period.

Consultation closes 22 November 2022 (and opened 22 August 2022).

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: Strengthening crisis preparedness on 10 May 2022.

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

Consultation (APRA)

Strengthening Financial Resilience in Superannuation

This Consultation remains OPEN.

APRA is seeking to gain further insights on sources of funding for RSE licensees, the use of the operational risk financial requirement (ORFR), reserving practices, protections afforded to trustees via insurance, provisioning for contingency expenditure items, and how these might need to adapt over time.

While the Consultation period ended 11 March 2022, this Consultation currently shows as “Open to Submissions”.

AIST made a submission re: Strengthening Financial Resilience in Superannuation on 11 March 2022.

Consultation (Treasury)

Review of Your Future, Your Super Measures

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Consultation Paper

The Your Future, Your Super measures, which are now law, are aimed at increasing member engagement, reducing fees, increasing performance, and holding trustees to account for the decisions they make.

The current Government has made a commitment to review the Your Future, Your Super measures to consider whether there have been any unintended consequences and implementation issues arising from any of the four elements of these measures:

• Performance test
• YourSuper comparison tool
• Stapling
• Best financial interests duty

The focus of the review is on ensuring that Australian superannuation funds perform better, delivering dignity in retirement, and avoiding perverse outcomes for members.

Treasury will also convene a technical working group on the performance test. The technical working group will be a consultation forum to constructively work through key issues and consider potential solutions.

Consultation will close 14 October 2022 (and opened 7 September 2022).

AIST has drafted, on the basis of workshops and roundtables seeking the views of AIST Member Funds, a submission to Treasury. The submission is, at the date of writing, being reviewed buy the AIST Policy Committee.

Consultation (ATO)

Taxpayers’ Charter

The Taxpayers' Charter outlines:

• taxpayers’ rights and obligations when interacting with the ATO
• what taxpayers can expect from the ATO as it administers the tax and superannuation systems.

The ATO are conducting a Review of the Taxpayers’ Charter “…to make sure the Charter:

• meets community expectations about how we engage with taxpayers when we administer the tax, super and registry systems
• accurately reflects what you can expect from us
• helps our staff when interacting with you
• fulfils its purpose of informing you of your rights and obligations when dealing with us.”

Consultation will close 24 October 2022 (and opened 26 September 2022).

Review Consultation (Treasury)

ASIC Industry Funding Model Review

The Review is being led by Treasury, in consultation with ASIC, the Department of Finance (Finance)

and the Department of the Prime Minister and Cabinet (PM&C).

On 8 August 2022, the Government announced a review of the Australian Securities and Investments Commission (ASIC) Industry Funding Model (IFM) and issued a Terms of Reference to guide the Review.

The Government has released a Discussion Paper to seek stakeholder views on options, examples of potential changes and questions that are designed to examine and address a range of issues set out in the Review’s Terms of Reference.

Stakeholder feedback received through this process will inform the Review’s consideration, including to consider whether any refinements are required to the IFM to ensure its settings remain appropriate.

Consultation will close 28 October 2022 (and opened 28 September 2022).