Superannuation Legislation Update - 24 March 2022

Financial Accountability Regime Bill 2021

The Financial Accountability Regime will impose four core obligations:

First, the regime will impose accountability obligations on superannuation directors, senior executives and influential executives.

Second, the Bill includes key personnel obligations which requires a superannuation fund to "nominate senior and influential executives to be responsible for all areas of their business operations".

Third, the regime introduces deferred remuneration obligations which require superannuation funds to defer at least 40 per cent of the variable remuneration of senior personnel for a minimum of 4 years.

Finally, the bill introduces notification obligations which require superannuation funds to provide the regulator (APRA or ASIC) with certain information re: senior staff and the superannuation fund business.

Considered by Senate Standing Committee for the Scrutiny of Bills 18/03/2022. The Committee queried:

•              the broad discretionary powers to grant exemptions,

•              the fact that significant matters would be left to delegated legislation,

•              the fact that the Bill did not provide for significant documents to be tabled in Parliament

•              the fact that the Bill reversed the evidential burden of proof, and

•              the fact that the Bill allowed for the incorporation of external materials as existing from time to time

The Act commences the day after this Act receives Royal Assent.

An RSE Licencee will become ‘accountable entity’ from the start of the latest of:

(a) 1 July 2023; and

(b) the day that is 18 months after the commencement of this Act

Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021

Makes consequential amendments to relevant Acts to support the Financial Accountability Regime; and introduces the CSLR

Considered by Senate Standing Committee for the Scrutiny of Bills 18/03/2022.

The Committee queried: the appropriateness of provisions which reverse the evidential burden of proof

At the same time as the Financial Accountability Regime Act 2021 commences.

Financial Services Compensation Scheme of Last Resort Levy Bill 2021 &

Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2021

The levy framework creates a tax to be levied against relevant industry entities to fund the compensation scheme of last resort (CSLR).

Referred to Senate Economics Legislation Committee (Report due 15 February 2022)

The Report was received on 15/2/22. The Committee (SELC) recommended that the Bills proceed.

At the same time as the Financial Accountability Regime Act 2021 commences

Treasury Laws Amendment (2021 Measures No. 7) Bill 2021

The Bill amends the AFCA Act to assist in the closure of the SCT and to facilitate any transitional arrangements associated with the transfer of superannuation complaints to AFCA.

Passed by HoR on 25 August.

Before the Senate since introduced on 19 October 2021

Day of Royal Assent

Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022

The Bill contains a number of amendments to, among other Acts, the ASIC ACT and Corporations Act.

Bill Introduced HoR 9/2/22

Various

Security Legislation Amendment (Critical Infrastructure Protection) Bill 2022

Aka SLACIP, a second set of amendments to the SOCI Act. The Bill proposes further amendments to the SOCI Act to enact a framework for risk management programs, enhanced cyber security obligations (including mandatory reporting).

Considered by Senate Standing Committee for the Scrutiny of Bills 18/03/2022.

The Committee is seeking advice from the minister in relation to the inclusion of significant matters in delegated legislation. The committee leaves to the Senate the appropriateness of provisions which abrogate the privilege against self-incrimination in circumstances where no derivative use immunity is provided.

Day after Royal Assent

Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022

The purpose of these amendments is to impose financial reporting obligations on registrable superannuation entities that are consistent with those that currently apply to public companies and registered schemes

Considered by Senate Standing Committee for the Scrutiny of Bills 18/03/2022.

The Committee is seeking advice from the minister in relation to the inclusion of significant matters in delegated legislation.

Schedule 2:
1 July 2023

Act -

Security Amendment Legislation (Critical Infrastructure) Act 2021

Aka SLACI, the Bill includes an additional positive security obligation for critical infrastructure assets. This includes the requirement to develop a risk management program as well as mandatory cyber incident reporting.

This is the first of two bills on the critical infrastructure reforms.

See also SLACIP, above.

Passed both Houses:
22 November 2021

Royal Assent:
2 December 2021

Act No. 124 of 2021

Various

Regulation –

Corporations Amendment (Portfolio Holdings Disclosure) Regulations 2021

Requires superannuation trustees to publicly disclose portfolio holdings using the prescribed table

In force (Regulation made 11 November 2021)

Reporting periods from 31 December 2021. Trustees must make certain information about the RSE’s investment options publicly available on the entity’s website no later than 90 days after a specified reporting day.

Regulation –

Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021

Amends the Corporations Regulations and SIS Regulations to:

• require that providers of Proxy Advice must be AFS Licencees and specify the circumstances in which voting advice is proxy advice (a kind of financial service)(on and from 7/2/22); and
• set out obligations for financial services licensees who provide proxy advice to:
  • provide any proxy advice to the entity that is the subject of the proxy advice on the same day it is provided to the client; and
  • be independent of their clients.

Regulation disallowed 10/2/22

Was to commence the day after Registration and several provisions were to have effect 7 February.

Disallowed by Senate 10 February 2022 which has the effect of removing the requirements (and any amendments) ab initio.

Act –

Corporations Amendment (Meetings and Documents) Act 2021

The Bill amends the Corporations Act 2001 to establish a permanent mechanism to allow companies and registered schemes to hold hybrid (in person and remote) meetings and to use technology to execute, sign and share company and meeting-related documents.

Passed both Houses 10/02/2022

Royal Assent 22/2/22

Act No. 9 of 2022

1 April 2022

Act –

Corporate Collective Investment Vehicle Framework and Other Measures Act 2021

The CCIV Bill introduces the Retirement Income Covenant. Schedule 9 of the Bill amends the SIS Act to introduce a covenant which requires trustees to formulate, review regularly and give effect to a retirement income strategy for beneficiaries who are retired or approaching retirement.

The obligations form part of the section 52 covenants, and consistent with a contravention of other section 52 covenants, a trustee who contravenes the retirement income covenant may be subject to a civil penalty.

Referred to Committee (02/12/2021): Senate Economics Legislation Committee; Report due 03/02/2022

Passed both Houses 10/2/2022

Royal Assent 22/2/22

Act No. 8 of 2022

1 July 2022

Regulation –

ASIC Corporations (Amendment) Instrument 2022/20

Amends the ASIC Corporations (Financial Counselling Agencies) Instrument 2017/792. This Regulation provides relief to financial counselling agencies that provide financial counselling predominately for the purpose of assisting individuals or small businesses who are in financial difficulty to resolve their problems. This Regulation ensures that Financial Counsellors continue to be exempt from holding an AFSL.

In force (Regulation made 8/2/2022)

9 February 2022

Act –

Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021

The Act covers the following:

• Removal of $450 monthly income threshold for super contributions (Sch. 1)
• Higher withdrawal limit for First Home Super Saver Scheme from $30k to $50k (Sch. 2)
• Lower age threshold for super downsizer scheme from 65 to 60 (Sch. 3)
• Removal of super contribution “work test” for those aged between 67 and 74 (Sch. 4)
• Work test will only apply for that age group if they want to claim a tax deduction for their voluntary contribution (Sch. 4)

Passed both Houses 10/2/2022

Royal Assent 22/2/22

Act No. 10 of 2022

Schedules 1 & 2: the day after the Act receives Royal Assent.

Schedules 3 to 6: The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives Royal Assent.

Regulation –

Superannuation (Government Co-contribution for Low Income Earners) Regulations 2022

The Superannuation (Government Co‑contribution for Low Income Earners) Regulations 2004 will ‘sunset’ on 1 April 2022. This Regulation will remake that Regulation with an effective date of 1 April 2022.

Generally changes of a minor or machinery nature ONLY have been made.

It is recommended that Trustees review current reporting data to ensure it complies in the next ‘round’ of Govt. Co-Contributions reporting and/or receipt.

In force (Regulation Registered 17 February 2022)

1 April 2022

Regulation –

Treasury Laws Amendment (Enhancing Superannuation Outcomes) Regulations 2022

The regulation makes amendments to the contributions acceptance rules as a result of the passage of the Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Act 2021.

Schedule 3 to the Regulations amends the ITAA 1997 to allow individuals aged 60 and above to make downsizer contributions to their superannuation plan from the proceeds of selling their home (previously 65 and above).

Schedule 4 to the Regulations relates to work test reforms for superannuation contributions made by over 67 year olds. Further, the ‘bring-forward rule’ is amended (by Schedule 4, Item 4), with effect from 1 July 2022, such that the bring-forward can be utilised by members up to the age of 75.

In force (Regulation Registered 3 March 2022)

1 April 2022 (although the amendments made apply in relation to contributions made on or after 1 July 2022)

Regulation –

Family Law (Superannuation) Amendment (2022 Measures No. 1) Regulations 2022

The purpose of the Family Law (Superannuation) Amendment (2022 Measures No. 1) Regulations 2022 is to:

·         include definitions and update references and terminology in the FLS Regulations, as a result of the merger between QSuper and Sunsuper on 28 February 2022;

·         clarify that the Attorney-General has the power to make information determinations for hybrid superannuation funds (i.e. funds with both defined benefit and accumulation components), consistent with existing powers in the FLS Regulations to make information determinations for defined benefit and accumulation funds; and

·         make two other minor amendments to update an out-of-date cross-reference and to fix a drafting error.

In force (Regulation Registered 21 March 2022)

The day after registration (22 March 2022)

Consultation (ASIC) –

CP 359 Update to RG 263 Financial Services and Credit Panel

ASIC proposes that RG 263 - Financial Services and Credit Panel be updated to reflect legislative changes in the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 (Better Advice Act). This consultation paper (CP 359) sets out ASIC’s proposals. The proposed Regulatory Guide relates solely to financial advisers.

Released 28 February 2022
Comments close 28 March 2022

Consultation (ASIC) –

CP 358 Remaking ASIC relief on PDSs, superannuation dashboards and FSGs

This consultation paper sets out ASIC’s proposals to remake class orders and one legislative instrument on specific disclosure requirements for financial services. The proposals are to:

• remake, in a single new instrument, relief in class orders relating to Product Disclosure Statement (PDS) in-use notices for employer-sponsored superannuation and product dashboard disclosure;
• remake, in a single new instrument, relief in instruments that relate to shorter PDSs and PDS obligations of superannuation trustees, IDPS operators and responsible entities of IDPS-like schemes; and
• remake, as a new instrument, a class order relating to Financial Services Guides (FSGs) in time critical situations.

Released 18 February 2022. Comments close 12 April 2022.

Consultation (APRA) –

Consultation on APRA's Superannuation Data Transformation

On 18 February 2022, APRA released a discussion paper outlining the proposals for the publication and confidentiality of data reported under the new superannuation reporting standards.

The discussion paper, draft metrics, draft publications and confidentiality proposals are available on the APRA website.

Released 18 February 2022. Comments close 15 April 2022.

Consultation (Treasury) –

Quality of Advice Review  Terms of Reference Published

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.

Consultation (Treasury) –

CDR Sectoral Assessment for the Open Finance sector - Non-Bank Lending

Phase 1 of the ‘Open Finance’ review in the context of the Consumer Data Right (CDR).

Public consultation has now commenced to inform the sectoral assessment for applying the Consumer Data Right to non-bank lending. Sectoral assessments are conducted with reference to the criteria set out in section 56AD of the Competition and Consumer Act 2010.

This consultation does not relate to superannuation but is provided FYI as an example of the Open Finance Sectoral Assessment consultation materials and processes. The ‘papers’ on the CDR and Open Finance will be of interest to Trustees.

Released 15 March 2022

Consultation closes 12 April 2022

Consultation (ASIC) –

Consultation Paper (CP) 360 CCIVs: Preparing for the commencement of the new regime

This consultation paper seeks feedback on ASIC’s proposed guidance on corporate collective investment vehicles (CCIVs). It includes proposals on how they will:

-    assess Australian financial services (AFS) licence applications from corporate directors seeking to operate a CCIV

-    assess AFS licence applications from persons seeking to provide financial product advice on and/or deal in CCIV securities, and

-    administer the licensee obligations that will apply to corporate directors

CCIVs are an alternative to Managed Investment Schemes (MISs) in that, structurally, they are more in line with similarly-purposed investments in overseas markets. This paper sets out ASIC’s proposals to modify various relevant AFS Licensing Regulatory Guides as well as relevant AFS Licence conditions.

Released 17 March 2022. Comments close 14 April 2022.

Consultation (APRA)

APRA's Superannuation Data Transformation

APRA’s Superannuation Data Transformation (SDT) project aims to drive better industry practices and improve member outcomes by significantly enhancing the comparability and consistency of reported data. The project will make it easier to scrutinise and reliably compare fund and product performance, especially in the choice segment of the market. Given the scale and complexity of the project, APRA has divided the consultation into three phases:

    Phase 1 (the current Consultation) (Breadth) will address the most urgent gaps in APRA’s data collection, particularly for choice products and investment options;

On 18 February 2022, APRA released a discussion paper outlining the proposals for the publication and the confidentiality of data reported under the new superannuation reporting standards. Submission on these proposals are due 15 April 2022

    Phase 2 (Depth) will increase the granularity of the entire collection, taking advantage of APRA’s new Data Collection Solution and enhanced data analytic capabilities; and

    Phase 3 (Quality) will assess the quality and consistency of the additional data reported during Phases 1 and 2, and review and address any implementation issues.

Each phase will involve the release of multiple topic papers, each covering a different aspect of the consultation.

Phase 1 Consultation was ‘issued’ on 18 February and submissions close 15 April 2022

Consultation (APRA)

Amendments to Prudential Standard SPS 310 Audit and Related Matters

On 10 December 2021, APRA released for consultation its proposed amendments to Prudential Standard SPS 310 Audit and Related Matters (SPS 310) to align with changes to APRA’s reporting standards for superannuation.

APRA will consult on these amendments for three months, with submissions due by 11 March 2022.

APRA issued a Letter to Trustees on 10 December 2021 outlining the purpose of the Consultation.

Consultation opened at 10 December 2021 and close on 11 March 2022 (it is listed as ‘Open’ as at 24 March 2022 on the APRA website).

Consultation (Treasury)

Statutory Review of the Consumer Data Right

The review will focus on implementation of Open Banking and the introduction of rules to cover the energy sector from late 2022 and consider other relevant CDR developments, such as the Digital Economy Strategy, the Government response to the final report of the Inquiry into Future Directions for the Consumer Data Right, the Consumer Data Right Strategic Assessment, and international developments.

The Consultation commenced on 14 February 2022 and is ongoing

Consultation (APRA)

Strengthening Financial Resilience in Superannuation

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.

The Consultation period was opened on 19 November 2021 and closes on 11 March 2022 (it is listed as ‘Open’ as at 24 March 2022 on the APRA website).

Consultation (APRA)

Strengthening crisis preparedness

On 2 December 2021, APRA released for consultation a discussion paper and two draft prudential standards to strengthen crisis preparedness across banks, insurers and superannuation trustees.

Draft Prudential Standard CPS 190 Financial Contingency Planning introduces requirements for all APRA-regulated entities to develop contingency plans to respond to financial stress by either recovering their financial resilience or exiting APRA-regulated activities in an orderly manner.

Draft Prudential Standard CPS 900 Resolution Planning requires large or complex entities, or those that provide critical functions to the economy, to be prepared for resolution to minimise the impact on the community and the financial system.

Consultation commenced on 2 December 2021 and closes 29 April 2022.

Consultation (APRA)

Prudential Standard SPS 530 Investment Governance in Superannuation

The proposed revisions to SPS 530 respond to findings from APRA’s unlisted asset valuation thematic review and APRA’s 2018-2019 post-implementation review (PIR) of the superannuation prudential framework.

The proposed updates focus on enhancements to stress testing, valuation and liquidity management practices. This consultation will run until 16 February 2022.

Consultation was commenced on and from 29 September and closes (according to the APRA website) on Second Semester of 2022 (or 16 February). It is listed as ‘Pending’ as at 24 March 2022 on the APRA website.