Superannuation Legislation Update - 8 September 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.

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 introduced to the HoR and Read for the First Time on 3 August 2022

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

The Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 has been introduced into the House of Reps:

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 the next “round” of what would ordinarily be indexation increases, i.e. 20 September 2022. These new thresholds will be again indexed on 20 September 2023

20 September 2022 (if passed)

To Senate Community Affairs Legislation Committee. Reported back to Parliament on 24 August 2022.

The Committee recommended that the Bill proceed as is.

Senate - 5 September 2022, introduced and Read for the 1^st time, 2^nd Reading moved.

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, Read a 1st time, 2nd Reading moved

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.

The FAR Bill was introduced in October last year but was prorogued on 11 April 2022 with the declaration of the election.

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

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

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

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

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.

Introduced into HoR 8 September 2022

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 the date of preparation of this table, there were no further details of this motion to disallow. AIST will continue to keep funds apprised of the progress of this issue.

ASIC Corporations (Amendment) Instrument 2022/775

The Legislative Instrument extends the operation of the conditional exemptions of LI2015/844 from 30 September 2022 to 30 September 2023 (by amending the ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844) and exempts spot settlement transactions from transaction reporting requirements and position reporting requirements under the Rules.

Consultation: AIST alerted Members to Consultation Paper 361 on 26 May 2022. It was proposed to amend the ASIC Derivative Transaction Rules (Reporting) 2013 made under s901A of the Corporations Act 2001, following ASIC’s first round of consultation in Consultation Paper 334.

In Force. Amending Regulations registered 5 September 2022

6 September 2022

Family Court Amendment Act 2022 (WA)

Amends the Family Court Act 1997 (WA) to

allow superannuation to be split between separating de facto couples, bringing Western Australia (WA) into alignment with the rest of the nation.

Passed by both Houses 19 August 2022

Assent Received 31 August 2022

The principal provisions commence on “a day fixed by proclamation, and different days may be fixed for different provisions.”

ASIC Corporations (Repeal) Instrument 2022/704

Repeals ASIC Class Order [CO 12/752] which related to the use of OTC Derivative instruments as part of the Net Tangible Assets (NTA)(i.e. adjusted assets minus adjusted liabilities) requirements. This Class Order was due to sunset (i.e. expire) on 1 October 2022.

In Force, Registered 6 September 2022

7 September 2022

ASIC Corporations (Financial Requirements for Issuers of Retail OTC Derivatives) Instrument 2022/705

This instrument has been made in order to replace the sunsetting ASIC Class Order [CO 12/752]. This Instrument remakes [CO 12/752] “…with only minor drafting changes to reflect ASIC’s current style and format, remove redundant provisions and update definitions, while preserving the current effect of the instrument. The Instrument has been remade for a period of five years.”

In Force, Registered 6 September 2022

7 September 2022

ASIC Corporations (Amendment) Instrument 2022/719

The temporary measures in this instrument are intended to allow entities up to one additional month to complete financial reports and have those reports audited, in compliance with the financial reporting and audit requirements of the Corporations Act 2001 (the Act).

The instrument allows an additional month for the deadline for lodgment of profit and loss and balance sheets (and other associated information).

In Force, Registered 7 September 2022

8 September 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.

The Consultation period closed on 3 June 2022.

134 submissions were received for this consultation, including 17 confidential submissions.

The (non-confidential) submissions made are on the QAR website.

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; 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.

Consultations (APRA)

APRA strengthens transparency on remuneration and bank disclosures

The cross-industry Prudential Standard CPS 511 was introduced last year to strengthen remuneration practices across the banking, insurance and superannuation industries. The implementation of CPS 511 is due in 2023 for large entities and 2024 for smaller entities.

APRA is consulting on disclosure and reporting proposals to support the implementation of CPS 511 which, once implemented, will provide greater transparency on remuneration practices across all APRA-regulated entities.

The Consultation relates principally to the disclosure and reporting obligations described in the Discussion Paper.

This Consultation further relates to APRA’s proposed changes to CPS 511 and the proposed Reporting Standard CRS 511 Remuneration and the Reporting template CRS 511.0.

Submissions are requested by APRA by 7 October 2022.

Following review of industry feedback, APRA plans to finalise the requirements by the end of 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 (Treasury)

Rationalisation of Ending ASIC Instrument Measures

The Government has released exposure draft legislation to move matters in legislative instruments made by the Australian Securities and Investments Commission (ASIC) into the primary law and regulations. This will provide greater certainty making it easier for stakeholders to identify their rights and obligations under the financial services law.

The draft legislation forms part of the Treasury Law Improvement Program, which supports the regulatory stewardship of Treasury portfolio legislation, and also includes Treasury’s regular minor and technical amendments process. The Government intends to pursue regular improvement and maintenance opportunities under this Program to ensure that Treasury laws remain current, fit‑for‑purpose and transparent.

Amendments relating to the Australian Law Reform Commission’s Interim Report A are also being consulted on, and are available on the Treasury website. The ALRC’s Interim Report B is due to be tabled 30 September 2022. BOTH reports will inform both this consultation and the Treasury Consultation re: the following item: Improving Corporations and Financial Services Law.

Consultation ends on 20 September 2022 (and commenced on 24 August 2022)

Consultation (Treasury)

Improving Corporations and Financial Services Law

The Government has released exposure draft legislation to reduce the complexity of Australia’s corporations and financial services laws by making these laws more adaptive, efficient and navigable within existing policy settings. Simplifying these laws will benefit industry and consumers and is critical to maintaining a strong financial sector.

The draft legislation implements formal recommendations and informal suggestions made by the Australian Law Reform Commission (ALRC) in Interim Report A of its Review of the Legislative Framework for Corporations and Financial Services Regulations (‘ALRC Financial Services Interim Report’).

Amendments to move matters in current legislative instruments made by the Australian Securities and Investments Commission (ASIC) into the primary law and regulations are also being consulted on and are available on the Treasury website.

The draft legislation forms part of the Treasury Law Improvement Program, which supports the regulatory stewardship of Treasury portfolio legislation and also includes Treasury's regular minor and technical amendments process. The Government intends to pursue regular improvement and maintenance opportunities under this Program to ensure that Treasury laws remain current and fit‑for‑purpose, including consideration of other ALRC recommendations and additional ASIC instruments.

Consultation ends on 20 September 2022 (and commenced on 24 August 2022)

Consultation (Treasury)

Financial adviser professional standards

This consultation is further described in the main body of the AIST Policy News.

The Government made an election commitment to remove the tertiary education requirements for financial advisers who have passed the exam, have 10 years’ experience in Australia and have a clean disciplinary record of financial practice.

The Government has released a consultation paper to seek industry’s views on how to best implement this commitment.

The consultation paper also seeks feedback on how education standards for new entrants could be improved, allowing financial advice to continue to develop into a career of choice. The paper proposes options to streamline the core knowledge areas for degrees, and to simplify the degree approval process and professional year.

Consultation ends on 16 September 2022 (and commenced on 23 August 2022)

Consultation (Treasury)

Treasury Laws Amendment (Modernising Business Communications) Bill 2022: Virtual hearings and examinations

The Government is seeking stakeholder views on exposure draft laws that clarify that relevant Treasury portfolio regulators (ASIC, APRA, FSCP, ACCC etc) can hold hearings and examinations virtually. These amendments will ensure that hearings and examinations can be held quickly and efficiently for the benefit of all parties.

The amendments will form part of a revised package to modernise business communications across a range of Treasury portfolio laws.

As Trustees will be aware, electronic facilities have previously been enabled for Financial Services Disclosures and meetings and contract/agreement execution are now permitted electronically.

These measures are consistent with the modernisation principles relating to financial services requirements.

Consultation commenced 29 August 2022 and ends 23 September 2022

Consultation (Treasury)

Miscellaneous amendments to Treasury portfolio laws 2022

The exposure draft Bill, Regulations, Instrument, and supporting explanatory materials in relation to each draft document cover proposed minor and technical amendments to the Treasury portfolio laws.

The amendments seek to ensure the law operates as intended by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes. The amendments are part of the Government’s commitment to the ongoing care and maintenance of Treasury laws.

The Government intends to pursue regular improvement and maintenance opportunities under this Program to ensure that Treasury laws remain current, fit-for-purpose and transparent.

Consultation opened 2 September 2022 and responses/submissions will be accepted until 29 September 2022.

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).

ACSI issued a paper, in July last year, titled “Moving from paper to practice: ASX200 reporting under Australia’s Modern Slavery Act”.

Consultation (APRA)

(SDT Phase 2)

Consultation on Superannuation Data Transformation Phase 2 Scope and Approach

On 29 August 2022, APRA released a response to its consultation on the proposed scope and approach to Phase 2 of APRA’s Superannuation Data Transformation (SDT) project.

The Response Paper is linked at left.

As outlined in the SDT Project Phase 1 Response Paper, the overall objective of APRA’s SDT project is to drive better industry practices and improve member outcomes by significantly enhancing the comparability and consistency of reported data. This overarching objective is the foundation for each of the topic-specific objectives. The SDT is a multi-year project that is broad in scope. APRA has divided the work into three phases:

• Breadth
• Depth
• Quality

This paper represents APRA’s response to the proposed scope, approach and timetable for introducing further enhancements to APRA’s superannuation data collections including their confirmation of the timetable for future consultation, a detailed proposed implementation timeline and a description of APRA’s “topic objectives” for Phase 2.

This Consultation is ongoing.

AIST made a submission, in relation to Phase 2 of the SDT project, on 16 May 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 Financial Resilience in Superannuation on 11 March 2022 and 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 (Treasury)

Review of Your Future, Your Super Measures

&

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).