Superannuation Legislation Update - 9 February 2023

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 and the CSLR Bills were debated (via Cognate Debate).

These Bills may be debated 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 and the CSLR Bills were debated (via Cognate Debate).

These Bills may be debated 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 re the FAR and associated Bills in December 2021

Introduced into HoR 8 September 2022

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

These Bills may be debated in a later sitting.

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

The principal 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 proceeded to the Senate and was Read a 1^st time on 1 December 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 has progressed through the House of Representatives. The Senate has moved a second reading on 7 February 2023

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. While Sen. The Debate on the Motion was postponed to 9 February 2023.

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

It is scheduled for 8 March 2023.

On 8 February 2023 the Hon Stuart Robert raised a disallowance motion in the lower house. This was not agreed to with a split of 74 to 64.

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

Enquiry (PJC, Corporations and Financial Services)

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

&

Australian Securities and Investments Commission investigation and enforcement (SERC)

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 (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”).

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, using a modified reserving policy, be permitted to address potential problems before they adversely affect members.

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

Consultation (Treasury)

Climate-related financial disclosure

This consultation paper seeks initial views on key considerations for the design and implementation of the Government’s commitment to standardised, internationally‑aligned requirements for disclosure of climate‑related financial risks and opportunities in Australia.

Views are also sought on other matters relevant to this commitment, such as necessary changes to ensure Australia’s financial reporting bodies are appropriately positioned for the expansion of international standard‑setting priorities on climate and sustainability reporting. Interested parties are invited to provide views by 17 February 2023.

Submissions in response to this consultation will be used to inform a specific design proposal for further consultation in 2023. At that time, views will be sought on more detailed proposals for the new reporting requirements, their implementation and sequencing.

Consultation closes

17 February 2023 (and opened 12 December 2022).

Consultation (Treasury)

Access to offenders’ superannuation for victims and survivors of child sexual abuse

The Government is seeking stakeholder views on 2 draft proposals to allow victims and survivors of child sexual abuse to access the superannuation of their offender for unpaid compensation orders. These proposals seek to support victims and survivors in accessing redress by preventing child sexual abuse offenders from shielding their assets in the superannuation system.

• The first proposal would allow victims and survivors to release ‘additional’ contributions from an offender or spouse’s superannuation to satisfy an unpaid compensation order.
• The second proposal aims to improve transparency and reduce the cost and complexity of pursuing compensation by providing visibility of superannuation accounts to ascertain the value of the ‘additional’ contributions made by an offender.

Consultation closes 16 February 2023 (Opened 19 January 2023)

Consultation (Treasury)

Non-Arm’s Length Expense Rules for Superannuation Funds

The government has released a consultation paper considering options to amend the non‑arm’s length income (NALI) provisions which apply to superannuation funds.

For the purposes of stakeholder consultation Treasury has developed potential policy changes to the NALI provisions, where they relate to general expenses which have a sufficient nexus to all ordinary and statutory income derived by the fund.

The Consultation Paper invites feedback regarding the provisions on five specific questions.

Details of the consultation and background to the NALI provisions can be found in the Consultation Paper on Treasury’s website.

Consultation closes 21 February 2023

(Opened 24 January 2023)

• On 8 February 2023 Treasury released the Final Report for the Quality of Advice review.

The Australian Prudential Regulation Authority (APRA) has released its policy and supervision priorities for 2023.  Key policy priorities for 2023 include:

• completing key reforms to strengthen the financial and operational resilience of APRA-regulated entities, and improve outcomes for superannuation members;
• progressing APRA’s plan to modernise the prudential architecture, a core strategic initiative designed to make the framework clearer, simpler and more adaptable; and
• reviewing core standards, including governance and the regulation of conglomerate groups.

Key supervision priorities for 2023 include:

• heightened supervision on cyber resilience through detailed assessments and rigorous pursuit of breaches;
• embedding the capital reforms for banks and insurers;
• continuing to hold trustees to account to improve superannuation member outcomes; and

ongoing work to address challenges in the availability, affordability and sustainability of insurance.

The finalised Parliamentary Sitting Calendar is now available: the Calendar can be viewed and downloaded from here

A number of Bills were passed and have received Royal Assent. Those Bills have now been taken off this Legislation Update but can be found on https://www.legislation.gov.au/Browse/Results/ByRegDate/Acts/Asmade/2022/0/0/all