Superannuation Policy News - 25 January 2023
Minister urges super funds to lift member satisfaction
The Federal Government has called on superannuation funds to take more action to improve member satisfaction.
Assistant Treasurer and Minister for Financial Services Stephen Jones said a recent survey by the Australian Securities and Investments Commission (ASIC) found:
- almost 20% of funds consistently fail to respond to complaints from members within the mandatory 45-day timeline
- almost half of the time, the reason was not outlined to members, as required, and
- almost 80% of funds' complaint management systems were not ‘up to scratch’
“This needs to be a wake-up call for the industry. Doing right by your customer should be a no-brainer for any business, and that goes double for super funds,” Mr Jones said in an opinion piece published in The Australian newspaper.
He said funds that were laggards in addressing these issues would find themselves not just the subject of regulatory attention but facing an intensifying fight for members from new competitors.
“Ultimately, this is not just about giving those who have taken the time to engage with their fund the proper level of attention,” Mr Jones said.
“It is about funds knowing and understanding all their members, even those who may not engage regularly or at all.
“If that means more investment in systems and data, so be it. And if it means finding new and better ways to communicate with members, that can only be a good thing.”
Consultation opens about changes to non-arm’s length income provisions
The Federal Government has released a consultation paper about options to amend the non-arm’s length income (NALI) provisions which prevent income being unduly diverted into superannuation funds to benefit from lower rates of tax.
Assistant Treasurer and Minister for Financial Services Stephen Jones said Treasury had developed potential 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”.
He said that under the potential amendments:
- self-managed superannuation funds and small APRA-regulated funds would be subject to a factor-based approach which would set an upper limit on the amount of fund income taxable as NALI due to a general expenses breach, and
- large APRA-regulated funds would be exempted from the NALI provisions for general expenses.
“The approach outlined in the consultation paper seeks to balance maintaining the integrity of the tax system with providing a greater level of certainty for trustees regarding the consequences of any breaches relating to general expenses,” Mr Jones said in a media release.
Please contact AIST Senior Manager, Policy David Haynes at email@example.com if you wish to provide input to our submission.
Government consults on plans to close sex offender super loophole
Treasury has released a discussion paper about proposals preventing convicted child sexual abusers from hiding their assets in super to avoid paying compensation to their victims.
Assistant Treasurer and Minister for Financial Services Stephen Jones said the two complementary proposals would provide for the release of an offender’s superannuation to satisfy unpaid compensation orders.
He said this would close a loophole that was causing further harm to victims by denying them court-awarded compensation.
“Together, these changes will leave offenders no place to hide their assets and no way of avoiding compensating their victims,” Mr Jones said in a media release.
Consultation closes on Thursday 16 February 2023 and the Government aims to introduce legislation into the parliament as a matter of priority.
Please contact AIST Senior Manager, Advocacy and Research Kate Brown at firstname.lastname@example.org if you wish to provide input to our submission.
AIST has again urged the Federal Government to extend the Your Future Your Super (YFYS) performance test to all Choice accumulation super products after media reports that government-appointed experts had suggested it not be extended.
Deputy CEO and General Manager, Advocacy Mel Birks said reports that an expert working group was worried the unintended consequences of the annual MySuper test may be magnified in a Choice environment should not deter the Government from applying the test to all products regulated by the Australian Prudential Regulation Authority (APRA).
Ms Birks said it was important to test all APRA-regulated accumulation products, including Choice products, because the recent APRA Choice heatmap found they were higher cost and had a greater variance in performance than MySuper products on average.
“The Productivity Commission (PC) has also found that Choice products underperformed MySuper products on average and had a relatively long ‘tail’ of underperformance, which is significant given they account for $1 in every $3 in APRA-regulated funds,” she said in a media release.
“It is important that the worst areas of underperformance in the super system are addressed by including all products in a performance assessment.
“This is also consistent with the PC’s view that all products should have simple and comparable dashboards and performance requirements.”
2023 brings expansion of ‘downsizer’ scheme
The expansion of the ‘downsizer’ scheme under which Australians aged over 55 can top up their super if the sell their home has come into effect.
Treasurer Jim Chalmers and Assistant Treasurer and Minister for Financial Services Stephen Jones said the minimum eligibility age to make downsizer contributions was lowered from 60 to 55 on 1 January.
They said this meant Australians aged 55 and over could contribute $300,000 to their superannuation, and a couple could contribute $600,000, from the proceeds of the sale of a home.
“Expansion of the downsizer scheme allows more Australians to use the equity they’ve built up in their homes to plan for retirement,” they said in a media release.
“The downsizer scheme has the added benefit of freeing up housing stock for young families and individuals looking to buy a home.”
For more information, go to: ato.gov.au/downsizing.
Regulators take action against Diversa Trustees
Prudential regulators have imposed additional licence conditions on, and issued an infringement notice to, superannuation trustee Diversa Trustees Limited (Diversa).
APRA said the new registrable superannuation entity licence conditions were imposed to address its prudential concerns about:
- the adequacy of Diversa’s resources to manage risks and meet regulatory and compliance obligations
- heightened inherent business risks driven by its complex structure and operations, and
- concerns regarding its ability to deliver quality member outcomes, including in relation to high fees and poor investment performance.
“These licence conditions set the minimum standard for governance, risk, outsourcing and oversight, and member outcomes to ensure that Diversa is in the best position to continue as a trustee in the long term," APRA Deputy Chair Margaret Cole said in a media release.
The Australian Securities and Investments Commission (ASIC) issued an infringement notice to Diversa in what it described as “further action against alleged greenwashing”.
With about 320,000 members and more than $11 billion in funds under management, Diversa is the issuer of superannuation product Cruelty Free Super (CFS), as trustee for Professional Super, a sub-fund of the Tidswell Master Superannuation Plan.
ASIC was concerned about statements on CFS’ website in which it claimed to prevent investment in companies involved in ‘polluting and carbon intensive activities’, ‘financing or support of activities which cause environmental and social harm’ and ‘poor corporate governance’.
“As consumers increasingly look to more sustainable and ethical investing, including via their superannuation, ASIC wants to make sure funds have the evidence to back their claims and are not promising exclusions that they can’t guarantee,” ASIC Deputy Chair Sarah Court said in a media release.
Diversa paid $13,320 in compliance with the infringement notices on 22 December 2022.
AAT sets aside decision to ban former Spaceship Capital director
The Administrative Appeals Tribunal (AAT) has set aside a decision to ban former Spaceship Capital Limited director, chairman and responsible manager Paul Ernest Dortkamp from working as an officer and responsible manager of a financial services business for two years.
On 20 December 2022, the AAT delivered its decision on the application for a review of ASIC’s decision on 2 June 2022 to ban Mr Dortkamp of Caringbah South, New South Wales, for two years.
Deputy President Rayment QC concluded he was not satisfied that Mr Dortkamp failed to act, did not understand the financial services which his company was providing, or is incompetent.
Spaceship is the promoter of the Spaceship Super Fund which is issued by Diversa Trustees Limited as trustee of the Tidswell Master Superannuation Plan.
New Australia-Serbia agreement ends double super and pension payments
Workers temporarily seconded to Australia or Serbia will no longer have to pay compulsory superannuation and pension contributions in both countries under a new social security agreement.
Minister for Social Services Amanda Rishworth said the new agreement would improve access to social security for people who split their lives between Australia and Serbia or have moved from one country to the other.
“This agreement will give people more freedom to move between Australia and Serbia, knowing their pension rights will be recognised and protected,” she said in a media release.
The new social security agreement is expected to come into effect in 2024, following the completion of treaty, legal and administrative processes in both countries.
More information on international social security agreements is available on the Department of Social Services website.
AIST’s weekly update on the status of legislation
Stay up-to-date on the current status of superannuation Bills currently before Parliament here.