Welcome to the latest issue of the KHQ Super Alert. This week, the Government announced its next stage of proposed Quality of Advice Review reforms and ASIC published the first set of industry data relating to internal dispute resolution. ASIC has also released its findings from a close review of the breach reporting arrangements of a select group of financial services entities.
APRA – Minor changes to CPS 511 delayed
On 5 December 2024, APRA issued a media release in relation to the finalisation of consultation relating to ‘proposed minor amendments to the prudential framework’.
As referred to in our Super Alert of 13 September 2024, the only superannuation-related amendment proposed for this consultation relates to CPS 511 Remuneration where APRA is proposing to:
- delete cross-references to the Banking Act in CPS 511 and instead replace them with references to the Financial Accountability Regime Act 2023 (Cth); and
- ‘address minor typographical errors’.
As part of the latest communication, APRA has advised that it will finalise these amendments in the first half of 2025.
Click here for details.
Treasury – Information about second tranche of Quality of Advice Review reforms
On 4 December 2024, Treasury released a fact sheet outlining the further reforms proposed to financial services laws following the Quality of Advice Review.
In an associated media release, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, announced that this second tranche of reforms proposes to:
- ‘create a new class of adviser to provide safe and simple advice to more Australians, such as choosing an insurance policy or basic questions about retirement’;
- ‘modernise the best interests duty by providing legal clarity that will allow advice on single or limited scope issues if this meets the client’s needs’;
- ‘remove the safe harbour steps so advisers can focus on their client’s needs’;
- ‘reform statements of advice so they help consumers make informed decisions’;
- ‘clarify the rules on what advice topics can be paid for through superannuation, including through collectively charged arrangements’; and
- ‘allow superannuation funds to provide helpful ‘nudges’ to drive greater member engagement at key life stages’.
Neither the Treasury fact sheet or the Minister’s media release specify any timing for the introduction of these reforms or release of the exposure draft legislation.
Click here and here for details.
ASIC – Findings from breach reporting review of select entities
On 4 December 2024, ASIC released the findings of a review it undertook in relation to the breach reporting arrangements ‘of 14 licensees of different sectors and sizes who had low numbers of reportable situations, or had not reported at all’.
ASIC’s key findings from this review were that:
- ‘Licensees were generally slow to report to ASIC. The key driver of these delays was that licensees took a long time to identify breaches in the first place and begin investigating’.
- ‘When ASIC reviewed why this was happening, ASIC found that there were deficiencies in licensees’ incident management, particularly how they identified, escalated and recorded incidents’.
- ‘Most licensees had gaps in how they monitored their own compliance with the regime’.
- ‘These poor practices had real impacts on consumers. The failures to promptly identify breaches meant that licensees were very slow to rectify breaches and remediate customers’.
ASIC has recommended all licensees to review these findings to uplift their breach reporting arrangements.
Click here for details.
ASIC – Consultation on proposed updates to digital asset guidance
On 4 December 2024, ASIC issued Consultation paper 381 Updates to INFO 225: Digital Assets: Financial Products and Services (CP 381) which outlines its proposal to update existing Information Sheet 225 Crypto Assets (INFO 225).
The feedback sought by ASIC relates to:
- ‘adding 13 practical examples of how the current financial product definitions apply to digital assets and related products’;
- ‘practical licensing issues for wrapped tokens and ‘stablecoins’, issues arising from the potential transition to the Government’s proposed digital asset platform and payment stablecoins regimes, and consideration of potential regulatory relief’; and
- ‘a potential class ‘no action’ position for digital asset businesses that are in the process of applying for or varying an AFS licence, Australian Markets Licence or Clearing and Settlement Facility licence’.
The consultation period will close on 28 February 2025.
In an associated media release, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, explained that ‘[f]eedback from ASIC’s consultation will help inform exposure draft legislation for the Government’s ‘digital asset platform’ and ‘payment stablecoin’ reforms, which will be released in 2025’.
Click here and here for details.
ASIC – Observations from internal dispute resolution data publication
On 3 December 2024, ASIC released ‘its first publication of industry-wide data reported under the internal dispute resolution (IDR) data reporting framework…[under which] most licensed financial firms are required to report IDR data to ASIC on a six-monthly basis’.
ASIC’s key observations from the data across all financial service industries included that:
- ‘most complaints were about service (45%), followed by charges (22%)’; and
- ‘623,555 complaints resulted in a monetary remedy, collectively totalling over $375 million’.
ASIC indicated that it ‘found variations in the volume of complaints reported by comparable firms and gaps in the IDR data’ so ‘ASIC is concerned that some firms are not reporting IDR data as accurately as is possible’. ASIC’s data found that ‘5,035 firms declared no complaints to report for the full year period’. ASIC may also publish ‘firm-level data’ but will first ‘consult on [its] approach to contextualising and presenting the data’.
Click here for details.
ASIC – Speech by ASIC Commissioner on retirement outcomes
On 3 December 2024, ASIC published a speech delivered by one of its Commissioners, Alan Kirkland. Mr Kirkland referred to Report 779: Superannuation and choice products: What focus is there on performance? which was released at the start of the year and ‘examined [the] practices [of trustees and financial advisers] and decision-making in relation to investment options and products that persistently failed to perform as anticipated’.
The ‘key findings’ discussed by Mr Kirkland in relation to super trustees included the following:
- ‘some due diligence policies lacked detail and were poorly drafted’;
- ’[t]here was sometimes an over-reliance on external research and ratings in the assessment of choice investment options’; and
- ‘[o]f the 29 options identified by trustees, 24 had not met the performance benchmark… for five or more years’.
The ‘action points’ suggested to trustees included:
- ‘When selecting investment options, trustees should not rely on a minimum external investment rating as the sole criteria for inclusion on their investment menus’;
- ‘They should also effectively monitor performance’; and
- ‘Where options are not performing as anticipated, they must decide how best to act’ which ‘includes effectively communicating underperformance – and taking into account the needs of members who may not be receiving advice.’
Click here for details.
Australian Government – response to Modern Slavery review
On 2 December 2024, the government released its response to the May 2023 report of the statutory review of the Modern Slavery Act 2018 (Cth) (referred to in our Super Alert of 2 June 2023). The associated release states that ‘[t]he government response agrees (in full, in part, or in principle) to 25 of the 30 recommendations and notes 5 recommendations’.
One of the key recommendations is to introduce penalties for non-compliance and the government will consult on this recommendation as a priority. Other key accepted recommendations relate to increasing the clarity and simplicity of the regime to ensure that ‘the framework is as clear as possible for reporting entities, investors, civil society, academia, consumers, and all interested members of the community’. The government did not accept the recommendation to lower the current reporting threshold from A$100 million to A$50 million.
Click here and here for details.
Parliament – Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (Cth) split into two Bills
On 28 November 2024, the Senate agreed to split the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (Cth) (the Original Bill) into two separate Bills, as follows:
- the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 to contain only ‘measures to reduce the tax concessions available to individuals with total superannuation balances exceeding $3 million’; and
- a new Treasury Laws Amendment (Miscellaneous Measures) Bill 2024 to contain Schedules 4 to 8, being ‘the remaining measures in the Original Bill’.
As referred to in our Super Alert of 8 December 2023, the Original Bill aims to increase the tax rate applying to investment earnings on superannuation balances above $3 million and ‘reduce the frequency of [the Financial Regulator Assessment Authority’s] reviews of ASIC and APRA to every five years’ (this second element will now be in the new separate Bill).
Click here and here for details.
ATO – Draft tax ruling released for consultation
On 27 November 2024, the ATO released a draft version of proposed amendments to Taxation Ruling TR 2010/1 Income tax: superannuation contributions. The purpose of the amendments is to:
- ‘explain the interactions between the non-arm’s length income provisions and the rules concerning superannuation contributions’; and
- make ‘changes to reflect the removal of the maximum earnings test for the purpose of deducting personal contributions, which commenced from 1 July 2017’.
The consultation process closes on 24 January 2025.
Click here for details.
