Super Alert – 13 November 2020

Welcome to the latest issue of the KHQ Super Alert. It has been a busy week with the introduction of another Royal Commission Bill before Parliament which deals with a number of outstanding recommendations such as the anti-hawking and ‘no other role for superannuation trustees’ rules. APRA has also had a busy week, releasing FAQs for the member outcomes assessment, and further proposed amendments to CPS 511 (Remuneration). 

KHQ Lawyers - Super Alert

APRA – Proposed amendments to remuneration standard

On 12 November 2020, APRA released a revised remuneration prudential standard for public consultation. The new draft CPS 511 proposes ‘more comprehensive requirements for larger, more complex regulated entities’. The proposed changes include:

  • ‘replacing the 50 per cent cap on financial measures for variable remuneration with a requirement that material weight be assigned to non-financial measures, combined with a risk and conduct modifier that can potentially reduce variable remuneration to zero’; and
  • ‘a reduction in the minimum deferral periods for variable remuneration from seven to six years for CEOs, from six to five years for senior managers and from six to four years for highly paid material risk takers’.

APRA has advised that entities ‘will be subject to greater public disclosure of their remuneration practices to demonstrate compliance with APRA requirements. The specific disclosure requirements will be defined through a future consultation process, expected to be conducted in late 2021’.

Submissions on the revised CPS 511 close on 12 February 2021.

Click here for details.

Parliament – Bill to implement further Royal Commission recommendations

On 12 November 2020, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was introduced into the House of Representatives. The Bill proposes to implement several Royal Commission recommendations by amending the SIS Act and Corporations Act to:

  • ‘strengthen the existing voluntary code of conduct framework to allow ASIC to designate enforceable code provisions in approved codes of conduct’ – recommendation 1.15 (date of effect: later of Royal Assent of the Act and 1 January 2021);
  • ‘ban the hawking of financial products’ – recommendations 3.4 and 4.1 (date of effect: later of Royal Assent of the Act and 5 October 2021);
  • ‘make claims handling and settling a financial service under the Corporations Act’ – recommendation 4.8 (date of effect: later of Royal Assent of the Act and 1 January 2021);
  • ‘impose a new condition on licences held by a body corporate trustee of a registrable superannuation entity…[to prohibit] these trustees from having a duty to act in the interests of another person, subject to exceptions that enable trustees to carry out their ordinary functions as a trustee of a registrable superannuation entity’ –  recommendation 3.1 (date of effect: later of Royal Assent of the Act and 1 July 2021);
  • extend ‘ASIC’s role in superannuation regulation to cover consumer protection and market integrity regulation’ – recommendation 6.4 (date of effect: later of Royal Assent of the Act and 1 January 2021);
  • extend ‘the Australian financial services licensing regime under the Corporations Act and the consumer protection provisions under the ASIC Act to cover a broader range of activities undertaken by APRA-regulated superannuation trustees’ – recommendation 6.4 (date of effect: later of Royal Assent of the Act and 1 January 2021); and
  • require ‘the regulators [being ASIC and APRA] to notify each other when they reasonably believe there may be material breaches of each other’s legislation’- recommendations 1.6, 2.8 and 7.2 (date of effect: later of Royal Assent of the Act and 1 January 2021).

The Royal Commission recommendations to ban the deduction of advice fees from MySuper accounts, and limit their deduction from choice accounts, have not been included in this Bill.

Click here for details.

Department of Home Affairs – Bill for protection of critical infrastructure including superannuation assets

On 11 November 2020, the Department of Home Affairs released a draft version of the Security Legislation Amendment (Critical Infrastructure) Bill 2020 for public consultation. The Bill proposes to amend the Security of Critical Infrastructure Act 2018 ‘to implement an enhanced framework to uplift the security and resilience of Australia’s critical infrastructure’. The explanatory document explains that a ‘Positive Security Obligation’ will be introduced to ensure that ‘industry is taking the appropriate steps to manage the security and resilience of their assets’.

In relation to superannuation, the Bill ‘introduces a definition of ‘critical superannuation asset’, recognising the significant role superannuation funds play in the Australian economy’. It is proposed that there will be rules to ‘prescribe specified assets that are critical to the security and reliability of operating a registrable superannuation entity and requirements for an asset to be critical to the operation of a registrable superannuation entity and requirements for such assets’. These rules are expected to affect around 30 superannuation funds.

The consultation period closes on 27 November 2020.

Click here for details.

Parliament – Bill to allow ATO to transfer to KiwiSaver accounts

On 11 November 2020, the Treasury Laws Amendment (2020 Measures No. 5) Bill 2020 was introduced into the House of Representatives. The only superannuation-related change proposed by the Bill is to amend the Superannuation (Unclaimed Money and Lost Members) Act 1999 and Income Tax Assessment Act 1997 ‘to facilitate the payment of money held by the [ATO] under the [Superannuation (Unclaimed Money and Lost Members) Act 1999] directly to New Zealand KiwiSaver schemes’. This measure was announced in the 2015/16 Federal Budget.

Click here for details.

Parliament – WA family law Bill moves to Senate

On 11 November 2020, the Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2020 moved to the Senate after being agreed to by the House of Representatives on 9 November 2020 (it had been before the House of Representatives since November 2019). According to the Explanatory Memorandum, this Bill will:

  • ‘give effect to a referral of power from Western Australia to the Commonwealth in respect of superannuation matters in family law proceedings for separating de facto couples in Western Australia’; and
  • ‘also extend federal bankruptcy jurisdiction to the Family Court of Western Australia to hear bankruptcy proceedings concurrently with family law proceedings, where appropriate’.

Click here for details.

APRA – FAQs for member outcomes assessment

On 11 November 2020, APRA published a new set of frequently asked questions to assist trustees in completing the member outcomes assessment required under section 52(9) of the SIS Act. The assessment is required to be completed by February 2021 and APRA has published answers to ‘common areas of weakness identified form APRA’s targeted review of trial outcomes assessments’.

The published questions include:

  • Should RSE licensees place on hold work underway to comply with the outcomes assessment, given that there may be changes to s 52(9) of the SIS Act to reflect the proposed budget measures?’;
  • ‘Can an RSE licensee use work undertaken to comply with Prudential Standard SPS 530 Investment Governance…in order to satisfy s 52(11)(b) of the SIS Act?’; and
  • ‘For the purposes of s 52(10) of the SIS Act, is an RSE licensee permitted to select the MySuper products against which to make the comparison?’.

Click here for details.

KHQ Lawyers - Sanela Osmanovic

Sanela Osmanovic Senior Associate

Sanela is a Senior Associate in the superannuation and financial services team, and has a broad range of experience working with a range of superannuation fund trustees, superannuation administrators,... Read More

KHQ Lawyers - Natalie Cambrell

Natalie Cambrell Principal Solicitor

Natalie Cambrell leads our superannuation and financial services team.  With more than 20 years’ experience, she has an enviable reputation for her in-depth knowledge in these highly regulated and... Read More