Super Alert – 16 October 2020

Welcome to this week’s issue of the KHQ Super Alert. APRA has published a number of materials this week including its annual report, the latest speech from its Deputy Chair, and a reminder to trustees about the application of the controlling stake requirements in the SIS Act. 

KHQ Lawyers - Super Alert

APRA – Review of controlling stake requirements

On 15 October 2020, APRA published a letter sent to all trustees in relation to the controlling stake requirements in Part 2A of the SIS Act. These provisions have been in the SIS Act for over a year now and APRA has identified that trustees ‘may not have always considered the application of these requirements to their particular circumstances’. For example, these requirements may be triggered if a director holds shares in the trustee entity, and another director is removed or appointed.

APRA has specified that trustees must now:

  • ‘identify if there have been any changes since 5 July 2019 to the ownership of shares in an RSE licensee in relation to which APRA approval has not been obtained … if so, [trustees must] contact their Responsible Supervisor within 30 days of the date of this letter to discuss next steps’;
  • ‘obtain appropriate professional advice on the [Financial Sector (Shareholdings) Act 1998] ownership requirements if necessary and how they apply to the RSE licensee’s current ownership structure and/or as part of any controlling stake proposal being considered. Particular attention needs to be given to the definition of “associates” … as “associates” is widely defined’;
  • ‘review the RSE licensee’s constitution, shareholder deed and/or risk management framework to ensure the controlling stake requirements are incorporated and the requirement to seek APRA approval is included as required’; and
  • ‘if required, lodge a controlling stake application using the Application Form and Instruction Guide available on the APRA website’.

Click here for details.

APRA – Annual report

On 13 October 2020, APRA published its annual report for the 2019/20 financial year. In relation to superannuation, APRA advised that it had achieved its objectives of:

  • improving outcomes for superannuation members by proposing revisions to SPS 250 (insurance in superannuation), publishing the MySuper heatmaps and monitoring the COVID early release of superannuation scheme; and
  • improving cyber resilience across the financial system by only granting CPS 234 extensions on a case-by-case basis rather than across the board.

Click here for details.

ATO – Death benefit reporting 

On 12 October 2020, the ATO published a web update titled ‘Clarification on reporting death benefit rollovers and paying death benefits after a rollover’.

The update includes a technical explanation about the calculations that trustees are required to make when a death benefit is rolled over to another fund. (Although the ATO’s update is focused on self-managed superannuation funds, it appears that the relevant section of the Income Tax Assessment Act 1997 also applies to APRA regulated funds.)

Click here for details.

APRA – Deputy Chair speech 

On 12 October 2020, APRA published a speech delivered by its Deputy Chair, Helen Rowell, to a trustees’ forum. In the speech titled ‘Continuing the drive towards a better super system’, Ms Rowell made the following comments:

  • the Federal Budget announcements are ‘very much aligned’ with APRA’s agenda and if passed by Parliament ‘will shine a brighter light on fund performance and trustees’ expenditure decisions, and help members make better informed decisions about who is looking after their retirement savings’;
  • APRA is ‘pushing harder’ into board governance issues with three main areas of focus:
    • ‘Board skills, composition succession planning and director tenure’ – ‘special circumstances’ should not be used lightly ‘to extend director tenure beyond maximum term for reasons that appear to reflect poor succession planning and management rather than genuine special circumstances’;
    • ‘Strategic planning and contingency planning’ – ‘if boards are failing to ask themselves the question “Would my members be better served in another fund?” [APRA] certainly will be, and will also be requiring action to move toward the exit lane’; and
    • ‘Merger scenarios and go forward boards’ – APRA ‘will continue to challenge and demand better practice on all dimensions of the [SFT] deal – the business case, the board composition and governance arrangements and the benefits that need to be realised for members’.

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