Welcome to the latest issue of the KHQ Super Alert. This week, APRA published a recent speech delivered by its chair, Wayne Byrnes, and the ATO issued an update on excess non-concessional contributions release authorities. Also, we report on a NSW Supreme Court decision from March which is now raising questions regarding indemnities given in successor fund transfer arrangements.
APRA – APRA Chair Wayne Byres speaks at FINSIA event
On 13 May 2022, APRA published a speech delivered by its chair, Wayne Byres in relation to the broad themes impacting APRA-regulated entities. Mr Byres commented that there were still ‘many trustees that could do better – including, in some cases, by handing their responsibilities to someone else’. Mr Byres explained that APRA’s ‘primary focus continues to be to drive out sub-standard products and practices, using a combination of the Government’s annual performance test, [APRA] heatmaps, intensified supervision, and (when needed) […] a more muscular approach to enforcement’.
Mr Byres then discussed two ‘foundational regulatory initiatives’ high on APRA’s agenda, namely –
- APRA’s ‘plan to modernise the prudential architecture’; and
- the ‘five-year roadmap laid out in March for transforming [APRA’s] approach to collecting financial data from the over-2000 entities APRA regulates’.
Click here for details.
ATO – Increased excess non-concessional contributions release authorities
On 13 May 2022, the ATO issued an update to announce that ‘due to unavoidable delays caused by improvements to [its] systems’ it would start issuing requests to superannuation funds to ‘release excess contributions and other charges for members who did not make an election on the tax treatment of their excess non-concessional contributions (ENCC) for prior financial years’.
The ATO warned that ‘this may result in a higher than normal number of release authorities for [fund] members over the coming months’ while it works through the backlog.
Click here for details.
NSW Supreme Court – SFT indemnities
On 22 March 2022, the NSW Supreme Court handed down its decision in BT Funds Management Limited (ACN 002 916 458) as trustee for the Retirement Wrap Superannuation Fund [2022] NSWSC 401. The Court made orders giving its consent to certain conduct proposed to be engaged in by BT Funds Management Limited (BTFM) which may have otherwise amounted to a breach of section 249E of the Crimes Act 1990 (NSW) and similar provisions in Queensland, Victoria and Western Australia (Provisions).
In substance, each of the Provisions ‘makes it a crime for the trustee to receive or to solicit a benefit from a person as an inducement or reward for the appointment of any other person to be a person entrusted with the property without the consent of either each person beneficially entitled to the property or the Supreme Court’.
BTFM’s application was prompted by a proposal to effect a transfer of its BT Super for Life Plan (Fund) to a potential successor fund. BTFM sought consent from the Court to engage in negotiations with potential transferees in respect of the usual indemnities, and also indemnities against all or part of the costs associated with the transfer as well as ‘Special Costs and Losses’ that may be suffered by individual members upon transfer of the Fund. There was a concern that such indemnities could be deemed a ‘benefit or inducement’ given to any successor trustee in breach of the Provisions.
The Court found that there were ‘benefits’ and an element of ‘inducement’ but agreed to make the orders giving the Court’s consent to the proposed indemnities. The key aspect of Justice Ball’s judgement is paragraph 21 as follows:
‘… I was satisfied that the benefits for which BTFM wished to negotiate are not benefits that accrued to it but rather are benefits that either will accrue directly to members of the Plan or are costs or liabilities for which BTFM would otherwise be entitled to an indemnity out of the assets of the Plan. The costs and losses that may be suffered by individual members falls into the first of these categories. The costs of the transaction and the indemnity in respect of claims fall into the second. These benefits provide an inducement to BTFM to appoint a new trustee. But they do not provide an inducement to act otherwise than in the best interests of beneficiaries in order to obtain the benefits, since they are not benefits that ultimately accrue to BTFM.’
Click here for details.
