Super Alert – 21 January 2022

Welcome to the first issue of the KHQ Super Alert for 2022. We hope you all had a wonderful holiday break. The year is already in full swing with the Senate holding a hearing in relation to the retirement income covenant, and just before Christmas seven judgements were handed down by various Supreme Courts in relation to trust deed amendments for SIS Act section 56 purposes. ASIC has also issued guidance in relation to the registration of advisers providing tax (financial) advice services. 

Parliament – Senate enquiry in relation to retirement income covenant

On 17 January 2022, the Senate Economics Legislation Committee held a public hearing in relation to the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021. Amongst other things, the Bill proposes to insert a covenant into the SIS Act which would require trustees ‘to develop a retirement income strategy for beneficiaries who are retired or are approaching retirement’. The Committee heard from Jane Eccleston, Senior Executive Leader, Superannuation, from ASIC, in relation to ASIC’s plans to approach the implementation of the covenant (in particular, its relationship with the financial advice framework).

Click here for details.

Federal Court – Decision in relation to penalties for misleading and deceptive conduct

On 17 January 2022, the Federal Court handed down its decision in Australian Securities and Investments Commission v Statewide Superannuation Pty Ltd [2021] FCA 1650. The relevant trustee had admitted various contraventions to ASIC in relation to false or misleading representations about members’ insurance cover. These representations had been made in annual statements issued to members in 2018 and 2019. Given the matters agreed between the parties, ‘the only contentious issue was the appropriate amount of the pecuniary penalties’.

The Court fixed a pecuniary penalty of $3,500,000 for the misleading conduct. In the Court’s view, the conduct ‘affected a large number of members of the Fund’ and the cause of the conduct ‘was an inadequate implementation of the change to the…administration system and…the failure to address adequately and in a timely fashion the problems and errors resulting from that implementation’. The Court acknowledged that ‘none of the conduct was deliberate and, importantly, none of the conduct was motivated by a desire to generate profit’.

The Court also fixed a pecuniary penalty of $500,000 for the trustee’s ‘delay to report significant breaches to ASIC’ even though ‘the delay was not substantial and the conduct was not deliberate’. The Court’s view was that the ‘reporting obligation is an important one in terms of the regulation of the financial services industry‘.

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ASIC – Guidance in relation to registration for tax (financial) advice services

On 23 December 2021, ASIC released Information Sheet 268 ‘FAQs: Regulation and registration of relevant providers of tax (financial) advice services’ (INFO 268) which arises as a result of the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021. The Act requires that ‘all financial advisers who provide personal advice to retail clients about relevant financial products be registered with ASIC by 1 January 2023’. INFO 268 answers frequently asked questions in relation to this process for ‘providers who provide, or intend to provide, tax (financial) advice services’.

Click here for details.

Legislation – Regulations registered in anticipation of superannuation splitting laws in WA

On 23 December 2021, the Superannuation Legislation Amendment (Western Australia De Facto Superannuation Splitting) Regulations 2021 were registered on the Federal Register of Legislation. The regulations ‘ensure that provisions [in existing regulations] dealing with superannuation splitting under the Family Law Act 1975 also apply to superannuation splits made by de facto couples in Western Australia in accordance with Part VIIIC of the Family Law Act 1975’. However, these regulations will only commence after the commencement of the Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Act 2020 (Cth). That Act will commence on a day to be fixed by proclamation.

Click here here for details.

Supreme Courts of Victoria, New South Wales and South Australia – Trustee remuneration and section 56 of the SIS Act

Between 14 December 2021 and 24 December 2021, the South Australian, New South Wales and Victorian Supreme Courts handed down the following decisions which in each case determined that the relevant trustee was justified in amending the fund’s trust deed in relation to trustee remuneration:

  • Re Application by LGSS Pty Ltd atf Local Government Super [2021] NSWSC 1613;
  • Re Application by Maritime Super Pty Ltd atf Maritime Super [2021] NSWSC 1614;
  • Application by Motor Trades Association of Australia Superannuation Fund Pty Ltd atf Spirit Super [2021] NSWSC 1672;
  • Re Care Super Pty Ltd (No 2) [2021] VSC 854, which overturned Re Care Super Pty Ltd [2021] VSC 805 (noted in our Super Alert of 10 December 2021);
  • Application by United Super Pty Ltd atf Construction and Building Unions Superannuation Fund [2021] NSWSC 1679;
  • Re Application by NGS Super Pty Ltd atf NGS Super [2021] NSWSC 1694; and
  • AustralianSuper Pty Ltd v McMillan [2021] SASC 147.

Click here, here, here, here, here, here and here  for details.

ASIC – Financial Services and Credit Panel receives statutory functions and powers

On 22 December 2021, ASIC issued a media release in relation to the operation of the Financial Services and Credit Panel (FSCP). A key reform – which commenced on 1 January 2022 – under the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 (Cth) (Act) is to provide the FSCP with ‘its own statutory functions and powers’. Under the Act, the FSCP is empowered to:

  • ‘direct financial advisers to undertake specified training, counselling or supervision’;
  • ‘report certain matters to ASIC’;
  • ‘suspend or cancel a financial adviser’s registration’;
  • ‘issue infringement notices in specified circumstances’;
  • ‘recommend that ASIC commence civil penalty proceedings’; and
  • ‘enter into enforceable undertakings with financial advisers’.

In early 2022, ASIC plans to:

  • ‘consult on guidance regarding the operation of the FSCP’; and
  • ‘release guidance about how ASIC will exercise its new power to issue warnings/reprimands’.

Click here for details.

ATO – Update in relation to reporting of market linked pensions

On 21 December 2021, the ATO issued a media release in relation to the reporting of market linked pensions. According to the ATO, it will ‘not take compliance action if funds did not report the required transfer balance account events of the commutation and/or the commencement of the new income stream in CRT Alert 031/2020’.

Funds are expected to ‘start reporting the new income streams when the regulations commence to ensure that the period in which affected individuals accrue excess transfer balance tax liabilities begins on or after the commencement of the regulations’. The ATO requests that before funds commence reporting, they ‘engage with [their] client relationship manager or the client relationship team to advise when [they] plan to commence so [the ATO] can support [the] individual scenarios and issue further instructions as required’.

Click here for details.

Treasury – Consultation in relation to super co-contributions completed

On 20 December 2021, Treasury released for consultation the Superannuation (Government Co-contribution for Low Income Earners) Regulations 2022 (Draft Regulations) to ‘ensure the continued operation of the super co-contribution [regime]’. In addition to this proposed change, the Draft Regulations also:

  • amend ‘the definition of an eligible account so that it excludes those which only provide terminal medical condition benefits in addition to the existing exclusion on accounts which provide only death or incapacity benefits’; and
  • clarify ‘where a Government co-contribution is to be directed in specific circumstances. The [Draft Regulations] ensure that only one item will apply in the event of multiple circumstances being applicable’.

The consultation period ended on 14 January 2022.

Click here and here for details.

ASIC – First sitting dates for 2022 financial adviser exam announced

On 20 December 2021, ASIC issued a media release in relation to the 2022 sitting dates for the financial adviser exam. ASIC, which took ‘over administration of the financial adviser exam from the Financial Adviser Standards and Ethics Authority (FASEA)’ following the commencement of the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Act 2021 (Cth) on 1 January 2022, has listed various dates in February as the first exam sitting dates for 2022. ASIC also notes that it will shortly ‘be publishing guidance and resources previously hosted by FASEA’ on a range of matters.

Click here for details.

Treasury – Consultation in relation to relief for Foreign Financial Service Providers completed

On 20 December 2021, Treasury released for consultation exposure draft legislation in relation to relief for Foreign Financial Service Providers (FFSP). According to Treasury, the ‘Exposure Draft legislation seeks to introduce:

  • the comparable regulator exemption, which exempts FFSPs authorised to provide financial services in a comparable regime from the requirement to be licensed when dealing with wholesale clients;
  • the professional investor exemption, which exempts FFSPs that provide financial services from outside Australia to professional investors from the requirement to be licensed in Australia; and
  • an exemption from the fit and proper person assessment to fast track the licensing process for FFSPs authorised to provide financial services in a comparable regulatory regime’.

The consultation period ended on 12 January 2022.

Click here for details.

Legislation – Regulations in relation to proxy advice registered

On 17 December 2021, the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021 (Cth) (Regulations) were registered on the Federal Register of Legislation. The purpose of the Regulations ‘is to strengthen the transparency and oversight of proxy advice’. The Regulations:

  • amend the Corporations Regulations to (among other things) specify ‘circumstances in which voting advice is proxy advice (a kind of financial service)’; and
  • amend the SIS Regulations ‘to expand the range of information that Registrable Superannuation Entity (RSE) licensees must make publicly available on the [RSE’s] website to include a summary of how voting rights attaching to shares in listed companies that the trustee of the [RSE] holds, or in which the trustee holds beneficial interests, have been exercised’.

Trustees should note that ‘the obligation to make information publicly available on the [RSE’s] website apply on and after 1 July 2022 in relation to a half of the financial year if the half begins on or after 1 January 2022’.

Click here and here for details.

Legislation – Regulations effecting minor and technical amendments to a suite of legislative instruments registered

On 17 December 2021, the Treasury Laws Amendment (Miscellaneous and Technical Amendments No. 2) Regulations 2021 (Regulations) were registered on the Federal Register of Legislation. The Regulations ‘make minor and technical amendments in the Treasury portfolio’.

Relevantly for trustees, the Regulations amend the overpayment recovery rules in the Superannuation (Unclaimed Money and Lost Members) Regulations 2019 to require the ATO to ‘give a debtor written notice, as prescribed by the regulations, of the proposed [overpayment] recovery and the amount to be recovered’.

The legislative changes commenced on 18 December 2021.

Click here for details.

ATO – Funds urged to be vigilant following cyber-attack

On 17 December 2021, the ATO issued CRT Alert 014/2021 in relation to ‘a recent cyber-attack involving Frontier Software and a large employer where employee information has been exposed online’. In response to the attack – which ‘may also have involved superannuation information’ – the ATO is ‘working with the Frontier Software and security experts to determine the extent of the employee data exposed and will apply protective controls on individual ATO records as required’. The ATO is encouraging ‘funds to be extra vigilant on changes to member accounts, new rollover requests, benefit payments or broader activity that may be out of pattern for [its] members’.

Click here for details.

ATO – New superannuation consultations released

On 15 December 2021, the ATO released for consultation the following draft guidance in relation to the taxation of superannuation benefits:

  • Draft Taxation Determination TD 2021/D6 Income tax: tax treatment of a superannuation benefit when the Commissioner exercises the discretion in subsection 304-10(4) of the Income Tax Assessment Act 1997 (Draft Determination); and
  • Draft Law Administration Practice Statement PS LA 2021/D3 Superannuation – Commissioner’s discretion where members receive benefits in breach of legislative requirements (Draft Statement).

The consultation periods for the Draft Determination and Draft Statement end on 4 February 2022.

Click here and here for details.

KHQ Lawyers - Jordan Diamantopoulos

Jordan Diamantopoulos Lawyer

Jordan is a graduate lawyer and is currently working in our Litigation team. Prior to joining KHQ Lawyers, Jordan worked as a Barrister’s research assistant and more recently at the Australian Competition... Read More

KHQ Lawyers - Sanela Osmanovic

Sanela Osmanovic Senior Associate

Sanela is a Senior Associate in the superannuation & 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