Welcome to the latest issue of the KHQ Super Alert, which might break records for the most news items we have ever reported on in one week! Among other things, ASIC published an article detailing its 2021-22 priorities in relation to regulating conduct within the superannuation industry and also published guidance and examples in relation to limited advice. APRA published climate change guidance and the Senate referred a suite of Bills for inquiry and report to its Economics Legislation Committee.
APRA – Draft prudential standards released for crisis preparedness
On 2 December 2021, APRA announced that it has ‘begun consulting on new prudential standards to strengthen the preparedness of banks, insurers and superannuation trustees to respond to future financial crises’. APRA has released two draft cross-industry prudential standards, being:
- CPS 190 Financial Contingency Planning which aims to ‘ensure all APRA-regulated entities have plans for responding to severe financial stress. These plans would set out actions that an entity would take in stress to restore financial resilience or exit the industry safely, while protecting depositors, insurance policyholders and superannuation fund members. Smaller entities will be subject to less onerous requirements, in line with their size, complexity and business models’; and
- CPS 900 Resolution Planning which seeks to ‘require large or complex APRA-regulated entities to take pre-emptive actions so that, in the event of their failure, APRA can resolve them with limited adverse impacts on the community and the financial system. This includes ensuring that critical financial services can continue to be provided with minimal disruption’.
The consultation period closes on 29 April 2022.
Click here and here for details.
APRA – Speech in relation to retirement income covenant
On 2 December 2021, APRA published a speech recently delivered by its Executive Director of the Superannuation Division, Suzanne Smith. Ms Smith spoke about the submissions received in Treasury’s consultation relating to the retirement income covenant (see our Super Alert of 1 October 2021) and made the following comments:
- APRA ‘sees an opportunity for trustees to show leadership in driving the direction of strategic and product innovation…an opportunity for industry participants to observe, learn from and compete with each other…[and] great opportunity in regulators taking a measured approach to evolving regulatory expectations in the initial stage of industry implementation and iteration’;
- ‘APRA will not issue guidance that would seek to clarify the intent of the law. The Explanatory Memoranda accompanying legislation is the appropriate place to seek this information’; and
- ‘APRA does expect that it will be necessary for trustees to give careful consideration to whether they have in place the resources (be those human, technical and financial) needed to implement and then continue to evolve a retirement income strategy and take necessary steps to access those resources’.
Click here for details.
Treasury – Consultation in relation to miscellaneous amendments to Treasury laws
On 2 December 2021, Treasury commenced a consultation process in relation to three draft pieces of legislation including the Treasury Laws Amendment (Measures for Consultation) Regulations 2021: Miscellaneous and Technical Amendments Autumn 2022 (the only document out of the three which is relevant to superannuation trustees).
According to the draft Explanatory Statement, the regulations propose to amend the Superannuation Industry (Supervision) Regulations 1994 and the Income Tax Assessment (1997 Act) Regulations 2021 to enable holders of certain pension products ‘that were commenced on or after 1 July 2017 to undertake commutations to resolve excess transfer balance amounts’.
Submissions to Treasury close on 15 December 2021.
Click here for details.
Parliament – Bill to amend Pension Loans Scheme
On 2 December 2021, the Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Bill 2021 was introduced into the House of Representatives. The Bill proposes to implement the 2021/22 Federal Budget measure to increase the flexibility of the current Pension Loans Scheme. It proposes to implement ‘a no negative equity guarantee’ for the Pension Loans Scheme and to enable ‘participants under the Scheme to access capped lump sum advance payments’.
Click here for details.
Parliament – Bill for miscellaneous changes to Treasury laws passes both Houses
On 1 December 2021, the Treasury Laws Amendment (2021 Measures No. 5) Bill 2021 (Bill) passed both Houses of Parliament. As referred to in our Super Alert of 20 August 2021, the Bill proposes to (amongst other things):
- amend the Superannuation (Unclaimed Money and Lost Members) Act 1999 (Cth) to allow the ATO to recover overpaid amounts transferred to active accounts of superannuation members (after giving 28 days’ written notice);
- amend the Income Tax Assessment Act 1997 (Cth) to ‘clarify that a [low balance account] fee refund paid by a trustee to a member’s superannuation account is not a concessional contribution’; and
- amend the SIS Act to add a reference to a ‘restructuring practitioner’ as a disqualified person under section 120 (ie, so the ‘appointment of a restructuring practitioner is an insolvency event…triggers the disqualification of a corporate trustee, custodian or investment manager of a superannuation entity from managing a superannuation entity’).
The commencement date of many of the legislative changes are dependent on the date of Royal Assent.
Click here for details.
ASIC – Guidance and examples on limited advice released
On 1 December 2021, ASIC released an information sheet and examples in relation to limited advice. The information sheet ‘INFO 267: Tips for giving limited advice provides tips and summarises the relevant guidance from Regulatory Guide 175 Licensing: Financial product advisers-Conduct and disclosure (RG 175) and Regulatory Guide 244: Giving information, general advice and scaled advice (RG 244)’, and the example statement of advice (SOA), aim ‘to assist financial advisers and advice licensees [to] comply with their obligations when providing limited personal advice to retail clients’.
ASIC notes that:
- ‘INFO 267 includes information on what advice providers can do to meet their obligations under the law, including the best interests duty and related obligations’; and
- ‘[the] SOA example…is annotated to help advisers understand the relevant requirements under the Corporations Act 2001’.
Click here for details.
ALRC – Financial services review
On 30 November 2021, the Financial Services Legislation: Interim Report A (Report) compiled by the Australian Law Reform Commission was tabled in Parliament. The Report ‘contains recommendations, proposals, and questions in relation to the reform of corporations and financial services legislation’. The Report’s recommendations ‘relate to matters of consensus at this stage in the process and are accordingly in a form that may be implemented prior to the conclusion’ of the inquiry.
In relation to the Report’s proposals and questions, ‘the ALRC is seeking written submissions from stakeholders’. Submissions must be provided by 25 February 2022.
Click here for details.
Financial Regulator Assessment Authority – ASIC assessment
On 29 November 2021, the Financial Regulator Assessment Authority (FRAA) released a consultation paper in relation to its first review of ASIC. According to FRAA, the review of ASIC will:
- ‘be a targeted assessment of ASIC’s effectiveness and capability in strategic prioritisation, planning and decision-making, ASIC’s surveillance function, and ASIC’s licensing function’; and
- ‘examine ASIC’s use of data and technology in each of these areas of focus’.
The consultation period ends on 28 January 2022. In an associated media release, the Treasurer advised that FRAA will provide its report to the Government by the end of July 2022.
Click here and here for details.
Legislation – KiwiSaver regulations registered
On 26 November 2021, the Treasury Laws Amendment (KiwiSaver Scheme) Regulations 2021 (Cth) (Regulations) were registered on the Federal Register of Legislation. The Treasury Laws Amendment (2020 Measures No. 5) Act 2020 previously made amendments to the Superannuation (Unclaimed Money and Lost Members) Act 1999 ‘to allow individuals to direct the [ATO] to pay amounts the [ATO] holds in respect of them under the Superannuation (Unclaimed Money and Lost Members) Act 1999 to a KiwiSaver scheme provider’.
The Regulations seek to support those amendments, by making consequential changes to the:
- Income Tax Assessment (1997 Act) Regulations 2021;
- Superannuation Industry (Supervision) Regulations 1994; and
- Superannuation (Unclaimed Money and Lost Members) Regulations 2019.
The amendments come into effect on a day to be fixed by Proclamation (pursuant to the Treasury Laws Amendment (2020 Measures No. 5) Act 2020).
Click here for details.
APRA – Climate change guidance published
On 26 November 2021, APRA released its final Prudential Practice Guide CPG 229 Climate Change Financial Risks. The finalised version follows APRA’s consultation earlier this year, as discussed in our Super Alert of 23 April 2021, ‘which received nearly 50 submissions from a diverse range of stakeholders’. According to APRA, ‘APRA-regulated entities are encouraged to begin using the finalised guidance immediately to enhance their management of climate change financial risks in a manner that is appropriate to their business and its particular circumstances’.
Click here for details.
Parliament – Corporate Collective Investment Vehicle Bill
On 25 November 2021, the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 (Bill) was introduced into the House of Representatives. A Corporate Collective Investment Vehicle (CCIV) ‘is an umbrella vehicle that is comprised of one or more sub-funds and is operated by its single corporate director’. The Bill proposes to:
- ‘establish the regulatory and tax frameworks of CCIVs’;
- ‘amend corporate and financial services law to establish a CCIV as a new type of a company limited by shares that is used for funds management’; and
- amend ‘the taxation law to specify the tax treatment for the CCIV…to ensure that the CCIV is taxed on a flow-through basis’.
Most changes proposed by the Bill are intended to commence on 1 July 2022. On 2 December 2021, the Bill was referred to the Senate Economics Legislation Committee, for report by 3 February 2022.
Click here for details.
Parliament – FAR and CSLR Bills referred to Senate Committee for inquiry
On 25 November 2021, the Senate referred to the Economics Legislation Committee (Committee) for inquiry and report, the:
- Financial Accountability Regime Bill 2021;
- Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021;
- Financial Services Compensation Scheme of Last Resort Levy Bill 2021; and
- Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2021 (collectively, the Bills).
The Bills propose to implement the Royal Commission’s recommendations ‘to establish the CSLR and the Financial Accountability Regime…to improve consumer protections’.
The Committee’s report is due by 15 February 2022, and while the Committee ‘welcomes submissions…the [Committee] is not obliged to accept every document it receives as a submission’.
ASIC – 2021-22 focus in superannuation
On 23 November 2021, ASIC published an article in relation to its key priorities for 2021-22 in superannuation. In its 2021-25 Corporate Plan – published earlier this year and discussed in our Super Alert of 27 August 2021 – ASIC identified its upcoming priorities. Relevant to the superannuation industry, ASIC notes that ‘reducing the risk of harm to consumers’ and helping to ‘drive industry readiness and compliance’ are the two priorities that it will focus on in 2021-22.
ASIC notes the following are ‘project areas of particular interest to trustees in the 2021-22 financial year’:
- ‘Performance communications review’;
- ‘IDR in super and the transition to RG 271’; and
- ‘Distribution reform implementation and surveillances’.
Click here for details.
