Welcome to the first issue of the KHQ Super Alert for 2023. We look forward to bringing you the latest superannuation news each week to keep you up-to-date with all the relevant regulatory changes. Since our last edition in December 2022, there have been many developments. Notably, APRA has released its supervision and policy priorities agenda for the next 18 months, along with the superannuation statistics for the 2021/22 financial year. Meanwhile Treasury commenced two consultations relating to the non-arm’s length expense rules and access to superannuation for victims of child sexual abuse.
APRA – Superannuation supervision and policy priorities for 2023
On 2 February 2023, APRA released two papers outlining its supervision and policy priorities for the next 12 to 18 months. Broadly, APRA’s superannuation supervision priorities are ‘rectifying substandard practices; reducing unacceptable underperformance through the annual performance test and transparency on performance via heatmaps; and examining trustees’ implementation of the retirement income covenant’.
Specifically, these include:
- a ‘focus on board capabilities, tenure, management of conflicts of interest and strength of internal control systems’;
- a targeted assessment of ‘how trustees are preparing for the changing [investment] environment and the adequacy of their practices to respond to market stresses, including possible liquidity stress’; and
- APRA (and ASIC) reviewing ‘how trustees have implemented the retirement income covenant within their business strategies and operations’ and how they are addressing any deficiencies.
As part of its policy priorities:
- amendments to SPG 530 associated with revisions to SPS 530 (released in 2022) are expected to be released mid-2023;
- proposed revisions to SPS 515 will be released for consultation this year;
- new requirements for the transfer of MySuper product assets will come into effect this year (including updating SPG 227) after industry consultation;
- there will be further consultation on SPS 114;
- there may be enhancements to standards and associated guidance following the thematic review of the implementation of the retirement income covenant; and
- there will be a review of and potential consultation on SPS 521 and SPS 160.
Click here for details.
APRA – Released annual superannuation bulletin
On 31 January 2023, APRA released its annual superannuation bulletin (for the financial year ending 30 June 2022), which provides an overview of the superannuation industry with information on ‘funds and membership profile, key financial performance metrics, financial position, fees and expenses’. Some key statistics include there being:
- $3.34 trillion in total superannuation assets;
- $881 billion of total assets in MySuper products; and
- $71 billion of contributions to MySuper products in the 2021/22 financial year.
The statistics also show that the average account balance for funds with more than six members is $104,710 and for MySuper members is $58,742.
Click here for details.
APRA – Speech on APRAs priorities for 2023
On 30 January 2023, APRA released a speech given by Deputy Chair Margaret Cole which outlined APRA’s priorities for superannuation in 2023. These priorities for the superannuation industry include:
- ‘[s]etting a clear course for better member outcomes’;
- ‘[r]ectifying substandard industry practices’;
- increasing transparency in the industry, especially as it relates to the underperformance of funds;
- ‘[i]nfluencing improved retirement outcomes’; and
- ‘[u]pdating member outcomes regulations’.
Several cross-industry priorities were also identified as being a focus for APRA and relevant to super funds being ‘cyber, climate and operational risk’.
Click here for details.
ALRC – Background Paper 10 for Financial Services Regulation Review
On 25 January 2023, the ALRC released Background Paper FSL10 as part of its ongoing ‘Review of the Legislative Framework for Corporations and Financial Services Regulation’. The Background Paper titled, Reflecting on Reforms II – Submissions to Interim Report, reviews feedback received in response to the ALRC’s proposals and recommendations released in Interim Report B (see our 7 October 2022 Super Alert).
Click here for details.
Treasury – Consultation on proposed changes to NALI/NALE provisions
On 24 January 2023, Treasury began consultation on options to amend the non-arm’s length income/expenses provisions in the Income Tax Assessment Act 1997 (Cth) (collectively, NALI/NALE provisions) which apply to superannuation funds. The consultation paper titled Non-arm’s length expense rules for superannuation funds, includes proposed amendments relating to large APRA-regulated funds to ‘mitigate the ‘tainting effect’…where all income of the fund is potentially subject to the top marginal tax rate due to a relatively minor breach of the rules due to a general expense’.
Under the proposed amendments large APRA-regulated funds would be exempt from the NALI/NALE provisions so far as they relate to general expenses. However, they would remain subject to the provisions so far as they relate to ‘specific expenses linked to specific asset and income sources’ (ie, ‘all the income of that asset will be NALI and subject to the highest marginal tax rate’).
Consultation closes on 21 February 2023.
Click here for details.
Assistant Treasurer – Opinion piece on super funds and member engagement
On 20 January 2023, the Assistant Treasurer and Minister for Financial Services the Hon Stephen Jones MP released an article titled Opinion piece: Super funds must step up to the mark on member engagement. The article comments on a report released by ASIC in 2022, on its review of complaints handling by superannuation trustees (see our 9 December 2022 Super Alert); stating that by not responding to complaints in a ‘timely and reasonable manner’, funds are not ‘growing engagement and building member satisfaction’.
The Assistant Treasurer encourages trustees to ‘[f]ocus on your members; respond to complaints more quickly; invest more in your relationship with members; and do better at understanding the needs of those who trust you with their contributions’.
Click here for details.
Treasury – Discussion paper on superannuation access to victims of child sexual abuse
On 19 January 2023, Treasury released for consultation a discussion paper titled Access to offenders’ superannuation for victims and survivors of child sexual abuse, outlining ‘two complementary proposals that would provide for the release of an offender’s superannuation for the purposes of satisfying unpaid compensation orders’.
The first proposal ‘would provide for a court-ordered early release mechanism facilitated by the [ATO]’, allowing victims and survivors to apply to the appropriate court and be ‘awarded an amount from the offender’s [or their spouse’s] ‘additional’ contributions’.
The second proposal ‘aims to improve transparency’ by allowing ‘victims and survivors to submit a superannuation information request to the appropriate court which could then request that the ATO discloses specific information regarding the offender’s or their spouse’s superannuation accounts’.
The Assistant Treasurer and Minister for Financial Services the Hon Stephen Jones MP issued an associated media release and commented on the discussion paper in two media interviews; saying in one interview that ‘[t]hese proposals will close a loophole that’s causing further harm to victims [and survivors] by denying them court awarded compensation’.
Consultation will close on 16 February 2023.
Click here, here, here and here for details.
ASIC – Financial Advisors Register to display which financial advisers can provide tax (financial) advice
On 6 January 2023, ASIC issued a media release outlining that from 1 February 2023, ASIC’s Financial Advisers Register ‘will display whether a financial adviser can provide tax (financial) advice services to retail clients’. To provide tax (financial) advice services to retail clients, financial advisers will be required to meet the new requirements outlined in Corporations (Relevant Providers—Education and Training Standards) Determination 2021 (Relevant Providers Determination) and will be known as ‘qualified tax relevant providers (QTRPs)’.
Click here for details.
This alert was written by Kiara Leslie (Lawyer), Sanela Osmanovic (Senior Associate), and Natalie Cambrell (Director).
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