Welcome to the latest issue of the KHQ Super Alert which covers a busy two week period. Among a range of developments, the first tranche of legislation to implement some of the Quality of Advice Review recommendations has been introduced, along with Bills relating to climate-related financial disclosure and proposing to increase the Commonwealth penalty rate unit. The ATO also released an update of its key super rates and thresholds information, and Treasury released exposure draft legislation to amend the transfer balance credit provisions for SFTs.
Federal Court – Decision in Alford v AMP Superannuation Limited [2024] FCA 332
On 4 April 2024, the Federal Court published its judgment in Alford v AMP Superannuation Limited [2024] FCA 332. A class action commenced in 2019 for members in the AMP Superannuation Savings Trust, AMP Retirement Trust and other related funds alleging that the relevant trustees contravened various laws resulting in members being overcharged administration fees. This judgment related to an interlocutory application where the applicants sought to discontinue proceedings against one of the respondents and claims originally made in relation to certain products.
The reason for discontinuing this element of the proceedings was because ‘the complexity and nature’ of the relevant products meant that certain expert ‘evidence could not be obtained to support [the] case’. Accordingly, the applicants were advised by counsel that this aspect of the claims ‘lacked reasonable prospects of success and should be withdrawn’.
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APRA – Climate risk self-assessment survey
On 3 April 2024, APRA issued a letter to all APRA-regulated entities to notify them that ‘APRA will shortly commence a voluntary survey of its regulated entities, asking them to self-assess the maturity of their current practices against APRA’s guidance on managing the financial risks of climate change’.
The survey is intended to gather information on how entities are ‘currently managing these risks, using APRA’s Prudential Practice Guide CPG 229 Climate Change Financial Risks, published on 26 November 2021, as its benchmark’. The survey is open to all APRA-regulated entities, and ‘[e]ntities choosing to participate in the survey will have six weeks from receiving the questionnaire to provide their responses’.
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Treasury – Draft legislation Treasury Laws Amendment Instrument 2024: Successor fund transfers and capped defined benefit income streams
On 3 April 2024, Treasury released for consultation exposure draft legislation to amend the transfer balance credit provisions for successor fund transfers to ensure that members with capped defined benefit income streams are not adversely affected (which occurs under the current legislation because the original income stream is treated as ceasing and a new one commencing in the successor fund). According to Treasury, ‘[t]he amendments would apply retrospectively to transfer balance credits that arose in relation to successor fund transfers that occurred on or after 1 July 2017’.
The consultation period closes on 24 April 2024.
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ATO – Release authorities updated website information
On 2 April 2024, the ATO released updated information on its website entitled ‘Release authorities – problem solving for SuperStream users’, intended to assist superannuation fund trustees to avoid errors and processing delays when actioning release authorities received via SuperStream. It also released updated information entitled ‘Release authorities’, outlining the various types of release authorities which may be sent by the ATO to superannuation fund trustees to release money from a member’s superannuation account.
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Federal Court – Resolution Life Australasia Limited v Mitchell [2024] FCA 310
On 28 March 2024, the Federal Court handed down its decision in Resolution Life Australasia Limited v Mitchell [2024] FCA 310. It was an appeal from a determination of the Australian Financial Complaints Authority (AFCA).
The case involved a highly specific set of facts. Importantly, the member had only been employed for a few weeks (23 May 2016 to 17 June 2016). The default insurance cover process under his employer’s superannuation plan in the AMP Superannuation Savings Trust was only initiated on 26 July 2016 (after he ceased employment). On 27 July 2016, he was sent a welcome letter by the trustee confirming that his superannuation account had been set up as of 23 May 2016 (when he commenced employment). In 2018, he applied for disability benefits, but the insurer and trustee declined the claim and refunded the premiums that had been deducted from his superannuation account. AFCA found for the member.
There were various complexities, but ultimately the Court had to consider a question of law as to whether AFCA had denied the insurer procedural fairness because AFCA’s reasons for its determination hinged on two critical matters which had not been the subject of any of the parties’ submissions and had not been adverted to in AFCA’s preliminary assessment which preceded AFCA’s final determination.
The Court found that AFCA had denied the insurer procedural fairness, and also found that AFCA had misconstrued the terms of the insurance policy. The matter has been remitted to AFCA. However, a key finding of the Court was that the policy provided that automatic insurance cover only applied under the employer plan if the person was ‘at work … on the date the application [for cover] was made’, and the application on the member’s behalf was not in fact made until 26 July 2016 (when he had ceased employment).
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Parliament – Objective of superannuation Bill
On 28 March 2024, the Senate Economics Legislation Committee released its final report in relation to the Superannuation (Objective) Bill 2023. As referred to in our Super Alert of 17 November 2023, the Bill proposes to introduce a new standalone Act which states that ‘[t]he objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way’.
The Committee recommended that the Bill be passed. Additional comments were also provided by Coalition Senators which recommend that ‘the Government develop a whole-of-system retirement income system objective, outlining the objective of the retirement income system and the roles of the pillars, as suggested by the 2020 Retirement Income Review. Factors impacting home ownership in retirement should be considered as part of the development of this objective’.
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Parliament – Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024
On 27 March 2024, the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 was introduced into the House of Representatives. According to the associated media release by the Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, this is ‘the first tranche of legislation to deliver [the Government’s] comprehensive package of reforms to ensure Australians have access to quality and affordable financial advice’.
There are five particular reforms being introduced to implement the following recommendations of the Quality of Advice Review:
- Deduction of adviser fees from superannuation – which relates to recommendation 7 about ‘clarifying the legal basis in the SIS Act for superannuation trustees to charge individual members for financial advice from their superannuation account, and clarify associated tax consequences under the ITAA 1997’;
- Ongoing fee arrangements – which relates to recommendation 8 about ‘streamlining ongoing fee renewal and consent requirements, including removing the requirement to provide a fee disclosure statement, in the Corporations Act’;
- Flexibility for FSG requirements – which relates to recommendation 10 about ‘providing more flexibility on how FSG requirements can be met under the Corporations Act’;
- Conflicted remuneration – which relates to recommendations 13.1 to 13.5 about ‘simplifying and clarifying the provisions governing conflicted remuneration in the Corporations Act’; and
- Standard consent requirements for certain insurance commissions – which relates to recommendations 13.7 to 13.9 about ‘introducing new standardised consent requirements for life risk insurance, general insurance and consumer credit insurance commissions’.
In addition, the Bill proposes to make other ‘miscellaneous and technical amendments’ to Treasury laws. This includes proposed amendments to the SIS Act to:
- ‘ensure all members of regulated superannuation funds can automatically maintain their insurance following a successor fund transfer’;
- relocate certain requirements relating to actuaries and auditors of superannuation entities ‘from the SIS Regulations into the SIS Act’;
- clarify the requirements ‘in relation to what information trustees of superannuation entities are required to give, and to whom this information is required to be given’ under sections 254 and 299U; and
- remove references to ‘annual report’ and replace the reference with ‘fund information’ in section 106 (regarding notifying regulators of significant adverse events).
The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 20 June 2024.
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Parliament – Climate-related financial disclosure Bill
On 27 March 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 was introduced into the House of Representatives. One of the measures proposed to be introduced is a requirement for ‘entities that lodge financial reports under Chapter 2M of the Corporations Act and meet certain minimum size thresholds…to make disclosures relating to climate in accordance with relevant sustainability standards made by the [Australian Accounting Standards Board]’.
This reporting requirement will apply to superannuation trustees ‘where the value of assets at the end of the financial year (including the entities it controls) is equal to or greater than $5 billion (or the amount determined by regulations)’ (referred to as Group 2 entities) and will ‘build on the existing annual financial reporting framework’.
The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 30 April 2024.
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Parliament – Crimes and Other Legislation Amendment (Omnibus No. 1) Bill 2024
On 27 March 2024, the Crimes and Other Legislation Amendment (Omnibus No. 1) Bill 2024 was introduced into the House of Representatives. Among other things, it will increase the penalty unit from $313 to $330 with effect from 1 July 2024.
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APRA – Response to SDT consultation feedback
On 27 March 2024, APRA issued a letter to all Registrable Superannuation Entity licensees setting out its response to feedback that APRA received on ‘the Superannuation Data Transformation (SDT) Publications and Confidentiality Consultation Letter dated 10 October 2023’ (see our Super Alert of 13 October 2023 for further information). This consultation was in relation to ‘the proposed publication of certain data, including the publication and confidentiality positions for expenses and detailed asset allocation data, and to determine certain data as non-confidential’.
APRA announced that following review of the feedback, it has decided to retain most of the proposals but with some (minor) modifications. It has also undertaken to ‘consult with the industry working group on expenses reporting in relation to the drafting of explanatory notes to provide additional context to the publications’. APRA states that ‘[t]he new publications are expected to be released in August 2024’.
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Fair Work Commission – Variation of modern award superannuation clause
On 26 March 2024, the Fair Work Commission handed down its decision to vary 147 modern awards to ensure that the superannuation clauses in those awards properly reflect current superannuation requirements ([2024] FWCFB 189). The determination to vary the awards will operate from 9 April 2024. This decision follows an earlier one on 4 March 2024 in which the Commission published draft determinations and invited interested parties to comment (see our Super Alert of 8 March 2024 ). Submissions were received from two superannuation fund trustees.
Those trustees ‘made submissions about the names of default funds listed in the superannuation clauses of certain awards, noted that the names of certain default funds had changed as a result of mergers and proposed that the relevant subclause in each affected award be varied to the reflect the new name of their particular default fund’. However, the issues raised were outside scope of the current matter and so the Commission decided that ‘a new matter will be created to deal with the name changes suggested by [the two trustees]. Variations to lists of superannuation default funds in the modern awards as a whole will also be considered in the new matter’ (at [7]).
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Legislation – ASIC Corporations (Amendment) Instrument 2024/187
On 22 March 2024, the ASIC Corporations (Amendment) Instrument 2024/187 was registered on the Federal Register of Legislation. According to the Explanatory Statement, the purpose of the Instrument is to:
- extend the operation of ASIC Corporations (Auditor Independence) Instrument 2021/75 and ASIC Corporations (Parent Entity Financial Statements) Instrument 2021/195 so that they continue to operate for a further 5 years until to 30 April 2029 and 1 April 2029 respectively; and
- ‘align the treatment of registrable superannuation entity audit clients with that of other statutory audit clients’.
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ASIC – Ongoing financial adviser registration
On 22 March 2024, ASIC issued a media release to reaffirm the ongoing registration obligations which apply to financial advisers. It states that ‘[f]ollowing the commencement of the registration requirement on 16 February 2024, most financial advisers (known as relevant providers) have been registered with ASIC’. This means that they can ‘legally provide personal advice to retail clients in relation to relevant financial products’. However, ASIC reminds AFS licensees and relevant providers that they ‘need to be aware of their ongoing registration obligations’.
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ATO – Key super rates and thresholds
On 20 March 2024, the ATO released an update of its ‘Key super rates and thresholds’ information. It covers a range of up-to-date and historical figures including in relation to contributions caps, Division 293 tax, payments from super, super income stream tax tables, Superannuation Guarantee, government contributions and transfer balance caps.
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Senate – Committee inquiry into wholesale investor/client tests
On 20 March 2024, an inquiry conducted by the Parliamentary Joint Committee on Corporations and Financial Services commenced in relation to the following two matters:
- ‘the wholesale investor test for offers of securities (Section 708 of Chapter 6D of the Corporations Act 2001)’; and
- ‘the wholesale client test for financial products and services (Sections 761G & 761GA of Chapter 7 of the Act)’.
The Committee has called for written submissions by 15 May 2024.
Click here for details.
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