Welcome to the latest issue of the KHQ Super Alert. This week, the Government released the outcomes from its Your Future, Your Super review. Meanwhile, Treasury released draft superannuation performance test regulations for consultation and a consultation paper on the implementation of the proposed adjustments to the concessional tax rate for members with large account balances.
Government – Outcomes of the Your Future, Your Super review
On 4 April 2023, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, issued a media release summarising the Government’s position on the Your Future, Your Super review (see our Super Alert of 9 September 2022 in relation to the original consultation commenced by Treasury). The media release outlines the key updates the Government proposes to make to the annual superannuation performance test, which are outlined in the news item below relating to the performance test regulations.
The media release also provides a ‘summary of the key themes raised by stakeholders’ as part of the Your Future, Your Super review, including proposed next steps. A few of the next steps proposed include:
- further guidance being issued by the regulators to address uncertainty around the best financial interests duty;
- extending the annual performance test to trustee-directed products for the 2023 testing period;
- extending the YourSuper comparison tool to trustee-directed products for the 2023 testing period; and
- addressing ‘some of the significant issues in the current [stapling] system’, these include:
- the possibility of legislating to prevent employee onboarding software providers from ‘undermining stapling’;
- an ATO offered ‘IT service for digital service providers [for employers] to adopt [into their payroll systems] in April 2023 which should support a more streamlined service’; and
- the ATO’s improvements to the ‘Choice of Fund form’ being finalised this month.
Click here for details.
Treasury – Consultation on superannuation performance test regulations
On 4 April 2023, Treasury released for consultation exposure draft regulations titled Superannuation Industry (Supervision) Amendment (Your Future, Your Super – Addressing Underperformance in Superannuation) Regulations 2023 (Draft Regulations). The Draft Regulations are intended to address issues raised in the Your Future, Your Super review by amending ‘the testing period, benchmarks and notification letter that form part of the annual performance test requirements’. Other (minor technical) amendments are intended to ‘improve accuracy and clarity for the annual performance test, reduce the administrative burden for APRA and ensure the test is fit for purpose when it is extended to trustee directed products’.
Some of the ways the Draft Regulations propose to amend the Superannuation Industry (Supervision) Regulations 1994 (Principal Regulations) are as follows:
- the ‘lookback period of the performance test’ will be extended from eight years to ten years for trustee-directed products;
- Schedule 2A of the Principal Regulations (setting out the prescribed form and content of the performance test failure notice) is being repealed and replaced with revised content; and
- the calculation of the strategic asset allocation for ‘lifecycle Part 6A products’ will be amended so the ‘test will consider data reported at the lifestage level’.
Consultation will close on 2 May 2023 and the Government has outlined its intention for the updates to be implemented ‘prior to the August 2023 performance test’.
Click here for details.
Treasury – Consultation on implementation of amended tax rate for high balances
On 31 March 2023, Treasury released a consultation paper seeking input on the implementation of the Government’s proposed adjustment to the concessional tax rate for super account balances above $3 million (see our Super Alert from 3 March 2023). Among other things, the paper, titled Better targeted superannuation concessions talks about the proposed application to SMSFs, defined benefit interests and constitutionally protected persons before touching on the proposed reporting process for funds.
Consultations will close on 17 April 2023.
Click here for details.
This alert was written by Kiara Leslie (Lawyer), Sanela Osmanovic (Senior Associate), and Natalie Cambrell (Director).
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