Welcome to the latest issue of the KHQ Super Alert. This week various instruments relating to the Financial Accountability Regime were registered. The Federal Court also released two superannuation related judgments which considered death benefit dependants and defined benefit lifetime pensions.
Legislation – FAR instruments registered
On 7 March 2024, the Financial Accountability Regime (Minister) Rules 2024 were registered on the Federal Register of Legislation. As referred to in our Super Alert of 9 February 2024, APRA and ASIC had previously warned the banking industry that there would be a delay in the release of these rules. The Minister Rules will apply to the superannuation industry once the Financial Accountability Regime becomes effective on 15 March 2025. The Regime commences for the banking industry on 15 March 2024.
In an associated media release, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, explained that the rules prescribe:
- ‘responsibilities and positions of accountable entities in each sector which make someone an ‘accountable person’ subject to the FAR’; and
- ‘the threshold (based on total asset size) above which an entity is required to provide the regulators with additional accountability statements and maps’.
The enhanced notification threshold for RSE entities under section 25(2) of the Minister Rules is as follows: ‘The accountable entity meets the threshold at a particular time during a financial year of the entity if the entity’s total assets value, as reported in the entity’s most recent final report, exceeds $30 billion.’
Two related legislative instruments were also registered – the Financial Accountability Regime Act (Information for register) Regulator Rules 2024 and Financial Accountability Regime (Consequential Amendments) Transitional Rules 2024.
Click here, here, here, and here for details.
Government – Superannuation on paid parental leave
On 7 March 2024, the Treasurer, the Hon Dr Jim Chalmers MP, issued a media release with various other Ministers announcing that the Government will pay superannuation on paid parental leave (PPL) from 1 July 2025. The Government expects that the ‘detail of this important measure to pay superannuation on PPL, including cost, will be released in the Budget’. The separate Paid Parental Leave Amendment (More Support for Working Families) Bill 2023 which proposes to increase the length of paid parental leave was passed by the House of Representatives on 7 February 2024 and has moved to the Senate.
Click here for details.
Federal Court – Death benefit decision relating to status of de facto
On 4 March 2024, the Federal Court released its judgment in the matter of Lingard v Commonwealth Bank Officers Superannuation Corporation Pty Limited [2024] FCA 174. The case related to an appeal of an AFCA determination where AFCA had affirmed a trustee’s decision that the appellant was not a dependant and therefore not entitled to a member’s death benefit. The appellant claimed that she was a de facto spouse or in the alternative in an interdependency relationship with the deceased.
AFCA found that although the member and appellant were in regular communication, there was significant evidence that the member ‘wished to be a free spirit; liked to have female friends, with no commitments; [and] had been in casual relationships with several partners’. The Federal Court ultimately upheld AFCA’s determination as no error of law had been established.
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ASIC – Focus on shutting down investment scam websites
On 4 March 2024, ASIC issued a media release announcing that since July 2023, ASIC has shut down ‘nearly 3,500 investment scam websites’. According to ASIC in the first six months of the ‘investment scams disruption work’, it has ‘secured almost $60 million in civil penalties and 9 criminal convictions…launched 83 new investigations, commenced 19 new civil proceedings, criminally charged 19 individuals and completed nearly 350 surveillances’.
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Fair Work Commission – Modern award superannuation clause review
On 4 March 2024, the Fair Work Commission published a decision: Variation of modern awards on the Commission’s own motion – Modern award superannuation clause review [2024] FWCFB 123. As referred to in our Super Alert of 2 February 2024, the Fair Work Commission started reviewing superannuation clauses in modern awards in December 2023 but did not make any final determinations for amendments until further submissions were obtained.
The Commission has now received responses from four unions and has determined that out of the 155 awards reviewed, 147 should be varied. The proposed variations have been released and if no objections are received by 15 March 2024, the Commission ‘will proceed to issue final determinations and vary the awards’.
Click here for details.
Federal Court – Decision relating to defined benefit pensions and transfer balance cap
On 1 March 2024, the Full Court of the Federal Court handed down its judgment in Stern v Commissioner of Taxation [2024] FCAFC 21. The Federal Court was required to consider whether defined benefit lifetime pensions are excluded from the calculation of the transfer balance cap if they are subject to commutation restrictions. The Court ultimately determined the answer to this question in the negative (in other words, they must be included in the transfer balance cap). The Court disagreed with the appellant’s claim that it was ‘unfair or unreasonable to take [the appellant’s] defined benefit lifetime pensions into account in calculating whether he has an excess transfer balance, so as to require commutation of his other superannuation income streams and to impose excess transfer balance tax’.
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ASIC – Form for transfer of life insurance released
On 1 March 2024, ASIC announced that it has approved the relevant memorandum of transfer form to be used for assigning rights under a life policy (under section 200 of the Life Insurance Act 1995 (Cth)). These forms are often used for novating insurance policies in successor fund transfers. The content of the standard form has not changed, however ASIC is now required to prescribe these forms, instead of the form being included in the relevant regulations.
Click here for details.
Legislation – Amendments required to AFCA rules to give effect to CSLR
On 29 February 2024, the ASIC Corporations (AFCA Regulatory Requirement) Instrument 2024/60 was registered on the Federal Register of Legislation. According to the Explanatory Statement, the purpose of the instrument is to require AFCA to amend its rules so that the intent of the Compensation Scheme of Last Resort is reflected in the rules.
Click here for details.
AUSTRAC – Guidance in relation to outsourcing of AML obligations
On 26 February 2024, AUSTRAC issued a draft guide on the topic of outsourcing AML/CTF obligations. According to AUSTRAC, the purpose of the guide is to help reporting entities comply with their ‘obligations when outsourcing’, ‘identify, mitigate and manage money laundering and terrorism financing (ML/TF) risks that could arise from outsourcing’ and ‘take steps to ensure providers tailor outsourcing arrangements to [their] business and its specific ML/TF risk’.
AUSTRAC is seeking feedback on the guidance.
The consultation period closes on 18 March 2024.
Click here for details.
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