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Superannuation monthly update – June 2021

13 July 2021

#Superannuation, Funds Management & Financial Services

Published by:

Michael O'Connor

Superannuation monthly update – June 2021

Regulator updates

APRA releases information on APRA Connect (4 June 2021)

APRA published further information to assist superannuation funds in getting ready for the new data platform ‘APRA Connect’, which commences in September 2021.

APRA Connect is the new data collection solution for reporting entities lodging information and data with APRA.

ASIC Information Sheet 256 FAQs: Ongoing fee arrangements (24 June 2021)

ASIC released Information Sheet 256 (INFO 256) outlining changes to ongoing fee arrangements introduced by the Financial Sector Reform (Hayne Royal Commission Response No 2) Act 2021 (Cth). INFO 256 answers frequently asked questions on obligations to provide a fee disclosure statement to retail clients for ongoing fee arrangements.

These obligations commenced on 1 July 2021.

Legislation

ASIC Corporations (Amendment) Instrument 2021/550 (18 June 2021)

The Instrument extends existing licensing relief for public offer trustees to all trustees when dealing with a financial product (other than an interest in the entity) in the ordinary course of operation of the entity. The exemption permits a trustee to conduct particular activities outside of their AFSL, including:

  • its own underlying investments
  • its own superannuation trustee services when performing its ordinary operations.

The exemption applies until 31 December 2022. 

Treasury Laws Amendment (Your Future, Your Super) Act 2021 (Cth) (22 June 2021)

The Act provides significant changes to superannuation laws as set out below.

Schedule 1 Stapled Funds

As of 1 November 2021, an employer must ensure superannuation contributions are paid to an employee’s ‘stapled fund’ regardless of the employer’s default superannuation fund or workplace determinations in place.

If a new employee fails to choose a fund, employers:

  • will be required to request that the ATO identifies whether a stapled fund for a new employee exists
  • must make super contributions to the new employee’s stapled fund as identified by the ATO
  • can make super contributions to the employer’s default fund, but only once the ATO confirms that it cannot identify a stapled fund.

Proposed regulations also provide tiebreaker rules when an employee contains multiple superannuation accounts, taking into account the most recent contribution or largest account balance at the end of the last financial year or when the employee joined each fund.

Schedule 2 Performance Benchmarks

As of 1 July 2021, performance assessments on MySuper products conducted by APRA will come into effect. Performance assessments of choice products will commence from 1 July 2022. The assessments will force trustees to ensure their MySuper and selected choice products (or a combination of choice products that are considered to be the one product for these rules) perform to a minimum of a benchmark standard or otherwise risk losing members.

Draft regulations have proposed the performance assessment examines the last eight years of actual net returns compared to the benchmark set by APRA. If a product fails an assessment, it must provide a prescribed form to members within 28 days as a hard copy letter and in electronic form if emails are known.

If a product fails an assessment for two consecutive years, the trustee must not allow:

  • new members to invest in the product
  • current members to switch to the product.

Schedule 3 Best Financial Interest Covenant

As of 1 July 2021, trustees and directors must meet the ‘best financial interest’ covenant. The Act makes clear the obligations under the covenant also apply in respect of payments to a third party, new contracts, or existing contracts that are renewed or varied on or after 1 July 2021.

Schedule 3 also introduces the reverse onus of proof which requires trustees to maintain sufficient records of decisions made in the event of a claim whereby they must adduce or point to evidence that they have complied with the best financial interest covenant.

The Act also repeals the portfolio holdings disclosure exemption that enables trustees not to disclose assets comprising less than 5 per cent of the portfolio’s value from 31 December 2021.

Treasury Laws Amendment (More Flexible Superannuation) Act 2021 (Cth) (22 June 2021)

The Act increases the maximum age at which individuals may bring forward non-concessional contributions to 66.

Financial Regulator Assessment Authority Act 2021 (Cth) (24 June 2021)

The Act establishes the Financial Regulator Assessment Authority (FRAA). As mentioned in our May update, FRAA will be charged with assessing both the effectiveness and capability of APRA and ASIC. However, despite the Act outlining a number of requirements for how FRAA is to be structured, the legislation does not define what either “effectiveness” or “capability” entails.

Australian Prudential Regulation Authority Supervisory Levies Determination 2021 (24 June 2021)

The determination implements the following levies for superannuation funds for the 2022 financial year:

  • restricted component of 0.00390 per cent of assets held by the fund with a minimum restricted levy of $7,500 and a maximum restricted levy of $800,000
  • unrestricted component of 0.002925 per cent of assets held by the fund.

The above levies do not apply to small APRA funds or pooled superannuation trusts.

Treasury Laws Amendment (Miscellaneous and Technical Amendments) Regulations 2021 (Cth) (24 June 2021)

The Regulations clarify that a fee refund paid by a trustee to a member’s superannuation account is not a concessional contribution. The change will apply to the 2022 financial year and later financial years.

Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2021 (Cth) (24 June 2021)

The Regulations reduce the minimum account-based pension drawdown rates by 50 per cent. The amendment is designed to allow pension accounts to recover from capital losses associated with the COVID-19 pandemic.

The measure extends to 30 June 2022.

Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021 (24 June 2021)

The Bill proposes new penalties and sanctions for financial advisors who have breached their obligations under the Corporations Act. The Bill also proposes to amend the role of the Financial Services and Credit Panel to operate as a single disciplinary body for financial advisors. The suggested changes are in response to the Financial Services Royal Commission’s conclusion that the financial advice industry lacked an effective professional discipline system and that too many different pathways existed for consumer complaints.

Treasury Laws Amendment (Measures for a later sitting) Bill 2021: Use of technology for meetings and related amendments (25 June 2021)

Treasury released draft legislation seeking to create a permanent statutory mechanism for the electronic execution of company documents. The proposed new laws will allow companies to sign and provide meetings-related documents electronically and use technology to hold meetings, including hybrid meetings, permanently.

Submissions are due by 16 July 2021.

Authors: Luke Hooper & Michael O'Connor

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this update is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Michael O'Connor

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