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Superannuation monthly update – May 2020

01 June 2020

#Superannuation, Funds Management & Financial Services

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Superannuation monthly update – May 2020

Regulator updates

ATO Super CRT Alert 027/2020: Coronavirus early release of super – updated questions and answers (May 2020)

The ATO has updated its questions and answers in respect of the COVID-19 early release of superannuation regime.

A number of answers have been amended and following three questions have been added:

  • What if a member says they don’t want the payment anymore?
  • What should I do before asking the ATO for the status of a determination?
  • Should a fund send information the subject of an AUSTRAC SMR to the ATO as well?

ASIC defers commencement of design and distribution obligations (8 May 2020)

ASIC announced it will defer the commencement date of the design and distribution obligations for six months from their original commencement dates, given the impact of COVID-19.

ASIC will defer the commencement date for the design and distribution obligations until 5 October 2021.

APRA Putting Members’ Interests First – frequently asked questions (15 to 22 May 2020)

APRA confirmed that the Government has indicated that it will pursue amendments to the SIS Act to ensure the Government’s original Putting Members’ Interests First (PMIF) policy intent is achieved in a number of areas that have been raised by the industry. APRA understands the Government will now also seek to amend the SIS Act to provide that:

  • elections regarding the provision of insurance under sections 68AAA, 68AAB and 68AAC of the SIS Act remain valid following a successor fund transfer (SFT)
  • the application and transition provisions of PMIF apply such that members who were not required to make an election under the Act (such as members who provided an election before 1 November 2019 or members aged under 25 prior to 1 April 2020) are not required to elect following an SFT.

APRA also has included the following frequently asked question:

“In a Successor Fund Transfer (SFT), if the RSE licensee of a successor fund does not seek or obtain from a member an insurance opt-in election, on the basis that:

  • the member had previously provided an insurance opt-in election to the transferring RSE licensee, or
  • the member was captured by the application and transition provisions of the PMIF Act,

what action is required from the RSE licensee of the successor fund?”[1]

ASIC’s frequently asked questions: COVID-19 – Information for superannuation trustees. Frequently asked questions (19 to 26 May 2020)

ASIC has updated its frequently asked questions by including the following new questions:

“1A. Do superannuation trustees need to issue an exit statement to members who have a zero balance due to accessing the COVID-19 early access to superannuation scheme? If so, when do they need to provide these exit statements?”

“1B. What are ASIC’s expectations of trustees in communicating to their members who have a zero or low balance due to accessing the COVID‑19 early access to superannuation scheme?”

“1C. What does ASIC expect of trustees in communicating to their members about the impact of COVID-19 on their insurance inside superannuation?”

“2E. Will ASIC be amending the transitional arrangements in RG 97 instrument ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070?”[2]

Legislation

Treasury Laws Amendment (2019 Measures No. 3) Bill 2019

The Bill (amongst other things) amends section 99G of the SIS Act so that a trustee is required to refund a low balance account member, who exits the fund, an excess above the 3% capped fees and costs threshold. Currently, despite what APRA may state, the Protecting Your Superannuation Package Act 2019 (Cth) failed to require that exiting members were paid and that the Act only required low balance members who remained with the fund as at the end of the income year (usually 30 June) receive a refund.

If the Bill does not pass, it raises the obvious question of whether trustees should use member money to refund exiting members.

It is also worth noting that the Act fails to change the payment timing rules. If the Bill is passed, trustees have until three months after the end of the income year to pay refunds (which would be sensible as it enables trustees to better calculate the indirect costs’ component of refunds).

Parliament is likely to sit for two weeks over June 10 to 18 in which it is likely this Bill will be considered.

Our thoughts

We have been clear on this issue since identifying it in May last year. We recommend trustees to keep a close watch on the progress of the Bill.

Parliamentary Contributory Superannuation (Early Release Payments) Regulations 2020 (1 May 2020)

The Regulations provide early release options to Parliamentary Contributory Superannuation Scheme deferring members for financial hardship and compassionate grounds – aligning with early release of superannuation options that currently exists for other superannuation fund members, under the SIS Regulations. This includes early release of superannuation on compassionate grounds due to COVID-19.

Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (5 May 2020)

The Determination makes temporary amendments to the Corporations Act to:

  • allow companies and other regulated entities which are required (or choose) to hold a meeting, including an Annual General Meeting (AGM), to do so using technology rather than face-to-face meetings. However, this will not apply to superannuation fund AGMs, which are governed under the SIS Act
  • modify the operation of section 127 of the Corporations Act to confirm that electronic execution of a document by a company officer (including an electronic document) will constitute a valid and binding form of execution.

The Determination has effect for six months from its commencement, meaning it will be automatically repealed on 5 November 2020 unless extended.

Anti-Money Laundering and Counter‑Terrorism Financing Rules Amendment Instrument 2020 (No. 2) (registered 7 May 2020)

The Instrument amends part 4.15 of the Anti-Money and Counter-Terrorism Financing Rules Instrument 2007 (No. 1), making it explicit that where it is not possible to verify information in accordance with an applicable customer identification procedure, based on an original, or certified copy or certified extract, of a document due to COVID‑19 pandemic measures, a reporting entity may rely on a copy of a document. This includes documents such as trust deeds, partnership agreements, association constitutions, and co-operative registers.

The amendment is intended as a time‑limited amendment that is specific to the duration of the COVID-19 pandemic.

Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 (13 May 2020)

The Bill was introduced into the House of Representatives and proposes to extend the three-year contributions bring-forward rule by enabling individuals aged 65 and 66 to bring forward non-concessional contributions on or after 1 July 2020. The Bill will amend the taxation rules around the bring-forward rule for members in this age group. 

Superannuation Supervisory Levy Imposition Amendment Bill 2020 (13 May 2020)

The Bill was introduced as part of a package of bills to the House of Representatives and proposes to increase the statutory upper limit of the levy that APRA can collect from superannuation fund trustees to $10 million.

Treasury Laws Amendment (2020 Measures No. 1) Bill 2020 (25 May 2020)

The Bill has been passed by both Houses of Parliament and awaits Royal Assent. Once enacted, capital gains tax loss relief that is provided to merging superannuation funds, on a temporary basis, will become permanent.

ASIC Corporations (Deferral of Design and Distribution Obligations) Instrument 2020/486 (27 May 2020)

ASIC has deferred the Superannuation Design and Distribution Obligations until October 2021.

Superannuation Legislation Amendment (2020 Measures No. 1) Regulations 2020 (28 May 2020)

The Regulations amend the SIS Regulations in order to:

  • increase the spouse contributions making age to 74
  • extend the work test exemption to certain members when making spouse contributions.

Cases and other recent developments

Insurance in Superannuation Voluntary Code of Practice (1 March 2020)

The Code has been updated in order to meet the Protecting your Superannuation Package and PMIF requirements.

AFCA extension of time to resolve complaints (8 May 2020)

The Government announced a six-month deferral to the implementation of commitments associated with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry as a result of the significant impacts of COVID-19.

Under the updated timetable, those measures that the Government had indicated would be introduced into the Parliament by 30 June 2020, will now be introduced by December 2020. Similarly, those measures originally scheduled for introduction by December 2020 will now be introduced by 30 June 2021.

Deferral of retirement income framework legislation (22 May 2020)

The Government announced plans to defer the introduction of the Retirement Income Covenant, previously scheduled to commence on 1 July 2020, as a result of the COVID-19 pandemic.

The purpose of the Retirement Income Covenant is to establish an additional obligation for trustees to formulate a retirement income strategy for their members. The deferral of the Retirement Income Covenant will also allow drafting of this measure to be informed by the Retirement Income Review.

The revised date will be determined following further consultation on the Covenant.

Author: Luke Hooper

[1] https://www.apra.gov.au/putting-members%E2%80%99-interests-first-%E2%80%93-frequently-asked-questions
[2] https://asic.gov.au/regulatory-resources/superannuation-funds/covid-19-information-for-superannuation-trustees/

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 newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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