- AIST Policy News - 11 January 2018
AIST Policy News - 11 January 2018
Measures needed to plug 'coverage' gaps in super: AIST Federal Budget submission
AIST has recommended a range of policy measures to address ‘coverage’ gaps in Australia’s super system.
AIST’s Pre-Budget submission for 2018 recommends measures to help address the retirement savings gender gap, measures to improve the collection of unpaid super and ways to improve access to super among Indigenous Australians. We also make recommendations on how to cover areas where super is not payable, or where the coverage is insufficient.
This includes our support for Women in Super’s Making Super Fair platform, which has been independently costed by Rice Warner at $2.7 billion. The platform includes the annual payment of a $1000 super boost to low income earners which would be additional to the Low Income Super Tax Offset where applicable.
AIST recommends linking the payment of SG to gross remuneration rather than Ordinary Time Earnings, reducing the Age Pension assets test taper rate to $2 and increasing funding for indigenous identification schemes. AIST has also suggested that the ATO commits to a holistic program of super administration.
Government to consult on early release of super
The Government has released a consultation paper examining the key issues related to the early release of super benefits under compassionate grounds, severe financial hardship grounds and for victims of crime compensation.
The paper examines several existing early access grounds, such as release on compassionate grounds to pay for a member’s medical expenses, which has received widespread media coverage in the past week. It also explores release on grounds of financial hardship. The paper also asks whether, and the circumstances in which, a perpetrator’s super assets should be available to pay compensation to victims of crime.
The release of the consultation paper is part of a Treasury-led review of the rules governing the early release of super benefits, announced last month. The rules – which have not changed substantially since 1997 - will be reviewed with a view to whether they are fit for the purpose that they are designed to serve.
The closing date for submissions is 12 February 2018 and AIST will make a submission.
We are interested in your views on the proposals and invite you to send your comments to Jake Sims, Policy & Regulatory Analyst at email@example.com.
Update on ASIC’s disclosure relief
AIST has welcomed the decision by the Australian Securities and Investments Commission (ASIC) to grant transitional relief for key RG 97 disclosure requirements.
The Relief - which includes the disclosure of property operating cost on PDS and periodic statements - was announced late last year and follows a joint application by AIST, ASFA and the FSC.
AIST’s advocacy included the need for clarity regarding property operating costs, noting that to disclose these without the outcomes of the RG97 review would be both confusing to members and costly for super funds.
The latest version of CO 14/1252, which includes the changes, is available here.
AIST understands that ASIC will shortly be updating the RG97 FAQs. We will be consulting with member funds regarding RG97 next steps.
CLICK HERE for further details on the Relief – including an AIST overview of the latest changes - prepared by AIST’s senior policy analyst, Karen Volpato.
Keep up to date with the Royal Commission into banks and super
With the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry having commenced, individuals wishing to keep up to date with the Commission proceedings can subscribe to email alerts on the Commission’s website.
The Royal Commission will publish a hearing schedule to assist parties, witnesses and members of the public. The public hearings will be streamed live through the Commission’s website, with transcripts available once the hearings commence.
The Commission website provides an email mailing list for those wishing to receive regular updates.
ASIC puts spotlight on employer benefits
The Australian Securities and Investments Commission (ASIC) has put the spotlight on benefits offered or provided to employers by trustees in relation to employer decision-making on default funds.
In a submission filed with the Productivity Commission (PC) in late November, ASIC noted it had served notice on 47 funds across the super sector asking questions about default advice given to employers, disclosure material, benefits and services offered and the role of third parties.
From its initial sample of trustees, ASIC found that the most popular benefits provided to employers were free educational materials (33 per cent) as well as free tickets to sporting events or corporate hospitality (24 per cent).
ASIC is currently finalizing a second round of work that seeks further information about benefits to employers. Its submission indicated the regulator may consider reviewing the application of the inducement prohibition in the SIS Act.
ASIC’s submission also reports on its 2017 surveillance project about insurance. Results so far indicate that:
- About 10 per cent of trustees still use smoker defaults, and approximately 10 per cent of trustees use defaults in relation to blue collar workers. One trustee used both of these defaults.
- Rebates were provided to around 20 per cent of trustees by insurers, and around 20 per cent of trustees reported receiving other benefits from insurers such as corporate hospitality.
- 70 per cent of claims were accepted in full during the time period of our notice and approximately 30 per cent of complaints received by trustees related to insurance issues (36 per cent of insurance related complaints related to TPD).
The ASIC submission said notices had been served on a smaller number of trustees to follow up on the data it had received to date with the notices seeking information about the process of selecting insurers by trustees, the defaults transfer arrangements used by trustees, complaints handling processes trustees had in place, and disclosures made to members about all of these matters.
AIST expects wide support from funds for Insurance Code
With the release of the Insurance in Super Code of Practice late last year, super funds have until March 2018 to assess the code and decide whether to become signatories.
The voluntary Code, which will come into effect from 1 July 2018, is a first for the super industry and sets stands that provide greater understanding, clearer accountability and consistency of delivery across the super industry.
As a co-owner of the Code along with ASFA and the Financial Services Council, AIST expects the final version of the Code will receive wide support from our member funds. Funds have until 31 March 2018 to state their intention to subscribe to the Code.
The Code will be reviewed after 3 years of operation to ensure it continues to articulate best practice guidance.
If you have any questions about or would like to discuss any aspect of the Code please contact Ailsa Goodwin 03 8677 3831 or email firstname.lastname@example.org.
ASIC proposes new obligations on financial product providers
ASIC has released a Draft Bill outlining proposed design and distribution obligations for financial product issuers and distributors.
While we plan to review the Bill in depth, AIST is generally supportive of the intent of the Bill’s measures, which include providing ASIC with product intervention powers.
AIST believes the proposals will help reduce the likelihood of consumers being mis-sold products that are not aligned with their financial situation, objectives and needs.
AIST’s earlier advocacy highlighted the extensive regulatory overlay for MySuper. The draft Bill proposes that MySuper be exempt from the proposed requirements. While generally supporting the proposals, AIST strongly advocates that there are many inconsistencies and gaps within current legislation which should be removed as a priority. Examples include the lower disclosure requirements applying to Choice products. Without removing these gaps, ASIC does not have a sufficiently solid consumer protection framework.
For the explanatory memorandum, click here.
Submissions are due until 9 February 2018.
Please contact Karen Volpato, Senior Policy Advisor at email@example.com or on 0419127496.
Inquiry recommends changes to simplify super splitting in family law
A Federal Parliamentary inquiry into a family violence has recommended administration and legal changes to simplify the process of splitting super for the purpose of a property settlement.
The House of Representatives Standing Committee Inquiry report - A better family law system to support and protect those affected by family violence - identifies that many families affected by violence face delays caused by the failure of a former partner to make full financial disclosure of super assets. In particular, the report noted problems in discovering the name of the super fund of former spouses as well as the cost and complexity of the process.
The report – released in mid-December- includes two recommendations designed to speed up and reduce complexity around the super splitting process:
- The development of an administrative mechanism to enable swift identification of super assets by parties to family law proceedings, leveraging information held by the Australian Tax Office;
- Amending the Family Law Act and relevant regulations to reduce the complexity associated with super splitting orders including simplifying forms required to be submitted to super funds.
AIST supports ASIC fee for service
AIST has supported the introduction of an ASIC fee for service model. In our submission to Treasury’s consultation paper, AIST’s concerns centre around a lack of full compliance with the Government’s Cost Recovery Guidelines, and the need for ASIC to commence collecting and reporting on the level of regulator activities based on a superannuation sector (ie profit-to-member/retail) basis.
AIST believes the level of regulator focus should be tied to the quantum of levies raised from superannuation sectors. AIST is seeking an industry roundtable to help aid consultation and clarity, as well as to discuss how the levy will be calculated, as this still cannot be done.
For further information, please contact AIST senior policy analyst at Kvolpato@aist.asn.au
ATO provides advices on housing related super measures
The ATO has released advice to help funds implement the new First Home Super Saver (FHSS) Scheme and the super downsizing measure which became law on 13 December.
The new law also includes a provision that requires an independent review of both FHSS and downsizing measures that will commence 18 months after royal assent.
The FHSS Scheme allows members to save money faster for a first home inside their superannuation fund with the concessional tax treatment within super.
From 1 July 2017, members can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions into their fund to save for their first home.
From 1 July 2018, they can then apply to release these contributions, along with associated earnings to help purchase their first home (members must be 18 years or over to apply for the release of these amounts).
The legislation enacting this measure included an amendment that broadened the eligibility for the scheme. Members may still be eligible even if they have previously owned property in Australia, if the Commissioner of Taxation determines that they have suffered a financial hardship. Regulations will be available prior to 1 July 2018 specifying the circumstances that the Commissioner is to consider when determining if members have suffered a financial hardship.
The downsizing measure allows members who are 65 years and over to make a contribution of up to $300,000 into their superannuation after selling their main residence. The contract for sale of the main residence must be entered into on or after 1 July 2018. A member's spouse may also be eligible to make a contribution.
A downsizer contribution does not count toward a member's contribution caps, and their ability to make a contribution is unaffected by their total super balance.
A downsizer contribution is treated the same as other super benefits or balances for the purposes of determining eligibility for the age pension.
While the contribution is known as a downsizer contribution, there is no requirement for the member to move to a smaller property or purchase another property.
A new transaction type 'Proceeds from primary residence disposal' has been included in the finalised Member Account Transaction Service (MATS) to allow funds to report downsizer contributions.
However, the ATO has been working with industry to also develop an alternative reporting solution for funds that decide not to build the 'Proceeds from primary residence disposal' contribution transaction type into their registry systems.
The ATO has identified a potential solution using a new MATS form in the ATO Business Portal and is working with Industry on the design.
Only the personal and proceeds from primary residence disposal transaction types will be available initially.
While the ATO is still designing the process, it envisages funds who choose to use this alternative process will generally:
- accept a downsizer contribution and record it as a personal contribution in their registry system
- report the contribution within 10 days of receipt through MATS After a period of time (which is still being determined) to ensure the MATS reporting has been processed, log on to the ATO Business Portal using AUSKEY authorization.
For further information please visit the ATO website page on these new measures.