- AIST Policy News - 15 February 2018
AIST Policy News - 15 February 2018
Productivity Commission delays report following data collection and consultation issues
The Productivity Commission has extended the timetable for its inquiry into superannuation, pushing out by four months the deadline for its draft stage 3 superannuation report.
The delay follows consultations between the Commission, AIST and other super industry stakeholders in which concerns were raised about the Commission’s approach to data collection and the quality of the survey questions sent to funds.
The draft report is now due in late May. The Commission has confirmed that the final report will also be delayed but is yet to advise on timing.
The original deadline for the draft report was January 2018 with the final report due in June 2018.
AIST Governance Code update
The AIST Governance Code will take effect on 1 July 2018 and AIST has developed a suite of resources to assist member funds in fulfilling their obligations under the Code.
The Code was developed in 2017 to promote good governance and to position profit-to-member funds at the leading edge of international best practice. The principles-based Code acknowledges the importance of good governance and creates a new standard of best practice in Australia. It contains 21 requirements that member funds must report against annually on an ‘if not, why not’ basis, explaining their approach to the requirements.
Compliance with the Code is mandatory for AIST members from 1 July 2018. AIST members wishing to discuss the Code or accompanying Guidance can contact the Code Compliance Panel at email@example.com.
AFCA Bill passes House of Representatives
The establishment of the Australian Financial Complaints Authority (AFCA) to be operational by mid year is one step closer after the Bill was passed by the House of Representatives this week.
The Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 passed the House of Representatives without amendment.
The Bill sets out mechanisms for the establishment of AFCA, which includes the merger of the Superannuation Complaints Tribunal, Financial Ombudsman Service and the Credit and Investments Ombudsman.
It will also require superannuation funds to participate in a new internal dispute resolution framework.
The Government is pursuing its objective for AFCA to be operational by 1 July 2018.
Call for decisions on early release super to be centralised
AIST has called for decisions relating to the early release of super on both financial hardship and compassionate grounds to be centralised.
AIST's submission to Treasury on the early release of super benefits argues that a centralised decision-making process would lead to greater consistency and efficiency in the assessment process.
Currently, decisions on early release on compassionate grounds are handled by the Department of Human Services, though the Australian Tax Office is set to take over this role shortly. By contrast, there is no centralised process for decisions about early release due to financial hardship. Not all super funds allow members to access super on these grounds, while those that do, often have different rules and evidentiary requirements.
AIST’s submission reiterates our view that early release conditions for super must be clear and operate in limited circumstances. We stress that any modification of the existing release grounds or developing new grounds for early release must have regard to retirement adequacy, financial literacy, system manipulation and consistency.
Royal Commission update
The first public hearing of the Royal Commission into misconduct in the banking, superannuation and financial services commenced in Melbourne this week, providing further details on the timeline and responses to requests from the Commission for information.
To date, the Commission has received a total of 385 submissions, with 18 per cent of these relating to superannuation issues and 49 per cent relating to banking.
The next public hearing in March will focus on consumer lending practices (mortgages, car loans and credit cards), with the following hearing likely to focus on financial advice and wealth management.
The Commission has released a transcript of the first public hearing and the first of its briefing papers, which focuses on competition and profits in the banking sector.
Insurance code update
AIST has stepped up its engagement with member funds on the Insurance in Super Code of Practice.
The Code is on the agenda for discussion at the upcoming board meetings of many of our member funds and funds are considering how it will most effectively by implemented in their circumstances. We are confident many profit-to-member funds will have stated their intention to subscribe to the Code by the end of March.
Earlier this week, AustralianSuper announced it had signed up to the Code, with the fund already working on its implementation.
AustralianSuper now exceeds many of the minimum standards set out the Code, having recently introduced a number of new measures aimed at addressing the issue of account erosion with young people, short-term employees and disability-supported employees.
For further information on the Code, please contact AIST Senior Policy Manager, David Haynes at firstname.lastname@example.org
Superannuation Guarantee integrity measures
AIST has responded to the Government’s reform package that aims to combat Superannuation Guarantee (SG) non-compliance.
In a submission to Treasury, AIST supports the six measures contained in Treasury Laws Amendment (Taxation and Superannuation Guarantee Integrity Measures) exposure draft bill 2018 to improve compliance with superannuation payment laws. However we believe that the package could be strengthened and note that the proposed amendments should also be reviewed two years after they come into effect so that the effectiveness of the measures, including those recommended by AIST, can be assessed.
The exposure bill also seeks to enhance the reporting framework and data collection by the Australian Taxation Office (ATO).
Govt moves to simplify TTR transfers
The Government has released exposure draft legislation to ensure that a reversionary Transition to Retirement Income Stream (TRIS) will always be allowed to automatically transfer to eligible dependants upon the death of the primary recipient.
Currently, a reversionary TRIS cannot transfer to a dependant if the dependant themselves has not satisfied a condition of release.
The Government has noted that allowing TRIS to automatically revert in all cases will simplify administrative processes for superannuation funds, while also making it easier for superannuation members by eliminating the need for recently bereaved dependants to quickly engage with the super affairs at what is a particularly difficult time.
AIST invites member feedback for a submission we will be preparing on the draft legislation. Please contact AIST Policy & Regulatory Analyst, Richard Webb on email@example.com
Ban on SMSF borrowings
AIST has reiterated its call for a ban on borrowing by self managed super funds.
In a submission to Treasury on Tax Integrity Measures, AIST points out that fund borrowings increase systemic risk across the financial system and run counter to the objective of super to provide income in retirement.
AIST supports the Financial System Inquiry (FSI) recommendation to remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by super funds.
AIST also supports proposed measures which will restrict the degree to which a Limited Recourse Borrowing Arrangement (LRBA) can be used to circumvent the Total Superannuation Balance (TSB) restriction on contributions.
For further information regarding our submission, please contact Richard Webb, Policy & Regulatory Analyst at firstname.lastname@example.org
Gateways funding model announced
The Government has announced legislation to provide 85 per cent of the funding for the Gateway Network Governance Body (GNGB) through the APRA supervisory levy – the remaining 15 per cent will come from gateways. This measure will give the GNGB and gateways greater funding security.
The GNGB is a joint initiative of the superannuation industry (including AIST) that moved the governance of the Superannuation Transaction Network from interim, government-sponsored arrangements to an enduring and sustainable model run and funded by industry, and provides oversight of the governance of the gateway operators. AIST is actively involved in the operation of the GNGB and is supporting this measure.
Time for a re-think on fee and cost disclosure– AIST’s latest Op Ed piece
AIST has called for a re-think on fee and cost disclosure, noting that ASIC’s Regulatory Guide 97 on disclosing fees and costs has failed to deliver on basic consumer protection principles of comparability, consistency and transparency.
In our latest Op Ed piece in Investment Magazine, AIST’s Head of Advocacy, Ailsa Goodwin, outlines a new approach that is focused on net returns and simpler for consumers to understand.
ATO update on Member Account services, SuperStream & more
The Australian Tax office (ATO) has released its February Superannuation Communique with updates on the readiness and implementation of Member Account Attribute Services, SuperStream implementation and Transfer Balance cap determinations.
The update also covers ATO online issues and outlines an engagement strategy around Single Touch Payroll.