- AIST Policy News -17 August 2017
AIST Policy News
Net returns key to Government’s ‘outcomes’ test
The Government’s proposed ‘outcomes’ test risks diluting the vital role of net investment returns in delivering optimal retirement outcomes for superannuation consumers, AIST has warned.
The warning is contained in AIST’s response to the Government's Treasury Legislation Amendment (Improving Accountability and Member Outcomes in Superannuation) Bill 2017, which seeks to introduce a package of reforms, that includes modifying the MySuper ‘scale’ test with a new outcomes assessment.
The package of reforms covers seven main areas:
- Annual MySuper outcomes assessment;
- Authority to offer a MySuper Product;
- Director penalties;
- Approval to own or control a registerable superannuation entity (RSE) licensee;
- Australian Prudential Regulation Authority (APRA) directions powers;
- Annual members’ meeting;
- Reporting standards.
While AIST is generally supportive of an outcomes test, we are concerned that the proposed framework for the assessment does not give sufficient weight to net returns.
The outcomes test will require trustees of regulated superannuation funds to consider the appropriateness and quality of their MySuper product offering on an annual basis. Trustees will be required to assess whether the outcomes being delivered by their MySuper products are promoting the financial interests of their MySuper members.
In a media release issued this week, AIST CEO Eva Scheerlinck noted the importance of prioritizing net returns.
“What really matters to members is the amount of super they receive when they retire,” Ms Scheerlinck said. “Net returns must be the number one consideration for any outcomes assessment and rank higher than any other criteria.”
Rather than the Government’s proposed outcomes test which gives equal weighting to a range of criteria, AIST has recommended a two-tiered test that ranks net returns above the other criteria which includes services provided and facilities offered. AIST has also called for the assessment - currently limited to MySuper options – to be applied across all sectors of the industry.
Similarly, we argue that the Government’s proposal to enhance APRA powers – which includes giving APRA directions power and expanding the director penalty regime - must equally apply to the Choice sector.
We support the requirement for annual member meetings, however the Bill is potentially too prescriptive and this risks stifling innovation. We stress that funds should be given the freedom to choose the most appropriate engagement strategy with their members.
Tackle unpaid super and black economy with Single Touch Payroll
AIST has called on the Government to extend the mandatory uptake of Single Touch Payroll for small businesses to address non-payment of superannuation in the black economy.
In its submission to the Black Economy Taskforce, AIST notes that Single Touch Payroll – a new electronic payment system that will be mandatory for large employers from July next year – ensures that the Australian Taxation Office (ATO) receives regular and accurate information on superannuation guarantee obligations from all employers.
AIST’s submission recommends the Taskforce support existing initiatives (SuperStream, Single Touch Payroll and new superannuation reporting) as the most effective ways of increasing super compliance, in preference to the Taskforce’s suggestion about adapting the New Payment Platform (NPP) for this purpose. The NPP provides a new payments system and is an important and exciting development, but SuperStream has already delivered billions of dollars of benefits to super fund members, and it’s being used to deliver even more benefits.
AIST senior policy manager David Haynes said that the scale of black economy transactions in Australia was a concern, not just with many employees being underpaid but these employees not getting superannuation entitlements from their employers.
“One of the best ways to tackle the black economy and unpaid super is to encourage uptake by businesses of electronic payment systems,” Mr Haynes said. “The technology exists but we need to get all businesses on board.”
AIST’s submission also urges the Taskforce to endorse the move for the super funds to report more information, more frequently to the ATO on the SG contributions received from employers.
AIST welcomes measures to close employer super loopholes
AIST has welcomed the Government’s proposal to reduce loopholes that employers can use to shortchange employees who salary sacrifice into their super.
On 26 July 2017 the Government released draft legislation that aims to improve the integrity of the superannuation system by ensuring that an individual’s salary sacrifice contributions cannot be used to reduce an employer’s own superannuation guarantee (SG) obligations.
In a submission to Treasury last week, AIST welcomed the proposed changes that would specifically include salary or wages sacrificed to superannuation in the base for calculating an employer’s SG obligations.
AIST also suggested a number of improvements to the proposal, such as using the employee’s gross remuneration, to calculate SG and calling for clearer labelling of contribution types under SuperStream.
If passed, the changes will apply from 1 July 2018. AIST has expressed its disappointment in the long lead time for the changes to come into effect.
Members can view details of the proposed changes, including worked examples, in the explanatory memorandum here.
ATO seeks feedback on proposed change to online services field
The ATO is seeking feedback on changing the ATO Online services super fund 'account name' display from 'legal entity name' to 'product name'.
Currently, when a member is in ATO Online the ‘super accounts’ screen displays the super fund 'account name', which is the legal entity name, and a link to the fund's website.
The ATO has received suggestions to display the funds' ‘trading name’ rather than the legal entity name, however they have advised this is not possible as they no long maintain ‘trading name’ data for entries. However, the ATO do maintain ‘product name’ data from the Fund Validation Service and could potentially display this instead.
Members wishing to provide feedback should email SuperCRT@ato.gov.au using the subject line 'ATO Online super account name display – feedback' by Friday 26 August.
Upcoming super changes survey
The ATO is asking funds to complete a short survey on their readiness for the 2016 Federal Budget super changes.
The short survey aims to give the ATO a picture of how funds are tracking to implement the changes and what processes still need to be completed.
The survey – with a response deadline of Thursday 24 August – is anonymous and should only take 1 to 2 minutes to complete. Only aggregated data will be reported.
Important SuperStream deadlines looming
Funds are reminded that they must implement SuperStream government contributions and error response messaging by 31 August 2017.
In its August Super Communique, the ATO has reported that it will not be granting extensions to the 31 August deadline. However it will be taking a pragmatic approach with those funds experiencing delays in the implementation of government contributions and asks for funds to keep it up to date with any changes to implementation plans.
To receive government contributions via SuperStream funds must ensure their GCON2.0-X certification change in the Fund Validation Service (FVS) – which indicates the unique super identifier (USI) is ready to accept SuperStream government contributions – has an effective date a few days before the dates for the ATO remittance processing runs. For assistance, funds should email email@example.com
Error response messaging must also be implemented by 31 August and the ATO will not be granting any further extensions. The ATO has advised that funds that do not comply will be reported to APRA for a breach of legislative obligations. Details and requirements for implementing business to business error response messaging can be found here.
Improvements to resolve and manage issues with unclaimed superannuation money (USM) rollover release have resulted in over 90 per cent of transactions now working successfully.
The ATO is hosting a SuperStream industry engagement forum in Sydney on 29 August 2017. The forum will discuss SuperStream implementation, issues, benefits, and also provide an update on the SuperStream roadmap, including the next 12 months of delivery, and details of the future reporting requirements for large funds. The ATO will be sending details for registration around shortly.
Kelly O’Dwyer appoints CEO of new financial adviser standards body
Dr Deen Sanders has been appointed as CEO of the Government’s new Financial Adviser Standards and Ethics Authority Limited (FASEA).
FASEA has been set up by the Government to establish mandatory educational and training requirements for financial advisers, including developing and setting an industry exam and creating a Code of Ethics to which advisers will be required to adhere.
Dr Sanders is currently CEO (Assistant Commissioner) of the Professional Standards Authority of Australia and has more than 16 years’ experience working in financial professional standards and training including as National Director, National Finance Industry Training Advisory Body and Chief Professional Officer, Financial Planning Association of Australia.
AIST applies for relief on exit statements
AIST has applied for Class Order relief on behalf of its members from the requirement to mail exit statements to members transferred to the ATO, due to lost or unclaimed money. The application points out that these statements are unlikely to be received, and in one administrator considers that this will save $20-$50 dollars per unclaimed money member.
For more information regarding this relief application, please contact AIST senior policy manager David Haynes at firstname.lastname@example.org