- AIST Policy News - 5 April 2018
AIST Policy News - 5 April 2018
Guidance paper released for Insurance Code of Practice
A guidance paper for the Insurance in Superannuation Voluntary Code of Practice is now available on the AIST website. The guidance has been prepared by the Code transition committee and approved by the Code-owners – AIST, ASFA and FSC. The transition committee has representatives from funds, insurers, administrators and the Code Owners, and meets regularly to discuss questions of Code implementation and interpretation, and to issue guidance.
The paper aims to assist trustees in interpreting and meeting their commitments under the Code.
The Code requires trustees to publish a transition plan on their website by 31 December 2018 detailing how their funds will become compliant with the standards of the Code.
While trustees have until 30 June 2021 to comply with all of the standards of the Code, AIST is encouraging trustees to transition as early as their systems and contractual relationships allow.
A key facts sheet is also planned and AIST intends to soon publish a register of funds that have issued a statement of intent to comply with the Insurance Code, including a link to this statement on fund websites.
AIST is pleased to report that most of our member funds have made a statement of intent to adopt the Code.
Royal Commission releases overview of financial advice ahead of April hearings
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has today published three background papers ahead of its next round of public hearings on financial advice.
The papers provide an overview of the financial planning industry, education and training and financial products available to retail investors. The first paper notes that superannuation and retirement advice is the most common type of financial advice sought by consumers, representing about one third of annual financial planning revenue. It also notes that consumers seek advice on retirement through intra-fund advice where the cost of that advice is borne by all members of the super fund.
The second round of hearings will run from Monday 16 April to Friday 27 April and will focus on financial advice and witnesses will include staff from AMP and the big 4 banks; related financial planning businesses of each; ASIC, the Financial Planning Association and the Association of Financial Advisors. The hearings will be structured around five topics with case studies involving fees for no service; investment platform fees; inappropriate financial advice; improper conduct by financial advisers; and the disciplinary regime for advisers.
The Commission has not yet indicated when it will be holding hearings on superannuation and insurance. So far the Commission has received 3071 submissions, 69 per cent of which related to banking, 9 per cent to superannuation and 5 per cent to general insurance and financial advice. Written submissions in response to the first round of hearings on consumer lending were also published today.
Data shows 20 percent jump in disclosed fees to members
Against the background of the ongoing debate about fee and cost disclosure, SuperRatings has published information about the changes to the fee landscape for super funds which raises concerns about the potential impact of new fees disclosure requirements on consumers.
Reviewing fee structures before and after the introduction of the ASIC’s Regulatory Guide 97 disclosure regime, SuperRatings found there has been a 20.5 per cent jump in disclosed fees to members across the balanced options. For the median fund, this represents a rise in fees from $548 to $658 on a balance of $50,000.
According to SuperRatings, the main drivers of the increase in fees are the changes in disclosure of Investment Management Fees (IMF) and Indirect Cost Ratios (ICR).
The data highlights that not all assets are impacted equally by the fee disclosure requirements and reinforces AIST’s concerns about concerns about slaws the current requirements and our emphasis on the need to focus on long term net outcomes.
Significantly, the changes have seen fees for the not-for-profit median balance rise by nearly 32 per cent, compared to a rise in the median master trust of less than 10 per cent.
SuperRatings further notes that given the outperformance of the not-for-profit sector, “the fee components that represent the greatest performance of cost for not-for-profit funds are those that can generate better retirement outcomes for members.”
Please contact Karen Volpato, Senior Policy Advisor for further information on AIST’s ongoing advocacy around RG 97 at firstname.lastname@example.org or 0419 127 496.
AIST calls on the Government to confirm its support for lifting super to 12%
AIST has called on the Government to confirm its commitment to increasing the compulsory super rate to 12 per cent.
Speaking at yesterday’s AFR Banking & Wealth Summit in Sydney, the Financial Services Minister, Kelly O’Dwyer, questioned the need to compel “an ever increasing amount of wage to be sacrificed into superannuation,” claiming that it had a “detrimental” impact on an individual’s wage.
In a media release, AIST CEO Eva Scheerlinck said it was worrying that the Government appeared to be backing away from its legislated timetable for increasing the Superannuation Guarantee (SG) from 9.5 per cent to 12 per cent by 2025-2026.
Ms Scheerlinck noted that the current timetable for the SG increases represented a significant delay of several years on previous timetables supported by former Labor Governments.
Legislation on unpaid super before Parliament
Employers failing to correctly pay workers their full superannuation entitlements will face fines and possibly jail time under legislation currently before Parliament.
The Treasury Laws Amendment (2018 Measures No. 4) Bill was tabled in Parliament on March 28 and includes other significant measures to ensure Australian workers receive their super entitlements.
This includes the introduction of a director identification number to assist the Australian Tax Office to identify wrongdoers, as well as closing the loophole allowing employers to pay less super to those who have salary sacrifice arrangements in place.
Most importantly, the legislation will make single touch payroll mandatory for all Australian businesses from July 2019, enabling the regulator to better track payments and detect underpayments in super.
AIST supported the legislation, having previously made submissions to help shape the draft Bill. We will continue to advocate for further measures to tackle unpaid super including the alignment of super payments with payslip reporting.
ATO releases draft online choice of fund form
The Australian Tax Office has released draft forms for online employee commencement. This includes the proposed online choice of fund form.
AIST has continued to take a lead role in the design of the online choice of fund form. The form has the capacity to influence behaviour and AIST has argued that the it must be consistent with the current policy position as reflected in the existing Standard Choice Form. This includes prominent listing of the employer’s default fund, inclusion of consumer protection information and the listing of existing funds by recent contributions, followed by account balance. AIST also seeks that future iterations of the form identify and give priority to a member’s existing MySuper products.
The ATO is continuing its consultation on the proposed new employee commencement processes.
Click here to read the ATO presentation at CMSF on single touch payroll.
ASIC indicative levies for 2017-18
Ahead of issuing final industry funding invoices in January 2019, the Australian Securities and Investments Commission (ASIC) has published estimates of what regulated sectors, including the superannuation industry, will pay.
According to the estimates, 144 entities in the super sector will collectively contribute $7.1 million toward ASIC’s regulatory costs. The indicative minimum levy is $18,000 with a maximum threshold of $250,000.
The indicative levies are based on ASIC's budgeted regulatory costs outlined in ASIC’s draft Cost Recovery Implementation Statement (CRIS).
The indicative levies provided remain an estimate and the amounts are likely to change when ASIC’s actual regulatory costs are known in November.
Between July and September 2018, all organisations that ASIC regulates must log on to a new online ASIC portal to submit or validate their business activity metrics.
In June, ASIC will send a letter to the person listed as the ASIC contact for each organisation. This letter will contain a unique security key for the portal and detailed information on the process.
ASIC will use the information in these submissions to calculate final invoices, and in future years, generate estimated levy amounts for the entire regulated population. ASIC will publish its actual regulatory costs in November, along with population and business activity metric data provided by industry, which will enable entities to better estimate their individual levy.
More about indicative levies and industry funding can be found here.
Problems with Small Business Clearing House causing processing errors
The Australian Tax Office is working to fix the issues affecting their ability to process some contribution transaction request messages coming through the Small Business Superannuation Clearing House.
As a result, both the Australian Prudential Regulation Authority (APRA) and the Australian Tax Office acknowledge that 100% compliance with trustee obligations may not be possible – through no fault of funds.
While the applicable period for allocating a contribution to a member is three days, APRA has confirmed that where the trustee is unable to allocate this within three days the position outlined in APRA SuperStream FAQ 8 will apply. Issues currently being investigated by the ATO include payment mismatch errors and duplicate messages being sent to funds. The ATO has also experienced problems in sending Member Registration Requests (MRR) and Contribution Transaction Requests (CTRs).
While the ATO has been progressively trying to address these issues some funds have received money from the ATO but no corresponding data. The current status is that most issues have been resolved, but there has been considerable backlog of messages. An ongoing cause of concern is the reconciliation of rejected messages, backlogged messages and new messages, as well as the fact that funds have had to start returning monies from contributions that have been unable to be allocated, due to reaching the Corporations Act 30-day limit for dealing with monies received.
The ATO is continuing to meet daily with the Superannuation Response Group (including AIST) and are working closely with industry representatives to resolve the issue.
Funds with any concerns about meeting their obligations are advised to speak to their APRA supervisor.
ATO targets 80k to reconnect lost super
From today, the Australian Tax Office will be emailing 80,000 members of superannuation funds with information about unclaimed super.
This will be followed by 20,000 letters and SMS messages to go out on April 16.
Unclaimed super is paid to the ATO by super funds when they lose contact with their members. The ATO reports that they currently hold 3.75 billion dollars of unclaimed super belonging to over 5 million accounts.
Senate to examine big business’ commitment to corporate tax cut
A Senate Committee will examine a commitment made by the Business Council of Australia (BCA) wage and employment increases in the event of a reduction to the corporate tax rate.
The Inquiry will examine annually measurable benchmarks relating to the Government’s proposed corporate tax reduction, including company wage growth estimates; employment estimates and schedules of investment by state and territory.
Additionally, corporate tax data will be examined in regards to the total tax paid over the past five years and the expected tax benefit from the Enterprise Tax Plan.
Click Here for further information and to make a submission. The closing date for submissions is Tuesday, April 10.