The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.
Find our round-up of the developments from the week of 24 May 2018 here.
Federal Parliament - Retirement Income Covenant
Source: Treasury Position Paper
The Minister for Revenue and Financial Services, Kelly O'Dwyer, has released a position paper "outlining the proposed principles underpinning a retirement income covenant", which was announced in the 2018-19 Budget.
According to the paper, the introduction of the income retirement covenant in the Superannuation Industry (Supervision) Act 1993 will be the first stage of the Government's proposed development of a comprehensive income product for retirement framework, which will "require trustees to develop a retirement income strategy for their members", as well as "[codifying] the requirements and obligations for superannuation trustees to consider the retirement income needs of their members, expanding individuals’ choice of retirement income products and improving standards of living in retirement".
The paper provides, with respect to proposed new disclosure requirements, that "the disclosure metrics, also announced in the Budget, are another crucial part of the framework to better inform consumers and aid comparison of retirement products. The Government is currently developing disclosure requirements and expects to consult on a detailed proposal later in the year".
Submissions in response to the position paper are due by 15 June 2018.
Federal Parliament - Requirement to lodge 2018 tax and other returns made
On 16 May 2018, the Notice of Requirement to Lodge a Return for the Year of Income Ended 30 June 2018 was registered on the Federal Register of Legislation.
The instrument sets out requirements for income tax returns and other lodgements of member information statements by superannuation providers.
Additionally, the instrument "includes the date by which the returns must be lodged, the requirements to lodge in the approved form and the penalties that may apply".
Federal Parliament - New Regulations - Small Superannuation Accounts Regulations
On 10 May 2018, the Small Superannuation Accounts Regulations 2018 (Cth) were made under the Small Superannuation Accounts Act 1995 (Cth).
According to the Explanatory Statement to the regulations, the purpose of the new regulations "is to remake and improve the Small Superannuation Accounts Regulations 2002 and ensure their effect continues".
Specifically, the new regulations remake and improve the previous regulations by "simplifying and updating the definitions used and adopting current drafting practices such as referring to ‘sections’ rather than ‘regulations’".
The new regulations commenced on 15 May 2018.
ASIC - Code of ethics compliance schemes for financial advisers: ASIC consultation paper
Source: ASIC media release
On 15 May 2018, ASIC announced the release of Consultation Paper 300: Approval and oversight of compliance schemes for financial advisers. The paper relates to the forthcoming requirement, introduced by the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017, for financial advisers to comply with a code of ethics and be covered by a compliance scheme approved by ASIC. The requirement applies from 1 January 2020.
According to the ASIC media release the Consultation Paper is "primarily for applicants for compliance scheme approval, but it may also be of interest to financial advisers and Australian financial services licensees who authorise financial advisers" (which may include superannuation fund trustees).
APRA - APRA letter regarding fund trustee board governance practices
On 17 May 2018, APRA published a letter to all RSE licensees outlining its observations and recommendations based on the Board Governance Thematic Review undertaken over 2016 and 2017.
APRA noted that "the review covered 29 RSE licensees representing a cross-section of fund type and size, ownership structures and board composition" and "particularly focused on board appointment and renewal policies and practices, and board performance assessment approaches".
The review recommendations emphasised that RSE licensees should:
- "consider, determine, document and regularly review the optimal composition for the board and board committees in the context of the RSE licensee’s business operations and strategic plan";
- have boards that "consider the extent to which the use of independent experts signals a skills deficiency on the board that would be more appropriately addressed through appointment of a director with the requisite skills and experience";
- "have a director selection process that provides a clear role for the board (and not just nominating bodies) in the appointment of candidates, with a view to ensuring that candidates with the necessary skills and capabilities are appointed";
- "have sound renewal and succession planning processes that include policies in relation to tenure limits and reappointment that strike an appropriate balance between ensuring continuity and bringing diversity and fresh perspectives, where the criteria for any exceptions to tenure policy are clear and limited, and the policy is demonstrably implemented in practice"; and
- "have a robust and objective board assessment process that considers the performance of the board as a whole, as well as performance of individual directors, and identifies recommendations to improve performance that are effectively implemented".
ATO - Super Transfer Balance Account Report
The ATO has advised that super funds are required to lodge a transfer balance account report and has released instructions on the process.
According to the ATO advice, funds should "use the report to advise [the ATO] when a transfer balance account event occurs. [The ATO] use this information to adjust a member’s transfer balance account so [the ATO] can correctly apply the transfer balance cap provisions".
Funds may also use this report when the ATO requires more information to calculate a member's total super balance.