The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.

Type Subject matter Source Description

Treasury

New regulations

Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Regulations 2018

On 7 March 2018, the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Regulations 2018 were registered.

The regulations establish the First Home Super Saver Scheme (FHSSS). The FHSSS allows individuals who are saving for their first home to take advantage of the concessional taxation arrangements that apply to the superannuation system. The changes will commence on 1 July 2018.

The FHSSS allows first home buyers who make voluntary contributions to their superannuation to "withdraw those contributions (up to certain limits) and an amount of associated earnings for the purposes of purchasing their first home".

Also, the regulations amend the current rules in relation to contributions, and will enable funds to accept "downsizer contributions" (a contribution from proceeds of the sale of a house). The maximum that an individual will be able to contribute is $300,000, where the contract is entered into on or after 1 July 2018.

APRA

Discussion Paper

Information security management: a new cross-industry prudential standard

On 7 March 2018, APRA released a discussion paper titled "Information security management: A new cross-industry prudential standard", and accompanying draft Prudential Standard CPS 234 Information Security. Among other entities, it will apply to RSE licensees.

Specifically, the draft standard proposes to ensure that APRA regulated entities take measures to ensure they are resilient against information security incidents and that the entities' information security capabilities are maintained so as to be "commensurate with information security vulnerabilitiesand threats".

APRA anticipates the final standard will be released in the fourth quarter of 2018 and come into effect on 1 July 2019. In the meantime, APRA invites industry feedback.

APRA Speech

APRA Media Release

On 8 March 2018, APRA Deputy Chairman Helen Rowell addressed the conference of the Superannuation Committee of the Law Council of Australia.

In her speech, Ms Rowell acknowledged that the financial services sector is presently under significant scrutiny: "there is intense focus on the financial services sector more broadly as a result of a number of missteps that have undermined the reputation of, and community trust in, many of its participants."

Ms Rowell spoke to a number of key areas of focus going forward, including:

  • strengthening member outcomes
  • connection with the Government's reforms;
  • implementing APRA's reforms;
  • what is needed to "pass" the member outcomes assessment;
  • consultation processes; and
  • further items on APRA's agenda.
Case Law Appeal from Superannuation Complaints Tribunal

Sharma v LGSS Pty Ltd [2018] FCA 167

On 1 March, the Federal Court of Australia delivered its judgment in Sharma v LGSS Pty Ltd [2018] FCA 167.

The applicant became a member of the Local Government Superannuation Scheme in April 2005, and in March 2007 applied for disability insurance cover under the trustee's group insurance arrangements. He then made a claim in 2012 which was rejected by the insurer on the basis of fraudulent misrepresentation and non-disclosure regarding a history of depression and tachycardia.

The member complained to the Superannuation Complaints Tribunal but was unsuccessful. On appeal, the question before the Court was whether the Tribunal erred in affirming the insurer's decision to avoid the member's insurance under section 29(2) of the Insurance Contracts Act 1984 (Act) for fraudulent misrepresentation and non-disclosure, and also whether section 21 of the Act imposed a duty of disclosure on the member.

The Court held that the member was not an "insured" within the meaning of section 21 in relation to the application made in March 2007. It noted that a number of authorities have held that the Act uses the term "insured" only in relation to contracting parties and not in relation to those who may benefit under a contract of insurance.

The Court held that the Tribunal did not identify a legal basis for its conclusion that the member owed a duty of disclosure to an insurer of the kind identified on the March 2007 application form: "properly construed, section 21 did not impose such a duty on [the member]".

Once this was established, the Court did not need to engage in any further analysis, but noted the following general comments in relation to the Act:

  • the onus of proof in section 29(1)(c) rests with the insurer to satisfy the court that it would have been prepared to enter into the contract of life insurance if the duty of disclosure had been complied with, or the misrepresentation had not been made before the contract was entered into; and
  • while a reckless failure to (as opposed to a deliberate failure) comply with the duty of disclosure may constitute a fraudulent non-disclosure, the finding that the member "should have known that he had a duty" to reveal matters is not sufficient to make a finding of fraud.