Regulator updates

ATO updated superannuation caps and thresholds for 2021-2022 (1 April 2021)

From 1 July 2021, the following rates and thresholds apply to contributions and benefits, employment termination payments, super guarantee and co-contributions:

  • contribution caps:
    • concessional contribution caps: $27,500
    • non-concessional contributions caps: $110,00
    • CGT cap amount: $1,615,000.
  • payments from super:
    • low rate cap amount: $225,000
    • untaxed plan cap amount: $1,615,000.
  • Division 293 threshold: Unchanged at $250,000
  • super guarantee percentage: 10%
  • maximum superannuation guarantee contribution base: $58,920
  • government co-contributions:
    • lower income threshold: $41,112
    • higher income threshold: $56,112.
  • transfer balance caps:
    • general transfer balance cap: $1,700,000
    • defined benefit income cap: $106,250.

ATO Practical Compliance Guideline PCG 2020/5: Applying the non-arm's length income provisions to 'non arm's length expenditure' – ATO compliance approach for complying superannuation entities (9 April 2021)

The Commissioner of Taxation (Commissioner) has amended the Guideline by extending the Guideline's compliance approach to the 2021/22 financial year.

The Guideline provides a transitional compliance approach for a complying superannuation entity concerning the application of the amendments to non-arm's length income (NALI) rules under the Income Tax Assessment Act 1997 (Cth), in respect of the 2019 to 2021 financial years.

The Guideline states that the ATO will not allocate compliance resources to determine whether the NALI provisions apply to a complying superannuation fund for the 2019 to 2021 financial years where the fund incurred certain non-arm's length expenditure of a general nature that has a sufficient nexus to all ordinary and/or statutory income derived by the fund in those respective financial years (for example, non-arm's length expenditure on accounting services).

This transitional compliance approach does not apply where the fund incurred non-arm's length expenditure that is directly related to the fund deriving particular ordinary or statutory income.

Former Aon Hewitt financial adviser banned for four years (20 April 2021)

ASIC banned a former authorised representative of Aon Hewitt Financial Advice Limited from providing financial services for four years as a result of ASIC surveillance finding that the adviser authorised misleading and inaccurate letters about the transition of default accounts to MySuper to some Aon Master Trust members. ASIC found that:

  • the letters contained incorrect information, including in relation to the past performance of Aon MySuper and the timing of when members would transition to MySuper
  • the letters omitted material information about the intended benefits of MySuper, such as lower fees and insurance premiums
  • the letters did not disclose that it would be in the adviser's interests if the members decided to opt-out of MySuper because this company would continue to receive commissions
  • some letters were seriously misleading "negative consent" letters that stated members would be opted out of MySuper within five working days if they did not respond
  • some letters could mislead members into believing they had been given financial advice that recommended them not to transfer their account balances to MySuper.

ASIC states that after receiving the letters, hundreds of members did not fully transition to MySuper and, instead, their accrued default amounts remained in Aon Master Trust's Choice superannuation product, which was generally more expensive than the MySuper product.

Consultation on APRA's draft Prudential Practice Guide on Climate Change Financial Risks (22 April 2021)

APRA released the draft Prudential Practice Guide CPG 229 Climate Change Financial Risks (CPG 229) which is designed to assist APRA-regulated entities in managing climate-related risks and opportunities as part of their existing risk management and governance frameworks.

CPG 229 covers APRA's view of sound practice in areas such as governance, risk management, scenario analysis and disclosure, but does not create new requirements or obligations.

APRA states that whilst it considers that climate risks can and should be managed within an institution's broader risk management framework, the financial risks associated with climate change have a number of elements that distinguish them from other financial risks, and necessitate a strategic approach to their management.

Submissions are due by 31 July 2021.

ASIC's Consultation Paper 340 Breach reporting and related obligations (22 April 2021)

ASIC issued its Consultation Paper setting out its proposals to guide AFSL holders on the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth) breach reporting obligation that applies from 1 October 2021.

The Consultation Paper accompanies a draft regulatory guide and information sheet, and contains the following proposals on which ASIC is seeking feedback:

  • B1 ASIC proposes to give consistent guidance for AFS licensees and credit licensees on how they can comply with the breach reporting obligation, with examples of how the obligation applies in particular situations
  • B2 ASIC proposes to include case studies and scenarios to supplement our general guidance and help illustrate key principles as they might apply to different licensees, industries and business models
  • B3 Draft RG 78 identifies where the existing breach reporting obligation (before 1 October 2021) continues to apply to AFS licensees
  • B4 ASIC proposes to provide high-level guidance to help AFS licensees and credit licensees identify what they must report to ASIC, including guidance on:
    • what is a 'reportable situation'
    • whether a breach or likely breach of a core obligation is significant
    • when an investigation is a reportable situation
    • what are 'additional reportable situations'
    • what are reportable situations about other licensees.
  • B5 ASIC proposes to include guidance in draft RG 78 about the obligation for licensees to report to ASIC within 30 days after they first know that, or are reckless with respect to whether, there are reasonable grounds to believe a reportable situation has arisen
  • B6 ASIC proposes to provide general guidance on the types of information we will include in the prescribed form that licensees must use to provide reports to ASIC
  • B7 ASIC proposes to provide high-level guidance on compliance systems for breach reporting to help licensees comply with the breach reporting obligation
  • C1 ASIC proposes to provide guidance for AFS licensees who are financial advisers and credit licensees who are mortgage brokers. The new obligations require these licensees to notify, investigate and remediate affected clients in certain circumstances. The Regulator's proposed guidance is set out in the information sheet
  • C2 ASIC proposes to give high-level guidance to AFS licensees and credit licensees about the types of information the Regulator considers should be included in the notices that must be given to affected clients.

Submissions are due on 3 June 2021.

ASIC extends deadlines for financial reports (23 April 2021)

ASIC has extended the deadline for listed and unlisted entities to lodge financial reports from 23 June to 7 July 2021 to assist with the account challenges presented by COVID-19 and to provide enough time to complete audit processes.

The deadline for lodgement of full-year financial reports, directors' reports and auditor's reports for:

  • listed entities, unlisted disclosing entities and unlisted registered schemes is extended from three to four months
  • all other unlisted entities are extended from four to five months (will apply to public and proprietary companies that are not disclosing entities or registered schemes.

The deadline for lodgement of half-year financial reports, directors' reports and audit/review reports for listed entities and unlisted disclosing entities (including unlisted registered schemes that are disclosing entities) is also extended from 75 to 75 days plus one month.

The deadline for lodgement of profit and loss and balance sheets (and other associated information) for:

  • unlisted AFSL holders that are bodies corporate and also disclosing entities or registered schemes is extended from three to four months
  • unlisted AFSL holders that are body corporates and are not disclosing entities or registered schemes is extended from four to five months.

APRA frequently asked questions – Superannuation Data Transformation (23 April 2021)

APRA released the following frequently asked questions (FAQs) on commonly asked questions about APRA reporting requirements:

General FAQs

1.1: Can all the reports be submitted in Excel format via APRA Connect?

1.2: What are the due dates for submission of data under the new reporting standards?

1.3: Do reporting standards from the existing data collection still need to be submitted?

FAQs for SRS 605.0

605a: How frequently is reporting under SRS 605.0 required if there is no change to an RSE's products, investment menus and investment options?

605b: What changes result in an ad-hoc submission of SRS 605.0?

605c: If RSEs are merging at 30 June 2021 what should they report under SRS 605.0?

605d: Can APRA clarify what should be reported under SRS 605.0 when the RSE does not have any superannuation products?

605e: Can APRA clarify what to report under SRS 605.0 when the RSE does not have an investment menu?

605f: Should investment options that are not currently on offer be reported?

605g: Can APRA clarify what should be reported under SRS 605.0 and SRS 606.0 where the RSE offers MySuper as an investment option within one or more products?

605h: Which direct investment options can be reported on an aggregated basis?

FAQs for SRS 606.0

606a: How should we report the 'Number of member accounts' in an investment option underlying defined benefits?

FAQs for SRS 705.0

705a: Do we need to report member initiated switching fees or buy/sell spreads on SRF 705.0?

FAQs for SRS 251.0

251a: Could APRA please clarify the reporting for 'number of policies in cluster' (SRF 251.0 table 1 column 7)?

251b: Under table 1 of SRS 251.0, are underwritten policies to be counted as separate policies?

251c: How does APRA expect an entity to categorise their occupation ratings into the categories provided under SRS 251.0?

FAQs for SRS 706.0

706a: How should fees and costs for defined benefit sub-funds be reported under SRS 706.0?

706b: Some discounted fee structures exist for corporate superannuation plans that are not detailed in a PDS. Such arrangements may be subject to confidentiality clauses in contracts with employers. Are such fee structures required to be reported?

Former Australian Unity financial adviser banned for five years (29 April 2021)

ASIC banned a former authorised representative of Australian Unity Personal Financial Services Limited from providing financial services for five years.

The ban follows an ASIC surveillance, which found that the adviser sent misleading and deceptive emails about superannuation to some clients in 2016 in contravention of section 1041H of the Corporations Act.

ASIC's review found that the adviser advised clients to opt-out of MySuper, claiming that the MySuper product had higher fees than the fee on their existing superannuation balances. However, this information was not correct for every client. ASIC states that subsequent to these emails, some members did not fully transition to MySuper and continued paying higher fees as a result.

In providing this advice, ASIC found the adviser failed to identify each client's objectives, financial situation and needs, and base all judgements on each client's relevant circumstances, while also prioritising his company receiving commissions over the interests of his clients.

During the initial course of ASIC's enquiries, ASIC stated that the adviser failed to disclose the emails to his licensee or to ASIC. ASIC further states that it considers that the adviser was not adequately trained or competent to provide financial services, and that he was likely to contravene a financial services law in future.

APRA consults on guidance in support of prudential standard on remuneration (30 April 2021)

APRA has commenced consultation on its draft guidance to assist the industry meet the requirements of APRA's updated prudential standard on remuneration.

The draft Prudential Practice Guide CPG 511 Remuneration (CPG 511) sets out principles and examples of better practice to assist banks, insurers and superannuation licensees comply with prudential standard CPS 511 Remuneration (CPS 511) which will be finalised later this year.

CPG 511 will assist trustees to comply with the new standard by:

  • outlining examples of better practice in board oversight, including robust challenge and independent scrutiny
  • setting out frameworks for defining non-financial measures and determining the material weight for calculating variable remuneration
  • setting out principles for downward adjustments of variable remuneration where there have been poor risk outcomes.

APRA is currently reviewing stakeholder submissions on the revised CPS 511 that was released for consultation in November 2020, but does not anticipate material changes. The final versions of CPS 511 and CPG 511 will be published in the second half of this year.

Submissions are due by 23 July 2021.


Treasury Laws Amendment (Reuniting More Superannuation) Regulations 2021 (1 April 2021)

The Treasury Laws Amendment (Reuniting More Superannuation) Regulations 2021 (TLA Regulations) amends the Superannuation (Unclaimed Money and Lost Members) Regulations 2019, the Retirement Savings Accounts Regulations 1997 and the SIS Regulations. The TLA Regulations align those regulations with changes to the corresponding legislation made through the Treasury Laws Amendment (Reuniting More Superannuation) Act 2021 (Cth), which includes:

  • facilitating the closure of eligible rollover funds by 31 January 2022
  • providing for the reunification of these amounts with a member's active account.

The TLA Regulations support these changes by:

  • no longer requiring or permitting trustees to transfer certain amounts to eligible rollover funds
  • enabling the Commissioner of Taxation to pay interest on amounts received from eligible rollover funds or other voluntary payments received from trustees.

Exposure Draft - Treasury Laws Amendment (Your Future, Your Super - Addressing Underperformance in Superannuation) Regulations 2021 (28 April 2021)

Treasury has released, for consultation, proposed regulations seeking to introduce elaborate annual performance assessment requirements into SIS as part of the Your Future, Your Super Bill currently before Parliament, including the methods for determining annual and benchmark returns for standard and lifecycle products.

Submissions are due by 25 May 2021.

Treasury Laws Amendment (Your Future, Your Super – Improving accountability and member outcomes) Regulations 2021 – (28 April 2021)

Treasury has released, for consultation, proposed regulations seeking to:

  • prescribe portfolio holdings disclosure into the Corporations Regulations
  • prescribe information that must be included in a notice to members for the purposes of an annual members' meeting, under SIS
  • repeal SIS regulation 13.18A(1)(d) which exempts trustees for the no-treating rules, where goods or services provided to an employer are also provided to all employees on terms no less than those offered to the employer,

as part of the Your Future, Your Super Bill currently before Parliament.

Submissions are due by 25 May 2021.

Exposure Draft – Treasury Laws Amendment (Your Future, Your Super – Single Default Account) Regulations 2021(28 April 2021)

Treasury has released, for consultation, proposed regulations seeking to introduce stapled fund requirements (including a tiebreaker requirement) into the Superannuation Guarantee (Administration) Regulations 2018 as part of the Your Future, Your Super Bill currently before Parliament.

Under the proposed regulations:

  • any current complying superannuation fund can be considered to be a stapled fund, provided that the employee is a member of the fund and the Commissioner can disclose relevant information to the employee's employer (or employer's agent, if necessary)
  • the following tiebreaker rules apply if the commissioner is notified of more than one superannuation fund of which the employee is a member:
    • firstly, the fund that received the most recent contribution for the benefit of the employee during the selection period (1 July of the most recently completed financial year)
    • if there is no such fund, then the superannuation fund that holds the highest balance for the employee at the end of the previous financial year
    • if there is no such fund, the Commissioner selects a fund with regards to when the member joined the relevant funds and any other relevant matters.

Submissions are due by 25 May 2021.

Other matters

Draft Regulator Performance Guide consultation supporting material (April 2021)

The Federal Government has released, for consultation, a draft Regulator Performance Guide which outlines the principles of best practice that underpin the Government's expectations of regulators and their performance, being:

  • Principle 1: Continuous improvement and building trust – regulators adopt a whole-of-system perspective, continuously improving their performance, capability and culture, to build trust and confidence in Australia's regulatory settings
  • Principle 2: Risk-based and data-driven – regulators maintain essential safeguards, using data and digital technology to manage risks proportionately to minimise regulatory burden and to support those they regulate to comply and grow
  • Principle 3: Collaboration and engagement – regulators are transparent and responsive, implementing regulations in a modern and collaborative way.

Submissions are due by 21 May 2021.

Appointment of new Chairperson and Deputy Chairperson to ASIC (29 April 2021)

The Government has appointed Mr Joseph Longo as the full-time Chairperson and Ms Sarah Court as a full-time Deputy Chairperson to ASIC for a five-year period commencing on 1 June 2021.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.