Superannuation Industry Stewardship Group key messages 18 August 2022

Welcome and introductions

The Chair opened the meeting, welcomed members, and reviewed apologies. No conflicts of interest were declared.

Superannuation regulators updates

Treasury

Treasury noted the following focus areas:

Consultation on performance test treatment of Faith-based products has now closed and Treasury will work through the feedback.
The review of Your Future, Your Super announced in July 2022 will include review of best financial interest duty and the comparison tool.
Treasury is undertaking a review of financial adviser education standards and expects to be able to release a consultation paper within the next month.
Treasury is planning to brief the Assistant Treasurer shortly on consultation and issues associated with non-arm’s length income/expenditure including some of the proposed policy changes raised by industry. Industry stressed the need for urgent consideration of legislative change and was encouraged to provide more detailed advice to Treasury on the practical implications and lead time required to implement change.

Australian Securities and Investments Commission

Australian Securities and Investment Commission (ASIC) advised of the upcoming release of their corporate plan which includes priorities for product design and distribution, retirement decision making, sustainable finance practices and technology risks.

As they reach the anniversary for reforms for breach reporting, ASIC is expecting to review and consult on some of the pain points and areas of confusion identified by stakeholders.

New legislative requirements associated with design and distribution obligations of financial products is also nearing its first-year anniversary and ASIC is reviewing how industry is complying with those obligations.

ASIC is doing more detailed work on a review of internal dispute resolution and will be in a position to share its findings by the end of the calendar year.

The forward workplan also includes:

communications on portfolio holdings disclosure, Regulatory Guide 97 and Target Market Determinations
updates to Information Sheet 170 MySuper product dashboard requirements for superannuation trustees with regards to stitching
expectation letters for trustees for those likely to fail the second round as we move into the second round of performance tests
work with the Australian Prudential Regulation Authority (APRA) on the implementation of the Retirement Income Covenant (RIC) including what’s good and what needs to be improved in terms of retirement strategies
choice product distribution – undertaking a proactive surveillance project to review trustee obligations and transparency of obligations
insurance in super – undertaking surveillance work to look at progress made on a number of areas raised over the past few years
trustee oversight of advice fee deductions – ASIC will be checking on industry practices
trustee transparency – reviewing industry practice and communicating expectations
work carried out by other specialist parts of ASIC – whistle-blower obligations is still an area of focus, remediation guidance to be issued soon; and work is being undertaken on issues for Indigenous Australians.

Australian Prudential Regulation Authority

APRA is in the midst of the second round of performance tests and expects results to be published by 31 August 2022. Work also continues on the next iteration of the heatmaps which will be published in December including MySuper and Choice heatmaps.

APRA has released consultation on proposed changes to Prudential Standard SPS 515 Strategic Planning and Member Outcomes which includes:

strengthened requirements to ensure trustees deliver quality outcomes to all cohorts of members in a more measurable way
increased board oversight of financial projections and resources
more timely action to address areas of underperformance including transferring members to better performing products or funds.

APRA continues to work closely with ASIC to review retirement income strategies issued since the introduction of the RIC and expects to issue further guidance on this matter.

ASIC/APRA gave a joint speech to the Conexus Retirement ConferenceExternal Link on 17 August 2022.

Australian Financial Complaints Authority

The Australia Financial Complaints Authority (AFCA) has released the end of year statistics Data snapshot 2022External Link which shows over 5,200 complaints were received last financial year in the superannuation space. A third of those complaints were associated with insurance matters and approximately 3,000 complaints were associated with a superannuation account; such as account administration errors and rollovers not received in time.

AFCA mentioned that there continues to be a steady stream of complaints associated with death benefits – approximately 450 for the last year. A few of those, raised issues around binding nominations and non-lapsing nominations.

AFCA conducted its latest member forum on 11 and 12 August – recordings from this forum will be available on the AFCA websiteExternal Link.

Legislation to address matters arising from the dissolution of the Superannuation Complaints Tribunal (SCT) has now passed. Where there is an appeal from an SCT decision and the Federal Court orders that the matter be remitted, the remittal will now be to AFCA.

AFCA’s new fee model is now in place. AFCA continues to receive a lot of questions about this which will be addressed in the facts and questions on their website.

AFCA continues to receive a huge number of insurance complaints resulting from recent natural disasters along the eastern seaboard. AFCA have had to clarify the categories of complaints they can/cannot consider.

ATO

The ATO has released its Corporate Plan for 2022–2023. The plan incorporates 7 key focus areas including expanding the use of Single Touch Payroll (STP) data to simplify employer reporting obligations and proactively address superannuation guarantee non-compliance. A particular area of focus will be on quality and timeliness of data reported by funds.

Other areas noted in ATO’s update include:

Work is underway to develop best practice guides for reporting, particularly for large funds and will be shared with industry for feedback.
We have seen close to 20 million STP records now finalised so that employees can complete their 2021–22 income tax return. About 800,000 remain unfinalised and nudge letters are expected to issue to these employers in the coming week.
ATO’s annual publication of Taxation Statistics has been published and includes a comprehensive summary of information taxpayers report to us. Emma Rosenzweig reinforced our approach to be transparent with industry about data on programs administered by the ATO which can be found on the ATO website. Any additional data used to assess risks, make operational decisions, or that goes to the effectiveness of government policy, is a matter for government to decide to release.
Work on the review of the Super Choice Form continues as we work through feedback received from various funds, small business, and tax and BAS agent stakeholder groups. User testing has been conducted with positive feedback being received on improvements to readability, user flow and the design of the new form. ATO expects the new form to be available in the next couple of months and will communicate with funds closer to the publication date.
There have been questions raised about the compliance approach and whether an employer can make payments for new employees into a closed fund. ATO confirmed that employers can still pay into closed funds where the employee has an open account. Employers cannot, however, create new accounts in closed funds (that is, those that have failed the performance test twice). APRA confirmed they are planning supervisory work to engage with products that failed last year, to understand what preparations are underway should they be close to failing a second time. This includes correspondence with employees that are likely to be impacted.
The Director ID project team provided a project update that was included with the meeting papers. Emma Rosenzweig reinforced that directors appointed before 31 October 2021 have until 30 November to apply for a Director ID. The SMSF Association asked about communications planned for self-managed super funds (SMSF) with shelf companies who are not able to get a Director ID. ATO will follow up with the Director ID project team and respond to the SMSF Association.

Environmental scan

Industry members noted the following:

Industry associations had been engaging with their funds to review strategies in light of the Retirement Income Covenant.
SMSF stakeholders continue to experience frustration and are working closely with APRA fund administrators to resolve SuperStream transaction issues.
The Australian Small Business and Family Enterprise Ombudsman has urged small businesses to take urgent action to safeguard and register their internet identityExternal Link before the 20 September deadline. Australian businesses with an existing domain name have until 20 September to reserve or register their equivalent au domain name before it becomes available to the general public.
Council on the Aging (COTA) is looking into the general nature of retirement strategies to see what industry can do to improve on more definitive advice for those in the 60 to 65+ year old cohort. They continue to raise the dilemmas around adequate advice for retired members with the Assistant Treasurer.

Update from ATO Second Commissioner

ATO Second Commissioner, Jeremy Hirschhorn provided SISG members with a brief update on matters of interest including:

the strategic importance of participation and feedback received from this group to improve the client experience and administration of Australia’s taxation and superannuation system
insight on the structure and operation within the ATO including that of the client engagement group – our intent is to maximise on intervention early rather than wait until it becomes a compliance issue
our priorities which include early intervention on debt, integrity, cyber security, and fraud.

Members discussed key issues impacting industry including:

access to ATO data so that financial planners and industry could provide better advice for individuals – Jeremy reaffirmed our privacy constraints and obligations to manage data that is submitted to the ATO and explained that there might be more opportunities to work in conjunction with the Australian Bureau of Statistics to see how we could share more unit level or aggregate data about cohorts within existing constraints.
managing IT priorities and resource constraints including the magnitude of change currently impacting the industry
opportunities where the ATO could improve and empower individuals with more holistic information about their financial position to support interactions with mortgage brokers and banks
moving to real-time payment of superannuation guarantee (SG), recognising that it is a policy matter for government – ATO acknowledged that our figures showed that 40% of employers (equalling 76% of the dollar value) already pay more regularly than quarterly.

Superannuation guarantee

The ATO led a discussion on superannuation guarantee and activities to ensure compliance including:

the ATO’s role in the Superannuation and Employment system
SG in operation including our net gap, changes to the minimum SG rate and removal of the $450 per month threshold
employer demographics
Help and Assist initiatives that ATO has undertaken to educate and support employers to meet their SG obligations
information about our proactive (education), preventative (opportunities to self-correct, reminders and nudges) and enforcement approaches to SG compliance
SG liabilities and penalties including those raised, collected, and distributed as a result of employee notifications, ATO initiated compliance activities and employer voluntary disclosures
information that can be disclosed to employees
collection of unpaid SG.
our future vision to continue to implement a preventative approach to SG non-compliance, based on guidance, early intervention and proactive data driven activities, to help employers to comply with their obligations and ensure employees receive their full SG entitlement.

Discussion noted:

There is a 37% increase in use of the business segment on ato.gov.au including ‘Do I have to pay SG’ webpages.
ATO is happy to have ATO staff engage with other member organisations to support and supplement their education/communication campaigns. White label content (for example, examples of correspondence and articles) that are used for clients will continue to be shared with stakeholders and stewardship groups.
Facebook and LinkedIn appeared to be more popular channels for employers and businesses to receive information rather than Twitter.
Obtaining a further understanding of the impact of the removal of the $450 threshold may not be known for a couple of years as the SG gap is a lag indicator.
There is an increase in the volume of Director Penalty Notices raised and a return to pre COVID-19 enforcement setting to resolving SG debt.
There is an increase in client-initiated insolvencies. ATO encourages business struggling to meet SG obligations to engage with the ATO early on.
STP data can be aligned with information reported by funds to engage with employers earlier.
ATO agrees with the recommendations around debt recovery and increased use of powers recommended as part of the recent Australian National Audit Office report into addressing SG non-complianceExternal Link.
ATO is also actively monitoring current cases and case law associated with the status of employer under the SG Act and once confirmed, or if required, will arrange for an update to rulings.

Attendees

Attendees list
Organisation	Member
ATO	Emma Rosenzweig (Co-chair), Superannuation and Employer Obligations
ATO	Melanie Casey, Superannuation and Employer Obligations
ATO	Michelle Allen, Superannuation and Employer Obligations
Association of Super Funds Australia	Glen McCrea
Australian Financial Complaints Authority	Heather Gray
Australian Prudential Regulation Authority	Katrina Ellis
Australian Securities and Investments Commission	Jane Eccleston
Australian Securities and Investments Commission	Jessica Spence
Chartered Accountants Australia and New Zealand	Tony Negline
COTA Australia	Ian Yates
Financial Services Council	Spiro Premetis
Industry Super Australia	Ella Cebon
Law Council of Australia	Michael Mathieson
Link Group	Deborah Schembri
Mercer	David Knox (Co-chair)
SMSF Association	Peter Burgess
Super Consumers Australia	Xavier O’Halloran
The Tax Institute	Phil Broderick
Treasury	Lynn Kelly

Guest attendees

Guest attendees list
Organisation	Attendee
ATO	Anita Challen, Lodge and Pay
ATO	Jeremy Hirschhorn, ATO Executive
ATO	Kylie White, Superannuation and Employer Obligations
ATO	Malcolm Allen, Superannuation and Employer Obligations
ATO	Mandy Chivers, ATO Corporate
ATO	Rebecca Knill, Superannuation and Employer Obligations
Australian Institute of Superannuation Trustees	David Haynes
Australian Securities and Investments Commission	Bradley Ruting
Treasury	James Thompson

Apologies

Apologies list
Organisation	Member
Australian Institute of Superannuation Trustees	Eva Scheerlinck
Australian Prudential Regulation Authority	Carolyn Morris
Business Council of Australia	Ben Davies